F O R M 10 - KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to _______________
Commission file number O-7267
WEB PRESS CORPORATION
Washington 91-0851298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22023 68th Avenue South, Kent, Washington 98032
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (253) 395-3343
Securities Registered Pursuant to 12(b) of the Act:
Title of each class Name of each exchange on which registered
None _________________________________________
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.025
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or such shorter period that the registrant was re-
quired to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
All reports during the preceding 12 months have been filed.
State issuer's revenues for its most recent fiscal year....$9,969,924.
As of February 26, 1999, 3,105,413 common shares were outstanding,
and the aggregate market value of the common shares (based upon
the closing bid price provided by the National Quotation Bureau,
Inc.) held by non-affiliates was approximately $567 thousand.
Documents incorporated by reference: Exhibits as described in
Part III, Item 13.
WEB PRESS CORPORATION
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-KSB
ITEM DESCRIPTION PAGE
PART I
1. BUSINESS........................................ 4
2. PROPERTIES...................................... 7
3. LEGAL PROCEEDINGS............................... 8
4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................ 8
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS............. 9
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 9
7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..... 14
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.......... 14
PART III
9. DIRECTORS AND EXECUTIVE OFFICERS
OF REGISTRANT................................... 15
10. EXECUTIVE COMPENSATION.......................... 18
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................... 18
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.. 20
13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K......................... 20
ANNUAL REPORT ON FORM 10-KSB
WEB PRESS CORPORATION
PART I
ITEM 1. BUSINESS
(A) General Development of Business
Web Press Corporation (herein referred to as "Web" or "Company")
was founded in late 1967 under the name "Web Press Aid" as a sole
proprietorship. The company was incorporated in November, 1969
under the laws of the State of Washington. Initially, the Com-
pany was involved primarily in the rebuilding and repair of web-
fed printing presses and related equipment. Shortly after incor-
poration, the Company undertook the development of a line of
printing press equipment of its own design. During 1972, the
Company commenced production of this equipment. While the manu-
facture of new equipment is now the Company's primary business,
it continues to deal in rebuilt and used equipment as an adjunct
to its new press sales. The Company also sells parts and service
for its new equipment. The sale of new and used presses ac-
counted for approximately 77% and 8%, respectively, of the Com-
pany's revenues in 1998. The Company's presses are primarily de-
signed to print on absorbent paper such as newsprint. Products
produced by the presses are newspapers (both broadsheet and tab-
loid sizes), shoppers, advertising inserts, and paperback books.
During 1984 and 1985, the Company developed four models of a new
high-speed press and added them to its product line. In 1992,
the Company added a new size cutoff to this line of presses, in-
creasing the number of models to six.
In 1995, the Company introduced and sold its first integrated
rollstand perfecting unit (IRU). The IRU has a single roll posi-
tion under the perfecting unit in place of a free-standing two-
position rollstand.
In June 1998, the Company introduced the Quad-Stack 4+4 perfect-
ing unit as a new module for the Atlas product line. The Quad-
Stack prints color simultaneously on both sides of the paper.
Its unique design results in a compact size for a 4+4 press.
(B) Financial Information About Segments
See Note 7 of Notes to Consolidated Financial Statements for in-
formation about the Company's operations by segment and geo-
graphic area for the years ended December 31, 1998 and 1997.
(C) Narrative Description of Business
Equipment which Web Press Corporation manufactures consists of
two basic products, the Web Leader and the Atlas. The Atlas is
made in six different models. The principal difference between
the Web Leader and the Atlas is that the Atlas is fifty percent
faster. Each press is composed of standard modules to unwind,
print, cutoff and fold the roll of paper into a finished product.
Each is arranged to meet the particular printer's requirements
for the number of pages, color, and size of his products. Fol-
lowing are descriptions of these modules:
PERFECTOR. Web's perfector is a rotary offset perfecting print-
ing press unit, consisting of two printing couples running "back-
to-back". Each perfector will print four broadsheet-size newspa-
per pages, in one color, on each revolution of the printing cou-
ples. Perfectors can be configured to print up to four colors.
They can print up to 32 broadsheet-size pages.
QUADRA-COLOR UNIT. Web's Quadra-Color unit consists of four
printing stations mounted around a common impression cylinder.
This unit prints four colors on two broadsheet-size pages at a
time. It offers better control over color register and thus is
capable of greater accuracy in color printing than conventional,
unit-to-unit methods for color printing. It is used in conjunc-
tion with the Company's other products to provide close register,
four-color capability in the printing system.
QUAD-STACK. Web's Quad-Stack unit consists of eight printing
stations positioned in two juxtaposed vertical stacks of four
printing stations each. The horizontal layout of each printing
station results in a compact 4+4 perfector that prints four col-
ors on four broadsheet-size pages at the same time. Like the
Quadra-Color, it offers excellent control over color register
resulting in superior color printing. It is available both with
or without an intergrated rollstand and is used in conjunction
with the Atlas product line.
FOLDER. Web's folder is used in conjunction with perfecting,
Quadra-Color and Quad-Stack units to fold the printed paper into
a finished product. The folder cuts the paper off in every plate
cylinder revolution and folds it in standard broadsheet-size
newspapers, tabloid-size papers, and shopping-flyer or magazine-
size products. The Company also produces two folder styles which
have the capability of making a second parallel fold to produce
"digest"-size signatures which are used in printing some books
and pamphlets.
TWO-POSITION ROLL ROLLSTANDS. Web's rollstand supports two, 42-
inch diameter rolls of 36-inch wide paper and is used in conjunc-
tion with the perfector and Quadra-Color units. The rollstand
controls the unwinding of the paper roll and feeds it to the
printing units under controlled tension.
The Company has an agreement granting it the exclusive right to
manufacture and sell in the United States and most other coun-
tries printing equipment designed by Color Impact International,
Inc. The grantor may purchase the equipment from the Company and
resell it in Russia and China. Another company has the exclusive
right to manufacture and sell the equipment in India. The agree-
ment commenced on August 17, 1998, and is for a period of 10
years. It requires the company to pay Color Impact International,
Inc. a license fee equal to 7 percent of the gross selling price
for equipment. The minimum license fee is $70 thousand in any 12-
month period from the commencement date. The Company may enhance
or modify the equipment and commingle it with equipment of its
own design.
Web Press Corporation markets its products through Company em-
ployed representatives in the United States and Canada. Foreign
sales are made through independent organizations in Latin Amer-
ica, Asia, Europe, and the Middle East.
The Company's presses are sold in a highly competitive world mar-
ket. Competition is based on a combination of price, service,
quality, and the versatility of the equipment. Web's presses are
priced competitively with similar products. The Company believes
that features incorporated in its presses, as well as the Com-
pany's policies of supporting its customers, will allow it to
continue to be very competitive. Web Press Corporation is the
only manufacturer in the United States producing a Quadra-Color
unit for its market.
The primary competitors of the Company are Goss Graphic Systems,
P.E.C. Corporation (King Press Division), Dauphin Graphic Ma-
chines, Inc. and Harris Graphics. Certain of these companies have
financial resources in excess of the Company's.
The most important materials employed in Web's product line are
steel and aluminum (plate and bar stock), tubing, bearings, and
rubber coverings. All are available through local suppliers.
The Company believes that its sources of supply for these materi-
als are adequate for its needs and that it is not substantially
dependent upon any one supplier. Lead times of up to six months
are required at some times for certain materials.
Web Press Corporation maintains an ongoing program of product de-
velopment and improvement. This program consists primarily of
technical improvements and supplementary developments which have
produced features and capabilities that management believes will
result in competitive marketing advantages for Web's product
line. In 1998, $450 thousand was expended for research and de-
velopment compared to $292 thousand in 1997.
Total employment of 63 persons as of December 31, 1998 compares
with approximately 50 at December 31, 1997.
Substantially all of the Company's operations are run by electri-
cal energy purchased from a local utility. The Company has not
experienced energy shortages and does not anticipate any diffi-
culties in the foreseeable future. Extended shortages of energy
would have an adverse impact on the Company.
Compliance with federal, state and local environmental protection
laws during 1998 had no material effect upon capital expendi-
tures, earnings, or the competitive position of Web Press Corpo-
ration.
The Company's computer software systems consist primarily of pro-
grams written for the Company. Certain of these programs will
need to be upgraded prior to the turn of the century to process
date sensitive items where the year is entered "00" for the year
2000. The Company has determined which programs will need to be
upgraded and held discussions with outside software vendors and
programmers familiar with the Company's computer software pro-
grams. Based on their advice, the Company does not believe up-
grading its current computer software programs to recognize the
year 2000 will present the Company with any significant problems.
The Company has a plan in place to make the necessary upgrades in
1999. The cost of upgrading the Company's computer software pro-
grams should be immaterial to the financial statements.
(D) Foreign Operations
The Company's foreign operations consist entirely of export sales
and related services originating at its facilities within the
United States. Export sales accounted for 26.2% of total sales
in 1998 and 56.7% in 1997. Further financial information relat-
ing to foreign operations for the two years ended December 31,
1998, is set forth in Note 7 (Segment Information) of the Notes
to Consolidated Financial Statements.
ITEM 2. PROPERTIES
OFFICE AND MANUFACTURING FACILITIES. The Company presently occu-
pies approximately 49,000 square feet of leased office and manu-
facturing space at 22023 68th Avenue South, Kent, Washington.
The term of the lease is five years, commencing in November 1998,
with a five-year renewal option. The monthly rental payment is
$16,155.
The Company has arrangements for small offices for each of its
three salesmen who are located in Burlington, Vermont; Blue
Springs, Missouri; and Charlotte, North Carolina.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION. On December 17, 1998, the Company received a Notice
of Deficiency for $70,316 from the Internal Revenue Service (IRS)
for federal income taxes for the calendar year 1990. In its 1993
federal tax return the Company carried back a loss to recover
taxes paid in 1990. The IRS has determined that in its 1993 fed-
eral tax return to Company should have included as taxable income
deposits received on sales that were delivered and installed in
1994 and included by the Company in its 1994 federal tax return.
