SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM TO
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Commission file number 0-439
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AMERICAN LOCKER GROUP INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of business issuer as specified in its charter)
DELAWARE 16-0338330
- ---------------------------------- ------------------------------------
(Sate of other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
608 ALLEN STREET, JAMESTOWN, NY 14701
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(716)664-9600
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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.
Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No Not Applicable
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's class of common
stock equity as of the latest practicable date: July 29, 1998
Common Stock $1.00 par value - 2,280,468
Transitional Small Business Disclosure (check one) Yes No X
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Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidted Balance Sheets
<S> <C> <C>
JUNE 30, December 31,
1999 1998
---------------------------
ASSETS
Current assets:
Cash and cash equivalents $1,605,662 $1,188,007
Accounts and notes receivable, less
allowance for doubtful accounts
(1999 $221,723; 1998 $216,062) 5,048,297 4,062,802
Inventories 5,710,091 6,312,131
Prepaid expenses 149,059 150,808
Prepaid federal, state and foreign income taxes 223,107 0
Deferred income taxes 501,477 501,477
---------------------------
Total current assets 13,237,693 12,215,225
Property, plant and equipment:
Land 500 500
Buildings 390,487 388,795
Machinery and equipment 9,347,715 8,408,983
---------------------------
9,738,702 8,798,278
Less allowances for depreciation and
amortization 7,983,562 7,681,632
---------------------------
1,755,140 1,116,646
Deferred income taxes 137,645 137,645
---------------------------
Total assets $15,130,478 $13,469,516
===========================
</TABLE>
2
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<TABLE>
<CAPTION>
Consolidated Balance Sheets
<S> <C> <C>
JUNE 30, December 31,
1999 1998
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,368,113 $1,574,809
Commissions, salaries, wages and taxes thereon 110,755 639,822
Other accrued expenses 851,148 600,582
Federal, state and foreign income taxes payable 0 82,941
Current portion of long-term debt 200,004 200,000
--------------------------
Total current liabilities 3,530,020 3,098,154
Long-term obligations:
Long-term debt 1,933,322 533,333
Pension benfits 612,529 573,973
--------------------------
2,545,851 1,107,306
Stockholders' equity:
Common stock, $1 par value:
Authorized shares --- 4,000,000
Issued shares - 2,498,768 (2,287,468 outstanding)
in 1999 and 2,422,772 (2,422,772 outstanding)
in 1998 2,498,768 2,422,772
Other capital 538,455 74,867
Retained earnings 8,480,340 6,976,987
Treasury stock at cost (211,300 shares) (2,288,531) 0
Accumulated other comprehensive loss (174,425) (210,570)
--------------------------
Total stockholders' equity 9,054,607 9,264,056
--------------------------
Total liabilities and stockholders' equity $15,130,478 $13,469,516
See accompanying notes.
</TABLE>
3
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<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
<S> <C>
SIX MONTHS ENDED JUNE 30,
1999 1998
---------------------------
Net sales $17,886,811 $21,394,533
Cost of products sold 12,672,550 14,701,805
---------------------------
5,214,261 6,692,728
Selling, administrative and general expenses 2,825,737 3,170,805
---------------------------
2,388,524 3,521,923
Interest income 29,341 36,131
Other income--net 128,452 131,883
Interest expense (36,632) (130,723)
---------------------------
Income before income taxes 2,509,685 3,559,214
Income taxes 1,006,332 1,382,910
---------------------------
Net Income $1,503,353 $2,176,304
===========================
Earnings per share of common stock:
Basic $0.61 $0.90
===========================
Diluted $0.60 $0.86
===========================
Dividends per share of common stock: $0.00 $0.00
===========================
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
<S> <C>
THREE MONTHS ENDED JUNE 30,
1999 1998
---------------------------
Net sales $10,029,123 $11,604,876
Cost of products sold 7,138,575 7,958,748
---------------------------
2,890,548 3,646,128
Selling, administrative and general expenses 1,444,211 1,678,064
---------------------------
1,446,337 1,968,064
Interest income 16,288 19,293
Other income--net 61,652 67,020
Interest expense (10,510) (64,055)
--------------------------
Income before income taxes 1,513,767 1,990,322
Income taxes 602,221 743,914
--------------------------
Net Income $911,546 $1,246,408
Earnings per share of common stock:
Basic $0.37 $0.52
==========================
Diluted $0.37 $0.49
==========================
Dividends per share of common stock: $0.00 $0.00
==========================
See accompanying notes.
</TABLE>
5
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<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
<S> <C>
SIX MONTHS ENDED JUNE 30,
1999 1998
---------------------------
OPERATING ACTIVITIES
Net Income $1,503,353 $2,176,304
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 253,666 344,259
Deferred income taxes (credits) 0 (80,000)
Change in assets and liabilities:
Accounts and notes receivable (985,495) (1,430,124)
Inventories 602,040 (2,204,228)
Prepaid expenses 1,749 (122,262)
Accounts payable and accrued expenses 431,866 1,612,615
Pension benefits 38,556 200,000
Prepaid income taxes 261,893 32,515
---------------------------
Net cash provided by operating activities 2,107,628 529,079
INVESTING ACTIVITIES
Purchase of property, plant and equipment (892,164) (136,410)
---------------------------
Net cash used in investing activities (892,164) (136,410)
FINANCING ACTIVITIES
Net repayment under line of credit 0 (100,000)
Additional long term borrowings 1,500,000 0
Debt repayment (100,007) (331,500)
Common stock purchased and retired (41) (98)
Common stock purchased for treasury (2,288,531) 0
Proceeds from exercise of stock options 54,625 13,813
---------------------------
Net cash used in financing activities (833,954) (417,785)
Effect of exchange rate changes on cash 36,145 (20,222)
---------------------------
Net increase (decrease) in cash 417,655 (45,338)
Cash and cash equivalents at beginning of period 1,188,007 1,154,045
---------------------------
Cash and cash equivalents at end of period $1,605,662 $1,108,707
===========================
Supplemental cash flow information:
Cash paid during the period for:
Interest $36,632 $130,723
===========================
Income Taxes $801,424 $1,247,592
See accompanying notes.
</TABLE>
6
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Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, the condensed financial statements do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of such condensed financial
statements have been included. Operating results for the six month period
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
2. Provision for income taxes is based upon the estimated annual effective tax
rate.
3. Net income per common share is computed by dividing net income by the
weighted average number of shares outstanding, plus, when dilutive, the
common stock equivalents which would arise from the exercise of stock
options, during the periods. Basic and diluted weighted average shares
outstanding were 2,449,184 (2,417,261 in 1998) and 2,503,856 (2,544,943 in
1998) respectively for the six month period ending June 30, 1999.
During the quarter ended June 30, 1999, the Company paid $2,288,531 to
purchase 211,300 shares of common stock. These shares are recorded as
treasury stock at June 30, 1999.
4. Inventories are valued at the lower of cost or market. Cost is determined by
using the last-in, first-out method for substantially all of the inventories.
MARCH 31, December 31,
1999 1998
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Raw materials $2,170,165
Work-in-process 1,723,736 $1,763,210
Finished goods 2,276,699 2,023,542
---------- ----------
$6,170,600 2,985,888
Less allowance to $6,772,640
reduce carrying
value to LIFO
basis (460,509) (460,509)
----------- -----------
$5,710,091 $6,312,131
========== ===========
5. Total comprehensive income consisting of net income and foreign currency
translation adjustment was $1,539,498 and $2,156,082 for the six months ended
June 30, 1999 and June 30, 1998 respectively.
6. The Company entered into a new term loan during June 1999, which provides for
borrowings up to $3 million at the Bank's prevailing Prime Rate. Interest
only payments are due monthly through July 2000, principal is payable
over a five year term beginning in August 2000. The outstanding balance
of this loan is $1,500,000 at June 30, 1999.
7
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Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations
American Locker Group Incorporated and Subsidiaries
FIRST SIX MONTHS 1999 VS FIRST SIX MONTHS 1998
Sales for the first six months of 1999 of $17,886,811 were down $3,507,722 or
16.4% compared to sales of $21,394,533 during the same period in 1998. Plastic
locker sales to the United States Postal Service (USPS) totaled $12,670,563
compared to $15,072,663 during the first half of 1998. Cluster Box Units (CBUs)
sales were $12,015,401 compared to $13,983,872 during the first half of 1998.
