FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
Commission File Number 0-13433
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MILTOPE GROUP INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2693062
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 Richardson Road South,
Hope Hull, Alabama 36043
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (334) 284-8665
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, par value $.01 each
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(Title of class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock of the registrant held
by non-affiliates (which excludes voting shares held by officers and
directors of the registrant) was $4,760,624 as of March 20, 1996.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock: Common Shares with a par value of $.01 each:
5,867,148 as of March 20, 1996.
Documents Incorporated by Reference:
The definitive Proxy Statement for the Annual Meeting of Stockholders to be
held June 3, 1996, to be filed with the Commission not later than 120 days
after the close of the Registrant's fiscal year, has been incorporated by
reference in whole or in part for Part III, Items 10, 11, 12 and 13, of the
December 31, 1995 Form 10-K.
<PAGE>
ITEM 1. BUSINESS
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GENERAL
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Miltope Group Inc. (the "Company"), a Delaware corporation
incorporated in March 1984, is the parent company of Miltope Corporation,
an Alabama corporation ("Miltope"), and Miltope Business Products, Inc., a
New York corporation ("MBP"). Miltope was originally incorporated as a New
York corporation in 1975 to acquire the assets and business of the Military
Equipment Division of Potter Instrument Company, Inc. and until June 1984
was a wholly owned subsidiary of Stonebrook Group Inc. (formerly Stenbeck
Reassurance Co. Inc.) ("SGI"). In June 1984, all of the outstanding stock
of the Company was issued to SGI in exchange for all of the outstanding
stock of Miltope. SGI is a privately held corporation which, since 1975,
has supported the formation and funding of companies engaged in the
development and manufacture of electronic hardware for defense and
communications applications and in communications services. In January
1985, shareholders of the Company (including SGI) sold 700,000 shares of
the Company's Common Stock in an initial public offering. In November
1985, the Company sold an additional 1,000,000 shares of its Common Stock
to the public. As of December 30, 1994, Miltope merged with and into a
newly formed Alabama corporation, which succeeded to all of the New York
corporation's assets and liabilities. On January 1, 1995, Innova
International Corporation, a Delaware corporation ("IIC"), acquired 62.8%
of the outstanding shares of Common Stock of the Company pursuant to
certain share exchange transactions with SGI, which at such time was a
holder of approximately 55.6% of the outstanding shares of common stock of
the Company, and Stuvik AB, a Swedish corporation and, at such time, a
holder of approximately 7.2% of the outstanding shares of Company common
stock. IIC provides, through its operating subsidiaries, integrated
network products and services. IIC is a subsidiary of Great Universal
American Industries Inc. (formerly American Satellite Network, Inc.), a
Delaware corporation which is engaged in network integration services and
the provision of satellite television programming.
Miltope is engaged in the design, development, manufacture and testing
of computers and computer peripheral equipment for military, rugged and
other specialized applications requiring reliable operations in severe
land, sea and airborne environments for both military and commercial
customers. Miltope's product lines include a broad range of computer
printers, disk memory products, magnetic tape drives, hand held terminals,
transportable microcomputers and electronically erasable programmable read
only memory ("EEPROM") together with subsystems incorporating these
products. Miltope believes that it is the largest independent producer
("non-OEM"; not an original equipment manufacturer) of such militarized and
ruggedized computer and peripheral equipment in the United States. In
addition, Miltope provides a complete line of ruggedized Hewlett Packard
Company computers and related equipment and has introduced a new product
family consisting of ruggedized portable and hand held computers.
MBP, incorporated in May 1984, develops, manufactures and markets
commercial computer printers and document processing products.
On January 1, 1996, the Company consolidated the operations of MBP
and Miltope Corporation. The Company's two industry segments will be
maintained through product line accountability.
In September 1994, the Company relocated its headquarters from
Melville, New York to Montgomery, Alabama.
On January 12, 1995, the Company completed a $6,100,000 industrial
revenue bond offering by the Alabama State Industrial Development Authority
("SIDA"), the proceeds of which were used to improve, equip and furnish the
new Montgomery facility and to pay the $3,375,000 principal amount of bank
indebtedness which was used in part in the acquisition of such facility.
SEGMENT INFORMATION
-------------------
The Company's business is divided into two industry segments,
consisting of the manufacture of militarized and rugged equipment primarily
for military applications conducted by the "Military/Rugged" segment, and
the manufacture and distribution of commercial products conducted by the
"Commercial" segment (formerly MBP). Financial information regarding the
Company's industry segments is included in Note 12 to the Notes to
Consolidated Financial Statements located in Item 8 of this Form 10-K.
DESCRIPTION OF BUSINESS
-----------------------
MILITARY/RUGGED GENERAL
-----------------------
The military/rugged segment is engaged in the design, development,
manufacture and testing of computer and computer peripheral equipment for
military, rugged and other specialized applications requiring reliable
operations in severe land, sea and airborne environments for both military
and commercial customers. Military/rugged product lines include a broad
range of computer printers, disk memory products, magnetic tape drives,
hand held terminals, transportable microcomputers and EEPROM solid state
memories, together with subsystems incorporating these products. The
Company believes that it is the largest independent producer (non-OEM) of
such militarized and ruggedized computers and peripheral equipment in the
United States. In 1988, the Company introduced a complete line of
ruggedized Hewlett Packard Company computers and related peripherals. The
equipment is being used for the United States Army's Tactical Command and
Control System/Common Hardware Software Program ("ATCCS/CHS") under a
contract awarded to the Company in August 1988, as well as to other
customers for related applications. During 1995, the Company introduced a
new product family consisting of ruggedized portable and hand held
computers to be used for both military and commercial applications. These
new products are reconfigurable for specific applications and employ
commercial "off the shelf" technology.
Substantially all of the military/rugged segment sales consist of
militarized and ruggedized products. "Militarized" equipment is designed
and built, with respect to each component and the whole, to conform to
stringent United States Department of Defense ("DOD") specifications
developed for severe land, sea and airborne operating environments. These
specifications define equipment operating parameters including atmosphere,
temperature and humidity conditions, permitted levels of shock and
vibration, susceptibility to electromagnetic interference and detection and
hardening for nuclear survivability. "Ruggedized" equipment is designed
and manufactured to less demanding specifications and may include
commercially available devices which are suitably modified for these
applications.
Production of equipment conforming to these DOD specifications has
required the development over the years by the Company of proprietary
electronic and electro-mechanical designs and engineering techniques and
specialized manufacturing and testing methods. By these means, the Company
has developed a broad range of proprietary components which meet these
specifications and are otherwise unavailable in the commercial market. To
support its engineering, manufacturing and testing activities, the Company
has extensive manufacturing equipment, clean rooms and reliability and
environmental testing facilities as well as a multi-function computer aided
design and manufacturing ("CAD/CAM") system and an electro-magnetic
interference ("EMI") test lab.
Military/rugged products are sold for use in a broad range of military
programs for the United States Air Force, Army, Navy and Marine Corps, for
NATO, for the British, Canadian, French, German, Israeli, Italian, Spanish
and Norwegian armed forces and for the armed forces of other countries.
Miltope's militarized and ruggedized computers and peripheral products are
compatible with most standard military computers and are sold to the DOD
and many prime DOD systems contractors and integrators, including Boeing
Co., EDS, E-Systems, Inc., Northrop Grumman Corporation, GTE Corp., ITT
Federal Services Corporation, Litton Data Systems, Lockheed Martin, Marconi
Radar Control Systems Limited, McDonnell Douglas Corp., Motorola Inc.,
Rockwell International, Loral Federal Systems, Teledyne Controls, Thompson
CSF, CAE Inc., ITT Defense Systems, TRW, Inc., and Westinghouse Electric.
Miltope believes that it has captured a major portion of the market
for militarized printers, magnetic tape systems and disk memory products.
In addition, Miltope is recognized as a leading supplier of rugged
computers and related equipment. A key element of Miltope's strategy has
been to develop and deliver a broad range of high reliability peripheral
components and systems on a cost effective and timely basis. The breadth
of Miltope's product offerings enables system integrators to avoid the
risks normally encountered when procuring peripherals from multiple
suppliers and to achieve significant price advantages. Miltope's ability
to meet the diverse requirements of its customers has resulted in
substantial recurring business. Also, as defense budgets have been
reduced, an emphasis on commercially adaptable electronics and the
requirement for smaller, less expensive and more portable systems has
occurred. Miltope believes its new product family of ruggedized,
reconfigurable portable and handheld computing devices will serve this
growing market niche well.
Miltope has been performing under a nine year DOD contract which runs
until August 1997 in connection with the ATCCS/CHS Program. The purpose of
the ATCCS/CHS Program is to integrate most of the aspects of land combat
through the common automation of mission command and control areas. To
date, Miltope has been issued firm orders valued at approximately
$281,000,000 under this contract. In addition, the Company has received
orders for ATCCS/CHS equipment for other defense contractors and foreign
governments.
COMMERCIAL - GENERAL
--------------------
The commercial segment (formerly MBP) develops, manufactures and
markets commercial products primarily for transportation markets. Its
primary products are airborne cockpit printers, and printers for airline
tickets and boarding passes. These products are based on direct thermal
and thermal transfer technology. This segment's business represented
approximately 15% of the Company's 1995 revenues, approximately 12% of the
Company's 1994 revenues and approximately 8% of the Company's 1993
revenues.
In January 1993, MBP completed the purchase of the assets of Mag-Tek
Inc.'s ("Mag-Tek") Airline Products Group. Included in this purchase was
the Automatic Ticket and Boarding Pass (ATB) Encoded/Printer. This product
is designed to meet the future needs of the international air transport
industry's passenger handling and ticketing systems, adding to this
segments current line of ticket printers.
SALES AND SIGNIFICANT CUSTOMERS
-------------------------------
Sales in 1995 attributable to the military industry segment were
approximately as follows: 64% from large DOD programs (each accounting for
2% or more of annual sales), 9% from smaller programs and sales of standard
items in Miltope's catalogue, 23% from sales to foreign governments and
defense contractors and 4% from spare parts sales. Sales to any one large
DOD program have varied substantially from year to year due to product
cycles and DOD requirements.
In 1995, sales to the DOD accounted for 63% of net sales of the
Company. Sales to Marconi Radar Control Systems Limited accounted for 13%
of net sales. No other customer accounted for more than 10% of net sales.
The Company has experienced large fluctuations from year to year in
the percentage of sales represented by particular customers due to product
cycles and customer requirements. The Company believes its customers and
the industry are moving to shorter lead times due to compressed technology
cycles and changes in procurement strategies.
Sales in 1995 attributable to the commercial industry segment amounted
to approximately 15% of the Company's total net sales.
GOVERNMENT CONTRACTS
--------------------
Miltope's business is subject to various statutes, regulations and
provisions governing defense contracts including the Truth in Negotiations
Act, which provides for the examination by the U.S. government of cost
records to determine whether accurate pricing information was disclosed in
connection with government contracts.
Contracts with the U.S. government as well as with U.S. government
prime contractors are typically at a fixed price with a delivery cycle of 6
to 18 months, with contracts under a particular program being subject to
further funding and negotiation. Miltope's defense contracts contain
customary provisions permitting termination at any time at the convenience
of the customer and providing for payment for work-in-progress should the
contract be canceled.
BACKLOG
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Backlog for both the military and commercial industry segments at
December 31, 1995 was $17,200,000, a 65.9% decrease from the $50,400,000
backlog at December 31, 1994. The Company believes a significant part of
this decrease was due to its customers and the industry moving to shorter
lead times in order to avoid technological obsolescence.
Backlog includes only orders covered by signed contracts with
customers and only current, funded portions of multi-year programs. The
Company believes that substantially all of the backlog will be recognized
as revenue by December 31, 1996. The Company also believes that a
substantial part of new business captured in 1996 will be recognized as
revenue in the same year due to shorter lead times.
Backlog for the commercial industry segment was approximately 26% of
the total backlog at December 31, 1995 and approximately 12% of the total
backlog at December 1994.
COMPETITION
-----------
Both of the Company's industry segments face intense competition in
markets for certain of their products. Competition comes from independent
producers as well as prime contractors. Some of these competitors have
greater resources than the Company. Competition is based on such factors
as price, technological capability, quality, reliability and timely
delivery.
The Company's competitive position in the military/rugged industry
segment has been based upon the experience of its technical personnel in
their respective specialized fields of computer and peripheral product
design; its broad range of products; its ability to design and manufacture
its products to meet customers' specifications; its specialized
manufacturing and testing facilities; its long association with many of its
customers and its managerial and marketing expertise in dealing with prime
contractors and the DOD. The Company believes that once a particular
supplier's computer and/or peripheral products have been selected for
incorporation in a military program, further competition by other vendors
during the life cycle of that program is limited.
ENGINEERING, RESEARCH AND DEVELOPMENT
-------------------------------------
The Company believes that success within the industry depends in large
part upon its ability to develop and apply new technology to modify,
enhance and expand its existing line of proprietary products. The funding
of these activities is primarily internal through Company sponsored
research and development. Product development activities are generally
the result of the need to respond to the anticipated requirements of future
programs, the introduction of new technology which can be used to enhance
product performance and direct requests by customers and the DOD. In
certain cases the Company has licensed technology from commercial
manufacturers for subsequent militarization and ruggedization. Management
believes that a budget of approximately 4% to 7% of net sales for
engineering, research and development expenditures should adequately
support the growth of the Company's business.
Engineering, research and development expenditures in 1993, 1994 and
1995 were approximately $5,400,000, $4,300,000 and $3,900,000,
respectively.
Currently, Miltope's funded research efforts for its military/rugged
segment include projects to enhance its disk drive, printer, computer
workstation and portable/hand held computer products. The commercial
segment's research and development costs have been incurred to enhance its
airline ticket printers and airborne cockpit printers for the commercial
market.
EMPLOYEES
---------
At December 31, 1995, the Company employed 319 full-time personnel.
None of the Company's employees are represented by a labor union and the
Company has experienced no work stoppages. The Company believes that
relations with its employees are excellent.
EXPORT SALES
------------
The Company recorded foreign sales in its military/rugged industry
segment of approximately $6,800,000, $11,160,000 and $12,846,000 in 1993,
1994 and 1995, respectively. The Company recorded foreign sales in its
commercial industry segment in 1993, 1994 and 1995 of approximately
$1,200,000, $940,000 and $257,000, respectively. Neither of the Company's
industry segments is dependent upon the Company's foreign sales.
SOURCE OF SUPPLY
----------------
The Company utilized multiple suppliers for most materials and
components. In order to minimize the risk of delay in delivering finished
systems, components are sometimes procured according to the projected need
for such components under annual purchasing agreements.
MISCELLANEOUS
-------------
Neither of the Company's two industry segments is subject to seasonal
business fluctuations.
ITEM 2. PROPERTIES
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The Company owns a 90,000 square foot building located on 25 acres in
Hope Hull (Montgomery), Alabama.
In addition, the Company owns a 60,000 square foot assembly and test
facility in Troy, Alabama and a 25,000 square foot clean room, assembly and
test facility in Springfield, Vermont.
The Company also leases various sales offices in the United States and
England.
The Company owns substantially all of the machinery and equipment used
in these facilities. The Company believes that these facilities are well
maintained and are adequate to meet its needs in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
-----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
During the fourth quarter of the fiscal year covered by this Report,
no matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise.
<PAGE>
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
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SHAREHOLDER MATTERS
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MARKET INFORMATION
------------------
The Company's Common Stock has been traded in the over-the-counter
market under the NASDAQ symbol "MILT" since its initial public offering on
January 23, 1985 and has been trading on the NASDAQ National Market since
June 4, 1985. The high and low closing sale prices for the Common Stock in
the over-the-counter market reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. The quarterly high and low selling prices (the last daily
sale price) of the Common Stock since January 1, 1994 have been:
CALENDAR YEAR 1994 HIGH LOW
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First Quarter................ $ 5-1/8 $ 3-7/8
Second Quarter .............. 3-7/8 2-1/4
Third Quarter................ 4-3/8 2-1/2
Fourth Quarter .............. 5-1/8 3-3/8
CALENDAR YEAR 1995
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First Quarter.............. $ 4-7/8 $ 3-1/2
Second Quarter ............ 4-3/8 2-3/4
Third Quarter ............ 3-7/8 3
Fourth Quarter ............ 3-7/8 2-1/2
HOLDERS OF COMMON STOCK
-----------------------
As of March 20, 1996, there were approximately 1,240 shareholders of
record and beneficial owners of the Company's Common Stock.
DIVIDED POLICY
-------------
No dividends were paid in 1994 or 1995. The Company does not
presently anticipate paying cash dividends on its Common Stock. However,
the Board of Directors of the Company will review this policy from time to
time in light of its earnings, capital requirements and financial condition
and other relevant factors, including applicable debt agreement
limitations.
On December 12, 1995, the Company received waivers from its lending
bank of certain financial covenant violations existing at September 30,
1995 and amendments of such covenants for future periods through December
31, 1996. The amendments prohibit payment of dividends as long as waivers
are required of certain financial covenants. Thereafter, the Company's
bank loan agreement permits the Company to pay annual dividends of up to
50% of the prior year's net income.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following is a summary of selected consolidated financial data of
the Company for the five years ended December 31, 1995 which should be read
in conjunction with the consolidated financial statements of the Company
and the notes thereto:
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1991 1992 1993 1994 1995
Income Statement Data:
----------------------
Net sales............ $103,078 $114,401 $84,320 $75,569 $65,708
Gross profit 25,104 28,392 21,232 5,680 13,372
Income (loss) before
income taxes....... 4,992 6,610 (1,381) (18,885) (984)
Net income (loss).... 3,397 4,187 (856) (15,460) (984)
Net income (loss) per
share.............. .58 .71 (.15) (2.65) (.17)
Cash dividends
per share......... - - - - -
Average shares
outstanding........ 5,863 5,857 5,825 5,834 5,853
Balance Sheet Data:
-------------------
Working capital....... $34,996 $35,769 $31,460 $19,398 $18,896
Total assets.......... 62,129 58,859 62,587 53,162 41,440
Long-term debt........ 14,642 11,231 7,872 17,551 16,953
Stockholders' equity.. 28,820 32,863 32,033 17,230 15,913
The Company changed its method of accounting for certain inventories
to the actual-cost-incurred method from the last-in, first-out (LIFO) cost
method. The results of operations for the years ended December 31, 1991
through December 31, 1993 have been adjusted to reflect this change.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
BUSINESS ENVIRONMENT
--------------------
The Company's primary business segment provides specialized computers
and related peripheral equipment to the United States and foreign military
defense departments. Equipment in this segment takes two primary forms.
The first of these is fully militarized products, usually designed
especially for a particular mission area with demanding environmental and
quality requirements. The second of these is rugged products, usually
based on a commercial baseline product, but adapted by the Company to meet
environmental and quality specifications that exceed the requirements for
commercial products.
This entire segment has been impacted in recent years by reduced
government spending and defense appropriations. The militarized product
area has been especially subject to defense budget cuts. The military
continues to reduce funding for the development and limited production
quantities of highly customized systems and products. The long design
cycle for these programs creates an intangible cost in the form of rapid
technological obsolescence. Some military programs that would have sought
militarized equipment some years ago have modified the requirements to
reflect a need for rugged or commercial products. This trend has tended to
benefit sales of the Company's rugged product line. Even in the rugged
product area, however, defense cuts have taken a toll. Competition in this
area has become more keen in recent years, as many government contractors
pursue fewer military programs.
Through its commercial segment, the Company designs, develops and
markets airline ticketing and boarding pass printers and baggage tag
printers for airline transportation and travel related industries. Through
this segment, the Company also designs, develops and markets airborne
cockpit printers. Sales in this commercial segment increased by 12.0% in
1995 reflecting the trend within the travel related industries toward new
magnetic encoding technology, ATB 2, as endorsed by the International Air
Transportation Association. Implementation of this technology involves
replacement of document printers at airports and major travel agencies
throughout the world.
The Company has continued its strategy to downsize and reallocate its
resources to accommodate as well as take advantage of this changing market
environment. Specifically, the Company has taken the following actions:
1. The Company has streamlined its product development cycle by
implementing rapid prototyping capabilities.
2. The Company continues its development of a broad offering of low
cost, rugged, commercial based products that are customized to
meet specific needs for both DOD and commercial markets.
3. The Company continues its commitment and focus on commercial
market opportunities.
4. The Company consolidated the operations of Miltope Corporation
and MBP to eliminate redundancies and reduce costs.
These actions have positioned the Company to go forward with a
substantially reduced cost base and to compete more aggressively in its
core businesses.
RESULTS OF OPERATIONS
---------------------
The Company reported income from operations of $377,000 compared to a
loss from operations of $17.6 million (including a relocation and
restructuring charge in the amount of $9.1 million and special charges
totaling $10 million) in 1994 and a loss from operations of $233,000 in
1993. The net loss per common share was $.17 compared to a net loss of
$2.65 per share in 1994 and a net loss of $.15 per share in 1993.
In 1994, the Company changed its method of accounting for certain
inventories to the actual-cost-incurred method from the last-in, first-out
(LIFO) cost method. The results of operations for the year ended December
31, 1993 has been adjusted to reflect this change.
