UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission File Number: 0-7445
DATRON SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 95-2582922
(State or other jurisdiction (I.R.S. Employer Identification No)
of incorporation or organization)
304 Enterprise Street, Escondido, California 92029-1297
Address of principal executive offices) (zip code)
(619) 747-3734
(Registrant's telephone number, including area code)
_______________________________________________________________
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15
(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of October 30, 1995, the Registrant had only one class of
common stock, par value $0.01, of which there were 2,597,542 shares
outstanding.
<PAGE> 1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Sept 30, March 31
1995 1995
-------- --------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $110 $3,510
Accounts receivable, net 21,739 17,611
Inventories 11,287 10,001
Deferred income taxes 2,579 2,579
Prepaid expenses and other current assets 476 635
-------- --------
Total current assets 36,191 34,336
Property, plant and equipment, net 13,730 14,155
Goodwill, net 6,855 6,977
Other assets 441 476
-------- --------
Total assets $57,217 $55,944
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,855 $8,909
Accrued expenses 4,989 5,740
Customer advances 2,162 2,457
Income taxes payable 2,554 2,551
Current portion of restructuring reserve 438 438
-------- --------
Total current liabilities 18,998 20,095
Long-term debt 1,200 ---
Restructuring reserve 1,949 2,144
Deferred income taxes 817 817
Other liabilities 45 23
-------- --------
Total liabilities 23,009 23,079
-------- --------
Stockholders' equity:
Preferred stock -- par value $0.01; authorized
2,000,000 shares, none issued or outstanding --- ---
Common stock -- par value $0.01; authorized
10,000,000 shares, 3,063,937 shares issued
in September and March 31 31
Additional paid-in capital 10,463 10,587
Retained earnings 26,645 25,390
Treasury stock, at cost; 466,395 and 504,314
shares in September and March, respectively (2,687) (2,979)
Stock option plan and stock purchase plan notes rec (244) (164)
-------- --------
Total stockholders' equity 34,208 32,865
-------- --------
Total liabilities and stockholders' equity $57,217 $55,944
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended
September 30,
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,255 $1,166
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 1,445 1,061
Restructuring (195) (408)
Changes in operating assets and liabilities:
Accounts receivable (4,128) (1,610)
Inventories (1,286) (3,279)
Deferred income taxes --- 160
Prepaid expenses and other assets 158 203
Accounts payable and accrued expenses (805) 2,321
Customer advances (295) (3,057)
Income taxes payable 3 247
Other liabilities 22 (425)
--------- ---------
Net cash used in operating activities (3,826) (3,621)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (862) (1,534)
Acquisition of business --- (415)
--------- ---------
Net cash used in investing activities (862) (1,949)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 1,200 4,500
Stock options exercised 219 110
Purchase of treasury stock (51) ---
Payment advanced against stock option
plan note receivable (80) ---
--------- ---------
Net cash provided by financing activities 1,288 4,610
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (3,400) (960)
Cash and cash equivalents at beginning of period 3,510 1,955
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $110 $995
========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
DATRON SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $17,445 $16,088 $31,801 $28,220
Cost of sales 11,559 11,477 20,555 19,469
------------------ ------------------
Gross profit 5,886 4,611 11,246 8,751
Selling, general and admin. 3,809 2,934 7,503 6,075
Research and development 704 369 1,699 703
------------------ ------------------
Operating income 1,373 1,308 2,044 1,973
Interest expense (21) (64) (36) (101)
Interest income 6 (1) 19 12
------------------ ------------------
Income before income taxes 1,358 1,243 2,027 1,884
Income taxes 518 470 772 718
------------------ ------------------
Net income $840 $773 $1,255 $1,166
================== ==================
Net income per share $0.32 $0.30 $0.47 $0.45
================== ==================
Weighted average number of
common and common equivalent
shares outstanding 2,663 2,594 2,656 2,588
================== ==================
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
Datron Systems Incorporated
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The unaudited consolidated financial statements included herein
contain the accounts of Datron Systems Incorporated and its wholly
owned subsidiaries (the "Company") and have been prepared in
accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. It is suggested
that these financial statements be read in connection with the
financial statements and notes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended March 31,
1995.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal
recurring adjustments, unless otherwise stated, which are necessary
to present fairly its financial position at September 30, 1995 and
the results of its operations and its cash flows for the periods
presented. Results of operations for the periods presented herein
are not necessarily indicative of what results will be for the
entire fiscal year. The balance sheet at March 31, 1995 has been
derived from audited financial statements.
