SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to_______
Commission file number 1-7708
------
MARLTON TECHNOLOGIES, INC.
-----------------------------------------------
(Exact name of issuer as specified in its charter)
New Jersey 22-1825970
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2828 Charter Road Philadelphia PA 19154
--------------------- ------------ ------------- -------------
(Address of principal City State Zip
executive offices)
Issuer's telephone number (215) 676-6900
--------------
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 of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
---------------------- -------------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by court
Yes No
---------------------- -------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding
of each of the issuer's classes of common equity as of the last practicable
date: 7,668,499
---------
Transitional Small Business Disclosure Form (check one):
Yes No X
---------------------- --------------------
ITEM 1 FINANCIAL STATEMENTS
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands except share data)
September 30, December 31,
ASSETS 2001 2000
Current assets: ------------- ------------
Cash and cash equivalents $ 81 $ 749
Accounts receivable, net of allowance
of $478 and $836, respectively 15,417 20,891
Inventory 8,365 8,918
Prepaids and other current assets 2,278 3,314
Deferred income taxes 724 724
-------- --------
Total current assets 26,865 34,596
Investment in affiliates 1,530 1,813
Property and equipment, net of accumulated
depreciation of $7,701 and $6,623, respectively 4,858 5,135
Rental assets, net of accumulated depreciation
of $2,811 and $2,417, respectively 2,131 2,088
Goodwill, net of accumulated amortization
of $3,969 and $3,353, respectively 18,813 19,429
Other assets, net of accumulated amortization
of $1,027 and $1,196, respectively 534 766
-------- --------
Total assets $ 54,731 $ 63,827
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 255 $ 56
Accounts payable 3,411 6,230
Accrued expenses and other 9,452 12,940
-------- --------
Total current liabilities 13,118 19,226
-------- --------
Long-term debt, net of current portion 13,033 16,067
Other long-term liabilities -- 289
Deferred income taxes 339 339
-------- --------
Total liabilities 26,490 35,921
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par - shares authorized
10,000,000; no shares issued or outstanding
Common stock, $.10 par - shares authorized -- --
50,000,000; 7,618,499 and 7,428,429 issued, respectively 762 743
Additional paid-in capital 30,628 30,544
Accumulated deficit (3,037) (3,269)
-------- --------
28,353 28,018
Less cost of 5,000 treasury shares (112) (112)
-------- --------
Total stockholders' equity 28,241 27,906
-------- --------
Total liabilities and stockholders' equity $ 54,731 $ 63,827
======== ========
See notes to consolidated financial statements.
2
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(In thousands except per share data)
For the three months ended For the nine months ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
-------- -------- -------- --------
Sales $ 17,072 $ 21,482 $ 60,099 $ 71,324
Cost of sales 13,121 17,417 45,827 55,270
-------- -------- -------- --------
Gross profit 3,951 4,065 14,272 16,054
Expenses:
Selling 2,087 2,272 7,371 7,841
Administrative and general 1,843 3,606 5,421 7,835
-------- -------- -------- --------
3,930 5,878 12,792 15,676
-------- -------- -------- --------
Operating profit 21 (1,813) 1,480 378
Other income (expense):
Interest income and other income 23 27 94 68
Interest (expense) (268) (384) (905) (1,030)
(Loss) from investments in affiliates (203) (71) (283) (67)
-------- -------- -------- --------
(448) (428) (1,094) (1,029)
-------- -------- -------- --------
Income (loss) before provision for income taxes (427) (2,241) 386 (651)
(Benefit from) provision for income taxes (171) (986) 154 (222)
-------- -------- -------- --------
Net income (loss) $ (256) $ (1,255) $ 232 $ (429)
======== ======== ======== ========
Income (loss) per common share:
Basic $ (0.03) $ (0.17) $ 0.03 $ (0.06)
Diluted $ (0.03) $ (0.17) $ 0.03 $ (0.06)
See notes to consolidated financial statements.
3
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(In thousands except share data)
Common Stock Additional Total
----------------- Paid-in Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Equity
------ ------ ---------- ----------- -------- -------------
Balance at December 31, 2000 7,428,429 $ 743 $ 30,544 $ (3,269) $ (112) $ 27,906
Issuance of shares under
compensation arrangements 190,070 19 84 -- -- 103
Net income for the nine months
ended September 30, 2001 -- -- -- 232 -- 232
--------- ----- -------- -------- ------ --------
Balance at September 30, 2001 7,618,499 $ 762 $ 30,628 $ (3,037) $ (112) $ 28,241
========= ===== ======== ======== ====== ========
See notes to consolidated financial statements.
4
MARLTON TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
For the nine months ended September 30,
2001 2000
Cash flows from operating activities: -------- --------
Net income $ 232 $ (429)
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 2,261 2,027
Equity in income of affiliates 283 (2)
Decrease in deferred tax asset -- (986)
Other items (51) 100
Change in assets and liabilities:
(Increase) decrease in accounts receivable, net 5,474 (4,753)
Decrease in inventory 553 370
Decrease in prepaid and other assets 1,036 492
Increase (decrease) in accounts payable, accrued
expenses and other (6,307) 554
------- -------
Net cash provided by (used in) operating activities 3,481 (2,627)
------- -------
Cash flows from investing activities:
Guaranteed payments to sellers (18) (197)
Capital expenditures (1,016) (1,390)
------- -------
Net cash used in investing activities (1,034) (1,587)
------- -------
Cash flows from financing activities:
Payments for loan origination fees (60) (432)
Net borrowings from revolving credit facility -- 4,839
Principal payments on seller notes (55) --
Principal payments on revolving credit facility (3,000) --
------- -------
Net cash (used in) provided by financing activities (3,115) 4,407
------- -------
(Decrease) in cash and cash equivalents (668) 193
Cash and cash equivalents - beginning of period 749 836
------- -------
Cash and cash equivalents - end of period $ 81 $ 1,029
======= =======
Supplemental cash flow information:
Non-cash financing activity:
Equipment acquired under a capital lease $ 221 --
======= =======
Issuance of common stock for revolving credit facility -- $ 100
======= =======
See notes to consolidated financial statements.