The Company disputes the entire amount of the deficiency and on
the advice of its legal counsel has petitioned the United States
Tax Court for a redetermination of the deficiency. A date has
not been set for trial. Should the court sustain the IRS's posi-
tion, the Company would be able to carry the loss forward to off-
set future earnings. The result would be payment of interest by
the Company on the disputed amount.
There are no other material pending legal proceedings, other than
ordinary legal matters incidental to the Company's business, to
which the Company is a party or in which any of the Company's
property is the subject.
ENVIRONMENTAL PROCEEDINGS. There are no proceedings against the
Company involving federal, state or local statutes or ordinances
dealing with environmental protection.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(A) Principal Market, Stock Price, and Dividend Information
Although certain dealers regularly provide quotations on the Com-
pany's stock, actual trading activity is limited.
The following table sets forth the high and low bid quotations
per share for the Company's common stock for the periods indi-
cated. These figures were provided by the National Quotation Bu-
reau, LLC, and may reflect inter-dealer prices, without retail
mark-up, mark-down or commission. They do not necessarily repre-
sent actual transactions.
1998 1997
Quarter High Low High Low
First $ .53 $.25 $.375 $.375
Second 1.50 .25 .375 .1875
Third .8438 .375 .1825 .15
Fourth .75 .4688 .25 .17
The Company has paid no dividends during the two years ended De-
cember 31, 1998.
(B) Approximate Number of Holders of Common Stock
The number of holders of record for the Company's common stock as
of February 26, 1999 was 529.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Web Press operates in a segment of the graphic arts industry.
Its primary business is the manufacture and sale of rotary off-
set, web-fed printing presses. These products are designed for
the use in printing newspapers, shoppers, advertising inserts,
paperback books and similar products. The market is dominated by
four domestic manufacturers. Sales in the industry are sensitive
to advertising expenditures, long-term interest rates and news-
print shortages. The product is labor intensive; materials
shortages are rare; and technical obsolescence has not been a
significant factor.
OPERATING RESULTS
1998 Compared With 1997
Nineteen ninety-eight ended with total sales of $9.970 million,
an increase of $147 thousand from total sales of $9.822 million
in 1997. New equipment sales declined 6.3 percent in 1998 to
$7.654 million from $8.171 million in 1997. New equipment sales
in 1997 included a significant amount of auxiliary equipment. The
Company sold 11 of the new Quad-Stack four-color perfectors to 6
different customers in 1998; 9 perfectors to 4 domestic customers
and 2 perfectors to 2 international customers. The domestic ver-
sus international mix of new equipment sales changed 180 degrees
in 1998 from 1997 as domestic sales increased $2.972 million to
$5.881 million and international sales declined $3.490 million to
$1.773 million. The Company is particularly pleased with domestic
sales of new equipment, which were at their highest level since
1990. Undoubtedly some of the decline in international sales was
the result of the sluggish economies in Asia and Latin America.
Nevertheless, the Company was active in the international market
in 1998, and for its efforts already has, as of March 12, 1999,
firm international orders for new equipment in 1999 in excess of
1998 international sales for new equipment. Used equipment sales
in 1998 were $784 thousand, compared with $241 thousand in 1997.
In 1998, parts sales increased to $1.391 million from $1.265 mil-
lion in 1997.
The gross profit margin on total sales was 22.8 percent in 1998,
compared with 22.3 percent in 1997. The gross profit margin on
new equipment sales and parts sales both increased slightly in
1998, when compared with 1997. Used equipment sales in 1998 re-
sulted in a gross profit of $86 thousand, versus a loss of $94
thousand in 1997. In 1998, cost of sales included a write-down
of $83 thousand for obsolete parts and certain equipment, com-
pared to a write-down of $57 thousand in 1997. Also included in
cost of goods sold were higher research and development expenses,
which increased $157 thousand to $450 thousand in 1998, compared
with $292 thousand in 1997. Engineering design and testing of
the new Quad-Stack perfector are the reason for the increase.
Selling, general and administrative expenses increased $270 thou-
sand, or 19 percent, in 1998 from 1997. Administrative expenses
declined $28 thousand, while selling expenses increased $298
thousand. Promotional expenses for the new Quad-Stack accounted
for most of the increase in selling expenses. In 1998, the Com-
pany spent $319 thousand attending both domestic and interna-
tional trade shows, compared with $159 thousand in 1997. Adver-
tisements in several trade publications cost $148 thousand in
1998, an increase of $67 thousand from the $81 thousand spent in
1997. Sales commissions in 1998 increased $49 thousand to $87
thousand. Higher domestic sales of new equipment caused the in-
crease. Accrued termination costs caused 1997 administrative ex-
penses to be higher than 1998. Most other selling, general and
administrative costs did not change significantly.
In 1998, other income included a $55 thousand reimbursement for
expenses incurred by the Company in a previous year.
Interest expense decreased 17.1 percent in 1998 from 1997. Aver-
age short-term borrowings from the bank were $623 thousand in
1998, compared with $683 thousand in 1997. The average interest
rate on all of the Company's short-term borrowings from the bank
was 10.1 percent in 1998 and 10.3 percent in 1997. Earnings in
the DISC, on which the Company must pay interest, increased again
in 1998.
In 1998, the Company had pre-tax earnings of $444 thousand, com-
pared with $542 thousand in 1997. Net earnings after taxes were
$280 thousand in 1998, versus $355 thousand in 1997. Incremental
costs totaling approximately $396 thousand to design, test, ad-
vertise and display the new Quad-Stack caused the lower profits
in 1998 despite nominal increases in 1998 for both sales and the
gross profit margin.
1997 Compared with 1996
Sales grew 48.4 percent in 1997 to $9.822 million from 1996 sales
of $6.617 million. Most of the growth was in new equipment
sales, which increased $2.709 million in 1997 from 1996. New
equipment sales were 83.2 percent of total sales in 1997, com-
pared to 82.5 percent in 1996. Domestic sales of new equipment
in 1997 were $2.908 million, an increase of 84.5 percent from
1996. The increase included a significantly higher than normal
amount of auxiliary equipment. Domestic customers continued to
purchase smaller press configurations than international custom-
ers. International sales of new equipment continued to grow in
1997, increasing 35.4 percent from 1996 to $5.263 million--53.6
percent of total sales. The Company had major sales to customers
in Ireland, Greece, Romania, Germany and Argentina. Parts and
used equipment sales in 1997 grew too, increasing $454 thousand
and $43 thousand from 1996, respectively.
The gross profit margin on sales declined to 22.3 percent in
1997, from 26.9 percent in 1996. The primary reason for the
lower gross profit margin was a decrease in the average gross
profit percentage for new equipment to 27.9 percent in 1997 from
33.2 percent in 1996. The higher than normal amount of auxiliary
equipment sold in 1997, on which the Company only makes a nominal
gross profit, caused much of the decline. The gross profit per-
centage for new equipment in 1997 would have been 31.1 percent if
it had not included the auxiliary equipment. In 1997, used
equipment was sold for a total gross loss of $94 thousand, com-
pared to a gross profit of $59 thousand in 1996. Cost of sales
in 1997 included a write-down of $57 thousand for obsolete parts
and certain used equipment, compared to a write-down of $80 thou-
sand in 1996. The gross profit margin on parts increased 7.2
percent in 1997 due to higher selling prices.
Selling, general and administrative expenses declined by $387
thousand in 1997 from 1996. Expenses in 1996 included a $400
separation payment due the former president/general manager of
the Company. Selling expenses increased 7.2 percent in 1997.
Incentive compensation increased $44 thousand in 1997 due to
higher sales and promotional and travel expenses were $31 thou-
sand higher. Excluding the $400 thousand separation payment,
general and administrative expenses decreased 6.3 percent in 1997
compared to 1996. Compensation expense in 1997 was lower by $92
thousand. This saving was partially offset by higher bank fees
and accrued termination costs. Most other selling, general and
administrative expenses did not change significantly.
Interest expense increased 18.7 percent in 1997 from 1996. In
1997, average short-term borrowings from the bank were $683 thou-
sand, compared to $531 thousand in 1996. The average interest
rates on all of the Company's short-term borrowings from the bank
were 10.3 percent in 1997 and 10.8 percent in 1996. Higher de-
ferred earnings in the DISC, on which the Company must pay inter-
est, also contributed to the increase in interest expense in
1997.
In 1997, the Company had an operating profit of $542 thousand,
before federal income tax expense of $187 thousand. The Company
had an operating loss of $220 thousand in 1996, before a tax
benefit of $76 thousand. In 1996, the Company would have had a
$180 thousand pre-tax profit had it not been for the $400 thou-
sand separaton expense. Net earnings for the year were $355
thousand in 1997, compared to a net loss of $144 thousand in
1996. Higher sales in 1997 are the primary reason for the im-
provement in earnings.
1999
Because of the high value of each order for the company's equip-
ment and the irregular timing of orders, projections for particu-
lar time periods are very difficult to make. However, the addi-
tion of the Quad-Stack perfecting module to the Atlas product
line should help sales both domestically and internationally. In
1999, design features from the Quad-Stack will be incorporated
into two new modules, a two-high four-station perfector and stan-
dard two-station perfector.
Domestically, demand for printing press equipment continues to be
strong due to a growth rate for newspapers in advertising sales
that exceeds the overall growth rate for the general economy. The
Newspaper Association of America projects total newspaper adver-
tising to rise by " . . . 4.5-to-6 percent through 2000". Most
economists believe the domestic economy will continue to expand
at a 2.2-to-2.5 percent growth rate in 1999. The Company believes
that because advertising growth is expected to surpass the growth
in the overall economy, domestic sales of its presses will be ex-
cellent again in 1999. This forecast assumes that long-term in-
terest rates will not increase significantly during the year.
The economic problems in Asia resulted in the Company not making
any sales there in 1998. At best, the Company hopes for 1 or 2
sales from Asia in 1999. However, the Company has prospects for
its equipment in Western Europe, Eastern Europe, Africa, Central
America and South America. The Company expects export sales to
account for approximately 50 percent of sales in 1999.