2. Income per Share
Shares used in computing income per share include the weighted
average of common stock outstanding plus equivalent shares issuable
under the Company's stock option plan.
3. Accounts Receivable
At September 30, 1995 and March 31, 1995, accounts receivable were
as follows:
September 30, March 31,
1995 1995
------------ -----------
Billed $11,869,000 $ 7,363,000
Unbilled 10,042,000 10,495,000
------------ -----------
Subtotal 21,911,000 17,858,000
Allowance for doubtful accounts (172,000) (247,000)
----------- -----------
Total $21,739,000 $17,611,000
=========== ===========
4. Inventories
At September 30, 1995 and March 31, 1995, inventories were as
follows:
September 30, March 31,
1995 1995
------------ -----------
Raw materials $5,266,000 $ 4,038,000
Work-in-process 5,092,000 3,779,000
Finished goods 929,000 2,184,000
------------ -----------
Total $11,287,000 $10,001,000
============ ===========
<PAGE> 5
5. Property, Plant and Equipment
At September 30, 1995 and March 31, 1995, property, plant and
equipment was as follows:
September 30, March 31,
1995 1995
------------ ----------
Land and buildings $8,443,000 $ 8,406,000
Leasehold improvements 761,000 706,000
Machinery and equipment 12,139,000 11,627,000
Furniture and office equipment 1,464,000 1,365,000
Construction-in-process 537,000 404,000
---------- ----------
Subtotal 23,344,000 22,508,000
Accumulated depreciation and
amortization (9,614,000) (8,353,000)
---------- ----------
Total $13,730,000 $14,155,000
========== ==========
6. Long-Term Debt
On August 17, 1995, the Company increased the limit of its
revolving credit line with its bank to $26,535,000, comprised of
$18,000,000 for the issuance of letters of credit and $8,535,000
for direct working capital advances. Maturity of the credit line
was extended to December 31, 1997 and interest payable on
borrowings under the line of credit was reduced to the bank's prime
rate plus 0.50% or to LIBOR plus 1.50%, at the option of the
Company.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Datron Systems Incorporated and its wholly owned subsidiaries (the
"Company") report operations in two business segments:
Communication Products and Services (formerly called the Radio
Communication Products business segment), and Antenna and Imaging
Systems (formerly called the Antenna and Satellite Communication
Systems business segment). The Communication Products and Services
business segment designs, manufactures and distributes high
frequency and very high frequency radios and accessories. The
Antenna and Imaging Systems business segment designs and
manufactures specialized satellite communication systems,
subsystems and antennas, and provides ground station hardware,
software and image processing systems for the remote sensing
market.
Results of Operations
Net income for the second quarter of fiscal 1996 increased 9% to
$840,000 or $0.32 per share compared with net income of $773,000 or
$0.30 per share in the second quarter of fiscal 1995. Net sales in
the second quarter of fiscal 1996 were $17,445,000, an 8% increase
from net sales of $16,088,000 in the second quarter last fiscal
year. The increase in sales was primarily due to higher sales of
radio products. The increase in net income resulted from higher
gross profits on the higher sales, partially offset by increased
selling expenses and research and development expenses.
<PAGE> 6
Net income for the six months ended September 30, 1995 increased 8%
to $1,255,000 or $0.47 per share, compared with net income of
$1,166,000 or $0.45 per share for the comparable period last fiscal
year. Net sales for the six months were $31,801,000, a 13%
increase from net sales of $28,220,000 for the first six months
last fiscal year. The increase in sales was primarily due to
higher sales of radio products and to sales of remote sensing
products by the Company's International Imaging Systems division,
which was acquired in August 1994. The increase in net income
resulted from higher gross profits on the higher sales, partially
offset by increased selling expenses and research and development
expenses.
Operating results for each business segment were as follows:
Communication Products and Services
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $7,926,000 $5,657,000 $13,004,000 $10,141,000
========= ========= ========== ==========
Gross profit $2,582,000 $1,731,000 $4,158,000 $3,480,000
========= ========= ========= =========
Operating income $808,000 $811,000 $1,006,000 $1,071,000
========= ========= ========= =========
</TABLE>
Sales of Communication Products and Services in the second quarter
and in the first six months of fiscal 1996 were 40% higher and 28%
higher, respectively, than they were in the comparable periods of
fiscal 1995. Sales were higher because of a faster turn around of
new order bookings for standard radio products.