Sales of Outdoor Parcel Lockers (OPLs) were $655,162 compared to $1,088,791 in
the first six months of 1998.
The decline in sales of CBUs relates to fewer units in total purchased by the
USPS compared to last year's first six months and also to lower selling prices
per unit. The Company has maintained its dominant market share position and USPS
procurement policy continues to limit purchase of NDCBUs (the steel predecessor
to plastic or aluminum CBUs) in relation to the new CBUs. However, USPS
accumulation of CBU inventories in the third quarter of 1998 and USPS operating
losses associated with deferring a postal rate increase for six months resulted
in lower CBU purchases in the fourth quarter of 1998 and first six months of
1999. Based on current information available to the Company, the Company
believes that the long term outlook for CBU volumes remains favorable in light
of continued USPS commitment to the CBU and its operating cost reduction
benefits. Also, the USPS has announced that effective September 15, 1999 it will
discontinue purchase of NDCBUs and decertify the unit for further installations.
Therefore, long term CBU volumes are expected to be positively effected by
replacement of older NDCBU installations.
As previously reported, the USPS has extended the Company's national contract
through April 14, 2000. Terms of the extension were finalized on April 14, 1999
and set prices and minimum quantities for the period through April 14, 2000. The
Company lowered prices on CBUs by approximately one-third of one percent
(0.33%). The contract minimum quantity is one and is solely a legal minimum, not
indicative of USPS requirements. As previously disclosed, total CBU demand is
influenced by a number of factors over which the Company has no control,
including but not limited to: Postal budgets, policies, financial performance,
domestic new housing starts, and the weather as these units are installed
outdoors. The CBU is a modernization of the NDCBU (which the USPS has purchased
for 20 years) and is an integral part of the USPS delivery cost reduction
program identified as Centralized Delivery.
The two CBU competitors, each with an aluminum CBU, also received one-year
contract extensions. The Company has maintained its dominant market share
position and believes our CBU prices are competitive. The Company believes its
CBU product line continues to represent the best value when all factors,
including price, quality of design and construction, long term durability and
service are considered.
All other sales, metal and electronic were $5,216,248 for the first six months
of 1999 compared to $6,321,870 for the first six months of 1998. This decrease
of $1,105,622 or 17.5% relates to a general decrease in demand across all
markets served by the Company.
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Cost of products sold as a percentage of sales was 70.8% during the first six
months of 1999 compared to 68.7% in the first six months of 1998. Decreased
gross margins are directly related to decreased sales volumes, resulting in
certain fixed costs being allocated to reduced sales.
Selling, general and administrative costs for the first six months of 1999
decreased $345,068 over the same period in 1998. Selling, general and
administrative expense as a percent of sales was 15.8% compared to 14.8% during
the first six months of 1998. The increase as a percentage of sales relates
primarily to decreased sales volume.
Interest expense in the first half of 1999 was $36,632 compared to $130,723 in
the same period in 1998. This decrease is due to lower average outstanding debt
during 1999 versus 1998.
SECOND QUARTER 1999 VS SECOND QUARTER 1998
Second quarter sales were $10,029,123 down $1,575,753 or 13.6% from the same
period in 1998. Plastic locker sales of $7,268,782 were down 13.1% or $1,097,882
over 1998's second quarter. Sales of other products, metal and electronic
lockers, were $2,760,341 during the second quarter of 1999, 14.8% lower than
1998.
Cost of products sold as a percentage of sales was 71.2% during the second
quarter of 1999 up from 68.6% during the second quarter of 1998.
Selling, administrative and general expenses as a percent of net sales was 14.4%
during the second quarter of 1999 compared to 14.5% in the second quarter of
1998.
Interest expense in the second quarter of $10,510 decreased from $64,055 in the
second quarter of 1998 due to lower average outstanding debt during 1999 versus
1998.
LIQUIDITY AND SOURCES OF CAPITAL
The Company continues to have adequate resources and liquidity to maintain and
expand its operations. Working capital at June 30, 1999 was $9,707,673, down
$573,556 from working capital of $10,281,229 at March 31, 1999. The ratio of
current assets to current liabilities was 3.75to 1 at June 30, 1999, as compared
to a ratio of 3.94 to 1 at December 31. 1998. Cash provided by operations was
$2,107,628 during the first six months of 1999, compared to $529,079 provided by
operating activities for the same period in 1998. The Company's $3,000,000 line
of credit is available to assist in satisfying future working capital needs, if
required.
The Company anticipates that its requirements for funds for operations and
capital expenditures will be provided principally from cash generated from
future operations.
As previously announced, the Company repurchased approximately 211,000 shares of
Company common stock in private and open market transactions during the quarter
ended June 30, 1999. The purchase of the shares was funded by working capital
and a new $3,000,000 term loan facility with the Company's primary bank lender.
At present, $1,500,000 of the $3,000,000 facility has been drawn.
9
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YEAR 2000 PROJECT UPDATE
The Year 2000 (Y2K) issue relates to the fact that many computers, computer
programs, and embedded microchips support only two digits to specify a year in
the date field. Therefore, if not corrected, these systems may fail or create
erroneous results in dealing with matters which refer to dates after December
31, 1999. The Company is aware of the issues and has actively pursued corrective
action since late 1996. Following is a project status update as of June 30,
1999.
A. Assessment
Assessment of the Company's Information Technology (IT) systems was completed
in 1997. Based on results of the assessment, the Company determined that
complete replacement of its IT system was the best course of action.
Assessment of the Company's non-IT systems with embedded microchips (security
systems, telephones, etc.) began in the first quarter of 1998 and is now
complete. No systems required renovation and none are critical to the
Company's production process.
B. Renovation
Renovation by replacement of the Company's IT system is proceeding on
schedule. New IT software that is certified Y2K compliant has been purchased,
installed, and is operational on a Novell network of personal computers.
Novell has advised its customers that further upgrade is necessary to assure
Y2K compliance. The Company will complete its testing and determine whether
to upgrade Novell or convert to Windows NT.
Total project expenditures through June 30, 1999 were $205,000 for hardware,
software, and implementation consulting fees. This represents over 80% of the
total projected project cost.
C. Validation
Validation and final testing of the new IT system commenced with full-scale
Company data starting January 1, 1999 and is completed. Testing of the
current Novell network will be completed in the third quarter.
D. Implementation
Final implementation of the new IT system is completed, subject to a possible
second upgrade of the Novell network or conversion to Windows NT as described
above.
E. Third Party Assessment
The Company surveyed its entire vendor base during the third quarter of 1998.
Final results were compiled during the fourth quarter 1998. The Company has
verified that its major vendors are working towards Y2K compliance and that
reasonable contingency plans are in place to allow the Company's production
of its products to continue. Also, the Company as normal policy, maintains
10
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adequate inventory of all but the most expensive components (those supplied
by vendors noted above) to safeguard against short term interruptions. The
Company has also built and will maintain a large inventory of completed CBUs
in order to ensure on-time deliveries to the USPS in spite of any Y2K related
interruptions in production. No single customer's failure to address the Y2K
issue, other than the United States Postal Service (USPS), would have a
material effect on the Company.
Worst Case Risks and Contingency Plans
In the first six months of 1999, the Company's contract with the United States
Postal Service (USPS) accounted for over 70% of the Company's revenues. Any
interruption or slowing of USPS orders or payments as a result of Y2K related
issues would have a material adverse effect on the Company's results of
operations, liquidity, and/or financial condition. However, through
communication with the USPS and assessment of USPS representations related to
their Y2K project status, the Company does not anticipate Y2K related
interruptions in USPS orders or payments.
In the event that a Y2K related slowdown or stoppage in USPS orders does occur,
the Company has a contingency plan whereby CBU inventory levels would be reduced
and orders for incoming materials would be delayed or cancelled in order to free
working cash. The Company's $3,000,000 line of credit, as well as other
financial instruments, may be utilized if necessary.