LIQUIDITY
Net working capital was $3.355 million and the current ratio was
2.2:1 on December 31, 1998. Changes in working capital compo-
nents include a decrease in accounts receivable of $1.499 mil-
lion; an increase of $1.224 million in total inventories; an in-
crease of $188 thousand in accounts payable; and a decrease of
$547 thousand in accrued expenses. Net cash provided from opera-
tions was $711 thousand in 1998.
Raw materials and parts inventories, and work-in-progress inven-
tories increased $544 thousand and $606 thousand, respectively in
1998. Inventories to support production of the Quad-Stack caused
the increase in both categories. Finished goods inventory de-
clined $49 thousand. Used equipment inventories increased $123
thousand in 1998 due primarily to the Company purchasing $200
thousand of used equipment at the end of the year.
Funds provided by operations are the Company's primary source of
liquidity. In addition, the Company uses short-term debt from
two separate revolving lines of credit with a commercial bank to
finance fluctuating working capital requirements. On December
31, 1998, the Company had additional borrowing capacity of $800
thousand from its operating line of credit and $913 thousand from
its export working capital line of credit. Both of these lines
expire on April 15, 1999. The Company expects to finalize a new
financing facility prior to then.
CAPITAL RESOURCES
Total assets were $6.981 million on December 31, 1998. Stock-
holders' equity increased by $280 thousand; working capital in-
creased by $70 thousand; non-current deferred income taxes in-
creased by $36 thousand; and long-term debt increased by $69
thousand.
Long-term financing in the form of secured notes are used to ac-
quire manufacturing equipment. The Company incurred $421 thou-
sand of new long-term debt in 1998 to purchase a new CNC machine
tool and made payments of $310 thousand on its long-term debt.
The Company believes that its additional long-term borrowing ca-
pacity is sufficient to provide for orderly growth.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data filed as part of this
report are listed in the index appearing in Item 13 to this Form
10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are:
Name Position Age
G. B. Palmer President and Director 50
E. P. Beierlorzer Vice President of Engineering 59
and Director
R. G. Mercer Vice President of Manufacturing 57
and Director
R. B. Thompson Vice President of Technical 58
Services and Director
A. W. White Vice President of Purchasing 44
and Director
R. M. Sprague Director 59
P. F. Dunn Director 50
C. L. Mathison Vice President of Finance 56
and Secretary/Treasurer
C. A. Gath Vice President of Sales 58
There are no family relationships between any directors or ex-
ecutive officers of the registrant. Officers are appointed by
the Board of Directors and serve at its will or until they re-
sign.
BUSINESS EXPERIENCE:
G. B. Palmer
Mr. Palmer has been president and a director of the Company
since December 1996. He served as the Company's director of
manufacturing from August 1990 to December 1996, and has been
employed by the Company since 1986. Prior to joining the Com-
pany, he was director of manufacturing of Pacific Hoe Corpora-
tion. He is a metallurgical engineer.
E. P. Beierlorzer
Mr. Beierlorzer rejoined the Company as director of engineering
in June 1997. He was elected to the board of directors at that
time and appointed vice president of engineering in November
1997. From July 1996 to June 1997, he was a consultant. Mr.
Beierlorzer was chief engineer with the Ecopak division of Ran-
pak Corporation from August 1992 to June 1996. From March 1984
to August 1992, he was director of engineering for the Company.
He holds four patents for equipment design.
R. G. Mercer
Mr. Mercer has worked for the Company in manufacturing since
1972. He was elected to the board of directors in June 1997 and
appointed vice president of manufacturing in November 1997. He
was director of manufacturing from December 1996 to November
1997. From August 1990 to December 1996, he was production man-
ager.
R. B. Thompson
Mr. Thompson has worked for the Company in technical services
since 1970. He was elected to the board of directors in June
1997 and appointed vice president of technical services in No-
vember 1997. He was customer service manager from October 1985
to November 1997.
A. W. White
Mr. White has worked for the Company in purchasing since 1976.
He was elected to the board of directors in June 1997 and ap-
pointed vice president of purchasing in November 1997. He has
been the Company's purchasing manager for 21 years.
R. M. Sprague
Mr. Sprague has been a director of the Company since January
1997. He is the founder and owner of Sprague Metal Company, a
manufacturer of specialty sheet metal products. He founded the
company in 1974 and has been employed in the metal trades busi-
ness for over 30 years.
P. F. Dunn
Mr. Dunn has been a director of the Company since February 1997.
He has been employed by the Boeing Company in various financial
positions since 1973. He currently is tax manager for the the
State and Local Division.
C. L. Mathison
Mr. Mathison was appointed vice president of finance in June
1998. He has been secretary/treasurer of the Company since
January 1997, and the Company's controller since October 1979.
Prior to joining the Company, he was assistant controller of
Bayliner Marine Corporation.
C. A. Gath
Prior to joining the Company as vice president of sales in May
of 1985, Mr. Gath was manager of South and Western Operations in
the Cheshire Division of Xerox Corporation, a manufacturer of
addressing and labeling equipment. He started with that divi-
sion in 1976 as a sales representative and progressed through
several management positions in sales and marketing.
401(K) PLAN:
Effective January 1, 1988, the Company established a 401(K) plan
under the Internal Revenue Service Regulations. Employees are
eligible to participate after one year of service. Plan partici-
pants self-direct their investments choosing from five options
sponsored by Merrill Lynch. An employee who elects to partici-
pate may contribute in a year up to the lower of 15% of gross
pay or the dollar limit under the regulations, which in 1998 was
$10,000. The Company contributes a matching amount of 10% of
the first $1,000 contributed by an employee in a year. In addi-
tion, the Company may make a discretionary matching contribu-
tion. The total amount is determined by the Company's Board of
Directors and allocated to the participants based on their con-
tributions. There were no discretionary contributions in 1998
and 1997. Effective January 1, 1999, the Company increased the
matching contribution to 25% of the first $4,000 contributed by
the employee in a year.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate total cash compen-
sation accrued during the fiscal years ended December 31, 1998,
1997, and 1996 for the chief executive officer of the Company.
Annual Compensation
Long-Term All Other
Name/Principal Salary Bonus Compensation Compensation
Position Year ($) ($) $ $___
G.B. Palmer 1998 72,500 0 0 0
President/ 1997 65,614 0 0 0
General Manager 1996 55,000 0 0 0
The Compensation Committee has established an incentive plan for the
Company's president. Effective June 1, 1997, the president's base
salary is $72,500 per year. The president is to receive a bonus of 5%
of the Company's pre-tax earnings in excess of $600 thousand, plus .5%
of gross sales in excess of $11 million. No bonus was earned in 1998.
The vice president of sales is paid commissions equal to 1% of firm
orders accepted. The remainder of the officers and directors are
under no formal compensation agreements.
During 1998, there were no options outstanding under the Company's
Stock Option Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of February 26, 1999, informa-
tion with respect to the beneficial ownership of common stock of
the Company by each person who is known by the Company to have
owned beneficially more than 5% of the Company's common stock,
by each of its officers and directors, and by its officers and
directors as a group:
Percent
Name and Address Shares Owned Of Class
Alan W. White 551,400 17.76%
3025 196th Ave. Ct. E
Sumner, WA 98390
Rolynn G. Mercer 520,667 (1) 16.77%
14409 - 151 Pl. SE
Renton, WA 98056
Roy B. Thompson 513,000 (2) 16.52%
3901 NE 22
Renton, WA 98056
Gary B. Palmer 264,833 8.53%
285 Mt. Rainier Pl.
Issaquah, WA 98027
Edwin P. Beierlorzer 256,500 8.26%
4714 - 161 Ave. SE
Bellevue, WA 98006
William F. Carmody 155,800 (3) 5.02%
10826 Auburn Ave. S
Seattle, WA 98178
Rufus M. Sprague 63,200 2.04%
417 Milwaukee Blvd. N.
Pacific, WA 98047
Charles A. Gath 6,000 (4) .19%
640 Jasmine Pl. N.W.
Issaquah, WA 98027
Patrick F. Dunn -0- *
9768 Waters Ave. S
Seattle, WA 98118
Craig L. Mathison -0- *
4504 SW Director Pl.
Seattle, WA 98136
All Directors and Officers
as a Group (9 persons) 2,175,600 70.06%
* Less than 1%
(1) Includes 73,894 shares owned by Mr. Mercer's wife.
(2) Includes 54,605 shares owned by Mr. Thompson's wife.
(3) Includes 800 shares held as custodian for Mr. Carmody's
child as to which he disclaims beneficial ownership.
(4) Includes 1,000 shares held as custodian for Mr. Gath's
grandchild as to which he disclaims beneficial ownership.
Except as noted, each person named in the table is believed to
have sole voting and investment power over the shares owned.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No officer, director, nominee or associate of any officer, di-
rector, or nominee was indebted to the Company in an amount in
excess of $60,000 at any time during the fiscal year ended De-
cember 31, 1998.
R. M. Sprague, a director of the Company and owner of Sprague
Metal Company, has an ongoing relationship with the Company as a
supplier of sheet metal products and other miscellaneous parts.
This relationship is expected to continue in the future. During
the fiscal year ended December 31, 1998, the Company purchased
parts costing $167,531 from the Sprague Metal Company. The Com-
pany's management negotiates purchase orders and prices for the
items purchased. Management believes the prices paid are com-
petitive with other sources.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 13 is sub-
mitted as a separate section of this report.
(a) (3) The following exhibits are incorporated herein by ref-
erence:
(3) Articles of Incorporation and by-laws. Exhibit 1 to
Registrant's Form 10-K for the year ended December 31,
1980, File No. 0-7267.
(10) Material Contracts
(10a) Exhibit 3 to Registrant's Form 10-K for the year
ended December 31, 1980, File No. 0-7267 being
Web Press Corporation's Company Stock Option
Plan.
(10b) being the lease for the Company's facilities be-
tween Web Press Corporation (lessee) and William
J. Bennett (lessor) dated October 16, 1987.
(10c) being the Promissory Note for term financing be-
tween Web Press Corporation and Washington First
International Bank dated February 3, 1997.