Gross profit on sales of Communication Products and Services was
32.6% in the second quarter of fiscal 1996 compared with 30.6% in
the second quarter last fiscal year. The increase in the recent
quarter was primarily due to a reclassification of certain overhead
expenses that occurred in the second quarter of fiscal 1995 and
which resulted in lower gross profits that quarter. Gross profit
for the first six months of fiscal 1996 was 32.0% of sales compared
with 34.3% of sales for the first six months of fiscal 1995. The
decrease was primarily due to a less favorable sales mix of
products and services in the recent six months and to higher
materials and overhead expenses.
Operating income from sales of Communication Products and Services
was 10.2% in the second quarter of fiscal 1996 compared with 14.3%
in the second quarter last fiscal year. The decrease resulted
primarily from higher international selling expenses and from
higher administrative expenses related to the Company's decision
not to continue pursuit of the satellite paging business.
Operating income for the first six months of fiscal 1996 was 7.7%
of sales compared with 10.6% of sales for the first six months of
fiscal 1995. The decrease was primarily due to lower gross
profits, higher international selling expenses and higher
administrative expenses.
Antenna and Imaging Systems
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $9,519,000 $10,431,000 $18,797,000 $18,079,000
========= ========== ========== ==========
Gross profit $3,304,000 $2,880,000 $7,088,000 $5,271,000
========= ========== ========== ==========
Operating income $901,000 $827,000 $1,756,000 $1,678,000
========= ========== ========== ==========
</TABLE>
<PAGE> 7
Sales of Antenna and Imaging Systems products decreased 9% in the
second quarter of fiscal 1996 compared with the second quarter of
fiscal 1995. The decrease was primarily due to delays in receipt
of several anticipated orders for remote sensing satellite systems.
Sales in the first six months of fiscal 1996 were 4% higher than in
the first six months of fiscal 1995. The increase was primarily
due to sales of remote sensing image processing products by this
segment's International Imaging Systems division, which was
acquired in August 1994.
Gross profit on sales of Antenna and Imaging Systems products was
34.7% in the second quarter of fiscal 1996 compared with 27.6% in
the second quarter last fiscal year. The increase was primarily
due to lower manufacturing costs associated with a more favorable
mix of profitable contracts. Gross profit for the first six months
of fiscal 1996 was 37.7% of sales compared with 29.2% of sales for
the first six months of fiscal 1995 for the same reason.
Operating income from sales of Antenna and Imaging Systems products
was 9.5% in the second quarter of fiscal 1996 compared with 7.9% in
the second quarter last fiscal year. The increase resulted from
higher gross profits, partially offset by higher research and
development expenses and by higher international selling expenses.
Operating income for the first six months of fiscal 1996 and the
first six months fiscal 1995 was the same, 9.3% of sales. Higher
gross profits in the first half of fiscal 1996 were offset by
higher research and development expenses and by higher
international selling expenses.
Consolidated expenses were as follows:
Selling, general and administrative expenses were $3,809,000 in the
second quarter of fiscal 1996, a 30% increase compared with second
quarter of fiscal 1995 expenses of $2,934,000. The increase was
primarily due to higher selling expenses associated with the
Company's focus on international markets in both segments of its
business. Selling, general and administrative expenses for the
first six months of fiscal 1996 were $7,503,000, a 24% increase
from the first six months of fiscal 1995 expenses of $6,075,000 for
the same reason.
Research and development (R & D) expenses were $704,000 in the
second quarter of fiscal 1996 compared with $369,000 in the second
quarter last fiscal year. The 91% increase resulted from an
acceleration of development programs for Direct Broadcast Satellite
(DBS) television antennas for recreational vehicles, long-haul
trucks and commercial aviation. R & D expenses in the first six
months of fiscal 1996 were $1,699,000, a 142% increase from the
first six months of fiscal 1995 expenses of $703,000. The Company
has identified the DBS television market for the mobile user as a
potential major new market for its products. R & D expenditures
and new market development expenditures are likely to increase
during the next several quarters as the Company seeks to establish
a dominant position in that market. The Company estimates that the
increased spending will lower fiscal 1996 net income from what it
would otherwise have been without the pursuit of the DBS market by
as much as $1,300,000 or approximately $0.50 per share.
