UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended December 2, 1995
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Commission file number 0-13003
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E-Z-EM, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 11-1999504
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 Main Street, Westbury, New York 11590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 333-8230
--------------
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
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On January 12, 1996, there were 4,032,532 shares of the registrant's Class A
Common Stock outstanding and 4,887,709 shares of the registrant's Class B
Common Stock outstanding.
Exhibit Index on Page 19
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E-Z-EM, Inc. and Subsidiaries
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - December 2, 1995 and
June 3, 1995 3 - 4
Consolidated Statements of Earnings - thirteen and
twenty-six weeks ended December 2, 1995 and thirteen
and twenty-seven weeks ended December 3, 1994 5
Consolidated Statement of Stockholders' Equity -
twenty-six weeks ended December 2, 1995 6
Consolidated Statements of Cash Flows - twenty-six
weeks ended December 2, 1995 and twenty-seven weeks
ended December 3, 1994 7 - 8
Notes to Consolidated Financial Statements 9 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 17
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security
Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 2, June 3,
ASSETS 1995 1995
---- ----
(unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $ 4,448 $ 3,962
Debt and equity securities 26,531 485
Accounts receivable, principally
trade, net 14,590 17,354
Inventories 22,852 22,752
Other current assets 1,807 2,602
-------- -------
Total current assets 70,228 47,155
PROPERTY, PLANT AND EQUIPMENT - AT COST,
less accumulated depreciation and
amortization 21,411 20,864
COST IN EXCESS OF FAIR VALUE OF NET ASSETS
ACQUIRED, less accumulated amortization 598 633
INTANGIBLE ASSETS, less accumulated
amortization 419 463
DEBT AND EQUITY SECURITIES 5,060 4,352
OTHER ASSETS 2,832 2,628
-------- -------
$100,548 $76,095
======== =======
The accompanying notes are an integral part of these financial statements.
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 2, June 3,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1995
---- ----
(unaudited) (audited)
CURRENT LIABILITIES
Notes payable $ 494 $ 1,021
Current maturities of long-term debt 204 208
Accounts payable 5,733 6,713
Accrued liabilities 5,486 5,559
Accrued income taxes 6,067 400
-------- -------
Total current liabilities 17,984 13,901
LONG-TERM DEBT, less current maturities 766 1,114
OTHER NONCURRENT LIABILITIES 2,004 1,805
MINORITY INTEREST IN SUBSIDIARY 1,385
CONTINGENCIES
-------- -------
Total liabilities 20,754 18,205
-------- -------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per
share - authorized, 1,000,000 shares;
issued, none - -
Common stock
Class A (voting), par value $.10 per
share - authorized, 12,000,000 shares;
issued and outstanding 4,032,532 shares
at December 2, 1995 and June 3, 1995 403 403
Class B (non-voting), par value $.10 per
share - authorized, 6,000,000 shares;
issued and outstanding 4,887,689 shares
at December 2, 1995 and 4,785,462
shares at June 3, 1995 489 479
Additional paid-in capital 12,231 11,570
Retained earnings 65,609 44,953
Unrealized holding gain on debt and
equity securities 2,304 1,786
Cumulative translation adjustments (1,242) (1,301)
-------- -------
Total stockholders' equity 79,794 57,890
-------- -------
$100,548 $76,095
======== =======
The accompanying notes are an integral part of these financial statements.
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Thirteen weeks ended Twenty-six Twenty-seven
-------------------- weeks ended weeks ended
December 2, December 3, December 2, December 3,
1995 1994 1995 1994
---- ---- ---- ----
(in thousands, except per share data)
Net sales $23,005 $21,377 $45,004 $42,922
Cost of goods sold 13,382 12,543 26,250 24,709
------- ------- ------- -------
Gross profit 9,623 8,834 18,754 18,213
------- ------- ------- -------
Operating expenses
Selling and administrative 8,063 6,827 15,053 13,620
Research and development 1,125 1,502 2,442 2,970
------- ------- ------- -------
Total operating expenses 9,188 8,329 17,495 16,590
------- ------- ------- -------
Operating profit 435 505 1,259 1,623
Other income (expense)
Interest income 101 100 160 384
Interest expense (65) (75) (129) (170)
Other, net 135 193 186 231
------- ------- ------- -------
Earnings from continuing
operations before
income taxes 606 723 1,476 2,068
Income tax provision 100 273 230 566
------- ------- ------- -------
Earnings from continuing
operations 506 450 1,246 1,502
Discontinued operation:
Earnings (loss) from
operations, net of taxes (38) 5 (209) 3
Gain on sale, net of income
taxes of $6,073,000 19,619 19,619
------- ------- ------- -------
NET EARNINGS $20,087 $ 455 $20,656 $ 1,505
======= ======= ======= =======
Earnings per common share
Primary $ 2.15 $ .05 $ 2.25 $ .17
======= ======= ======= =======
Fully diluted $ 2.13 $ .05 $ 2.21 $ .17
======= ======= ======= =======
Weighted average common shares
Primary 9,354,645 8,817,945 9,178,723 8,828,170
========= ========= ========= =========
Fully diluted 9,448,238 8,817,945 9,328,812 8,837,406
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Twenty-six weeks ended December 2, 1995
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Unrealized
Class A Class B holding gain
common stock common stock Additional on debt Cumulative
-------------- --------------- paid-in Retained and equity translation
Shares Amount Shares Amount capital earnings securities adjustments Total
------ ------ ------ ------ ------- -------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 3, 1995 4,032,532 $403 4,785,462 $479 $11,570 $44,953 $1,786 $(1,301) $57,890
Exercise of stock options 101,340 10 656 666
Issuance of stock 887 5 5
Net earnings 20,656 20,656
Unrealized holding gain on debt
and equity securities 518 518
Foreign currency translation
adjustments 59 59
--------- ---- --------- ---- ------- ------- ------ ------- -------
Balance at December 2, 1995 4,032,532 $403 4,887,689 $489 $12,231 $65,609 $2,304 $(1,242) $79,794
========= ==== ========= ==== ======= ======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of this financial statement.
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Twenty-six Twenty-seven
weeks ended weeks ended
December 2, December 3,
1995 1994
---- ----
(in thousands)
Cash flows from operating activities:
Net earnings $20,656 $1,505
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation and amortization 1,338 1,384
Gain on disposal of business (25,692)
Deferred income taxes 340 (2)
Minority share of subsidiary's
operations (200) 3
Changes in operating assets and
liabilities, net of disposition
Accounts receivable 831 1,401
Inventories (2,267) (2,409)
Other current assets 683 926
Other assets (316) (106)
Accounts payable 326 510
Accrued liabilities 328 178
Accrued income taxes 5,649 75
Other noncurrent liabilities 79 121
-------- -------
Net cash provided by operating
activities 1,755 3,586
-------- -------
Cash flows from investing activities:
Additions to property, plant and
equipment, net (2,284) (3,865)
Proceeds from disposal of business,
net of cash sold 26,785
Increase in debt and equity securities (25,943) (1,980)
-------- -------
Net cash used in investing activities (1,442) (5,845)
-------- -------
Cash flows from financing activities:
Repayments of debt (352) (712)
Proceeds from issuance of debt 340
Proceeds from issuance of loan by
minority shareholder 238
Proceeds from exercise of stock options 666
Issuance of stock in connection with
the stock purchase plan 5
-------- -------
Net cash provided by (used in)
financing activities 557 (372)
-------- -------
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E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
Twenty-six Twenty-seven
weeks ended weeks ended
December 2, December 3,
1995 1994
---- ----
(in thousands)
Effect of exchange rate changes on
cash and cash equivalents $ (384) $ 233
------ ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 486 (2,398)
Cash and cash equivalents
Beginning of period 3,962 6,851
------ ------
End of period $4,448 $4,453
====== ======
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 63 $ 127
====== ======
Income taxes (net of $68,000 and
$449,000 in refunds in 1995 and
1994, respectively) $ 318 $ 111
====== ======
The accompanying notes are an integral part of these financial statements.
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E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 2, 1995 and December 3, 1994
(unaudited)
NOTE A - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of December 2, 1995, the consolidated
statement of stockholders' equity for the period ended December 2, 1995,
and the consolidated statements of earnings and cash flows for the
periods ended December 2, 1995 and December 3, 1994, have been prepared
by the Company without audit. In the opinion of management, all
adjustments (which include only normally recurring adjustments)
necessary to present fairly the financial position, changes in
stockholders' equity, results of operations and cash flows at December
2, 1995 (and for all periods presented) have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the fiscal 1995
Annual Report on Form 10-K filed by the Company on September 1, 1995.
The results of operations for the periods ended December 2, 1995 and
December 3, 1994 are not necessarily indicative of the operating
results for the respective full years.
NOTE B - INVENTORIES
Inventories consist of the following:
December 2, June 3,
1995 1995
---- ----
(in thousands)
Finished goods $11,519 $11,856
Work in process 1,800 2,214
Raw materials 9,533 8,682
------- -------
$22,852 $22,752
======= =======
NOTE C - DISCONTINUED OPERATION
On November 22, 1995 (the "Closing Date"), the Registrant completed the
sale of all of the capital stock of Surgical Dynamics Inc. ("SDI") held
by the Registrant through its subsidiary, E-Z-SUB, Inc., (collectively,
the "Company") to United States Surgical Corporation ("USSC") pursuant
to the terms of an Agreement and Plan of Merger Agreement dated November
7, 1995 (the "Merger Agreement") by and among USSC, USSC Acquisition
Corporation, SDI, CalMed Laboratories, Inc. ("CalMed") and the Company.