5
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements included herein are unaudited and have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the financial statements reflect all adjustments (of a
normal and recurring nature) which are necessary to present fairly the financial
position, results of operations and cash flows for the interim periods. These
financial statements should be read in conjunction with the Annual Report to
Shareholders and Form 10-K for the year ended December 31, 2000.
2. PER SHARE DATA
The following table sets forth the computation of basic and diluted net income
per common share (in thousands except per share data):
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2001 2000 2001 2000
------ ------ ------ ------
Net income (loss) $(256) $(1,255) $ 232 $ (429)
===== ======= ====== ======
Weighted average common
shares outstanding used to compute
basic net income (loss) per common share 7,520 7,380 7,613 7,367
Additional common shares to be issued
assuming exercise of stock options,
net of shares assumed reacquired -- -- -- 38
Total shares used to compute diluted
net income (loss) per common share 7,520 7,380 7,613 7,405
===== ======= ====== ======
Basic net income (loss) per share $(.03) $ (.17) $ .03 $ (.06)
===== ======= ====== ======
Diluted net income (loss) per share $(.03) $ (.17) $ .03 $ (.06)
===== ======= ====== ======
Options and warrants to purchase 2,110,000 and 1,779,000 shares of common stock
were outstanding at September 30, 2001 and 2000, respectively, but were not
included in the computation of diluted income per common share because the
options' and warrants' exercise prices were greater than the average market
price.
3. INVENTORY
Inventory consists of the following (in thousands):
September 30, 2001 December 31, 2000
------------------ -----------------
Raw Materials $ 579 $ 252
Work In Process 3,362 4,718
Finished Goods 4,424 3,948
------ ------
$8,365 $8,918
====== ======
6
MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. SUBSEQUENT EVENT
At the Annual Meeting of Shareholders held on November 7, 2001, the Company's
shareholders approved the reincorporation of the Company from New Jersey to
Pennsylvania and the issuance for an aggregate of $2,650,000 of 5,300,000 shares
of the Company's common stock and warrants to purchase 5,300,000 shares of the
Company's common stock and related transactions, as more fully set forth in the
Company's Proxy Statement dated September 27, 2001. Consummation of these
transactions is subject to satisfaction of applicable conditions of closing.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued SFAS No. 141. "Business Combinations" (SFAS 141),
which supercedes Accounting Principles Board Opinion No. 16 "Business
Combinations" (APB 16) and SFAS No. 38 "Accounting for Preacquisition
Contingencies of Purchased Enterprises" (SFAS 38). It is expected that SFAS 141
will improve the transparency of the accounting and reporting for business
combinations by requiring that all business combinations be accounted for under
the purchase method. Use of the pooling-of-interests method is no longer
permitted. The Company adopted SFAS 141 in the third quarter of 2001. The
adoption of SFAS 141 is not expected to have a material effect on the Company's
financial position or results of operations.
In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets" (SFAS 142), which supercedes APB No. 17 "Intangible Assets". SFAS 142
requires that goodwill no longer be amortized to earnings, but instead be
reviewed for impairment. It is expected that this change will provide investors
with greater transparency regarding the economic value of goodwill and its
impact on earnings. The Company will adopt SFAS 142 effective January 1, 2002.
The Company recognized $0.6 million of goodwill amortization expense for each of
the nine month periods ended September 30, 2000 and 2001. These amounts are
disclosed for informational purposes only and are not necessarily reflective of
future reductions to amortization expense. The impact of adopting SFAS 142 has
not yet been determined.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. While the Company is currently evaluating the
impact of the adoption of SFAS No. 143 will have on its financial position and
results of operations, it does not expect such impact to be material.
In August 2001, the FASB issued SFAS No. 144, " Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supersedes SFAS No. 121 and is effective
for fiscal years beginning after December 15, 2001. While the Company is
currently evaluating the impact of adopting SFAS No. 144 will have on its
financial position and results of operations, it does not expect such impact to
be material.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Three months ended
(in thousands)
-------------------------------
September 30, September 30, % Increase/
2001 2000 (Decrease)
------------- ------------- -----------
Trade show exhibits group $ 7,486 $ 9,642 (22.4)%
Permanent and scenic displays group 9,586 11,840 (19.0)
------- ------- -----
Total net sales $17,072 $21,482 (20.5)%
======= ======= =====
Nine months ended
(in thousands)
-------------------------------
September 30, September 30, % Increase/
2001 2000 (Decrease)
------------- ------------- -----------
Trade show exhibits group $39,284 $44,111 (10.9)%
Permanent and scenic displays group 20,815 27,213 (23.5)
------- ------- -----
Total net sales $60,099 $71,324 (15.7)%
======= ======= =====
Total net sales decreased $4.4 million, or 20.5%, in the third quarter of 2001
and $11.2 million, or 15.7% in the first nine months of 2001, from the same
prior year periods. The third quarter 2001 decrease was comprised of a 22.4%
decrease in sales of trade show exhibits and a 19% decrease in sales of
permanent and scenic displays. The decrease for the first nine months of 2001
was comprised of a 10.9% decrease in sales of trade show exhibits and a 23.5%
decrease in sales of permanent and scenic exhibits. The decrease in sales of
trade show exhibits was largely due to the loss of an international client and
to reductions in some of the marketing trade show budgets of the Company's
clients in response to a slower economy. In addition, the events of September
11, 2001 led to subsequent convention and trade show cancellations. The decrease
in sales of permanent and scenic displays was primarily due to lower sales of
permanent themed displays previously manufactured at the Company's Orlando,
Florida operation. This manufacturing operation was consolidated with the
Company's Atlanta, Georgia production facility during the second quarter of
2001.
