<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
Commission File Number 0-22190
ELTRAX SYSTEMS, INC.
(Name of issuer as specified in its charter)
MINNESOTA 41-1484525
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
2000 TOWN CENTER
SUITE 690
SOUTHFIELD, MI 48075
(Address of principal executive offices)
(248) 358-1699
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 .
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and no disclosure will be contained,
to the best of 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 ]
As of MARCH 18, 1999, 13,039,938 shares of Common Stock of the
registrant were outstanding, and the aggregate market value of the Common
Stock of the registrant as of that date (based upon the last reported sale
price of the Common Stock reported on that date by the NASDAQ Small Cap
Market), excluding outstanding shares beneficially owned by directors and
officers, was $44,744,409.
DOCUMENTS INCORPORATED BY REFERENCE
None
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This Form 10-K/A is being filed solely to report the information required
under Items 10, 11, 12, and 13. Item 4a from the Company's original Annual
Report on Form 10-K is hereby deleted as such information is included in Item
10 of this Form 10-K/A. This information was originally to be incorporated by
reference from the Company's Proxy Statement for its Annual Meeting of
Shareholders scheduled to be held on May 25, 1999. The Company has
rescheduled the meeting for June 1999 and is accordingly providing the
required information herein.
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The executive officers and directors of the Company, their ages and the
offices held, as of April 12, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------- --- --------
<S> <C> <C>
DIRECTORS:
William P. O'Reilly 53 Chairman of the Board
James C. Barnard 65 Private Investor
Patrick J. Dirk 59 Chief Executive Officer of Troy Group, Inc.
Don G. Hallacy 43 President and Chief Executive Officer of the
Company
Clunet R. Lewis 52 Secretary and General Counsel
Stephen E. Raville 51 Chairman of Pointe Communications, Inc.
Penelope A. Sellers 48 President of the Company's Encore Subsidiary
Mack V. Traynor, III 41 Former President and Chief Operating Officer of the
Company
EXECUTIVE OFFICERS (EXCLUDING DIRECTORS):
Edward C. Barrett 50 Executive Vice President
Terri S. Allen 44 Vice President-Sales and Marketing
Nicholas J. Pyett 39 Chief Financial Officer and Treasurer
</TABLE>
Information regarding the business experience of the executive officers and
directors is set forth below.
WILLIAM P. O'REILLY has been Chief Executive Officer of the Company
since January 1997, Chairman of the Board of Directors since August 1995 and
a director of the Company since July 1995. For the past 15 years, Mr.
O'Reilly has been a private investor and entrepreneur who has managed several
different successful business ventures. In 1989, Mr. O'Reilly formed a group
of investors to acquire Military Communications Center, Inc., where he served
as Chairman of the Board and Chief Executive Officer from 1989 to 1994. In
1986, Mr. O'Reilly founded Digital Signal, Inc., a provider of fiber optic
capacity to long distance carriers in the telecommunications industry, where
he served as Chief Executive Officer from 1986 to 1989. In 1981, Mr. O'Reilly
founded Lexitel Corporation, a long distance carrier (which was subsequently
acquired by ALC Communications, Inc.), where he served as Chairman of the
Board and Chief Executive Officer from 1980 to 1984. Mr. O'Reilly is also
currently a director of Pointe
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Communications, Inc., a builder and operator of international communication
networks which provides voice, video and data services, and several private
companies.
JAMES C. BARNARD has served as a director of the Company since 1997.
Prior to his retirement, Mr. Barnard served as Chairman and Chief Executive
Officer of Access America Telemanagement, Inc., a telecommunications
management company which Mr. Barnard founded in July 1989. Prior to forming
Access America Telemanagement, Inc., Mr. Barnard served as Chairman and Chief
Executive Officer of LDX NET, INC., a telecommunications company which merged
with Wiltel in July 1987 to form the Williams Telecommunications Group, Inc.
From July 1987 to June 1989, Mr. Barnard served as Vice Chairman of the Board
of Directors of Williams Telecommunications Group, Inc.
PATRICK J. DIRK has served as a director of the Company since its
formation and served as Chairman of the Board from February 1995 until August
1995. Mr. Dirk served as President and Chief Executive Officer of the Company
from its formation until September 1985 and as Chairman of the Board from
formation until May 1989. Mr. Dirk is Chairman of the Board and Chief
Executive Officer of Troy Group, Inc., an enterprise output solutions
provider. From 1973 until 1982, Mr. Dirk was employed in various executive
positions and as a Board member with Kroy Inc., a marketer of automated
lettering systems.