The forward looking statements contained in the Year 2000 Project Update should
be read in conjunction with the Company's disclosures under the heading "Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995."
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations, and intentions are subject to
change at any time at the discretion of the Company, (ii) the Company's plans
and results of operations will be affected by the Company's ability to manage
its growth and inventory, and (iii) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
Part II
Item 1. Legal Matters
In September 1998 and subsequent months, the Company was named as an additional
defendant in 50 cases pending in state court in Massachusetts. The plaintiffs in
each such case assert that the Company manufactured and furnished to various
shipyards components containing asbestos during the period from 1948 to 1972 and
that injuries resulted from exposure to such products. The assets of this
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division were sold by the Company in 1973. Based upon investigations conducted
by the Company to date, the Company has discovered no evidence that the former
division manufactured or supplied any products containing asbestos. Therefore,
barring the discovery of contrary evidence, the Company does not anticipate that
these actions will have any substantial impact on the Company's operations or
financial condition. Defense of these cases has been assumed by the Company's
insurance carrier, subject to a customary reservation of rights
In December 1998, the Company was named as a defendant in a lawsuit titled
"ROBERTA RAIPORT, ET AL. V. GOWANDA ELECTRONICS CORP. AND AMERICAN LOCKER GROUP,
INC." pending in the State of New York Supreme Court, County of Cattaragus. The
suit involves property located in Gowanda, New York which was sold by the
Company to Gowanda Electronics Corp. prior to 1980. The plaintiffs, current or
former property owners in Gowanda, New York, assert that defendants each
operated machine shops at the site during their respective periods of ownership
and that as a result of such operation soil and groundwater contamination
occurred which has adversely affected the plaintiffs and the value of
plaintiffs' properties. The plaintiffs assert a number of causes of action and
seek compensatory damages of $5,000,000 related to alleged diminution of
property values, $3,000,000 for economic losses and "disruption to plaintiffs'
lives," $10,000,000 for "nuisance, inconveniences and disruption to plaintiffs'
lives," $25,000,000 in punitive damages, and $15,000,000 to establish a "trust
account" for monitoring indoor air quality and other remedies." The Company
believes that its potential liability with respect to this site, if any, is
de minimus. Therefore, based on the information currently available, management
does not believe the outcome of this suit will have a substantial impact on the
Company's operations or financial condition. Defense of this case has been
assumed by the Company's insurance carrier, subject to a customary reservation
of rights.
Item 4. Submission of Matters to a Vote of Security Holders
On May 13, 1999, the stockholders of the Company at the annual meeting of
stockholders approved the American Locker Group Incorporated 1999 Stock
Incentive Plan (the "Plan") with a vote of 1,651,967 shares for adoption of the
Plan, 338,933 against adoption of the Plan and 19,120 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 American Locker Group Incorporated 1999 Stock Incentive Plan
(b) Exhibit 10.2 Amendment Agreement dated June 9, 1999 between American
Locker Group Incorporated and Manufacturers and Traders Trust Company
(c) Exhibit 10.3 Sixth Amendment dated as of May 13, 1999 to Manufacturing
Agreement as of December 29, 1999 between American Locker Security
Systems, Inc. and Signore Inc.
(d) Exhibit 27.1 Financial Data Schedule dated June 30, 1999.
(e) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1999.
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S I G N A T U R E
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN LOCKER GROUP INCORPORATED
(Registrant)
/s/Edward F. Ruttenberg
--------------------------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
Date: August 10, 1999
---------------------------------
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EXHIBIT INDEX
.
Prior Filing
or Sequential
EXHIBIT NO. EXHIBIT INDEX Page NO. HEREIN
10.1 American Locker Group Incorporated
1999 Stock Incentive Plan
10.2 Amendment Agreement dated June 9,
1999 between American Locker
Group Incorporated and
Manufacturers and Traders Trust
Company
10.3 Sixth Amendment dated as of May 13,
1999 to Manufacturing Agreement as
of December 29, 1999 between American
Locker Security Systems, Inc. and
Signore, Inc.
27.1 Financial Data Schedule dated
June 30, 1999
14
EXHIBIT 10.1
AMERICAN LOCKER GROUP INCORPORATED
1999 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the American Locker Group Incorporated 1999
Stock Incentive Plan (hereinafter referred to as the "Plan") is to assist in
attracting and retaining highly competent key employees and consultants and to
act as an incentive in motivating selected key employees and consultants of
American Locker Group Incorporated and its Subsidiaries (as defined below) to
achieve long-term corporate objectives.
1.02 ADOPTION AND TERM. The Plan was approved by the Board of Directors
(hereinafter referred to as the "Board") of American Locker Group Incorporated
(hereinafter referred to as the "Company") effective as of March 3, 1999 (the
"Effective Date"), subject to the approval of the stockholders of the Company.
The Plan shall remain in effect until terminated by action of the Board;
provided, however, that no Incentive Stock Option (as defined below) may be
granted hereunder after the tenth anniversary of the Effective Date.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, capitalized terms shall have the following
meanings:
2.01 AWARD means any grant to a Participant of one or a combination of
Non-Qualified Stock Options, Incentive Stock Options and/or Stock Appreciation
Rights described in Article VI.
2.02 AWARD AGREEMENT means a written agreement between the Company and a
Participant or a written notice from the Company to a Participant specifically
setting forth the terms and conditions of an Award granted under the Plan.
2.03 BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
2.04 BOARD means the Board of Directors of the Company.
2.05 CHANGE IN CONTROL means, and shall be deemed to have occurred upon
the occurrence of, any one of the following events:
(a) the acquisition by any person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Exchange Act of "beneficial ownership" (as determined in accordance with
Rule 13d-3 promulgated under the Exchange Act, except that a person shall
be deemed to be a "beneficial owner" of all securities that such person
has the right to acquire, whether such right is exercisable
<PAGE>
immediately or only after the passage of time), directly or indirectly, of
shares of capital stock of the Company entitling such person to exercise
30% or more of the total voting power of the Company Voting Securities;
(b) during any year or any period of two consecutive years
(not including any period prior to the Effective Date), individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(a), (c) or (d) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason
to constitute at least a majority thereof;
(c) any consolidation or merger of the Company with or into
any other person, or any sale or transfer of all or substantially all of
the assets of the Company to another person, other than any such
transaction immediately following which more than 70% of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and the Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of
the Outstanding Common Stock and Company Voting Securities, as the case
may be; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding the foregoing, unless otherwise determined by the Board, no
change in control of the Company shall be deemed to have occurred for purposes
of determining a Participant's rights under this Plan if (x) the Participant is
a member of a group that first announces a proposal which, if successful, would
result in a Change of Control, which proposal (including any modifications
thereof) is ultimately successful, or (y) the Participant acquires a two percent
or more equity interest in the entity that ultimately acquires the Company
pursuant to the transaction described in (x) of this paragraph. For purposes of
this definition, transfers by the Estate of Harold J. Ruttenberg to members of
Mr. Harold J. Ruttenberg's family or trusts for the benefit of Mr. Harold J.
Ruttenberg's family shall not be considered in determining if a Change in
Control has occurred.
2.06 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
2.07 COMMITTEE means the committee established in accordance with Section
3.01.
2.08 COMPANY means American Locker Group Incorporated, a Delaware
corporation, and its successors and assigns.
2.09 COMPANY VOTING SECURITIES means the outstanding shares of any class
or classes (however designated) of capital stock of the Company entitled to vote
generally in the election of the Board.
2.10 COMMON STOCK means Common Stock of the Company, par value $ 1.00 per
share.
<PAGE>
2.11 DATE OF GRANT means the date designated by the Committee as the date
as of which it grants an Award, which shall not be earlier than the date on
which the Committee approves the granting of such Award.
2.12 EFFECTIVE DATE shall have the meaning given to such term in Section
1.02.
2.13 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.14 EXERCISE PRICE means, with respect to a Stock Appreciation Right, the
amount established by the Committee in the related Award Agreement as the amount
to be subtracted from the Fair Market Value on the date of exercise in order to
determine the amount of the payment to be made to the Participant, as further
described in Section 6.02(b).