As of the Closing Date, the Company owned 51% (approximately 47% on a
fully diluted basis after taking into account outstanding options) of
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E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 2, 1995 and December 3, 1994
(unaudited)
NOTE C - DISCONTINUED OPERATION (continued)
the outstanding capital stock of SDI and CalMed, a company not
affiliated with the Registrant, owned 49% (approximately 45% on a fully
diluted basis after taking into account outstanding options) of the
outstanding capital stock of SDI. The aggregate consideration paid for
SDI was $59,900,000 in cash, which amount included repayment by USSC of
$200,000 of loans owed by SDI to its shareholders. After closing costs
and payments made to option holders, the Company received at closing,
cash proceeds of $27,073,000 for the sale of its interest in SDI. In
addition, $510,000 of the consideration payable to the Company is being
held back by USSC as a non-exclusive source of indemnification for
breaches of representations and warranties, and to the extent not drawn
upon, will be repaid to the Company two years after the Closing Date.
As a result of this sale, the Company recognized a gain, pre-tax of
approximately $25,692,000, after-tax of approximately $19,619,000, or
$2.10 per common share on a primary basis. The effective tax rate of
24% on the gain on the sale of SDI differs from the Federal statutory
tax rate of 35% due primarily to the utilization of previously
unrecorded tax loss and tax credit carryforwards.
SDI is a leading manufacturer of minimally invasive surgical devices for
the spine, including the NucleotomeTM for use in percutaneous diskectomy
and the Ray Threaded Fusion CageTM spine implants for use in interbody
fusions.
SDI has been reported as a discontinued operation and accordingly, the
gain from the sale of SDI and the Company's proportionate share of
earnings (loss) from operations of SDI have been reported separately
from continuing operations in the consolidated statements of earnings.
Revenues attributable to the SDI operations were approximately
$3,475,000 for the period June 4, 1995 through November 22, 1995 and
$4,879,000 for the twenty-seven weeks ended December 3, 1994. Changes
in operating assets and liabilities reflected in the consolidated
statements of cash flows includes amounts pertaining to the operations
of SDI.
NOTE D - COMMON STOCK
Under the 1983 and 1984 Stock Option Plans, options for 11,000 shares were
granted at $6.00 per share, options for 101,340 shares were exercised at
prices ranging from $4.75 to $6.25 per share and options for 42,125
shares were cancelled at prices ranging from $4.75 to $10.08 per share
during the twenty-six weeks ended December 2, 1995.
Under the Employee Stock Purchase Plan, 887 shares were purchased at
prices ranging from $4.57 to $6.38 per share during the twenty-six weeks
ended December 2, 1995. Total proceeds received by the Company
approximated $5,000.
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E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 2, 1995 and December 3, 1994
(unaudited)
NOTE E - CONTINGENCIES
Pursuant to a contractual agreement with Picker International, Inc.
("Picker"), the Company has assumed the defense of a lawsuit in which
Picker, along with multiple other named defendants, has been sued for
injuries alleged to have resulted from the use of protective aprons.
The suit has been brought by an individual plaintiff on his own behalf
and by the plaintiff on behalf of a class of persons allegedly injured
in a similar manner. The litigation is in its preliminary stages, and
it is not possible, at this time, to ascertain the extent, if any, of
the Company's liability. The Company does not believe that the ultimate
outcome in this action will have a material adverse effect on the
consolidated financial statements.
The Company is presently a defendant in two unrelated product liability
actions. These suits claim damages based upon alleged injuries
resulting from the use of one of the Company's products. The actions
are in their early stages and while the Company is actively defending
against the claims, it is unable to predict their outcome. It should be
noted that in these actions the Company is one among several defendants
and, as such, the Company's liability, if any, is not quantifiable at
this time. The Company does not believe that the ultimate outcome in
these actions will have a material adverse effect on the consolidated
financial statements.
The Company has been sued by Olympia Holding Corporation p/k/a P-I-E
Nationwide, Inc. for $443,830. The suit, filed on October 5, 1992, is
presently pending in the United States Bankruptcy Court for the Middle
District of Florida. The case is in its preliminary stages. The
Company is being represented in this action by a law firm which is also
representing numerous other defendants being sued by the same plaintiff
on the same grounds - recovery for alleged undercharges for freight
carriage. It is not possible, at this stage, to determine what, if any,
liability exists with respect to the Company in this matter. The
Company will vigorously defend against this action; it has been informed
by legal counsel that there exist numerous valid defenses to this case.
During 1993, Surgical Dynamics Inc.'s ("Surgical") lease agreement on the
Alameda, California office and production facilities was prematurely
terminated by Surgical, a former 51%-owned subsidiary of the Company.
As of the termination, the remaining future minimum lease payments
totalled approximately $3,146,000. In 1993, Surgical accrued $600,000
for the estimated settlement of the lease commitment. Pursuant to the
terms of the Merger Agreement (reference is made to Note C), the Company
and the previous minority shareholder of Surgical assumed any liability
in excess of $600,000 in connection with the lease termination. The
final resolution is dependent upon future events, the outcome of which
is not fully determinable at the present time.
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E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 2, 1995 and December 3, 1994
(unaudited)
NOTE F - RECLASSIFICATIONS
Certain reclassifications have been made to the prior year amounts to
conform to the current year presentation.
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<PAGE>
E-Z-EM, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is based on the results of continuing
operations of the Company.
QUARTERS ENDED DECEMBER 2, 1995 AND DECEMBER 3, 1994
RESULTS OF OPERATIONS
SEGMENT OVERVIEW
The diagnostic products industry segment includes both contrast systems
and non-contrast systems. Diagnostic product sales, which increased 3% in
the quarter, accounted for 88% of sales in the current quarter versus 92% in
the comparable period of last year. The AngioDynamics products industry
segment includes the Pulse SprayTM pulsed infusion and CO2 Angiographic
Injection systems and various specialty catheters, including the Soft-VuTM
angiographic catheter. AngioDynamics markets to radiologists and
cardiologists. AngioDynamics product sales, which increased 58% in the
quarter, represented 12% of sales in the current quarter versus 8% in the
comparable period of the prior year.
During the current quarter, the Company discontinued the operation of
its surgical products industry segment when it sold Surgical Dynamics Inc.
("Surgical"), its 51%-owned subsidiary, to United States Surgical
Corporation. As a result of this sale, the Company recognized a gain, pre-
tax of approximately $25,692,000, after-tax of approximately $19,619,000, or
$2.10 per common share on a primary basis. The surgical products industry
segment has been reported as a discontinued operation and accordingly, the
gain from the sale of Surgical and the Company's proportionate share of
earnings (loss) from operations of Surgical have been reported separately
from continuing operations in the consolidated statements of earnings. The
surgical products industry segment included the Nucleotome device, the Ray
Threaded Fusion CageTM and other surgical devices and accessories used in
spinal surgery.
Diagnostic segment results for the current quarter were adversely
affected by unabsorbed overhead costs associated with the relocation of a
portion of the Company's core manufacturing operations, as well as by
increased selling and marketing expenses in the Company's core business.
The unabsorbed overhead costs resulted during the planned construction at
the Company's Canadian manufacturing facility. The effects of the
relocation will continue to be felt through the third fiscal quarter,
resulting in lower than normal Canadian gross profits. Investment in new
marketing and product initiatives contributed to the increased selling and
marketing expenses.
AngioDynamics segment results for the current quarter were positively
affected by sales growth of 58% coupled with improved manufacturing
efficiencies. AngioDynamics incurred operating losses of $143,000 in the
current quarter, as compared to operating losses of $1,705,000 in the
comparable quarter of the prior year.
CONSOLIDATED RESULTS OF OPERATIONS
For the quarter ended December 2, 1995, the Company reported net
earnings of $20,087,000, or $2.15 and $2.13 per common share on a primary
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and fully diluted basis, respectively, as compared to net earnings of
$455,000, or $.05 per common share on both a primary and fully diluted
basis, for the comparable period of last year. Results for the current
quarter were positively impacted by the after-tax gain on the sale of
Surgical of $19,619,000, or $2.10 and $2.08 per common share on a primary
and fully diluted basis, respectively.
Earnings from continuing operations for the current quarter were
$506,000, or $.05 per common share on both a primary and fully diluted
basis, as compared to $450,000, or $.05 per common share on both a primary
and fully diluted basis, for the comparable period of last year. Results
from continuing operations for the current quarter were positively affected
by sales growth and improved AngioDynamics manufacturing efficiencies, and
were adversely impacted by unabsorbed overhead costs during construction at
the Company's Canadian facility, as well as by increased selling and
marketing expenses in the Company's core business.
Sales for the quarter ended December 2, 1995 increased 8% as compared
to the quarter ended December 3, 1994 due primarily to increased
AngioDynamics sales of $975,000, which includes the Pulse SprayTM pulsed
infusion system and Soft-VuTM angiographic catheter line. Price increases,
which accounted for approximately 1 1/2% of sales in the current quarter
and increased non-contrast systems sales of $307,000 also contributed to the
sales improvement. Sales in international markets, including direct exports
from the United States, increased 11%, or $884,000 in the current quarter
versus the comparable period of last year principally due to increased sales
of AngioDynamics products of $455,000, contrast systems of $292,000, and
non-contrast systems of $137,000, relating almost entirely to custom
contracts.
Gross profit expressed as a percentage of sales increased to 42% during
the current quarter from 41% in the comparable quarter of the prior year
due primarily to improved AngioDynamics manufacturing efficiencies,
partially offset by approximately $570,000 of unabsorbed overhead costs
during construction at the Company's Canadian facility.
