Registration No. 33-64641
As filed with the Securities and Exchange Commission on May 10, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2632319
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(201) 898-1500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MARK S. NEWMAN
5 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(201) 898-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
MARK N. KAPLAN, ESQ.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
Cross Reference Sheet Pursuant to
Rule 501(b) of Regulation S-K, Showing
Location in Prospectus of Information
Required by Part I of Form S-1
Item
No. Caption Location in Prospectus
1. Forepart of the Registration Statement and Outside Front Cover
Outside Front Cover Page of Prospectus......... Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover
of Prospectus.................................. Page; Outside Back
Cover Page
3. Summary Information, Risk Factors and Ratio Prospectus Summary;
of Earnings to Fixed Charges.................... Risk Factors; The
Company; Selected
Consolidated Finan-
cial Data
4. Use of Proceeds................................ Use of Proceeds
5. Determination of Offering Price................ Plan of Distribution
6. Dilution....................................... Not Applicable
7. Selling Security Holders....................... Selling Security
Holders
8. Plan of Distribution........................... Outside Front Cover
Page; Plan of
Distribution
9. Description of Securities to be Registered...... Description of the
Debentures; Description
of Capital Stock
10. Interests of Named Experts and Counsel.......... Legal Matters
11. Information with Respect to the Registrant....... Prospectus Summary;
The Company;
Capitalization;
Market Prices
of Capital Stock;
Dividend Policy;
Selected
Consolidated
Financial Data;
Management's
Discussion
and Analysis
of Financial
Condition and
Results of
Operations;
Business;
Management;
Security
Ownership;
Certain
Relationships
and Related
Transactions;
Description
of the
Debentures;
Description
of Capital
Stock; Plan
of Distribution;
Index to
Financial
Statements
12. Disclosure of Commission Position on Indem-
nification for Securities Act Liabilities.... Not Applicable
[FLAG]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the post-effective
amendment to the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED MAY 10, 1996
PROSPECTUS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
$25,000,000 9% Senior Subordinated Convertible Debentures Due 2003
-------------------------------
This Prospectus relates to $25,000,000 aggregate principal
amount of 9% Senior Subordinated Convertible Debentures Due 2003 (the
"Debentures") of Diagnostic/Retrieval Systems, Inc. (the "Company"), and
the shares of Common Stock (as defined herein) of the Company which are
issuable from time to time upon conversion of the Debentures. The
Debentures or Common Stock issued upon conversion may be offered from time
to time for the account of holders of the Debentures named herein (the
"Selling Security Holders"). The Debentures were originally issued by the
Company on September 29, 1995 in a private placement (including the
over-allotment option for $5,000,000 aggregate principal amount of the
Debentures which was exercised on November 3, 1995) (the "Debenture
Offering"). The Company will not receive any proceeds from this offering.
On March 26, 1996, the stockholders of the Company approved the
reclassification (the "Reclassification") of each share of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), and each share of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common Stock"), into one share of the
Company's new single class of common stock, par value $.01 per share (the
"Common Stock"). The Reclassification became effective on April 1, 1996.
Interest on the Debentures is payable semi-annually on April 1
and October 1 of each year, commencing April 1, 1996. The Debentures are
convertible at any time prior to maturity, unless previously redeemed or
repurchased, into shares of Common Stock of the Company, at a conversion
price of $8.85 per share, subject to adjustment under certain
circumstances. Prior to this offering there has not been any public market
for the Debentures. The Debentures are eligible for trading in the Private
Offerings, Resale and Trading through Automated Linkages ("PORTAL") Market.
The Debentures and the shares of Common Stock which are issuable upon
conversion of the Debentures are listed on the American Stock Exchange (the
"AMEX"). The Company has been advised by Forum Capital Markets L.P. (the
"Initial Purchaser") that it intends to make a market in the Debentures.
The Initial Purchaser is, however, under no obligation to do so and may
discontinue any such market making activity at any time without notice.