(10d) being the Business Loan Agreement between Web
Press Corporation and Washington First Interna-
tional Bank dated April 3, 1998.
(10e) being the Promissory Note for term financing be-
tween Web Press Corporation and Washington First
International Bank dated February 18, 1998.
(10f) being the Borrowing Agreement between Web Press
Corporation and the Export-Import Bank of the
United States dated April 3, 1998.
The following exhibits are filed herewith:
(10g) being the agreement to manufacture and sell
equipment between Web Press Corporation and
Color Impact International, Inc.
(22) Subsidiaries of Registrant
(b) Report on Form 8-K
There have been no reports on Form 8-K filed during the
three months ended December 31, 1998
.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Se-
curities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
WEB PRESS CORPORATION
March 22, 1999 By: /s/ Gary B. Palmer
Gary B. Palmer
President and Chairman
of the Board
March 22, 1999 By: /s/ Craig L. Mathison
Craig L. Mathison
Vice President of Finance
(Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report was signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
/s/ Gary B. Palmer March 22, 1999
Gary B. Palmer
President and Chairman
of the Board
/s/ Edwin P. Beierlorzer March 22, 1999
Edwin P. Beierlorzer
Vice President of Engineering
and Director
/s/ Rolynn G. Mercer March 22, 1999
Rolynn G. Mercer
Vice President of Manufacturing
and Director
/s/ Roy B. Thompson March 22, 1999
Roy B. Thompson
Vice President of Technical Services
and Director
/s/Alan W. White March 22, 1999
Alan W. White
Vice President of Purchasing
and Director
/s/ Rufus M. Sprague March 22, 1999
Rufus M. Sprague
Director
/s/ Patrick F. Dunn March 22, 1999
Patrick F. Dunn
Director
WEB PRESS CORPORATION
FORM 10-KSB
ITEMS 7, 13(a) (1) AND (2)
INDEX OF FINANCIAL STATEMENTS
The following financial statements of the registrant and
its subsidiary required to be included in Item 7 are listed be-
low:
Page
Consolidated Financial Statements:
Report of Independent Certified Public
Accountants........................................... 24
Balance Sheet as of December 31, 1998................... 25
Statements of Operations for each of the two
years ended December 31, 1998......................... 27
Statements of Stockholders' Equity for each of
the two years ended December 31, 1998................. 28
Statements of Cash Flows for each of the two
years ended December 31, 1998......................... 29
Notes to Consolidated Financial Statements.............. 31
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Web Press Corporation
Kent, Washington
We have audited the accompanying consolidated balance sheet of
Web Press Corporation (a Washington corporation) and Subsidiary
as of December 31, 1998 and the related consolidated statements
of operations, stockholders' equity, and cash flows for the years
ended December 31, 1998 and 1997. These financial statements are
the responsibility of the Company's management. Our responsibil-
ity is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above pres-
ent fairly, in all material respects, the consolidated financial
position of Web Press Corporation and Subsidiary as of December
31, 1998, and the consolidated results of their operations and
their consolidated cash flows for the years ended December 31,
1998 and 1997, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
Grant Thornton LLP
Seattle, Washington
March 12, 1999
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS December 31, 1998
Current Assets:
Cash......................................... $ 6
Accounts receivable, less allowance for
doubtful accounts of $10 (Note 3).......... 1,974
Inventories (Notes 2 and 3).................. 3,974
Refundable income taxes (Note 4)............. 84
Deposits..................................... 26
Prepaid expenses............................. 45
------
Total Current Assets......................... 6,109
Machinery and Leasehold Improvements,
at cost (Notes 2 and 3):
Machinery and equipment................ 3,374
Leasehold improvements................. 197
------
3,571
Less accumulated depreciation
and amortization...................... 2,699
------
Machinery and Leasehold Improvements (Net)... 872
------
Total Assets................................. $6,981
======
The accompanying notes are an integral part of the Consolidated
Financial Statements.
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' December 31, 1998
EQUITY
Current Liabilities:
Note payable to bank (Note 3)............... $ 487
Accounts payable............................ 876
Customer deposits........................... 269
Accrued expenses............................ 761
Deferred income taxes (Note 4).............. 43
Current portion of long-term debt........... 318
------
Total Current Liabilities................... 2,754
Long-Term Debt, less current
portion (Note 3).......................... 765
Deferred tax liabilities (Note 4)........... 474
Commitments (Note 6)
Stockholders' Equity (Note 5):
Common stock, par value $.025
per share:
Authorized, 4,000,000 shares
Issued, 3,436,513 shares............ 86
Paid-in capital....................... 320
Retained earnings..................... 2,679
------
3,085
Treasury stock, 331,100 shares
at cost............................. (97)
------
Total Stockholders' Equity.................. 2,988
------
Total Liabilities and Stockholders' Equity.. $6,981
======
The accompanying notes are an integral part of the Consolidated
Financial Statements.
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Year Ended December 31,
1998 1997
---- ----
Sales (Note 7)...................... $9,970 $9,822
Cost of Sales....................... 7,698 7,629
------ ------
2,272 2,193
Selling, general and
administrative expenses (Note 6).. 1,688 1,418
------ ------
584 775
Other income........................ 59 7
Interest expense.................... (199) (240)
------ ------
(140) (233)
------ ------
Earnings before taxes............... 444 542
Taxes on earnings
(Note 4).......................... 164 187
------ ------
Net earnings ....................... $ 280 $ 355
====== ======
Basic earnings per share............ $.09 $.11
==== ====
The accompanying notes are an integral part of the Consolidated
Financial Statements.
WEB PRESS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
Common Stock Treasury Paid-in Retained
Shares Amount Stock Capital Earnings
Balance, January 1, 1997 3,436,513 $86 $(97) $320 $2,044
Net earnings for the year _________ ___ ____ ____ 355
Balance, December 31, 1997 3,436,513 86 (97) 320 2,399
Net Earnings for the Year _________ ___ ____ ____ ___280
Balance, December 31, 1998 3,436,513 $86 $(97) $320 $2,679
The accompanying notes are an integral part of the Consolidated Financial
Statements.
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
1998 1997
Cash flows from operating activities:
Net earnings (loss)................... $ 280 $ 355
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization...... 219 211
Provision for losses on accounts
receivable....................... 6 (6)
Inventory valuation reserve........ (313) 57
Deferred taxes..................... 117 224
Retirement of plant assets......... 3 2
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable................ 1,493 (2,027)
Refundable income taxes............ 27 (111)
Inventory.......................... (911) 650
Deposits........................... 81 (107)
Prepaid expenses................... (7) 24
Accounts payable................... 188 147
Customer deposits.................. 75 (348)
Accrued expenses................... (547) 495
Income taxes payable............... ______ (38)
Total adjustments.................. 431 (827)
Net cash provided (used) by operating
activities 711 (472)
Cash flows from investing activities:
Capital expenditures.................. (595) (222)
Proceeds from retirement of plant
assets............................. 58 ____19
Net cash used in investing activities. (537) (203)
(Continued on following page)
(Continued from previous page)
Cash Flows from financing activities:
Proceeds from issuance of
long-term debt.................... 421 1,111
Payments on long-term debt.......... (310) (1,109)
Net borrowings (payments) on line
of credit........................ (285) 673
Net cash provided (used) by
financing activities.............. (174) 675
Net increase (decrease) in cash........ 0 0
Cash at beginning of period............ 6 6
Cash at end of period.................. $ 6 $ 6
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest $202 $215
Taxes 75 111
The accompanying notes are an integral part of the Consolidated
Financial Statements.
WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1998
Note 1 - Nature of the Company's Business:
The Company manufactures web-fed offset printing presses.
It has two product lines, the Web Leader and the Atlas. The
primary difference between the Web Leader and the Atlas is that
the Atlas is fifty percent faster and is manufactured in three
different broadsheet newspaper page lengths. The Company's
presses are designed to print on absorbent paper such as news-
print. Among the products produced by the presses are newspa-
pers (both broadsheet and tabloid sizes), shoppers, advertising
inserts, and paperback books. Each press is composed of stan-
dard modules to unwind, print, cut-off and fold the roll of pa-
per into a finished product. The equipment is arranged to meet
the particular printer's requirements for the number of pages,
color, and size of products.
The Company markets its presses worldwide. Company em-
ployed sales representatives sell the Company's presses in the
United States and Canada. Foreign sales are made through inde-
pendent agents in Central and South America, Asia, Europe, and
the Middle East. Sales are based on a combination of price,
service, quality, and the versatility of the equipment.
Note 2 - Summary of Significant Accounting Policies:
Principles of consolidation
The accompanying consolidated financial statements include
the accounts of Web Press Corporation and Web Leader Interna-
tional, Inc., its wholly-owned Domestic International Sales Cor-
poration (DISC). All significant inter-company accounts and
transactions have been eliminated in consolidation.
Inventories
Raw materials, work-in-progress and finished goods are
stated at the lower of average cost or market. Used presses and
other related press equipment are stated at the lower of
cost(specific identification basis) or market. Inventory costs
include material, labor, and manufacturing overhead. Invento-
ries were classified as follows at December 31:
(Dollars in Thousands)
1998
Raw materials and parts
(including subassemblies)........ $1,768
Work-in-progress................. 1,117
Finished goods................... 721
Used equipment................... 368
$3,974
Machinery and leasehold improvements
Machinery and equipment are depreciated on the straight-
line method for financial statement purposes, based upon useful
lives of three to ten years. Leasehold improvements are amor-
tized over their useful lives or the term of the lease, which-
ever is shorter. For income tax purposes, accelerated methods
are used for all eligible assets.
Maintenance and repairs are charged directly to costs or
expenses as incurred. Equipment of only nominal value and re-
newals and betterments which do not appreciably extend the life
of the asset are charged directly to costs or expenses.
Fully depreciated or fully amortized assets which are no
longer in use or are not identifiable are written off by charges
to the allowance for accumulated depreciation and amortization.