Operating Profit
The Company operated at a break-even operating profit level in the third quarter
of 2001 as compared with an operating loss of $1.8 million for the third quarter
of 2000. The Company recorded a bad debt provision of $1.4 million and an
inventory reserve of $0.6 million in the third quarter of 2000 related to
permanent and scenic displays customers. Third quarter 2001 operating profits
were depressed as a result of lower sales volume discussed above.
For the first nine months of 2001 operating profit was $1.5 million as compared
with $0.4 million for the same prior year period. The bad debt and inventory
reserve provisions reduced operating income in 2000 by $2 million and relocation
of the Company's Orlando, Florida operation reduced operating profits by
approximately $0.6 million in 2001. Excluding these provisions and the
relocation costs, operating profit was $2.1 million in the first nine month of
2001 as compared with $2.4 million in the same prior year period. This remaining
decrease was principally attributable to lower sales volume in 2001.
Selling expenses decreased to $2.1 million and $7.4 million from $2.3 million
and $7.8 million in the third quarter and first nine months of 2001 and 2000,
respectively. These decreases were largely due to lower variable selling
expenses as a result of the lower sales volume.
Administrative and general expenses were reduced to $1.8 million and $5.4
million from $3.6 million and $7.8 million in the third quarter and first nine
months of 2001 and 2000, respectively. These decreases were attributable to
several factors, including the $1.4 million bad debt provision recorded in the
third quarter of 2000, the mutual terminations of certain employment agreements
in the first quarter of 2001, and staff and cost reduction initiatives
implemented by management on a company-wide basis.
8
Other Income (Expense)
Interest expense decreased to $268,000 and $905,000 from $384,000 and $1,030,000
in the third quarter and first nine months of 2001 and 2000, respectively, as a
result of lower borrowings and lower interest rates.
A loss of $283,000 for the first nine months of 2001 from investments in
affiliates was principally attributable to a third quarter loss of $203,000
recognized for the Company's 25% minority investment in a portable exhibit
manufacturer.
Income Taxes
The benefit from income taxes, as a percentage of pre-tax losses, decreased to
40% in the third quarter of 2001 from 44% in the third quarter of 2000 and
increased to 40% in the first nine months of 2001 from 34% in the first nine
months of 2000. These changes were attributable in large part to non-taxable
income in the first quarter of 2001 and non-deductible goodwill amortization.
Net Income (Loss)
A net loss of $0.3 million was incurred for the third quarter of 2001 as
compared with a net loss of $1.3 million for the third quarter of 2000. The
third quarter 2001 loss was due in large part to lower sales volume and the
third quarter 2000 loss was primarily attributable to the bad debt and inventory
provisions.
For the first nine months of 2001 net income was $0.3 million as compared with a
net loss of $0.4 million for the same prior year period. This change was
primarily due to the changes in operating profit discussed above.
Backlog
The Company's backlog of orders decreased to approximately $19 million at
September 30, 2001 from approximately $22 million at September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased to $13.7 million at September 30, 2001
from $15.4 million at December 31, 2000. Lower accounts receivable attributable
to lower sales volume largely accounted for this decrease.
The Company had borrowings of $13 million under its $25 million revolving credit
facility at September 30, 2001 as compared with borrowings of $16 million at
December 31, 2000.
SUBSEQUENT EVENT
At the Annual Meeting of Shareholders held on November 7, 2001, the Company's
shareholders approved the reincorporation of the Company from New Jersey to
Pennsylvania and the issuance for an aggregate of $2,650,000 of 5,300,000 shares
of the Company's common stock and warrants to purchase 5,300,000 shares of the
Company's common stock and related transactions, as more fully set forth in the
Company's Proxy Statement dated September 27, 2001. Consummation of these
transactions is subject to satisfaction of applicable conditions of closing.
9
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued SFAS No. 141. "Business Combinations" (SFAS 141),
which supercedes Accounting Principles Board Opinion No. 16 "Business
Combinations" (APB 16) and SFAS No. 38 "Accounting for Preacquisition
Contingencies of Purchased Enterprises" (SFAS 38). It is expected that SFAS 141
will improve the transparency of the accounting and reporting for business
combinations by requiring that all business combinations be accounted for under
the purchase method. Use of the pooling-of-interests method is no longer
permitted. The Company adopted SFAS 141 in the third quarter of 2001. The
adoption of SFAS 141 is not expected to have a material effect on the Company's
financial position or results of operations.
In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets" (SFAS 142), which supercedes APB No. 17 "Intangible Assets". SFAS 142
requires that goodwill no longer be amortized to earnings, but instead be
reviewed for impairment. It is expected that this change will provide investors
with greater transparency regarding the economic value of goodwill and its
impact on earnings. The Company will adopt SFAS 142 effective January 1, 2002.
The Company recognized $0.6 million of goodwill amortization expense for each of
the nine month periods ended September 30, 2000 and 2001. These amounts are
disclosed for informational purposes only and are not necessarily reflective of
future reductions to amortization expense. The impact of adopting SFAS 142 has
not yet been determined.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. While the Company is currently evaluating the
impact of the adoption of SFAS No. 143 will have on its financial position and
results of operations, it does not expect such impact to be material.