Selling and administrative ("S&A") expenses were $8,063,000 during the
quarter ended December 2, 1995 versus $6,827,000 during the quarter ended
December 3, 1994. This increase of $1,236,000, or 18%, in the current
quarter was principally due to expanded domestic selling and marketing
efforts in the Company's core business approximating $756,000 and expanded
AngioDynamics selling and marketing efforts in both the domestic and
international marketplace approximating $222,000. Investment in new
marketing and product initiatives contributed to the increased selling and
marketing expenses in both industry segments.
Research and development ("R&D") expenditures decreased 25% in the
current quarter to $1,125,000, or 5% of sales, from $1,502,000, or 7% of
sales, in the comparable quarter of the prior year. This decline was due
primarily to reduced spending of $346,000 relating to AngioDynamics projects
and reduced spending of $117,000 relating to the commercialization of H.
pylori test-related products. Of the R&D expenditures in the current
quarter, approximately 46% relate to contrast systems, 18% to AngioDynamics
projects, 7% to immunological projects, 15% to other projects and 14% to
general regulatory costs. R&D expenditures are expected to continue at
approximately current levels.
Other income, net of expenses, decreased $47,000 in the current quarter
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versus the comparable period of last year due to declines in realized
foreign currency exchange gains of $37,000 and licensing fee income of
$20,000.
For the quarter ended December 2, 1995, the Company's effective tax
rate of 17% differed from the Federal statutory tax rate of 35% due
primarily to earnings of the Puerto Rican subsidiary, which are subject to
favorable United States tax treatment, and the utilization of net operating
loss carryforwards in certain jurisdictions. The Company's effective tax
rate was 38% during the quarter ended December 3, 1994 as compared to the
Federal statutory tax rate of 35%. Significant factors affecting the
Company's effective tax rate were earnings of the Puerto Rican subsidiary,
which are subject to favorable United States tax treatment, offset by the
fact that the Company did not provide for the tax benefit on losses incurred
in certain jurisdictions, since, at that time, it was more likely than not
that such benefits would not be realized.
TWENTY-SIX WEEKS ENDED DECEMBER 2, 1995 AND
TWENTY-SEVEN WEEKS ENDED DECEMBER 3, 1994
RESULTS OF OPERATIONS
SEGMENT OVERVIEW
Diagnostic product sales, which increased 1% during the twenty-six
weeks ended December 2, 1995, accounted for 89% of sales in the current
period versus 92% in the comparable period of last year. AngioDynamics
product sales, which increased 46% during the twenty-six weeks ended
December 2, 1995, represented 11% of sales in the current period, as
compared to 8% in the prior year.
During the current period, the Company discontinued the operation of
its surgical products industry segment when it sold Surgical Dynamics Inc.
("Surgical") to United States Surgical Corporation. As a result of this
sale, the Company recognized a gain, pre-tax of approximately $25,692,000,
after-tax of approximately $19,619,000, or $2.14 per common share on a
primary basis. The surgical products industry segment has been reported as
a discontinued operation and accordingly, the gain from the sale of Surgical
and the Company's proportionate share of earnings (loss) from operations of
Surgical have been reported separately from continuing operations in the
consolidated statements of earnings.
Diagnostic segment results for the current period were adversely
affected by unabsorbed overhead costs associated with the relocation of a
portion of the Company's core manufacturing operations, as well as by
increased selling and marketing expenses in the Company's core business.
Investment in new marketing and product initiatives contributed to the
increased selling and marketing expenses.
AngioDynamics segment results for the current period were positively
affected by sales growth of 46% coupled with improved manufacturing
efficiencies. AngioDynamics incurred operating losses of $593,000 in the
current period, as compared to operating losses of $2,346,000 in the
comparable period of last year.
CONSOLIDATED RESULTS OF OPERATIONS
For the twenty-six weeks ended December 2, 1995, the Company reported
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net earnings of $20,656,000, or $2.25 and $2.21 per common share on a
primary and fully diluted basis, respectively, as compared to net earnings
of $1,505,000, or $.17 per common share on both a primary and fully diluted
basis, for the comparable period of last year. Results for the current
period were positively impacted by the after-tax gain on the sale of
Surgical of $19,619,000, or $2.14 and $2.10 per common share on a primary
and fully diluted basis, respectively.
Earnings from continuing operations for the current period were
$1,246,000, or $.14 and $.13 per common share on a primary and fully diluted
basis, respectively, as compared to $1,502,000, or $.17 per common share on
both a primary and fully diluted basis, for the comparable period of last
year. Results from continuing operations for the current quarter were
adversely impacted by unabsorbed overhead costs during construction at the
Company's Canadian facility, as well as by increased selling and marketing
expenses in the Company's core business, and were positively affected by
sales growth and improved AngioDynamics manufacturing efficiencies.
Sales for the twenty-six weeks ended December 2, 1995 increased 5% as
compared to the twenty-seven weeks ended December 3, 1994 due primarily to
increased AngioDynamics sales of $1,566,000, which includes the Pulse
SprayTM pulsed infusion system and Soft-VuTM angiographic catheter line and
non-contrast systems sales of $437,000. Price increases, which accounted
for approximately 1 1/2% of sales in the current period, offset the reduced
demand for the Company's core contrast systems. Sales in international
markets, including direct exports from the United States, increased 8%, or
$1,200,000 in the current period versus the comparable period of last year
principally due to increased sales of AngioDynamics products of $573,000,
contrast systems of $381,000, and non-contrast systems of $246,000, relating
almost entirely to custom contracts.
Gross profit expressed as a percentage of sales was 42% during both the
current period and the comparable period of last year. Gross profit in the
current period was positively affected by improved AngioDynamics
manufacturing efficiencies, and was negatively impacted by approximately
$1,240,000 of unabsorbed overhead costs during construction at the Company's
Canadian facility.
S&A expenses were $15,053,000 during the twenty- six weeks ended December
2, 1995 versus $13,620,000 during the twenty-seven weeks ended December 3, 1994.
This increase of $1,433,000, or 11%, in the current period was principally due
to expanded domestic selling and marketing efforts in the Company's core
business approximating $825,000 and expanded AngioDynamics selling and marketing
efforts in both the domestic and international marketplace approximating
$441,000. Investment in new marketing and product initiatives contributed to the
increased selling and marketing expenses in both industry segments.
R&D expenditures decreased 18% in the current period to $2,442,000, or
5% of sales, from $2,970,000, or 7% of sales, in the comparable prior year
period. This decline was due primarily to reduced spending of $283,000
relating to the commercialization of H. pylori test-related products and
reduced spending of $182,000 relating to AngioDynamics projects. Of the R&D
expenditures in the current period, approximately 36% relate to contrast
systems, 33% to AngioDynamics projects, 7% to immunological projects, 13% to
other projects and 11% to general regulatory costs.
Other income, net of expenses, decreased $228,000 versus the comparable
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<PAGE>
period of last year principally due to the discounting effect of an
interest free loan, which the Company repaid during the comparable period of
the prior year.
For the twenty-six weeks ended December 2, 1995, the Company's
effective tax rate of 16% differed from the Federal statutory tax rate of
35% due primarily to earnings of the Puerto Rican subsidiary, which are
subject to favorable United States tax treatment, and the utilization of net
operating loss carryforwards in certain jurisdictions. The Company's
effective tax rate of 27% during the twenty-seven weeks ended December 3,
1994 differed from the Federal statutory tax rate of 35% due primarily to
earnings of the Puerto Rican subsidiary, which are subject to favorable
United States tax treatment, and was partially offset by the fact that the
Company did not provide for the tax benefit on losses incurred in certain
jurisdictions, since, at that time, it was more likely than not that such
benefits would not be realized.
LIQUIDITY AND CAPITAL RESOURCES
During the twenty-six weeks ended December 2, 1995, capital
expenditures and increased inventory levels (on continuing operations) were
funded primarily by cash provided by operations. As a result of the sale of
Surgical Dynamics in November 1995, the Company increased its cash reserves
by approximately $27,000,000, of which approximately $6,000,000 in Federal
income taxes will be paid in February 1996. The proceeds from the sale of
Surgical have currently been invested in debt securities. The Company's
policy has been to fund capital requirements without incurring significant
debt. At December 2, 1995, debt (notes payable, current maturities of
long-term debt and long-term debt) declined to $1,464,000 from $2,343,000
at June 3, 1995 and from a previously reported high of $6,219,000 at
February 27, 1993. The Company has available $4,732,000 under various bank
lines of credit of which no amounts were outstanding at December 2, 1995.
The Company's current policy has been to issue stock dividends. During
the third quarter of fiscals 1993, 1994 and 1995, the Company issued 3%
stock dividends.
Presently, the Company is continuing to look for both new and
complementary lines of business for expansion in order to ensure its
continued growth.
At December 2, 1995, approximately 68% of the Company's assets consist
of debt and equity securities, inventories, accounts receivable, and cash
and cash equivalents. Inventories (on continuing operations) have increased
at a greater rate than sales as a result of broadened product lines. The
current ratio is 3.91 to 1, with net working capital of $52,244,000 at
December 2, 1995, as compared to the current ratio of 3.39 to 1, with net
working capital of $33,254,000 at June 3, 1995. The improvement in both the
current ratio and net working capital is a direct result of the cash
proceeds received from the sale of Surgical Dynamics.
During the quarter ended September 2, 1995, the Company entered into a
license agreement to distribute a certain product with commitments which
could aggregate $550,000 over the next two to three fiscal years.
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<PAGE>
E-Z-EM, Inc. and Subsidiaries
Part II: Other Information
ITEM 1. LEGAL PROCEEDINGS
Pursuant to a contractual agreement with Picker International, Inc.