When assets are retired or disposed of, the costs and accumu-
lated depreciation of such assets are removed from the accounts
and the difference between the net depreciated cost and the
amount received is recorded in the statements of operations.
Research and development costs
Research and development costs are expensed as incurred.
Total research and development costs charged to operations dur-
ing the years ended December 31, 1998 and 1997 were $450 thou-
sand and $292 thousand, respectively.
Revenue recognition
Revenue from sales of manufactured products under firm con-
tracts is recognized generally at the time equipment is avail-
able for shipment. All freight and installation costs are ac-
crued at the time revenue is recognized. Estimated costs re-
lated to product warranties are provided at the time of sale.
Proceeds received on contracts prior to recognition as a sale
are recorded as deposits.
Earnings per share
Earnings per share-basic and diluted were calculated based
on the weighted average number of shares outstanding. The
weighted average-basic and diluted number of shares outstanding
was 3,105,413 in 1998 and 1997.
Estimates
The Company makes certain cost estimates when it records a
press sale and uses other estimates and assumptions regarding
certain types of assets, liabilities, revenues, and expenses.
Such estimates primarily relate to unsettled transactions and
events as of the date of the financial statements. All are re-
ported in conformity with generally accepted accounting princi-
ples. Company management believes the basis for these estimates
are accurately reflected in the financial statements; however,
actual results may differ from estimated amounts.
Note 3 - Financing:
On December 31, 1998, the Company had a financing facility
with a commercial bank consisting of two separate term notes and
two separate revolving lines of credit.
The Company's primary line of credit is for borrowing up to
$1.2 million and matures on April 15, 1999. On December 31,
1998, the balance owing on the line was $400 thousand. The in-
terest rate charged is 2 percent above the bank's prime rate.
The rate was 9.75 percent on December 31, 1998.
The Company has a second line of credit for borrowing up to
an additional $1 million to manufacture equipment for export.
The line matures on April 15, 1999. The loan is a revolving
line of credit based on a series of transactions backed by let-
ter of credit orders acceptable to the bank. The interest rate
charged is 1.5 percent above the bank's prime rate. Borrowings
against this line were $87 thousand on December 31, 1998, and
the interest rate charged was 9.25 percent. The line is secured
by an "export working capital guarantee" from the Export-Import
Bank of the United States.
The Company has a term loan with the bank for $975 thousand
dated February 3, 1997. The loan requires the Company to make
48 monthly payments, with the first payment due March 3, 1997,
and the final payment due February 3, 2001. The interest rate
charged is 2 percent above the bank's prime rate. On December
31, 1998, the balance outstanding on the note was $578 thousand,
the interest rate was 9.75 percent, and the monthly payment was
$24,857.
The Company has a second term loan with the bank for
$420,700 dated February 18, 1998. The loan is amortized over 7
years and the interest rate charged is 9 percent. The first
payment was due on March 18, 1998, and was for interest only, to
be followed by 59 monthly payments of $6,794. The final payment
of $155,675 is due on February 18, 2003. On December 31, 1998,
the balance outstanding on the note was $387 thousand.
Accounts receivable, firm orders in production, inventories
and values in excess of the long-term financing on equipment are
pledged as collateral.
Long-term debt consists of the following:
(Dollars in Thousands)
December 31, 1998
Term note, 2% above prime rate,
due in monthly installments of $24,857
including interest. Final payment
due February, 2001........................ $ 578
Note payable for equipment, 9.3%,
due in monthly installments of $2,198
including interest. Final payment due
in March, 2004............................ 109
Note payable for equipment, 9%, due in
monthly installments of $6,794 including
interest. Final payment of $155,675 due
in March, 2003............................ 387
Note payable for equipment, 8.23%, due in
monthly installments of $277 including
interest. Final payment due in December,
2001...................................... 9
1,083
Less current portion...................... _ 318
$ 765
Equipment with an original cost of $571 thousand is pledged
as collateral under the notes payable for equipment.
Maturities of the long-term debt for the next five years
are as follows:
(Dollars in Thousands)
1999 $ 318
2000 352
2001 131
2002 86
2003 190
Thereafter 6
$1,083
The estimated fair value of long-term debt approximates
carrying value at December 31, 1998 and 1997, based on the bor-
rowing rates currently available to the Company for bank loans
with similar terms and average maturities.
Note 4 - Income Taxes:
The taxes on earnings consist of the following:
(Dollars in Thousands)
Year Ended December 31,
1998 1997
Current tax expense $ 47
Currently refundable $(37)
Deferred taxes 117 224
$164 $187
The taxes on earnings differ from the federal statutory
rate as follows:
(Dollars in Thousands)
Year Ended December 31,
1998 1997
Taxes at statutory rate $151 $184
Permanent difference 5 3
Prior year tax adjustment 8 ____
$164 $187
The components of deferred taxes included in the balance
sheet as of December 31, 1998, are as follows:
(Dollars in Thousands)
Current deferred tax liabilities:
Gross margin on deferred sales.. $139
Inventory valuation reserve..... (12)
Compensation payable............ (44)
Warranty........................ (18)
263(a) costs.................... (19)
Other........................... (3)
$ 43
Non-current deferred tax liabilities:
Deferred DISC income............ $464
Excess tax depreciation......... 10
$474
Note 5 - Common Stock:
The Company's Stock Option Plan permits issuance of stock
options to key employees at prices not less than 100% of market
price at the date of grant. An aggregate of 600,000 shares of
common stock is reserved in connection with this Plan. As of
December 31, 1998, no options have been granted under this Plan.
Note 6 - Commitments and contingencies:
On December 17, 1998, the Company received a Notice of De-
ficiency for $70,316 from the Internal Revenue Service (IRS) for
federal income taxes for the calendar year 1990. In its 1993
federal tax return the Company carried back a loss to recover
taxes paid in 1990. The IRS has determined that in its 1993
federal tax return the Company should have included as taxable
income deposits received on sales that were delivered and in-
stalled in 1994 and included by the Company in its 1994 federal
tax return. The Company disputes the entire amount of the defi-
ciency and on the advice of its legal counsel has petitioned the
United States Tax Court for a redetermination of the deficiency.
A date has not been set for trial. Should the court sustain the
IRS's position the Company would be able to carry the loss for-
ward to offset future earnings. The result would be the payment
of interest by the Company on the disputed amount.
The Company has an agreement granting it the exclusive
right to manufacture and sell in the United States and most
other countries printing equipment designed by Color Impact In-
ternational, Inc. The grantor may purchase the equipment from
the Company and resell it in Russia and China. Another company
has the exclusive right to manufacture and sell the equipment in
India. The agreement commenced on August 17, 1998, and is for a
period of 10 years. It requires the Company to pay Color Impact
International, Inc. a license fee equal to 7 percent of the
gross selling price for the equipment. The minimum license fee
is $70 thousand in any 12-month period from the commencement
date. The Company may enhance or modify the equipment and com-
mingle it with equipment of its own design.
The Company has leased a 49,000 square foot manufacturing
and office facility located in Kent, Washington, since May 1988.
The lease expires in November 2003, and includes a five-year re-
newal option. The total monthly payment is $16,155.
Rental expense was $169 thousand in 1998 and $159 thousand
in 1997.
Remaining minimum rental commitments are as follows:
(Dollars in Thousands)
1999......... $194
2000......... 194
2001......... 194
2002......... 194
2003......... 173
$949
Note 7 - Market Segment and Concentration Information:
Substantially all of the Company's operations relate to the
manufacture and sale of printing presses and associated equipment.
The Company markets its presses worldwide. International sales
accounted for 26.2% of total sales in 1998 and 56.7% in 1997. The
Company is not dependent on any country or region of the world for
international sales and domestic sales are disseminated throughout
the United States.
Export sales of equipment by geographical area were as fol-
lows:
(Dollars in Thousands)
Year Ended December 31,
1998 1997
Asia $ $ 15
Western Hemisphere 679 1,416
Europe 1,441 3,891
$2,120 $5,322
The Company normally has one or more individual press sales
which account for more than 10% of revenues in a given year. It
is uncommon for a customer to place a large order for additional
equipment in the years immediately following purchase of a press.
On an ongoing basis, the Company does not believe it is dependent
on any one customer for a significant portion of its business.
During 1998, the Company had sales to two separate customers
which, as a percentage of total consolidated sales, were 11.8%
and 10.5%. In 1997, the Company had sales to two separate cus-
tomers which accounted for 10.1% and 22.4% of sales.
Note 8 - Retirement Savings Plan:
The Company has a 401(k) plan covering all employees who
have completed one year of service. Plan participants self-
direct their investments choosing from five options sponsored
by Merrill Lynch. The Company matches up to 10% of the first
$1,000 contributed by the employee in a year. Effective Janu-
ary 1, 1999, the Company increased the matching contribution to
25% of the first $4,000 contributed by the employee in a year.
The Company may also make discretionary contributions to the
plan. Fees paid the administrator, plus the Company's matching
contribution, totaled approximately $7 thousand in 1998 and $10
thousand in 1997.
1
38
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 1033
<ALLOWANCES> 6
<INVENTORY> 4430
<CURRENT-ASSETS> 5715
<PP&E> 3573
<DEPRECIATION> 2662
<TOTAL-ASSETS> 6626
<CURRENT-LIABILITIES> 2629
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 2626
<TOTAL-LIABILITY-AND-EQUITY> 6626
<SALES> 6020
<TOTAL-REVENUES> 6020
<CGS> 4596
<TOTAL-COSTS> 4596
<OTHER-EXPENSES> 1261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> 6
<INCOME-TAX> 2
<INCOME-CONTINUING> 4
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit (10g) being the agreement to manufacture and sell equipment
between Web Press Corporation and Color Impact
International, Inc.
AGREEMENT
between
COLOR IMPACT INTERNATIONAL, INC.
and
WEB PRESS CORPORATION
THIS AGREEMENT is entered into between COLOR IMPACT INTERNATIONAL, INC.,
a corporation of the State of Washington, USA, (hereinafter referred to
as "CII"), having a place of business at 114 Ave. C, Snohomish,
Washington 98290, and WEB PRESS CORPORATION, (including WEB LEADER
INTERNATIONAL which is a wholly owned subsidiary of WEB PRESS CORP.) a
corporation of the State of Washington, USA, (hereinafter referred to as
"WPC"), having a place of business at 22023 68th Avenue South, Kent,
Washington 98032.
