SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended JUNE 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 0-14870
QUIPP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2306191
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 N.W. 157TH STREET, MIAMI, FLORIDA 33014
(Address of principal executive offices)
Registrant's telephone number, including area code (305) 623-8700
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 ______
The number of shares of the registrant's common stock, $.01 par value,
outstanding at June 30, 1998 was 1,636,994.
1
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QUIPP, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets - 3
June 30, 1998 and December 31, 1997
Consolidated Statements of Income - 4
Three months ended June 30, 1998 and 1997
Six months ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows - 5
Three months ended June 30, 1998 and 1997
Six months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosure about Market Risk 8
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 9
Item 6 - Exhibits and Reports on Form 8-K 10
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
QUIPP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 941,427 $ 822,573
Securities available for sale - current 14,960,756 12,845,884
Accounts receivable, net 3,694,105 4,381,535
Inventories 3,209,701 3,530,609
Deferred tax asset - current 1,169,119 1,169,119
Prepaid expenses and other receivables 83,844 132,508
--------------------------------------
TOTAL CURRENT ASSETS 24,058,952 22,882,228
Other assets:
Property, plant and equipment, net 1,809,582 1,825,906
Goodwill 421,471 437,082
Other assets 85,415 110,417
Deferred tax asset - long term 47,434 47,434
--------------------------------------
TOTAL ASSETS $ 26,422,854 $ 25,303,067
======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 100,000 $ 100,000
Accounts payable 1,250,385 1,252,375
Accrued salaries and wages 562,272 588,165
Deferred revenues 1,259,038 1,342,963
Income tax payable 215,380 184,044
Other accrued liabilities 1,677,038 2,225,676
--------------------------------------
TOTAL CURRENT LIABILITIES 5,064,113 5,693,223
Noncurrent liabilities:
Long term debt 1,050,000 1,050,000
--------------------------------------
TOTAL LIABILITIES 6,114,113 6,743,223
Shareholders' equity:
Common stock - par value $.01 per share, 8,000,000
shares authorized. 1,636,994 and 1,636,444 shares issued,
respectively June 30, 1998 and December 31, 1997 16,370 16,365
Additional paid-in capital 5,562,740 5,359,845
Retained earnings 14,729,631 13,329,609
Treasury stock, at cost, 0 and 33,950 shares
respectively June 30, 1998 and December 31, 1997 - (145,975)
--------------------------------------
TOTAL SHAREHOLDERS' EQUITY 20,308,741 18,559,844
--------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 26,422,854 $ 25,303,067
======================================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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QUIPP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 7,043,107 $ 6,491,179 $ 12,834,722 $ 12,404,247
Cost of sales 4,272,763 4,239,454 7,931,167 8,012,271
----------------------------------------------------------------------------
GROSS PROFIT 2,770,344 2,251,725 4,903,555 4,391,976
Other operating income and expense items:
Selling, general and administrative expenses 1,537,725 1,185,977 2,687,323 2,345,598
Research and developments expense 207,356 69,716 350,918 131,575
----------------------------------------------------------------------------
OPERATING PROFIT 1,025,263 996,032 1,865,314 1,914,803
----------------------------------------------------------------------------
Other income and expense:
Interest income 165,265 146,187 292,964 211,027
Interest expense 11,364 4,151 22,145 24,266
----------------------------------------------------------------------------
153,901 142,036 270,819 186,761
----------------------------------------------------------------------------
Income before income taxes 1,179,164 1,138,068 2,136,133 2,101,564
Income tax 403,036 421,085 736,113 777,578
----------------------------------------------------------------------------
NET INCOME $ 776,128 $ 716,983 $ 1,400,020 $ 1,323,986
- -----------------------------------------------------------------------------------------------------------------------------------
Per share amounts:
Basic income per common share 0.48 0.44 0.87 0.82
Diluted income per common share 0.46 0.42 0.82 0.78
Weighted average number of common
equivalent shares outstanding 1,712,619 1,606,774 1,702,663 1,586,777
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
QUIPP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash provided by operations:
Net income $ 776,128 $ 716,982 $ 1,400,020 $ 1,323,985
-------------------------- --------------------------
Reconciliation of net income to net cash
(used in) provided by operations:
Depreciation and amortization 65,988 60,811 145,224 169,119
Other noncash items - 15,160 - 15,160
Changes in operational assets and liabilities:
Accounts receivable, net 1,327,325 1,324,871 687,432 418,323
Inventories 485,464 (638,616) 320,908 (900,605)
Other assets, prepaid expenses and other receivables 55,751 (73,789) 48,664 (51,969)
Accounts payable and other accrued liabilities 82,122 694,379 (576,520) 419,042
Deferred revenues (382,474) (451,653) (83,925) 1,241,284
Income tax payable (66,741) (219,665) 31,336 136,827
-------------------------- --------------------------
NET CASH (USED IN) PROVIDED BY OPERATIONS 2,343,563 1,428,480 1,973,139 2,771,166
-------------------------- --------------------------
Cash flow from investing activities:
Securities available for sale (2,482,578) (905,237) (2,114,872) (1,996,379)
Capital expenditures (64,231) (26,751) (88,289) (28,894)
-------------------------- --------------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,546,809) (931,988) (2,203,161) (2,025,273)
Cash flow from financing activities:
Repayment of debt - - - (300,000)
Conversion of stock options 312,875 - 348,875 -
-------------------------- --------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 312,875 - 348,875 (300,000)
-------------------------- --------------------------
Increase (decrease) in cash and cash equivalents 109,629 496,492 118,853 445,893
Cash and cash equivalents at the beginning of the quarter/year 831,797 97,830 822,573 148,429
- ------------------------------------------------------------------------------------------- --------------------------
CASH AND CASH EQUIVALENTS AT END OF THE MONTH/QUARTER $ 941,426 $ 594,322 $ 941,426 $ 594,322
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash payments made for:
Interest $ 11,364 $ 13,295 $ 22,145 $ 24,266
-------------------------- --------------------------
Income Taxes $ 806,500 $ 645,000 $ 1,041,566 $ 645,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Quipp, Inc. and Quipp Systems, Inc. (a wholly owned subsidiary). All
significant intercompany transactions have been eliminated in consolidation. The
accompanying consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 1997 and, in
the opinion of management, reflect all adjustments (principally consisting of
normal recurring accruals) considered necessary to present fairly the financial
position of Quipp, Inc. as of June 30, 1998 and the results of its operations
and cash flows for the six months ended June 30, 1998. The results of operations
for the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1998. These
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The consolidated balance sheet at December 31, 1997 was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. Certain previously
reported amounts have been reclassified to conform to the current period's
presentation.