In 1994, the Company made the decision to restructure and relocate the
Company resulting in special charges which significantly impacted 1994
operating results. The Company incurred a pre-tax charge of $9.1 million
to cover costs associated with severance and related human resource
programs, employee relocation, the transfer of assets and the operational
impact due to the transition. The transition was completed during 1995.
Additional special charges in the amount of $10 million were recorded in
1994 to reflect inventory obsolescence and other costs related to
discontinued product lines, end of life contract costs and additional costs
on long-term contracts. The special charges were principally non-cash in
nature and included $4.9 million applicable to discontinued products and
inventory obsolescence, $2.2 million related to end of life contracts and
$2.9 million for additional costs on long-term contracts.
Sales for 1995 totaled $65.7 million, a decrease of $9.9 million, or
13.1%, from 1994. This change was attributable to a reduction in military
sales of $10.9 million partially offset by an increase in commercial sales
in the amount of $1.0 million. Sales in 1994 totaled $75.6 million, a
decrease of $8.8 million, or 10.4% from 1993. A substantial portion of the
sales decline was attributable to difficulties in effecting the relocation.
Exclusive of special charges in 1994, gross profit as a percent of
sales declined from 20.7% in 1994 to 20.4% in 1995. This decline was the
result of a change in mix in products and the different margins associated
with the commercial and ruggedized lines.
Selling, general and administrative expenses, as a percentage of
sales, totaled 16.4% in 1993, 13.0% in 1994 and 13.9% in 1995. The
increase in 1995 was principally due to an emphasis on increased marketing
and business development efforts and severance costs related to a
reorganization which took place in the second quarter of 1995. The
decrease in 1994 was principally due to cost benefits of the relocation and
reduced sales related expenses and professional fees.
Engineering, research and development expenses, as a percentage of
sales, totaled 6.4% in 1993, 5.7% in 1994 and 5.9% in 1995. The increase
in 1995 was driven primarily by product development of the company's new
family of portable and hand held computers. The primary cause of the
decrease in 1994 was related to the cost benefits of the relocation.
During 1993, the Company exercised an option to purchase its main
operating facility in Melville, New York for $5.0 million. Prior to
December 31, 1993, the Company recognized a non-recurring charge of
approximately $2.2 million representing the excess of the carrying value of
the building and related improvements over the estimated selling price less
cost to dispose which in turn was sold in 1994.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital at December 31, 1995 totaled $18.9 million, a decrease
of $502 thousand from December 31, 1994. Accounts receivable and inventory
declined by $7.2 million reflecting the Company's lower sales volume. A
term loan from the bank was used by the Company to purchase and renovate
its new corporate headquarters in 1994 in anticipation of receiving
industrial revenue bond financing. The decrease in accounts payable is due
to the payment of same with the proceeds of the industrial revenue bond.
The decrease in accrued expenses reflects the payment of the Company's
relocation charges that remained outstanding as at December 31, 1994 and
the Company's lower sales volume.
The Company entered into a revolving credit facility in July 1994 for
an amount not to exceed $15 million. In February 1995, the credit facility
was amended to an amount not to exceed $19 million. In November 1995 the
credit facility was amended again to an amount not to exceed $15 million
and it was extended for an additional one-year period expiring May 31,
1997, subject to extension for additional one-year periods. As of December
31, 1995, the Company had approximately $4.7 million available under such
facility. In August 1994, the Company sold its principal operating
facility in Melville, New York for $6.1 million. Net proceeds of the sale
were used to pay down the revolving credit facility.
Cash provided by (used in) operating activities was $5.7 million in
1993, $(2.0 million)in 1994 and $(295 thousand) in 1995. The decrease of
cash used in operating activities in 1995 compared to 1994 is primarily a
result of decreases in accounts receivable and inventories and collection
of an income tax receivable partially offset by the payment in 1995 of
accounts payable that were used in 1994 to fund the purchase of a new
headquarters facility and related costs prior to receiving industrial
revenue bond financing, and the payment in 1995 of remaining relocation
charges accrued in 1994.
In April 1994, the Company purchased a new headquarters facility and
related capital equipment located in Montgomery, Alabama. The purchase was
financed through a bank term loan and the proceeds of the offering of
taxable revenue bonds (the "Bonds") by the Alabama State Industrial
Development Authority which was completed January 12, 1995 (the "SIDA
Offering"). Repayment of the Bonds is secured by an irrevocable letter of
credit issued by First Alabama Bank in an amount up to $6.2 million which
in turn is secured by a mortgage on the Montgomery and Troy, Alabama
facilities and a security interest in the equipment located at such
facilities.
As a result of the net operating losses, the Company was unable to
remain in compliance with financial covenants contained in the revolving
credit agreement. On December 12, 1995, an amendment to the agreement was
executed, which principally provided additional flexibility with respect to
certain future covenants and waived technical violations of those covenants
which existed at September 30, 1995.
The Company has a net operating loss carry forward for Federal income
tax purposes of approximately $10.3 million and $1.2 million which will
expire in 2009 and 2010, respectively, if not utilized. No benefit has
been recognized within the 1995 consolidated financial statements for the
related net deferred tax asset which could be recognized in future periods
if the probability of realization increases.
The Company believes that its working capital and capital requirement
needs for its current lines of business and new product development will be
met by its cash flow from operations and existing bank loan arrangements.
EFFECTS OF INFLATION
--------------------
Inflation has not had a significant impact on the Company's results
of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Table of Contents to Consolidated Financial Statements on
Page F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
During the twenty-four months prior to the date of the financial
statements contained herein, no Form 8-K reporting a change of accountants
has been filed which included a reported disagreement on any matter of
accounting principles or practices or financial statement disclosure.
<PAGE>
PART III
--------
The information called for by Part III (Items 10, 11, 12 and 13) of
this Report is hereby incorporated by reference from the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 in connection with the election of
directors at the 1996 Annual Meeting of Stockholders of the Company, which
definitive Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the Company's fiscal
year ended December 31, 1995.
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K
-----------
(a) The following documents are filed as part of Page
this Report ----
1. Consolidated Financial Statements:
Table of Contents to Consolidated
Financial Statements F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets as of
December 31, 1994 and 1995 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1993,
1994 and 1995 F-4
Consolidated Statements of Stockholders'
Equity for the Years Ended December 31,
1993, 1994 and 1995 F-5
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1993,
1994 and 1995 F-6
Notes to Consolidated Financial
Statements for the Years Ended December
31, 1993, 1994 and 1995 F-7
2. All schedules are omitted because they
are not applicable or the required
information is shown in the consolidated
financial statements or notes thereto.
3. Exhibits 16
<PAGE>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
----- ---------------------- ------
3(a) Certificate of Incorporation of the
Registrant, as amended to date
[Incorporated by reference to Exhibit 3(a)
to the Registrant's Registration Statement
on Form S-1 filed with the Commission on
September 6, 1984 (Registration No. 2-93134)]
3(b) By-laws of the Registrant, as currently in effect
[Incorporated by reference to Exhibit 3(b) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1987 (File No. 0-13433)].
3(c) Specimen share certificate for the Common Stock of
the Registrant [Incorporated by reference to Exhibit
4(b) to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 filed with the
Commission on January 8, 1985 (Registration No.
2-93134)].
10(a)(A) 1985 Key Employee Stock Option Plan adopted by
the Board of Directors of the Registrant on July 1,
1985 [Incorporated by reference to Exhibit 10(a) to
the Registrant's Registration Statement on Form S-1
filed with the Commission on October 22, 1985
(Registration No. 33-1042)].
10(a)(B) Form of 1985 Key Employee Stock Option
Agreement, dated as of July 1, 1985, between the
Registrant and certain key employees of the
Registrant [Incorporated by reference to Exhibit
10(b) to the Registrant's Registration Statement on
Form S-1 filed with the Commission on October 22,
1985 (Registration No. 33-1042)].
10(b)(A) Incentive Stock Option Plan adopted by the Board of
Directors of the Registrant on June 1, 1984 and
approved by Stonebrook Group Inc. (formerly
Stenbeck Reassurance Co. Inc.) on June 1, 1984, as
amended by the Board of Directors of the Registrant
on May 6, 1985 [Incorporated by reference to
Exhibit 10(c) to the Registrant's Registration
Statement on form S-1 filed with the Commission on
October 22, 1985 (Registration No. 33-1042)].
10(b)(B) Form of Incentive Stock Option Agreement, dated as
of June 1, 1984, between the Registrant and certain
key employees of the Registrant [Incorporated by
reference to Exhibit 10(e) to the Registrant's
Registration Statement on Form S-1 filed with the
Commission on October 22, 1985 (Registration No.
33-1042)].
10(c)(A) Management Stock Option Plan adopted by the Board
of Directors of the Registrant on June 1, 1984 and
approved by Stonebrook Group Inc. on June 1, 1984,
as amended by the Board of Directors of the
Registrant on May 6, 1985 [Incorporated by reference
to Exhibit 10(f) to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
October 22, 1985 (Registration No. 33-1042)].
10(c)(B) Form of Management Stock Option Agreement, dated
as of June 1, 1984, between the Registrant and
certain management employees of the Registrant
[Incorporated by reference to Exhibit 10(d) to the
Registrant's Registration Statement on Form S-1 filed
with the Commission on September 6, 1984
(Registration No. 2-93134)].
10(d) Miltope Corporation Cash Bonus Plan, as amended,
effective January 1, 1984 [Incorporated by reference
to Exhibit 10(e) to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
September 6 , 1984 (Registration No. 2-93134)].
10(e)(A) Miltope Corporation Pay Conversion Plan (as
amended 1984) [Incorporated by reference to Exhibit
10(i)(A) to the Registrant's Form 10-K filed with the
Commission on March 31, 1987 (File No. 0-13433)].
10(e)(B) Amendment No. 1, dated as of January 1, 1984, to
the Miltope Corporation Pay Conversion Plan
[Incorporated by reference to Exhibit 10(i)(B) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1987 (File No. 0-13433)].
10(e)(C) Amendment No. 2, dated as of January 1, 1987, to
the Miltope Corporation Pay Conversion Plan
[Incorporated by reference to Exhibit 10(h)(C) to the
Registrant's Form 10-K filed with the Commission on
March 31, 1989 (File No. 0-13433)].
10(f)(A) 1995 Stock Option and Performance Award Plan
adopted by the Board of Directors of the Registrant
on April 11, 1995 and approved by the stockholders
of the Registrant on June 5, 1995 [Incorporated
by reference to Exhibit 4(a)(1) to the
Registrant's Registration Statement on Form S-8
filed with the Commission on December 21, 1995
(File No. 33-65233)].
10(f)(B) Form of Non-Qualified Stock Option Agreement under
the 1995 Stock Option and Performance Award Plan
[Incorportated by reference to Exhibit 4(a)(2) to
the Registrant's Registration Statement on
Form S-8 filed with the Commission on
December 21, 1995 (File No. 33-65233)].
10(f)(C) Form of Incentive Stock Option Agreement under the
1995 Stock Option and Performance Award Plan
[Incorporated by reference to Exhibit 4(a)(3) to the
Registrant's Registration Statement on Form S-8 filed
with the Commission on December 21, 1995
(File No. 33-65233)].
10(g) Lease, dated February 9, 1987, between McConnel
Marina Properties and Miltope Corporation
[Incorporated by reference to Exhibit 10(k)(B) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1989 (File No. 0-13433)].
10(h)(A) Real Estate Sales Contract, dated July 18, 1984,
between the City of Troy, Alabama and Miltope
Corporation [Incorporated by reference to
Exhibit 10(o) to the Registrant's Registration
Statement on Form S-1 filed with the Commission
on September 6, 1984 (Registration No. 2-93134)].
10(h)(B) Lease Agreement, dated November 1, 1985, between
the Industrial Development Board of the City of
Troy, Alabama and Miltope Corporation
[Incorporated by reference to Exhibit 10(s)(B) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1986 (File No. 0-13433)].
10(i) Agreement of Sale, dated July 15, 1994, between
Miltope Corporation and Marc Beige, with respect
to the sale of 1770 Walt Whitman Road, Melville,
New York [Incorporated by reference to Exhibit 10(l)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(j) Agreement of Lease, dated as of August 10, 1994,
between Melville Associates, L.P. and Miltope
Corporation [Incorporated by reference to
Exhibit 10(m) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(k) Purchase and Sale Agreement, dated April 19, 1994,
between Collier Management Group, Inc. and
Miltope Corporation, with respect to 500 Richardson
Road South, Hope Hull, Alabama [Incorporated by
reference to Exhibit 10(n) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(l)(A)(1) Loan Agreement, dated July 27, 1994, among
First Alabama Bank, as lender, and Miltope
Corporation and Miltope Business Products,
Inc., as borrowers [Incorporated by reference
to Exhibit 10(o)(A)(1) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(l)(A)(2) Amendment to Loan Agreement, dated as of
October 3, 1994, among First Alabama Bank,
Miltope Corporation and Miltope Business
Products, Inc. [Incorporated by reference
to Exhibit 10(o)(A)(2) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(l)(A)(3) Amendment to Loan Agreement and Related
Documents, dated February 3, 1995, among First
Alabama Bank, Miltope Corporation and Miltope
Business Products, Inc. [Incorporated by reference
to Exhibit 10(o)(A)(3) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(l)(B) Guaranty Agreement, dated July 27, 1994,
by the Registrant to First Alabama Bank
[Incorporated by reference to
Exhibit 10(o)(B) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(l)(C) Security Agreement, dated July 27, 1994,
among Miltope Corporation, Miltope Business
Products, Inc. and First Alabama Bank
[Incorporated by reference to
Exhibit 10(o)(C) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(m)(A) Term Loan Agreement, dated October 13,
1994, between First Alabama Bank, as
lender, and Miltope Corporation, as borrower
[Incorporated by reference to Exhibit 10(p)(A)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(m)(B) Real Estate Mortgage and Security Agreement,
dated October 13, 1994, by Miltope Corporation
in favor of First Alabama Bank [Incorporated by
reference to Exhibit 10(p)(B) to the Registrant's
Form 10-K filed with the Commission on March 31,
1995 (File No. 0-13433)].
10(n)(A) Loan Agreement, dated January 1, 1995, between
the State Industrial Development Authority and
Miltope Corporation [Incorporated by reference
to Exhibit 10(q)(A) to the Registrant's
Form 10-K filed with the Commission on March 31,
1995 (File No. 0-13433)].
10(n)(B) Credit Agreement, dated January 1, 1995, between
Miltope Corporation and First Alabama Bank
[Incorporated by reference to Exhibit 10(q)(B)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(n)(C) Guaranty Agreement, dated January 1, 1995, by the
Registrant to First Alabama Bank [Incorporated by
reference to Exhibit 10(o)(C) to the Registrant's
Form 10-K filed with the Commission on March 31,
1995 (File No. 0-13433)].
10(n)(D) Bond Purchase Agreement, dated January 11, 1995,
among Miltope Corporation, the State Industrial
Development Authority and Merchant Capital,
L.L.C. [Incorporated by reference to
Exhibit 10(q)(D) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(n)(E) Remarketing Agreement, dated January 1, 1995,
among Miltope Corporation, the State Industrial
Development Authority and Merchant Capital,
L.L.C. [Incorporated by reference to
Exhibit 10(q)(E) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(n)(F) Real Estate Mortgage and Security Agreement,
dated as of January 1, 1995, from Miltope
Corporation in favor of First Alabama Bank
[Incorporated by reference to Exhibit 10(q)(F)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(o) License Agreement, dated as of December 31, 1983,
between Stonebrook Group Inc. and Miltope
Corporation [Incorporated by reference to
Exhibit 10(w) to the Registrant's Registration
Statement on Form S-1 filed with the Commission
on September 6, 1984 (Registration No. 2-93134)].
10(p) Letter Agreement, dated December 31, 1983, among
Miltope Corporation, Stonebrook Group Inc. and
Millidyne Inc. [Incorporated by reference to
Exhibit 10(x) to the Registrant's Registration
Statement on Form S-1 filed with the Commission
on September 6, 1984 (Registration No. 2-93134)].
10(q)(A) Stock Option Agreement, dated as of August 14,
1986, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(v) to
the Registrant's Form 10-K filed with the
Commission on March 31, 1987 (File No. 0-13433)].
10(q)(B) Stock Option Agreement, dated as of September 7,
1988, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(t)(B)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1989 (File No. 0-13433)].
10(q)(C) Stock Option Agreement, dated as of March 30,
1990, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(r)(C)
to the Registrant's Form 10-K filed with the
Commission on March 27, 1991 (File No. 0-13433)].
10(q)(D) Stock Option Agreement, dated as of June 14,
1990, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(r)(D)
to the Registrant's Form 10-K filed with the
Commission on March 27, 1991 (File
No. 0-13443)].
10(q)(E) Stock Option Agreement, dated as of June 13,
1991, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(p)(E)
to the Registrant's Form 10-K filed with the
Commission on March 27, 1992 (File No. 0-13433)].
10(q)(F) Stock Option Agreement, dated as of June 8,
1992, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(p)(F)
to the Registrant's Form 10-K filed with the
Commission on March 25, 1993 (File No. 0-13433)].
10(q)(G) Stock Option Agreement, dated as of June 25,
1993, between the Registrant and Jon L. Boyes.
[Incorporated by reference to Exhibit 10(p)(G)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1994 (File No. 0-13433)].
10(q)(H) Stock Option Agreement, dated as of June 3,
1994, between the Registrant and Jon L. Boyes
[Incorporated by reference to Exhibit 10(t)(H)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(r)(A) Stock Option Agreement, dated as of June 25,
1993, between the Registrant and William L.
Dickinson. [Incorporated by reference to
Exhibit 10(q) to the Registrant's Form 10-K
filed with the Commission on March 31, 1994
(File No. 0-13433)].
10(r)(B) Stock Option Agreement, dated as of June 3,
1994 between the Registrant and William L.
Dickinson [Incorporated by reference to
Exhibit 10(u)(B) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
*10(r)(C) Stock Option Agreement, dated as of June 5,
1995 between the Registrant and William L.
Dickinson.
10(s)(A) Stock Option Agreement, dated as of September 7,
1988, between the Registrant and Alvin E. Nashman
[Incorporated by reference to Exhibit 10(t)(D)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1989 (File No. 0-13433)].
10(s)(B) Stock Option Agreement, dated as of March 30,
1990, between the Registrant and Alvin E.
Nashman [Incorporated by reference to
Exhibit 10(t)(B) to the Registrant's Form 10-K
filed with the Commission on March 27, 1991
(File No. 0-13433)].
10(s)(C) Stock Option Agreement, dated as of June 14,
1990, between the Registrant and Alvin E.
Nashman [Incorporated by reference to
Exhibit 10(t)(B) to the Registrant's Form 10-K
filed with the Commission on March 27, 1991
(File No. 0-13433)].
10(s)(D) Stock Option Agreement, dated as of June 13,
1991, between the Registrant and Alvin E.
Nashman [Incorporated by reference to
Exhibit 10(r)(D) to the Registrant's Form 10-K
filed with the Commission on March 27, 1992
(File No. 0-13433)].
10(s)(E) Stock Option Agreement, dated as of June 8,
1992, between the Registrant and Alvin E.
Nashman [Incorporated by reference to
Exhibit 10(r)(E) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
10(s)(F) Stock Option Agreement, dated as of June 25, 1993,
between the Registrant and Alvin E. Nashman.
[Incorporated by reference to Exhibit 10(r)(F)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1994 (File No. 0-13443)].
10(s)(G) Stock Option Agreement, dated as of June 3, 1994,
between the Registrant and Alvin E. Nashman
[Incorporated by reference to Exhibit 10(w)(G)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
*10(s)(H) Stock Option Agreement, dated as of June 5, 1995,
between the Registrant and Alvin E. Nashman.
*10(t) Stock Option Agreement, dated as of August 7, 1995,
between the Registrant and George K. Webster.
*10(u) Stock Option Agreement, dated as of November 8, 1995,
between the Registrant and James E. Matthews.
10(v) Representative Agreement, dated as of October 1,
1994, between Miltope Corporation and Pandolfi
Group, Inc. [Incorporated by reference to
Exhibit 10(x) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
*10(w) Settlement and Release Agreement, dated November 1,
1995, by and among the Registrant, Miltope
Corporation, Miltope Business Products, Inc.,
Pandolfi Group, Inc. and Richard Pandolfi.
10(x)(A) Asset Purchase Agreement, dated as of
December 23, 1992, between Miltope Business
Products, Inc. and Mag-Tek, Inc. [Incorporated
by reference to Exhibit 10(x)(A) to the
Registrant's Form 10-K filed with the
Commission on March 25, 1993 (File No. 0-13433)].
10(x)(B) Guaranty of the Registrant, dated as of
December 23, 1992, pursuant to Asset Purchase
Agreement, dated as of December 23, 1992,
between Miltope Business Products, Inc. and
Mag-Tek, Inc. [Incorporated by reference to
Exhibit 10(x)(B) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
10(x)(C) Supply Agreement, dated as of January 5, 1993,
between Miltope Business Products, Inc. and
Mag-Tek, Inc. [Incorporated by reference to
Exhibit 10(x)(C) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
10(x)(D) Escrow Agreement, dated as of January 5, 1993,
among Miltope Business Products, Inc., Mag-Tek,
Inc. and First Interstate Bank of California,
as Escrow Agent [Incorporated by reference to
Exhibit 10(x)(D) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
10(x)(E) Marketing Agreement, dated as of January 5, 1993,
between Miltope Business Products, Inc. and
Mag-Tek, Inc. [Incorporated by reference to
Exhibit 10(x)(E) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
10(x)(F) Noncompetition Agreement, dated as of January 5,
1993, between Miltope Business Products, Inc.
and Mag-Tek, Inc. [Incorporated by reference to
Exhibit 10(x)(F) to the Registrant's Form 10-K
filed with the Commission on March 25, 1993
(File No. 0-13433)].