WITNESSETH
WHEREAS, CII has developed and manufactured various equipment for the
printing industry (hereinafter referred to as the "PRODUCTS") as
described in EXHIBIT A which is attached hereto and by its reference
made a part of this Agreement.
WHEREAS, CII and WPC desire to have WPC manufacture the PRODUCTS for
CII or alternatively for WPC to manufacture the PRODUCTS for WPC's own
sales, use and/or distribution under license from CII, under the terms
of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. SUBJECT OF AGREEMENT
1.1. The subject of this Agreement is WPC's manufacture, marketing and
sales of the PRODUCTS on a long term basis under the terms of this
Agreement. Hereinafter, the terms "manufacture" and "produce" shall
mean the manufacturing, assembling, testing and packing for shipment of
the PRODUCTS by WPC for sale and shipment to CII or for WPC's own use,
sales and/or distribution under the terms of this Agreement.
1.2. CII hereby appoints WPC as CII's exclusive contractor for
manufacturing of the PRODUCTS for CII's use, sales and/or distribution.
Such use, sales and/or distribution by CII shall be restricted to the
territorial boundaries of INDIA, RUSSIA and CHINA.
1.3. CII hereby grants WPC the exclusive right to manufacture the
PRODUCTS on a world wide basis with the exception of INDIA. It is
understood that the prototype version of the PRODUCT was manufactured by
a press manufacturer in INDIA and that CII has previously granted that
manufacturer the right to manufacture said prototype version of the
PRODUCT for sale and use only within the territorial boundaries of INDIA.
1.4. CII hereby grants WPC the exclusive right to use, market, sell
and/or distribute the PRODUCTS in any country in the world except INDIA,
RUSSIA and CHINA.
1.5. At CII's sole option and without restriction, CII shall be free to
use, market, sell and/or distribute the PRODUCTS and/or appoint
distributors and/or agents to sell the PRODUCTS within the territorial
boundaries of INDIA, RUSSIA and CHINA.
2. THE PRODUCTS
2.1. The PRODUCTS are those listed and specified in the attached EXHIBIT
A.
2.2. The complete configuration of the PRODUCTS is described in the
attached EXHIBIT A.
2.3. Either CII or WPC may make requests to the other for desired
changes, enhancements or additions which effect the price of the PRODUCT
being sold to CII. Said requests shall be submitted to the other party
in writing and shall state the desired change(s), when the desired
change(s) are to take place and the estimated price increase (or
decrease) of the desired change(s) and said written request shall be
accepted in writing by an authorized representative of the other party
before the price change is implemented.
3. OWNERSHIP OF THE INTELLECTUAL PROPERTIES
3.1. CII shall retain the rightful ownership of the Intellectual
Properties contained in the design and the engineering drawings of the
PRODUCTS (CII's "know how") until such time as WPC has fully completed
its ten (10) year license fee payment obligations as stated in this
Agreement.
3.2. Following WPC's completion of said ten (10) year license fee
payment obligations, the rightful ownership of CII's Intellectual
Properties of the PRODUCTS shall be shared with WPC and each party
(without restriction) shall be permitted to manufacture, sell and/or
distribute the PRODUCTS independently of the other.
3.3. All drawings and documentation of the PRODUCTS and/or CAD drawings,
their accompanying documentation and software, shall remain the sole
property of CII for the duration of this Agreement.
3.4. Any and all modifications to the original PRODUCTS' design shall
also be the exclusive property of CII regardless of whether CII or WPC
initiates and/or incorporates those design modifications. CII's legal
ownership of these modifications shall not be shared with WPC until WPC
has completely fulfilled its license fee payment obligations as
stipulated in this Agreement.
3.5. All the PRODUCTS, as described in EXHIBIT A, including all
modifications there upon, are the original design of and exclusive
property of CII and these property rights shall not be shared with WPC
until WPC has completely fulfilled its license fee payment obligations
as stipulated in this Agreement.
4. LICENSING OF THE PRODUCTS
4.1. For a continuous ten (10) year period following the date of WPC's
shipment of the first PRODUCT(S) having a license fee due, WPC shall pay
CII a License Fee based upon the gross selling price of the PRODUCTS
paid by the end user /customer.
4.2. Said License fee payments shall be made by WPC to CII in the amount
of seven percent (7%) of the PRODUCTS' gross selling price to the end
user customer.
4.3. Said License Fee shall not be paid on those machines sold directly
to CII.
4.4. WPC shall not have the right to assign the sales or distribution
rights of the PRODUCTS to any other party or company unless CII is paid
the license fee on said sale(s) in accordance with the terms of this
Agreement.
4.5. In the event WPC fails to pay CII the minimum agreed upon license
fee of seventy thousand dollars ($70,000) in any twelve (12) consecutive
month period following the shipment date of the first PRODUCT during the
term of this Agreement, CII shall without restriction be free to appoint
other contractors to manufacture the PRODUCTS (or components) in any
country in the world and CII shall without restriction be free to use,
sell and distribute said PRODUCTS in any country in the world.
4.6. In the event WPC makes a sale or sales of the PRODUCTS to a third
party, without reporting the transaction(s) to CII, thus avoiding the
payment of the License Fees due CII, as a penalty WPC shall pay as
punitive damages to CII, 5 (five) times the License Fee payment normally
due CII, as defined in this Agreement.
4.7. The gross selling price (upon which license fee payments shall be
computed) shall NOT include freight, customs duties, or other federal or
local taxes that are borne by the end user / customer; nor shall it
include the Agent's selling fee providing said selling fee does not
exceed fifteen percent (15%) of the gross selling price, nor shall it
include installation charges providing those installation charges do not
exceed four percent (4%) of the gross selling price. In the event said
Agent's fee exceed fifteen percent (15%) of the gross selling price, the
license fee will be paid on the amount in excess of fifteen percent
(15%). In the event said installation charges exceeds four percent (4%)
of the gross selling price, the license fee will be paid on the amount
in excess of four percent (4%).
4.8. For foreign sales (those outside the territorial boundaries of the
United States of America) WPC's payment of the license fee shall be made
in full to CII within ninety (90) days of shipment of the products from
the manufacturing facility.
4.9. For domestic sales (those within the territorial boundaries of the
United States of America), WPC's payment of the license fee shall be
made in full to CII within sixty (60) days of shipment of the PRODUCTS
from the manufacturing facility.
4.10. In the event WPC delays making a license fee payment for more than
thirty (30) days past the due date(s), as stipulated in this Agreement,
CII shall have the right to terminate this Agreement as provided for in
this Agreement.
5. PURCHASE OF THE PRODUCTS BY CII
5.1. During the entire period of time in which WPC is obligated to pay a
license fee to CII, CII may place purchase orders with WPC for the
PRODUCTS and upon those purchase order's acceptance by WPC, WPC shall
produce for CII the PRODUCTS as listed and described in EXHIBIT A of
this Agreement.
5.2. In the event WPC finds any reason NOT to sell the PRODUCTS to CII
under the terms of this Agreement, then nonetheless, WPC must accept
CII's purchase orders for (and WPC must sell to CII) at least twenty
percent (20%) of the total WPC production of the PRODUCTS providing CII
wishes to purchase and CII's purchase orders conform to the terms of
this Agreement.
5.3. Purchase orders (for the PRODUCTS) placed by CII with WPC shall
state the purchase order number, the date, the configuration of the
PRODUCTS as specified in EXHIBIT A, the quantity of PRODUCTS, the price,
the terms of payment and the shipment date. Said purchase orders shall
be in writing and shall be signed by an authorized representative of
CII.
5.4. Within thirty (30) days of WPC's receipt of a CII purchase order
(for the PRODUCTS) WPC shall fax (and at the same time, place in the
mail) written notification to CII at both its American and Russian
offices stating WPC's acceptance or refusal of said purchase order and
this notification shall be signed by an authorized representative of
WPC.
5.5. In case of force majeure circumstances (natural disaster, fire,
war, civil or political upheaval, etc.), the time of fulfillment of this
Agreement's obligations is extended for the period of time equal to that
during which such circumstances last, and the parties agree to revise
the terms of this Agreement on the basis of mutual profitable
cooperation, but if longer than ninty (90) days, applicable purchase
orders may be terminated.
5.6. Both WPC and CII agree that CII may purchase from WPC the PRODUCTS
as listed in EXHIBIT A. The price paid by CII shall at CII's option, be
either WPC's manufacturing cost plus thirty three percent (33%) or the
prices listed in EXHIBIT A as adjusted every six (6) months to reflect
increase/decrease in the U.S. department of Labor's machinery
manufacturing cost index.
5.7. As an expedience (in order to conclude this agreement as soon as
possible) so that WPC can immediately begin filling orders for the
PRODUCTS, the prices of only the R-11 and R-44 have been finalized. It
is agreed by both parties that within twelve (12) months of the signing
of this Agreement, WPC shall submit firm prices for the complete range
of PRODUCTS as listed on EXHIBIT A and that said price submission shall
be in line with the prices already quoted .
6. TERMS OF PAYMENT
6.1. Payment in full for CII's purchase of the PRODUCTS from WPC shall
be made in the form of CII's confirmed irrevocable international letters
of credit issued from CII's bank to and confirmed by a U.S. bank
designated by WPC. Said letters of credit shall be payable upon
presentation of shipping documents. The terms of payment may be altered
only with the execution of a separate written agreement signed by
authorized officers of both CII and WPC.
6.2. WPC's acceptance of a purchase order from CII shall state the exact
bank and account number to which funds are to be sent. WPC shall place
this information and the acceptance signature in the appropriate spaces
provided on each accepted purchase order (before returning it to CII) as
confirmation of the purchase order's acceptance.