NOTE 2 - INVENTORIES
Inventories at June 30, 1998 include material, labor and factory overhead and
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method. The composition of inventories at June 30,
1998 and December 31, 1997 is as follows:
JUNE 30, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------
Raw materials $1,945,040 $2,631,602
Work in process 980,629 731,850
Finished goods 284,032 167,157
-------------------------------------------------
$3,209,701 $3,530,609
NOTE 3 - EARNINGS PER SHARE
Earnings per share amounts are based upon the weighted average number of common
and common equivalent shares outstanding during the year. Common equivalent
shares are excluded from the computation in periods in which they have an
anti-dilutive effect. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128), which specifies the computation, presentation and disclosure
requirements for earnings per share (EPS). It replaces the presentation of
primary and fully diluted EPS with basic and diluted EPS. Basic EPS excludes all
dilution, and is based upon the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
would occur if option, warrants, convertible securities or other contracts to
issue common stock were exercised or converted into common stock. The Company
has adopted the provisions of SFAS 128, which is effective for periods ending
after December 15, 1997. The Company has restated all previously reported per
share amounts to conform to the new presentation.
6
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NOTE 4 - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130). This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. It does not, however, specify when to
recognize or how to measure items that make up comprehensive income. SFAS 130
was issued to address the concerns over the practice of reporting elements of
comprehensive income directly in equity. Adoption of this statement did not have
a material impact on the Company's financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS: The following table presents statements of income items
expressed as a percentage of net sales for the periods indicated:
PERCENTAGE OF NET SALES
THREE MONTHS ENDED JUNE 30,
1998 1997
- ------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Net sales 100.0% 100.0%
Gross profit 39.3% 34.7%
Selling, general and administrative expenses 21.8% 18.3%
Research and development 2.9% 1.1%
Interest income 2.3% 2.3%
Net income 11.0% 11.0%
NET SALES for the three and six months ended June 30, 1998 were $7,043,107 and
$12,834,722, respectively, an increase of $551,928 or 8.5% and $430,475 or 3.5%
over net sales of $6,491,179 and $12,404,247 for the corresponding periods in
1997. The increase in net sales reflected strong domestic sales offset by a
decline in foreign sales.
GROSS PROFIT for the three and six months ended June 30, 1998 was $2,770,345 and
$4,903,556, respectively, as compared to $2,251,725 and $4,391,976 for the
corresponding periods in 1997. The increase in gross profit as a percentage of
net sales was due to a more favorable product mix.
SELLING, GENERAL AND ADMINISTRATIVE expenses for the three and six months ended
June 30, 1998 were $1,537,725 and $2,687,323, respectively, an increase of
$351,748 or 29.7% and $341,724 or 14.6% from the corresponding periods of 1997.
As a percentage of net sales, selling, general and administrative expenses for
the three and six months ended June 30, 1998 increased to 21.8% and 20.9%,
respectively, from 18.6% and 19.3% for the corresponding periods in 1997. The
increase was mainly attributable to increased legal expenses resulting from a
lawsuit filed by the Company to enforce one of its patents.
RESEARCH AND DEVELOPMENT expenses for the three and six months ended June 30,
1998 were $207,356 and $350,918, respectively, an increase of 194.4% and 166.7%
over the same periods in 1997. As a percentage of net sales, research and
development expenses for the three and six month periods ended June 30, 1998
increased to 2.9% and 2.73%, respectively, from 1.1% and 1.1% for the
corresponding periods in 1997. The increase was mainly attributable to product
enhancements for the Company's single gripper conveyer and the development of a
new palletizer for the newspaper industry.
7
<PAGE>
INTEREST INCOME for the three and six months ended June 30, 1998 was $165,265
and $292,964, respectively, as compared to $146,187 and $211,027 for the same
periods in 1997. The increase in interest income was mainly attributable to
higher balances in cash and cash equivalents and securities available for sale
during 1998.
GENERAL
The Company's backlog as of June 30, 1998 was $7,080,838 compared to $9,198,624
at June 30, 1997. The Company expects to ship all backlog items within the next
twelve months.
LIQUIDITY
At June 30, 1998 cash, cash equivalents and securities available for sale were
$15,902,183 as compared to $13,668,457 at December 31, 1997, an increase of
$2,233,726 or 16.3%. This increase was primarily due to cash provided by
operations and a reduction in accounts receivable. The Company believes that its
cash, cash equivalents and securities available for sale are adequate to support
the Company's operations at its current level.
