UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year ended October 31, 1998
----------------
or
[ ] SECURITIES EXCHANGE ACT OF 1934 TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
For the transition period from __________to _____________
Commission File No. 0-22920
NUMEREX CORP.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 11-2948749
- ---------------------------------------- -----------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1600 Parkwood Circle
Suite 200
Atlanta, Georgia 30339-2119
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (770) 693-5950
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock, no par value 10,366,092
- ---------------------------------------- -----------------------------------
(Title of Class) (Number of Shares Outstanding
as of January 15, 1999)
Indicate by check mark whether the Registrant (i) 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 (ii) 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. [ ]
<PAGE>
EXPLANATORY NOTE
The purpose of this Amendment No. 1 is to file Part III of the Annual
Report on Form 10-K, pursuant to Instruction G(3) of such form. In that the
Company does not anticipate filing definitive proxy material within 120 days of
the end of its fiscal year, it is, by this amendment, filing information
responsive to Part III of the Form 10-K.
(i)
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to Directors
<TABLE>
<CAPTION>
Name Age Position Director Since
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George Benson(l)(2)(3) 64 Director 1995
Matthew J. Flanigan(l)(2)(3) 53 Director 1994
Kenneth F. Manser 65 Director; Managing 1994
Director of the
Company's subsidiary,
Versus Technology
Limited
Gordon T. Ray 70 Chairman of the Board 1995
of Directors, President and
Chief Executive Officer of the
Company
Andrew J. Ryan(l)(2) 40 Director 1996
Frederick C. Shay(4) 54 Director 1994
</TABLE>
- --------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Employee Stock Option Plan Committee
(4) Mr. Shay presently serves as a director of the Company, but will not be
standing for re-election.
George Benson has served as a Director of the Company since June 1995. Mr.
Benson has served as Chairman and Chief Executive Officer of Wisconsin Wireless
Communications Corporation and Airadigm Communications since September 1992 and
Senior Vice President of Mitel, Inc., a public telecommunications company, from
September 1990 until September 1992. From 1979 until 1990 Mr. Benson served as
Founder, President and Chief Executive Officer of Telecom North, Inc.
Matthew J. Flanigan has served as a Director of the Company since July
1994. Mr. Flanigan has been the President of the Telecommunication Industry
Association, a trade association for telecommunication companies, since April
1994. From March 1987 to January 1994, he served as President of Cognitronics
Corporation, a telecommunications manufacturer.
Kenneth F. Manser has been the Managing Director of the Company's
subsidiary, Versus Technology Limited, since December 1990 and Chairman of the
Board of the Company from February 1994 to July 1998, at which time he
relinquished the position of Chairman of the Board. Mr. Manser continues to
serve as a Director. Prior thereto, since 1987, he was sales manager of the
Telecommunications Group of Base Ten Systems, Inc., a defense electronic systems
manufacturer.
1
<PAGE>
Gordon T. Ray has served as Chairman of the Board of Directors, President
and Chief Executive Officer of the Company since July 1998. He has served as a
Director of the Company since October 1995. Mr. Ray also took on the additional
responsibilities of Chairman and President of Cellemetry LLC, a majority owned
subsidiary of the Company, in October 1998. Mr. Ray has served as President of
Global Information, Ltd., a technology marketing consulting company, from
September 1993 to present and for more than five years prior thereto he served
as Executive Vice President of NEC America, an equipment manufacturing company.
Mr. Ray is also a director of the Telecommunication Industry Association and a
member of the board of governors of the Electronic Industries Association, trade
associations for telecommunications and electronics companies.
Andrew J. Ryan has served as a director of the Company since May 1996. Mr.
Ryan has practiced law with the law firm of Salisbury & Ryan from August 1994 to
present, from March 1993 to August 1994 with the law firm of Pepper Hamilton &
Scheetz and from December 1987 to March 1993 with the law firm of Lord Day &
Lord. Mr. Ryan serves as Gwynedd's designee on the Board. See "Arrangements with
Respect to the Board of Directors" and "Certain Relationships and Related
Transactions."