DON G. HALLACY was named President, CEO and a director of the Company in
April 1999. Prior to joining the Company, Mr. Hallacy was with Sprint for 7
years. At Sprint he held several key senior level positions including Vice
President - Data Networks Operations, Vice President - Strategic Growth
Initiatives and Vice President - Technology Integration. As Vice President of
Data Networks Operations, he oversaw an organization of 1500 people and
managed all aspects of this high growth area, including network monitoring,
service delivery, service assurance and system development. In the role of
Vice President - Strategic Growth Initiatives, Mr. Hallacy played a key role
in the setting and implementation of Sprint's broadband and application
services strategy. As Vice President - Technology Integration, he oversaw
management and development of products for Sprint's business and government
markets. Mr. Hallacy has also served on the Board of Directors for Iridium
North America. Prior to joining Sprint, Mr. Hallacy had an extensive
background in systems development and strategy with McKinsey & Co. and
Andersen Consulting.
CLUNET R. LEWIS has served as a director of the Company since August
1995. From April 1997 he served as General Counsel and Secretary of the
Company. From September 1996 to March 1997, Mr. Lewis served as Acting Chief
Financial Officer of the Company. Mr. Lewis was a member of the law firm of
Jaffe, Raitt, Heuer & Weiss, P.C. for 20 years, ending in 1993. From 1989 to
1994, Mr. Lewis acted as Secretary, General Counsel and director of Military
Communications Center, Inc. Since 1993, Mr. Lewis has also served on the
Board of Directors and the audit committee of Sun Communities, Inc., a New
York Stock Exchange real estate investment trust.
STEPHEN E. RAVILLE has been a director of the Company since October
1997. Since 1996, Mr. Raville has been Chairman of the Board of Pointe
Communications, Inc. Mr. Raville is also President and controlling
shareholder of First Southeastern Corp., a private investment company he
formed in 1992. In 1983, Mr. Raville founded TA Communications, a
long-distance telephone company, and served as its President. In 1985, in
conjunction with a merger between TA Communications and Advanced
Telecommunications ("ATC"), he became Chairman and Chief Executive Officer of
ATC until the merger of ATC into WorldCom in late 1992. He currently serves
on the Board of Directors of Pointe Communications, Inc.
PENELOPE A. SELLERS has been a director of the Company since September,
1998 following the acquisition of Encore Systems, Inc. by the Company. Ms.
Sellers has been President of Encore Systems, Inc. for 20 years.
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MACK V. TRAYNOR, III has been a director of the Company since August
1995. Since late 1998 Mr. Traynor has been President, CEO and a Director of
Neo Networks, a manufacturer of data communications equipment. Until
September 1997, Mr. Traynor served as Chief Operating Officer of the Company.
From August 1995 to January 1997, Mr. Traynor served as Chief Executive
Officer of the Company, and from September 1995 to May 1996, Mr. Traynor was
the Company's Chief Financial Officer. From June 1988 to July 1995, Mr.
Traynor was the President and Chief Operating Officer of Military
Communications Center, Inc., a company which provided telecommunications
services to US military personnel and which was acquired by LDDS
Communications in October 1994. From July 1980 to May 1988, Mr. Traynor was
employed by US West, most recently as President of the US West Enterprises
Technologies division, which was responsible for designing, developing and
marketing new products for the telecommunications industry. Mr. Traynor is
also a director of Telident, Inc. and HEI, Inc.
EDWARD C. BARRETT joined the Company in August 1997 with the acquisition
of Hi-Tech Connections, Inc. where he served as President for over thirteen
years. In October, 1997, Mr. Barrett assumed the responsibilities of Chief
Operating Officer and was elected an Executive Vice President in February
1998. Since November 1998, Mr. Barrett has served as a director of First
Leesport Bancorp.
TERRI S. ALLEN joined the Company in July 1998 as the Company's Vice
President of Sales and Marketing. Ms. Allen came from Xerox Corporation where
she was employed for approximately 20 years in a variety of positions
including Vice President-Graphic Arts Marketing, Vice President/General
Manager-Xerox of the Carolinas and National Operations Manager-Contracting
Services.