YEAR 2000
Based on correspondence received from the respective software vendors, the
Company believes that its operating and accounting systems, which were recently
upgraded, are Year 2000 compliant. The Company's manufacturing department uses
Kronos, a computerized data collection system, to record labor time and
attendance. The Kronos system is not Year 2000 compliant. The Company plans to
replace the Kronos software and related hardware during the forth quarter of
1998, but is unable to assure that the new labor time and attendance recording
system will be Year 2000 compliant on a timely basis. Nevertheless, the Company
does not anticipate that the failure to be Year 2000 compliant with respect to
labor time and attendance data would have a material adverse effect on the
Company, since the necessary information could be entered manually rather than
under the currently employed bar code scanning method. Management estimates that
the overall cost of hardware and software upgrades will be less than $100,000
and will not materially affect future operating results or financial condition.
With respect to the Company's major vendors, the Company has initiated inquiries
to determine whether they will be subject to Year 2000 issues in a manner that
may have an impact on the Company's operations. The Company will further explore
its Year 2000 readiness and the need for any remedial actions during the
remainder of 1998.
FORWARD LOOKING STATEMENTS
The statements contained above regarding the shipment of backlog during the next
twelve months; net sales in the quarter ended September 30, 1998; anticipated
measures to address the Year 2000 issue (including, without limitation,
replacement of hardware and software); third party statements regarding Year
2000 readiness of their products and systems; costs of Year 2000 measures; and
other Year 2000 related matters are forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. A number of
important factors could cause actual results to differ materially from those in
the forward looking statements including, among others, economic conditions
generally and in the newspaper industry, change in product demand, delays in
shipment, cancellation of customer orders, unanticipated hardware or software
problems in connection with Year 2000 upgrades, unanticipated difficulties in
manual entry of labor time and attendance data, and unanticipated costs of Year
2000 measures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 12, 1998 the Company held its Annual Meeting of
Shareholders (the "Meeting"). At the Meeting, the shareholders
voted on the election of the board of directors, a proposal to
amend the Articles of Incorporation to provide for the
classification of the Board of Directors, a proposal to amend
the Articles of Incorporation to require that all shareholder
action be taken at a shareholder meeting and not by written
consent, a proposal to amend the Company's 1996 Equity
Compensation Plan and a proposal to ratify the appointment of
KPMG Peat Marwick LLP as the Company's independent public
accountants for 1998.
The voting results are set forth as follows:
1. Election of the Board of Directors:
NAME OF NOMINEE FOR WITHHELD
--------------- --- --------
Jack D. Finley 1,145,307 156,850
Anthony P. Peri 1,145,407 156,750
William L. Rose 1,145,407 156,750
Ralph M. Branca 1,145,407 156,750
Louis D. Kipp 1,145,407 156,750
Richard H. Campbell 1,145,407 156,750
Cristina H. Kepner 1,145,407 156,750
2. To amend the Articles of Incorporation to provide for
the classification of the Board of Directors:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
657,774 305,868 5,300 333,215
3. To amend the Articles of Incorporation to require
that all shareholder action be taken at a shareholder
meeting and not by written consent:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
705,624 255,368 4,950 336,215
4. To amend the Equity Compensation Plan:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
701,422 259,005 8,265 333,465
5. Ratification of the appointment of KPMG Peat Marwick
LLP as the Company's independent public accountants
for 1998:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
1,294,018 5,289 2,850 0
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) Articles of Amendment to Articles of Incorporation
and Articles of Incorporation, as amended
(10) Quipp, Inc. 1998 Equity Compensation Plan, as amended
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIPP, INC.
Date: August 13, 1998 BY: /S/ ANTHONY P. PERI
-----------------------
Anthony P. Peri
President and Chief Executive Officer
BY: /S/ JEFFREY S. BAROCAS
--------------------------
Jeffrey S. Barocas
Chief Financial Officer and Treasurer
11
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
3 Articles of Amendment to Articles of Incorporation and
Articles of Incorporation, as amended
10 Quipp, Inc. 1998 Equity Compensation Plan, as amended
27 Financial Data Schedule
12
EXHIBIT 3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
QUIPP, INC.
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the undersigned, Quipp, Inc., a Florida corporation, by its
President, does hereby make and execute these Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is Quipp, Inc.
2. The Articles of Incorporation are amended as follows:
(a) by deleting Article VI thereof in its entirety and by
inserting, in lieu thereof, the following new Article VI:
ARTICLE VI
(1) The total number of directors of this corporation
shall be the number from time to time fixed by the directors
in accordance with the terms and conditions of the bylaws of
the corporation.
(2) The directors shall be classified, with respect
to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, one class to
be originally elected for a term expiring at the annual
meeting of shareholders to be held in 1999, another class to
be originally elected for a term expiring at the annual
meeting of shareholders to be held in 2000, and another class
to be originally elected for a term expiring at the annual
meeting of shareholders to be held in 2001, with each class to
hold office until its successor is duly elected and qualified.
At each succeeding annual meeting of shareholders, directors
elected to succeed those directors whose terms then expire
shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders after their
election, with each director to hold office until such
person's successor shall have been duly elected and qualified.
<PAGE>
(b) by adding the following new Article VIII:
ARTICLE VIII
No action required to be taken or which may be taken at any
annual or special meeting of shareholders of the corporation may be
taken by shareholders without a meeting, and the power of shareholders
to consent in writing without a meeting to the taking of any such
action is specifically denied.
3. The date of the adoption of the amendment by the shareholders of
Quipp, Inc. was May 12, 1998.
4. The only voting group entitled to vote on the amendment was the
holders of the common stock. The number of votes cast for the amendment by the
holders of the common stock was sufficient for approval by that voting group.
IN WITNESS WHEREOF, these Articles of Amendment to Articles of
Incorporation of Quipp, Inc. have been executed by Quipp, Inc., by its
President, this 12th day of May, 1998.
QUIPP, INC.
By: /s/ ANTHONY P. PERI
-----------------------
Anthony P. Peri
President
-2-
<PAGE>
ARTICLES OF INCORPORATION OF
QUIPP, INC.