Frederick C. Shay has served as a Director of the Company from February
1994, but will not be standing for re-election. Mr. Shay served as President of
Cellemetry LLC, a majority owned subsidiary of the Company from May 1998 to
October 1998. Prior to that Mr. Shay served as the Company's Chief Technology
Officer, from October 1997 to May 1998. From June 1996 until October 1997 Mr.
Shay served as President of the Company's subsidiary, DCX Systems, Inc. Mr. Shay
served as acting President and acting Chief Executive Officer of the Company
from June 1995 to June 1996. From November 1995 through June 1995, Mr. Shay
served as Vice President of the Company.
Arrangements with Respect to the Board of Directors
The Company has entered into an agreement providing Gwynedd the right to
designate one director to the Board. Additionally, in the event the Board
consists of more than seven directors, Gwynedd, at its option, may designate one
additional director. Any designee's appointment will be subject to the exercise
by the Board of Directors of its fiduciary duties and the approval of the
Company's shareholders upon the expiration of any appointed term at the next
annual meeting of shareholders. Gwynedd's right to designate directors will
cease at such time as Gwynedd's equity interest in the Company drops below ten
percent of the outstanding shares of the Company's Common Stock. Mr. Ryan
currently serves as Gwynedd's designee.
Set forth below is certain information concerning the executive officers
and key employees of the Company who are not also directors.
Name Age Position
---- --- --------
Charles L. McNew .......... 46 Vice President, Chief Operating Officer and
Chief Financial Officer
Charles L. McNew has been Vice President and Chief Financial Officer of the
Company since July 1994 and has been Chief Operating Officer since July 1998.
Mr. McNew served as Vice President-Finance, Chief Financial Officer and
Treasurer of InterDigital Communications Corporation, a company engaged in the
development of advanced digital wireless telecommunications systems, from June
1993 to
2
<PAGE>
July 1994. From March 1990 to May 1993, Mr. McNew served as the Chief Financial
Officer of International Computaprint Corporation, a company engaged in
electronic publishing. From 1982 to 1990, Mr. McNew held various positions with
the Digilog Division of CXR Telecom Corporation, or its predecessor, most
recently as Vice President and Chief Financial Officer.
Item 11. Executive Compensation.
SUMMARY C0MPENSATION TABLE
The following table sets forth all cash compensation paid to the Chief
Executive Officer of the Company, and the four most highly compensated executive
officers of the Company and its subsidiaries whose salary and bonus exceeded
$100,000 for services rendered in all capacities to the Company and its
subsidiaries, during the Company's fiscal years ended October 31, 1998, 1997 and
1996, except for the Chief Executive Officer.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------------- ---------------------
Other Annual Securities Underlying All Other
Name and Principal Position Fiscal Year Salary Bonus Compensation Options Compensation
- --------------------------- ----------- --------- --------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gordon T. Ray, Chairman, 1998(1) $ 76,364 -- -- 104,000 $10,250
President and Chief 1997 -- -- -- 2,500 9,500
Executive Officer 1996 -- -- -- 2,500 7,125
John J. Reis, 1998(2) $206,250 -- $102,141 75,000 $11,706
President and Chief 1997 256,250 $66,983 -- 100,000 $6,431
Executive Officer 1996 93,750 20,833 -- 100,000 --
Kenneth F. Manser, 1998(3) $157,786 -- -- -- $29,979(4)
Chairman of the Board of 1997 156,218 $23,487 -- -- 27,988(4)
the Company and Managing 1996 147,307 -- -- -- 22,693(4)
Director of Versus Technology
Limited
Charles L. McNew, Vice 1998(5) $160,208 -- -- 50,000 $5,000
President, Chief 1997 133,500 $32,827 -- 25,000 4,713
Operating Officer and 1996 123,500 -- -- 25,000 3,708
Chief Financial Officer
Frederick C. Shay, 1998(6) $150,000 -- -- -- $4,500
Director 1997 145,000 -- -- 10,000 4,200
1996 161,667 -- -- 40,000 4,445
</TABLE>
- -----------------------
(1) Mr. Ray became Chairman of the Board of Directors, President and Chief
Executive Officer of the Company in July 1998. Amounts under caption "All
Other Compensation" represent fees as an outside director prior to July
1998.