("Picker"), the Company has assumed the defense of a lawsuit in which
Picker, along with multiple other named defendants, has been sued for
injuries alleged to have resulted from the use of protective aprons. The
suit has been brought by an individual plaintiff on his own behalf and by
the plaintiff on behalf of a class of persons allegedly injured in a similar
manner. The litigation is in its preliminary stages, and it is not
possible, at this time, to ascertain the extent, if any, of the Company's
liability. The Company does not believe that the ultimate outcome in this
action will have a material adverse effect on the consolidated financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held October 12, 1995, the
following persons were elected as Directors of the Company:
CLASS I DIRECTOR: (until the 1997 Annual Meeting)
Michael A. Davis
CLASS II DIRECTORS: (until the 1998 Annual Meeting)
Paul S. Echenberg
Donald A. Meyer
Robert M. Topol
In this election, 3,376,678 votes were cast for Mr. Davis, 3,378,278
votes were cast for Messrs. Echenberg and Topol, 3,378,263 votes were cast
for Mr. Meyer, 196,371 votes were cast against Mr. Davis, 194,771 votes were
cast against Messrs. Echenberg and Topol, 194,786 votes were cast against
Mr. Meyer, and no shares abstained from voting.
The following Directors continue in office for the duration of their
terms:
CLASS I DIRECTORS: (until the 1997 Annual Meeting)
James L. Katz
Daniel R. Martin
CLASS III DIRECTORS: (until the 1996 Annual Meeting)
Phillip H. Meyers, M.D.
Irwin H. Nadel
Howard S. Stern
A proposed amendment to the Company's Restated Certificate of
Incorporation to (i) decrease the number of authorized shares of Class A
Common Stock from 12,000,000 to 6,000,000 and (ii) increase the number of
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authorized shares of Class B Common Stock from 6,000,000 to 10,000,000 was
approved by a vote of 2,916,855 in favor, 652,977 against, and 3,217 shares
abstaining.
A proposed amendment to the Company's 1983 Employee Stock Option Plan
to (i) extend the term, (ii) approve an increase in the number of authorized
shares reserved for issuance from 1,500,000 to 1,600,000, and (iii) provide
that no recipient of options may be granted options in excess of twenty-five
(25%) percent of the maximum number of shares authorized to be issued was
approved by a vote of 2,892,027 in favor, 678,722 against, and 2,300 shares
abstaining.
A proposed amendment to the Company's 1984 Directors and Consultants
Stock Option Plan to (i) extend the term, (ii) approve an increase in the
number of authorized shares reserved for issuance from 300,000 to 400,000,
and (iii) provide that no recipient of options may be granted options in
excess of twenty-five percent (25%) of the maximum number of shares
authorized to be issued was approved by a vote of 3,123,217 in favor,
447,982 against, and 1,850 shares abstaining.
In addition, the action of the Board of Directors in appointing Grant
Thornton LLP as the Company's independent auditors for fiscal year 1996 was
approved by a vote of 3,570,683 in favor, 1,539 against, and 827 shares
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
No. Description
--- -----------
3(i) Restated Certificate of Incorporation, as amended
10(a) 1983 Stock Option Plan
10(b) 1984 Directors and Consultants Stock Option Plan
27 Financial data schedule
(b) REPORTS ON FORM 8-K
During the quarter ended December 2, 1995, one report on Form 8-K,
dated November 22, 1995, was filed. The report included Item 2 (Disposition
of Assets) and Item 7 (Pro Forma Financial Information and Exhibits).
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
E-Z-EM, Inc.
----------------------------------
(Registrant)
Date January 12, 1996 /s/ Daniel R. Martin
---------------- ----------------------------------
Daniel R. Martin, President, Chief
Executive Officer and Director
Date January 12, 1996 /s/ Dennis J. Curtin
---------------- ----------------------------------
Dennis J. Curtin, Vice President-
Finance (Chief Accounting and
Financial Officer)
EXHIBIT (3)(i)
RESTATED
CERTIFICATE OF INCORPORATION
OF
E-Z-EM, INC.
This Restated Certificate of Incorporation of E-Z-EM, Inc.
(the "Company") has been duly executed and is being filed by the Company to
restate its Certificate of Incorporation, which was originally filed on August
5, 1983, with the Secretary of State of the State of Delaware (the
"Certificate"). The Restated Certificate of Incorporation, which was duly
adopted in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware, only restates and integrates and does
not further amend the provisions of the Company's Certificate as theretofore
amended or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation.
The Certificate is hereby restated in its entirety to read as
follows:
1. NAME. The name of the corporation is E-Z-EM, Inc.
(the "Company").
2. REGISTERED OFFICE AND AGENT. The address of the
Company's registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The
Corporation Trust Company.
3. PURPOSE. The purposes for which the Company is
formed are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law
of Delaware and to possess and exercise all of the powers and
privileges granted by such law and any other law of Delaware.
4. AUTHORIZED CAPITAL. The total number of shares of all
classes of capital stock that the Company shall have authority to issue shall be
19,000,000, consisting of 1,000,000 shares of preferred stock, $.10 per share
("Preferred Stock"), and 18,000,000 shares of common stock, consisting of
12,000,000 shares of Class A Common Stock, par value $0.10 per share ("Class A
Common Stock"), and 6,000,000 shares of Class B Common Stock, par value $0.10
per share ("Class B Common Stock" and, together with the Class A Common Stock,
"Common Stock").
<PAGE>
4.1. TERMS OF THE CLASS A COMMON STOCK AND CLASS B
COMMON STOCK. The powers, preferences and rights of the Class A Common Stock and
the Class B Common Stock, and the qualifications, limitations and restrictions
thereof, shall be in all respects identical except as otherwise required by law
or expressly provided in this Certificate of Incorporation, as amended.
4.1.1. VOTING. Except as otherwise provided by
the Board of Directors in fixing the voting rights of any series of Preferred
Stock in accordance with Section 4.2 of this Article 4 or as otherwise required
by law or expressly provided in this Certificate of Incorporation, voting power
in the election of directors and for all other purposes shall be vested
exclusively in the holders of Class A Common Stock, and each holder of Class A
Common Stock shall be entitled to one vote for each share of Class A Common
Stock held. Notwithstanding anything to the contrary contained in this
Certificate of Incorporation, no action may be taken without the affirmative
vote of sixty-six percent (66%) of the outstanding shares of Class A Common
Stock with respect to any (i) amendment of this Certificate of Incorporation,
(ii) reduction of capital, (iii) merger or consolidation of the Company with one
or more other corporations, (iv) sale, conveyance, lease, mortgage, pledge, or
exchange of all or substantially all of the Company's property or assets or (v)
liquidation, dissolution, or winding up of the Company. The Class B Common Stock
shall have no voting rights on any matters except as otherwise required by law
or expressly provided in this Certificate of Incorporation.
4.1.2. DIVIDENDS AND OTHER DISTRIBUTIONS. The
record holders of Common Stock shall be entitled to receive such dividends and
other distributions in cash, stock or property of the Company as may be declared
thereon by the Board of Directors out of funds legally available therefor. Each
share of Class A Common Stock and each share of Class B Common Stock shall have
identical rights with respect to dividends and distributions (including
distributions in connection with any recapitalization, and upon liquidation,
dissolution or winding up of the Company); provided that, in the case of cash
dividends, the payment per share of Class B Common Stock may be higher (but in
no event lower) than the payment per share of Class A Common Stock; and
provided, further, that dividends or other distributions payable on Common Stock
in shares of Common Stock shall be made to all holders of Common Stock and may
be made only as follows: (i) in shares of Class B Common Stock to the record
holders of Class A Common Stock and to record holders of Class B Common Stock;
or (ii) in shares of Class A Common Stock to the record holders of Class A
Common Stock and in shares of Class B Common Stock to the record holders of
Class B Common Stock.
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<PAGE>
4.1.3. CONVERTIBILITY. Except as described
below, neither the Class A Common Stock nor the Class B Common Stock shall be
convertible into another class of Common Stock or any other security of the
Company.
(a) All outstanding shares of Class B Common
Stock may be converted into shares of Class A Common Stock on a share-for-share
basis by resolution of the Board of Directors if, as a result of the existence
of the Class B Common Stock, either the Class A Common Stock or the Class B
Common Stock is, or both are, excluded from quotation on the National
Association of Securities Dealers, Inc. Automated Quotation System National
Market System (the "NASDAQ/NMS") or, if such shares are quoted on another
national quotation system or listed on a national securities exchange, from
trading on the principal national quotation system or principal national
securities exchange on which such securities are traded.
(b) All outstanding shares of Class B Common
Stock shall be immediately converted into shares of Class A Common Stock on a
share-for-share basis if at any time the number of outstanding shares of Class A
Common Stock as reflected on the stock transfer records of the Company falls
below 10% of the aggregate number of outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, any shares of Common Stock
repurchased or otherwise acquired by the Company and held as treasury shares
shall not be deemed "outstanding" from and after the date of acquisition.
(c) In the event of any conversion of the Class B
Common Stock pursuant to subsection (a) or (b) of this Section 4.1.3,
certificates that formerly represented outstanding shares of Class B Common
Stock will thereafter be deemed to represent a like number of shares of Class A
Common Stock and all shares of Common Stock authorized by this Certificate of
Incorporation shall be deemed to be shares of Class A Common Stock.