2.15 FAIR MARKET VALUE means, as of any applicable date: (i) if the Common
Stock is listed on a national securities exchange or is authorized for quotation
on The Nasdaq National Market System ("NMS"), the mean of the high and low
prices of the Common Stock on such exchange or NMS, as the case may be, on such
date or if no sale of the Common Stock shall have occurred on such date, the
highest asked price for the Common Stock on such date; or (ii) if the Common
Stock is not listed for trading on a national securities exchange or authorized
for quotation on NMS, the closing bid price as reported by The Nasdaq SmallCap
Market on such date, or if no such price shall have been reported for such date,
on the next preceding date for which such price was so reported; or (iii) if the
Common Stock is not listed for trading on a national securities exchange or
authorized for quotation on NMS or The Nasdaq SmallCap Market (if applicable),
the mean between the bid and ask prices published in the "pink sheets" or
displayed on the National Association of Securities Dealers, Inc. ("NASD")
Electronic Bulletin Board, as the case may be; or (iv) if the Common Stock is
not listed for trading on a national securities exchange, is not authorized for
quotation on NMS or The Nasdaq SmallCap Market and is not published in the "pink
sheets" or displayed on the NASD Electronic Bulletin Board, the fair market
value of the Common Stock as determined by the Committee based upon such
evidence as it may think necessary or desirable.
2.16 INCENTIVE STOCK OPTION means a stock option within the meaning of
Section 422 of the Code.
2.17 MERGER means any merger, reorganization, consolidation, share
exchange, transfer of assets or other transaction having similar effect
involving the Company.
2.18 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.19 OPTIONS means all Non-Qualified Stock Options and Incentive Stock
Options granted at any time under Section 6.01(a) of the Plan.
2.20 OUTSTANDING COMMON STOCK means, at any time, the issued and
outstanding shares of Common Stock.
2.21 PARTICIPANT means a person designated to receive an Award under the
Plan in accordance with Section 5.01.
2.22 PLAN means the American Locker Group Incorporated 1999 Stock
Incentive Plan as described herein, as the same may be amended from time to
time.
2.23 PURCHASE PRICE, with respect to Options, shall have the meaning set
forth in Section 6.01(b).
<PAGE>
2.24 RETIREMENT means early or normal retirement under a pension plan or
arrangement of the Company or one of its Subsidiaries in which the Participant
participates.
2.25 STOCK APPRECIATION RIGHTS means Awards granted in accordance with
Section 6.02(a).
2.26 SUBSIDIARY means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
2.27 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Company or a Subsidiary for
any reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any similar transaction in which
the Participant's employer ceases to be the Company or one of its Subsidiaries.
Whether entering military or other government service shall constitute
Termination of Employment, or whether a Termination of Employment shall occur as
a result of disability, shall be determined in each case by the Committee in its
sole discretion. In the case of a consultant who is not an employee of the
Company or a Subsidiary, Termination of Employment shall mean voluntary or
involuntary termination of the consulting relationship for any reason.
ARTICLE III
ADMINISTRATION
3.01 COMMITTEE. The Plan shall be administered by a committee of the Board
(the "Committee") comprised of at least two persons. The Committee shall have
exclusive and final authority in each determination, interpretation or other
action affecting the Plan and its Participants. The Committee shall have the
sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, and to take such steps in connection with
the Plan and Awards granted hereunder as it may deem necessary or advisable. The
Committee may, subject to compliance with applicable legal requirements, with
respect to Participants who are not subject to Section 16(b) of the Exchange
Act, delegate such of its powers and authority under the Plan as it deems
appropriate to designated officers or employees of the Company. In addition, the
Board may exercise any of the authority conferred upon the Committee hereunder.
In the event of any such delegation of authority or exercise of authority by the
Board, references in the Plan to the Committee shall be deemed to refer to the
delegate of the Committee or the Board, as the case may be.
ARTICLE IV
SHARES
4.01 NUMBER OF SHARES ISSUABLE. The total number of shares initially
authorized to be issued under the Plan shall be 150,000 shares of Common Stock.
The number of shares available for issuance under the Plan shall be subject to
adjustment in accordance with Section 7.07. The shares to be offered under the
Plan shall be authorized and unissued shares of Common Stock, or issued shares
of Common Stock which will have been reacquired by the Company.
4.02 SHARES SUBJECT TO TERMINATED AWARDS. Shares of Common Stock covered
by any unexercised portions of terminated Options (including canceled Options)
granted under Article VI and shares of Common Stock subject to any Award that
are otherwise surrendered by a Participant may be subject to new Awards under
the Plan. Shares of Common Stock subject to Options, or portions thereof, that
have been surrendered in connection with the exercise of Stock Appreciation
Rights shall not be available for subsequent Awards under the Plan, but shares
of Common Stock issued in payment of such Stock Appreciation Rights shall not be
charged against the number of shares of Common Stock available for the grant of
Awards hereunder.
<PAGE>
ARTICLE V
PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such key
employees and consultants of the Company and its Subsidiaries, whether or not
members of the Board, as the Committee, in its sole discretion, may designate
from time to time. The Committee's designation of a Participant in any year
shall not require the Committee to designate such person to receive Awards in
any other year. The designation of a Participant to receive an Award under one
portion of the Plan does not require the Committee to include such Participant
under other portions of the Plan. The Committee shall consider such factors as
it deems pertinent in selecting Participants and in determining the types and
amounts of their respective Awards. Subject to adjustment in accordance with
Section 7.07, during any calendar year no Participant shall be granted Awards in
respect of more than 15,000 shares of Common Stock (whether through grants of
Options or Stock Appreciation Rights or other rights with respect thereto).
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01 OPTION AWARDS.
(A) GRANT OF OPTIONS. The Committee may grant, to such Participants as the
Committee may select, Options entitling the Participants to purchase shares of
Common Stock from the Company in such numbers, at such prices, and on such terms
and subject to such conditions, not inconsistent with the terms of the Plan, as
may be established by the Committee. The terms of any Option granted under the
Plan shall be set forth in an Award Agreement.
(B) PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of Common
Stock which may be purchased upon exercise of any Option granted under the Plan
shall be determined by the Committee; provided, however, that the Purchase Price
shall in all cases be equal to or greater than the Fair Market Value on the Date
of Grant.
(C) DESIGNATION OF OPTIONS. Except as otherwise expressly provided in the
Plan, the Committee may designate, at the time of the grant of an Option, such
Option as an Incentive Stock Option or a Non-Qualified Stock Option; provided,
however, that an Option may be designated as an Incentive Stock Option only if
the applicable Participant is an employee of the Company or a Subsidiary on the
Date of Grant.
(D) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant may be granted
Incentive Stock Options under the Plan (or any other plans of the Company and
its Subsidiaries) that would result in Incentive Stock Options to purchase
shares of Common Stock with an aggregate Fair Market Value (measured on the Date
of Grant) of more than $100,000 first becoming exercisable by such Participant
in any one calendar year.
(E) RIGHTS AS A STOCKHOLDER. A Participant or a transferee of an Option
pursuant to Section 7.04 shall have no rights as a stockholder with respect to
the shares of Common Stock covered by an Option until that Participant or
transferee shall have become the holder of record
<PAGE>
of any such shares, and no adjustment shall be made with respect to any such
shares of Common Stock for dividends in cash or other property or distributions
of other rights on the Common Stock for which the record date is prior to the
date on which that Participant or transferee shall have become the holder of
record of any shares covered by such Option; provided, however, that
Participants are entitled to share adjustments to reflect capital changes under
Section 7.07.
6.02 STOCK APPRECIATION RIGHTS.
(A) STOCK APPRECIATION RIGHT AWARDS. The Committee is authorized to grant
to any Participant one or more Stock Appreciation Rights. Such Stock
Appreciation Rights may be granted either independent of or in tandem with
Options granted to the same Participant. Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in the case of
Non-Qualified Stock Options, subsequent to, the grant to such Participant of the
related Options; provided, however, that: (i) any Option covering any share of
Common Stock shall expire and not be exercisable upon the exercise of any Stock
Appreciation Right with respect to the same share, (ii) any Stock Appreciation
Right covering any share of Common Stock shall expire and not be exercisable
upon the exercise of any Option with respect to the same share, and (iii) an
Option and a Stock Appreciation Right covering the same share of Common Stock
may not be exercised simultaneously. Upon exercise of a Stock Appreciation Right
with respect to a share of Common Stock, the Participant shall be entitled to
receive an amount equal to the excess, if any, of (A) the Fair Market Value of a
share of Common Stock on the date of exercise over (B) the Exercise Price of
such Stock Appreciation Right established in the Award Agreement, which amount
shall be payable as provided in Section 6.02(c).