There can be no assurance that a secondary market in the Debentures will
develop or be maintained. The Company's Common Stock is listed on the AMEX
under the symbol "DRS." On April 25, 1996, the last reported sale price of
the Common Stock on the AMEX was $7-5/16 per share.
The Debentures are unsecured and subordinate to all Senior
Indebtedness (as defined herein) and are effectively subordinated to all
obligations of the subsidiaries of the Company. The Indenture (as defined
herein) governing the Debentures provides that the Company will not (i)
issue or incur any Debt (other than Senior Indebtedness or Capitalized
Lease Obligations) unless such Debt is subordinate in right of payment to
the Debentures at least to the same extent that the Debentures are
subordinate to Senior Indebtedness or (ii) permit any of its subsidiaries
to issue or incur any Debt (other than Senior Indebtedness or Capitalized
Lease Obligations) unless such Debt provides that it will be subordinate in
right of payment to distributions and dividends from such subsidiary to the
Company in an amount sufficient to satisfy the Company's obligations under
the Debentures at least to the same extent that the Debentures are
subordinate to Senior Indebtedness. At December 31, 1995, Senior
Indebtedness (excluding current installments) was approximately $2.8
million and the indebtedness (excluding liability for income taxes) of the
Company's subsidiaries was approximately $16.6 million. The Debentures will
mature on October 1, 2003. The Company may not redeem the Debentures prior
to October 1, 1998. On or after such date, the Company may redeem the
Debentures, in whole or in part, at the redemption prices set forth herein
plus accrued but unpaid interest to the date of redemption. Upon a Change
of Control (as defined herein), the Company will offer to repurchase the
Debentures at 100% of the principal amount thereof plus accrued but unpaid
interest to the date of repurchase. In addition, upon a Net Worth
Deficiency (as defined herein), the Company will offer to repurchase up to
10% of the aggregate principal amount of Debentures at 100% of the
principal amount thereof plus accrued but unpaid interest to the date of
repurchase. See "Description of the Debentures."
-------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------
The Company has been advised by the Selling Security Holders
that the Selling Security Holders, acting as principals for their own
account, directly, through agents designated from time to time, or through
dealers or underwriters also to be designated, may sell all or a portion of
the Debentures or shares of Common Stock offered hereby from time to time
on terms to be determined at the time of sale. To the extent required, the
aggregate principal amount of the Debentures or the number of shares of
Common Stock to be sold, the names of the Selling Security Holders, the
purchase price, the name of any such agent, dealer or underwriter and any
applicable commissions with respect to a particular offer will be set forth
in an accompanying Prospectus Supplement or, if appropriate, a
post-effective amendment to the Registration Statement of which this
Prospectus is a part. The aggregate proceeds to the Selling Security
Holders from the sale of Debentures and Common Stock offered by the Selling
Security Holders hereby will be the purchase price of such Debentures or
Common Stock less any commissions. For information concerning
indemnification arrangements between the Company and the Selling Security
Holders, see "Plan of Distribution."
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Debentures or shares of Common Stock may be deemed to
be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of
the Debentures or shares of Common Stock purchased by them may be deemed to
be underwriting commissions or discounts under the Securities Act.
-------------------------------
The date of this Prospectus is , 1996
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC") . Such reports and other
information filed by the Company with the SEC in accordance with the
Exchange Act may be inspected, without charge, at the Public Reference
Section of the SEC located at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the SEC located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of all or any portion
of the material may be obtained from the Public Reference Section of the
SEC upon payment of the prescribed fees. Materials can also be inspected at
the offices of the AMEX, 86 Trinity Place, New York, New York 10006, the
exchange on which the Common Stock is listed.
The Company is required, pursuant to the terms of the Indenture
under which the Debentures were issued, to deliver to the Trustee and the
holders of the Debentures, within 15 days after the Company has filed the
same with the SEC, copies of the annual reports and information, documents
and other reports which the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act.