4.1.4. CLASS B PROTECTION. (a) If at any time
after the effective time of this amendment of Article 4 (the "Effective Time")
either (i) any person or group acquires (other than upon issuance or sale by the
Company, by operation of law, by will or the laws of descent and distribution,
by gift, or by foreclosure of a bona fide loan) beneficial ownership of shares
of Class A Common Stock constituting 10% or more of the then issued and
outstanding shares of Class A Common Stock or (ii) any group is formed whose
members have acquired after the Effective Time (other than upon issuance or sale
by the Company, by operation of law, by will or the laws of descent and
distribution, by gift, or by foreclosure of a bona fide loan) beneficial
ownership of shares of Class A Common Stock constituting 10% or more of the then
issued and outstanding shares of Class A Common Stock (any person or group
making any
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<PAGE>
such acquisition or any group so formed being hereinafter referred to in this
Section 4.1.4 as a "Significant Shareholder"), and such person or group does not
at the time of such acquisition beneficially own shares of Class B Common Stock
acquired after the time at which the Company shall have first made a
distribution of one share of Class B Common Stock for each share of Class A
Common Stock (hereafter referred to in this Section 4.1.4 as the "Distribution")
constituting an equal or greater percentage of the then issued and outstanding
shares of Class B Common Stock, such Significant Shareholder shall, within the
90-day period beginning the date after becoming a Significant Shareholder,
commence a public cash tender offer to purchase additional shares of Class B
Common Stock (a "Class B Protection Transaction") in accordance with this
Section 4.1.4.
(b) In a Class B Protection Transaction, the
Significant Shareholder shall offer to purchase for cash from the holders of the
Class B Common Stock, pursuant to a public tender offer that is in compliance
with all applicable laws and regulations, at the price determined pursuant to
the formula set forth in subsection (d) of this Section 4.1.4, that number of
additional shares of Class B Common Stock (the "Additional Shares") determined
by (i) multiplying (x) the percentage of issued and outstanding shares of Class
A Common Stock that were beneficially owned by such person or group on the date
(the "Trigger Date") on which such person or group became a Significant
Shareholder and acquired by such Significant Shareholder after the Effective
Time by (y) the number of shares of Class B Common Stock issued and outstanding
on the Trigger Date and (ii) subtracting from such product the number of shares
of Class B Common Stock that were beneficially owned by such Significant
Shareholder on the Trigger Date and acquired by such Significant Shareholder
after the Distribution (including shares acquired on the Trigger Date at or
prior to the time such person or group became a Significant Shareholder). The
Significant Shareholder shall purchase all shares validly tendered in such Class
B Protection Transaction and not withdrawn; provided, however, that if the
number of shares of Class B Common Stock so tendered and not withdrawn exceeds
the number of shares required to be purchased pursuant to the formula set forth
above in this subsection (b), the number of shares of Class B Common Stock
purchased from each tendering holder shall be pro rata in proportion to the
total number of shares of Class B Common Stock so tendered and not withdrawn by
all tendering holders.
(c) A Class B Protection Transaction shall also
be effected by any Significant Shareholder that acquires, or joins a group whose
members (after giving effect to such joining) have since the Effective Time
acquired, beneficial ownership of additional shares of Class A Common Stock
(other than upon issuance or sale by the Company, by operation of law, by will
or the laws of descent and distribution, by gift, or by foreclosure
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<PAGE>
of a bona fide loan) if (i) such additional acquisition or joining results in
such Significant Shareholder beneficially owning shares of Class A Common Stock
acquired after the Effective Time representing the next higher integral multiple
of 5% (e.g., 15%, 20%, 25%, etc.) of the total number of shares of Class A
Common Stock issued and outstanding on the date of such acquisition or joining
(a "Subsequent Trigger Date") and (ii) such Significant Shareholder (after
giving effect to such joining, if any) does not on such Subsequent Trigger Date
beneficially own shares of Class B Common Stock acquired after the Distribution
constituting an equal or greater percentage of the total number of shares of
Class B Common Stock issued and outstanding on such Subsequent Trigger Date.
Such Significant Shareholder shall be required to offer to purchase, through a
public cash tender offer that is in compliance with all applicable laws and
regulations, that number of Additional Shares determined by (i) multiplying (x)
the percentage of issued and outstanding shares of Class A Common Stock that
were beneficially owned by such Significant Shareholder on such Subsequent
Trigger Date and acquired by such Significant Shareholder after the Effective
Time by (y) the number of shares of Class B Common Stock issued and outstanding
on such Subsequent Trigger Date and (ii) subtracting from such product the
number of shares of Class B Common Stock that were beneficially owned by such
Significant Shareholder on such Subsequent Trigger Date and acquired by such
Significant Shareholder after the Distribution (including shares acquired on
such Subsequent Trigger Date at or prior to the time such Significant
Shareholder acquired the shares of Class A Common Stock resulting in ownership
of applicable higher integral multiple of 5%). Such Significant Shareholder
shall purchase all shares validly tendered and not withdrawn, or a pro rata
portion thereof as specified in subsection (b) of this Section 4.1.4, at the
price determined pursuant to the formula set forth in subsection (d) of this
Section 4.1.4, even if a previous Class B Protection Transaction resulted in
fewer shares of Class B Common Stock being purchased than the previous tender
offer included.
(d) The offer price for any shares of Class B
Common Stock to be purchased by a Significant Shareholder pursuant to a Class B
Protection Transaction shall be the greater of (i) the highest price per share
paid by such Significant Shareholder for any share of Class A Common Stock in
the six-month period ending on the applicable Trigger Date or Subsequent Trigger
Date, as the case may be, and (ii) the highest bid price of a share of Class A
Common Stock or Class B Common Stock (whichever is higher) on the NASDAQ/NMS (or
such other quotation system or securities exchange constituting the principal
trading market for either class of Common Stock) on such Trigger Date or
Subsequent Trigger Date, as the case may be. In the event that the Significant
Shareholder has acquired shares of Class A Common Stock during such six-month
period for consideration other than
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<PAGE>
cash, the value of such consideration per share shall be as determined in good
faith by the Board of Directors.
(e) A Class B Protection Transaction shall be
deemed to have been effected by making the requisite public cash tender offer
and purchasing (after proration, if applicable) all shares that have been
validly tendered into such tender offer and not withdrawn, even if the number of
shares purchased is less than the number of shares included in such tender
offer.
(f) If any Significant Shareholder fails either
to make a public cash tender offer as provided in by this Section 4.1.4 or to
purchase (after proration, if applicable), all shares validly tendered into such
tender offer and not withdrawn, such Significant Shareholder shall not be
entitled to vote any shares of Class A Common Stock beneficially owned by such
Significant Shareholder and acquired by such Significant Shareholder after the
Effective Time unless and until either (i) the provisions of this Section 4.1.4
are complied with or (ii) all shares of Class A Common Stock whose acquisition
after the Effective Time resulted in the occurrence of a Trigger Date or
Subsequent Trigger Date are no longer beneficially owned by such Significant
Shareholder. To the extent that the voting power of any shares of Class A Common
Stock is so suspended, such shares shall not be included in the determination of
aggregate voting shares for any purpose under this Certificate of Incorporation
or applicable law.
(g) Neither a Trigger Date nor a Subsequent
Trigger Date shall be deemed to have occurred in the event of any increase in
percentage ownership of Class A Common Stock resulting solely from a change in
the total amount of Class A Common Stock outstanding; provided that any
acquisition by any person or group occurring after such change shall be subject
to any Class B Protection Transactions provisions that would otherwise apply
pursuant to this Section 4.1.4.
(h) All calculations with respect to percentage
ownership of issued and outstanding shares of either class of Common Stock shall
be based upon the numbers of issued and outstanding shares reported by the
Company on the last filed of the Company's: (i) most recent Annual Report on
Form 10-K; (ii) most recent Quarterly Report on Form 10-Q; or (iii) most recent
Current Report on Form 8-K, if any.
(i) In the event of an acquisition of Class A
Common Stock by the Company, acquired shares shall be considered issued and
outstanding for purposes of determining the Company's obligations under this
Section 4.1.4.
(j) For purposes of this Section 4.1.4: (i) the
meanings of the terms "beneficially own" and "beneficial
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<PAGE>
ownership" shall be determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision; (ii) whether a "group" has been formed or exists shall be
determined in accordance with Rule 13d-5(b) promulgated under the Exchange Act,
or any successor provision; (iii) the term "person" shall mean any individual,
partnership, joint venture, corporation, trust, incorporated organization,
government or governmental department or agency, or any other individual or
entity that would be deemed a "person" under Section 13(d)(3) of the Exchange
Act, or any successor provision; and (iv) shares of Class A Common Stock that
were acquired by a person or group beneficially owning shares of common stock of
the Company immediately prior to the Effective Time solely by virtue of the
reclassification of such shares into shares of Class A Common Stock at the
Effective Time shall not constitute shares of Class A Common Stock acquired
after the Effective Time. Shares of Class B Common Stock that were acquired by a
person or group beneficially owning shares of Class A Common Stock on the record
date for the Distribution pursuant to the Distribution shall not constitute
shares of Class B Common Stock acquired after the Distribution.
4.1.5. MERGER AND CONSOLIDATION. In the event
of a merger or consolidation of the Company with or into another entity (whether
or not the Company is the surviving entity), the holders of Class B Common Stock
shall be entitled to receive the same amount and form of consideration per share
as the per-share consideration, if any, received by any holder of the Class A
Common Stock in such merger or consolidation.
4.1.6. SUBDIVISION OF SHARES. If the Company
shall in any manner split, subdivide or combine the outstanding shares of Class
A Common Stock or Class B Common Stock, the outstanding shares of the other such
class of Common Stock shall be proportionally split, subdivided or combined in
the same manner and on the same basis as the outstanding shares of the other
class of Common Stock have been split, subdivided or combined.
4.1.7. POWER TO SELL AND PURCHASE SHARES. The
Board of Directors shall have the power to cause the Company to issue and sell
all or any part of any class of stock herein or hereafter authorized to such
persons, firms, associations or corporations, and for such consideration, as the
Board of Directors shall from time to time, in its discretion, determine,
whether or not greater consideration could be received upon the issue or sale of
the same number of shares of another class, and as otherwise permitted by law.