NICHOLAS J. PYETT joined the Company in April 1997 as Chief Financial
Officer and Treasurer. Prior to joining the Company, Mr. Pyett had over 10
years experience in private industry, most recently as the Chief Financial
Officer of Arcadia Services, Inc., a national healthcare service company. Mr.
Pyett also has extensive public accounting experience with Arthur Andersen &
Company.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and all persons who
beneficially own more than 10% of the outstanding shares of the Company's
Common Stock ("Reporting Persons") to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of the Company's Common Stock and other equity securities of the
Company. Reporting persons are also required to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely upon a review of the copies of such forms furnished to the
Company for the year ended December 31, 1998, and the information provided to
the Company by Reporting Persons of the Company, no Reporting Person failed
to file the forms required by Section 16 of the Exchange Act on a timely
basis.
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ITEM 11. DIRECTOR AND EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
DIRECTORS' FEES. The Company pays non-employee directors $1,500 cash
compensation for each fiscal quarter. Accordingly, during the year ended
December 31, 1998, Messrs. Barnard, Dirk, Traynor and Raville each received
$6,000 cash compensation for service in 1998. Mr. Traynor received
compensation of $6,477 and certain employee benefits as an employee of the
Company. The Company reimburses directors for out-of-pocket expenses incurred
in attending Board or committee meetings.
STOCK OPTIONS. In February 1998, the Board of Directors approved the
grant of an option to purchase 10,000 shares of Common Stock to each
non-employee director. Mr. O'Reilly received options to purchase 75,000
shares of Common Stock in 1998. Mr. Lewis received options to purchase 50,000
shares of Common Stock in 1998.
The Compensation Committee or the Board of Directors will likely grant
options to the Company's current and any future non-employee directors from
time to time.
5
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years, as well as the nine-month transition
period ended December 31, 1996, awarded to or earned by the Chief Executive
Officer of the Company as well as for other executive officers of the Company
and its subsidiaries whose salary and bonus exceeded $100,000 during the year
ended December 31, 1998 (the "Named Executive Officers"). No other executive
officer of the Company received or earned compensation in the form of salary
and bonus which exceeded $100,000 during the year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (S) BONUS ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
William P. O'Reilly (1)
CHIEF EXECUTIVE OFFICER 1998 $103,846 $- 75,000
1997 - 150,000 $ -
1996(5) 72,692 - - 25,000
1996(6) - - - -
- -
Clunet R. Lewis (2)
GENERAL COUNSEL AND 1998 $103,846 $- 50,000 $ -
SECRETARY 1997 72,692 - 75,000 25,000
1996(5) - - - -
1996(6) - - - -
Edward C. Barrett (3)
EXECUTIVE VICE PRESIDENT 1998 $136,850 $- - $ -
AND CHIEF OPERATING OFFICER 1997 38,760 - 46,667 -
1996(5) - - - -
1996(6) - - - -
Nicholas J. Pyett (4)
CHIEF FINANCIAL OFFICER 1998 $135,000 $- 10,000 $ -
AND TREASURER 1997 94,134 - 100,000 -
1996(5) - - - -
1996(6) - - - -
</TABLE>
(1) William O'Reilly became the Chief Executive Officer in January 1997. Until
April 1, 1997, when he became an employee, Mr. O'Reilly was a consultant to
the Company. Mr. O'Reilly became an employee on April 1, 1997. The Company
paid $25,000 to Mr. O'Reilly in 1997 as a consultant. Such amount is listed
under "All Other Compensation". In April 1999, Mr. O'Reilly again entered
into a consulting contract with the Company.
(2) Clunet R. Lewis became the Secretary and General Counsel in January 1997.
Until April 1, 1997, when he became an employee, Mr. Lewis was a consultant
to the Company. Mr. Lewis became an employee on April 1, 1997. The Company
paid $25,000 to Mr. Lewis in 1997 as a consultant. Such amount is listed
under "All Other Compensation". In April 1999, Mr. Lewis again entered into
a consulting contract with the Company.
(3) Edward C. Barrett became an employee on August 15, 1997 with the
acquisition of Hi-Tech Connections, Inc. and was elected Executive Vice
President in 1997.
(4) Nicholas J. Pyett joined the Company as Chief Financial Officer and
Treasurer on April 1, 1997.