(B) EXERCISE PRICE. The Exercise Price established for any Stock
Appreciation Right granted under this Plan shall be determined by the Committee,
but in the case of Stock Appreciation Rights granted in tandem with Options
shall not be less than the Purchase Price of the related Options. Upon exercise
of Stock Appreciation Rights, the number of shares issuable upon exercise under
any related Options shall automatically be reduced by the number of shares of
Common Stock represented by such Options which are surrendered as a result of
the exercise of such Stock Appreciation Rights.
(C) PAYMENT OF INCREMENTAL VALUE. Any payment that may become due from the
Company by reason of a Participant's exercise of a Stock Appreciation Right may
be paid to the Participant as determined by the Committee (i) all in cash, (ii)
all in Common Stock, or (iii) in any combination of cash and Common Stock. In
the event that all or a portion of the payment is to be made in Common Stock,
the number of shares of Common Stock to be delivered in satisfaction of such
payment shall be determined by dividing the amount of such payment or portion
thereof by the Fair Market Value on the date of exercise . No fractional share
of Common Stock shall be issued to make any payment in respect of Stock
Appreciation Rights; if any fractional share would otherwise be issuable, the
combination of cash and Common Stock payable to a Participant shall be adjusted
as directed by the Committee to avoid the issuance of any fractional share.
6.03 TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(A) CONDITIONS ON EXERCISE. An Award Agreement with respect to Options
and/or Stock Appreciation Rights may contain such waiting periods, exercise
dates and restrictions on exercise (including, but not limited to, periodic
installments) as may be determined by the Committee at the time of grant.
(B) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock
Appreciation Rights shall terminate after the first to occur of the following
events:
<PAGE>
(i) Expiration of the Option or Stock Appreciation Right as provided
in the related Award Agreement; or
(ii) Termination of the Award as provided in Section 6.03(e),
following the applicable Participant's Termination of Employment; or
(iii) In the case of an Incentive Stock Option, ten years from the
Date of Grant; or
(iv) Solely in the case of a Stock Appreciation Right granted in
tandem with an Option, upon the expiration of the related Option.
(C) ACCELERATION OF EXERCISE TIME. The Committee, in its sole discretion,
shall have the right (but shall not in any case be obligated), exercisable at
any time after the Date of Grant, to permit the exercise of any Option or Stock
Appreciation Right prior to the time such Option or Stock Appreciation Right
would otherwise become exercisable under the terms of the related Award
Agreement.
(D) EXTENSION OF EXERCISE TIME. In addition to the extensions permitted
under Section 6.03(e) in the event of Termination of Employment, the Committee,
in its sole discretion, shall have the right (but shall not in any case be
obligated), exercisable on or at any time after the Date of Grant, to permit the
exercise of any Option or Stock Appreciation Right after its expiration date
described in Section 6.03(e), subject, however, to the limitations described in
Sections 6.03(b)(i), (iii) and (iv).
(E) EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS UPON TERMINATION OF
EMPLOYMENT.
(I) TERMINATION OF VESTED OPTIONS AND STOCK APPRECIATION RIGHTS UPON
TERMINATION OF EMPLOYMENT. The following provisions shall apply to all Options
and Stock Appreciation Rights unless the applicable Award Agreement shall
provide otherwise:
(A) TERMINATION. In the event of Termination of Employment of
a Participant other than by reason of death, disability or
Retirement, the right of the Participant to exercise any Option or
Stock Appreciation Right shall terminate on the date of such
Termination of Employment, unless the exercise period is extended by
the Committee in accordance with Section 6.03(d).
(B) DISABILITY. In the event of a Participant's Termination of
Employment by reason of disability, the right of the Participant to
exercise any Option or Stock Appreciation Right which he or she was
entitled to exercise upon Termination of Employment (or which became
exercisable at a later date pursuant to Section 6.03(e)(ii)) shall
terminate twelve months after the date of such Termination of
Employment, unless the exercise period is extended by the Committee
in accordance with Section 6.03(d). Notwithstanding the foregoing,
if, upon the disability of the Participant, the Participant's age
plus years of continuous service with the Company and its affiliates
and predecessors (as combined and rounded to the nearest month)
equal 65 or more, then all of his Options and Stock Appreciation
Rights shall be exercisable on the date of such disability, for the
exercise period stated above. In no event, however, may any Option
or Stock Appreciation Right be exercised later than the date of
expiration of the Option determined pursuant to Section 6.03(b)(i),
(iii) or (iv).
(C) RETIREMENT. In the event of a Participant's Termination of
Employment by reason of Retirement, the right of the Participant to
exercise any Option or Stock Appreciation Right which he or she was
entitled to exercise
<PAGE>
upon Termination of Employment (or which became exercisable at a
later date pursuant to Section 6.03(e)(ii)) shall terminate three
months after the date of such Termination of Employment, unless the
exercise period is extended by the Committee in accordance with
Section 6.03(d). Notwithstanding the foregoing, if, upon the
retirement of the Participant, the Participant's age plus years of
continuous service with the Company and its affiliates and
predecessors (as combined and rounded to the nearest month) equal
65 or more, then all of his Options and Stock Appreciation Rights
shall be exercisable on the date of such retirement, for the
exercise period stated above. In no event, however, may any Option
or Stock Appreciation Right be exercised later than the date of
expiration of the Option determined pursuant to Section 6.03(b)
(i), (iii) or (iv).
(D) DEATH. In the event of the death of a Participant while
employed by the Company or a Subsidiary or within any additional
period of time from the date of the Participant's Termination of
Employment and prior to the expiration of any Option or Stock
Appreciation Right as provided pursuant to Section 6.03(e)(i)(B) or
(C) or Section 6.03(d) above, to the extent the right to exercise
the Option or Stock Appreciation Right was accrued as of the date of
such Termination of Employment and had not expired during such
additional period, the right of the Participant's Beneficiary to
exercise the Option or Stock Appreciation Right shall terminate
twelve months after the date of the Participant's death, unless the
exercise period is extended by the Committee in accordance with
Section 6.03(d). In no event, however, may any Option or Stock
Appreciation Right be exercised later than the date of expiration of
the Option determined pursuant to Section 6.03(b)(i), (iii) or (iv).
(II) TERMINATION OF UNVESTED OPTIONS OR STOCK APPRECIATION RIGHTS
UPON TERMINATION OF EMPLOYMENT. Subject to Section 6.03(c), and except as
otherwise expressly provided pursuant to Section 6.03(e)(1)(B) or (C), to
the extent the right to exercise an Option or a Stock Appreciation Right,
or any portion thereof, has not accrued as of the date of Termination of
Employment, such right shall expire at the date of such Termination of
Employment.
6.04 EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer or employee of the Company designated in the
Award Agreement at or before the close of business on the expiration date of the
Award. The Purchase Price of shares purchased upon exercise of an Option granted
under the Plan shall be paid in full in cash by the Participant pursuant to the
Award Agreement; provided, however, that the Committee may (but shall not be
required to) permit payment to be made by delivery to the Company of either (a)
shares of Common Stock (which may include Restricted Shares or shares otherwise
issuable in connection with the exercise of the Option, subject to such rules as
the Committee deems appropriate) or (b) any combination of cash and Common Stock
or (c) such other consideration as the Committee deems appropriate and in
compliance with applicable law (including payment in accordance with a cashless
exercise program under which, if so instructed by a Participant, shares of
Common Stock may be issued directly to the Participant's broker or dealer upon
receipt of an irrevocable written notice of exercise from the Participant). In
the event that any shares of Common Stock shall be transferred to the Company to
satisfy all or any part of the Purchase Price, the part of the Purchase Price
deemed to have been satisfied by such transfer of shares of Common Stock shall
be equal to the product derived by multiplying the Fair Market Value as of the
date of exercise times the number of shares of Common Stock transferred to the
Company. The Participant may not transfer to the Company in satisfaction of the
Purchase Price any fractional share of Common Stock. Any part of the Purchase
Price paid in cash upon the exercise of any Option shall be added to the general
funds of the Company and may be used for any
<PAGE>
proper corporate purpose. Unless the Committee shall otherwise determine, any
shares of Common Stock transferred to the Company as payment of all or part of
the Purchase Price upon the exercise of any Option shall be held as treasury
shares.