6.3. CII shall submit its letters of credit to WPC's bank sixty (60)
days prior to the PRODUCTS' shipment date as stated on CII's purchase
order or alternatively, sixty (60) days prior to any mutually agreed
upon advanced shipment date. Letters of Credit confirmed less than
sixty (60) days prior to the requested shipping date may be cause for a
shipment delay.
6.4. Letter of credit payments shall be in accordance with the prices as
stated in the corresponding purchase orders issued by CII and accepted
by an authorized representative of WPC.
6.5. Payment shall be in dollars of the United States of America.
7. SHIPMENTS TO CII
7.1. All PRODUCTS CII purchases from WPC are understood to be mounted on
skids and loaded aboard an enclosed truck EX WORKS at WPC's
manufacturing facility in a manner satisfactory for domestic shipment.
7.2. WPC shall ship the PRODUCTS ordered by CII in accordance with
specific CII purchase order instructions.
7.3. WPC shall ship the PRODUCTS on or before the date of shipment
specified on each individual purchase order.
7.4. The date of shipment shall be the date that the PRODUCTS leave
WPC's manufacturing facility.
8. OBLIGATIONS OF CII
8.1. CII hereby agrees to disclose and transfer its "know how" of the
PRODUCTS to WPC under the terms of this Agreement.
8.2. CII's authorized representative(s) shall assist in the supervision
of drawing conversion to the English language.
8.3. CII accepts the obligation of fully evaluating all of WPC's
proposals for design, specification and technological changes in the
PRODUCTS which are intended to reduce the cost of manufacture, and to do
so without compromising the mechanical integrity of (or operational
efficiency of) the PRODUCTS. CII's evaluation analysis response
regarding said proposals shall be presented to WPC no later than 10
working days following the date of CII's receipt of WPC's official
written proposal(s).
8.4. CII shall be prohibited from assisting any company (other than WPC)
in the manufacture or sales of the PRODUCTS. In the event CII makes a
sale or sales of the PRODUCTS or if CII aids any other party other than
WPC in the production or sale of the PRODUCTS in any country other than
INDIA, RUSSIA and CHINA, as a penalty CII shall pay as punitive damages
to WPC, five (5) times the license fee payment normally due CII, as
defined under the terms of this Agreement. Such aid includes (but is
not limited to) providing of technical aid or production / manufacturing
drawings of the PRODUCTS.
8.5. CII shall provide a technically qualified representative to assist
WPC's personnel in the assembly and testing of the first production
prototype of perfecting units, 4-high perfecting units and folding units
as defined herein under EXHIBIT A.
8.6. To enable WPC to best manufacture the PRODUCTS, CII shall supply
machining drawings, assembly drawings, production documentation, and
"know how" to WPC.
8.7. CII shall provide a qualified engineer and/or technician to: *
assist WPC in any required conversions and understanding of the
CII supplied drawings, * assist WPC in solving any technical
problems involved in designing and manufacturing the required
special tooling for the initial production of the PRODUCTS, *
assist WPC in solving the initial technical problems involved in
manufacturing the PRODUCTS' component parts, * assist WPC in the
operational testing of the first batch of PRODUCTS, * assist WPC
in the first installation of the PRODUCTS.
9.RIGHTS OF WPC
9.1. For its world wide PRODUCT distribution system, WPC shall be
entitled to appoint sales agents and/or distributors in any country in
the world except INDIA, RUSSIA and CHINA.
9.2. It is understood by both parties that WPC wishes to manufacture
and/or sell the PRODUCTS (and perhaps other web offset printing presses
or components or derivatives thereof) directly or indirectly to end user
customers and not just to CII. Both parties acknowledge that this
Agreement provides for this "Direct Sales" arrangement and that under
the terms of this Agreement, WPC shall be free to make "direct sales" of
the PRODUCTS.
9.3. On a world wide basis, without restriction and without obligation
to CII, WPC may sell, market or distribute any item(s) other than those
listed as PRODUCTS.
10. OBLIGATIONS OF WPC
10.1. Within 30 days of receiving a written request from CII, WPC shall
surrender to an authorized officer of CII one complete set of copies of
all drawings (plus one complete set of "hard copies" and one complete
set of "software copies" of CAD drawings) concerning the PRODUCTS. This
request may be made only once in any one year period.
10.2. WPC shall be responsible for supplying all the necessary
design/engineering personnel, materials, manpower and machine tool time
for the manufacturing of the special tooling required to produce the
PRODUCTS.
10.3. WPC shall establish an e-mail and fax communication system in its
Kent, Washington office, provide for their every day support and pay for
all communications from WPC.
11. JOINT OPERATION
11.1. Whenever practical, CII together with WPC shall make mutually
agreed upon design changes and improvements in the PRODUCTS, especially
for:
* improvements in the quality parameters of the PRODUCTS;
* modifications in the PRODUCT components to enable a manufacturing
cost reduction;
* changes in the PRODUCT component materials to enable a
manufacturing cost reduction;
* changes in the specifications of the PRODUCTS to enable a manufacturing
cost reduction.
11.2. Both CII and WPC understand that errors will be made during the
drawing conversion processes, during the manufacturing processes, during
the assembly processes and during the testing processes. In the spirit
of mutual cooperation it is agreed that whenever possible, both CII and
WPC will strive to hold the resultant cost of these errors to an
absolute minimum. In the event of a CII caused drawing error that
results in a rectification cost exceeding five hundred dollars ($500)
both CII and WPC shall equally share in the cost of the mutually agreed
upon rectification measures.
12. CONDITIONS OF CONFIDENTIALITY
12.1. CII and WPC agree that all designs, drawings, layouts, production
documentation and manufacturing costs regarding the PRODUCTS, including
any details of this Agreement, are TRADE SECRETS and will not be shared
with parties outside of this Agreement without the written permission of
the other party.
12.2. For the purposes of production (including sub-contractor's
production), WPC shall make copies of drawings or documentation
regarding the PRODUCTS, but for other purposes, WPC may make copies only
with the expressed written consent of an authorized representative of
CII.
13. QUALITY CRITERIA AND WARRANTIES
13.1. WPC warrants that it will manufacture the PRODUCTS in accordance
with the drawings, materials specifications and production documentation
presented by CII.
13.2. WPC shall be responsible for the quality control of all component
parts of the PRODUCTS.
13.3. WPC shall be solely responsible for the manufacture, assembly,
testing and the placing on skids of the PRODUCTS .
13.4. CII warrants that: if the PRODUCTS (as defined within this
Agreement) are manufactured, assembled and adjusted in accordance with
CII's drawings, specifications and instructions, the resulting PRODUCTS
shall be capable of operating in accordance with the specifications
contained in CII's "ECLIPSE" advertising document attached hereto as
EXHIBIT B and by its reference made a part of this Agreement.
14. INDEMNITY
14.1. CII represents that it does not know of any adverse claims against
the design and manufacturing rights of the PRODUCTS which are the
subject of this Agreement, including trade secrets or industrial
proprietary rights of others, nor of any adversely held patents or
patent applications relating thereto. CII agrees to indemnify and hold
WPC harmless from all judgments recovered against WPC for infringement
of patent rights wherein the claim of infringement arises from, or
relates to, the manufacture of the PRODUCTS. WPC shall immediately
notify CII of any such claim(s), and CII shall have the option of
providing its own legal counsel to assist or to defend against any such
claim(s).
15. TERMINATION
15.1. Both parties confirm their best intentions to perform all
obligations, conditions and provisions of this Agreement.
15.2. Both CII and WPC hold the right to terminate this Agreement upon
any breach by the other party that is not cured within thirty (30) days
of receiving written notice (from the other) that such a breach has
occurred. Termination shall occur ninety (90) days after receiving
written notice of a breach, providing the breach is not cured within the
thirty (30) day period as provided.
15.3. In the event of termination, WPC shall completely cease the
manufacture and sales of any and all PRODUCTS and shall refrain from
further PRODUCT manufacturing continuance except for: present work in
progress, existing inventory, satisfying previously signed sales
contracts upon which down payments have already been taken or satisfying
its customers' demands for replacement parts for previously purchased
PRODUCTS.
15.4. In the event of termination WPC may retain and use drawings and
documentation only to the extent necessary to satisfy its customers'
demands for replacement parts for previously purchased PRODUCTS.
15.5. In the event of termination, all the PRODUCTS and their component
parts that contain no defects, which have been ordered by CII and have
already been produced by WPC, must be surrendered to CII in exchange for
CII's payment under the payment terms of this Agreement and at the
prices as provided for in this Agreement.
15.6. In the event of termination, all the component parts which have
been produced by WPC but which were not covered by purchase orders from
CII must be either surrendered to CII in exchange for CII's payment
under the terms of this Agreement and in accordance with the previously
agreed prices or, (providing WPC pays CII the license fee as stipulated
in this Agreement) maintained by WPC solely for satisfying its
customers' demands for replacement parts for previously purchased
PRODUCTS.
15.7. In the event this Agreement is terminated by either party, within
sixty (60) days following such termination, one copy of all drawings and
documentation (including hard copies and software copies) concerning the
PRODUCTS in the possession of WPC shall be surrendered to CII and
delivered to CII's Washington State address.
16. ASSIGNMENT
16.1. The rights, duties and obligations of the parties herein may not
be assigned by either party to any other person, firm or corporation
without the prior written consent of an authorized officer of the other
party.
17. GOVERNING LAW
17.1. This Agreement shall be governed by the laws of The State of
Washington, USA.
18. NOTICES
18.1. All notices, requests, demands and other communications under this
Agreement or in connection therewith shall be given to or be made upon
the respective parties hereto as follows:
COLOR IMPACT INTERNATIONAL
114 Avenue C 43 Svetlanskaya St., Third Floor
Snohomish, Wa. 98290 Vladivostok, Primorsky, 690000
USA, FAX (360)-568-6937 Russia, FAX (4232)-266-193
WEB PRESS CORPORATION
22023 68th Avenue South
Kent, Washington, USA
FAX (253)-395-4492
18.2. All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in
writing delivered personally or by certified or registered mail with
return receipt, postage prepaid, addressed as specified in the preceding
paragraph.