(2) Mr. Reis became President and Chief Executive Officer of the Company in
June 1996 at a base salary of $225,000, which was increased to $250,000 on
January 1, 1997. His base salary was increased to $275,000, effective June
1, 1997. Mr. Reis' employment with the Company terminated in July 1998, at
which time he ceased to serve as President, Chief Executive Officer and as
a Director of the Company. See "Employment and Related Agreements."
3
<PAGE>
(3) Mr. Manser's salary, bonus and other compensation for fiscal 1996, 1997 and
1998 were (pound)10,000, (pound)14,287 and $95,000; (pound)-0-,
(pound)l8,050 and $95,000; and (pound)14,283, (pound)18,050 and $95,000,
respectively, which have been converted into dollars at the exchange rate
of $1.5506 for fiscal 1996, $1.6444 for fiscal 1997 and $1.6609 for 1998,
respectively, per (pound)100 based on the average of the noon buying rates
in New York City on the last day of each month during fiscal 1996, 1997 and
1998, respectively, for cable transfers as certified for customs purposes
by the Federal Reserve Bank of New York.
(4) Represents private health insurance premium payments and amounts
contributed to Mr. Manser's account under a Limited Pension and Death
Benefits Plan. See "Limited Pension and Death Benefits Plan."
(5) Mr. McNew became Vice President and Chief Financial Officer in July 1994
and in July 1998 assumed the additional position of Chief Operating Officer
of the Company.
(6) Mr. Shay served as a Director of the Company from February 1994, but will
not be standing for re-election. Mr. Shay served as President of Cellemetry
LLC, a majority owned subsidiary of the Company from May 1998 to October
1998. Prior to that Mr. Shay served as the Company's Chief Technology
Officer, from October 1997 to May 1998. From June 1996 until October 1997
Mr. Shay served as President of the Company's subsidiary, DCX Systems, Inc.
Mr. Shay served as acting President and acting Chief Executive Officer of
the Company from June 1995 to June 1996. From November 1995 through June
1995, Mr. Shay served as Vice President of the Company. Accordingly, Mr.
Shay's annual compensation includes amounts paid under various capacities.
Employment and Related Agreements
In June 1996, the Company entered into a one year employment agreement,
which was extended by mutual agreement, with Mr. Reis pursuant to which he
served as President, Chief Executive Officer and a Director of the Company. For
all services rendered Mr. Reis received an annual salary of $225,000 (increased
to $250,000 effective January 1, 1997 and $275,000 effective June 1, 1997), plus
an initial bonus equal to $50,000, $25,000 of which was pro-rated over the first
six months of his employment, while the remaining $25,000 was awarded by the
Board of Directors. Mr. Reis was also reimbursed for business travel and
other business expenses. Additionally, Mr. Reis received options to purchase, in
the aggregate, 125,000 shares of Numerex Common Stock, at exercise prices equal
to the fair market value of the Company Common Stock in the dates of grant. The
options are exercisable as follows: (i) 50,000, at such time as the closing
price of the Company's Common Stock equals or exceeds $10.00 per share for a
period of 60 consecutive days; (ii) 25,000, at such time as the closing price of
the Company's Common Stock equals or exceeds $12.50 per share for a period of 60
consecutive days; and (iii) 50,000, at such time as the closing price of the
Company's Common Stock equals or exceeds $15.00 per share for a period of 60
consecutive days. The exercisability of the options was modified to provide that
they may be exercised at the earlier of (i) the closing price of the Company's
Common Stock equaling or exceeding the price levels for the trading periods set
forth above, or (ii) five years from the date of grant. Mr. Reis was also
entitled to benefits under Company employee benefit plans and programs in which
other executives of the Company are eligible to participate. Mr. Reis was
entitled to four weeks of annual vacation. The Company was permitted to
terminate this agreement "for cause" (as defined therein) in which case Mr. Reis
would have had no right to receive compensation or other benefits for any period
after such termination. In the event of termination for "good reason" (as
defined therein), which includes a merger, consolidation or reorganization, sale
of all or substantially all of the assets or any similar event, a "change in
control" (as defined therein), or for termination without cause, Mr. Reis would
receive his base salary plus bonus for the most recently completed year of
employment, payment of which would be made at the time provided for in the
agreement as though employment had not been terminated. This payment would be in
lieu of the base annual salary and bonus compensation he would otherwise
receive. The agreement also required certain payments by the Company in the
event of disability or partial disability. The agreement also contained
non-competition, non-disclosure and confidentiality provisions, certain of which
extend beyond the term of the agreement. In July 1998 the Company entered into a
consulting agreement (the "Consulting Agreement") with Mr. Reis. Pursuant to the
Consulting Agreement, for a period of 60 days, Mr. Reis agreed to
4
<PAGE>
provide certain services to the Company, and in return therefor, Mr. Reis
received compensation, based upon his then current annual compensation. In
addition, Mr. Reis received certain other benefits, including medical benefits
for fourteen months, reimbursement for automobile expenses and reimbursement for
out-placement expenses, not to exceed $25,000. In addition, the Company agreed
to use its best efforts to protect the value of stock options granted to Mr.