6.05 CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Options and
Stock Appreciation Rights outstanding on the date of such Change in Control
shall become immediately and fully exercisable. The provisions of this Section
6.05 shall not be applicable to any Options or Stock Appreciation Rights granted
to a Participant if any Change in Control results from such Participant's
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of Common Stock or Company Voting Securities.
ARTICLE VII
TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
7.01 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the Committee
have the power to grant any Award under the Plan the terms of which are contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 7.03
and Section 7.07, the terms of any Award granted under the Plan may not be
changed after the Date of Grant of such Award so as to materially decrease the
value of the Award without the express written approval of the holder.
7.02 AWARD AGREEMENT. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or the Participant shall have received and acknowledged notice of the
Award authorized by the Committee expressly granting the Award to such person
and containing provisions setting forth the terms of the Award.
7.03 MODIFICATION OF AWARD AFTER GRANT. No Award granted under the Plan to
a Participant may be modified (unless such modification does not materially
decrease the value of that Award) after its Date of Grant except by express
written agreement between the Company and such Participant, provided that any
such change (a) may not be inconsistent with the terms of the Plan, and (b)
shall be approved by the Committee.
7.04 LIMITATION ON TRANSFER. A Participant's rights and interest under the
Plan may not be assigned or transferred other than by will or the laws of
descent and distribution and, during the lifetime of a Participant, only the
Participant personally (or the Participant's personal representative) may
exercise rights under the Plan. The Participant's Beneficiary may exercise the
Participant's rights to the extent they are exercisable under the Plan following
the death of the Participant. Notwithstanding the foregoing, the Committee may
grant Non-Qualified Stock Options that are transferable, without payment of
consideration, to immediate family members of the Participant or to trusts or
partnerships for such family members or such other parties as the Committee may
approve (as evidenced by the applicable Award Agreement or an amendment
thereto), and the Committee may also amend outstanding Non-Qualified Stock
Options to provide for such transferability.
7.05 TAXES. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award or with
<PAGE>
respect to any income recognized upon a disqualifying disposition of shares
received pursuant to the exercise of an Incentive Stock Option, and the Company
may defer payment of cash or issuance of shares upon exercise or vesting of an
Award unless indemnified to its satisfaction against any liability for any such
tax. The amount of such withholding or tax payment shall be determined by the
Committee and shall be payable by the Participant in cash at such time as the
Committee determines; provided, however, that with the approval of the
Committee, the Participant may elect to meet his or her withholding requirement
by delivering (actually or by attestation) to the Company that number of
previously acquired shares of Common Stock, or by having withheld from such
Award at the appropriate time that number of shares of Common Stock, rounded up
to the next whole share, the Fair Market Value of which is equal to the amount
of withholding taxes due.
7.06 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Committee and
the Participant approve.
7.07 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(A) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such shares,
the number and kind of shares available for Awards subsequently granted
under the Plan and the maximum number of shares in respect of which Awards
can be made to any Participant in any calendar year shall be appropriately
adjusted to reflect any stock dividend, stock split, combination or
exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the
Awards granted under the Plan. The Committee shall have the power and sole
discretion to determine the amount of the adjustment to be made in each
case.
(B) MERGER. In the event of a Merger in which the Company is not the
surviving corporation or pursuant to which a majority of the shares which
are of the same class as the shares that are subject to outstanding Awards
are exchanged for, or converted into, or otherwise become shares of
another corporation or other consideration, the Committee shall have the
sole discretion to determine that (i) the surviving, continuing, successor
or purchasing corporation, as the case may be (the "Acquiring
Corporation"), will either assume the Company's rights and obligations
under outstanding Award Agreements or substitute awards in respect of the
Acquiring Corporation's stock for outstanding Awards or (ii) the
outstanding Awards shall be cancelled in exchange for such consideration
as the Committee shall approve (based on the value of the consideration
received in the Merger by holders of the same class of shares that are
subject to outstanding Awards).
(C) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED COMPANIES. After
any merger in which the Company or a Subsidiary shall be a surviving
corporation, the Committee may grant substituted options under the
provisions of the Plan, pursuant to Section 424 of the Code, replacing old
options granted under a plan of another party to the merger whose shares
of stock subject to the old options may no longer be issued following the
merger. The manner of application of the foregoing provisions to such
options and any appropriate adjustments shall be determined by the
Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject
to any Options.
7.08 LEGAL COMPLIANCE. Shares of Common Stock shall not be issued
hereunder unless the issuance and delivery of such shares shall comply with
applicable laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
<PAGE>
7.09 NO RIGHT TO EMPLOYMENT. No employee or other person shall have any
claim of right to be granted an Award under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any of its Subsidiaries.
7.10 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit
plan applicable to the Participant which is maintained by the Company or any of
its Subsidiaries, except as may be provided under the terms of such plans or
determined by the Board.
7.11 GOVERNING LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of the State of Delaware and construed in
accordance therewith.
7.12 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
7.13 CAPTIONS. The captions (i.e., all Section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions had been
used in the Plan.
7.14 SEVERABILITY. Whenever possible, each provision in the Plan and every
Award at any time granted under the Plan shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of the Plan
or any Award at any time granted under the Plan shall be held to be prohibited
by or invalid under applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (b) all other provisions of the Plan,
such Award and every other Award at any time granted under the Plan shall remain
in full force and effect.
7.15 AMENDMENT AND TERMINATION.
(A) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time. No termination or amendment of the Plan may,
without the consent of the Participant to whom any Award shall theretofore
have been granted under the Plan, materially adversely affect the right of
such individual under such Award.
(B) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall
not have any other effect and any Award outstanding at the time of the
termination of the Plan may be exercised after termination of the Plan at
any time prior to the expiration date of such Award to the same extent
such Award would have been exercisable had the Plan not been terminated.
EXHIBIT 10.2
AMENDMENT AGREEMENT
This Amendment Agreement is made this 9th day of June 1999 between
Manufacturers and Traders Trust Company, a New York banking organization having
its chief executive office at One M&T Plaza, Buffalo, New York 14240, (the
"Bank") and American Locker Group Incorporated, a Delaware business corporation
having its chief executive office at 608 Allen Street, P.O. Box 1000, Jamestown,
New York 14702-1000, (the "Borrower").
WHEREAS, the Bank and the Borrower previously entered into a
Corporate Term Loan Agreement dated August 30, 1991, which was amended by (1) an
Amendment Agreement dated as of May 1, 1994, (2) an Amendment Agreement dated
March 12, 1996 and (3) an Amendment Agreement dated as of August 22, 1997 (as so
amended, the "Loan Agreement"); and
WHEREAS, the Bank and the Borrower now desire to amend certain
provisions of the Loan Agreement;
NOW, THEREFORE, effective on the date of this Amendment Agreement,
the Bank and the Borrower agree that:
1. A new clause (jiii) to read "(jiii) Loan III," is added to
Section 1 of the Loan Agreement after clause (jii) of such Section 1.
.