Order backlog at September 30 was as follows:
1995 1994
---------- ----------
Communication Products and Services $12,658,000 $14,911,000
Antenna and Imaging Systems 26,206,000 37,417,000
---------- ----------
Total $38,864,000 $52,328,000
========== ==========
<PAGE> 8
The 15% decrease in Communication Products and Services backlog at
September 30, 1995 resulted primarily from a faster turn around of
new order bookings to sales during the first six months of fiscal
1996 than for the comparable period in fiscal 1995. The 30%
decrease in Antenna and Imaging Systems backlog at September 30,
1995 was primarily due to delays in receipt of several anticipated
international orders for remote sensing systems and to a continued
decline in U.S Department of Defense business.
Liquidity and Capital Resources
At September 30, 1995, working capital was $17,193,000 compared
with $14,241,000 at March 31, 1995, an increase of $2,952,000 or
21%. Major changes affecting working capital during this period
were the following: accounts receivable increased $4,128,000 due
to strong September sales; inventories increased $1,286,000 to meet
production requirements for new radio orders and for anticipated
DBS antenna orders; and accounts payable and accrued expenses
decreased $805,000. The Company borrowed $1,200,000 in term debt
from its bank during the first six months to meet the resulting
cash requirement.
Capital equipment expenditures were $862,000 during the first six
months of fiscal 1996 compared with $1,534,000 for the first six
months last fiscal year. The decrease was primarily due to lower
purchases of equipment for the Communication Products and Services
business segment.
On August 17, 1995, the Company increased the limit of its
revolving credit line with its bank to $26,535,000, comprised of an
$18,000,000 credit limit for the issuance of letters of credit and
an $8,535,000 credit limit for direct working capital advances.
The Company believes that its existing working capital, anticipated
future cash flows from operations and available credit with its
bank are sufficient to finance presently planned capital and
working capital requirements.
<PAGE> 9
PART II -- OTHER INFORMATION
Item 2. Changes in Securities.
Pursuant to a business loan agreement with a bank, the Company must
comply with certain financial covenants. The agreement also
prohibits the Company from declaration or payment of dividends or
other distributions on the Company's stock, except under certain
conditions specified in the agreement. The Company is in
compliance with both requirements.
Item 4. Submission of Matters to a Vote of Security Holders.
On August 15, 1995, the Company held its annual meeting of
stockholders, proxies for which were solicited pursuant to
Regulation 14 under the Act. All existing directors were re-
elected. Also, the stockhholders approved the Company's 1995 Stock
Option Plan with 1,331,008 votes cast in favor of approval and
451,660 votes cast against approval.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.50 Fifth Amendment to Credit Agreement and Note between
the Registrant and Union Bank dated as of August 17,
1995.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DATRON SYSTEMS INCORPORATED
Date: November 1, 1995 By: /s/ WILLIAM L. STEPHAN
William L. Stephan
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
FIFTH AMENDMENT TO CREDIT AGREEMENT AND NOTE
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND NOTE ("Fifth
Amendment"), made and entered into as of the 17th day of August
1995, by and between DATRON SYSTEMS INCORPORATED, a Delaware
corporation ("Company"), and UNION BANK, a California banking
corporation ("Bank"),
W I T N E S S E T H:
WHEREAS, on May 11, 1994, the Company and the Bank entered
into a certain Credit Agreement and Note (as amended by those
certain First, Second, Third and Fourth Amendments to Credit
Agreement and Note, dated as of October 26, 1994, December 29,
1994, February 28, 1995 and March 31, 1995, respectively, the
"Credit Agreement") pursuant to which the Bank agreed to extend to
the Company and the Company agreed to accept from the Bank certain
credit facilities more particularly described therein; and
WHEREAS, the Company and the Bank desire to amend the Credit
Agreement (i) to extend the Facilities Termination Date through and
including December 31, 1997, (ii) to increase availability under
the Standby Facility from Fifteen Million Dollars ($15,000,000.00)
to Eighteen Million Dollars ($18,000,000.00), (iii) to reduce the
rate of interest payable with respect to Revolving Loans under the
Revolving Loan Facility, and (iv) to provide for certain ancillary
matters;
NOW, THEREFORE, for and in consideration of the premises
hereof, and other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used in this Fifth Amendment
shall, unless otherwise defined herein or unless the context
otherwise requires, have the meanings given thereto in the Credit
Agreement.