*10(y) Employment Agreement, dated November 8, 1995,
between the Registrant and James E. Matthews.
18 Letter re change in accounting principle, dated
May 13, 1994 [Incorporated by reference to
Exhibit 18 to the Registrant's Form 10-Q filed
with the Commission on May 16, 1994 (File
No. 0-13433)].
*21 Subsidiaries of the Registrant.
*23 Independent Auditors' Consent, dated March 20,
1996, to the incorporation by reference in
Registration Statements No. 2-97977, No. 33-8245,
No. 33-78744 and No. 33-65233 on Form S-8 and
No. 33-33752 on Form S-3 of their report dated
March 20, 1996 appearing in this Annual Report on
Form 10-K for the year ended December 31, 1995.
*27 Financial Data Schedule
-----------------
*Filed herewith
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED FOR FILING AS PART OF THE
ANNUAL REPORT (FORM 10-K) TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------
PAGE
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1994
and 1995 F-3
Consolidated Statements of Operations for the
Years Ended December 31, 1993, 1994 and 1995 F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1993, 1994 and 1995 F-5
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1993, 1994 and 1995 F-6
Notes to Consolidated Financial Statements for the
Years Ended December 31, 1993, 1994 and 1995 F-7
All supplemental schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial statements
or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and Board of Directors
of Miltope Group Inc.:
We have audited the accompanying consolidated balance sheets of Miltope
Group Inc. and its subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December
31, 1994 and 1995, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
As further discussed in Note 2, during 1994 the Company changed its method
of accounting for certain inventories. The accompanying consolidated
financial statements for the year ended December 31, 1993 have been
retroactively adjusted for this change.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
March 20, 1996
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
--------------------------------------------------------------------------
ASSETS NOTES 1994 1995
------ ----- ---- ----
CURRENT ASSETS:
Cash $ 811,000 $ 301,000
Accounts receivable 3,7 14,623,000 10,417,000
Inventories 4,7 19,414,000 16,432,000
Income tax receivable 2,524,000 -
Advances and other 328,000 256,000
----------- -----------
Total current assets 37,700,000 27,406,000
----------- -----------
PROPERTY AND EQUIPMENT - at cost: 1,7
Machinery and equipment 7,847,000 7,467,000
Furniture and fixtures 1,438,000 1,467,000
Land, buildings and improvements 7,105,000 7,108,000
----------- -----------
Total property and equipment 16,390,000 16,042,000
Less accumulated depreciation 4,400,000 5,313,000
----------- -----------
Property and equipment - net 11,990,000 10,729,000
----------- -----------
OTHER ASSETS 1,6,7 3,472,000 3,305,000
----------- -----------
TOTAL $53,162,000 $41,440,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $13,950,000 $ 5,956,000
Accrued expenses 3,815,000 1,958,000
Current maturities of
long-term debt 7 230,000 528,000
Deferred income taxes 1,8 307,000 68,000
----------- -----------
Total current liabilities 18,302,000 8,510,000
LONG-TERM DEBT 7 17,551,000 16,953,000
DEFERRED INCOME TAXES 1,8 79,000 64,000
----------- -----------
TOTAL LIABILITIES 35,932,000 25,527,000
----------- -----------
COMMITMENTS AND CONTINGENCIES 11
STOCKHOLDERS' EQUITY: 1,7,10
Common stock - $.01 par value;
20,000,000 shares authorized;
5,834,148 and 5,867,148 shares
outstanding at December 31, 1994
and 1995, respectively 68,000 68,000
Capital-in-excess of par value 20,154,000 20,253,000
Retained earnings 10,597,000 9,613,000
Net unrealized appreciation on
investment available for sale,
net of deferred income tax
liability of $386,000 and
$132,000 at December 31, 1994
and 1995, respectively 1,6 657,000 225,000
----------- -----------
31,476,000 30,159,000
Less treasury stock 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 17,230,000 15,913,000
----------- -----------
TOTAL $53,162,000 $41,440,000
=========== ===========
See notes to consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
-------------------------------------------------------------------------
NOTES 1993 1994 1995
----- ---- ---- ----
NET SALES 1,12 $ 84,320,000 $ 75,569,000 $ 65,708,000
------------- ------------- -------------
COSTS AND EXPENSES:
Cost of sales,
as adjusted 2,4 63,088,000 69,889,000 52,336,000
Selling, general
and administrative 13,861,000 9,834,000 9,135,000
Engineering, research
and development 1 5,406,000 4,314,000 3,860,000
Excess of asset
carrying value
over net realizable
value 5 2,198,000 - -
Relocation and
restructuring
charge 14 - 9,100,000 -
------------- ------------- -------------
Total 84,553,000 93,137,000 65,331,000
------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (233,000) (17,568,000) 377,000
INTEREST EXPENSE - net 1,148,000 1,317,000 1,361,000
------------- ------------ -------------
LOSS BEFORE INCOME
TAXES (1,381,000) (18,885,000) (984,000)
INCOME TAX BENEFIT 1,8 (525,000) (3,425,000) -
------------- ------------ -------------
NET LOSS $ (856,000) $ (15,460,000) $ (984,000)
============= ============= =============
NET LOSS PER COMMON
SHARE 1 $ (.15) $ (2.65) $ (.17)
============= ============= =============
See notes to consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
------------------------------------------------------------------------
Common Stock
-------------- Capital-in
Par Excess of Retained
Shares Value Par Value Earnings
------ ----- --------- --------
Balance, January 1, 1993 6,762,487 $68,000 $20,125,000 $26,913,000
Exercise of stock options 11,250 - 29,000 -
Net Loss - - - (856,000)
--------- ------- ----------- -----------
Balance, December 31, 1993 6,773,737 68,000 20,154,000 26,057,000
Change in unrealized
appreciation on
investment available
for sale - - - -
Net loss - - - (15,460,000)
--------- ------- ----------- -----------
Balance, December 31, 1994 6,773,737 68,000 20,154,000 10,597,000
Exercise of stock options 33,000 - 99,000 -
Change in unrealized
appreciation on
investment available
for sale - - - -
Net loss - - - (984,000)
--------- ------- ----------- -----------
Balance, December 31, 1995 6,806,737 $68,000 $20,253,000 $9,613,000
========== ======= =========== ==========
Net
Unrealized
Appreciation Treasury Stock
on Investment --------------
Available
for Sale Shares Cost
------------- ------ ----
Balance, January 1, 1993 939,589 $14,246,000
Exercise of stock options - -
Net loss - -
---------- ------- -----------
Balance, December 31, 1994 939,589 14,246,000
Change in unrealized
appreciation on
investment available
for sale $ 657,000 - -
Net loss - - -
---------- ------- -----------
Balance, December 31, 1994 657,000 939,589 14,246,000
Exercise of stock options - - -
Change in unrealized
appreciation on
investment available
for sale (432,000) - -
Net loss - - -
---------- ------- -----------
Balance, December 31, 1995 $ 225,000 939,589 $14,246,000
========== ======= ===========
See notes to consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
------------------------------------------------------------------------
1993 1994 1995
---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (856,000) $(15,460,000) $ (984,000)
Adjustments to reconcile
net loss to cash provided
by (used in) operating
activities:
Provision for doubtful
accounts receivable - 90,000 100,000
Provision for (recovery of)
slow-moving and obsolete
inventories (268,000) 2,160,000 883,000
Depreciation and
amortization 1,190,000 1,572,000 1,701,000
(Gain) loss on disposi-
tion of property and
equipment 127,000 (133,000) 420,000
Deferred income taxes (736,000) (1,137,000) -
Excess of asset carrying
value over net
realizable value 2,198,000 - -
Gain on sale of investment
available for sale - (472,000) (678,000)
Write-down of property,
equipment and inventory - - 168,000
Change in operating assets
and liabilities:
Accounts receivable 1,875,000 3,739,000 4,106,000
Inventories 1,560,000 6,038,000 2,282,000
Income tax receivable (968,000) (1,237,000) 2,524,000
Advances and other 14,000 (74,000) 72,000
Other assets 228,000 (920,000) (782,000)
Deferred costs - - (256,000)
Accounts payable and
accrued expenses 1,290,000 3,879,000 (9,851,000)
------------ ----------- -------------
Cash (used in) pro-
vided by operating
activities 5,654,000 (1,955,000) (295,000)
------------ ----------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (6,591,000) (6,054,000) (716,000)
Proceeds from sale of
property and equipment 24,000 5,662,000 22,000
Proceeds from sale of
investment available
for sale - 473,000 680,000
Payment for acquisition of
business (2,000,000) - -
------------ ----------- -------------
Cash (used in) pro-
vided by investing
activities (8,567,000) 81,000 (14,000)
------------ ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments
of) revolving credit
loan - net 3,200,000 2,482,000 (3,003,000)
Payments of other
long-term debt (111,000) (231,000) (22,000)
Payments of short-term debt - - (3,375,000)
Borrowing of long-term debt - - 6,100,000
Exercise of stock options 29,000 - 99,000
------------ ----------- -------------
Cash (used in) pro-
vided by financing
activities 3,118,000 2,251,000 (201,000)
------------ ----------- -------------
NET INCREASE (DECREASE) IN CASH 205,000 377,000 (510,000)
CASH, BEGINNING OF YEAR 229,000 434,000 811,000
------------ ----------- -------------
CASH, END OF YEAR $ 434,000 $ 811,000 $ 301,000
============ =========== =============
SUPPLEMENTAL DISCLOSURE:
Payments made (received) for:
Income taxes $ 1,277,000 $ (1,131,000) $ (2,802,000)
============ =========== =============
Interest $ 1,025,000 $ 1,079,000 $ 1,596,000
============ =========== =============
See notes to consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
--------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING
AND FINANCIAL REPORTING POLICIES
---------------------------------
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
---------------------------
include the accounts of Miltope Group Inc. (the "Company") and its
wholly-owned subsidiaries, Miltope Corporation ("Miltope"), Miltope
Business Products, Inc. ("MBP") and Miltope's wholly-owned subsidiary,
International Miltope, Ltd., a Foreign Sales Corporation ("FSC").
All material intercompany transactions have been eliminated.
NATURE OF OPERATIONS - The Company through its two industry segments,
--------------------
military/rugged and commercial (MBP), is engaged in the development of
computers and peripheral equipment for rugged and other specialized
applications for military and commercial customers, domestic and
international. On January 1, 1996, the Company consolidated the
operations of Miltope and MBP.
ACCOUNTING ESTIMATES - The Company's consolidated financial statements
--------------------
are prepared in conformity with generally accepted accounting
principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of the
------------------------------------
Company's accounts receivable, accounts payable and accrued expenses
approximates fair value because of the short-term maturity of those
instruments. Additional information regarding the fair value of other
financial instruments is disclosed in Notes 6 and 7.
INVESTMENT AVAILABLE FOR SALE - During 1994, the Company adopted the
-----------------------------
provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"). SFAS 115 requires a positive intent and ability to hold
debt securities to maturity as a precondition for reporting those
securities at amortized cost. Securities not meeting the condition
are considered either available for sale or trading, as defined, and
reported at fair value. The investment owned by the Company is
considered available for sale. Gains and losses on the disposition of
the investment available for sale are computed under the specific
identification method. Unrealized gains and losses, net of tax,
related to the investment available for sale are reported as a
separate component of stockholders' equity. The Company did not hold
any trading investments or securities deemed to be held to maturity
throughout 1994 or 1995. Restrictions on the Company's ability to
sell this investment were resolved during 1994, thus there would be no
effect on stockholders' equity had the Company adopted SFAS 115 at
December 31, 1993.
DEPRECIATION AND AMORTIZATION - Depreciation of machinery, equipment,
-----------------------------
furniture and fixtures is computed on the straight-line method over
the estimated useful lives of the related assets ranging from 3 to 10
years. Depreciation of buildings and improvements is computed on the
straight-line method over an estimated useful life of 30 years.
Amortization of leasehold improvements is computed on the straight-
line method over the lesser of the estimated useful life of the
improvement or the remaining term of the lease.
INTANGIBLE ASSETS - Intangible assets include a noncompete agreement
-----------------
and purchased technology with an aggregate carrying value of $900,000
and $695,000 at December 31, 1994 and 1995, respectively, which are
being amortized over a six to seven-year period on a straight-line
basis. The accumulated amortization as of December 31, 1994 and 1995
is $313,000 and $605,000, respectively. The Company periodically
reviews intangible assets to assess recoverability, and impairments
would be recognized in operating results if a permanent diminution
were to occur.
PROGRESS BILLINGS - In accordance with the terms of certain sales
-----------------
contracts, a portion of the costs incurred as of the end of specified
periods may be billed to the applicable customers even though the
contracted units have not been delivered. In accordance with trade
practice, such progress payments are not recorded as revenue until the
related units are shipped. The amounts of paid progress billings for
which the related units have not been shipped are applied against the
carrying value of inventories held for the contracts (see Note 4).
REVENUE RECOGNITION - Sales and related cost of sales are generally
-------------------
recognized under the unit-of-delivery method of accounting. A
significant multi-year contract is accounted for under the percentage-
of-completion method of accounting. Income is recognized under the
percentage-of-completion method using the cost-to-cost method after
considering management's estimates of costs to complete utilizing all
available information. Sales under cost reimbursable type contracts
are recorded as work is performed. Provisions for estimated losses on
contracts in progress are recorded in the period in which the loss is
determined. Revisions in profit estimates are reflected in the period
in which the facts that require revision are known. Amounts
representing contract change orders or claims are included in sales
only when they can be reasonably estimated and realization is
probable.
ENGINEERING, RESEARCH AND DEVELOPMENT - Engineering, research and
-------------------------------------
development expenditures not made in connection with sales contracts
are charged to expense as incurred.
INCOME TAXES - On January 1, 1993, the Company adopted the provisions
------------
of Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS 109"), which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of
events that have been included in the Company's consolidated financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the
financial accounting and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. The impact on the Company's 1993 consolidated
financial statements of the adoption of SFAS 109 was not material.
NET LOSS PER COMMON SHARE - Net loss per common share is based on the
-------------------------
weighted average number of shares outstanding during the year. The
dilutive effect of outstanding common stock options was not included
in the loss per share computations. The weighted average number of
shares used in computing net loss per common share was 5,825,000 in
1993, 5,834,000 in 1994 and 5,853,000 in 1995.
RECLASSIFICATIONS - Certain prior years amounts have been reclassified
-----------------
to conform with the 1995 presentation.
ACCOUNTING STANDARDS - Yet to be Adopted In October 1995, the
--------------------
Financial Accounting Standards Board ("FASB") issued SFAS No. 123,
Accounting for Stock-Based Compensation, which requires adoption of
the disclosure provisions no later than fiscal years beginning after
December 15, 1995 and adoption of the recognition and measurement
provisions for nonemployee transactions entered into after December
15, 1995. The new standard defines a fair value method of accounting
for stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period,
which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, ("APB No
25") but would be required to disclose in a note to the financial
statements pro forma net income and earnings per share as if the
company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of
adoption. The Company has determined that it will continue to account
for employee stock-based transactions under APB No. 25 and will not
elect to change to the fair value method. Adoption of the disclosure
provisions of this statement in 1996 will result in only increased
disclosures regarding pro forma net income and earnings per share as
if the Company had applied the new method of accounting.
The FASB has also issued SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of. This
statement is effective for fiscal years beginning after December 15,
1995 and management believes its impact would be immaterial to the
Company's consolidated financial statements if adopted currently.
2. CHANGE IN ACCOUNTING PRINCIPLE
------------------------------
On January 1, 1994, the Company changed its method of accounting for
certain inventories to the actual-cost-incurred method from the last-
in, first-out ("LIFO") cost method. The Company adopted the LIFO
method during 1975 at a time when the cost of materials, labor and
overhead were increasing annually at dramatic rates. However, since
that time, the prices for materials have declined and created an
annual reduction of such costs while labor and overhead have
increased substantially. This has created an inconsistent effect
among the Company's cost components and, as a result, LIFO does not
properly reflect the aggregate cost of inventories. The change to
the actual-cost-incurred method was made to avoid distortions in
financial reporting and to achieve what management believes will be
a better reflection of operating results and greater comparability
from period to period. In addition, the change will eliminate the
additional record keeping and computational effort required in using
the LIFO method.
The Company has retroactively adjusted its consolidated financial
statements for this change. The effect of the accounting change
decreased net income and net income per share as previously reported
for the year ended December 31, 1993 by $986,000 and $.17,
respectively.
3. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable consists of the following:
1994 1995
---- ----
Amounts receivable from the
United States Government $ 3,359,000 $ 2,775,000
Unbilled receivables on
contracts in progress 3,223,000 1,655,000
Amounts receivable from
other customers 8,291,000 6,388,000
Allowance for doubtful accounts (250,000) (401,000)
------------ ------------
Total $ 14,623,000 $ 10,417,000
============ ============
Unbilled receivables relate principally to certain long-term contracts
accounted for on the percentage-of-completion basis. Receivables on
the contracts are billed upon shipment of deliverables to the
customers.
4. INVENTORIES
-----------
Inventories consist of the following:
1994 1995
---- ----
Purchased parts and subassemblies $ 3,268,000 $ 2,766,000
Work-in-process 13,769,000 13,581,000
Inventoried costs relating to long-
term contracts and programs, net
of amounts attributed to revenues
recognized to date 2,687,000 85,000
------------ ------------
19,724,000 16,432,000
Less progress billings received 310,000 -
------------ ------------
Total $ 19,414,000 $ 16,432,000
============ ============
Work-in-process inventories include materials purchased for specific
contracts. Inventories include an allowance for slow-moving and
obsolete items of $1,240,000, $2,000,000 and $2,700,000 at December
31, 1993, 1994, and 1995, respectively. The Company wrote-off
$379,000, $1,400,000 and $183,000 of slow-moving and obsolete
inventory during 1993, 1994 and 1995, respectively.
Cost has been determined on the first-in, first-out basis for Miltope
and MBP. Inventory relating to a significant long-term government
contract is accounted for based on the estimated average cost of all
items included in the contract.
5. ASSET AVAILABLE FOR SALE
------------------------
During 1993, the Company exercised an option to purchase its
manufacturing and administrative facility in Melville, New York for
$5.0 million. During the fourth quarter of 1993, the Company decided
to sell the building. As a result, at December 31, 1993, the Company
recognized a charge of approximately $2.2 million representing the
excess of the carrying value of the building and related improvements
over the estimated selling price (less costs to dispose). At December
31, 1993, the Company classified the net realizable value of the asset
and related improvements as a current asset since they intended to
consummate the sale during 1994. Such sale occurred during 1994.
6. OTHER ASSETS
------------
In January 1993, the Company acquired certain assets of Mag-Tek, Inc.,
a manufacturer of commercial airline products, for aggregate
consideration, including related acquisition costs, of approximately
$3.5 million. The consideration consisted of $2.0 million in cash,
aggregate discounted minimum royalties of approximately $1.1 million
(see Note 7) and $400,000 in related acquisition costs. The
acquisition has been accounted for as a purchase.
The Company has an investment available for sale, with an original
cost of $5,000, in M-Systems Flash Disk Pioneers, Ltd. ("M-Systems"),
a company based in Israel. The Company is a major customer of M-
Systems. The Company currently owns 92,014 shares of M-Systems
stock at December 31, 1995. The fair market value of the Company's
investment in M-Systems stock on December 31, 1995 is $357,000 and is
included in other assets and as a separate component of stockholders'
equity (net of deferred income taxes) on the accompanying consolidated
balance sheet. During 1994 and 1995, the Company sold 111,500 and
160,850 shares of stock, respectively. The Company has provided
notice to M-Systems of its intent to exercise its option to purchase
an additional 153,242 shares of M-Systems stock at a price of
$231,000. No value has been ascribed to the option at December 31,
1995.
The Company made loans to a related entity of which the chairman of
such entity is a member of the Company's board of directors and,
through other shareholdings, is affiliated with the majority
shareholder of the Company. The loans bear interest at .75 percent
above the prime lending rate (such prime lending rate being 8.5
percent and 8.75 percent at December 31, 1994 and 1995, respectively).
The maximum amount loaned during the years ended December 31, 1994 and
1995 was $500,000. At December 31, 1994 and 1995, this loan of
$500,000 is reflected within other assets on the accompanying
consolidated balance sheets since collection is not anticipated to
occur during the next fiscal year.
7. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
1994 1995
---- ----
Revolving credit loan $ 13,307,000 $ 10,304,000
Term loan 3,375,000
Present value of minimum royalty
payments 1,099,000 1,077,000
1995 Industrial Development Authority
Revenue Bond - 6,100,000
------------ ------------
Total 17,781,000 17,481,000
Less current maturities 230,000 528,000
------------ ------------
Total $ 17,551,000 $ 16,953,000
============ ============
A $15,000,000 revolving credit agreement bears interest at the bank's
reference rate plus .25% (8.75% and 9.0% at December 31, 1994 and
1995, respectively) and is scheduled to mature on May 31, 1997, at
which time the outstanding amount would be converted into a term loan
payable in twelve equal quarterly installments. However, at the
request of the Company, the bank may extend the revolving credit
agreement for successive one year periods based upon a review of the
previous year-end audited consolidated financial statements. The
Company's accounts receivable, contract rights and inventories are
pledged as collateral to the agreement.
The term loan from the bank was used by the Company to purchase and
renovate its new corporate headquarters in 1994. The interest rate on
this loan at December 31, 1994 was 8.75%. In January 1995, the
Company repaid the term loan with a portion of the proceeds of
$6,100,000 of the 1995 Industrial Development Authority Revenue Bonds
(the "Bonds"). Principal payments under the agreement with the
Industrial Development Authority begin in December 1996. Repayment of
the Bonds is secured by an irrevocable letter of credit issued by an
Alabama bank in an amount up to $6.2 million which in turn is secured
by a mortgage on the Montgomery and Troy, Alabama facilities and a
security interest in the equipment located at such facilities.
Property and equipment with a carrying value of $8,205,000 and
$7,744,000 at December 31, 1994 and 1995, respectively, are pledged as
collateral. The agreement with the Industrial Development Authority
bears interest at a variable market rate which ranged from 5.77% to
6.33% during 1995, and was 5.87% at December 31, 1995.
The credit agreements referenced above include various provisions
requiring the maintenance of certain financial ratios and limitations
on (i) transactions with affiliates, (ii) other debt and guarantees,
(iii) investment in, and advances to, other entities, and (iv) payment
of dividends. On December 12, 1995, the Company received waivers from
the bank of certain financial covenant violations existing at
September 30, 1995 and amendments of such covenants for future periods
through December 31, 1996. There were no financial covenant
violations as of December 31, 1995. The amendments prohibit payment
of dividends as long as waivers are required of certain financial
covenants. Thereafter, the Company's bank loan agreement permits the
Company to pay annual dividends of up to 50% of the prior year's net
income.
In connection with an acquisition (see Note 6), the Company agreed to
pay annual minimum royalty payments of $200,000, $400,000, $500,000
and $600,000, which began in October, 1995. The Company recorded
this obligation based on the present value of those payments using a
15% discount rate.
The aggregate maturities of long-term debt subsequent to December 31,
1995 are as follows:
Year Ending December 31,
------------------------
1996 $ 528,000
1997 2,403,000
1998 4,008,000
1999 3,745,000
2000 2,057,000
Thereafter 4,740,000
-----------
Total $17,481,000
===========
It is not practicable to estimate the fair value of the minimum
royalty payments because quoted market prices do not exist for similar
type instruments. The fair value of other long-term debt approximated
the carrying value as of December 31, 1995.
8. INCOME TAXES
------------
The provision (benefit) for income taxes consists of the following:
1993 1994 1995
---- ---- ----
Current:
Federal $ 87,000 $(2,450,000) $ -
State 124,000 162,000 -
Deferred (736,000) (1,137,000) -
--------- ----------- -------------
Total $(525,000) $(3,425,000) $ -
========== =========== =============
The deferred tax assets and liabilities at December 31, 1994 and 1995 are
comprised of the following:
1994
-----------------------------------
DEFERRED
DEFERRED TAX
Current: TAX ASSETS LIABILITIES
---------- -----------
Inventory - $ (574,000)
Non-deductible accruals $ 846,000 -
---------- -----------
Total current 846,000 (574,000)
Valuation allowance (579,000) -
---------- -----------
Net current 267,000 (574,000)
---------- -----------
Long-term:
Reserves 228,000 -
Net operating loss
carryforward 3,499,000 -
Alternative minimum tax
credit carryforward 163,000 -
Accelerated depreciation - (922,000)
Unrealized appreciation on
investment available for sale - (386,000)
----------- ------------
Total long-term 3,890,000 (1,308,000)
Valuation allowance (2,661,000) -
----------- ------------
Net long-term 1,229,000 (1,308,000)
----------- ------------
Net $1,496,000 $ (1,882,000)
=========== =============
1994
-----------------------------------
Current: TOTAL
----------
Inventory $ (574,000)
Non-deductible accruals 846,000
----------
Total current 272,000
Valuation allowance (579,000)
----------
Net current (307,000)
----------
Long-term:
Reserves 228,000
Net operating loss
carryforward 3,499,000
Alternative minimum tax
credit carryforward 163,000
Accelerated depreciation (922,000)
Unrealized appreciation on
investment available for sale (386,000)
-----------
Total long-term 2,582,000
Valuation allowance (2,661,000)
-----------
Net long-term (79,000)
-----------
Net $ (386,000)
===========
1995
-----------------------------------
DEFERRED
DEFERRED TAX
Current: TAX ASSETS LIABILITIES
---------- -----------
Inventory $ (114,000)
Non-deductible accruals $ 205,000 -
---------- -----------
Total current 205,000 (114,000)
Valuation allowance (159,000) -
---------- -----------
Net current 46,000 (114,000)
---------- -----------
Long-term:
Reserves 297,000 -
Net operating loss
carryforward 3,962,000 -
Alternative minimum tax
credit carryforward 163,000 -
Accelerated depreciation - (932,000)
Unrealized appreciation on
investment available for sale - (132,000)
----------- ------------
Total long-term 4,422,000 (1,064,000)
Valuation allowance (3,422,000) -
----------- ------------
Net long-term 1,000,000 (1,064,000)
----------- ------------
Net $1,046,000 $ (1,178,000)
=========== =============
1995
-----------------------------------
Current: TOTAL
----------
Inventory $ (114,000)
Non-deductible accruals 205,000
----------
Total current 91,000
Valuation allowance (159,000)
----------
Net current (68,000)
----------
Long-term:
Reserves 297,000
Net operating loss
carryforward 3,962,000
Alternative minimum tax
credit carryforward 163,000
Accelerated depreciation (932,000)
Unrealized appreciation on
investment available for sale (132,000)
-----------
Total long-term 3,358,000
Valuation allowance (3,422,000)
-----------
Net long-term (64,000)
-----------
Net $ (132,000)
===========
At December 31, 1994 and 1995, a valuation allowance of
$3,240,000 and $3,581,000 has been established against the net
deferred income tax assets. Such valuation allowance can be adjusted
in future periods as the probability of realization of the net
deferred income tax assets increases.
The Company has a net operating loss carryforward for Federal
income tax purposes of approximately $10,300,000 and $1,200,000, which
will expire in 2009 and 2010, respectively, if not utilized.
The Company's benefit for income taxes differs from the
amount computed using the Federal statutory tax rate as a result
of the following items:
1993 1994 1995
---- ---- ----
Amount at Federal
statutory rate $ (469,000) $(6,421,000) $(335,000)
Increases (reductions)
due to:
State taxes - net of
Federal income tax
benefit 116,000 132,000 (34,000)
Exempt FSC income (20,000) - -
Reversal of excess amounts
provided in prior years (163,000) - -
Change in state tax rates - (283,000) -
Valuation allowance provided 3,240,000 341,000
Other 11,000 (93,000) 28,000
--------- ----------- ----------
Total $(525,000) $(3,425,000) $ -
========= ========== ==========
9. EMPLOYEE BENEFIT PLANS
----------------------
CASH BONUS PLAN - The Company has a bonus plan which provides for
---------------
employee participation in earnings. All permanent, full-time employees
(excluding certain executives) are eligible. The bonus plan provides
for quarterly contributions of up to 8 percent of a defined base. All
eligible employees participate in the bonus plan based upon respective
salary levels and years of service. The Company's bonus provision for
the years ended December 31, 1993 and 1994 was $442,000, and $185,000,
respectively. The Company did not award a bonus for 1995.
SAVINGS PLAN - The Company has a profit-sharing retirement plan
------------
(the "Plan") which covers substantially all employees. Company
contributions are discretionary and are determined annually based on
profits. The Plan allows for an employee pay conversion feature
whereby each eligible employee may contribute from 4 to 15 percent of
their total pay. The Company's provision pursuant to the Plan
amounted to $262,000 and $270,000 in 1993 and 1994, respectively.
The Company made no contributions for 1995.
PERFORMANCE BASED BONUS PLAN The Company has a bonus plan that
----------------------------
provides for additional compensation to certain executive officers.
The bonus is payable upon the attainment of certain financial targets
that are approved by the Board of Directors, and is calculated as a
specified percentage of the officer's current base salary. The
Company's bonus provision for 1993 was $20,000. No bonus provision
was made for 1994 or 1995.
10. STOCK OPTIONS
-------------
The Company has an Incentive Stock Option Plan ("ISO"), a
Management Stock Option Plan ("MSO") and a Key Employee Stock Option
Plan ("KSO"). The ISO, MSO and KSO Plans expired in 1994 and 1995.
In addition, on April 11, 1995, the Company adopted the 1995 Stock
Option and Performance Award Plan ("SOPA") which was approved by the
Company's stockholders on June 5, 1995. Under the ISO, MSO, KSO and
SOPA plans, 376,780, 187,700, 150,000 and 500,000 shares of common
stock, respectively, were reserved for issuance under options to be
granted for periods not to exceed ten years at an exercise price not
less than the fair market value of the shares at the date of grant.
Such options are exercisable at a cumulative rate of 25 percent in
each of the first four years subsequent to the applicable grant.
Options for 126,515 shares, 112,390 shares and 185,585 shares were
exercisable at December 31, 1993, 1994 and 1995, respectively.
In addition, certain of the Company's outside directors have been
granted options to purchase shares of common stock at exercise prices
of 85 percent of the fair market value of such shares at date of
grant. Such options are exercisable at any time during the term of
ten years as long as the recipient is a director or within one year
after termination of service. Options were exercisable for 68,247
shares, 85,164 shares and 155,085 shares at December 31, 1993, 1994
and 1995, respectively.
Additional information regarding stock options granted pursuant
to the stock option plans is as follows:
Options For
Shares Option Price
----------- ------------
OUTSTANDING -
December 31, 1992 395,601 $2.55 to $16.79
Granted 108,896 $3.72 to $5.50
Canceled (133,735) $3.00 to $16.00
Exercised (11,250) $2.63
-------------------------------------------------------------------------
OUTSTANDING -
December 31, 1993 359,512 $2.55 to $16.79
Granted 41,917 $2.66 to $3.63
Canceled (103,125) $5.50 to $15.38
-------------------------------------------------------------------------
OUTSTANDING -
December 31, 1994 298,304 $2.55 to $16.79
Granted 150,278 $2.66 to $3.75
Canceled (168,497) $3.63 to $15.38
-------------------------------------------------------------------------
OUTSTANDING -
December 31, 1995 280,085 $2.66 to $16.79
=======
In addition, options to purchase 33,000 shares were exercised
during 1995 at an exercise price of $3.00 per share. These options
were originally granted independently of the aforementioned stock
option plans. There are no other options granted independently of
the aforementioned stock option plans.
11. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is obligated under several noncancelable operating
leases covering office facilities and equipment. Minimum rental
payments under all noncancelable leases, exclusive of renewal options,
are as follows:
YEAR ENDING DECEMBER 31,
-----------------------
1996 $ 222,000
1997 166,000
1998 84,000
1999 68,000
2000 29,000
Thereafter 2,547,000
---------
Total $3,116,000
=========
Aggregate rental expense under noncancelable operating leases
amounted to $1,371,000, $749,000 and $688,000 in 1993, 1994 and 1995,
respectively.
In relation to a significant contract which was terminated in
October 1992, the Company has an equitable adjustment claim of $2.4
million, which is part of its prime contractor's claim against its
customer, and has submitted a termination settlement proposal which is
presently in negotiation. In 1994, $800,000 of the equitable
adjustment claim was recognized as revenue.
12. SEGMENT INFORMATION
-------------------
The Company operates in two industry segments. Information about the
Company's industry segments is as follows:
MILITARY/RUGGED COMMERCIAL
--------------- ----------
1993
----
Sales to unaffiliated customers $ 77,672,000 $ 6,648,000
Intersegment sales 5,981,000 3,000
------------ -----------
Net sales $ 83,653,000 $ 6,651,000
============ ===========
Income (loss) from operations $ 2,165,000 $(2,337,000)
============ ===========
Interest expense - net
Loss before income taxes
Identifiable assets $ 53,601,000 $ 9,136,000
============ ===========
Capital expenditures $ 5,959,000 $ 632,000
============ ===========
Depreciation and amortization $ 952,000 $ 238,000
============ ===========
MILITARY/RUGGED COMMERCIAL
--------------- ----------
1994
----
Sales to unaffiliated customers $ 66,882,000 $ 8,687,000
Intersegment sales 8,976,000 38,000
------------ -----------
Net sales $ 75,858,000 $ 8,725,000
============ ===========
Loss from operations $(13,287,000) $(4,546,000)
============ ===========
Interest expense - net
Loss before income taxes
Identifiable assets $ 46,201,000 $ 6,846,000
============ ===========
Capital expenditures $ 5,972,000 $ 82,000
============ ===========
Depreciation and amortization $ 896,000 $ 676,000
============ ===========
MILITARY/RUGGED COMMERCIAL
--------------- ----------
1995
----
Sales to unaffiliated customers $ 55,974,000 $ 9,733,000
Intersegment sales 9,247,000 46,000
------------ -----------
Net sales $ 65,221,000 $ 9,779,000
============ ===========
Income (loss) from operations $ 3,164,000 $(2,557,000)
============ ===========
Interest expense - net
Loss before income taxes
Identifiable assets $ 35,905,000 $ 5,845,000
============ ===========
Capital expenditures $ 563,000 $ 153,000
============ ===========
Depreciation and amortization $ 1,024,000 $ 677,000
============ ===========
ELIMINATIONS CONSOLIDATED
------------ ------------
1993
----
Sales to unaffiliated customers $ 84,320,000
Intersegment sales $(5,984,000)
----------- ------------
Net sales $(5,984,000) $ 84,320,000
=========== ============
Income (loss) from operations $ (61,000) $ (233,000)
===========
Interest expense - net 1,148,000
------------
Loss before income taxes $ (1,381,000)
============
Identifiable assets $ (150,000) $ 62,587,000
=========== ============
Capital expenditures $ 6,591,000
============
Depreciation and amortization $ 1,190,000
============
ELIMINATIONS CONSOLIDATED
------------ ------------
1994
----
Sales to unaffiliated customers $ 75,569,000
Intersegment sales $(9,014,000)
----------- ------------
Net sales $(9,014,000) $ 75,569,000
=========== ============
Loss from operations $ 265,000 $(17,568,000)
===========
Interest expense - net 1,317,000
------------
Loss before income taxes $(18,885,000)
============
Identifiable assets $ 115,000 $ 53,162,000
=========== ============
Capital expenditures $ 6,054,000
============
Depreciation and amortization $ 1,572,000
============
ELIMINATIONS CONSOLIDATED
------------ ------------
1995
----
Sales to unaffiliated customers $ 65,708,000
Intersegment sales $(9,293,000)
----------- ------------
Net sales $(9,292,000) $ 65,708,000
=========== ============
Income (loss) from operations $ (230,000) $ 377,000
===========
Interest expense - net 1,361,000
------------
Loss before income taxes $ (984,000)
============
Identifiable assets $ 115,000 $ 41,635,000
=========== ============
Capital expenditures $ 716,000
============
Depreciation and amortization $ 1,701,000
============
In 1993, 1994 and 1995, foreign sales accounted for 9 percent, 17
percent and 23 percent, respectively, of the military/rugged segment
net sales and 18 percent, 11 percent and 3 percent, respectively, of
the commercial segment net sales.
During 1993, 1994 and 1995, the United States Government
accounted for 62 percent, 57 percent and 63 percent of consolidated
net sales of the Company, respectively.
13. UNAUDITED QUARTERLY FINANCIAL DATA
----------------------------------
Summarized unaudited quarterly financial data for the years ended
December 31, 1994 and December 31, 1995 is as follows:
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 31, 1994 JULY 2, 1994
-------------- ------------
Net Sales $20,089,000 $18,803,000
=========== ===========
Gross Profit $ 5,046,000 $ 4,913,000
=========== ===========
Net Income (loss) $(5,144,000) $ 795,000
=========== ===========
Net Income (loss)
Per Common Share $(.88) $.14
===== ====
THIRTEEN WEEKS ENDED
--------------------------------
OCTOBER 2, 1994 DECEMBER 31, 1994
--------------- -----------------
Net Sales $21,085,000 $ 15,592,000
=========== ============
Gross Profit $ 4,848,000 $ (9,127,000)
=========== ============
Net Income (loss) $ 960,000 $(12,101,000)
=========== ============
Net Income (loss)
Per Common Share $.16 $(2.07)
==== ======
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 31, 1995 JULY 1, 1995
-------------- ------------
Net Sales $16,199,000 $21,063,000
=========== ===========
Gross Profit $ 2,546,000 $ 4,662,000
=========== ===========
Net Income (loss) $(1,332,000) $ 193,000
=========== ===========
Net Income (loss)
Per Common Share $(.23) $.03
===== ====
THIRTEEN WEEKS ENDED
-----------------------------------
OCTOBER 1, 1995 DECEMBER 31, 1995
--------------- -----------------
Net Sales $18,226,000 $ 10,220,000
=========== ============
Gross Profit $ 3,611,000 $ 2,553,000
=========== ============
Net Income (loss) $ 618,000 $ (463,000)
=========== ============
Net Income (loss)
Per Common Share $.11 $(.08)
==== =====
14. RELOCATION AND RESTRUCTURING
----------------------------
In 1994, the Company relocated and restructured substantially all
of the manufacturing, engineering and administrative functions located
in Melville, New York to Alabama and Vermont. A pre-tax charge of
$9.1 million was recorded during fiscal 1994 to cover the costs
associated with the relocation and restructuring, which include the
following:
Severance and related
human resource programs $1,080,000
Employee relocation 3,151,000
Transfer of assets to Alabama
and Vermont 2,326,000
Production inefficiencies 2,543,000
-----------
Total $9,100,000
==========
At December 31, 1994, $1.3 million of this charge, representing
certain relocation related costs, is included in accrued expenses on
the accompanying consolidated balance sheet and was paid during 1995.
At December 31, 1995, there is substantially no remaining liability on
the accompanying consolidated balance sheet, as the relocation is
complete.
15. RELATED PARTY TRANSACTION
-------------------------
Effective January 1, 1995, Innova International Corporation acquired
62.8%, subject to adjustment in certain circumstances, of the out-
standing common stock of the Company pursuant to certain share ex-
change transactions with Stonebrook Group, Inc. and Stuvik AB.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
MILTOPE GROUP INC.
March 27, 1996
/s/ George K. Webster
-------------------------------------
George K. Webster
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 27, 1996 /s/ George K. Webster
------------------------------------
George K. Webster
President and Chief Executive
Officer (Principal Executive Officer)
March 27, 1996 /s/ James E. Matthews
------------------------------------
James E. Matthews
Vice President, Finance (Principal
Accounting and Financial Officer)
March , 1996
------------------------------------
J. Shelby Bryan
Director
March 27, 1996 /s/ Alvin E. Nashman
------------------------------------
Alvin E. Nashman
Director
March 27, 1996 /s/ Jan H. Stenback
------------------------------------
Jan H. Stenbeck
Director
March 27, 1996 /s/ William Mustard
------------------------------------
William Mustard
Director
March 27, 1996 /s/ John Cusik
------------------------------------
John Cusick
Director
March 27, 1996 /s/ Franklin Miller
------------------------------------
Franklin Miller
Director
March 27, 1996 /s/ William L. Dickinson
------------------------------------
William L. Dickinson
Director
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
10(r)(C) Stock Option Agreement, dated as of
June 5, 1995 between the Registrant
and William L. Dickinson.
10(s)(H) Stock Option Agreement, dated as of
June 5, 1995, between the
Registrant and Alvin E. Nashman.
10(t) Stock Option Agreement, dated as of
August 7, 1995, between the
Registrant and George K. Webster.
10(u) Stock Option Agreement, dated as of
November 8, 1995, between the
Registrant and James E. Matthews.
10(w) Settlement and Release Agreement,
dated November 1, 1995, by and
among the Registrant, Miltope
Corporation, Miltope Business
Products, Inc., Pandolfi Group,
Inc. and Richard Pandolfi.
10(y) Employment Agreement, dated
November 8, 1995, between the
Registrant and James E. Matthews.
21 Subsidiaries of the Registrant.
23 Independent Auditors' Consent,
dated March 20, 1996, to the
incorporation by reference in
Registration Statements No. 2-
97977, No. 33-8245, No. 33-78744
and No. 33-65233 on Form S-8 and
No. 33-33752 on Form S-3 of their
report dated March 20, 1996
appearing in this Annual Report on
Form 10-K for the year ended
December 31, 1995.
27 Financial Data Schedule
Exhibit 10(r)(C)
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made as of this 5th day of June 1995 between
MILTOPE GROUP INC., a Delaware corporation (the "Company"), and
WILLIAM L. DICKINSON residing at 3535 North Glebe Road, Arlington
Virginia 22207 (the "Director").