(5) Represents the nine-month period ended December 31, 1996. In October 1996,
the Company changed its fiscal year end from March 31 to December 31,
effective December 31, 1996.
(6) Represents the twelve-month period ended March 31, 1996.
6
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AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
DECEMBER 31, 1998 AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS/SAR'S IN-THE-MONEY OPTIONS/SAR'S
SHARES AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED ON VALUE ---------------------------------------------------------------
NAME EXERCISE IN 1998 RECEIVED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
William P. O'Reilly -- N/A 235,000 -- $15,977 $-
Clunet R. Lewis -- N/A 135,000 -- 15,977 --
Edward C. Barrett -- N/A 43,500 3,167 -- --
Nicholas J. Pyett -- N/A 60,000 50,000 -- --
</TABLE>
(1) Value of the Company's unexercised, in-the-money options based on the
average of the high and low price of the Company's Common Stock as of
December 31, 1998 which was $4.53.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS TABLE
POTENTIAL REALIZABLE
VALUE AT ASSUMED
SHARES ANNUAL RATES OF STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION
OPTIONS/SARS OPTIONS/SARS EXERCISE FOR OPTION TERM
GRANTED IN GRANTED TO PRICE EXPIRATION
NAME 1998 EMPLOYEES IN 1998 ($/SH.) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
William P. O'Reilly 75,000 9.0% $ 5.13 2/09/08 $241,731 612,595
Clunet R. Lewis 50,000 6.0 5.13 2/09/08 161,154 408,397
Edward C. Barrett -- -- N/A N/A -- --
Nicholas J. Pyett 10,000 1.2 5.13 2/09/08 32,231 81,679
</TABLE>
EMPLOYMENT AGREEMENTS
BARRETT EMPLOYMENT AGREEMENT. Edward C. Barrett, an executive officer of
the Company entered into an Employment and Non-Competition Agreement with the
Company on August 15, 1997 (the "Barrett Employment Agreement"). The Barrett
Employment Agreement provides for a minimum annual base salary for Mr. Barrett
of $100,000. The Barrett Employment Agreement contains a two-year
non-competition clause in the event of termination of Mr. Barrett's employment.
The Barrett Employment Agreement will terminate on July 31, 2000, unless
terminated earlier. Commencing August 1, 2000 and on each August 1st thereafter,
the term of the Barrett Employment Agreement will be automatically extended for
one (1) additional year unless on or before the July 1 immediately preceding any
such renewal period either party gives written notice to the other of the
cessation of further extensions, in which case no further automatic extensions
will occur. The Barrett Employment Agreement may be terminated (i) by Eltrax
immediately for cause; (ii) by either party upon 75 days' written notice for
whatever reason; and (iii) automatically in the event of the death or disability
of Mr. Barrett. In the event that Eltrax terminates the Barrett Employment
Agreement without cause, Mr. Barrett will be entitled to continue to be paid his
base salary through the termination date or 75 days, whichever is greater.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1999, unless
otherwise noted, by (a) each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) each director and
nominee for director, (c) each executive officer named in the Summary
Compensation Table below under the heading "Executive Compensation and Other
Benefits -- Summary of Cash and Certain Other Compensation," and (d) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)(2)
-------------------------
PERCENT
NAME AMOUNT OF CLASS
- ---- ------ --------
<S> <C> <C>
William P. O'Reilly 1,509,416 (3) 6.4%
2000 Town Center, Ste. 690
Southfield, Michigan 48075
Edward C. Barrett 558,623 (4) 2.4%
1037C MacArthur Rd
Reading, PA 19605
Mack V. Traynor, III 500,000 (5) 2.1%
19880 Sweetwater Curve
Shorewood, MN 55331
Clunet R. Lewis 437,053 (6) 1.8%
2000 Town Center, Ste. 690
Southfield, Michigan 48075
Penelope A. Sellers 418,500 1.8%
900 Circle 75 Parkway, Ste 1700
Atlanta, GA 30339
Patrick J. Dirk 367,742 (7) 1.6%
Troy Group, Inc.