18.3. Alternatively, notices may be given by FAX provided the received
FAX is signed by an authorized representative of the receiving party and
return FAXED back to the original sender.
19. THE AGREEMENT
19.1. This Agreement becomes effective on the day of signing by both
parties. The term of this Agreement is through completion of the
performances as stated herein and may be extended by written agreement
signed by authorized representatives of both parties.
19.2. This Agreement contains all representations, understanding,
conditions, warranties, covenants and agreements of the parties hereto
and supersedes any and all prior Agreements. Unless set forth herein,
neither party shall be liable for any previous representations made, and
all modifications and amendments hereto must be in writing, and signed
by duly authorized officers of both parties.
19.3. Each provision of this Agreement is severable and in the event
that any one or more thereof may be declared invalid, the remainder of
the Agreement shall nevertheless remain in full force and effect. The
failure of either party at any time to require performance by the other
party of any provision hereof shall not affect in any way the full right
to require such performance at any time thereafter.
20. LANGUAGE
20.1. This Agreement is written and executed in the English language.
In the event this Agreement is translated into any language other than
the English language for any purpose, the parties agree that the English
version shall be the governing version.
21. ARBITRATION
21.1. Any dispute, controversy or claim arising out of or relating to
this Agreement, that cannot be settled in an amicable manner, shall be
settled by arbitration in accordance with the statutes of the State of
Washington governing arbitration in effect on the date of execution of
this Agreement.
21.2. Either party may elect to initiate arbitration proceedings when
and if there is just cause.
21.3. The language to be used in any arbitration proceedings shall be
English.
IN WITNESS HEREOF, the parties have hereunto set their hands and seals
on the date herein stated. The officers whose signatures are on this
document have the authority to bind the parties.
COLOR IMPACT INTERNATIONAL, INC.
Its Secretary-Treasurer
/s/Edward B. Wise
___________________________________
Edward B. Wise
Date: March 28, 1998
WEB PRESS CORPORATION, INC.
Its President
/s/Gary Palmer
___________________________________
Gary Palmer
Date: March 20, 1998
EXHIBIT A, page 1 of 4
THE PRODUCTS
The PRODUCTS, as referred to in the attached EXHIBIT A, are different
models and components of the ECLIPSE web- offset-printing-press,
consisting of the following major components:
THE MAJOR COMPONENTS
A.1. - The printing module,
A.2. - The roll stand,
A.4. - The SD-14 folder,
A.5. - The printing unit base frame,
A.6. - The top module compensator,
A.7. - The upper drive shaft,
A.8. - The s-wrap rollers and brackets.
All ECLIPSE printing presses may be shipped with one or more of the
following ancillary and/or spare items:
THE ANCILLARY - SPARE ITEMS
A.11. - Main drive motor/controller, 35 Kw to 110 Kw (spec. no. 11-035,
11- 075, and 11-110),
A.12. - One time set of spares for a one to a three module press
(specification no. 12-120),
A.14. - One time set of spares for a SD-14 folder (specification no. 14-140),
A.15. - One time set of spares for a four to a six module press
(specification no. 15-150),
A.16. - One time set of spares for a seven to ten module press
(specification no. 16- 160),
A.17. - One time set of spares for a Roll Stand (specification no. 17-170),
A.18. - Main drive shaft with "U" Joints and guard/covers
(specification no. 18-180),
A.19. - Plate bending tool (specification No. 19-190).
The major components are described in detail below:
A.1. The Printing Module (the component parts of which are listed in
specification 1-100) is a completely assembled perfecting web offset
printing component capable of printing one color on each side of the web
of paper. When stacked one on top of the other (as in the R-22, R-44,
B-22 and the B-44), each additional Printing Module enables one
additional color on each side of the web of paper.
A.2. The Roll Stand (the component parts of which are listed in
specification 2-200) is a completely assembled paper roll unwind
component, which also serves as a support for the above mounted printing
module(s). EXHIBIT A, page 2 of 4
A.4. The SD-14 Half Folder (hereinafter referred to as the "SD-14 H.F.",
the component parts of which are listed in specification 4-400) is a
completely assembled component that cuts the web into sheets, folds the
sheets into either a standard (A-2) broadsheet newspaper or a (A-3)
tabloid newspaper and delivers the folded newspapers on its motorized
delivery table.
Optional attachments to the SD-14 folder are listed below:
A.4.1. The SD-14 Quarter Folder attachment (hereinafter referred to as
the "Q.F.", the component parts of which are listed in specification
4-410) is a completely assembled component that attaches to the SD-14
H.F. and (at full press speeds) folds the SD-14 H.F. sheet one
additional time, at right angles to the previous fold thus rendering a
magazine size, or postage mailing (A-4) size, product. When the Q.F. is
combined with the H.F., the resulting operational combination is
referred to as a SD-14 H.F./Q.F. folder.
A.4.2. The SD-14 Double Parallel attachment (hereinafter referred to as
"D.P.", the component parts of which are listed in specification 4-420)
is a set of component parts that are assembled into the SD-14 H.F./Q.F.
The D.P. renders the SD-14 capable producing an untrimmed double folded
product size of 144 mm X 450 mm at a folded copy rate of speed equal to
that of the H.F. but with two times as many pages as the H.F. When the
D.P. is combined with the H.F./Q.F. the resulting operational
combination is referred to as a "SD-14 H.F./Q.F./D.P." folder.
A.4.3. The SD-14 Cross Perforator attachment (hereinafter referred to as
the "Cross Perf.", the component parts of which are listed in
specification 4-430) is a set of component parts that are assembled into
the SD-14 H.F./Q.F. The Cross Perf. makes an intermittent cut across the
web which renders a Q.F. products acceptable for the production of
magazines and the D.P. products acceptable for the production of books.
When the Cross Perf. is combined with the H.F./Q.F. the resulting
operational combination is referred to as the "SD-14 HF/QF/Cross Perf.".
A.5. The Base Frame (the component parts of which are listed in
specification 5-500) is a component which serves as a support for the
above mounted printing modules.
EXHIBIT A, page 3 of 4
A.6. The Top Module Compensator attachment (hereinafter referred to as
the "compensator", the component parts of which are listed in
specification 6-600) is a set of component parts that are assembled on
top of the upper most printing module of a printing unit thus providing
the necessary means of adjusting the alignment of the printing unit's
printed image with the cut-off of the folder..
A.7. The Upper Drive Shaft attachment on the R-11 and B-22 units (the
component parts of which are listed in specification 7-700) is a set of
component parts that are assembled on the printing module of a R-11
printing unit or on the uppermost module of the B-22 thus making those
units' drive shafts align with the other models of ECLIPSE printing
units and folders.
A.8. The S-Wrap Rollers and Brackets (hereinafter referred to as the
"S-Roller", the component parts of which are listed in specification
8-800) are a set of component parts that are assembled on top of the
Compensator and provide for the passage of that unit's web as well as
the passage of other upper webs.
The major ECLIPSE components are assembled into the below listed
printing-unit configurations:
A.50. R-11 Printing Unit, (specification no. 50-500) consisting of.
One - A.1. Printing Module, (specification no. 1-100)
One - A.2. Roll Stand, (specification no. 2-200)
One - A.6. Compensator, (specification no. 6-600)
One - A.7. Drive Shaft, (specification no. 7-700)
One - A.8. S-Roller, (specification no. 8-800)
A.60. R-22 Printing Unit, (specification no. 60-600) consisting of:
Two - A.1. Printing Modules, (specification no. 1-100)
One - A.2. Roll Stand, (specification no. 2-200)
One - A.6. Compensator, (specification no. 6-600)
One - A.8. S-Roller, (specification no. 8-800)
A.70. R-44 Printing Unit, (specification no. 70-700) consisting of:
Four - A.1. Printing Modules, (specification no. 1-100)
One - A.2. Roll Stand, (specification no. 2-200)
One - A.6. Compensator, (specification no. 6-600)
One - A.8. S-Roller, (specification no. 8-800)
EXHIBIT A, page 4 of 4
A.80. B-22 Printing Unit, (specification no. 80-800) consisting of:
Two - A.1. Printing Modules, (specification no.1-100)
One - A.5. Base Frame, (specification no. 5-500)
One - A.6. Compensator, (specification no. 6-600)
One - A.7. Drive Shaft, (specification no. 7-700)
One - A.8. S-Roller, (specification no. 8-800)
A.90. B-44 Printing Unit, (specification no. 90-900) consisting of:
Four - A.1. Printing Modules, (specification no. 1-100)
One - A.5. Base Frame, (specification no. 5-500)
One - A.6. Compensator, (specification no. 6-600)
One - A.8. S-Roller, (specification no. 8-800)
PRICESof the PRODUCTS
DESCRIPTION PRICE, (US dollars) Date
A.1. - The printing module, (specification no 1-100). N/A 1/1/98
A.2. - The roll stand, (specification no. 2-200). N/A 1/1/98
A.4. - The SD-14 folder, (specification no. 4-400). N/A 1/1/98
A.4.1. Quarter Folder, (specification no. 4-410). N/A 1/1/98
A.4.2. Double Parallel, (specification no. 4-420). N/A 1/1/98
A.4.3. Cross Perf., (specification no. 4-430). N/A 1/1/98
A.5. - Printing unit base frame, (specification no. 5-500). N/A 1/1/98
A.6. - Top module compensator, (specification no. 6-600). N/A 1/1/98
A.7. - Upper drive shaft, (specification no. 7-700). N/A 1/1/98
A.8. - S-wrap rollers and brackets, (specification no. 8-800).N/A 1/1/98
A.50. R-11 Printing Unit, (specification no. 50-500) 60,045. 1/1/98
A.60. R-22 Printing Unit, (specification no. 60-600) N/A 1/1/98
A.70. R-44 Printing Unit, (specification no. 70-700) $181.496. 1/1/98
A.80. B-22 Printing Unit, (specification no. 80-800) N/A 1/1/98
A.90. B-44 Printing Unit, (specification no. 90-900) N/A 1/1/98
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