The Board of Directors shall have the power to cause the Company to purchase,
out of funds legally available therefor, any class of stock herein or hereafter
authorized from such persons, firms, associations or corporations, and for such
consideration, as the Board of
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<PAGE>
Directors shall from time to time, in its discretion, determine, whether or not
less consideration could be paid upon the purchase of the same number of shares
of another class, and as otherwise permitted by law.
4.1.8. INCREASE OR DECREASE IN NUMBER OF
SHARES. The number of authorized shares of Class B Common Stock may be increased
or decreased (but not below the number of shares then outstanding) by the
affirmative vote of sixty-six percent (66%) of the outstanding shares of the
Class A Common Stock.
4.2. PREFERRED STOCK. The Board of Directors
shall have the power by resolution to (i) provide for the issuance of shares of
Preferred Stock in series, (ii) determine the number of shares in any such
series and (iii) fix the designations, preferences, qualifications, limitations,
restrictions, and special or relative rights of the Preferred Stock or any
series thereof.
5. TERM. The Company is to have perpetual existence.
6. BYLAWS. The bylaws of the Company may be altered,
amended or repealed by the vote of a majority of all the
directors or by the vote of holders of a majority of the
outstanding stock entitled to vote.
7. LIMITATION OF LIABILITY. No director of the Company shall
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 26th day of October, 1992.
E-Z-EM, INC.
/s/ Daniel Martin
--------------------------------
Daniel Martin
President and Chief Operating
Officer
ATTEST:
/s/ W. Philip Van Kirk
- ----------------------
W. Philip Van Kirk
Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
E-Z-EM, INC.
Under Section 242 of the General Corporation Law
================================================================================
It is hereby certified that:
1. The name of the corporation is E-Z-EM, Inc. (the
"Company").
2. The Restated Certificate of Incorporation of the Company
(the "Restated Certificate of Incorporation") is hereby amended in accordance
with the following resolution:
RESOLVED, that the First Paragraph of Article 4 of
the Restated Certificate of Incorporation of the Company is hereby
amended to read in its entirety as follows:
"4. AUTHORIZED CAPITAL. The total number of shares of
all classes of capital stock that the Company shall have
authority to issue shall be 17,000,000, consisting of
1,000,000 shares of preferred stock, $.10 par value per share
("Preferred Stock"), and 16,000,000 shares of common stock,
consisting of 6,000,000 shares of Class A Common Stock, $.10
par value per share ("Class A Common Stock") and 10,000,000
shares of Class B Common Stock, $.10 par value per share
("Class B Common Stock" and together with the Class A Common
Stock, "Common Stock")."
3. This Amendment of the Restated Certificate of Incorporation
herein certified has been duly adopted in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands this 11th
day of December 1995.
E-Z-EM, INC.
/s/ Dennis J. Curtin
-------------------------------------
By: Dennis J. Curtin
Title: Vice President - Finance
ATTEST:
/s/ Terry S. Zisowitz
- -----------------------------------
By: Terry S. Zisowitz
Title: Vice President - Legal and Regulatory Affairs
-2-
EXHIBIT 10(a)
E-Z-EM, INC.
1983 STOCK OPTION PLAN
(As amended through October 12, 1995)
1. PURPOSE OF PLAN
The purpose of the Plan is to assist the Company in the
continued employment of valued employees by offering them a
greater stake in the Company's success and a closer identity with
it, and to aid in gaining the services of individuals whose
employment would be helpful to the Company and would contribute
to its success.
2. DEFINITIONS
(a) "Board" means the board of directors of the Parent
Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the committee described in
Paragraph 5.
(d) "Company" means E-Z-EM, Inc. and each of its
Subsidiary Companies.
(e) "Date of Grant" means the date on which an Option
is granted.
(f) "Incentive Stock Option" shall mean an option granted
under the Plan, designated by the Committee at the time of such grant as an
Incentive Stock Option and containing the terms specified herein for Incentive
Stock Options.
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(g) "Non-Qualified Option" shall mean an option granted under
the Plan, designated by the Committee at the time of such grant as a
Non-Qualified Option and containing the terms specified herein for Non-Qualified
Options.
(h) "Option" means any stock option granted under the
Plan and described either in Paragraph 3(a) or 3(b).
(i) "Optionee" means a person to whom an Option has been
granted under the Plan, which Option has not been exercised and has not expired
or terminated.
(j) "Parent Company" means E-Z-EM, Inc.
(k) "Shares" means shares of common stock of the
Parent Company.
(l) "Subsidiary Companies" means all corporations that, at the
time in question, are subsidiary corporations of the Parent Company within the
meaning of Section 425(f) of the Code.
(m) "Ten Percent Shareholder" means a person who on the Date
of the Grant owns, either directly or within the meaning of the attribution
rules contained in Section 425(d) of the Code, stock possessing more than ten
percent of the total combined voting power of all classes of stock of his or her
employer corporation or of its parent or subsidiary corporations, as defined
respectively in Sections 425 (e) and (f) of the Code.
(n) "Value" means on any given date, the closing price of the
Shares as reported by NASDAQ, or if listed on a national exchange, the closing
price of the Shares on such exchange on such date.
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3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are:
(a) Incentive Stock Options, that give the Optionee the right
for a specified time period to purchase a specified number of Shares for a price
not less than their Value on the Date of Grant; and
(b) Non-Qualified Options, that give the Optionee the right
for a specified time period to purchase a specified number of Shares for a price
not less than their Value on the Date of the Grant.
Options granted prior to and exercised on or after October 26,
1992 are exercisable for Shares consisting of half Class A Common Stock and half
Class B Common Stock. Options granted on or after October 26, 1992 are
exercisable for Shares consisting of Class B Common Stock only.
4. STOCK SUBJECT TO PLAN
Not more than 1,600,000 Shares in the aggregate may be issued
pursuant to the Plan upon exercise of Options. If an Option terminates without
having been exercised in whole or part, other Options may be granted covering
the Shares as to which the Option was not exercised. Notwithstanding anything
contained in the Plan to the contrary, no recipient of Options may be granted
options to purchase in excess of twenty-five percent (25%) of the maximum number
of Shares authorized to be issued under the Plan.
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5. ADMINISTRATION OF PLAN
To the extent required by Rule 16b-3 under the Securities
Exchange Act of 1934 (or any similar rule of the Securities and Exchange
Commission), the Plan shall be administered by the Compensation Committee, which
shall be composed of two directors of the Parent Company, appointed by the
Board.
6. GRANT OF RIGHTS
The Committee may grant Options to eligible employees of the
Company.
7. ELIGIBILITY
(a) Options may be granted only to employees of the Company
who are officers or persons whose principal duties consist of supervising the
work of other employees of the Company, including employees who are also
directors.
(b) An Incentive Stock Option shall not be granted to a Ten
Percent Shareholder except on such terms concerning the Option Price and period
of exercise as are provided in Paragraph 8 with respect to such a person.
8. OPTION AGREEMENTS AND TERMS
All options shall be granted within ten years of December 31,
1995 and be evidenced by option agreements that shall be executed on behalf of
the Parent Company and by the respective Optionees. The terms of each such
agreement shall be determined from time to time by the Committee consistent,
however, with the following:
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(a) OPTION PRICE. The option price per Share shall be
determined by the Committee but shall not be less than 100 percent of the Value
of the Shares on the Date of Grant; provided that with respect to any Incentive
Stock Options granted to a Ten Percent Shareholder, the option price per Share
shall not be less than 110 percent of the Value of the Shares on the Date of
Grant.
(b) RESTRICTION ON TRANSFERABILITY. An Option shall not be
transferable otherwise than by will or the laws of descent and distribution and,
during the lifetime of the Optionee, shall be exercisable only by him or her.
Upon the death of an Optionee, the person to whom the rights shall have passed
by will or by the laws of descent and distribution may exercise any Options in
accordance with the provisions of Paragraph 8(e).
(c) PAYMENT. Full payment for Shares purchased upon the
exercise of an Option shall be made in cash or, at the election of the Optionee
and subject to the approval of the Committee, by surrendering Shares with an
aggregate Value equal to the aggregate option price or by delivering such
combination of Shares and cash as the Committee may in its discretion approve.
(d) ISSUANCE OF CERTIFICATES; PAYMENT OF CASH. Only whole
Shares shall be issuable upon exercise of Options. Any right to a fractional
Share shall be satisfied in cash. Upon payment of the option price, a
certificate for the number of whole Shares and a check for the Value on the date
of exercise of
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the fractional share to which the Optionee is entitled shall be delivered to
such Optionee by the Parent Company. If listed on a national exchange, the
Parent Company shall not be obligated to deliver any certificates for Shares
until such Shares have been listed (or authorized for listing upon official
notice of issuance) upon each stock exchange upon which outstanding Shares of
such class at the time are listed nor until there has been compliance with such
laws or regulations as the Parent Company may deem applicable. The Parent
Company shall use its best efforts to effect such listing and compliance.