2. Section 1.01 of the Credit Agreement is amended to read
as follows:
1.01 Availability of the Facilities. Subject to the terms and
conditions of this Agreement, the Bank shall, from time to time
during the period commencing on the Fifth Amendment Effective Date
and ending on December 31, 1997 (the "Facilities Termination
Date"), advance to the Company such loans as the Company may
request under the Revolving Loan Facility (individually a
"Revolving Loan" and collectively the "Revolving Loans"), issue for
the account of the Company such standby letters of credit as the
Company may request under the Standby Facility (individually a
"Standby L/C" and collectively the "Standby L/C's"), and issue for
the account of the Company such commercial documentary letters of
credit as the Company may request under the L/C Facility
(individually a "Commercial L/C" and collectively the "Commercial
L/C's"); provided, however, that:
(a) The principal amount of all Revolving Loans shall not
exceed Eight Million Five Hundred Thirty-five Thousand Dollars
($8,535,000.00) in the aggregate at any one time outstanding (the
"Revolving Loan Commitment");
(b) Except as otherwise provided in Subsections 1.01(c),
(d) and (e) hereof, the sum of:
(i) the aggregate amount available to be drawn under all
Standby L/C's;
(ii) the aggregate amount of unpaid reimbursement obligations
in respect of all drafts drawn under Standby L/C's (the sum of the
aggregate amounts described in Subsection 1.01(b)(i) hereof and in
this Subsection 1.01(b)(ii) being hereinafter referred to as
"Standby L/C Utilization");
(iii) the aggregate amount available to be drawn under all
Commercial L/C's; and
(iv) the aggregate amount of unpaid reimbursement obligations
in respect of all drafts drawn under Commercial L/C's (the sum of
the aggregate amounts described in Subsection 1.01(b)(iii) hereof
and in this Subsection 1.01(b)(iv) being hereinafter referred to as
"Commercial L/C Utilization");
shall not exceed in the aggregate at any one time Eighteen Million
Dollars ($18,000,000.00);
(c) Commercial L/C Utilization shall not exceed in the
aggregate at any one time the lesser of (i) Two Million Dollars
($2,000,000.00), or (ii) the difference between Eighteen Million
Dollars ($18,000,000.00) and Standby L/C Utilization;
(d) Standby L/C Utilization relating to Standby L/C's
issued in favor of beneficiaries located in countries listed in
Column B or Column C of Exhibit A hereto shall not exceed, as to
all beneficiaries located in any given country listed in Column B
or Column C of Exhibit A hereto, Three Million Five Hundred
Thousand Dollars ($3,500,000.00) in the aggregate at any one time;
and
(e) Standby L/C Utilization relating to Standby L/C's
issued in favor of beneficiaries located in countries listed in
Column D of Exhibit A hereto (individually a "Column D Country" and
collectively the "Column D Countries") shall not exceed in the
aggregate at any one time (i) in the case of all beneficiaries
located in any given Column D Country, Five Hundred Thousand
Dollars ($500,000.00), and (ii) in the case of all beneficiaries
located in all Column D Countries, the lesser of (A) Two Million
Five Hundred Thousand Dollars ($2,500,000.00), or (B) the
difference between (1) Eighteen Million Dollars ($18,000,000.00),
and (2) the sum of (I) Standby L/C Utilization relating to Standby
L/C's issued in favor of all beneficiaries located in all countries
other than Column D Countries, and (II) Commercial L/C Utilization.
Within the limits set forth above, and except as otherwise provided
herein, the Company may utilize the Facilities, repay amounts owing
thereunder, and reutilize the Facilities.