The Company has filed with the SEC a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act, with
respect to the Debentures and shares of Common Stock offered pursuant to
this Prospectus. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain items of which are contained in the
exhibits and schedules thereto as permitted by the rules and regulations of
the SEC. For further information with respect to the Company, the
Debentures and the Common Stock, reference is made to the Registration
Statement, including the exhibits and schedules filed therewith. Statements
contained in this Prospectus concerning the provisions of certain documents
filed with the Registration Statement are not necessarily complete, each
statement being qualified in all respects by such reference. Copies of all
or any part of the Registration Statement, including exhibits thereto, may
be obtained, upon payment of the prescribed fees, at the offices of the SEC
as set forth above.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in
this Prospectus.
Unless the context otherwise requires, all references herein to the
"Company" include Diagnostic/Retrieval Systems, Inc. and its consolidated
subsidiaries.
THE COMPANY
Diagnostic/Retrieval Systems,Inc. ("DRS" or the "Company")
designs, manufactures and markets high-technology computer workstations for
the United States (the "U.S.") Department of Defense, electro-optical
targeting systems for military customers and image and data storage
products for both military and commercial customers. In response to a 1992
mandate by the Joint Chiefs of Staff, the Company focuses on
"commercial-off- the-shelf" ("COTS") product designs, whereby commercial
electronic components are adapted, upgraded and "ruggedized" for
application in harsh military environments. The Company believes that
military expenditures on electronic systems and equipment will grow in
coming years as the nature of modern warfare dictates increasing reliance
on real-time, accurate battlefield information and the electronic content
and sophistication of defense systems increases.
During its last three fiscal years, the Company has restructured
its management team and implemented strategies to exploit the changing
nature of military procurement programs brought on by the end of the cold
war, military budget constraints and the COTS mandate. The Company's
strategies include:
o expanding and diversifying the Company's technology
and product base into complementary military and
commercial markets primarily through acquisitions and
the forging of strategic relationships;
o increasing revenue opportunities through the design and
adaptation of products for use by all branches of the
military; and
o enhancing financial performance through specific cost
reduction measures and increased manufacturing
efficiencies.
To effect these strategies, the Company has (i) acquired several
businesses with complementary military and commercial products and
technologies over the last three years; (ii) forged strategic relationships
with other defense suppliers such as Lockheed-Martin Tactical Defense
Systems (formerly, Loral Corporation) and Westinghouse Electric
Corporation, among others; (iii) emphasized the development of COTS-based
products as well as products and systems that are easily adapted to similar
weapons platforms for use by all branches of the military; and (iv)
implemented cost reduction programs to reduce its fixed-cost base, allow
for growth and maintain the flexibility of its operations.
The implementation of these strategies has resulted in
increasing revenues and profits over the last three fiscal years. Although
the Company experienced operating losses in fiscal 1990 through 1992,
primarily due to cost overruns on a single fixed-price development
contract, a shift over the last several years in the nature of military
development contracting from fixed-price to cost-type contracts has reduced
the Company's exposure in this area. For the fiscal year ended March 31,
1995, the Company had revenues of $69.9 million, net income of $2.6 million
and earnings per share of $.50, representing increases of 20.9%, 61.2% and
66.7%, respectively, compared with the year ended March 31, 1994. For the
nine months ended December 31, 1995 the Company had revenues of $65.6
million, net income of $2.5 million and fully diluted earnings per share of
$.44, representing increases of 38.4%, 45.7% and 29.4%, respectively,
compared with the same nine-month period ended December 31, 1994.