(e) PERIODS OF EXERCISE OF OPTIONS. An Option shall be
exercisable in whole or in part at such time as may be determined by the
Committee and stated in the option agreement, provided that an Incentive Stock
Option shall not be exercisable after five years from the Date of Grant in the
case of an Option granted to a Ten Percent Shareholder and any other Option
shall not be exercisable after ten years from the Date of Grant in all other
cases, except as provided below:
(i) Subject to the limitations on the exercise of
Incentive Stock Options contained in Paragraph 9, in
the event that an Optionee ceases to be employed by
the Company for any reason other than death, an
Option shall not be exercisable after 3 months from
the date the Optionee ceases to be employed by the
Company; provided that if such cessation of
employment is due to the disability
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or the retirement of the Optionee he or she shall
have the right to exercise his or her Options to the
extent determined by the Committee in its discretion
and set forth in the option agreement, even if the
date of exercise is within any time period prescribed
by the Plan prior to which such Option shall not be
exercisable, PROVIDED, HOWEVER, that in no event
shall an Incentive Stock Option be exercisable after
five years from the Date of Grant in the case of Ten
Percent Shareholder and no other Option shall be
exercisable after ten years from the Date of Grant in
all other cases; and
(ii) In the event that an Optionee ceases to be
employed by the Company by reason of his or her
death, an Incentive Stock Option shall not be
exercisable after six months from the date of death
and a Non-Qualified Option shall not be exercisable
after one year from the date of death; provided that
in such event, the person to whom the rights of the
Optionee shall have passed by will or by the laws of
descent and distribution may exercise any of the
descendent's Options to the extent determined by the
Committee in its discretion and set forth in the
option agreement, even if the date of exercise is
within any time
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period prescribed by the Plan prior to which such
Option shall not be exercisable, and provided that an
Incentive Stock Option shall not be exercisable after
five years from the Date of Grant in the case of a
Ten Percent Shareholder and any to her Option shall
not be exercisable after ten years from the Date of
Grant in all other cases.
(f) DATE OF EXERCISE. The date of exercise of an Option shall
be the date on which written notice of exercise, addressed to the Parent Company
at its main office to the attention of its Treasurer, is hand delivered,
telecopied or mailed, first class postage prepaid; provided that the Parent
Company shall not be obliged to deliver any certificates for Shares pursuant to
the exercise of an Option until the Optionee shall have made payment in full of
the option price for such Shares. Each such exercise shall be irrevocable when
given. Each notice of exercise must state whether the Optionee is exercising an
Incentive Stock Option or a Non-Qualified Option and must include a statement of
preference as to the manner in which payment to the Parent Company shall be made
(Shares or cash or a combination of Shares and cash).
(g) TERMINATION OF STATUS. For the purposes of the Plan a
transfer of an employee between two employers, each of which is a Company, shall
not be deemed a termination of employment.
(h) NO RELATION BETWEEN INCENTIVE STOCK OPTIONS AND
NON-QUALIFIED OPTIONS. The grant, exercise, termination or
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expiration of any Incentive Stock Option granted to an Optionee shall have no
effect upon any Non-Qualified Option held by such Optionee, nor shall the grant,
exercise, termination or expiration of any Non-Qualified Option granted to an
Optionee have any effect upon any Incentive Stock Option held by such Optionee.
(i) CONTINUED EMPLOYMENT. Each Optionee holding an Incentive
Stock Option shall agree that the Company shall have the right to require him to
continue in the service of the Company for such period, not less than two years
from the date the option was granted, as the Board may determine and as may be
stated in the option agreement.
(j) CONVERSION OF INCENTIVE STOCK OPTIONS. With the consent of
the Committee, an Optionee holding an Incentive Stock Option may convert such
Option to a Non-Qualified Option in which event, unless otherwise determine by
the Committee and stated in the amended option agreement (i) such Option shall
be exercisable until ten years from the original Date of Grant, (ii) the option
price per Share shall be 100 percent of the Value of the Shares on the original
Date of Grant, and (iii) such Option shall thereupon cease to be an Incentive
Stock Option hereunder and shall be a Non-Qualified Option hereunder.
9. LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS
The aggregate fair market value (determined as of the time
Options are granted) of the shares with respect to which Incentive Stock Options
may first become exercisable by an Optionee in any one calendar year under the
Plan and any other
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plan of his or her employer corporation and its parent subsidiary corporations,
as defined respectively in sections 425(e) and (f) of the Code, shall not exceed
$100,000. The foregoing limitation shall apply only to Incentive Stock Options
granted under the Plan, and not to any other Options granted under the Plan.
10. RIGHTS AS STOCKHOLDERS
An Optionee shall have no right as a stockholder with respect
to any Shares covered by his or her Options until the date of issuance of a
stock certificate to him or her for such Shares.
11. CHANGES IN CAPITALIZATION
In the event of a stock dividend, stock split,
recapitalization, combination, subdivision, issuance of rights to all
stockholders, or other similar corporate change, the Board shall make an
appropriate adjustment in the aggregate number of Shares that may be subject to
Options, and the number of Shares subject to, and the option price of, each
then-outstanding Option.
12. MERGERS, DISPOSITIONS AND CERTAIN OTHER TRANSACTIONS
If during the term of any Option the Parent Company or any of
the Subsidiary Companies shall be merged into or consolidated with or otherwise
combined with or acquired by another person or entity, or there is a divisive
reorganization or a liquidation or partial liquidation of the Parent Company,
the Parent Company may choose to take no action with regard to the Options
outstanding or to take any of the following courses of action:
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(a) Subject to the limitations on the exercise of Incentive
Stock Options contained in Paragraph 9, not less than 15 days nor more than 60
days prior to any such transaction all Optionees shall be notified that their
Options shall expire on the 15th day after the date of such notice, in which
event all Optionees shall have the right to exercise all of their Options prior
to such new expiration date;
(b) The Parent Company shall provide in any agreement with
respect to any such merger, consolidation, combination or acquisition that the
surviving, new or acquiring corporation shall grant options to the Optionees to
acquire shares in such corporation with respect to which the excess of the fair
market value of the shares of such corporation immediately after the
consummation of such merger, consolidation, combination or acquisition over the
option price, shall not be greater than the excess of the Value of the Shares
over the option price of Options, immediately prior to the consummation of such
merger, consolidation, combination or acquisition; or
(c) The Parent Company shall take such other action as the
Board shall determine to be reasonable under the circumstances in order to
permit Optionees to realize the value of rights granted to them under the Plan.
13. PLAN NOT TO AFFECT EMPLOYMENT
Neither the plan nor any Option shall confer upon any employee
of the Company any right to continue in the employment of the Company.
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14. INTERPRETATION
The Committee shall have the power to interpret the Plan and
to make and amend rules for putting it into effect and administering it. It is
intended that the Incentive Stock Options shall constitute incentive stock
options within the meaning of Section 422A of the Code, that the Non-Qualified
Options shall constitute property subject to federal income tax pursuant to the
provisions of Section 83 of the Code and that the Plan shall qualify for the
exemption available under Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission. The provisions of the Plan shall be interpreted and applied
insofar as possible to carry out such intent.
15. AMENDMENTS
The Plan may be amended by the Board, but any amendment that
increases the aggregate number of Shares that may be issued pursuant to the Plan
upon exercise of Options (otherwise than pursuant to Paragraph 11), that changes
the class of eligible employees, or that otherwise requires the approval of the
shareholders of the Parent Company in order to maintain the exemption available
under Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission
shall require the approval of the holders of such portion of the shares of the
capital stock of the Parent Company present and entitled to vote on such
amendment as is required by applicable state law and the terms of the Parent
Company's capital stock to make the amendment effective. No outstanding Option
shall be affected by any such amendment
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without the written consent of the Optionee or other person then entitled to
exercise such Option.
16. SECURITIES LAWS
The Committee shall have the power to make each grant under
the Plan subject to such conditions as it deems necessary or appropriate to
comply with the then existing requirements of Rule 16b-3 (or any similar rule)
of the Securities and Exchange Commission.
17. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on August 9, 1983, the date on
which the Plan was adopted by the Board and shall expire on December 30, 1995
unless sooner terminated by the Board. The Board shall submit the Plan to the
shareholders of the Parent Company for their approval at the first annual
meeting of shareholders held after August 8, 1983 unless such shareholders'
approval shall have been obtained prior to such meeting. Any Option granted
before the approval of the Plan by the Parent Company's shareholders shall be
expressly conditioned upon, and shall not be exercisable until, such approval.
If such shareholder approval is not received before August 7, 1984 the Board
shall have the right to terminate the Plan, in which case all Options granted
under the Plan shall expire.
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EXHIBIT 10(b)
E-Z-EM, INC.
1984 DIRECTORS AND CONSULTANTS STOCK OPTION PLAN
(As amended through October 12, 1995)
1. PURPOSE OF PLAN
The purpose of the Plan is to assist the Company in the
continued retention of valued directors and consultants by offering them a
grater stake in the Company's success and a closer identity with it, and to aid
in gaining the services of individuals whose services as directors or
consultants would be helpful to the Company and would contribute to its success.
2. DEFINITIONS
(a) "Board" means the board of directors of the Parent
Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the committee described in
Paragraph 5.
(d) "Company" means E-Z-EM, Inc. and each of its
Subsidiary Companies.
(e) "Date of Grant" means the date on which an Option
is granted.
(f) "Option" means any stock option granted under the
Plan.
(g) "Optionee" means a person to whom an Option has been
granted under the Plan, which Option has not been exercised and has not expired
or terminated.
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(h) "Parent Company" means E-Z-EM, Inc.
(i) "Shares" means shares of common stock of the
Parent Company.
(j) "Subsidiary Companies" means all corporations that, at the
time in question, are subsidiary corporations of the Parent Company within the
meaning of Section 425(f) of the Code.
(k) "Value" means on any given date, the mean between the
closing bid and asked prices of the Shares as reported by NASDAQ, or if listed
on a national exchange, the mean between the highest and lowest prices of actual
sales of Shares on the principal national securities exchange on which the
Shares are listed on such date or, if there are no such sales on such date, the
mean between the closing bid and asked prices of the Shares on such exchange on
such date.
3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are Options that
give the Optionee the right for a specified time period to purchase a specified
number of Shares for a price not less than their Value on the Date of Grant.
Options granted prior to and exercised on or after October 26, 1992 are
exercisable for Shares consisting of half Class A Common Stock and half Class B
Common Stock. Options granted on or after October 26, 1992 are exercisable for
Shares consisting of Class B Common Stock only.