Reis, provided that such protections did not have an adverse effect on the
Company or Mr. Reis, and in this regard the Company and Mr. Reis agreed to
convert his incentive stock options to non-qualified stock options and to
provide that the options would not terminate 90 days after termination of Mr.
Reis' employment. All other terms of the options remain unchanged. In addition,
the Company acknowledged its obligations under Mr. Reis' employment agreement
referred to above. Accordingly, Mr. Reis is also entitled to receive payment his
base salary plus bonus for the most recently completed year of employment,
payment of which will be made over a twelve month period.
In November 1993, the Company entered into an employment agreement with
Kenneth F. Manser, pursuant to which Mr. Manser has served as Managing Director
of Versus Technology Limited for two years, which ended in November 1995,
subject to automatic one year extensions unless notice of termination is given
by either party at least 90 days prior to the end of the then current term. The
employment agreement terminated in February 1999. Mr. Manser's salary is
(pound)95,000 per year, or such higher rate as may from time to time be agreed.
In the event of Mr. Manser's death during the term of the agreement, his wife
will be entitled to receive a lump-sum payment equal to six months salary at his
then current rate. Versus Technology Limited provides Mr. Manser with an
automobile, which may be used for business and private use, private health
insurance coverage for Mr. Manser and his wife, and pension and life insurance
arrangements as shall from time to time be agreed upon. The agreement may be
terminated due to Mr. Manser's long-term disability, serious breach of the
agreement, grossly negligent conduct or personal bankruptcy. Mr. Manser is
prohibited from disclosing or using confidential information during and after
the term of his agreement and from soliciting business from the Company's
customers for a period of one year after the termination of his employment.
In May 1996, Numerex entered into severance agreements with Messrs. Shay
and McNew, which terminate at the earlier of (i) death or permanent disability,
(ii) termination by the Company for cause, (iii) mutual agreement, (iv)
termination by resignation or otherwise, or (v) one year from the date of the
agreement, and year to year thereafter unless appropriate notice is given. The
agreements generally provide that if employment is terminated during the term by
reason of a merger or similar transaction, a "change in control" (as defined
therein), change to a less responsible position, termination of employee (except
for cause), employee shall receive, for a period of six months following
termination 50% of his annual base salary. In addition, the employee shall be
entitled to receive, for a period of six months following the termination date,
reimbursement of all reasonable expenses incurred in connection with his search
for new employment, not to exceed 20% of base annual salary, or, at employee's
option, a lump sum payment of $10,000. For a period of one year following the
termination date employee shall be entitled to all Company non-discriminatory
benefits, such as medical care and life insurance benefits. The agreements also
contain certain provisions preventing the employee from disclosing confidential
information and not competing with the Company. The severance agreement with Mr.
McNew terminated by the terms of the employment agreement entered into between
Mr. McNew and the Company referred to hereunder. Payment of severance benefits
to Mr. Shay commenced in January 1999. In addition, the Company agreed to
convert 50,000 of Mr. Shay's incentive stock options to non-qualified stock
options and to provide that the options would not terminate 90 days after
cessation of Mr. Shay's employment. All other terms of the options remain
unchanged.