In August 2001, the FASB issued SFAS No. 144, " Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supersedes SFAS No. 121 and is effective
for fiscal years beginning after December 15, 2001. While the Company is
currently evaluating the impact of adopting SFAS No. 144 will have on its
financial position and results of operations, it does not expect such impact to
be material.
OUTLOOK
The Company expects sales of trade show exhibits and sales of permanent/scenic
displays to decrease in the last three months of 2001 and in the first half of
2002 as compared with the same prior year periods. In view of current economic
conditions, the trade show exhibit client base of Fortune 1000 companies is
expected to tightly manage their marketing budgets, which may adversely impact
the Company's trade show exhibit sales and profit margins. Adversely affected
internet and technology-driven businesses, particularly in the Western Region,
have also led to a decline in trade show exhibit sales. In addition, the events
of September 11, 2001 may continue to reduce business travel and trade show
spending. The Company continues to explore new sales opportunities while
pursuing operating efficiency improvements and cost reduction initiatives.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. When used in this report, the
words "intends," "believes," "plans," "expects," "anticipates" and similar words
are used to identify these forward looking statements. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, there are certain important factors that could cause the Company's actual
results to differ materially from those included in such forward-looking
statements. Some of the important factors which could cause actual results to
differ materially from those projected include, but are not limited to: the
Company's ability to continue to identify and enter new markets and expand
existing business; continued availability of financing to provide additional
sources of funding for capital expenditure requirements, working capital and
investments; the effects of competition on products and pricing; growth and
acceptance of new product lines through the Company's sales and marketing
programs; changes in material prices from suppliers; changes in customers'
financial condition; the Company's ability to attract and retain competent
employees; the Company's ability to add and retain customers; changes in sales
mix; the Company's ability to integrate and upgrade technology; uncertainties
regarding accidents or litigation which may arise; the financial impact of
facilities consolidations; the impact from the events of September 11, 2001 on
business travel and trade show spending; and the effects of, and changes in the
economy, monetary and fiscal policies, laws and regulations, inflation and
monetary fluctuations as well as fluctuations in interest rates, both on a
national and international basis.
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's revolving credit facility bears a floating rate of interest, based
on LIBOR rates, plus an applicable spread. The Company had borrowings of $13
million under its $25 million revolving credit facility at September 30, 2001.
Fluctuations in foreign currency exchange rates do not significantly affect the
Company's financial position and results of operations.
ENVIRONMENTAL
The Company believes it is in compliance with federal, state and local
provisions regulating discharge of materials into the environment or otherwise
relating to protection of the environment. The Company has not been identified
by federal or state authorities as a potentially responsible party for
environmental clean-ups at any of its sites.
LITIGATION
The Company from time to time is a defendant and counterclaimant in various
lawsuits that arise out of, and are incidental to, the conduct of its business.
The resolution of pending legal matters should not have a material effect on the
financial position of the Company.
PART II - OTHER INFORMATION
Responses to Items 1 2, 3 and 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders of the Company was held on November 7, 2001.
At the Annual Meeting, Fred Cohen and William Hamilton were elected as directors
of the Company. Robert Ginsburg, Alan Goldberg and Seymour Hernes continued
their terms of office as directors of the Company after the Annual Meeting. The
matters voted on at the Annual Meeting and the results of voting are as follows:
For Withheld Authority
--- ------------------
1. Election of Directors
Fred Cohen 6,576,255 113,965
William Hamilton 6,589,055 100,865
2. Approval of Investment Transaction Proposal
to issue 5,300,000 shares of common stock
and warrants to purchase 5,300,000 shares of
common stock, and approve related
transactions, as more fully set forth in the
Company's Proxy Statement dated September For Against Abstain Non-Votes
27, 2001. --- ------- ------- ---------
5,073,912 173,216 12,534 1,430,258
3. Approval of Reincorporation Proposal to
merge the Company into a subsidiary in order
to change the Company's state of
incorporation from New Jersey to
Pennsylvania, as more fully set forth in the
Company's Proxy Statement dated September
27, 2001. 5,112,500 134,628 121,534 1,430,258
4. Approval of 2001 Equity Incentive Plan
Proposal as more fully set forth in the
Company's Proxy Statement dated September
27, 2001. 4,983,022 247,271 29,399 1,430,258
Consummation of the transactions contemplated by the Investment Proposal and
Reincorporation Proposal are subject to satisfaction of applicable conditions of
closing.
12
ITEM 6.
(a) Exhibits
The following document is filed as part of this report: 10(ee) -- 2001
Equity Incentive Plan -- Page 14.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period covered
by this report on Form 10-Q
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MARLTON TECHNOLOGIES, INC.
/s/ Robert B. Ginsburg
----------------------
Robert B. Ginsburg
President and Chief Executive Officer
/s/ Stephen P. Rolf
-------------------
Stephen P. Rolf
Chief Financial Officer
Dated November 13, 2001
13
MARLTON TECHNOLOGIES, INC.
2001 EQUITY INCENTIVE PLAN
SECTION 1. Purpose; Definitions. The purposes of the Marlton Technologies,
Inc. 2001 Equity Incentive Plan (the "Plan") are to: (a) enable Marlton
Technologies, Inc. (the "Company") and its affiliated companies to recruit and
retain highly qualified employees, directors and consultants; (b) provide those
employees, directors and consultants with an incentive for productivity; and (c)
provide those employees, directors and consultants with an opportunity to share
in the growth and value of the Company.