WHEREAS, the Company desires, in connection with the
service of the Director on the Board of Directors of the Company,
to provide the Director with an opportunity to acquire Common
Stock, par value $.01 per share (the "Common Stock"), of the
Company on favorable terms;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants herein set forth and other good and valuable
consideration, the Company and the Director hereby agree as
follows:
1. Confirmation of Grant of Option.
-------------------------------
Pursuant to a determination by the Board of Directors of the
Company made as of June 5, 1995 (the "Date of Grant"), the
Company hereby confirms that the Director has been granted
effective June 5, 1995, as a matter of separate inducement and
agreement, and in addition to and not in lieu of salary or other
compensation for services to be rendered by the Director, the
right to purchase (the "Option") 5,639 shares of Common Stock,
$.01 par value, of the Company (the "Shares"), subject to
adjustment as provided in Section 7 hereof.
2. Purchase Price.
--------------
The purchase price per share of the Shares will be $2.66 per
share, subject to adjustment as provided in Section 7 hereof.
3. Exercise of Option.
------------------
The Option may be exercised at any time during its term pursuant
to the provisions of Sections 9 and 14 hereof. Except as
provided in Section 6 hereof, the Option can only be exercised
while the Director is a member of the Board of Directors of the
Company or within one (l) year after the termination of the
Director's services as a director of the Company.
4. Term of Option.
--------------
The term of the Option shall be a period of ten (10) years from
the Date of Grant, subject to earlier termination or cancellation
as provided in this Agreement. The Option may not be exercised
after the expiration of its term.
The holder of the Option will not have any rights to
dividends or any other rights of a stockholder with respect to
any share subject to the Option until it has been issued to him
(as evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company). The date of issuance
shall not be earlier than the Closing Date, as defined in
Section 9 hereof.
5. Non-transferability of Option.
-----------------------------
The Option is not transferable otherwise than by will or by the
laws of descent and distribution, and the Option may be exercised
during the lifetime of the Director only by him. More
particularly, but without limiting the generality of the
foregoing, the Option may not be assigned, transferred or
otherwise disposed of, or pledged or hypothecated in any way
(voluntarily or involuntarily), and is not subject to execution,
attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted
contrary to the provisions of this Agreement, or any levy of
execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make
any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event if the
Board of Directors of the Company, at any time, should, in its
sole discretion, so elect, by written notice to the Director or
to the person then entitled to exercise the Option; provided,
however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any
rights or remedies which the Company or any subsidiary thereof
may have under this Agreement or otherwise.
6. Exercise Upon Death.
-------------------
If the Director dies while still a member of the Board of
Directors of the Company or within one (1) year after the
Director's service as a director of the Company has terminated,
the Option may be exercised to the extent the Director would have
been entitled under Section 3 hereof to exercise the Option on
the day next preceding the date of his death, by the estate of
the deceased Director, or by any person who acquired the right to
exercise the Option by bequest or inheritance or by reason of the
death of the Director, at any time within six (6) months after
his death, at the end of which period the Option shall terminate.
Such period shall in no event extend the date of exercise of the
Option beyond the term thereof as provided in Section 4.
7. Adjustments.
------------
In the event of a stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation,
acquisition or disposition of property or shares, reorganization,
liquidation or other similar changes or transactions of or by the
Company, the Board of Directors of the Company will make (or will
undertake to have the Board of Directors of any corporation which
merges with, or acquires the stock or assets of, the Company
make) an adjustment of the number or class of shares then covered
by the Option, or of the purchase price per share of the Shares,
or both, as it in its sole discretion deems appropriate to give
proper effect to the event.
8. Registration.
------------
The Company may register or qualify the Shares for sale pursuant
to the Securities Act of 1933, as amended (the "Securities Act"),
at any time prior to or after the exercise in whole or in part of
the Option.
9. Method of Exercise of Option.
----------------------------
The Option is exercisable by notice and payment to the Company in
accordance with the procedure prescribed herein. Each such
notice will:
(a) State the election to exercise the Option and
the number of shares in respect of which it is being exercised;
(b) Contain a representation and agreement as to
investment intent, if required by counsel to the Company with
respect to such Shares, in form satisfactory to counsel for the
Company; and
(c) Be signed by the person entitled to exercise
the Option and, if the Option is being exercised by any person
other than the Director, be accompanied by proof, satisfactory to
counsel for the Company, of the right of that person to exercise
the Option.
Upon receipt of such notice, the Company will specify,
by written notice to the person exercising the Option, a date and
time (the "Closing Date") and place for payment of the full
purchase price of such Shares. The Closing Date will be not more
than fifteen days from the date the notice of exercise is
received by the Company unless another date is agreed upon by the
Company and the person exercising the Option or is required upon
advice of counsel for the Company in order to meet the
requirements of Section 10 hereof.
Payment of the purchase price will be made at the place
specified by the Company on or before the Closing Date by
delivering to the Company a certified or bank cashier's check
payable to the order of the Company. The Option will be deemed
to have been exercised with respect to any particular shares of
Common Stock if, and only if, the preceding provisions of this
Section 9 and the provisions of Section 10 hereof shall have been
complied with, in which event the Option will be deemed to have
been exercised on the Closing Date. Anything in this Agreement
to the contrary notwithstanding, any notice of exercise given
pursuant to the provisions of this Section 9 will be void and of
no effect if all the preceding provisions of this Section 9 and
the provisions of Section 10 have not been complied with. The
certificate(s) for shares of Common Stock as to which the Option
shall be exercised will be registered in the name of the person
exercising the Option (or, if the Option is exercised by the
Director and if the Director so requests in the notice exercising
the Option, will be registered in the name of the Director and
another person jointly, with right of survivorship) and will be
delivered on the Closing Date to the person exercising the Option
at the place specified for the closing, but only upon compliance
with all of the provisions of this Agreement. If the Director
fails to accept delivery of and pay for all or any part of the
number of shares specified in the notice upon tender or delivery
thereof on the Closing Date, his right to exercise the Option
with respect to those undelivered shares may be terminated in the
sole discretion of the Board of Directors of the Company. The
Option may be exercised only with respect to full shares.
10. Approval of Counsel.
-------------------
The exercise of the Option and the issuance and delivery of
shares of Common Stock pursuant thereto is subject to approval by
the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the
Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and the
requirements of any stock exchange upon which the Common Stock
may then be listed.
11. Resale of Common Stock.
----------------------
Before any sale or transfer of the Common Stock purchased upon
exercise of the Option, the Director will deliver to the Company
an opinion of counsel satisfactory to counsel for the Company to
the effect that either (i) the Common Stock to be sold or
transferred has been registered under the Securities Act and that
there is in effect a current prospectus meeting the requirements
of Subsection 10(a) of the Securities Act which is being or will
be delivered to the purchaser or transferee at or prior to the
time of delivery of the certificates evidencing the Common Stock
to be sold or transferred, or (ii) such Common Stock may then be
sold without violating Section 5 of the Securities Act.
The Common Stock issued upon exercise of the Option
shall bear the following legend if required by counsel for the
Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY
NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE
COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
12. Reservation of Shares.
---------------------
The Company shall at all times during the term of the Option
reserve and keep available a number of shares of the class of
stock then subject to the Option sufficient to satisfy the
requirements of this Agreement.
13. Limitation of Action.
--------------------
The Director and the Company each acknowledges that every right
of action accruing to him or it, as the case may be, and arising
out of or in connection with this Agreement against the Company
or a subsidiary thereof, on the one hand, or against the
Director, on the other hand, will, irrespective of the place
where an action may be brought, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action arises.
14. Notices.
-------
Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address.
All notices to the Company will be addressed to it at 1770 Walt
Whitman Road, Melville, New York 11747. All notices to the
Director or other person then entitled to exercise the Option
will be addressed to the Director or other person at the
Director's address above specified. Anyone to whom a notice may
be given under this Agreement may designate a new address by
notice to that effect.
15. Benefits of Agreement.
---------------------
This Agreement will inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations
imposed upon the Director and all rights granted to the Company
under this Agreement will be binding upon the Director's heirs,
legal representatives and successors.
16. Severability.
------------
In the event that any provision of this Agreement shall be deemed
to be illegal or unenforceable, that illegality or
unenforceability will not affect the validity and enforceability
of the remaining legal and enforceable provisions hereof, which
shall be construed as if the illegal or unenforceable provision
had not been inserted.
17. Governing Law.
-------------
This Agreement will be construed and governed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its name by its President and its
corporate seal to be hereunto affixed and attested by its
Secretary and the Director has hereunto set his hand all as of
the day, month and year first above written.
ATTEST: MILTOPE GROUP INC.
/s/ Leonard Gubar By: /s/ George K. Webster
---------------------------- --------------------------
Leonard Gubar, Secretary George K. Webster,
Acting President and Chief
Executive Officer
/s/ William L. Dickinson
-----------------------------
WILLIAM L. DICKINSON
Exhibit 10(s)(H)
STOCK OPTION AGREEMENT
----------------------
AGREEMENT made as of this 5th day of June 1995 between
MILTOPE GROUP INC., a Delaware corporation (the "Company"), and
ALVIN E. NASHMAN residing at 3609 Ridgeway Terrace, Falls Church,
Virginia 22044 (the "Director").
WHEREAS, the Company desires, in connection with the
service of the Director on the Board of Directors of the Company,
to provide the Director with an opportunity to acquire Common
Stock, par value $.01 per share (the "Common Stock"), of the
Company on favorable terms;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants herein set forth and other good and valuable
consideration, the Company and the Director hereby agree as
follows:
1. Confirmation of Grant of Option.
-------------------------------
Pursuant to a determination by the Board of Directors of the
Company made as of June 5, 1995 (the "Date of Grant"), the
Company hereby confirms that the Director has been granted
effective June 5, 1995, as a matter of separate inducement and
agreement, and in addition to and not in lieu of salary or other
compensation for services to be rendered by the Director, the
right to purchase (the "Option") 5,639 shares of Common Stock,
$.01 par value, of the Company (the "Shares"), subject to
adjustment as provided in Section 7 hereof.
2. Purchase Price.
--------------
The purchase price per share of the Shares will be $2.66 per
share, subject to adjustment as provided in Section 7 hereof.
3. Exercise of Option.
------------------
The Option may be exercised at any time during its term pursuant
to the provisions of Sections 9 and 14 hereof. Except as
provided in Section 6 hereof, the Option can only be exercised
while the Director is a member of the Board of Directors of the
Company or within one (l) year after the termination of the
Director's services as a director of the Company.
4. Term of Option.
--------------
The term of the Option shall be a period of ten (10) years from
the Date of Grant, subject to earlier termination or cancellation
as provided in this Agreement. The Option may not be exercised
after the expiration of its term.
The holder of the Option will not have any rights to
dividends or any other rights of a stockholder with respect to
any share subject to the Option until it has been issued to him
(as evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company). The date of issuance
shall not be earlier than the Closing Date, as defined in
Section 9 hereof.
5. Non-transferability of Option.
-----------------------------
The Option is not transferable otherwise than by will or by the
laws of descent and distribution, and the Option may be exercised
during the lifetime of the Director only by him. More
particularly, but without limiting the generality of the
foregoing, the Option may not be assigned, transferred or
otherwise disposed of, or pledged or hypothecated in any way
(voluntarily or involuntarily), and is not subject to execution,
attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted
contrary to the provisions of this Agreement, or any levy of
execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make
any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event if the
Board of Directors of the Company, at any time, should, in its
sole discretion, so elect, by written notice to the Director or
to the person then entitled to exercise the Option; provided,
however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any
rights or remedies which the Company or any subsidiary thereof
may have under this Agreement or otherwise.
6. Exercise Upon Death.
-------------------
If the Director dies while still a member of the Board of
Directors of the Company or within one (1) year after the
Director's service as a director of the Company has terminated,
the Option may be exercised to the extent the Director would have
been entitled under Section 3 hereof to exercise the Option on
the day next preceding the date of his death, by the estate of
the deceased Director, or by any person who acquired the right to
exercise the Option by bequest or inheritance or by reason of the
death of the Director, at any time within six (6) months after
his death, at the end of which period the Option shall terminate.
Such period shall in no event extend the date of exercise of the
Option beyond the term thereof as provided in Section 4.
7. Adjustments.
-----------
In the event of a stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation,
acquisition or disposition of property or shares, reorganization,
liquidation or other similar changes or transactions of or by the
Company, the Board of Directors of the Company will make (or will
undertake to have the Board of Directors of any corporation which
merges with, or acquires the stock or assets of, the Company
make) an adjustment of the number or class of shares then covered
by the Option, or of the purchase price per share of the Shares,
or both, as it in its sole discretion deems appropriate to give
proper effect to the event.
8. Registration.
------------
The Company may register or qualify the Shares for sale pursuant
to the Securities Act of 1933, as amended (the "Securities Act"),
at any time prior to or after the exercise in whole or in part of
the Option.
9. Method of Exercise of Option.
----------------------------
The Option is exercisable by notice and payment to the Company in
accordance with the procedure prescribed herein. Each such
notice will:
(a) State the election to exercise the Option and
the number of shares in respect of which it is being exercised;
(b) Contain a representation and agreement as to
investment intent, if required by counsel to the Company with
respect to such Shares, in form satisfactory to counsel for the
Company; and
(c) Be signed by the person entitled to exercise
the Option and, if the Option is being exercised by any person
other than the Director, be accompanied by proof, satisfactory to
counsel for the Company, of the right of that person to exercise
the Option.
Upon receipt of such notice, the Company will specify,
by written notice to the person exercising the Option, a date and
time (the "Closing Date") and place for payment of the full
purchase price of such Shares. The Closing Date will be not more
than fifteen days from the date the notice of exercise is
received by the Company unless another date is agreed upon by the
Company and the person exercising the Option or is required upon
advice of counsel for the Company in order to meet the
requirements of Section 10 hereof.
Payment of the purchase price will be made at the place
specified by the Company on or before the Closing Date by
delivering to the Company a certified or bank cashier's check
payable to the order of the Company. The Option will be deemed
to have been exercised with respect to any particular shares of
Common Stock if, and only if, the preceding provisions of this
Section 9 and the provisions of Section 10 hereof shall have been
complied with, in which event the Option will be deemed to have
been exercised on the Closing Date. Anything in this Agreement
to the contrary notwithstanding, any notice of exercise given
pursuant to the provisions of this Section 9 will be void and of
no effect if all the preceding provisions of this Section 9 and
the provisions of Section 10 have not been complied with. The
certificate(s) for shares of Common Stock as to which the Option
shall be exercised will be registered in the name of the person
exercising the Option (or, if the Option is exercised by the
Director and if the Director so requests in the notice exercising
the Option, will be registered in the name of the Director and
another person jointly, with right of survivorship) and will be
delivered on the Closing Date to the person exercising the Option
at the place specified for the closing, but only upon compliance
with all of the provisions of this Agreement. If the Director
fails to accept delivery of and pay for all or any part of the
number of shares specified in the notice upon tender or delivery
thereof on the Closing Date, his right to exercise the Option
with respect to those undelivered shares may be terminated in the
sole discretion of the Board of Directors of the Company. The
Option may be exercised only with respect to full shares.
10. Approval of Counsel.
-------------------
The exercise of the Option and the issuance and delivery of
shares of Common Stock pursuant thereto is subject to approval by
the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the
Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and the
requirements of any stock exchange upon which the Common Stock
may then be listed.
11. Resale of Common Stock.
----------------------
Before any sale or transfer of the Common Stock purchased upon
exercise of the Option, the Director will deliver to the Company
an opinion of counsel satisfactory to counsel for the Company to
the effect that either (i) the Common Stock to be sold or
transferred has been registered under the Securities Act and that
there is in effect a current prospectus meeting the requirements
of Subsection 10(a) of the Securities Act which is being or will
be delivered to the purchaser or transferee at or prior to the
time of delivery of the certificates evidencing the Common Stock
to be sold or transferred, or (ii) such Common Stock may then be
sold without violating Section 5 of the Securities Act.
The Common Stock issued upon exercise of the Option
shall bear the following legend if required by counsel for the
Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY
NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE
COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
12. Reservation of Shares.
---------------------
The Company shall at all times during the term of the Option
reserve and keep available a number of shares of the class of
stock then subject to the Option sufficient to satisfy the
requirements of this Agreement.
13. Limitation of Action.
--------------------
The Director and the Company each acknowledges that every right
of action accruing to him or it, as the case may be, and arising
out of or in connection with this Agreement against the Company
or a subsidiary thereof, on the one hand, or against the
Director, on the other hand, will, irrespective of the place
where an action may be brought, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action arises.
14. Notices.
-------
Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address.
All notices to the Company will be addressed to it at 1770 Walt
Whitman Road, Melville, New York 11747. All notices to the
Director or other person then entitled to exercise the Option
will be addressed to the Director or other person at the
Director's address above specified. Anyone to whom a notice may
be given under this Agreement may designate a new address by
notice to that effect.
15. Benefits of Agreement.
---------------------
This Agreement will inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations
imposed upon the Director and all rights granted to the Company
under this Agreement will be binding upon the Director's heirs,
legal representatives and successors.
16. Severability.
------------
In the event that any provision of this Agreement shall be deemed
to be illegal or unenforceable, that illegality or
unenforceability will not affect the validity and enforceability
of the remaining legal and enforceable provisions hereof, which
shall be construed as if the illegal or unenforceable provision
had not been inserted.
17. Governing Law.
-------------
This Agreement will be construed and governed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its name by its President and its
corporate seal to be hereunto affixed and attested by its
Secretary and the Director has hereunto set his hand all as of
the day, month and year first above written.
ATTEST: MILTOPE GROUP INC.
/s/ Leonard Gubar By: /s/ George K. Webster
---------------------------- --------------------------
Leonard Gubar, Secretary George K. Webster,
Acting President and Chief
Executive Officer
/s/ Alvin E. Nashman
-----------------------------
ALVIN E. NASHMAN
Exhibit 10(t)
OPTION NO. 95-ISO-
================================================================
MILTOPE GROUP INC.
1995 Stock Option and Performance Award Plan
INCENTIVE STOCK OPTION
Granted To
GEORGE K. WEBSTER
---------------------------
Optionee
60,000 $3.25
----------------- ---------------------
Number of Shares Price per Share (Fair Market
Value on Date of Grant)
DATE GRANTED: August 7, 1995 EXPIRATION DATE: August 6, 2000
-------------- --------------
=================================================================
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
AGREEMENT made as of this 7th day of August, 1995
between MILTOPE GROUP INC., a Delaware corporation (hereinafter
referred to as the "Company"), and GEORGE K. WEBSTER, residing at
6410 Thistlewood Court, Montgomery, Alabama 36117 (hereinafter
referred to as the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires, in connection with the
employment of the Employee and in accordance with its 1995 Stock
Option and Performance Award Plan (the "Plan"), to provide the
Employee with an opportunity to acquire Common Stock, $.01 par
value (hereinafter referred to as "Common Stock"), of the Company
on favorable terms and thereby increase his proprietary interest
in the continued progress and success of the business of the
Company;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants herein set forth and other good and valuable
consideration, the Company and the Employee hereby agree as
follows:
1. Confirmation of Grant of Option.
-------------------------------
Pursuant to a determination by the Stock Option Committee of the
Board of Directors of the Company authorized to administer the
Plan, made on August 7, 1995 (the "Date of Grant") the Company,
subject to the terms of the Plan and this Agreement, hereby
confirms that the Employee has been granted as a matter of
separate inducement and agreement, and in addition to and not in
lieu of salary or other compensation for services, the right to
purchase (hereinafter referred to as the "Option") an aggregate
of 60,000 shares of Common Stock, subject to adjustment as
provided in Section 9 hereof (such shares, as adjusted, shall
hereinafter be referred to as the "Shares"). The Option is
intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Purchase Price.
--------------
The purchase price of shares of Common Stock covered by the
Option will be $3.25 per share, being not less than 100% of the
Fair Market Value of a share of Common Stock on the Date of
Grant, subject to adjustment as provided in Section 9 hereof.
3. Exercise of Option.
------------------
The Option shall be exercisable on the terms and conditions
hereinafter set forth:
(a) The Option shall become exercisable
cumulatively as to the following amounts of the number of Shares
originally subject thereto (after giving effect to any adjustment
pursuant to Section 9 hereof), on the dates indicated:
(i) as to 15,000 Shares on or after August 7,
1996;
(ii) as to 15,000 Shares on or after August 7,
1997;
(iii) as to 15,000 Shares on or after August
7, 1998; and
(iv) as to 15,000 Shares on or after August 7,
1999.
(b) The Option may be exercised pursuant to the
provisions of this Section 3, by notice and payment to the
Company as provided in Sections 11 and 16 hereof.
4. Term of Option.
--------------
The term of the Option shall be a period of five (5) years from
the Date of Grant, subject to earlier termination or cancellation
as provided in this Agreement. This Option, to the extent
unexercised, shall expire at the end of the term set forth in the
immediately preceding sentence. The holder of the Option shall
not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Common Stock subject to
the Option until such shares shall have been issued to him (as
evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company) provided that the date
of issuance shall not be earlier than the Closing Date (as
hereinafter defined with respect to such shares pursuant to
Section 11 hereof) upon purchase of such shares upon exercise of
the Option.