In July 1998 the Company and Mr. McNew entered into a one-year employment
agreement, which shall continue for additional one-year terms, unless prior
notice of non-extension is given by either party. Mr. McNew agreed to serve as
Vice President, Chief Operating Officer and Chief Financial Officer of the
Company. This Agreement supersedes and cancels the severance agreement between
the Company and Mr. McNew referred to above. Mr. McNew receives an annual salary
of $185,000, or such higher salaries as may be negotiated from time to time by
Numerex and Mr. McNew. Mr. McNew is also entitled to be reimbursed for business
travel and other expenses and is entitled to four weeks of annual vacation. The
Company is permitted to terminate this agreement "for cause" (as defined
therein) in which case Mr. McNew would have no right to receive compensation or
other benefits for any period after such termination. In the event of
termination for "good reason" (as defined therein), which includes a merger,
consolidation or reorganization, sale of all or substantially all the assets or
any similar event, a "change of control" (as defined therein), inability to
promote the best interests of the Company following a
5
<PAGE>
change in the President of the Company, or for termination without cause, Mr.
McNew is entitled to receive his base salary plus bonus for the most recently
completed year of employment, payment of which will be made at the time provided
for in the agreement as though employment had not been terminated. This payment
would be in lieu of the base annual salary and bonus compensation he would
otherwise receive. In addition, Mr. McNew is entitled to receive reimbursement
for out-placement related expenses incurred by him, not to exceed $25,000.
Additionally, all options heretofore granted to Mr. McNew under any of the
Company's stock option plans would be amended to become non-qualified stock
options and such options would be further amended so that they do not expire 90
days after Mr. McNew's termination of employment. The agreement also requires
certain payments by the Company in the event of disability or partial
disability. The agreement also contains non-competition, non-disclosure and
confidentiality provisions, certain of which extend beyond the term of the
agreement.
Stock Option Plans
In May 1994, the shareholders approved the Company's Employee Stock Option
Plan (the "Employee Plan") and the Non-Employee Director Stock Option Plan (the
"Director Plan" and, together with the Employee Plan, the "Plans"). In December
1994, the Plans were amended by the Board of Directors, and approved by the
shareholders in February 1995 to, among other things, permit options under the
Plans to be granted only with respect to Class A Common Stock. In addition, the
Employee Plan was amended to increase the total number of shares for which
options may be granted from 125,000 shares of Common Stock to 447,500 shares of
Common Stock and to limit the maximum number of shares of Common Stock for which
options may be granted under the Employee Plan to any one employee during any
fiscal year of the Company to 100,000 shares. In February 1997, shareholders
approved an amendment to the Employee Plan to increase the total number of
shares under the Employee Plan for which options may be granted from 447,500
shares of Common Stock to 747,500 and in February 1998 shareholders approved an
amendment to increase the total number of shares for which options may be
granted under the Employee Plan to 1,500,000.
The following table sets forth certain information concerning stock options
granted under the Employee Plan during the fiscal year ended October 31, 1998 to
the executive officers of the Company named in the Summary Compensation Table:
6
<PAGE>
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Potential Realized Value
at Assumed Annual
Rates of Stock Price
Appreciation For
Individual Grants Option Term(1)
---------------------------------------------------------------------- ------------------------
Number of
Securities Percent of Total
Underlying Options Granted to
Options Employees In Fiscal Exercise Expiration
Name Granted Year Price Date 5% 10%
- ---------------------------- ---------- ------------------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles L. McNew 50,000 15.6% $4.44 6/26/08 $139,615 $353,811
Kenneth F. Manser -- -- -- -- -- --
Gordon T. Ray 100,000(2) 31.1% $3.06 9/14/08 $192,630 $488,163
John J. Reis 75,000 23.3% $4.44 6/26/08 $209,422 $530,716
Frederick C. Shay -- -- -- -- -- --
</TABLE>
- -----------------
(1) Shows the difference between the market value of the Common Stock for which
the option may be exercised, assuming that the market value of the Common
Stock appreciates in value from the date of grant to the end of the
ten-year option term at annualized rates of 5% and 10%, respectively, less
the exercise price of the option.