For purposes of the Plan, the following initially capitalized words and
phrases will be defined as set forth below, unless the context clearly requires
a different meaning:
a. "Affiliate" means, with respect to a Person, a Person that directly
or indirectly controls, or is controlled by, or is under common control with
such Person.
b. "Award" means a grant of Options or Restricted Shares pursuant to
the provisions of this Plan.
c. "Award Agreement" means, with respect to any particular Award, the
written document that sets forth the terms of that particular Award.
d. "Board" means the Board of Directors of the Company, as constituted
from time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board's administrative functions hereunder pursuant
to Section 2, references in this Plan to the "Board" will be deemed to also
refer to that Committee in connection with administrative matters to be
performed by that Committee.
e. "Cause" means (i) alcohol abuse or use of controlled drugs (other
than in accordance with a physician's prescription); (ii) refusal, failure or
inability to perform any material obligation or fulfill any duty (other than any
duty or obligation of the type described in clause (iv) below) to the Company
(other than due to a Disability), which failure, refusal or inability is not
cured within ten (10) days after delivery of notice thereof; (iii) gross
negligence or willful misconduct in the course of employment; (iv) any breach of
any obligation or duty to the Company or any of its Subsidiaries or Affiliates
(whether arising by statute, common law, contract or otherwise) relating to
confidentiality, noncompetition, nonsolicitation or proprietary rights; (v)
other conduct involving any type of disloyalty to the Company or any of its
Affiliates or Subsidiaries, including, without limitation, fraud, embezzlement,
theft or proven dishonesty; and (vi) conviction of (or the entry of a plea of
guilty or nolo contendere to) a misdemeanor involving moral turpitude or a
felony. Notwithstanding the foregoing, if a Participant and the Company (or any
of its Affiliates or Subsidiaries) have entered into an employment agreement,
consulting agreement or other similar agreement that specifically defines
"cause," then with respect to such Participant, "Cause" shall have the meaning
defined in that employment agreement, consulting agreement or other agreement.
14
f. "Change in Control" means (i) the sale, transfer, assignment or
other disposition (including by merger or consolidation, but excluding any sales
by stockholders made as part of an underwritten public offering of the common
stock of the Company) by stockholders of the Company, in one transaction or a
series of related transactions, of more than fifty percent (50%) of the voting
power represented by the then outstanding capital stock of the Company to one or
more Persons, (ii) the sale of substantially all the assets of the Company
(other than a transfer of financial assets made in the ordinary course of
business for the purpose of securitization), or (iii) the liquidation or
dissolution of the Company.
g. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
h. "Committee" means a committee appointed by the Board in accordance
with Section 2 of this Plan.
i. "Director" means a member of the Board.
j. "Disability" means a condition rendering an Optionee Disabled.
k. "Disabled" will have the same meaning as set forth in Section
22(e)(3) of the Code.
l. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
m. "Fair Market Value" means, as of any date: (i) if the Shares are not
traded in the over-the-counter market, the value of such Shares on that date, as
determined by the Board in its sole and absolute discretion; or (ii) if the
Shares are traded in the over-the-counter market, the Fair Market Value per
Share shall be the mean of the bid and asked prices for a Share on the relevant
valuation date as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotations ("NASDAQ") System), as applicable or, if there is no
trading on such date, on the next preceding date on which there were reported
Share prices. In the event Shares are listed on a national or regional
securities exchange or traded through the NASDAQ National Market, the Fair
Market Value of a Share shall be the closing price for a Share on the exchange
or on the NASDAQ National Market, as reported in The Wall Street Journal on the
relevant valuation date, or if there is no trading on that date, on the next
preceding date on which there were reported Share prices.
n. "Incentive Stock Option" means any Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
o. "Non-Employee Director" will have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board or the Committee may, to the
extent that it deems necessary to comply with Section 162(m) of the Code or
regulations thereunder, require that each "Non-Employee Director" also be an
"outside director" as that term is defined in regulations under Section 162(m).
p. "Non-Qualified Stock Option" means any Option that is not an
Incentive Stock Option.
15
q. "Option" means any option to purchase Shares (including Restricted
Shares, if the Board so determines) granted pursuant to Section 5 hereof.
r. "Participant" means an employee, consultant or Director of the
Company or any of its Affiliates to whom an Award is granted.
s. "Person" means an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.
t. "Restricted Shares" means Shares that are subject to restrictions
pursuant to Section 7 hereof.
u. "Share" means a share of Company's common stock, subject to
substitution or adjustment as provided in Section 3(c) hereof.
v. "Subsidiary" means, in respect of the Company, a subsidiary company,
whether now or hereafter existing, as defined in Sections 424(f) and (g) of the
Code.
SECTION 2. Administration. The Plan will be administered by the Board;
provided, however, that the Board may at any time appoint a Committee to perform
some or all of the Board's administrative functions hereunder; and provided
further, that the authority of any Committee appointed pursuant to this Section
2 will be subject to such terms and conditions as the Board may prescribe and
will be coextensive with, and not in lieu of, the authority of the Board
hereunder.
Any Committee established under this Section 2 will be composed of not
fewer than two members, each of whom will serve for such period of time as the
Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Securities Exchange
Act of 1934, all members of any Committee established pursuant to this Section 2
will be Non-Employee Directors. From time to time the Board may increase the
size of the Committee and appoint additional members thereto, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
Members of the Board who are eligible for Awards or have received Awards
may vote on any matters affecting the administration of the Plan or the grant of
Awards, except that no such member will act upon the grant of an Award to
himself or herself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is taken
with respect to the grant of Awards to himself or herself.