3. Subsection 1.02(d) of the Credit Agreement is amended
to read as follows:
(d) Revolving Loan Interest Rate Options. The Company shall
pay interest on the unpaid principal amount of each Revolving Loan
from the date of such loan (if such loan is made on or after the
Fifth Amendment Effective Date), from the Fifth Amendment Effective
Date (if such loan is a Reference Rate Revolving Loan made prior to
the Fifth Amendment Effective Date), or from the first day of the
first Interest Period for such loan which commences on or after the
Fifth Amendment Effective Date (if such loan is a LIBOR Revolving
Loan made prior to the Fifth Amendment Effective Date), until the
maturity thereof (whether by acceleration or otherwise), at one of
the following rates per annum:
(i) Reference Rate Option - During such periods as such
Revolving Loan is a Reference Rate Revolving Loan, a rate per annum
equal to the Reference Rate plus one-half of one percent (1/2 of
1%), such rate to change from time to time as the Reference Rate
shall change; or
(ii) LIBO Rate Option - During such periods as such Revolving
Loan is a LIBOR Revolving Loan, a rate per annum equal at all times
during each Interest Period for such loan to the LIBO Rate for such
Interest Period plus one and one-half percent (1-1/2%).
Each Revolving Loan shall, at any given time prior to maturity,
bear interest at one, and only one, of the above rates.
4. The first sentence of Subsection 1.05(c) of the Credit
Agreement is amended to read as follows:
All amounts due or to become due hereunder are secured by (i) a
Security Agreement (Chattel Mortgage), dated April 21, 1994,
executed by the Company, (ii) a Continuing Guaranty, dated August
1, 1995, executed by Datron/Transco Inc. ("D/T"), which Continuing
Guaranty is in turn secured by (A) a Security Agreement (Chattel
Mortgage), dated April 21, 1994, executed by D/T, and (B) a Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing,
dated February 28, 1995, executed by D/T, as amended, and (iii) a
Continuing Guaranty, dated August 1, 1995, executed by Datron World
Communications Inc. (formerly known as Trans World Communications,
Inc.) ("DWC"), which Continuing Guaranty is in turn secured by a
Security Agreement (Chattel Mortgage), dated March 31, 1995,
executed by DWC.
5. Section 7.01 of the Credit Agreement is amended by the
addition thereto of the following definitions in proper alphabetic
order:
"Fifth Amendment" shall mean that certain Fifth Amendment to Credit
Agreement and Note, dated as of August 17, 1995, by and between the
Company and the Bank.
"Fifth Amendment Effective Date" shall mean the date on which the
Fifth Amendment becomes effective as provided in Paragraph 6
thereof.
"First Amendment to Deed of Trust" shall have the meaning given to
that term in Subparagraph 6(h) of the Fifth Amendment.
6. This Fifth Amendment shall become effective on the date
on which the Bank shall have received the following:
(a) This Fifth Amendment, duly executed by the Company;
(b) A certificate of the Company's secretary or an
assistant secretary, dated not later than the date of this Fifth
Amendment, certifying the following documents, copies of which
shall be attached to or incorporated in such certificate: (i)
resolutions, adopted by the Company's Board of Directors and
continuing in effect, which authorize the execution, delivery and
performance by the Company of this Fifth Amendment and all other
documents and instruments to be executed, delivered and performed
by the Company in connection herewith; and (ii) all other documents
evidencing additional corporate action and governmental or other
approvals, if any, necessary for the execution, delivery and
performance by the Company of this Fifth Amendment and all other
documents and instruments to be executed, delivered and performed
by the Company in connection herewith;
(c) A certificate of the Company's secretary or an
assistant secretary, dated not later than the date of this Fifth
Amendment, certifying the incumbency and signatures of the officers
of the Company authorized to execute, deliver and perform on behalf
of the Company this Fifth Amendment and all other documents and
instruments to be executed, delivered and performed by the Company
in connection herewith;
(d) A Continuing Guaranty on the Bank's standard form,
dated not later than the date of this Fifth Amendment and duly
executed by DWC;
(e) A Judicial Reference Agreement on the Bank's standard
form, dated not later than the date of this Fifth Amendment and
duly executed by DWC;
(f) A Continuing Guaranty on the Bank's standard form,
dated not later than the date of this Fifth Amendment and duly
executed by D/T;
(g) A Judicial Reference Agreement on the Bank's standard