<TABLE>
<CAPTION>
SUMMARY FINANCIAL INFORMATION
Nine Months
Year Ended March 31, Ended December 31,
------------------------------------------------------------- ---------------------------
1995 1994 1993 1992 1991 1995 1994
----------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS DATA:
Revenues.................. $ 69,930,000 $ 57,820,000 $ 47,772,000 $ 28,925,000 $ 47,762,000 $ 65,628,000 $ 47,404,000
Costs and Expenses....... 64,836,000 54,372,000 45,461,000 37,032,000 52,812,000 60,289,000 44,143,000
------------- ------------- ------------- ------------ ------------ ------------- -------------
Operating Income (Loss).. 5,094,000 3,448,000 2,311,000 (8,107,000) (5,050,000) 5,339,000 3,261,000
Interest and Related Expenses (1,372,000) (1,574,000) (1,735,000) (2,198,000) (2,362,000) (1,675,000) (1,020,000)
Other Income, Net........ 534,000 834,000 1,224,000 944,000 1,677,000 425,000 613,000
------------- ------------- ------------- ------------- ------------- ------------- ------------
Earnings (Loss) before
Income Taxes (Benefit)... 4,256,000 2,708,000 1,800,000 (9,361,000) (5,735,000) 4,089,000 2,854,000
Income Taxes (Benefit)... 1,652,000 1,093,000 715,000 (4,006,000) (1,488,000) 1,594,000 1,142,000
------------- ----------- ------------ ------------- ------------ ------------ -----------
Net Earnings (Loss)...... $ 2,604,000 $ 1,615,000 $ 1,085,000 $ (5,355,000) $(4,247,000) $2,495,000 $ 1,712,000
============= =========== =========== ============= ============ ========== ===========
Net Earnings (Loss) per share
of Class A and Class B
Common Stock(1)(2)..... $ .50 $ .30 $ .20 $ (1.01) $ (.79) $ .44 $ .34
OTHER OPERATIONS DATA:
EBITDA(3)............... $ 7,574,000 $6,006,000 $5,513,000 $ (4,393,000) $ (973,000) $7,565,000 $5,228,000
Ratio of Earnings to Fixed
Charges(4)(5)....... 2.9x 2.3x 1.8x -- -- 2.8x 2.7x
Ratio of Earnings to Fixed
Charges, as adjusted(4)(6)... 1.8x 2.2x
December 31, 1995
__________________________________
Actual As Adjusted(7)
BALANCE SHEET DATA:
Working Capital.................. $ 40,585,000 $ 38,085,000
Net Property, Plant and
Equipment..................... $ 14,728,000 $ 14,728,000
Total Assets..................... $ 90,770,000 $ 85,631,000
Long-Term Debt, Excluding
Current Installments.......... $ 35,319,000 $ 32,819,000
Net Stockholders' Equity......... $ 24,907,000 $ 24,907,000
<FN>
- ------------------------------------------------------------------------------
(1) No cash dividends have been distributed during any of the years in the
five-year period ended March 31, 1995 or the nine months ended
December 31, 1995.
(2) Does not give effect to the Reclassification. On April 1, 1996, the
Reclassification became effective pursuant to which each share of
the Class A Common Stock and each share of the Class B Common Stock
was reclassified into one share of the Common Stock. See
"Description of Capital Stock."
(3) EBITDA is defined as operating income (loss) plus depreciation
and amortization. EBITDA is a widely accepted financial
indicator of a company's ability to service and incur debt.
EBITDA should not be considered in isolation or as a substitute
for net income, cash flows or other consolidated income or cash
flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's
profitability or liquidity.
(4) Earnings used in computing the ratio of earnings to fixed
charges consist of earnings before income taxes plus fixed
charges. Fixed charges consist of interest expense, amortization
of debt issuance costs and the portion of the Company's rent
expense that the Company believes is representative of the
interest factor.
(5) Earnings were inadequate to cover fixed charges in fiscal 1992
and fiscal 1991. Earnings (Loss) before Income Taxes (Benefit)
in fiscal 1992 and fiscal 1991 include fixed charges of
approximately $2.7 million and $2.9 million, respectively.
(6) Adjusted to reflect the application of the proceeds from the Debenture
Offering, which was consummated on September 29, 1995 (including
the over-allotment option which was exercised on November 3, 1995).
The ratio also assumes additional interest income was earned on the
proceeds remaining after the redemption of the Company's 1998 Debentures
(as defined herein). See "Use of Proceeds."
(7) Adjusted to give effect to the use of the net proceeds from the Debenture
Offering to redeem $4,963,000 of the 1998 Debentures and for the payment
of $176,000 of accrued interest thereon as of December 31, 1995. See
"Use of Proceeds."