The Board will have full authority to grant Awards under this Plan. In
particular, the Board will have the authority:
a. to select the persons to whom Awards may from time to time be
granted hereunder (consistent with the eligibility conditions set forth in
Section 4);
b. to determine the type of Award to be granted to any person
hereunder;
16
c. to determine the number of Shares, if any, to be covered by each
such Award;
d. to establish the terms and conditions of each Award Agreement;
e. to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(d); and
f. to determine whether, to what extent and under what circumstances
Shares and other amounts payable with respect to an Award may be deferred either
automatically or at the election of the Participant.
The Board will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it, from
time to time, deems advisable; to interpret the terms and provisions of the Plan
and any Award issued under the Plan (and any Award Agreement); to amend the
terms of any Award Agreement, provided that the Participant consents to such
amendment; and to otherwise supervise the administration of the Plan. The Board
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent it deems necessary to
carry out the intent of the Plan.
All decisions made by the Board pursuant to the provisions of the Plan will
be final and binding on all persons, including the Company and Participants. No
member of the Board will be liable for any good faith determination, act or
omission in connection with the Plan or any Award.
SECTION 3. Shares Subject to the Plan.
a. Shares Subject to the Plan. The Shares to be subject to Options or
Restricted Shares under the Plan will be authorized and unissued Shares of the
Company, whether or not previously issued and subsequently acquired by the
Company. The maximum number of Shares that may be subject to Options or
Restricted Shares under the Plan is 2,000,000 and the Company will reserve for
the purposes of the Plan, out of its authorized and unissued Shares, such number
of Shares. Notwithstanding the foregoing, no individual may receive Awards with
respect to more than 750,000 Shares in any calendar year.
b. Effect of the Expiration or Termination of Awards. If and to the
extent that an Option expires, terminates or is canceled or forfeited for any
reason without having been exercised in full, the Shares associated with that
Option will again become available for grant under the Plan. Similarly, if any
Restricted Share is canceled, forfeited or repurchased for any reason, or if any
Share is withheld pursuant to Section 9(d) in settlement of a tax withholding
obligation associated with an Award, that Share will again become available for
grant under the Plan. Finally, if any Share is received in satisfaction of the
exercise price payable upon exercise of an Option, that Share will become
available for grant under the Plan.
c. Other Adjustment. In the event of any recapitalization, stock split
or combination, stock dividend or other similar event or transaction affecting
the Shares, equitable substitutions or adjustments will be made by the Board, in
its sole and absolute discretion, to the aggregate number, type and issuer of
the securities reserved for issuance under the Plan, to the number, type and
issuer of Shares subject to outstanding Options, to the exercise price of
outstanding Options, and to the number, type and issuer of Restricted Shares.
17
d. Change in Control. Notwithstanding anything to the contrary set
forth in this Plan, upon or in anticipation of any Change in Control, the Board
may, in its sole and absolute discretion and without the need for the consent of
any Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) cause all outstanding Options to
become fully vested and immediately exercisable; (ii) cause all outstanding
Restricted Shares to become non-forfeitable; (iii) cancel any Option in exchange
for an option to purchase common stock of any successor corporation, which new
option satisfies the requirements of Treas. Reg. ss. 1.425-1(a)(4)(i)
(notwithstanding the fact that the original Option may never have been intended
to satisfy the requirements for treatment as an Incentive Stock Option), (iv)
cancel any Restricted Shares in exchange for restricted shares of the common
stock of any successor corporation, (v) redeem any Restricted Share for cash
and/or other substitute consideration with a value equal to the Fair Market
Value of an unrestricted Share on the date of the Change in Control; (vi) cancel
any Option in exchange for cash and/or other substitute consideration with a
value equal to (A) the number of Shares subject to that Option, multiplied by
(B) the difference between the Fair Market Value per Share on the date of the
Change in Control and the exercise price of that Option; provided, however, the
Board may not take any action with respect to the Plan that would make a Change
in Control ineligible for pooling of interests accounting treatment or any
particular tax treatment if, in the absence of such action, the Change in
Control would qualify for such treatment and the Company intends to use such
treatment with respect to that Change in Control.
SECTION 4. Eligibility. Employees, directors, consultants, and other
individuals who provide services to the Company or its Affiliates are eligible
to be granted Awards under the Plan. Persons who are not employees of the
Company or a Subsidiary are eligible to be granted Awards, but are not eligible
to be granted Incentive Stock Options.
SECTION 5. Options. Options granted under the Plan may be of two types: (i)
Incentive Stock Options or (ii) Non-Qualified Stock Options. Any Option granted
under the Plan will be in such form as the Board may from time to time approve.
The Award Agreement evidencing any Option will incorporate the following
terms and conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board deems appropriate in its
sole and absolute discretion:
a. Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option will be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option will be not less than 100%
of the Fair Market Value of the Share on the date of the grant. However, any
Incentive Stock Option granted to any Participant who, at the time the Option is
granted, owns more than 10% of the voting power of all classes of shares of the
Company or of a Subsidiary will have an exercise price per Share of not less
than 110% of Fair Market Value per Share on the date of the grant.
b. Option Term. The term of each Option will be fixed by the Board, but
no Option will be exercisable more than ten (10) years after the date the Option
is granted. However, any Incentive Stock Option granted to any Participant who,
at the time such Option is granted, owns more than 10% of the voting power of
all classes of shares of the Company or of a Subsidiary may not have a term of
more than five (5) years. No Option may be exercised by any person after
expiration of the term of the Option.