form, dated not later than the date of this Fifth Amendment and
duly executed by D/T;
(h) A First Amendment to Deed of Trust, Assignment of
rents, Security Agreement and Fixture Filing in the form appended
to this Fifth Amendment as Exhibit I ("First Amendment to Deed of
Trust"), dated the date of the Continuing Guaranty of D/T referred
to in Subparagraph 6(f) of this Fifth Amendment and duly executed
and acknowledged by D/T, reflecting the supersession and
replacement of the Continuing Guaranty of D/T, dated February 28,
1995, with the Continuing Guaranty of D/T referred to in
Subparagraph 6(f) of this Fifth Amendment, together with evidence
that the First Amendment to Deed of Trust has been duly recorded;
(i) A 110.5 endorsement to the ALTA policy of title
insurance delivered to the Bank pursuant to Subparagraph 10(j) of
the Third Amendment, insuring that the interest of the Bank under
the Deed of Trust as amended by the First Amendment to Deed of
Trust is and continues to be a valid, perfected and enforceable
lien on the Property subject to no mortgages, deeds of trust,
liens, charges, security interests or other encumbrances of any
character whatsoever other than liens for current real property
taxes and assessments not yet due and payable and such other liens
and encumbrances as may be approved in writing by the Bank;
(j) A certificate of the secretary or an assistant
secretary of each of D/T and DWC, each dated not later than the
date of this Fifth Amendment, certifying the following documents,
copies of which shall be attached to or incorporated in such
certificate: (i) resolutions, adopted by the Board of Directors of
D/T or DWC, as the case may be, and continuing in effect, which
authorize the execution, delivery and performance by D/T or DWC, as
the case may be, of such corporation's Continuing Guaranty and
Judicial Reference Agreement (and, in the case of D/T, the First
Amendment to Deed of Trust); and (ii) all other documents
evidencing additional corporate action and governmental or other
approvals, if any, necessary for the execution, delivery and
performance by D/T or DWC, as the case may be, of such
corporation's Continuing Guaranty and Judicial Reference Agreement
(and, in the case of D/T, the First Amendment to Deed of Trust);
together with a certificate of the secretary or an assistant
secretary of each of D/T and DWC, each dated not later than the
date of this Fifth Amendment, certifying the incumbency and
signatures of the officers of D/T or DWC, as the case may be,
authorized to execute, deliver and perform on behalf of D/T or DWC,
as the case may be, such corporation's Continuing Guaranty and
Judicial Reference Agreement (and, in the case of D/T, the First
Amendment to Deed of Trust); and
(k) Such other documents and agreements as the Bank may
reasonably require to effectuate the intent and purpose of this
Fifth Amendment.
7. Except as expressly provided herein, the Credit
Agreement is unchanged and remains in full force and effect.
8. This Fifth Amendment shall be governed by and construed
in accordance with the laws of the State of California.
9. This Fifth Amendment may be executed in any number of
identical counterparts, any set of which signed by both parties
hereto shall be deemed to constitute a complete, executed original
for all purposes.
IN WITNESS WHEREOF, the Bank and the Company have caused this
Fifth Amendment to be executed as of the day and year first above
written.
UNION BANK DATRON SYSTEMS INCORPORATED
By: /s/ RICHARD C. PETRIE By: /s/ WILLIAM L. STEPHAN
Title:Vice President Title: Vice President and CFO
By:/s/ JOSEPH OTTING By:/s/ DAVID A. DERBY
Title:S.V.P. Title:President, CEO
EXHIBIT I
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Union Bank
Commercial Documentation Center
Attn: AREVALOS - 40061
P. O. Box 30115
Los Angeles, California 90030-0115
Assessor's Identification Number: 95000649
FIRST AMENDMENT TO DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS FIRST AMENDMENT TO DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING ("First Amendment"), made and
entered into as of the 17th day of August, 1995, by and among
DATRON/TRANSCO INC., a California corporation ("Trustor"), UNION
BANK, a California banking corporation (in its capacity as trustee,
"Trustee"), and UNION BANK, a California banking corporation (in
its capacity as beneficiary, "Beneficiary"),
W I T N E S S E T H:
WHEREAS, on February 28, 1995, Trustor entered into that
certain Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing ("Deed of Trust") in favor of Trustee and
Beneficiary, which Deed of Trust was recorded on March 13, 1995, as
Instrument No. 95-027943, in the Official Records of Ventura