(2) Does not include options to purchase 4,000 shares of Common Stock under the
Directors Plan which were granted when Mr. Ray was eligible to participate
therein.
The following table sets forth certain information concerning the number of
unexercised options and the value of unexercised options at the end of the
fiscal year ended October 31, 1998 held by the executive officers of the Company
named in the Summary Compensation Table. No options were exercised by such
executive officers in fiscal 1998.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND OCTOBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at October 31, 1998 October 31, 1998(1)
----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles L. McNew 15,000 135,000 -- --
Kenneth F. Manser -- -- -- --
Gordon T. Ray -- 100,000 -- --
John J. Reis -- 275,000 -- --
Frederick C. Shay 24,000 76,000 -- --
</TABLE>
- -----------------
(1) Although the last sale price per share exceeded the option exercise price
of the Common Stock on October 31, 1998 on the Nasdaq National Market,
pursuant to the terms of 521,000 of the 586,000 options included hereunder,
they may not be exercised until the earlier of (i) the closing price of
Numerex Common Stock exceeds certain per share thresholds ranging between
$7.50-$15.00 for 60 consecutive days, or (ii) five years from February 27,
1997, or such later date of grant.
Under the Director Plan, each director who is not also an employee of the
Company or a Gwynedd designated director automatically is granted options under
the Director Plan. The Director Plan is administered by the Board of Directors
of the Company, including non-employee directors, who may modify, amend, suspend
or terminate the plan, provided that such action may not affect outstanding
options and provided further that provisions concerning the number of shares
with respect to which options are to be granted, the option exercise price and
the class of persons eligible to participate, may not be amended more than once
every six months except in certain circumstances.
Pursuant to the Director Plan, options may be granted for an aggregate of
62,500 shares of Common Stock. Options granted under the Director Plan are not
incentive stock options under Section 422 of the Code. Options under the
Director Plan are granted at the fair market value of the Common Stock on the
date of grant and are exercisable beginning one year after the date of grant.
7
<PAGE>
Each person who was not a director of the Company for at least one year as
of April 1, 1995, and was not an employee of the Company or any subsidiary, or a
Gwynedd designated director, and who on or after April 1, 1995 was elected as a
director of the Company at any annual or special meeting of shareholders of the
Company, shall, as of the date of such election, automatically be granted an
option to purchase 2,500 shares of the Common Stock. This amount was increased
to 4,000 shares in 1998. On each anniversary of the initial option granted
hereunder and provided a person described above continues to be a director who
is not also an employee of the Company or any subsidiary, or a Gwynedd
designated director, on such anniversary, such person shall automatically be
granted an option to purchase 4,000 shares of the Common Stock, or such lower
number of shares as shall be equal to the number of shares as shall then be
available (if any) for grant under this Director Plan divided by the number of
persons who are to receive an option on such anniversary. Pursuant to the
Director Plan, during fiscal 1998 Messrs. Benson, Ray and Flanigan each received
options to purchase 4,000 shares of Company Common Stock.
Limited Pension and Death Benefits Plan
Mr. Manser, as a full-time employee of Versus Technology Limited,
participates in the Limited Pension and Death Benefits Plan (the "Versus
Technology Plan") maintained for employees of Versus Technology Limited. Under
the Versus Technology Plan, a participant who retires at the normal retirement
age of 65 will be entitled to receive an annual pension equal to 1/60th of such
participant's "final pensionable earnings" for each complete year of pensionable
service (subject to a maximum of 40 years). Final pensionable earnings are the
average of a participant's highest three consecutive annual earnings from Versus
Technology Limited in the last ten years before the normal retirement date,
except that if a participant retires or leaves the Versus Technology Limited
Plan more than ten years before the normal retirement date, a participant's
final pensionable earnings will be equal to such participant's last annual
earnings from Versus Technology Limited. Participants are required to contribute
five percent of annual earnings towards the cost of their pension benefits.
Assuming that Mr. Manser retired at age 65 and that his final pensionable
earnings were equal to (pound)95,000 (his current base annual salary), Mr.
Manser would be entitled to receive an annual pension of approximately
(pound)17,500.