18
c. Exercisability. Options will vest and be exercisable at such time or
times and subject to such terms and conditions as determined by the Board at the
time of grant. If the Board provides, in its discretion, that any Option is
exercisable only in installments, the Board may waive such installment exercise
provisions at any time at or after grant, in whole or in part, based on such
factors as the Board determines, in its sole and absolute discretion.
d. Method of Exercise. Subject to the exercise provisions under Section
5(c) and the termination provisions set forth in Section 6, Options may be
exercised in whole or in part at any time and from time to time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of Shares to be purchased. Such notice will be accompanied by payment
in full of the purchase price, either by certified or bank check, or such other
means as the Board may accept. As determined by the Board, in its sole
discretion, at or after grant, payment in full or in part of the exercise price
of an Option may be made in the form of previously acquired Shares based on the
Fair Market Value of the Shares on the date the Option is exercised; provided,
however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of previously acquired Shares may be authorized only at the
time the Option is granted.
No Shares will be issued upon exercise of an Option until full payment
therefor has been made. A Participant will not have the right to distributions
or dividends or any other rights of a shareholder with respect to Shares subject
to the Option until the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has made the representations
described in Section 9(a) hereof.
e. Incentive Stock Option Limitations. In the case of an Incentive
Stock Option, the aggregate Fair Market Value (determined as of the time of
grant) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year under
the Plan and/or any other plan of the Company or any Subsidiary will not exceed
$100,000. For purposes of applying the foregoing limitation, Incentive Stock
Options will be taken into account in the order granted. Any Option not meeting
such limitation will be treated for all purposes as a Non-Qualified Stock
Option.
f. Termination of Employment. Unless otherwise specified in the Award
Agreement, Options will be subject to the terms of Section 6 with respect to
exercise upon termination of employment.
g. Transferability of Options. Except as may otherwise be specifically
determined by the Board with respect to a particular Option, no Option will be
transferable by the Participant other than by will or by the laws of descent and
distribution, and all Options will be exercisable, during the Participant's
lifetime, only by the Participant or, in the event of his Disability, by his
personal representative.
19
SECTION 6. Termination of Service. Unless otherwise specified with respect
to a particular Option in the applicable Award Agreement, all Options will
remain exercisable after termination of employment only to the extent specified
in this Section 6.
a. Termination by Reason of Death. If a Participant's service with the
Company or any Affiliate terminates by reason of death, any Option held by such
Participant may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Board may determine, at or after grant, by the
legal representative of the estate or by the legatee of the Participant under
the will of the Participant, for a period expiring (i) at such time as may be
specified by the Board at or after the time of grant, or (ii) if not specified
by the Board, then twelve (12) months from the date of death, or (iii) if sooner
than the applicable period specified under (i) or (ii) above, then upon the
expiration of the stated term of such Option.
b. Termination by Reason of Disability. If a Participant's service with
the Company or any Affiliate terminates by reason of Disability, any Option held
by such Participant may thereafter be exercised by the Participant or his
personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Board may determine at or after
grant, for a period expiring (i) at such time as may be specified by the Board
at or after the time of grant, or (ii) if not specified by the Board, then
twelve (12) months from the date of termination of service, or (iii) if sooner
than the applicable period specified under (i) or (ii) above, then upon the
expiration of the stated term of such Option.
c. Cause. If a Participant's service with the Company or any Affiliate
is terminated for Cause: (i) any Option not already exercised will be
immediately and automatically forfeited as of the date of such termination, and
(ii) any Shares for which the Company has not yet delivered share certificates
will be immediately and automatically forfeited and the Company will refund to
the Participant the Option exercise price paid for such Shares, if any.
d. Other Termination. If a Participant's service with the Company or
any Affiliate terminates for any reason other than death, Disability or Cause,
any Option held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such termination,
or on such accelerated basis as the Board may determine at or after grant, for a
period expiring (i) at such time as may be specified by the Board at or after
the time of grant, or (ii) if not specified by the Board, then 90 days from the
date of termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option.
SECTION 7. Restricted Shares.
a. Issuance. Restricted Shares may be issued either alone or in
conjunction with other Awards. The Board will determine the time or times within
which Restricted Shares may be subject to forfeiture, and all other conditions
of such Awards.
b. Awards and Certificates. The Award Agreement evidencing the grant of
any Restricted Shares will contain such terms and conditions, not inconsistent
with the terms of the Plan, as the Board deems appropriate in its sole and
absolute discretion. The prospective recipient of an Award of Restricted Shares
will not have any rights with respect to such Award, unless and until such
recipient has executed an Award Agreement and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such Award. The purchase price for Restricted Shares
may, but need not, be zero.
20
A share certificate will be issued in connection with each Award of
Restricted Shares. Such certificate will be registered in the name of the
Participant receiving the Award, and will bear the following legend and/or any
other legend required by this Plan, the Award Agreement or by applicable law:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE MARLTON
TECHNOLOGIES, INC. 2001 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED
INTO BETWEEN [THE PARTICIPANT] AND MARLTON TECHNOLOGIES, INC. (WHICH
TERMS AND CONDITIONS MAY INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER
RESTRICTIONS, REPURCHASE RIGHTS AND FORFEITURE CONDITIONS). COPIES OF
THAT PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF MARLTON
TECHNOLOGIES, INC. AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE
COMPANY.