</TABLE>
THE OFFERING
Debentures Offered..................... $25,000,000 principal
amount of Senior
Subordinated Convertible
Debentures Due 2003.
Maturity Date........................... October 1, 2003
Interest Payment Dates................. April 1 and October 1
Interest.............................. 9.0% per annum
Conversion............................ Convertible into Common
Stock at any time prior
to maturity, unless
previously redeemed or
repurchased, at a
conversion price of
$8.85 per share,
subject to adjustment
in certain circumstances.
Redemption at the Option of the Company...... Redeemable at the option
of the Company, in whole
or in part at any time on
or after October 1, 1998,
upon not less than 30 nor
more than 60 days'
notice, at the redemption
prices set forth herein
plus accrued but unpaid
interest to the date of
redemption. See
"Description of the
Debentures -- Redemption."
Redemption at the Option of the Holders...... Upon a Change of Control
(as defined herein), the
Company will offer to
repurchase the Debentures
at 100% of the principal
amount thereof plus accrued
but unpaid interest to the
date of repurchase. See
"Description of the
Debentures -- Change of
Control."
In the event the Company's
Consolidated Net Worth (as
defined herein) at the end
of any two consecutive
fiscal quarters is below
$18.0 million (a "Net Worth
Deficiency"), the Company
will offer to repurchase up
to 10% of the aggregate
principal amount of
Debentures at 100% of the
principal amount thereof
plus accrued but unpaid
interest to the date of
repurchase. See
"Description of the
Debentures -- Maintenance
of Consolidated Net Worth."
Ranking................................. The Debentures are sub-
ordinated to all Senior
Indebtedness (as defined
herein) and will be
effectively subordinated to
all obligations of the
subsidiaries of the Company.
The Indenture (as
defined herein) governing
the Debentures provides
that the Company will not
(i) issue or incur any
Debt (other than Senior
Indebtedness or Capitalized
Lease Obligations) unless
such Debt (other than
Senior Indebtedness or
Capitalized Lease
Obligations) is subordinate
in right of payment to
the Debentures at least to
the same extent that the
Debentures are subordinate
to Senior Indebtedness
or (ii) permit any of its
subsidiaries to issue or
incur any Debt (other than
Senior Indebtedness or
Capitalized Lease
Obligations) unless such
Debt (other than Senior
Indebtedness or Capitalized
Lease Obligations) provides
that it will be subordinate
in right of payment to
distributions and dividends
from such subsidiary to the
Company in an amount suffi-
cient to satisfy the
Company's obligations under
the Debentures at least
to the same extent that the
Debentures are subordinate
to Senior Indebtedness.
At December 31, 1995,
Senior Indebtedness (ex-
cluding current install-
ments) was approximately
$2.8 million and the
indebtedness (excluding
liability for income
taxes) of the Company's
subsidiaries was
approximately $16.6
million. See "Description
of the Debentures --
Ranking."
Registration Rights .................... Pursuant to a registration
rights agreement (the
"Registration Rights
Agreement") between the Company
and the Initial Purchaser, the
Company has agreed to file a
shelf registration statement
(the "Shelf Registration
Statement") relating to the
Debentures and the shares of
Common Stock which are issuable
from time to time upon
conversion of the Debentures.
The Company has agreed to use
its reasonable best efforts to
maintain the effectiveness of
the Shelf Registration
Statement until the third
anniversary of the issuance of
the Debentures, except that it
will be permitted to suspend
the use of the Shelf
Registration Statement during
certain periods under certain
circumstances. Upon default by
the Company with respect to
certain of its obligations
under the Registration Rights
Agreement, liquidated damages
will be payable on the
Debentures and Common Stock
affected by such default. See
"Description of the Debentures
-- Registration Rights;
Liquidated Damages."
Restrictive Covenants.................. The indenture under which the
Debentures were issued (the
"Indenture") limits (i) the
issuance of additional debt by
the Company, (ii) the payment
of dividends on the capital
stock of the Company and
investments by the Company,
(iii) certain transactions
with affiliates, (iv)
incurrence of liens, (v)
issuance of preferred stock by
the Company or its
subsidiaries, (vi) stock
splits, consolidations and
reclassifications and (vii)
sales of assets and subsidiary
stock. The Indenture also
prohibits certain restrictions
on distributions from
subsidiaries. However, all
these limitations and
prohibitions are subject to a
number of important
qualifications. See
"Description of the Debentures
-- Certain Covenants of the
Company."