Incentive Compensation
The Company has implemented an incentive compensation program for fiscal
1998 for executive level employees based upon the business plan attainment. The
amount of incentive compensation will range between 20-24% of the executive's
base salary if certain revenue and operating income objectives are achieved
pursuant to the Company's business plan. Incentive compensation can be earned
and paid, based upon annual performance. Additional incentive compensation may
be paid for over-achievement of objectives. To be eligible to receive incentive
compensation the employee must be in the Company's employ on the date of
distribution. The Company reserves the right to make modifications to the
incentive compensation program.
Director Compensation
Each director of the Company who is not also an employee of the Company or
a Gwynedd designated director receives an annual fee of $12,000 and a fee of
$250 for each meeting (except telephonic meetings, in which case the fee is
$125) of the Board or a committee thereof attended plus reimbursement of
expenses incurred in attending meetings. No additional fee is paid for committee
meetings held the same day as Board meetings.
Directors who are not employees or a Gwynedd designated director are
entitled to receive options under the Company's Non-Employee Director Stock
Option Plan. See "Executive Compensation - Stock Option Plans."
8
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 22, 1999, by (i) each
person known by the Company to be the beneficial owner of five percent or more
of the Common Stock, (ii) each director of the Company, (iii) each executive
officer of the Company named in the Summary Compensation Table which follows,
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise indicated below, the beneficial owners of the Common Stock listed
below have sole investment and voting power with respect to such shares.
Name of Beneficial Owner
or Identity of Group Shares Beneficially Owned(1)
-------------------------------
Number Percent
------------------------------------- ----------- ----------
Gwynedd Resources, Ltd.
900 Market Street
Suite 200
Wilmington, DE 19801 3,207,280(2) 30.4%
Elizabeth Baxavanis, Trustee
Dominion Holdings #5
Revocable Trust for the
Benefit of Maria E. Nicolaides
900 Market Street
Suite 200
Wilmington, DE 19801 3,207,280(3) 30.4%
Maria E. Nicolaides
4193 Las Palmas Way
Sarasota, FL 34238 3,207,280(4) 30.4%
Douglas Holsclaw, MD
42 Llanberries Road
Bala Cynwyd, PA 19004 752,382(5) 7.1%
Kenneth F. Manser
Versus Technology Limited
Unit B7, Armstrong Mail
Southwood Summit Centre
Farnborough, Hampshire GU14 ONR 1,334,658 12.6%
George Benson (6) 11,000(7) *
Matthew J. Flanigan (6) 13,700(7) *
Frederick C. Shay (6) 30,000(8) *
Gordon T. Ray (6) 126,397(7) *
John J. Reis (6) 10,000(9) *
Andrew J. Ryan (10) 15,000 *
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Charles L. McNew (6) 16,000(11) *
All Directors and Executive Officers
as a group (7 persons) 1,546,755(12) 14.4%
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*less than 1%
(1) The shares "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include shares owned by or for, among other things, the wife, minor
children or certain other relatives of such individual, as well as other
shares as to which the individual has or shares voting or investment power
or has the right to acquire within 60 days after January 22, 1999.
(2) The shareholders of Gwynedd Resources, Ltd. ("Gwynedd") include various
trusts for the benefit of Maria E. Nicolaides and her children (for which
Mrs. Baxavanis is trustee) and Dr. Holsclaw. Gwynedd has the same
shareholders as Dominion Group Limited, a Member Company of Dominion
Holdings. See "Certain Relationships and Related Transactions." See
footnotes (3), (4), (5) and (10).
(3) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs. Baxavanis,
Maria E. Nicolaides' mother-in-law, is trustee, own approximately 89.8% and
0.9%, respectively, of the outstanding stock of Gwynedd. Mrs. Baxavanis
disclaims beneficial ownership of all shares of Common Stock owned by
Gwynedd. See footnote (4) below.
(4) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs. Baxavanis,
Maria E. Nicolaides' mother-in-law, is trustee, own approximately 89.8% and
0.9%, respectively, of the outstanding stock of Gwynedd. Maria E.
Nicolaides disclaims beneficial ownership of 325,651 shares of Common Stock
owned by Gwynedd which may be deemed to be beneficially owned by the other
shareholders of Gwynedd, including trusts for the benefit of her children.