County, California, and which Deed of Trust encumbers certain real
property located in the City of Simi Valley, County of Ventura,
State of California, more particularly described in Exhibit "A"
appended thereto; and
WHEREAS Trustor and Beneficiary desire to amend the Deed of
Trust to reflect that certain of the obligations of Trustor to
Beneficiary secured by the Deed of Trust as originally executed
have been superseded and replaced by certain other obligations of
Trustor to Beneficiary more particularly described herein;
NOW, THEREFORE, for and in consideration of the premises
hereof and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, it is hereby agreed as
follows:
1. Section 2(I) of the Deed of Trust is amended by deleting
the same in its entirety and by substituting in lieu thereof the
following:
(I) Payment of all sums at any time owing and the performance
of all other obligations arising under that certain Continuing
Guaranty in the original principal amount of Twenty-nine Million
and no/100 Dollars ($29,000,000.00), dated August 1, 1995, executed
by Datron/Transco Inc. ("Obligor") to the order of or in favor of
Beneficiary (the "Debt Instrument"), and any and all modifications,
replacements, extensions and renewals thereof, whether hereafter
evidenced by the Debt Instrument or otherwise;
2. Trustor and Beneficiary hereby expressly acknowledge and
agree (a) that the obligations arising under the Continuing
Guaranty which is described in Section 2(I) of the Deed of Trust as
amended by this First Amendment (the "Replacement Guaranty")
supersede and replace, but do not constitute payment, satisfaction
or extinguishment of, the obligations arising under the Continuing
Guaranty in the original principal amount of Twenty-six Million and
no/100 Dollars ($26,000,000.00), dated February 28, 1995, executed
by Trustor to the order of or in favor of Beneficiary which is
described in Section 2(I) of the Deed of Trust as originally
executed (the "Original Guaranty"), and (b) that the Replacement
Guaranty supersedes and replaces but does not constitute payment,
satisfaction or extinguishment of, the Original Guaranty.
3. Trustor hereby expressly agrees that the obligations
arising under the Replacemnt Guaranty shall in all respects be
secured by the Deed of Trust, as amended hereby.
4. Except as otherwise expressly provided herein, the Deed of
Trust is unchanged and remains in full force and effect.
5. Trustee accepts these modifications to the trust when this
First Amendment, duly executed and acknowledged, is made a public
record as provided by law.
IN WITNESS WHEREOF, Trustor and Beneficiary have executed ths
First Amendment as of the date first hereinabove set forth.
DATRON/TRANSCO INC. UNION BANK
By: /s/ DAVID A. DERBY By: /s/ RICHARD A. PETRIE
Title: Chairman Title:
By: /s/ WILLIAM L. STEPHAN By: /s/ JOSEPH OTTING
Title: Asst. Secretary Title: S.V.P.
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On August 14, 1995, before me, J. BEUKMAN a Notary Public in
and for said State, personally appeared JOSEPH OTTING AND RICHARD
A. PETRIE, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/ARE
subscribed to the within instrument and acknowledged to me that
he/she/THEY executed the same in his/her/THEIR authorized
capacity(ies), and that by his/her/THEIR signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
(graphic Notary Seal) /s/ J. BEUKMAN
J. BEUKMAN Notary Public
COMM #1039373 in and for said State
NOTARY PUBLIC-CALIFORNIA
SAN DIEGO COUNTY
MY COMMISSION EXPIRES
OCTOBER 5, 1988
STATE OF CALIFORNIA )
) ss.
COUNTY OF VENTURA )
On August 17, 1995, before me, E. L. HOWE a Notary Public in
and for said State, personally appeared DAVID A. DERBY AND WILLIAM
L. STEPHAN, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/ARE
subscribed to the within instrument and acknowledged to me that
he/she/THEY executed the same in his/her/THEIR authorized
capacity(ies), and that by his/her/THEIR signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
(graphic Notary Seal) /s/ ELLEN L. HOWE
ELLEN L. HOWE Notary Public
COMM #1043039 in and for said State
Notary Public - California
VENTURA COUNTY
MY COMM. Expires OCT 23, 1998
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
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<RECEIVABLES> 21,911
<ALLOWANCES> 172
<INVENTORY> 11,287
<CURRENT-ASSETS> 36,191
<PP&E> 23,344
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0
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<TOTAL-REVENUES> 31,820
<CGS> 20,555
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<INCOME-PRETAX> 2,027
<INCOME-TAX> 772
<INCOME-CONTINUING> 1,255
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