(Pursuant to Item 601(3)(b)(i) of Regulation S-K, the following
consitutes a complete copy of the Articles of Incorporation of the Regsitrant,
as amended to dates and as currently in effect).
ARTICLE I
NAME
The name of the Corporation shall be: QUIPP, INC.
ARTICLE II
PURPOSE
The Corporation is organized for the purpose of transacting any and all
lawful business for which Corporations may be incorporated under the State of
Florida.
ARTICLE III
CAPITAL STOCK
The aggregate number of shares which this corporation shall have
authority to issue is 8,000,000 shares of common stock, $.01 par value.
ARTICLE IV
NO PREEMPTIVE RIGHTS
The holders of the common stock of this corporation shall have no
preemptive rights to purchase any shares of the stock of this Corporation.
ARTICLE V
TERM OF EXISTENCE
This Corporation shall exist perpetually.
ARTICLE VI
(1) The total number of directors of this corporation shall be the
number from time to time fixed by the directors in accordance with the terms and
conditions of the bylaws of the corporation.
<PAGE>
(2) The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, one class to be originally elected for a term expiring at the
annual meeting of shareholders to be held in 1999, another class to be
originally elected for a term expiring at the annual meeting of shareholders to
be held in 2000, and another class to be originally elected for a term expiring
at the annual meeting of shareholders to be held in 2001, with each class to
hold office until its successor is duly elected and qualified. At each
succeeding annual meeting of shareholders, directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of shareholders after their
election, with each director to hold office until such person's successor shall
have been duly elected and qualified.
ARTICLE VII
REGISTERED OFFICE AND AGENT
The street office of the registered office of the Corporation is 2655
LeJeune Road, Suite 11011, Coral Gables, Florida, 33134 and the name of the
registered agent of the Corporation at that address is Charles P. Sacher.
ARTICLE VIII
No action required to be taken or which may be taken at any annual or
special meeting of shareholders of the corporation may be taken by shareholders
without a meeting, and the power of shareholders to consent in writing without a
meeting to the taking of any such action is specifically denied.
EXHIBIT 10
QUIPP, INC. 1996 EQUITY COMPENSATION PLAN
The purpose of the Quipp, Inc, 1996 Equity Compensation Plan
(the "Plan") is (i) to provide designated officers (including officers who are
also directors), and other employees of Quipp, Inc. and its subsidiaries (within
the meaning specified in Section 424(f) of the Code) (hereinafter collectively
referred to as the "Company"), members of the Board who are not employed in any
capacity by the Company ("Non-Employee Directors") and consultants and advisors
to the Company ("Key Advisors") with certain rights to acquire common stock of
the Company, and (ii) to provide for the grant of incentive stock options and
nonqualified stock options. The Company believes that the Plan will be an
incentive to the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and will align the
economic interests of the participants with those of the shareholders.
1. ADMINISTRATION
Subject to the provisions of Section 6, the Plan shall be
administered and interpreted by the Board of Directors or by a committee
consisting of not less than two persons appointed by the Board of Directors of
the Company from among its members who are Non-Employee Directors of the
Company, all of whom are "outside directors" as defined under section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") and related Treasury
regulations. The Board of Directors, in such administrative capacity or, if
appointed, such Committee, (either of which are hereinafter referred to as the
"Committee"), subject to the provisions of Section 6, shall have the sole
authority to determine (i) the individuals to whom options and awards shall be
granted under the Plan, (ii) the type, size and terms of the grants or awards to
be made to each such individual, (iii) the time when the grants or awards will
be made and (iv) any other matters arising under the Plan. The Committee shall
have full power and authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interests in the Plan or in any awards granted hereunder.
2. GRANTS AND AWARDS
Incentives under the Plan shall consist of incentive stock
options, nonqualified stock options, restricted stock grants (hereinafter
collectively referred to as "Grants") and stock bonus awards ("Awards"). All
Grants and Awards shall be subject to the terms and conditions set forth herein
and to those other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the employee, Key Advisor or Non-Employee Director (the "Grant Letter"). The
Committee shall
<PAGE>
approve the form and provisions of each Grant Letter. Grants and/or Awards under
a particular Section of the Plan need not be uniform as among the employees or
Key Advisors and Grants and/or Awards under two or more Sections of the Plan may
be combined in one instrument. Grants to Non-Employee Directors shall be
governed by Section 6.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustment specified below, the aggregate
number of shares of common stock, $.01 par value, of the Company ("Company
Stock") that may be issued or transferred under the Plan is 600,000 shares. The
maximum aggregate number of shares of Company Stock that shall be subject to
options restricted stock grants or stock bonus awards under the Plan to any
single individual during the term of the Plan shall be 100,000 shares. The
shares may be authorized but unissued shares of Company Stock or treasury shares
of Company Stock, including, without limitation, shares repurchased by the
Company on the open market. If and to the extent options granted under the Plan
terminate, expire, or cancel without having been exercised, or if any shares of
restricted stock are forfeited (regardless of whether any voting rights are
exercised, dividends received, or any other rights were vested in the
Participant prior to forfeiture), the shares subject to such option or
comprising such restricted stock shall again be available for purposes of the
Plan.