2331 South Pullman Street
Santa Ana, California 92705
Stephen E. Raville 135,000 (8) *%
2472 Brookhaven Place
Atlanta, Georgia 30319
Nicholas J. Pyett 110,000 (9) *%
2000 Town Center, Ste. 690
Southfield, MI 48075
Don G. Hallacy 110,000 (10) *%
900 Circle 75 Parkway, Ste. 1700
Atlanta, GA 30339
James C. Barnard 85,000 (11) *%
14308 Spyglass Ridge
Chesterfield, Missouri 63017
All current directors and executive officers as a group 4,231,334 (12) 17.8%
</TABLE>
* LESS THAN 1% OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK.
8
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(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days are treated
as outstanding only when determining the amount and percent owned by such
person or group.
(2) Unless otherwise noted, all of the shares shown are held by individuals or
entities possessing sole voting and investment power with respect to such
shares.
(3) Includes options to purchase 235,500 shares of Common Stock, all
exercisable within 60 days.
(4) Includes 100,000 shares owned by Mr. Barrett's wife as to which he may be
deemed to share voting and investment power, 15,000 shares owned by Mr.
Barrett as custodian for his minor children as which he may be deemed to
have sole voting and investment power and options to purchase 43,500
shares of Common Stock, all exercisable within 60 days.
(5) Includes options to purchase 278,447 shares of Common Stock, all
exercisable within 60 days.
(6) Includes 50,000 shares of Common Stock held in trust for Mr. Lewis's
children as to which he may be deemed to have voting and investment
power, and options to purchase 135,500 shares of Common Stock, all
exercisable within 60 days.
(7) Includes 11,567 shares of Common Stock owned by Troy Systems, Inc. of which
Mr. Dirk is the Chairman of the Board, as to which he may be deemed to have
sole voting and investment power, 280,675 shares owned jointly with Mr.
Dirk's wife, as to which he may be deemed to share voting and investment
power and options to purchase 75,500 shares of Common Stock, all
exercisable within 60 days.
(8) Includes options to purchase 35,000 shares of Common Stock, all exercisable
within 60 days.
(9) Includes options to purchase 110,000 shares of Common Stock, all
exercisable within 60 days.
(10) Includes options to purchase 100,000 shares of Common Stock, all
exercisable within 60 days and 10,000 shares owned by Mr. Hallacy's
wife's trust as to which he may be deemed to share voting and investment
power.
(11) Includes options to purchase 35,000 shares of Common Stock, all exercisable
within 60 days.
(12) Includes (i) an aggregate of 417,242 shares of Common Stock held by
controlled corporations, jointly with spouses or by spouses, as to which
members of the group may be deemed to have sole or shared voting and
investment power, and (ii) options to purchase an aggregate of 1,048,447
shares of Common Stock exercisable within 60 days held by members of the
group.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
O'REILLY CONSULTING AGREEMENT.
Effective April 1999, Mr. O'Reilly entered into a consulting agreement
with the Company. The contract provides for an initial consulting fee of
$225,000, and a consulting fee of $250,000 for years thereafter. The
agreement is for two years ending March 31, 2001, and renews for successive
one-year periods if not terminated earlier by the Company or Mr. O'Reilly.
The agreement contains a non-competition clause that expires two years after
the termination of the agreement.
LEWIS CONSULTING AGREEMENT.
Effective April 1999, Mr. Lewis entered into a consulting agreement with
the Company. The contract provides for an initial consulting fee of $215,000,
and a consulting fee of $240,000 for years thereafter. The agreement is for
two years ending March 31, 2001, and renews for for successive one-year
periods if not terminated earlier by the Company or Mr. Lewis. The agreement
contains a non-competition clause that expires two years after the
termination of the agreement.
HI-TECH CONNECTIONS, INC. ACQUISITION. On August 1, 1997, the Company
acquired its Hi-Tech Connections subsidiary from its owners, including Edward
C. Barrett, for approximately 919,999 shares of Common Stock (the "Hi-Tech
Acquisition Shares"). All of the Hi-Tech Acquisition Shares are restricted
stock, and have certain piggyback registration rights. All expenses of such
registration will be borne by the Company.
In addition to the foregoing, Eltrax entered into an Employment and
Non-Competition Agreement with Edward C. Barrett. See "Employment Agreements
- -Barrett Employment Agreement."
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf on April 30, 1999 by
the undersigned, thereunto duly authorized.
ELTRAX SYSTEMS, INC.
By: /s/ William P. O'Reilly
-------------------------
William P. O'Reilly
Chairman of the Board