<PAGE>
2. There is added to the Loan Agreement after Section 2B thereof a
new Section 2C to read as follows:
2C. LOAN III.
a. MAKING AND OBTAINING LOAN III. Upon and subject to each
term and condition of this Agreement, the Bank shall
make Loan III to the Borrower, and the Borrower shall
obtain Loan III from the Bank. The principal amount of
Loan III shall be $3,000,000. The Borrower may obtain
Loan III in a series of advances.
b. TERMINATION OF OBLIGATION. Any obligation of the Bank to
make Loan III or any advance of any portion thereof
shall terminate no later than June 30, 2000.
c. REPAYMENT. The Borrower shall repay the outstanding
principal amount of Loan III on July 1, 2000 to the Bank
in 60 monthly installments, with the first of such
installments to become due on August 1, 2000 and one of
such installments to become due on the same day of each
succeeding calendar month through July 1, 2005, when the
Borrower shall repay the outstanding principal amount of
Loan III to the Bank and pay to the Bank all interest
owing pursuant to this Agreement in connection with Loan
III and remaining unpaid and all other amounts owing by
the Borrower to the Bank pursuant to this Agreement in
connection with Loan III and remaining unpaid. Such
installments shall consist of 60 installments equal in
amount or 59 installments equal in amount followed by a
final installment as nearly equal in amount to the other
59 installments as possible.
d. OPTIONAL REPAYMENT IN ADVANCE. The Borrower shall have
the option of repaying the principal amount of Loan III
to the Bank in advance in full or in part at any time
and from time to time; provided, however, that (i) the
amount of any such repayment in part shall be an
integral multiple of $50,000 and (ii) upon making any
such repayment in full the Borrower shall pay to the
Bank all interest owing pursuant to this Agreement in
connection with Loan III and remaining unpaid and all
other amounts owing by the Borrower to the Bank pursuant
to this Agreement in connection with Loan III and
remaining unpaid. Each such repayment in part shall be
applied to the installments of the principal amoun t of
Loan III in the inverse order of such installments
becoming due.
<PAGE>
e. INTEREST. From and including the date Loan III is made
to but not including the date the outstanding principal
amount of Loan III is repaid in full, the Borrower shall
pay to the Bank interest, calculated on the basis of a
360-day year for the actual number of days of each year
(365 or 366, as applicable), on such outstanding
principal amount at a rate per year that shall (i) on
each day beginning before the maturity, whether by
acceleration or otherwise, of such outstanding principal
amount be the rate in effect such day as the Bank's
Prime Rate and (ii) on each day subsequent to the last
day described in clause (i) of this sentence be 3% above
the rate in effect such subsequent day as the Bank's
Prime Rate; provided, however, that (A) in no event
shall such interest be payable at a rate in excess of
the maximum rate permitted by applicable law and (B)
solely to the extent necessary to result in such
interest not being payable at a rate in excess of such
maximum rate, any amount that would be treated as part
of such interest under a final judicial interpretation
of applicable law shall be deemed to have been a mistake
and automatically canceled, and, if received by the
Bank, shall be refunded to the Borrower, it being the
intention of the Bank and of the Borrower that such
interest not be payable at a rate in excess of such
maximum rate. Except as otherwise provided in Section
2Cc or 2Cd of this Agreement, payments of such interest
shall become due on the last day of each calendar month,
beginning on the first day of the first calendar month
after the calendar month in which Loan III or the first
advance of any portion thereof is made.
f. GENERAL PROVISIONS AS TO REPAYMENT AND PAYMENT.
Repayment of the principal amount of Loan III, payment
of all interest owing pursuant to this Agreement in
connection with Loan III and payment of all other
amounts owing by the Borrower to the Bank pursuant to
this Agreement in connection with Loan III shall be made
in lawful money of the United States and in immediately
available funds at the banking office of the Bank
located at One Fountain Plaza, Buffalo, New York, or at
such other office of the Bank as may at any time and
from time to time be specified in any notice delivered,
given or sent to the Borrower by the Bank. No such
repayment or payment shall be deemed to have been
received by the Bank until received by the Bank at the
office of the Bank determined in accordance with the
preceding sentence, and any such repayment or payment
received by the Bank at such office after 2:00 P.M. on
any day shall be deemed to have been received by the
Bank at the time such office opens for business on the
next business day of the Bank. If the time by which any
of the principal amount of Loan III is to be repaid is
extended by operation of law or otherwise,
<PAGE>
the Borrower shall pay interest on the outstanding
portion thereof during such period of extension as
provided in Section 2Ce of this Agreement.
g. NON-USAGE FEE. For each period (i) beginning on the date
of this Agreement and ending on the last day of the
calendar quarter containing such date or (ii) consisting
of a calendar quarter beginning after the calendar
quarter containing the date of this Agreement and ending
on or before June 30, 2000, the Borrower shall pay to
the Bank on demand made by the Bank a non-usage fee
equal to the product obtained by multiplying (A) the
difference between $3,000,000 and the daily average
during such period of the outstanding principal amount
of Loan III first by (B) 1/4% and then by (C) the
fraction obtained by dividing the number of days in such
period by 360; provided, however, that (I) in no event
shall there be payable any such non-usage fee that would
result in interest being payable on the outstanding
principal amount of Loan III at a rate in excess of the
maximum rate permitted by applicable law and (II) solely
to the extent necessary to result in such interest not
being payable at a rate in excess of such maximum rate,
any amount that would be treated as part of such
interest under a final judicial interpretation of
applicable law shall be deemed to have been a mistake
and automatically canceled and, if received by the Bank,
shall be refunded to the Borrower, it being the
intention of the Bank and of the Borrower that such
interest not be payable at a rate in excess of such
maximum rate.
3. Section 3 of the Loan Agreement is amended in its entirety to
read as follows:
3. PREREQUISITES TO ANY LOAN. The obligation of the Bank to
make any Loan or any advance of any portion of Loan III
shall be conditioned upon the following:
a. NO DEFAULT. (i) There not having occurred or existed at
any time during the period beginning on the date of this
Agreement and ending at the time such Loan or advance is
to be made, and there not existing at the time such Loan
or advance is to be made, any Event of Default or
Potential Event of Default and (ii) the Bank not
believing in good faith that any Event of Default or
Potential Event of Default has so occurred or existed or
so exists;
b. REPRESENTATIONS AND WARRANTIES. (i) Each representation
and warranty made in this Agreement being true and
correct as of all times during
<PAGE>
the period beginning on the date of this Agreement and
ending at the time such Loan or advance is to be made
and as of the time such Loan or advance is to be made,
except to the extent updated in (A) a certificate
executed by the Chief Executive Officer or the President
or a Vice President of the Borrower and by the chief
financial officer of the Borrower and received by the
Bank before the time such Loan or advance is to be made
or (B) Exhibit A attached to and made a part of this
Agreement, (ii) each other representation and warranty
made to the Bank by or on behalf of the Borrower or by
or on behalf of any Subsidiary or Other Obligor before
the time such Loan or advance is to be made being true
and correct as of the date thereof, except to the extent
updated in (A) a certificate executed by the Chief
Executive Officer or the President or a Vice President
of the Borrower and by the chief financial officer of
the Borrower and received by the Bank before the time
such Loan or advance is to be made or (B) Exhibit A
attached to and made a part of this Agreement, (iii)
each financial statement provided to the Bank by or on
behalf of the Borrower or by or on behalf of any
Subsidiary or Other Obligor before the time such Loan or
advance is to be made being true and correct as of the
date thereof and (iv) the Bank not believing in good
faith that (A) any such representation or warranty,
except as so updated, was or is other than true and
correct as of any such time, or as of such date, of
determination of the truth and correctness thereof or
(B) any such financial statement was other than true and
correct as of the date thereof;
c. PROCEEDINGS. The Bank being satisfied as to each
corporate or other proceeding in connection with any
transaction contemplated by this Agreement; and
d. RECEIPT BY BANK. The receipt by the Bank at or before
the time such Loan or advance is to be made of the
following, in form and substance satisfactory to the
Bank: i. If such Loan is Loan I, a Promissory Note I,
appropriately completed and duly executed by the
Borrower;
ii. If such Loan is Loan II, a Promissory Note II,
appropriately completed and duly executed by the
Borrower;
ii(I). If such Loan is Loan III, a Promissory Note III,
appropriately completed and duly executed by the
Borrower;
<PAGE>
iii. A Ratification of General Guaranty Agreement,
appropriately completed and duly executed by
American Locker Security Systems, Inc.;
iv. A Ratification of General Guaranty Agreement,
appropriately completed and duly executed by
American Locker Company, Inc.;
v. A certificate executed by the Chief Executive
Officer or the President or a Vice President of
the Borrower and by the chief financial officer
of the Borrower and stating that (A) there did
not occur or exist at any time during the period
beginning on the date of this Agreement and
ending at the time such Loan or advance is to be
made, and there does not exist at the time such
Loan or advance is to be made, any Event of
Default or Potential Event of Default and (B)
each representation and warranty made in this
Agreement was true and correct as of all times
during the period beginning on the date of this
Agreement and ending at the time such Loan or
advance is to be made and is true and correct as
of the time such Loan or advance is to be made,
except to the extent updated in a certificate
executed by the Chief Executive Officer or the
President or a Vice President of the Borrower
and by the chief financial officer of the
Borrower and received by the Bank before the
time such Loan or advance is to be made;
vi. Evidence that each of the Borrower and all
Subsidiaries is at the time such Loan or advance
is to be made in good standing under the law of
the jurisdiction in which it is incorporated;
vii. A copy of the certificate or articles of
incorporation or other charter document of each
of the Borrower and all Subsidiaries certified
by its Secretary to be complete and accurate at
the time such Loan or advance is to be made;
viii. A copy of the by-laws or other
organizational document of each of the Borrower
and all Subsidiaries certified by its Secretary
to be complete and accurate at the time such
Loan or advance is to be made;
<PAGE>
ix. Evidence of the taking, and of the continuation
in full force and effect at the time such Loan
or advance is to be made, of each corporate or
other action of the Borrower or of any other
Person necessary to authorize the obtaining of
such Loan or advance by the Borrower, the
execution, delivery to the Bank and performance
of each Loan Document and the imposition or
creation of any security interest, mortgage and
other lien and encumbrance imposed or created
pursuant to any Loan Document;
x. Evidence that each requirement contained in any
Loan Document with respect to insurance is being
met at the time such Loan or advance is to be
made;
xi. Each additional writing required by any Loan
Document or deemed necessary or desirable by the
Bank at the sole option of the Bank; and
xii. Payment of all costs and expenses payable
pursuant to the first sentence of Section 8 of
this Agreement at or before the time such Loan
or advance is to be made.