5. Non-transferability of Option.
-----------------------------
The Option shall not be transferable otherwise than by will or by
the laws of descent and distribution or pursuant to a domestic
relations order, and the Option may be exercised during the
lifetime of the Employee only by him. More particularly, but
without limiting the generality of the foregoing, the Option may
not be assigned, transferred (except as provided in the next
preceding sentence) or otherwise disposed of, or pledged or
hypothecated in any way, and shall not be subject to execution,
attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted
contrary to the provisions of this Agreement, or any levy of
execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make
any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event;
provided, however, that any such termination of the Option under
the foregoing provisions of this Section 5 will not prejudice any
rights or remedies which the Company or any Parent or Subsidiary
may have under this Agreement or otherwise.
6. Exercise Upon Cessation of Employment.
-------------------------------------
(a) If the Employee at any time ceases to be an employee of the
Company and of any Parent or Subsidiary by reason of his
discharge for Good Cause the Option shall forthwith terminate and
the Employee shall forfeit all rights hereunder. If, however,
the Employee for any other reason (other than Disability or
death) ceases to be such an employee, the Option may, subject to
the provisions of Sections 5 and 8 hereof, be exercised by the
Employee to the same extent the Employee would have been entitled
under Section 3 hereof to exercise the Option on the day next
preceding the date of such cessation of employment, at any time
within three (3) months after such cessation of employment, at
the end of which period the Option to the extent not then
exercised, shall terminate and the Employee shall forfeit all
rights hereunder, even if the Employee subsequently returns to
the employ of the Company or any Parent or Subsidiary. In no
event, however, may the Option be exercised after the expiration
of the term provided in Section 4 hereof.
(b) The Option shall not be affected by any
change of duties or position of the Employee so long as he
continues to be an employee of the Company or any subsidiary
thereof. If the Employee is granted a temporary leave of
absence, such leave of absence shall be deemed a continuation of
his employment by the Company or any subsidiary thereof for the
purposes of this Agreement, but only if and so long as the
employing corporation consents thereto.
7. Exercise Upon Death or Disability.
---------------------------------
(a) If the Employee dies while he is employed by the Company or
by any Parent or Subsidiary (or within three (3) months after his
termination of employment other than for Good Cause), and on or
after the first date upon which he would have been entitled to
exercise the Option under the provisions of Section 3 hereof, the
Option may, subject to the provisions of Sections 5 and 8 hereof,
be exercised with respect to the shares of Common Stock as to
which the deceased Employee had not exercised the Option at the
time of his death (and only to the extent the Option was
exercisable at the date of his death), by the estate of the
Employee (or by the person or persons who acquire the right to
exercise the Option by written designation of the Employee) at
any time within the period ending one (1) year after the death of
the Employee, at the end of which period the Option, to the
extent not then exercised, shall terminate and the estate or
other beneficiaries shall forfeit all rights hereunder. In no
event, however, may the Option be exercised after the expiration
of the term provided in Section 4 hereof.
(b) In the event that the employment of the
Employee by the Company and any Parent or Subsidiary is
terminated by reason of the Disability of the Employee on or
after the first date upon which he would have been entitled to
exercise the Option under the provisions of Section 3 hereof, the
Option may, subject to the provisions of Sections 5 and 8 hereof,
be exercised with respect to the shares of Common Stock as to
which he had not exercised the Option at the time of his
Disability (and only to the extent the Option was exercisable at
the date of such termination of employment) by the Employee at
any time within the period ending one (1) year after the date of
such termination of employment, at the end of which period the
Option, to the extent not then exercised, shall terminate and the
Employee shall forfeit all rights hereunder even if the Employee
subsequently returns to the employ of the Company or any Parent
or Subsidiary. In no event, however, may the Option be exercised
after the expiration of the term provided in Section 4 hereof.
8. Limitation on Exercisability.
----------------------------
To the extent the aggregate of the (a) Fair Market Value of
Common Stock (determined as of the date of this Agreement)
subject to purchase under this Option and (b) the fair market
values (determined as of the appropriate date(s) of grant) of all
other shares of stock subject to incentive stock options granted
to the Employee by the Company or any Parent or Subsidiary, which
are exercisable for the first time by any individual during any
calendar year, exceed(s) one hundred thousand dollars ($100,000),
such excess shares of stock shall not be deemed to be purchased
pursuant to incentive stock options. The terms of the
immediately preceding sentence shall be applied by taking options
into account in the order in which they are granted.
9. Adjustments.
-----------
In the event there is any change in the Common Stock of the
Company by reason of any reorganization, recapitalization, stock
split, stock dividend or otherwise, there shall be substituted
for or added to each share of Common Stock theretofore
appropriated or thereafter subject, or which may become subject,
to this Option the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case
may be, and the per share price thereof also shall be
appropriately adjusted; provided, however, that no such
adjustment shall be made so as to deem such modification,
extension or renewal of the Option as the issuance of a new
option under Section 424(h) of the Code, or so as to prevent the
Company or any other corporation or subsidiary thereof, if the
Employee shall become employed by such corporation by reason of
the transaction in respect of which such adjustment is made, from
being a corporation issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies.
10. Registration.
------------
The shares of Common Stock subject hereto and issuable upon the
exercise hereof may not be registered under the Securities Act of
1933, as amended, and, if required upon the request of counsel to
the Company, the Employee will give a representation as to his
investment intent with respect to such shares prior to their
issuance as set forth in Section 11 hereof.
The Company may register or qualify the shares covered
by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or
in part of the Option.
11. Method of Exercise of Option.
----------------------------
(a) Subject to the terms and conditions of this
Agreement, the Option shall be exercisable by notice (in the
manner set forth in Exhibit A hereto) and payment to the Company
in accordance with the procedure prescribed herein. Each such
notice shall:
(i) state the election to exercise the Option and the
number of Shares in respect of which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by counsel to the Company with
respect to such Shares, in form satisfactory to counsel for the
Company;
(iii) be signed by the Employee or the person or
persons entitled to exercise the Option and, if the Option is
being exercised by any person or persons other than the Employee,
be accompanied by proof, satisfactory to counsel for the Company,
of the right of such person or persons to exercise the Option;
and
(iv) be received by the Company on or before the date
of the expiration of this Option. In the event the date of
expiration of this Option falls on a day which is not a regular
business day at the Company's executive office in Hope Hull,
Alabama, then such written notice must be received at such office
on or before the last regular business day prior to such date of
expiration.
(b) Upon receipt of such notice, the Company
shall specify, by written notice to the Employee or to the person
or persons exercising the Option, a date and time (such date and
time being herein called the "Closing Date") and place for
payment of the full purchase price of such Shares. The Closing
Date shall not be more than fifteen days from the date the notice
of exercise is received by the Company unless another date is
agreed upon by the Company and the Employee or the person or
persons exercising the Option or is required upon advice of
counsel for the Company in order to meet the requirements of
Section 12 hereof.
(c) Payment of the purchase price of any shares
of Common Stock, in respect of which the Option shall be
exercised, shall be made by the Employee or such person or
persons at the place specified by the Company on or before the
Closing Date by delivering to the Company (i) a certified or bank
cashier's check payable to the order of the Company, or (ii)
properly endorsed certificates of shares of Common Stock (or
certificates accompanied by an appropriate stock power) with
signature guaranties by a bank or trust company or (iii) any
combination of (i) and (ii).
(d) The Option shall be deemed to have been
exercised with respect to any particular shares of Common Stock
if, and only if, the preceding provisions of this Section 11 and
the provisions of Section 12 hereof shall have been complied
with, in which event the Option shall be deemed to have been
exercised on the date the notice of exercise of the Option was
received by the Company. Anything in this Agreement to the
contrary notwithstanding, any notice of exercise given pursuant
to the provisions of this Section 11 shall be void and of no
effect if all the preceding provisions of this Section 11 and the
provisions of Section 12 shall not have been complied with.
(e) The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised will be
registered in the name of the Employee (or in the name of the
Employee's estate or other beneficiary if the Option is exercised
after the Employee's death), or if the Option is exercised by the
Employee and if the Employee so requests in the notice exercising
the Option, will be registered in the name of the Employee and
another person jointly, with right of survivorship and will be
delivered on the Closing Date to the Employee at the place
specified for the closing, but only upon compliance with all of
the provisions of this Agreement.
(f) If the Employee fails to accept delivery of
and pay for all or any part of the number of Shares specified in
such notice upon tender or delivery thereof on the Closing Date,
his right to exercise the Option with respect to such undelivered
Shares may be terminated in the sole discretion of the Board of
Directors of the Company. The Option may be exercised only with
respect to full Shares.
(g) The Company shall not be required to issue or
deliver any certificate or certificates for shares of its Common
Stock purchased upon the exercise of any part of this Option
prior to the payment to the Company, upon its demand, of any
amount requested by the Company for the purpose of satisfying its
liability, if any, to withhold state or local income or earnings
tax or any other applicable tax or assessment (plus interest or
penalties thereon, if any, caused by a delay in making such
payment) incurred by reason of the exercise of this Option or the
transfer of shares thereupon. Such payment shall be made by the
Employee in cash or, with the consent of the Company, by
tendering to the Company shares of Common Stock equal in value to
the amount of the required withholding. In the alternative, the
Company may, at its option, satisfy such withholding requirements
by withholding from the shares of Common Stock to be delivered to
the Employee pursuant to an exercise of this Option a number of
shares of Common Stock equal in value to the amount of the
required withholding.
12. Approval of Counsel.
-------------------
The exercise of the Option and the issuance and delivery of
shares of Common Stock pursuant thereto shall be subject to
approval by the Company's counsel of all legal matters in
connection therewith, including compliance with the requirements
of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder, and the requirements of any stock exchange upon which
the Common Stock may then be listed.
13. Resale of Common Stock.
----------------------
(a) If so requested by the Company, upon any sale or transfer of
the Common Stock purchased upon exercise of the Option, the
Employee shall deliver to the Company an opinion of counsel
satisfactory to the Company to the effect that either (i) the
Common Stock to be sold or transferred has been registered under
the Securities Act of 1933, as amended, and that there is in
effect a current prospectus meeting the requirements of Section
10(a) of said Act which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of
the certificates evidencing the Common Stock to be sold or
transferred, or (ii) such Common Stock may then be sold without
violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the
Option shall bear the following legend if required by counsel for
the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE FIRST BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
REGISTRATION IS NOT REQUIRED.
14. Reservation of Shares.
---------------------
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of the class of
stock then subject to the Option as will be sufficient to satisfy
the requirements of this Agreement.
15. Limitation of Action.
--------------------
The Employee and the Company each acknowledges that every right
of action accruing to him or it, as the case may be, and arising
out of or in connection with this Agreement against the Company
or a Parent or Subsidiary, on the one hand, or against the
Employee, on the other hand, shall, irrespective of the place
where an action may be brought, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action arises.
16. Notices.
-------
Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address.
All notices to the Company or the Committee shall be addressed to
them at 500 Richardson Road South, Hope Hull, Alabama 36043,
Attn: Vice President, Finance and Chief Financial Officer. All
notices to the Employee shall be addressed to the Employee or
such other person or persons at the Employee's address above
specified. Anyone to whom a notice may be given under this
Agreement may designate a new address by notice to that effect.
17. Benefits of Agreement.
---------------------
This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations
imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee's heirs,
legal representatives and successors.
18. Severability.
------------
In the event that any one or more provisions of this Agreement
shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and
enforceability of the remaining legal and enforceable provisions
hereof, which shall be construed as if such illegal or
unenforceable provision or provisions had not been inserted.
19. Governing Law.
-------------
This Agreement will be construed and governed in accordance with
the laws of the State of New York.
20. Disposition of Shares.
---------------------
By accepting this Agreement, the Employee agrees that in the
event that he shall dispose (whether by sale, exchange, gift, or
any like transfer) of any shares of Common Stock of the Company
(to the extent such shares are deemed to be purchased pursuant to
an incentive stock option) acquired by him pursuant hereto within
two years of the date of grant of this Option or within one year
after the acquisition of such shares pursuant hereto, he will
notify the secretary of the Company no later than 15 days from
the date of such disposition of the date or dates and the number
of shares disposed of by him and the consideration received, if
any, and, upon notification from the Company, promptly forward to
the secretary of the Company any amount requested by the Company
for the purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon,
if any, caused by delay in making such payment) incurred by
reason of such disposition.
21. Acknowledgement of Employee.
---------------------------
The Employee represents and agrees that as of the date of grant
of this Option, he does not own (within the meaning of Section
422(b)(6) of the Code) shares possessing more than 10% of the
total combined voting power of all classes of shares of the
Company or of any Parent or Subsidiary.
22. Employment.
----------
Nothing contained in this Agreement shall be construed as (a) a
contract of employment between the Employee and the Company or
any Parent or Subsidiary, (b) as a right of the Employee to be
continued in the employ of the Company or any Parent or
Subsidiary, or (c) as a limitation of the right of the Company or
any Parent or Subsidiary to discharge the Employee at any time,
with or without cause.
23. Definitions.
-----------
Unless otherwise defined herein, all capitalized terms shall have
the same definitions as set forth under the Plan.
24. Incorporation of Terms of Plan.
------------------------------
This agreement shall be interpreted under, and subject to, all of
the terms and provisions of the Plan, which are incorporated
herein by reference.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its name by its Chairman of the Board
or one of its Vice Presidents and its corporate seal to be
hereunto affixed and attested by its Secretary or one of its
Assistant Secretaries and the Employee has hereunto set his hand
all as of the date, month and year first above written.
MILTOPE GROUP INC.
By: /s/ Alvin E. Nashman
------------------------
Name: Alvin E. Nashman
Title: Chairman of the
Board
/s/ George K. Webster
-----------------------------
George K. Webster
###-##-####
-----------------------------
Social Security Number
ATTEST:
/s/ Leonard Gubar
------------------------
Leonard Gubar, Secretary
<PAGE>
EXHIBIT A
INCENTIVE STOCK OPTION EXERCISE FORM
[DATE]
Miltope Group Inc.
500 Richardson Road South
Hope Hull, Alabama 36043
Attention: Vice President and
Chief Financial Officer
Dear Sirs:
Pursuant to the provisions of the Incentive Stock
Option Agreement dated as of August 7, 1995, whereby you have
granted to me an incentive stock option to purchase up to 60,000
shares of Common Stock of Miltope Group Inc. (the "Company"), I
hereby notify you that I elect to exercise my option to purchase
[ ] of the shares covered by such option at the price
specified therein. In full payment of the price for the shares
being purchased hereby, I am delivering to you herewith (a) a
certified or bank cashier's check payable to the order of the
Company in the amount of $____________,* or (b) a certificate or
certificates for [ ] shares of Common Stock of the
Company, and which have a fair market value as of the date hereof
of $______________, and a certified or bank cashier's check,
payable to the order of the Company, in the amount of
$____________.** Any such stock certificate or certificates are
endorsed, or accompanied by an appropriate stock power, to the
order of the Company, with my signature guaranteed by a bank or
trust company or by a member firm of the New York Stock Exchange.
I hereby acknowledge that I am purchasing these shares of Common
Stock for investment purposes only and not for resale.
Very truly yours,
---------------------------
[Address]
(For notices, reports,
dividend checks and other
communications to
stockholders.)
------------------
* $____________ of this amount is the purchase price of the
shares, and the balance represents payment of withholding
taxes as follows: State $______ and Local $________. No
withholding will be required in states and localities which
follow Federal tax law.
** $____________ of this amount is at least equal to the
current market value of one share of Common Stock of the
Company, and the balance represents payment of withholding
taxes as follows: State $________ and Local $__________.
No withholding will be required in states and localities
which follow Federal tax law.
Exhibit 10(u)
OPTION NO. 95-ISO-
=================================================================
MILTOPE GROUP INC.
1995 STOCK OPTION AND PERFORMANCE AWARD PLAN
INCENTIVE STOCK OPTION
GRANTED TO
JAMES MATTHEWS
------------------------
OPTIONEE
20,000 $2.875
-------------------- ----------------------------
Number of Shares Price per Share (Fair Market
Value on Date of Grant)
DATE GRANTED: November 8, 1995 EXPIRATION DATE: November 7, 2005
---------------- ----------------
=================================================================
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
AGREEMENT made as of this 8th day of November, 1995
between MILTOPE GROUP INC., a Delaware corporation (hereinafter
referred to as the "Company"), and JAMES MATTHEWS, residing at
604 Stonehedge Drive, Vestal, New York 13850 (hereinafter
referred to as the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires, in connection with the
employment of the Employee and in accordance with its 1995 Stock
Option and Performance Award Plan (the "Plan"), to provide the
Employee with an opportunity to acquire Common Stock, $.01 par
value (hereinafter referred to as "Common Stock"), of the Company
on favorable terms and thereby increase his proprietary interest
in the continued progress and success of the business of the
Company;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants herein set forth and other good and valuable
consideration, the Company and the Employee hereby agree as
follows:
1. Confirmation of Grant of Option.
-------------------------------
Pursuant to a determination by the Stock Option Committee of the
Board of Directors of the Company authorized to administer the
Plan, made on November 8, 1995 (the "Date of Grant") the Company,
subject to the terms of the Plan and this Agreement, hereby
confirms that the Employee has been granted as a matter of
separate inducement and agreement, and in addition to and not in
lieu of salary or other compensation for services, the right to
purchase (hereinafter referred to as the "Option") an aggregate
of 20,000 shares of Common Stock, subject to adjustment as
provided in Section 9 hereof (such shares, as adjusted, shall
hereinafter be referred to as the "Shares"). The Option is
intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Purchase Price.
--------------
The purchase price of shares of Common Stock covered by the
Option will be $2.875 per share, being not less than 100% of the
Fair Market Value of a share of Common Stock on the Date of
Grant, subject to adjustment as provided in Section 9 hereof.
3. Exercise of Option.
------------------
The Option shall be exercisable on the terms and conditions
hereinafter set forth:
(a) The Option shall become exercisable
cumulatively as to the following amounts of the number of Shares
originally subject thereto (after giving effect to any adjustment
pursuant to Section 9 hereof), on the dates indicated:
(i) as to 5,000 Shares on or after November 8,
1996;
(ii) as to 5,000 Shares on or after November 8,
1997;
(iii) as to 5,000 Shares on or after November 8,
1998; and
(iv) as to 5,000 Shares on or after November 8 1999.
(b) The Option may be exercised pursuant to the
provisions of this Section 3, by notice and payment to the
Company as provided in Sections 11 and 16 hereof.
4. Term of Option.
--------------
The term of the Option shall be a period of ten (10) years from
the Date of Grant, subject to earlier termination or cancellation
as provided in this Agreement. This Option, to the extent
unexercised, shall expire at the end of the term set forth in the
immediately preceding sentence. The holder of the Option shall
not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Common Stock subject to
the Option until such shares shall have been issued to him (as
evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company) provided that the date
of issuance shall not be earlier than the Closing Date (as
hereinafter defined with respect to such shares pursuant to
Section 11 hereof) upon purchase of such shares upon exercise of
the Option.
5. Non-transferability of Option.
-----------------------------
The Option shall not be transferable otherwise than by will or by
the laws of descent and distribution or pursuant to a domestic
relations order, and the Option may be exercised during the
lifetime of the Employee only by him. More particularly, but
without limiting the generality of the foregoing, the Option may
not be assigned, transferred (except as provided in the next
preceding sentence) or otherwise disposed of, or pledged or
hypothecated in any way, and shall not be subject to execution,
attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted
contrary to the provisions of this Agreement, or any levy of
execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make
any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will cause the Option to
terminate immediately upon the happening of any such event;
provided, however, that any such termination of the Option under
the foregoing provisions of this Section 5 will not prejudice any
rights or remedies which the Company or any Parent or Subsidiary
may have under this Agreement or otherwise.
6. Exercise Upon Cessation of Employment.
-------------------------------------
(a) If the Employee at any time ceases to be an employee of the
Company and of any Parent or Subsidiary by reason of his
discharge for Good Cause the Option shall forthwith terminate and
the Employee shall forfeit all rights hereunder. If, however,
the Employee for any other reason (other than Disability or
death) ceases to be such an employee, the Option may, subject to
the provisions of Sections 5 and 8 hereof, be exercised by the
Employee to the same extent the Employee would have been entitled
under Section 3 hereof to exercise the Option on the day next
preceding the date of such cessation of employment, at any time
within three (3) months after such cessation of employment, at
the end of which period the Option to the extent not then
exercised, shall terminate and the Employee shall forfeit all
rights hereunder, even if the Employee subsequently returns to
the employ of the Company or any Parent or Subsidiary. In no
event, however, may the Option be exercised after the expiration
of the term provided in Section 4 hereof.
(b) The Option shall not be affected by any
change of duties or position of the Employee so long as he
continues to be an employee of the Company or any subsidiary
thereof. If the Employee is granted a temporary leave of
absence, such leave of absence shall be deemed a continuation of
his employment by the Company or any subsidiary thereof for the
purposes of this Agreement, but only if and so long as the
employing corporation consents thereto.