4. STOCK SUBJECT TO PLAN
Not more than 400,000 Shares in the aggregate may be issued
pursuant to the Plan upon exercise of Options. If an Option terminates without
having been exercised in whole or part,
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other Options may be granted covering the Shares as to which the Option was not
exercised. Notwithstanding anything contained in the Plan to the contrary, no
recipient of Options may be granted options to purchase in excess of twenty-five
percent (25%) of the maximum number of Shares authorized to be issued under the
Plan.
5. ADMINISTRATION OF PLAN
To the extent required by Rule 16b-3 under the Securities
Exchange Act of 1934 (or any similar rule of the Securities and Exchange
Commission), the Plan shall be administered by the Compensation Committee, which
shall be composed of two directors of the Parent Company, appointed by the
Board.
6. GRANT OF RIGHTS
The Committee may grant Options to eligible employees of the
Company.
7. ELIGIBILITY
Options may be granted only to directors and consultants of
the Company who are not eligible to participate under any other discretionary
plan of the Company or any of its affiliates entitling them to acquire stock,
stock options or stock appreciation rights of the Company or any of its
affiliates. To the extent required by Rule 16b-3 under the Securities exchange
Act of 1934 (or any similar rule of the Securities and Exchange Commission),
members of the Committee will not be eligible, during their term on the
Committee and for a period of one year thereafter, to receive Options or to
participate under any other discretionary plan of the Company or
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any of its affiliates entitling them to acquire stock, stock options or stock
appreciation rights of the Company or any of its affiliates.
8. ANNUAL GRANTS
At the end of each fiscal year, each outside director of the
Company who has served as a director for the entire fiscal year shall be granted
Options to purchase 1,000 Shares under the terms set forth in the Plan.
9. OPTION AGREEMENTS AND TERMS
All Options shall be granted within ten years of December 31,
1995 and be evidenced by option agreements that shall be executed on behalf of
the Parent Company and by the respective Optionees. The terms of each such
agreement shall be determined from time to time by the Committee consistent,
however, with the following:
(a) OPTION PRICE. The option price per Share shall be
determined by the Committee but shall not be less than 100 percent of the Value
of the Shares on the Date of Grant.
(b) RESTRICTION ON TRANSFERABILITY. An Option shall not be
transferable otherwise than by will or the laws of descent and distribution and,
during the lifetime of the Optionee, shall be exercisable only by him or her.
Upon the death of an Optionee, the person to whom the rights shall have passed
by will or by the law of descent and distribution may exercise any Options in
accordance with the provisions of Paragraph 8(e).
(c) PAYMENT. Full payment for Shares purchased upon the
exercise of an Option shall be made in cash or, at the
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election of the Optionee and subject to the approval of the Committee, by
surrendering Shares with an aggregate Value equal to the aggregate option price
or by delivering such combination of Shares and cash as the Committee may in its
discretion approve.
(d) ISSUANCE OF CERTIFICATES; PAYMENT OF CASH. Only whole
Share shall be issuable upon exercise of Options. Any right to a fractional
Share shall be satisfied in cash. Upon payment of the option price, a
certificate for the number of whole Shares and a check for the Value on the date
of exercise of the fractional share to which the Optionee is entitled shall be
delivered to such Optionee by the Parent Company. If listed on a national
exchange, the Parent Company shall not be obligated to deliver any certificates
for Shares until such Shares have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange upon which outstanding
Shares of such class at the time are listed nor until there has been compliance
with such laws or regulations as the Parent Company may deem applicable. The
Parent Company shall use its best efforts to effect such listing and compliance.
(e) PERIODS OF EXERCISE OF OPTIONS. Any Option shall be
exercisable in whole or in part at such time as may be determined by the
Committee and stated in the option agreement, provided that no Options hall be
exercisable after ten years from the Date of Grant, except as provided below:
(i) In the event that an Optionee ceases to be a
director of or a consultant to the Company for any
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reason other than his or her death, an Option shall
not be exercisable after three months from the date
the Optionee ceases to be a director or a consultant
to the Company; provided that if such cessation is
due to the disability of the Optionee he or she shall
have the right to exercise his or her Options to the
extent determined by the Committee in its discretion
and set forth in the option agreement, even if the
date of exercise is within any time period prescribed
by the Plan prior to which such Option shall not be
exercisable, and provided that an Option shall not be
exercisable after ten years from the Date of Grant.
(ii) In the event that an Optionee ceases to be a
director of or consultant to the Company by reason of
his or her death, an Option shall not be exercisable
after one year from the date of death; provided that
in such event, the person to whom the rights of the
Optionee shall have passed by will or by the laws of
descent and distribution may exercise any of the
decedent's Options to the extent determined by the
Committee in its discretion and set forth in the
option agreement, even if the date of exercise is
within any time period prescribed by the Plan prior
to which such Option shall not be exercisable, and
provided that
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such Option shall not be exercisable after ten
years from the Date of Grant.
(f) DATE OF EXERCISE. The date of exercise of an Option shall
be the date on which written notice of exercise, addressed to the Parent Company
at its main office to the attention of its Secretary, is hand delivered,
telecopied or mailed, first class postage prepaid; provided that the Parent
Company shall not be obliged to deliver any certificates for Shares pursuant to
the exercise of an Option until the Optionee shall have made payment in full of
the option price for such Shares. Each such exercise shall be irrevocable when
given. Each notice of exercise must state whether the Optionee is exercising an
Option and must include a statement of preference as to the manner in which
payment to the Parent Company shall be made (Shares or cash or a combination of
Shares and cash).
(g) TERMINATION OF STATUS. For the purposes of the Plan a
transfer of a director or consultant between two companies, each of which is a
Company, shall not be deemed a termination of status as a director or
consultant.
10. RIGHTS AS STOCKHOLDERS
An Optionee shall have no right as a stockholder with respect
to any Shares covered by his or her Options until the date of issuance of a
stock certificate to him or her for such Shares.
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11. CHANGES IN CAPITALIZATION
In the event of a stock dividend, stock split,
recapitalization, combination, subdivision, issuance of rights, or other similar
corporate change, the Board shall make an appropriate adjustment in the
aggregate number of Shares that may be subject to Options, and the number of
Shares subject to, and the option price of, each then-outstanding Option.
12. MERGERS, DISPOSITIONS AND CERTAIN OTHER TRANSACTIONS
If during the term of any Option the Parent Company or any of
the Subsidiary Companies shall be merged into or consolidated with or otherwise
combined with or acquired by another person or entity, or there is a divisive
reorganization or a liquidation or partial liquidation of the Parent Company,
the Parent Company may choose to take no action with regard to the Options
outstanding or to take any of the following courses of action:
(a) Not less than fifteen days nor more than sixty days prior
to any such transaction, all Optionees shall be notified that their options
shall expire on the fifteenth day after the date of such notice, in which event
all Optionees shall have the right to exercise all of their Options prior to
such new expiration date; or
(b) The Parent Company shall provide in any agreement with
respect to any such merger, consolidation, combination or acquisition that the
surviving, new or acquiring corporation shall grant options to the Optionees to
acquire shares in such corporation with respect to which the excess of the fair
market
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value of the shares of such corporation immediately after the consummation of
such merger, consolidation, combination or acquisition over the option price,
shall not be greater than the excess of the Value of the Shares over the option
price of Options, immediately prior to the consummation of such merger,
consolidation, combination or acquisition; or
(c) The Parent Company shall take such other action as the
Board shall determine to be reasonable under the circumstances in order to
permit Optionees to realize the value of rights granted to them under the Plan.
13. PLAN NOT TO AFFECT STATUS
Neither the Plan nor any Option shall confer upon any director
of or consultant to the Company any right to continue in such position with the
Company.
14. INTERPRETATION
The Committee shall have the power to interpret the Plan and
to make and amend rules for putting it into effect and administering it. It is
intended that the Options shall constitute property subject to federal income
tax pursuant to the provisions of Section 83 of the Code and that the Plan shall
qualify for the exemption available under Rule 16b-3 (or any similar rule) of
the Securities and Exchange Commission. The provisions of the Plan shall be
interpreted and applied insofar as possible to carry out such intent.
15. AMENDMENTS
The Plan may be amended by the Board, but any amendment that
increases the aggregate number of Shares that may be issued
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pursuant to the Plan upon exercise of Options (otherwise than pursuant to
Paragraph 10), that changes the class of eligible directors or consultants, or
that otherwise requires the approval of the shareholders of the Parent Company
in order to maintain the exemption available under Rule 16b-3 (or any similar
rule) of the Securities and Exchange Commission shall require the approval of
the holders of such portion of the shares of the capital stock of the Parent
Company present and entitled to vote on such amendment as is required by
applicable state law and the terms of the Parent Company's capital stock to make
the amendment effective. No outstanding Option shall be affected by any such
amendment without the written consent of the Optionee or other person then
entitled to exercise such Option.
16. SECURITIES LAWS
The Committee shall have the power to make each grant under
the Plan subject to such conditions as it deems necessary or appropriate to
comply with the then-existing requirements of Rule 16b-3 (or any similar rule)
of the Securities and Exchange Commission.
17. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on August 3, 1984, the date on
which the Plan was adopted by the Board and shall expire on December 30, 1995
unless sooner terminated by the Board. The Board shall submit the Plan to the
shareholders of the Parent Company for their approval at the first annual
meeting of shareholders held after August 3, 1984. Any Option granted before the
approval of the Plan by the Parent Company's
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shareholders shall be expressly conditioned upon, and shall not be exercisable
until, such approval. If such shareholder approval is not received before August
2, 1985 the Board shall have the right to terminate the Plan, in which case all
Options granted under the Plan shall expire.
* * * * * *
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended December 2, 1995 and is qualified
in its entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