(b) If there is any change in the number or kind of shares of
Company Stock outstanding by reason of a stock dividend, recapitalization, stock
split, or combination or exchange of such shares, or a merger, reorganization or
consolidation of the Company, reclassification or change in par value or by
reason of any other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company's receipt of consideration or if
the value of outstanding Shares of Company Stock is substantially reduced due to
the Company's payment of an extraordinary dividend or distribution, the maximum
number of shares of Company Stock available for Grants or Awards, the maximum
number of shares of Company Stock for which any one individual participating in
the Plan may receive Grants and Awards over the term of the Plan, and the number
of shares and price per share subject to outstanding Stock Options shall be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants or Awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. During the Restriction Period (as defined
in Section 7(a)), shares of the Company Stock subject to the Restricted Stock
Grant (as defined in the introductory clause of Section 7) shall be deemed to be
outstanding, and the number and kind of such shares shall be adjusted in the
same manner as other outstanding shares of Company Stock as a result of any of
the events that would cause the operation of the provisions of this Section
3(b). The adjustments determined by the Committee shall be final, binding and
conclusive. As used herein, the term "Company Stock" shall include any other
kind of Company securities issued in respect of Company Stock pursuant to the
events set forth in this Section 3(b).
-2-
<PAGE>
4. ELIGIBILITY FOR PARTICIPATION
Officers and other employees of the Company, Key Advisors
designated by the Committee and Non-Employee Directors shall be eligible to
participate in the Plan (hereinafter referred to individually as the
"Participant" and collectively as the "Participants"). The Committee shall
select the individuals (other than Non-Employee Directors) to receive Grants and
Awards (the "Grantees") from among the Participants and determine the number of
shares of Company Stock subject to a particular Grant or Award in such manner as
the Committee determines; provided, however, that Key Advisors must render bona
fide services and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction; and provided further, that
Non-Employee Directors may receive only Nonqualified Stock Options (as defined
below) pursuant to Section 6 hereof.
5. GRANTING OF OPTIONS
(a) NUMBER OF SHARES. The Committee shall grant to each
Grantee a number of stock options as the Committee shall determine.
(b) TYPE OF OPTION AND PRICE. The Committee may grant options
qualifying as incentive stock options within the meaning of Section 422 of the
Code ("Incentive Stock Options") or stock options which are not intended to so
qualify ("Nonqualified Stock Options") or any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter referred to collectively as
"Stock Options") in accordance with the terms and conditions set forth herein;
provided, however, that Key Advisors shall not be eligible to receive grants of
Incentive Stock Options and Non-Employee Directors may receive only Nonqualified
Stock Options pursuant to Section 6 hereof.
The purchase price of Company Stock subject to an Incentive
Stock Option or a Nonqualified Stock Option shall be at least equal to the "Fair
Market Value" of a share of such Company Stock on the date such Stock Option is
granted. The Fair Market Value per share shall be, if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National Market, the last reported sale price thereof on the relevant date or
the latest preceding date upon which a sale was reported, or, if the Company
Stock is not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices thereof on the relevant date, as reported
on Nasdaq or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service, as
applicable and as the Committee determines. If the Company Stock is not subject
to reported transactions or "bid" or "ask" quotations as set forth above, the
Fair Market Value per share shall be as determined by the Committee.
(c) TERM. The Committee shall determine the option term of
each Stock Option. The term shall not exceed ten years from the date of grant.
-3-
<PAGE>
(d) EXERCISABILITY OF OPTIONS. Subject to Section 6, Stock
Options shall become exercisable in accordance with the terms and conditions
determined by the Committee, in its sole discretion, and specified in the Grant
Letter. The Committee, in its sole discretion, may accelerate the exercisability
of any or all outstanding Stock Options, other than stock options granted
pursuant to Section 6 and held by a Participant who is then a Non-Employee
Director, at any time and for any reason. In addition, all outstanding Stock
Options including stock options granted pursuant to Section 6, shall become
immediately exercisable upon a Change in Control (as defined herein) unless the
Committee, in its sole discretion, determines not to accelerate such Stock
Options upon a Change in Control (the Committee shall not make such a
determination in connection with Stock Options granted pursuant to Section 6
held by a Participant who is then a Non-Employee Director). The Committee may
make such determination prior to the Change in Control or, provided that the
Committee making such determination following a Change in Control is comprised
of the same members as those on the Committee immediately prior to such Change
in Control, within thirty (30) days following such Change in Control.
(e) MANNER OF EXERCISE. A Grantee may exercise a Stock Option,
in whole or in part, by delivering a notice of exercise to the Committee with
accompanying payment of the option price. Such notice may instruct the Company
to deliver shares of Company Stock due upon the exercise of the Stock Option to
any registered broker or dealer designated by the Company ("Designated Broker")
in lieu of delivery to the Grantee. Such instructions must designate the account
into which the shares are to be deposited. The Grantee may tender this notice of
exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
(f) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.
(1) In the event the Grantee ceases to be an employee
or director of the Company or Key Advisor for any reason other than disability,
death or a termination for cause by the Company, any Stock Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within
ninety days of the date on which he ceases to be an employee or Key Advisor (or,
except with respect to Stock Options granted pursuant to Section 6 and held by
persons who are then Non-Employee Directors, within such other period of time as
may be specified by the Committee), but in any event no later than the date of
expiration of the option term.
(2) In the event the Grantee ceases to be an employee
or director of the Company or a Key Advisor because he is disabled within the
meaning of section 22(e)(3) of the Code, any Stock Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year of
the date on which he ceases to be an employee, director or Key Advisor (or,
except with respect to Stock Options granted pursuant to Section 6 and held by
persons who are then Non-Employee Directors, within such other period of time as
may be
-4-
<PAGE>
specified by the Committee), but in any event no later than the date of
expiration of the option term.
(3) In the event of the death of the Grantee while he
is an employee, director or Key Advisor of the Company or within not more than
three months of the date on which he ceases to be an employee, director or Key
Advisor (or, except with respect to Stock Options granted pursuant to Section 6
and held by persons who are then Non-Employee Directors, within such other
period of time as may be specified in by the Committee), any Stock Option which
was otherwise exercisable by the Grantee at the date of death may be exercised
by his personal representative at any time prior to the expiration of one year
from the date of death (or, except with respect to Stock Options granted
pursuant to Section 6 and held by persons who are then Non-Employee Directors,
within such other period of time as may be specified in by the Committee), but
in any event no later than the date of expiration of the option term.