4. Section 4a of the Loan Agreement is amended in its entirety to
read as follows:
a. USE OF PROCEEDS. The proceeds of Loan I and Loan II will
be used only (i) to refinance existing indebtedness of
the Borrower to the Bank in the approximate outstanding
principal amount of $950,000 and (ii) to repurchase
187,385 shares of stock of the Borrower from Thomas P.
Johnson and his family. The proceeds of the first
advance of any portion of Loan III will be used only to
refinance existing indebtedness of the Borrower to the
Bank in the approximate amount of $1,900,000 incurred to
finance the repurchase of shares of stock of the
Borrower. The proceeds of subsequent advances of any
portion of Loan III will be used only to repurchase
shares of stock of the Borrower.
5. Section 10j of the Loan Agreement is amended in its entirety to
read as follows:
j. LOAN. "Loan" means Loan I, Loan II or Loan III.
<PAGE>
6. There is added to the Loan Agreement after Section 10j(ii)
thereof a new Section 10j(iii) to read as follows:
j(iii). LOAN III. "Loan III" means a loan by the Bank to
the Borrower in the principal amount shown in Section
2Ca of this Agreement.
7. The references in the third sentence of Section 4f of the Loan
Agreement, the second sentence of Section 8 of the Loan Agreement, clause (i) of
Section 10h of the Loan Agreement and the first sentence of Section 11 of the
Loan Agreement to "either Loan" are changed to "any Loan."
8. The references in clause (ix) of Section 10h of the Loan
Agreement to "either Loan" are changed to "any Loan or any advance of any
portion of Loan III."
9. The Loan Agreement is changed by this Amendment Agreement only to
the extent that it is specifically amended by this Amendment Agreement, and, as
so amended, the Loan Agreement shall remain in full force and effect. Effective
on the date of this Amendment Agreement, references in the Loan Agreement to
"this Agreement" shall be deemed to be references to the Loan Agreement as
amended by this Amendment Agreement.
<PAGE>
IN WITNESS WHEREOF, the Bank and the Borrower have caused this
Amendment Agreement to be duly executed on the date shown at the beginning of
this Amendment Agreement.
MANUFACTURERS AND TRADERS
TRUST COMPANY
By /s/ RICHARD S. BAGOSY
------------------------------------------
AMERICAN LOCKER GROUP INCORPORATED
By /s/ EDWARD F. RUTTENBERG
------------------------------------------
Edward F. Ruttenberg, Chairman and
Chief Executive Officer
SIXTH AMENDMENT TO MANUFACTURING AGREEMENT
This Sixth Amendment made as of May 13, 1999, to Manufacturing
Agreement dated December 29, 1989 between SIGNORE, INC., a Delaware corporation
("Seller") and AMERICAN LOCKER SECURITY SYSTEMS, INC., a Delaware corporation
("Buyer").
WHEREAS, Seller and Buyer are parties to a Manufacturing Agreement
dated December 29, 1989, as amended by the First Amendment to Manufacturing
Agreement dated as of May 3, 1995, as further amended by the Second Amendment to
Manufacturing Agreement dated as of March 15, 1996, as further amended by the
Third Amendment to Manufacturing Agreement dated as of May 21, 1996, as further
amended by the Fourth Amendment to Manufacturing Agreement dated as of May 20,
1997, and as further amended by the Fifth Amendment to Manufacturing Agreement
dated as of May 19, 1998 (such Manufacturing Agreement, as so amended, the
"Amended Agreement"); and
WHEREAS, Seller and Buyer wish to make certain amendments to the
Amended Agreement.
NOW, THEREFORE, for good and valuable consideration and intending to
be legally bound hereby, Seller and Buyer agree as follows:
1. All defined terms used herein shall have the definitions set
forth in the Amended Agreement.
2. Buyer and Seller acknowledge that as of December 31, 1998, the
Remaining Inventory Value of Locker Inventory (as defined in
Section 3(f) of the Amended Agreement) was $1,353,988. In
accordance with the provisions of Section 3(f) of the Amended
Agreement, Buyer has paid to Seller the sum of $52,649,
receipt of which is acknowledged by Seller.
Such $52,649 payment is calculated as follows:
Actual Inventory 12/31/98 $1,353,988
Remaining Inventory Value 1/1/98 1,301,339
Payment Due from Buyer to Seller $ 52,649
==========
3. Buyer and Seller agree that Locker Inventory determined on a
pro forma basis as of December 31, 1998 as if all payments
required under Section 2 hereof had been made as of that date
was $1,353,988 (i.e. Remaining Locker Inventory as of January
1, 1998 of $1,301,339 plus the $52,649 payment made by Buyer
under Section 2 hereof).
4. Except as expressly provided herein, the Amended Agreement
shall remain unamended and in full force and effect.
<PAGE>
WITNESS the due execution hereof.
SIGNORE, INC.
By /s/ ALEX N. DITONTO
Title: Chairman and Chief Executive
Officer
AMERICAN LOCKER SECURITY SYSTEMS, INC.
By /s/ EDWARD F. RUTTENBERG
------------------------------------
Title: Chairman and Chief Executive
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
American Locker Group Incorporated
Financial Data Schedule
June 30, 1999
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000008855
<NAME> AMERICAN LOCKER GROUP INCORPORATED
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.0000
<CASH> 1,605,662
<SECURITIES> 0
<RECEIVABLES> 5,048,297
<ALLOWANCES> 221,723
<INVENTORY> 5,710,091
<CURRENT-ASSETS> 13,237,693
<PP&E> 9,738,702
<DEPRECIATION> 7,983,562
<TOTAL-ASSETS> 15,130,478
<CURRENT-LIABILITIES> 3,530,020
<BONDS> 1,933,322
0
0
<COMMON> 2,498,768
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<TOTAL-LIABILITY-AND-EQUITY> 15,130,478
<SALES> 17,886,811
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<CGS> 12,672,550
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<INTEREST-EXPENSE> 36,632
<INCOME-PRETAX> 2,509,685
<INCOME-TAX> 1,006,332
<INCOME-CONTINUING> 1,503,353
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,503,353
<EPS-BASIC> .61
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