Share certificates evidencing Restricted Shares will be held in custody
by the Company or in escrow by an escrow agent until the restrictions thereon
have lapsed. As a condition to any Restricted Share Award, the Participant may
be required to deliver to the Company a share power, endorsed in blank, relating
to the Shares covered by such Award.
c. Restrictions and Conditions. The Restricted Shares awarded pursuant
to this Section 7 will be subject to the following restrictions and conditions:
(i) During a period commencing with the date of grant of an Award of
Restricted Shares and ending at such time or times as specified by the Board
(the "Restriction Period"), the Participant will not be permitted to sell,
transfer, pledge, assign or otherwise encumber Restricted Shares awarded under
the Plan. The Board may condition the lapse of restrictions on Restricted Shares
upon the continued employment or service of the Participant, the attainment of
specified individual or corporate performance goals, or such other factors as
the Board may determine, in its sole and absolute discretion.
(ii) Consistent with Section 3(c), any distributions or dividends
paid in the form of securities with respect to Restricted Shares will be subject
to the same terms and conditions as the Restricted Shares with respect to which
they were paid, including, without limitation, the same Restriction Period.
21
(iii) Subject to the applicable provisions of the Award Agreement,
if a Participant's service with the Company terminates prior to the expiration
of the Restriction Period, all of that Participant's Restricted Shares which
then remain subject to forfeiture will be forfeited.
(iv) In the event of hardship or other special circumstances of a
Participant whose service with the Company is involuntarily terminated (other
than for Cause), the Board may, in its sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such Participant's
Restricted Shares, based on such factors as the Board may deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Shares (or if and when the restrictions applicable
to Restricted Shares lapse pursuant to Sections 3(d) or 7(c)(iv)), the
certificates for such Shares will be replaced with new certificates, without the
portion of restrictive legends described in Section 7(b) applicable to such
lapsed restrictions, and such new certificates will be promptly delivered to the
Participant, the Participant's representative (if the Participant has suffered a
Disability), or the Participant's estate or heir (if the Participant has died).
SECTION 8. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but, except as otherwise provided in Section
3(d) of the Plan, no amendment, alteration or discontinuation will be made which
would impair the rights of a Participant with respect to an Award, without that
Participant's consent, or which, without the approval of such amendment within
one year (365 days) of its adoption by the Board, by a majority of the votes
cast at a duly held shareholder meeting at which a quorum representing a
majority of the Company's outstanding voting shares is present (either in person
or by proxy), would: (i) increase the total number of Shares reserved for the
purposes of the Plan (except as otherwise provided in Section 3(c)), or (ii)
change the persons or class of persons eligible to receive Awards.
SECTION 9. General Provisions.
a. The Board may require each Participant to represent to and agree
with the Company in writing that the Participant is acquiring any unregistered
securities of the Company for investment purposes and without a view to
distribution thereof and as to such other matters as the Board believes are
appropriate. The certificate evidencing any Award and any securities issued
pursuant thereto may include any legend which the Board deems appropriate to
reflect any restrictions on transfer and compliance with securities laws.
All certificates for Shares or other securities delivered under the
Plan will be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations, and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable Federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
22
b. Nothing contained in the Plan will prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
c. The adoption of the Plan will not confer upon any employee of the
Company or a Subsidiary any right to continued employment with the Company or
such Subsidiary, nor will it interfere in any way with the right of the Company
or such Subsidiary to terminate the employment of any of its employees at any
time.
d. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award under the Plan, the Participant will pay to
the Company, or make arrangements satisfactory to the Board regarding the
payment of, any Federal, state or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the Board,
the minimum required withholding obligations may be settled with Shares,
including Shares that are part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan will be conditioned
on such payment or arrangements and the Company will, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
SECTION 10. Effective Date of Plan. This Plan will become effective on the
date that it is approved by a majority of the votes cast at a duly held
shareholder meeting at which a quorum representing a majority of Company's
outstanding voting shares is present, either in person or by proxy.
SECTION 11. Term of Plan. This Plan will continue in effect until
terminated in accordance with Section 8; provided, however, that no Incentive
Stock Option will be granted hereunder on or after the tenth (10th) anniversary
of the date of shareholder approval of the Plan; but provided further, that
Incentive Stock Options granted prior to such tenth (10th) anniversary may
extend beyond that date.
SECTION 12. Invalid Provisions. In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any applicable law,
such invalidity or unenforceability will not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions will be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.
SECTION 13. Governing Law. This Plan and all Awards granted hereunder will
be governed by and construed in accordance with the laws and judicial decisions
of the Commonwealth of Pennsylvania, without regard to the application of the
principles of conflicts of laws.
SECTION 14. Board Action. Notwithstanding anything to the contrary set
forth in this Plan, any and all actions of the Board or Committee, as the case
may be, taken under or in connection with this Plan and any agreements,
instruments, documents, certificates or other writings entered into, executed,
granted, issued and/or delivered pursuant to the terms hereof, will be subject
to and limited by any and all votes, consents, approvals, waivers or other
actions of all or certain stockholders of the Company or other persons required
by:
23
a. the Company's Articles of Incorporation (as the same may be amended
and/or restated from time to time); and
b. the Company's Bylaws (as the same may be amended and/or restated
from time to time).
SECTION 15. Notices. Any notice to be given to the Company pursuant to the
provisions of the Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to time)
at its principal executive office, and any notice to be given to a Participant
shall be delivered personally or addressed to him or her at the address given
beneath his or her signature on his or her Award Agreement, or at such other
address as such Participant may hereafter designate in writing to the Company.
Any such notice shall be deemed duly given on the date and at the time delivered
via personal, courier or recognized overnight delivery service or, if sent via
telecopier, on the date and at the time telecopied with confirmation of delivery
or, if mailed, on the date five (5) days after the date of the mailing (which
shall be by regular, registered or certified mail). Delivery of a notice by
telecopy (with confirmation) shall be permitted and shall be considered delivery
of a notice notwithstanding that it is not an original that is received.
24