(4) In the event the Grantee ceases to be an employee
or director of the Company or Key Advisor on account of a termination for
"Cause" by the Company, any Stock Option held by the Grantee shall terminate as
of the date he ceases to be an employee or Key Advisor (or, except with respect
to Stock Options granted pursuant to Section 6 and held by persons who are then
Non-Employee Directors, as the Committee may otherwise provide) but in any event
no later than the date of expiration of the option term. "Cause" shall mean (i)
with respect to Grantees other than Non-Employee Directors, except to the extent
otherwise provided in a Grantee's Grant Letter, a finding by the Committee,
after full consideration of the facts presented on behalf of both the Company
and the Grantee, that the Grantee has breached his or her employment or service
contract with the Company, or has been engaged in disloyalty to the Company,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment or service,
or has disclosed trade secrets or confidential information of the Company, (ii)
with respect to Non-Employee Directors, the date the Grantee's directorship is
terminated, if the directorship is terminated on account of (A) any act of
fraud, intentional misrepresentation, embezzlement or theft, (B) commission of a
felony or (C) disclosure of trade secrets or confidential information of the
Company. In such event, in addition to the immediate termination of the Option,
the Grantee shall automatically forfeit all Option Shares for any exercised
portion of an Option for which the Company has not yet delivered the share
certificates upon refund by the Company of the Option Price.
(g) SATISFACTION OF OPTION PRICE. The Grantee shall pay the
option price in cash or, with the approval of the Committee, by delivering
shares of Company Stock already owned by the Grantee for the period necessary to
avoid a charge to the Company's earnings for financial reporting purposes and
having a fair market value on the date of exercise equal to the option price or
with a combination of cash and shares, or (except with respect to Stock Options
granted pursuant to Section 6 and held by persons who are then Non-Employee
Directors) by such other mode of payment as the Committee may approve, including
payment
-5-
<PAGE>
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board or any successor regulation of the agency then responsible
for administering margin regulations pertaining to securities brokers
("Regulation T"). Non-Employee Directors who hold Stock Options granted pursuant
to Section 6 may make payment through a broker in accordance with procedures
permitted by Regulation T. The Grantee shall pay the option price and the amount
of withholding tax due, if any, at the time of exercise. Shares of Company Stock
shall not be issued or transferred upon exercise of a Stock Option until the
option price and applicable withholding taxes are fully paid.
(h) REQUIREMENTS FOR INCENTIVE STOCK OPTIONS. Each Grant of an
Incentive Stock Option shall provide that to the extent that the aggregate fair
market value of the Company Stock on the date of the Grant with respect to which
Incentive Stock Options are exercisable for the first time by a Grantee during
any calendar year under the Plan or any other stock option plan of the Company
exceeds $100,000, then such Stock Options, to the extent of such excess, shall
be treated as Nonqualified Stock Options. An Incentive Stock Option shall not be
granted to any Participant who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or parent of the Company, unless the option price per share is not
less than 110% of the fair market value of Company Stock on the date of grant
and the option term is not more than five years from the date of grant.
Notwithstanding anything in the Plan to the contrary, to the extent that any
Stock Option does not qualify as an Incentive Stock Option, such option shall be
treated as a Nonqualified Stock Option.
6. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
A Non-Employee Director shall be entitled to receive Nonqualified Stock
Options only in accordance with this Section 6.
(a) INITIAL GRANT. Each Non-Employee Director who is a member
of the Board on the effective date of the Plan (the "Effective Date") and who
was not previously an employee of the Company will receive on the Effective Date
a grant of a Nonqualified Stock Option to purchase 5,000 shares of Company
Stock. Each Non-Employee Director who first becomes a member of the Board after
the Effective Date will receive a grant of a Nonqualified Stock Option to
purchase 5,000 shares of Company Stock immediately upon his or her becoming a
member of the Board.
(b) ANNUAL GRANTS. On each date that the Company holds its
annual meeting of stockholders, commencing with the 1997 calendar year, each
Non-Employee Director in office immediately after the annual election of
directors (excluding any directors first elected at such meeting, who shall each
receive the grant specified in Section 6(a)) will receive a grant of a
Nonqualified Stock Option to purchase 5,000 shares of Company Stock.
-6-
<PAGE>
(c) OPTION EXERCISE PRICE; TERM OF OPTIONS. Options granted
under this Section 6 shall have a per share exercise price equal to the Fair
Market Value of a share of Company Stock on the date of grant, and such options
shall be fully exercisable on the date of grant. Options granted under this
Section 6 shall have a term of ten years from the date of grant, subject to
earlier termination pursuant to Section 5(f).
(d) ADMINISTRATION. The provisions of this Section 6 are
intended to operate automatically and not require administration. However, to
the extent that administrative determinations are required, the provisions of
this Section 6 shall be made by the members of the Board who are not eligible to
receive grants under this Section 6, but in no event shall such determinations
affect the eligibility of Grantees, the determination of the exercise price, the
timing of the grants or the number of shares subject to Stock Options granted
hereunder or otherwise cause the Plan, insofar as it relates to Non-Employee
Directors, to fail to satisfy the conditions of Rule 16b-3(c)(ii) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(e) ACCELERATION. Upon the occurrence of a Change of Control,
each Stock Option granted pursuant to this Section 6 shall automatically
accelerate and become fully exercisable as to all shares subject to such option
and shall remain exercisable until the expiration of the option term.