7. Exercise Upon Death or Disability.
---------------------------------
(a) If the Employee dies while he is employed by
the Company or by any Parent or Subsidiary (or within three (3)
months after his termination of employment other than for Good
Cause), and on or after the first date upon which he would have
been entitled to exercise the Option under the provisions of
Section 3 hereof, the Option may, subject to the provisions of
Sections 5 and 8 hereof, be exercised with respect to the shares
of Common Stock as to which the deceased Employee had not
exercised the Option at the time of his death (and only to the
extent the Option was exercisable at the date of his death), by
the estate of the Employee (or by the person or persons who
acquire the right to exercise the Option by written designation
of the Employee) at any time within the period ending one (1)
year after the death of the Employee, at the end of which period
the Option, to the extent not then exercised, shall terminate and
the estate or other beneficiaries shall forfeit all rights
hereunder. In no event, however, may the Option be exercised
after the expiration of the term provided in Section 4 hereof.
(b) In the event that the employment of the
Employee by the Company and any Parent or Subsidiary is
terminated by reason of the Disability of the Employee on or
after the first date upon which he would have been entitled to
exercise the Option under the provisions of Section 3 hereof, the
Option may, subject to the provisions of Sections 5 and 8 hereof,
be exercised with respect to the shares of Common Stock as to
which he had not exercised the Option at the time of his
Disability (and only to the extent the Option was exercisable at
the date of such termination of employment) by the Employee at
any time within the period ending one (1) year after the date of
such termination of employment, at the end of which period the
Option, to the extent not then exercised, shall terminate and the
Employee shall forfeit all rights hereunder even if the Employee
subsequently returns to the employ of the Company or any Parent
or Subsidiary. In no event, however, may the Option be exercised
after the expiration of the term provided in Section 4 hereof.
8. Limitation on Exercisability.
----------------------------
To the extent the aggregate of the (a) Fair Market Value of
Common Stock (determined as of the date of this Agreement)
subject to purchase under this Option and (b) the fair market
values (determined as of the appropriate date(s) of grant) of all
other shares of stock subject to incentive stock options granted
to the Employee by the Company or any Parent or Subsidiary, which
are exercisable for the first time by any individual during any
calendar year, exceed(s) one hundred thousand dollars ($100,000),
such excess shares of stock shall not be deemed to be purchased
pursuant to incentive stock options. The terms of the
immediately preceding sentence shall be applied by taking options
into account in the order in which they are granted.
9. Adjustments.
-----------
In the event there is any change in the Common Stock of the
Company by reason of any reorganization, recapitalization, stock
split, stock dividend or otherwise, there shall be substituted
for or added to each share of Common Stock theretofore
appropriated or thereafter subject, or which may become subject,
to this Option the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case
may be, and the per share price thereof also shall be
appropriately adjusted; provided, however, that no such
adjustment shall be made so as to deem such modification,
extension or renewal of the Option as the issuance of a new
option under Section 424(h) of the Code, or so as to prevent the
Company or any other corporation or subsidiary thereof, if the
Employee shall become employed by such corporation by reason of
the transaction in respect of which such adjustment is made, from
being a corporation issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies.
10. Registration.
------------
The shares of Common Stock subject hereto and issuable upon the
exercise hereof may not be registered under the Securities Act of
1933, as amended, and, if required upon the request of counsel to
the Company, the Employee will give a representation as to his
investment intent with respect to such shares prior to their
issuance as set forth in Section 11 hereof.
The Company may register or qualify the shares covered
by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or
in part of the Option.
11. Method of Exercise of Option.
----------------------------
(a) Subject to the terms and conditions of this
Agreement, the Option shall be exercisable by notice (in the
manner set forth in Exhibit A hereto) and payment to the Company
in accordance with the procedure prescribed herein. Each such
notice shall:
(i) state the election to exercise the Option and
the number of Shares in respect of which it is being
exercised;
(ii) contain a representation and agreement as to
investment intent, if required by counsel to the Company
with respect to such Shares, in form satisfactory to counsel
for the Company;
(iii) be signed by the Employee or the person
or persons entitled to exercise the Option and, if the
Option is being exercised by any person or persons other
than the Employee, be accompanied by proof, satisfactory to
counsel for the Company, of the right of such person or
persons to exercise the Option; and
(iv) be received by the Company on or before the
date of the expiration of this Option. In the event the
date of expiration of this Option falls on a day which is
not a regular business day at the Company's executive office
in Hope Hull, Alabama, then such written notice must be
received at such office on or before the last regular
business day prior to such date of expiration.
(b) Upon receipt of such notice, the Company
shall specify, by written notice to the Employee or to the person
or persons exercising the Option, a date and time (such date and
time being herein called the "Closing Date") and place for
payment of the full purchase price of such Shares. The Closing
Date shall not be more than fifteen days from the date the notice
of exercise is received by the Company unless another date is
agreed upon by the Company and the Employee or the person or
persons exercising the Option or is required upon advice of
counsel for the Company in order to meet the requirements of
Section 12 hereof.
(c) Payment of the purchase price of any shares
of Common Stock, in respect of which the Option shall be
exercised, shall be made by the Employee or such person or
persons at the place specified by the Company on or before the
Closing Date by delivering to the Company (i) a certified or bank
cashier's check payable to the order of the Company, or (ii)
properly endorsed certificates of shares of Common Stock (or
certificates accompanied by an appropriate stock power) with
signature guaranties by a bank or trust company or (iii) any
combination of (i) and (ii).
(d) The Option shall be deemed to have been
exercised with respect to any particular shares of Common Stock
if, and only if, the preceding provisions of this Section 11 and
the provisions of Section 12 hereof shall have been complied
with, in which event the Option shall be deemed to have been
exercised on the date the notice of exercise of the Option was
received by the Company. Anything in this Agreement to the
contrary notwithstanding, any notice of exercise given pursuant
to the provisions of this Section 11 shall be void and of no
effect if all the preceding provisions of this Section 11 and the
provisions of Section 12 shall not have been complied with.
(e) The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised will be
registered in the name of the Employee (or in the name of the
Employee's estate or other beneficiary if the Option is exercised
after the Employee's death), or if the Option is exercised by the
Employee and if the Employee so requests in the notice exercising
the Option, will be registered in the name of the Employee and
another person jointly, with right of survivorship and will be
delivered on the Closing Date to the Employee at the place
specified for the closing, but only upon compliance with all of
the provisions of this Agreement.
(f) If the Employee fails to accept delivery of
and pay for all or any part of the number of Shares specified in
such notice upon tender or delivery thereof on the Closing Date,
his right to exercise the Option with respect to such undelivered
Shares may be terminated in the sole discretion of the Board of
Directors of the Company. The Option may be exercised only with
respect to full Shares.
(g) The Company shall not be required to issue or
deliver any certificate or certificates for shares of its Common
Stock purchased upon the exercise of any part of this Option
prior to the payment to the Company, upon its demand, of any
amount requested by the Company for the purpose of satisfying its
liability, if any, to withhold state or local income or earnings
tax or any other applicable tax or assessment (plus interest or
penalties thereon, if any, caused by a delay in making such
payment) incurred by reason of the exercise of this Option or the
transfer of shares thereupon. Such payment shall be made by the
Employee in cash or, with the consent of the Company, by
tendering to the Company shares of Common Stock equal in value to
the amount of the required withholding. In the alternative, the
Company may, at its option, satisfy such withholding requirements
by withholding from the shares of Common Stock to be delivered to
the Employee pursuant to an exercise of this Option a number of
shares of Common Stock equal in value to the amount of the
required withholding.
12. Approval of Counsel.
-------------------
The exercise of the Option and the issuance and delivery of
shares of Common Stock pursuant thereto shall be subject to
approval by the Company's counsel of all legal matters in
connection therewith, including compliance with the requirements
of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder, and the requirements of any stock exchange upon which
the Common Stock may then be listed.
13. Resale of Common Stock.
----------------------
(a) If so requested by the Company, upon any sale
or transfer of the Common Stock purchased upon exercise of the
Option, the Employee shall deliver to the Company an opinion of
counsel satisfactory to the Company to the effect that either (i)
the Common Stock to be sold or transferred has been registered
under the Securities Act of 1933, as amended, and that there is
in effect a current prospectus meeting the requirements of
Section 10(a) of said Act which is being or will be delivered to
the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Common Stock to be sold or
transferred, or (ii) such Common Stock may then be sold without
violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the
Option shall bear the following legend if required by counsel for
the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE FIRST BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
REGISTRATION IS NOT REQUIRED.
14. Reservation of Shares.
---------------------
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of the class of
stock then subject to the Option as will be sufficient to satisfy
the requirements of this Agreement.
15. Limitation of Action.
--------------------
The Employee and the Company each acknowledges that every right
of action accruing to him or it, as the case may be, and arising
out of or in connection with this Agreement against the Company
or a Parent or Subsidiary, on the one hand, or against the
Employee, on the other hand, shall, irrespective of the place
where an action may be brought, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action arises.
16. Notices.
-------
Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address.
All notices to the Company or the Committee shall be addressed to
them at 500 Richardson Road South, Hope Hull, Alabama 36043,
Attn: Secretary. All notices to the Employee shall be addressed
to the Employee or such other person or persons at the Employee's
address above specified. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to
that effect.
17. Benefits of Agreement.
---------------------
This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations
imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee's heirs,
legal representatives and successors.
18. Severability.
------------
In the event that any one or more provisions of this Agreement
shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and
enforceability of the remaining legal and enforceable provisions
hereof, which shall be construed as if such illegal or
unenforceable provision or provisions had not been inserted.
19. Governing Law.
-------------
This Agreement will be construed and governed in accordance with
the laws of the State of New York.
20. Disposition of Shares.
---------------------
By accepting this Agreement, the Employee agrees that in the
event that he shall dispose (whether by sale, exchange, gift, or
any like transfer) of any shares of Common Stock of the Company
(to the extent such shares are deemed to be purchased pursuant to
an incentive stock option) acquired by him pursuant hereto within
two years of the date of grant of this Option or within one year
after the acquisition of such shares pursuant hereto, he will
notify the secretary of the Company no later than 15 days from
the date of such disposition of the date or dates and the number
of shares disposed of by him and the consideration received, if
any, and, upon notification from the Company, promptly forward to
the secretary of the Company any amount requested by the Company
for the purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon,
if any, caused by delay in making such payment) incurred by
reason of such disposition.
21. Acknowledgement of Employee.
---------------------------
The Employee represents and agrees that as of the date of grant
of this Option, he does not own (within the meaning of Section
422(b)(6) of the Code) shares possessing more than 10% of the
total combined voting power of all classes of shares of the
Company or of any Parent or Subsidiary.
22. Employment.
----------
Nothing contained in this Agreement shall be construed as (a) a
contract of employment between the Employee and the Company or
any Parent or Subsidiary, (b) as a right of the Employee to be
continued in the employ of the Company or any Parent or
Subsidiary, or (c) as a limitation of the right of the Company or
any Parent or Subsidiary to discharge the Employee at any time,
with or without cause.
23. Definitions.
-----------
Unless otherwise defined herein, all capitalized terms shall have
the same definitions as set forth under the Plan.
24. Incorporation of Terms of Plan.
------------------------------
This agreement shall be interpreted under, and subject to, all of
the terms and provisions of the Plan, which are incorporated
herein by reference.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its name by its President, its
Chairman of the Board or one of its Vice Presidents and its
corporate seal to be hereunto affixed and attested by its
Secretary or one of its Assistant Secretaries and the Employee
has hereunto set his hand all as of the date, month and year
first above written.
MILTOPE GROUP INC.
By: /s/ George K. Webster
-------------------------
Name: George K. Webster
Title: President and
Chief Executive Officer
/s/ James Matthews
------------------------------
James Matthews
###-##-####
------------------------------
Social Security Number
ATTEST:
/s/ Leonard Gubar
------------------------
Leonard Gubar, Secretary
<PAGE>
EXHIBIT A
INCENTIVE STOCK OPTION EXERCISE FORM
[DATE]
Miltope Group Inc.
500 Richardson Road South
Hope Hull, Alabama 36043
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Incentive Stock
Option Agreement dated as of November 8, 1995, whereby you have
granted to me an incentive stock option to purchase 20,000 shares
of Common Stock of Miltope Group Inc. (the "Company"), I hereby
notify you that I elect to exercise my option to purchase [
] of the shares covered by such option at the price specified
therein. In full payment of the price for the shares being
purchased hereby, I am delivering to you herewith (a) a certified
or bank cashier's check payable to the order of the Company in
the amount of $_____________,* or (b) a certificate or
certificates for [ ] shares of Common Stock of the
Company, and which have a fair market value as of the date hereof
of $_____________, and a certified or bank cashier's check,
payable to the order of the Company, in the amount of
$_____________.** Any such stock certificate or certificates are
endorsed, or accompanied by an appropriate stock power, to the
order of the Company, with my signature guaranteed by a bank or
trust company or by a member firm of the New York Stock Exchange.
[I hereby acknowledge that I am purchasing these shares of Common
Stock for investment purposes only and not for resale.]
Very truly yours,
__________________________
[Address]
(For notices, reports,
dividend checks and other
communications to stockholders.)
---------------------
* $____________ of this amount is the purchase price of the
shares, and the balance represents payment of withholding taxes
as follows: State $______ and Local $________. No withholding
will be required in states and localities which follow Federal
tax law.
** $____________ of this amount is at least equal to the
current market value of one share of Common Stock of the Company,
and the balance represents payment of withholding taxes as
follows: State $_________ and Local $_________. No withholding
will be required in states and localities which follow Federal
tax law.
Exhibit 10(w)
SETTLEMENT AND RELEASE AGREEMENT
--------------------------------
THIS SETTLEMENT AND RELEASE AGREEMENT (this
"Agreement"), is entered into this 1st day of November 1995, by
and among MILTOPE GROUP INC., a Delaware corporation ("MGI"),
MILTOPE CORPORATION, an Alabama corporation ("Miltope"), MILTOPE
BUSINESS PRODUCTS, INC., a New York corporation ("MBP") (MGI,
Miltope and MBP shall hereinafter collectively be referred to as
the "Company"), PANDOLFI GROUP, INC., a New York corporation
("PGI"), and RICHARD PANDOLFI, an individual ("Pandolfi").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, PGI and Miltope have entered into that certain
Representative Agreement dated as of October 1, 1994 (the
"Representative Agreement"), pursuant to which PGI has agreed to
provide certain marketing and sales services for Miltope with
respect to certain ruggedized and militarized products and
product lines in the Territory (as such term is defined in the
Representative Agreement"); and
WHEREAS, PGI and Miltope desire to terminate the
Representative Agreement on the terms and conditions set forth
herein; and
WHEREAS, Pandolfi, a former employee of Miltope and a
former director and Vice Chairman of the Board of Directors of
MGI, has, from time to time, on behalf of himself and/or PGI,
alleged certain claims against MGI, Miltope or MBP, as the case
may be, arising out of services performed by PGI or Pandolfi
pursuant to the Representative Agreement, or pursuant to any
other agreement or understanding among certain or all of the
parties hereto or otherwise relating to or arising out of the
former employment of Pandolfi by Miltope or with respect to any
alleged activities of Pandolfi subsequent to such termination of
employment as an agent or representative of MGI, Miltope or MBP
in respect of commissions, compensation, fees or reimbursement of
expenses; and
WHEREAS, except as specifically set forth herein,
Pandolfi, PGI, and the Company desire to effect the settlement of
all claims, controversies and disputes among the parties hereto,
of any nature whatsoever, upon the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the releases,
covenants and promises contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties to this Agreement do hereby
covenant and agree as follows:
Section 1. Settlement Payment.
------------------
In consideration of the release of all claims of any nature
whatsoever by Pandolfi and PGI against the Company as more
specifically set forth in Section 4 hereof, and the agreements of
PGI and Pandolfi set forth herein, Miltope shall pay Pandolfi,
individually and on behalf of PGI, an aggregate amount of One
Hundred Fifty Thousand Dollars ($150,000), payable in
installments of Ten Thousand Dollars ($10,000) per month for 15
consecutive months (the "Settlement Payment"), in full and
complete settlement of any and all claims which have been or
could have been or could be made by Pandolfi, PGI, or any entity
controlled by Pandolfi or PGI and their respective officers,
directors, employees, representatives and agents, against MGI,
Miltope or MBP, and their respective officers, directors,
employees, representatives and agents, with respect to any
possible claims or disputes of any nature whatsoever, including
without limitation, those arising out of or relating to the
Representative Agreement, or otherwise relating to any
predecessor agreement or any other agreement or understanding,
whether written or oral, relating to the former employment of
Pandolfi by Miltope or with respect to any alleged activities by
Pandolfi subsequent to such termination of employment as an agent
or representative of MGI, Miltope or MBP in respect of
commissions, compensation, fees or reimbursement of expenses, or
otherwise relating to any other dealings between Pandolfi and/or
PGI and MGI, Miltope or MBP, as the case may be, from and to the
date of this Agreement. The Settlement Payment shall be paid by
check made payable to Pandolfi at his office located at c/o
Pandolfi Group, Inc., 204 Terminal Drive, Plainview, New York
11803, with the first such payment of $10,000 to be paid on
November 1, 1995, or on such earlier date as shall be mutually
agreed to by the parties hereto.
Section 2. Agreement in Lieu of Other Rights.
---------------------------------
In addition to the general release of claims set forth in Section
4 hereof, PGI and Pandolfi hereby agree that this Agreement and
the Settlement Payment to be received by Pandolfi hereunder shall
constitute full payment for all services performed or alleged to
have been performed by PGI and/or Pandolfi pursuant to the terms
of the Representative Agreement, or otherwise pursuant to any
other agreement or understanding, whether written or oral, and
are in lieu of any other rights that PGI and/or Pandolfi may have
against MGI, Miltope, or MBP and their respective officers,
directors, employees, representatives and agents, for
compensation (including expense reimbursement) for services
rendered to MGI, Miltope or MBP prior to the date of this
Agreement, and PGI and/or Pandolfi shall not have any other claim
against the Company, except, with respect to Pandolfi, for
indemnification claims pursuant to the laws of the State of
Delaware or the Certificate of Incorporation or By-Laws of MGI
solely by reason of his being a former director of MGI and the
parties hereto acknowledge and agree that any such
indemnification claim is not intended to be released by Pandolfi
pursuant to Section 4 hereof or otherwise pursuant to any other
provision of this Agreement.
Section 3. Termination of Representative Agreement.
---------------------------------------
MGI, Miltope, PGI and Pandolfi hereby agree that the
Representative Agreement shall terminate effective as of the date
hereof, and any and all duties and obligations of the parties
which currently or may in the future be owing thereunder shall be
fully and completely discharged concurrently with said
termination.
Section 4. Release by PGI and Pandolfi.
---------------------------
Except as otherwise specifically provided herein, from and after
the date of this Agreement, PGI and Pandolfi hereby release and
forever discharge MGI, or any of its subsidiaries or affiliated
entities, including, but not limited to, Miltope and MBP and
their respective officers, directors, employees, agents,
representatives and attorneys, and their respective successors
and assigns, and each and all thereof, from any and all manner of
actions, suits, claims, damages, judgments, levies and execution,
whether known or unknown, liquidated or unliquidated, fixed or
contingent, direct or indirect, which Pandolfi, his successors
and assigns, PGI or any of its respective affiliated entities,
and their respective officers, directors, employees,
representatives and agents, and their respective successors and
assigns, ever had, has or ever can, shall or may have or claim to
have against MGI, or any of its subsidiaries or affiliated
entities, including but not limited to, Miltope and MBP and their
respective officers, directors, employees, agents,
representatives and attorneys, and their respective successors
and assigns, for, upon or by reason of any matter, act or thing
occurring prior to the date of this Agreement, including without
limitation, any claims, demands, rights of actions, liabilities,
expenses or rights of indemnity arising out of or connected with
or related to the Representative Agreement or otherwise relating
to any predecessor agreement or any other agreement or
understanding, whether written or oral, with regard to the former
employment of Pandolfi by Miltope or with respect to any alleged
activities by Pandolfi subsequent to such termination of
employment as an agent or representative of MGI, Miltope or MBP
in respect of commissions, compensation, fees or reimbursement of
expenses, or otherwise relating to any other dealings between
Pandolfi and/or PGI and MGI, Miltope or MBP, as the case may be.
Section 5. Non-Disclosure of Confidential Information.
------------------------------------------
PGI and Pandolfi recognize and agree that they have acquired
certain information which the Company has not made, does not
make, or which is not and does not otherwise become publicly
available knowledge, and which does not otherwise become known to
PGI or Pandolfi independently through its or his efforts on
behalf of the Company (i) relating to the products, processes,
designs, inventions and/or business concepts heretofore
developed, acquired and/or used by the Company, and (ii) relating
to the customers and employees of the Company (all such
information shall be hereinafter referred to collectively as
"Confidential Information"). The parties hereto acknowledge that
such Confidential Information is of great value to the Company
and is the property of the Company. Accordingly, PGI and
Pandolfi hereby agree, that neither PGI nor Pandolfi will
directly or indirectly, after the date hereof, divulge to any
persons, firms or corporations (hereinafter referred to
collectively as "third parties") other than the Company, or use
or cause to authorize any third parties to use, any Confidential
Information, or any other information relating to the business or
interests of the Company regarded as confidential and valuable by
the Company which PGI or Pandolfi knows or should know is
regarded as confidential and valuable by the Company. PGI and
Pandolfi represent that each such party has returned all
documents, files, and lists of information relating to the
business and customers of the Company and any and all software,
hardware, order-books, customer lists, logs, documents and
materials, and all copies thereof, in its or his possession or
under its or his control relating to any Confidential Information
or any discoveries which are otherwise the property of the
Company.