See footnote (3) above.
(5) Does not include any shares of Common Stock owned by Gwynedd. Dr. Holsclaw
is the owner of approximately 9.3% of the outstanding stock of Gwynedd.
(6) The address of such person is c/o Numerex Corp., 1600 Parkwood Circle SE,
Suite 200, Atlanta, GA 30339-2119.
(7) Represents or includes options to purchase Common Stock under the
Non-Employee Director Stock Option Plan (the "Director Plan"), as follows:
George Benson-9,000; Matthew J. Flanigan-10,700; and Gordon T. Ray-9,000
and 100,000 under the Company's Employee Plan, but does not include 100,000
under the Employee Plan, which are not exercisable as of the date of this
table.
(8) Includes options to purchase 24,000 shares of Common Stock under the
Employee Stock Option Plan (the "Employee Plan"). Mr. Shay, a Director of
the Company will not be standing for re-election.
(9) Does not include options to purchase 275,000 shares of Common Stock under
the Employee Plan which are not currently exercisable.
(10) Mr. Ryan disclaims beneficial ownership of the 3,207,280 shares of Common
Stock owned by Gwynedd. Mr. Ryan's address is: Salisbury & Ryan, 1325
Avenue of the Americas, Seventh Floor, New York, NY 10019-6026.
(11) Includes options to purchase 15,000 shares of Common Stock under the
Employee Plan.
(12) Does not include ownership of Mr. Reis who is not presently an executive
officer or director of the Company. Includes options to purchase 167,700
shares of Common Stock under the Employee Plan and the Director Plan.
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Item 13. Certain Relationships and Related Transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had in the past entered into various transactions and
arrangements with Dominion Group Limited, a Member Company of Dominion Holdings
or a corporation which previously carried on certain activities of such entity
(collectively, "Dominion"). Dominion is an investment and merchant banking firm
which has in prior years provided financial advisory and investment banking
services to the Company. Dominion received fees of $234,000 for investment
banking related services for the fiscal year ended October 31, 1997, and no fees
for fiscal 1998. Gwynedd owns approximately 30.4% of the outstanding Common
Stock of the Company. The shareholders of Dominion are also shareholders of
Gwynedd. See "Security Ownership of Management and Certain Beneficial Owners."
Gwynedd has the right to designate one member of the Company's Board of
Directors (two members if the Board consists of more than seven directors) as
long as Gwynedd owns at least ten percent of the outstanding Common Stock. Mr.
Ryan serves as Gwynedd's designee. See Proposal One - "Election of Directors -
Arrangements with Respect to the Board of Directors."
During fiscal 1995 the Company's subsidiary, DA Systems, manufactured
certain products for CellTel Data Services, Inc. ("CellTel"), a company in which
Dominion owns a controlling interest. Sales to CellTel approximated $368,500
during fiscal 1995. In October 1996 Numerex invested $375,000 in return for an
initial 10% equity interest in CellTel. These funds were used by CellTel to
repay the account receivable relating to the 1995 product sales. In 1999 Numerex
has the right to put its initial equity interest to Dominion and Dominion can
call this interest for $500,000. In addition, in 1999, if the above-referenced
call is not exercised by Numerex, it may acquire an additional 10% interest in
CellTel for $1.00. The Company believes that the terms related to the
manufacture and sale of products to CellTel and its investment in CellTel are no
less favorable to the Company than those generally available from an
unaffiliated party.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amended Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
NUMEREX CORP.
Date: February 25, 1999 By:/s/Gordon T. Ray
-----------------------------------------
Gordon T. Ray, Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amended Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/s/Kenneth F. Manser
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Kenneth F. Manser Director February 25, 1999
/s/Charles L. McNew
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Charles L. McNew Vice President, Chief February 25, 1999
Operating Officer and Chief
Financial Officer (principal
financial officer and principal
accounting officer)
/s/George Benson
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George Benson Director February 25, 1999
/s/Matthew J. Flanigan
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Matthew J. Flanigan Director February 25, 1999
/s/Andrew J. Ryan
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Andrew J. Ryan Director February 25, 1999
/s/Frederick C. Shay
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Frederick C. Shay Director February 25, 1999
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