(f) APPLICABILITY OF PLAN PROVISIONS. Except as otherwise
provided in the Plan (including this Section 6), the Nonqualified Stock Options
granted to Non-Employee Directors shall be subject to the provisions of this
Plan applicable to Nonqualified Stock Options granted to other persons.
(g) AMENDMENT. Notwithstanding any other provision of the
Plan, this Section 6 and the provisions of Section 5(f) and Section 5(g) as they
pertain to Non-Employee Directors may not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the rules
thereunder.
7. RESTRICTED STOCK GRANTS
The Committee may issue or transfer shares of Company Stock, subject to
restriction as set forth herein, to a Participant under a grant (a "Restricted
Stock Grant"). Non-Employee Directors and Key Advisors shall not be eligible to
receive Restricted Stock Grants. The following provisions are applicable to
Restricted Stock Grants:
(a) GENERAL REQUIREMENTS. Shares of Company Stock issued
pursuant to Restricted Stock Grants will be issued for no consideration unless
otherwise required under applicable law. Subject to any other restrictions by
the Committee as provided pursuant to this Section, restrictions on the transfer
of shares of Company Stock set forth in Section 7(d) shall
-7-
<PAGE>
lapse as provided in the Grant Letter. The period of time during which the
Restricted Stock Grant will remain subject to restrictions including the time
prior to satisfaction of performance or other conditions for removal of
restrictions will be designated in the Grant Letter as the "Restriction Period."
(b) NUMBER OF SHARES. The Committee shall grant to each
Grantee a number of shares of Company Stock pursuant to a Restricted Stock Grant
in such manner as the Committee determines.
(c) REQUIREMENT OF EMPLOYMENT. If the Grantee's employment
terminates during a period designated in the Grant Letter as the Restriction
Period, the Restricted Stock Grant terminates as to all shares covered by the
Grant as to which restrictions on transfer have not lapsed, and, unless the
Company has retained possession of the shares of Company Stock subject to
restriction, those shares of Company Stock must be immediately returned to the
Company. The Committee may, however, provide for complete or partial exceptions
to this requirement as it deems equitable.
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE.
During the Restriction Period, a Grantee may not sell, assign, transfer, pledge,
or otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except as provided by the Committee. Each certificate for a share
issued or transferred under a Restricted Stock Grant shall contain a legend
giving appropriate notice of the restrictions in the Grant. The Grantee shall be
entitled to have the legend removed from the stock certificate or certificates
covering any of the shares subject to restrictions when all restrictions on such
shares have lapsed.
(e) VOTING AND DIVIDENDS. If so determined by the Committee,
the Grantee shall have the right to vote shares of the Company Stock subject to
the Restricted Stock Grant and to receive the payment of any cash dividends paid
on such shares during the Restricted Period.
(f) LAPSE OF RESTRICTIONS. All restrictions imposed under the
Restricted Stock Grant shall lapse upon the expiration of the applicable
Restriction Period; provided, however, that upon a Change in Control (as defined
herein), the Restricted Period relating to the shares which have not, prior to
such date, been satisfied shall immediately lapse, unless the Committee, in its
sole discretion, determines not to lapse such restrictions upon a Change in
Control. The Committee may make such determination prior to the Change in
Control or, provided that the Committee making such determination following a
Change in Control is comprised of the same members as those on the Committee
immediately prior to such Change in Control, within thirty (30) days following
such Change in Control. In addition, the Committee may determine as to any or
all Restricted Stock Grants, that all the restrictions shall lapse, without
regard to any Restriction Period, under such circumstances as it deems
appropriate.
-8-
<PAGE>
8. STOCK-BASED AWARDS.
The Committee is authorized, subject to limitations under
applicable law, to grant to Participants other than Non-Employee Directors
Awards of Company Stock purely as a "bonus" and not subject to any restrictions
or conditions.
9. TRANSFERABILITY OF STOCK OPTIONS
No Stock Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution. During the lifetime
of the person to whom a Stock Option is granted, such Stock Option may be
exercised only by such person. Notwithstanding the foregoing, a (i) Nonqualified
Stock Option may be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of ERISA and (ii) the Committee may
provide, in a Grant Letter, that a Grantee may transfer Stock Options to his or
her children, grandchildren or spouse or to one or more trusts for the benefit
of such family members or to partnerships in which such family members are the
only partners (a "Family Transfer"), provided that the Grantee receives no
consideration for a Family Transfer and the Grant Letters relating to Stock
Options transferred in a Family Transfer continue to be subject to the same
terms and conditions that were applicable to such Stock Options immediately
prior to the Family Transfer.
10. CHANGE IN CONTROL
A "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following events: (i) the date the shareholders of
the Company (or the Board of Directors, if shareholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated, or (ii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company, or (iii) the date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) and the shareholders
of the other constituent corporation (or its board of directors if shareholder
action is not required) have approved a definitive agreement to merge or
consolidate the Company with or into such other corporation, other than, in
either case, a merger or consolidation of the Company in which holders of shares
of the Company Stock immediately prior to the merger or consolidation will have
at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in the same
proportion as such holders' ownership of Company Stock of the Company
immediately before the merger or consolidation, or (iv) the date any entity,
person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Securities
-9-
<PAGE>
Exchange Act of 1934, as amended, (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company) shall
have become the beneficial owner of, or shall have obtained voting control over,
securities of the Company having at least twenty percent (20%) of the combined
voting power of outstanding securities of the Company in the election of
directors, or (v) the first day after the date this Plan is approved by
shareholders of the Company when directors are elected such that a majority of
the members of the Board of Directors shall have been members of the Board of
Directors for less than two years, unless the election or nomination for
election of each new director who was not a director at the beginning of such
two year period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.
11. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an incentive stock option or increase the
maximum number of shares as to which Grants or Awards may be made under the
Plan, or the individual limit for any single Participant, without obtaining
shareholder approval by such vote as is required by the Florida Business
Corporation Act, as amended and, if applicable, the provisions of the Company's
Articles of Incorporation or By-Laws, or, if a greater vote is required in order
to comply with applicable requirements of the Code or Rule 16b-3, by such vote
as is required by the Code or Rule 16b- 3. No amendment to the Plan shall
adversely affect any outstanding Grant or Award, however, without the consent of
the Participant holding such Grant or Award.
(b) TERMINATION OF PLAN. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board of Directors of the Company or unless extended
by the Board with the approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A
termination or amendment of the Plan that occurs after a Grant or Award is made
shall not result in the termination or amendment of the Grant or Award unless
the Participant holding such Grant or Award consents or unless the Committee
acts under Section 18(b). The termination of the Plan shall not impair the power
and authority of the Committee with respect to an outstanding Grant. Whether or
not the Plan has terminated, an outstanding Grant or Award may be terminated or
amended under Section 18(b) or may be amended by agreement of the Company and
the Participant holding such Grant or Award consistent with the terms of the
Plan.
-10-
<PAGE>
12. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Participant or other
person to any claim or right to be given a Grant or Award under this Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any Participant any rights to be retained by or in the employ of the Company.
13. WITHHOLDING OF TAXES
The Company shall have the right to deduct from wages paid to
the employee of the Company, any federal, state or local taxes required by law
to be withheld with respect to Grants or Awards, and the Participant or other
person receiving Company Stock under the Plan shall be required to pay to the
Company the amount of any such taxes which the Company is required to withhold
with respect to such Company Stock.
14. AGREEMENTS WITH PARTICIPANTS
Each Grant made under this Plan shall be evidenced by a Grant
Letter containing such terms and conditions consistent with the terms of the
Plan, as the Committee shall approve.
15. REQUIREMENTS FOR ISSUANCE OF SHARES
No Company Stock shall be issued or transferred upon payment
of any Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Restricted Stock Grant, Stock Option or Award made to any Participant
hereunder on such Participant's undertaking in writing to comply with such
restrictions on his subsequent disposition of such shares of Company Stock as
the Committee shall deem necessary or advisable as a result of any applicable
law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
16. HEADINGS
Section headings are for reference only. In the event of a
conflict between a title and the content of a Section, the content of the
Section shall control.
17. EFFECTIVE DATE OF THE PLAN
Subject to the approval of the Company's shareholders, this
Plan shall be effective as of the date the Plan is adopted by the Board of
Directors of the Company. If the Plan is not approved by the Company's
shareholders within twelve months following such
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<PAGE>
date, all Grants under the plan shall be null and void. No Awards may be made
prior to shareholder approval.
18. MISCELLANEOUS
(a) SUBSTITUTE GRANTS. The Committee may make a Grant to an
employee of another corporation who becomes a Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant granted by such
corporation ("Substituted Stock Incentives"). The terms and conditions of the
substitute Grant may vary from the terms and conditions required by the Plan and
from those of the Substituted Stock Incentives. The Committee shall prescribe
the provisions of the substitute Grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Grants and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by an
governmental or regulatory agency as may be required, including, without
limitation, the filing of a registration statement under the Securities Act of
1933 with respect to shares of Company Stock under the Plan. The Plan is
intended to enable transactions under the Plan with respect to directors and
officers (within the meaning of Section 16(a) under the Securities Exchange Act
of 1934, as amended) to satisfy the conditions of Rule 16b-3; to the extent that
any provision of the Plan would cause a conflict with such conditions or would
cause the administration of the Plan as provided in Section 1 to fail to satisfy
the conditions of Rule 16b-3, such provision shall be deemed null and void to
the extent permitted by applicable law. Notwithstanding the foregoing, the
provision in Grant Letters for Family Transfers pursuant to Section 9 is
expressly permitted, even though Stock Options evidenced by such Grant Letters
may not be deemed to satisfy the conditions of Rule 16b-3 as a result of such
provision. The Committee may revoke any Grant if it is contrary to applicable
law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Participants. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
(c) OWNERSHIP OF STOCK. A Participant shall have no rights as
a shareholder with respect to any shares of Company Stock covered by a Grant or
Award until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company, except as may be
determined pursuant to Section 7(e).
AMENDED: May 12, 1998
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Quipp, Inc., Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 and is qualified in its entirety by reference to such
Form 10-Q.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 941,427 941,427
<SECURITIES> 14,960,756 14,960,756
<RECEIVABLES> 3,002,129 3,002,129
<ALLOWANCES> 691,975 691,975
<INVENTORY> 3,209,701 3,209,701
<CURRENT-ASSETS> 24,058,952 24,058,952
<PP&E> 3,879,992 3,879,992
<DEPRECIATION> 2,070,410 2,070,410
<TOTAL-ASSETS> 26,422,854 26,422,854
<CURRENT-LIABILITIES> 5,064,113 5,064,113
<BONDS> 1,050,000 1,050,000
0 0
0 0
<COMMON> 16,370 16,370
<OTHER-SE> 20,292,371 20,292,371
<TOTAL-LIABILITY-AND-EQUITY> 26,422,854 26,422,854
<SALES> 7,043,107 12,834,722
<TOTAL-REVENUES> 7,043,107 12,834,722
<CGS> 4,272,763 7,931,167
<TOTAL-COSTS> 6,017,844 10,969,408
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,364 22,145
<INCOME-PRETAX> 1,179,164 2,136,133
<INCOME-TAX> 403,036 736,113
<INCOME-CONTINUING> 776,128 1,400,020
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 776,128 1,400,020
<EPS-PRIMARY> 0.48 0.87
<EPS-DILUTED> 0.46 0.82
</TABLE>