Section 6. Confidentiality of Agreement.
----------------------------
The parties hereto covenant and agree to keep the terms and
existence of this Agreement and the actual settlement among the
parties confidential, and not to disclose the terms of this
Agreement to any other person or entity other than (i) as is
jointly agreed by the parties, (ii) as is necessary to their
advisors in connection with the interpretation or enforcement of
the terms of this Agreement, or (iii) as required by applicable
law.
Section 7. No Admission.
------------
Nothing herein contained shall be construed as an admission by
any party of any wrongdoing or liability.
Section 8. Reliance.
--------
In executing this Agreement, the parties rely upon their own
judgment, belief and knowledge as to the nature, extent and
effect of the potential liability of the parties released hereby.
This Agreement is made without reliance by any party upon any
statement or agreement not stated specifically herein.
Section 9. Disparaging Comments.
--------------------
All parties to this Agreement agree to refrain from making any
disparaging comments as to any other party to this Agreement from
and after the date hereof.
Section 10. Entire Agreement; Modification.
------------------------------
This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, supersedes any prior
agreement between the parties, and may not be changed or
terminated orally. No change, termination or attempted waiver of
any of the provisions hereof shall be binding unless in writing
and signed by the party against whom the same is sought to be
enforced.
Section 11. Further Assurances.
------------------
Each of the parties hereto agrees to execute all further
documents and instruments and to take or to cause to be taken all
reasonable actions which are necessary or appropriate to complete
the transactions contemplated by this Agreement.
Section 12. Severability.
------------
In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect under any law, rule or
regulation of any governmental authority having jurisdiction over
the parties hereto, such invalidity, illegality or
unenforceability shall not affect the validity and enforceability
of any of the other provisions hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
Section 13. Authority.
---------
Each person who signs this Agreement expressly represents and
covenants that he has full and binding authority to enter into
this Agreement on behalf of himself or the entity for which he is
signing.
Section 14. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section 15. Successors and Assigns.
----------------------
This Agreement shall be binding on, and shall inure to the
benefit of, all successors, assigns, executors, legal
representatives, and administrators of any of the parties hereto.
Section 16. Notices.
-------
All notices, requests, demands or other communications hereunder
shall be deemed to have been given if delivered in writing
personally or by certified mail to each party at the address set
forth below, or at such other address as each party may designate
in writing to the other parties:
If to MGI, Miltope or MBP:
Miltope Group Inc.
500 Richardson Road South
Hope Hull, AL 36043
Attention: President and
Chief Executive Officer
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
If to PGI or Pandolfi:
Pandolfi Group, Inc.
204 Terminal Drive
Plainview, New York 11803
Attention: Richard Pandolfi
Section 17. Governing Law.
-------------
All questions governing the construction, validity and
interpretation of this Agreement shall be governed by the laws of
the State of New York.
Section 18. Headings.
--------
The headings of the paragraphs of this Agreement are for
descriptive purposes only and not to be construed to affect the
substance of the Agreement.
[The Remainder of this Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound
thereby, the undersigned parties have executed this Agreement as
of the date first written above.
MILTOPE GROUP INC.
By: /s/ George K. Webster
---------------------------
Name:
Title:
MILTOPE CORPORATION
By: /s/ George K. Webster
---------------------------
Name:
Title:
MILTOPE BUSINESS PRODUCTS, INC.
By: /s/ George K. Webster
---------------------------
Name:
Title:
PANDOLFI GROUP, INC.
By: /s/ Richard Pandolfi
---------------------------
Name: Richard Pandolfi
Title: President
/s/ Richard Pandolfi
------------------------------
RICHARD PANDOLFI
Exhibit 10(y)
EMPLOYMENT AGREEMENT
--------------------
Agreement made as of the 23rd day of October, 1995, by and
between MILTOPE GROUP INC., a Delaware corporation (the
"Company"), having its principal office at 500 Richardson Road
South, Hope Hull, Alabama 36043 and James Matthews residing at
604 Stonehedge Drive, Vestal, New York 13850 (the "Employee").
WITNESSETH
----------
WHEREAS, the Company desires to retain the services of the
Employee as Vice President, Finance, and Chief Financial Officer
of the Company and the Employee desires to render such services;
NOW, THEREFORE, in consideration of the representations,
warranties and mutual covenants set forth herein, the parties
agree as follows:
1. Employment.
----------
The Company hereby retains the Employee as Vice President,
Finance and Chief Financial Officer of the Company and the
Employee hereby accepts such employment, all upon and subject to
the terms and conditions hereinafter set forth.
2. Term.
----
The term of employment under this Agreement shall be for a period
commencing on or about November 13, 1995, and terminating on
November 12, 1996, (the "Employment Term"), subject to the
termination provisions in Section five below.
3. Duties.
------
(a) The Employee will render his services to the
Company as Vice President, Finance and Chief Financial Officer
and shall perform the duties and services incident to that
position and such other duties as may be assigned to him from
time to time by the President and Chief Executive Officer of the
Company. In addition, the Employee will hold, without additional
compensation therefor, such other offices and directorships in
the Company or any subsidiary of the Company to which, from time
to time, he may be appointed or elected.
(b) During the term of his employment hereunder, the
Employee will devote his full working time to the business of the
Company, and, without the prior written consent of the President
and Chief Executive Officer of the Company, will not (i) actively
engage in any other business or business activity or (ii)
directly or indirectly have any financial interest, as
shareholder, partner, or otherwise, in any proprietorship,
partnership, corporation or other entity in competition with the
Company or its affiliates, except for securities issued by a
publicly traded corporation to the extent that the Employee does
not own more than 5% of any class of voting securities of such
publicly traded corporation.
4. Compensation Benefits.
---------------------
(a) In consideration of the services to be rendered by
the Employee hereunder, including, without limitation, any
services rendered by him as an officer or director of the Company
or of any subsidiary of the Company, the Company agrees to pay to
the Employee, and the Employee agrees to accept as compensation
(which payments shall be made by Miltope Group) a salary at the
annual rate of $120,000.00 per annum (the "Salary"), payable in
accordance with the Company s normal payroll policies.
Additionally, the Employee will receive a monthly automobile
allowance of $575.00, a gasoline credit card and membership to
the Capital City Club. In the event that, for any reason, the
Company is unable to make the compensation payments set forth in
the Section 4(a), hereof Miltope Group Inc. shall be responsible
for making such payments to the Employee. In addition, the
Employee:
(i) Shall participate in the Company s Executive Bonus
Plan and the Executive Insurance Coverage Program, as currently
in effect, and as amended from time to time by the Board of
Directors of the Company; and
(ii) Shall receive a stock option on the date of
commencement of employment to purchase an aggregate of 20,000
shares of the Company s Common Stock, $0.1 par value, ("Common
Stock"), under the Company s 1995 Stock Option and Performance
Award Plan of the Company (the "Plan") at such price and upon
such conditions as are contained in a stock option agreement
prepared in accordance with the "Plan" and approved by the
committee of the Board of Directors of the Company, which
administers the "Plan" and;
(b) During the term of his employment hereunder, the
Employee shall be entitled to the following employment benefits:
(i) Vacations in accordance with the Company s
policies from time to time in effect for officers and employees
of the Company, to be taken on reasonable prior notice and at a
time and in a manner designed not to interfere with the proper
operation of the business of the Company. The Employee shall
begin employment with ten (10) days of vacation available for
use. Additional vacation shall accrue at the rate of 1.25 days
per month of employment, beginning January 13, 1995.
(ii) Sick leaves in accordance with the Company s
policies from time to time in effect for officers and employees
of the Company.
(iii) Participation, subject to qualification
requirements, in all medical and hospitalization plans, health
benefit and life insurance, pension, profit sharing, fringe
benefit and other employee benefit programs of whatever nature to
the extent that such programs are available generally to
executive officers of the Company.
(c) The Employee shall be reimbursed for reasonable
and necessary expenses incurred by the Employee in performing his
employment hereunder, provided such expenses are adequately
documented in accordance with the Company s policies.
(d) The Employee shall receive a one-time sign-on
bonus (the "Bonus") in the amount of $15,000. The Bonus shall be
paid when requested by the Employee, but in any event no earlier
than November 13, 1995, and no later than May 30, 1996. If for
whatever reason, the Employee decides to leave the Company at his
own volition, prior to November, 1996, the Employee shall repay
in full the subject sign-on bonus.
5. Termination in Case of Disability, Death or for Cause
-----------------------------------------------------
(a) If the Employee, due to physical or mental injury,
illness, disability or incapacity, shall fail to render the
services provided for in this Agreement for a consecutive period
of three (3) months, or an aggregate of three (3) months in any
six (6) month period, the Company may, at its option, terminate
the Employee s employment hereunder upon fourteen (14) days
written notice to the Employee; provided, however, that if the
Employee has accrued sick time, as described in the Miltope
Corporation Employee Handbook, in excess of the respective
periods referred to above, the Company may not terminate the
Employee s employment pursuant to this Section 5(a) until the
completion of such sick time.
(b) If the Employee shall die during the term of this
Agreement, this Agreement and the Employee s employment hereunder
shall terminate immediately upon the Employee s death.
(c) Notwithstanding anything to the contrary in this
Agreement, the Company, upon notice to the Employee, may
terminate this Agreement and the employment of the Employee
hereunder for cause, which, for purposes of this agreement shall
mean (i) the continued and repeated failure or refusal by the
employee to perform specific directives of the Board of Directors
of the Company, which directives are consistent with the scope
and nature of the employee s duties and responsibilities, (ii)
embezzlement or any offense involving misuse or misappropriation
of money or other property of the Company, (iii) conviction of
any felony, (iv) any act of dishonesty, disloyalty or other
conduct that is materially injurious to the company, or (v)
material breach by the Employee of any of the terms of this
Agreement other than those contained in this Section 5.
6. Severance Compensation.
----------------------
In the event the Employee s employment hereunder is terminated by
the Company for any reason, including the expiration of the
Employment Term without renewal thereof, and other than for
cause, death or disability, the Company shall pay to the Employee
Severance Compensation (as defined below). For purposes of this
Agreement, the term "Severance Compensation" shall mean:
(a) In the event the Employee s employment hereunder
is terminated by the Company for any reason, other than for
cause, death or disability, and other than the expiration of the
Employment Term without renewal thereof, an amount equal to the
greater of six (6) months Salary or the balance of the Salary due
hereunder during the remainder of the Employment Term. Severance
Compensation shall also include a continuation of the benefits
described in Section 4(b) (iii) hereof, to which the Employee is
then entitled and participating, for a period equal to the longer
of six (6) months or the balance of the Employment Term hereunder
following the date of such termination.
(b) In the event that the Employee s employment
hereunder is terminated because of the expiration of the
Employment Term without renewal thereof, an amount equal to six
(6) months Salary. Severance Compensation shall also include a
continuation of the benefits described in Section 4(b) (iii)
hereof, to which the Employee is then entitled and participating,
for a period of six (6) months following the expiration of the
Employment Term.
In the event the Employee receives Severance
Compensation under this Section 6, the Employee shall not be
entitled to receive any other compensation or benefits under this
Agreement after the termination of the Employee s employment
hereunder and, as a condition to receiving such Severance
Compensation, the Employee hereby agrees that he shall have no
other claim against the Company by reason of this Agreement or
otherwise.
7. Disclosure and Assignment of Discoveries.
----------------------------------------
(a) The Employee shall (without any additional
compensation) promptly disclose in writing to the Board of
Directors of the Company all ideas, processes, devices and
business concepts (hereinafter referred to collectively as
"discoveries"), whether or not patentable or copyrightable, which
he, while employed by the Company, conceives, develops, acquires
or reduces to practice, whether alone or with others and whether
during or after usual working hours, and which are related to the
Company s business or interests, or are used or usable by the
Company, or arise out of or in connection with the duties
performed by him hereunder; and the Employee hereby transfers and
assigns to the Company all rights, title and interest in and to
such discoveries. Upon the request of the Company, the Employee
shall (without any additional compensation), from time to time
during or after the expiration or termination of his employment,
execute such further instruments and do all such other acts and
things as may be deemed necessary or desirable by the Company to
protect and/or enforce its rights in respect of such discoveries.
(b) For purposes of this Section 7 and the following
Section 8, the term "Company" shall mean and include all
subsidiaries, parents and affiliated corporations of the Company
in existence from time to time.
8. Non-Disclosure of Confidential Information and
----------------------------------------------
Competition.
------------
(a) The Employee represents that he has been informed
that it is the policy of the Company to maintain as secret and
confidential all information (i) relating to the products,
processes and/or business concepts used by the Company and (ii)
relating to the customers and employees of the Company
("Confidential Information"), and the Employee further
acknowledges that such Confidential Information is of great value
to the Company and is the property of the Company. The parties
recognize that the services to be performed by the Employee are
special and unique, and that by reason of his employment by the
Company, he will acquire Confidential Information as aforesaid.
The parties confirm that it is reasonably necessary to protect
the Company s goodwill that the Employee agree, and accordingly
the Employee does hereby agree, that he will not directly or
indirectly (except where authorized by the Board of Directors of
the Company for the benefit of the Company):
A. at any time during his employment hereunder or after he
ceases to be employed by the Company, divulge to any persons,
firms or corporations, other than the Company (hereinafter
referred to collectively as "third parties") or use or cause to
authorize any third parties to use, any such Confidential
Information, or any other information regarded as confidential
and valuable by the Company which he knows or should know is
regarded as confidential and valuable by the Company (whether or
not any of the foregoing information is actually novel or unique
or is actually known to others); or
B. at any time during his employment hereunder and for a
period of one (1) year after he ceases to be employed by the
Company, solicit or cause or authorize, directly or indirectly,
to be solicited, for or on behalf of himself or third parties,
any business from third parties who were, at any time within one
year prior to the cessation of his employment hereunder,
customers of the Company with respect to computer peripheral
products or services for military, rugged or other specialized
applications; or
C. at any time during his employment hereunder and for a
period of one (1) year after he ceases to be employed by the
Company, accept or cause or authorize, directly or indirectly, to
be accepted, for or on behalf of himself or third parties, any
such business from any customers of the Company; or
D. at any time during his employment hereunder and for a
period of one (1) year after he ceases to be employed by the
Company, solicit or cause or authorize, directly or indirectly,
to be solicited for employment, for or on behalf of himself or
third parties, any persons who were at any time within one (1)
year prior to the cessation of his employment hereunder,
employees of the Company; or
E. at any time during his employment hereunder and for a
period of one (1) year after he ceases to be employed by the
Company, employ or cause or authorize, directly or indirectly, to
be employed, for or on behalf of himself or third parties, any
such employees of the Company; or
F. at any time during his employment hereunder and for any
period during which the Employee is receiving severance pay and
benefits after he ceases to be employed by the Company, unless
agreed to by the Company in writing, the Employee will not accept
employment with or participate, directly or indirectly, as owner,
stockholder, director, officer, manager, consultant or agent, or
otherwise use his special, unique or extraordinary skills or
knowledge with respect to the business of the Company or of any
affiliate of the Company in or with any business, firm,
corporation, partnership, association, venture or other entity or
person which is engaged in the business of designing, developing
and manufacturing computers, printers or computer peripheral
equipment for rugged or other specialized applications, except
that this paragraph F shall not be construed to prohibit the
Employee from owning up to 5% of the securities or a corporation
which are publicly traded on a national securities exchange or in
the over-the-counter market.
(b) The Employee agrees that he will not, at any time,
remove from the Company s premises any drawings, notebooks, data
and other documents and materials relating to the business and
procedures heretofore or hereafter acquired, developed and/or
used by the Company without prior written consent of the
President and Chief Executive Officer of the Company, except as
reasonably necessary to the discharge of his duties hereunder;
provided, however, that the removal of any such documents that
are deemed sensitive must be handled by the Employee in
accordance with the Company s United States Department of Defense
Security Manual.
(c) The Employee agrees that upon the expiration of his
employment by the Company for any reason, he shall forthwith
deliver up to the Company any and all order-books, customer
lists, logs, drawings, notebooks and other documents and
material, and all copies thereof, in his possession or under his
control relating to any Confidential Information or any
discoveries or which is otherwise the property of the Company.
(d) The Employee agrees that any breach or threatened
breach or alleged breach or alleged threatened breach by him of
any provision of this Section 8 shall entitle the Company, in
addition to any other legal remedies available to it, to apply to
any court of competent jurisdiction to enjoin such breach or
threatened breach or alleged breach or alleged threatened breach.
The parties understand and intend that each restriction agreed to
by the Employee herein shall be construed as separable and
divisible from every other restriction, and that the
unenforceability, in whole or in part, of any other restriction,
will not affect the enforceability of the remaining restrictions
that one or more of all of such restrictions may be enforced in
whole or in part as the circumstances warrant. No waiver of any
one breach of the restrictions contained in this Section 8 shall
be deemed a waiver of any future breach.
(e) The Employee hereby acknowledges that he is fully
cognizant of the restrictions put upon him by this Section 8.
9. Relocation Expenses
-------------------
a) Subject to this Agreement, the Company shall pay
the following actual expenses of the Employee incurred in
connection with, or incidental to, the relocation of the Employee
(the "Relocation"): (i) all taxes, title and closing costs
including up to two "points" in origination fees and prepaid
interest expenses; (ii) reasonable legal and lenders fees; (iii)
travel expenses including food and lodging, directly incurred in
connection with the search for and purchase of a new primary
residence in the Montgomery, Alabama, region which is within
commuting distance to the Company s facilities; (iv) closing
costs on the sale of the Employee s primary residence in Vestal,
New York; (v) expenses for the movement of household goods from
the Employee s primary residence in the Vestal, New York area, to
a new permanent residence in the Montgomery, Alabama, area; and
(vi) two trips (Employee & Spouse), to Montgomery, Alabama and
return to current residence in New York by air for the purpose of
looking for a primary residence. All relocation expenses will be
grossed up to cover applicable federal, state and local taxes.
10. Temporary Living Expenses.
-------------------------
During the employment term and prior to the relocation of the
Employee, but in no event to exceed a period of 180 days, the
Employee shall be reimbursed for temporary living expenses
incurred by the Employee in an amount not to exceed $2,000 per
month, provided such expenses are adequately documented in
accordance with the Company s policies.
11. Life Insurance.
--------------
The Employee agrees that the Company may apply for and purchase
one or more life insurance policies on the life of the Employee,
and the Employee acknowledges that the Company has an insurable
interest in the life of the Employee. The Employee agrees to
take all actions reasonably necessary for the Company to procure
such policies, including, without limitation, the execution of
any consents or applications and the undergoing of one or more
physical examinations.
12. Notices.
-------
All notices, requests, demands or other communications hereunder
shall be deemed to have been given if delivered in writing
personally or by certified mail to each party at the address set
forth below, or at such other address as each party may designate
in writing to the other:
If to the Company:
Miltope Group Inc.
500 Richardson Road South
Hope Hull, Alabama 36043
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
If to the Employee:
James Matthews
604 Stonehedge Drive
Vestal, New York 13850
13. Entire Agreement
----------------
This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, supersedes any prior
agreement between the parties, and may not be changed or
terminated orally. No change, termination or attempted waiver of
any of the provisions hereof shall be binding unless in writing
and signed by the party against whom the same is sought to be
enforced.
14. Successors and Assigns.
----------------------
This Agreement shall be binding upon and shall inure to the
benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto.
15. Severability.
------------
In the event that any one or more of the provisions of this
Agreement shall be declared to be illegal or unenforceable under
any law, rule or regulation of any government having jurisdiction
over the parties hereto, such illegality or unenforceability
shall not affect the validity and enforceability of the other
provisions of this Agreement.
16. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Governing Law.
-------------
All matters concerning the validity and interpretation of and
performance under this Agreement shall be governed by the laws of
the State of Alabama.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MILTOPE GROUP INC.,
/s/ James Matthews by: /s/ George K. Webster
------------------------- -----------------------------
James Matthews George K. Webster
President and CEO
Exhibit 21
SUBSIDIARIES OF MILTOPE GROUP INC.
----------------------------------
% Owned
Direct or
Name State of Incorporation Indirect
---- ---------------------- --------
Miltope Corporation Alabama 100%
Miltope Business Products, Inc. New York 100%
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 2-97977, No. 33-8245, No. 33-78744 and No. 33-
65233 of Miltope Group, Inc. on Forms S-8 and No. 33-33752 of
Miltope Group, Inc. on Form S-3 of our report dated March 20,
1996, appearing in the Annual Report on Form 10-K of Miltope
Group Inc. for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MILTOPE
GROUP INC. FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 301,000
<SECURITIES> 0
<RECEIVABLES> 10,417,000
<ALLOWANCES> 0
<INVENTORY> 16,432,000
<CURRENT-ASSETS> 27,406,000
<PP&E> 16,042,000
<DEPRECIATION> 5,313,000
<TOTAL-ASSETS> 41,440,000
<CURRENT-LIABILITIES> 8,510,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 15,845,000
<TOTAL-LIABILITY-AND-EQUITY> 41,440,000
<SALES> 65,708,000
<TOTAL-REVENUES> 65,708,000
<CGS> 52,336,000
<TOTAL-COSTS> 65,331,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,361,000
<INCOME-PRETAX> (984,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (984,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (984,000)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