Use of Proceeds........................ The Company will not receive
any proceeds from the sale of
the Debentures or shares of
Common Stock offered pursuant
to this Prospectus. The
Selling Security Holders will
receive all of the net
proceeds from any sale of the
Debentures or shares of Common
Stock offered hereby. See
"Use of Proceeds" and "Selling
Security Holders."
RISK FACTORS
In addition to the other information contained in this
Prospectus, prospective investors should consider carefully the following
factors before purchasing the Debentures offered hereby.
AMOUNT AND RISKS OF GOVERNMENT BUSINESS
Substantially all the Company's revenues are derived from
contracts or subcontracts with domestic and foreign government agencies of
which a significant portion is attributed to United States Navy (the "U.S.
Navy") procurements. The development and success of the Company's business
in the future will depend upon the continued willingness of the U.S.
Government to commit substantial resources to such U.S. Navy programs and,
in particular, upon continued purchases of the Company's products. See
"Business -- Company Organization and Products."
The Company's business with the U.S. Government is subject to
various risks, including termination of contracts at the convenience of the
U.S. Government; termination, reduction or modification of contracts or
subcontracts in the event of changes in the U.S. Government's
requirements or budgetary constraints; shifts in spending priorities; and
when the Company is a subcontractor, the failure or inability of the prime
contractor to perform its prime contract. Certain contract costs and fees
are subject to adjustment as a result of audits by government agencies.
In addition, all defense businesses are subject to risks associated with
the frequent need to bid on programs in advance of design completion (which
may result in unforeseen technological difficulties and/or cost overruns).
Multi-year U.S. Government contracts and related orders are
subject to cancellation if funds for contract performance for any
subsequent year become unavailable. In addition, if certain technical or
other program requirements are not met in the developmental phases of the
contract, then the follow-on production phase may not be realized. Upon
termination other than for a contractor's default, the contractor normally
is entitled to reimbursement for allowable costs, but not necessarily all
costs, and to an allowance for the proportionate share of fees or earnings
for the work completed. Foreign defense contracts generally contain
comparable provisions relating to termination at the convenience of the
foreign government. See "Business -- Contracts."
REDUCED SPENDING IN DEFENSE INDUSTRY
Reductions in U.S. Government expenditures for defense products
are likely to continue during the 1990's. These reductions may or may not
have an effect on the Company's programs; however, in the event
expenditures for products of the type manufactured by the Company are
reduced and not offset by greater foreign sales or other new programs or
products, there will be a reduction in the volume of contracts or
subcontracts awarded to the Company. Unless offset, such reductions would
adversely affect the Company's earnings.
LIMITED TERM OF CONTRACTS
The Company's contracts with the U.S. Government are for varying
fixed terms, and there can be no assurance that a renewal or follow-on
contract will be awarded to the Company by the U.S. Government upon the
expiration of any such contract. Certain of the Company's U.S. Government
contracts account for a substantial portion of the Company's revenues
(i.e., the AN/UYQ-65 production contract). The loss of revenue resulting
from the failure to obtain a renewal or follow-on contract with respect to
any significant contract or a number of lesser contracts, in either case
without the substitution of revenues from the award of new contracts, would
have a material adverse effect upon the Company's results of operations and
financial position. In addition, from time to time the Company enters into
U.S. Government contracts with a full funded backlog but in which the price
per unit may not be determined at the time of award. If the price per unit
which is ultimately determined is significantly less than anticipated by
the Company, the net revenues of the Company would be adversely affected.
HOLDING COMPANY STRUCTURE; SUBORDINATION
The Debentures are a direct obligation of DRS, which derives a
majority of its revenues from the operations of its subsidiaries. The
ability of DRS to make interest payments on or redeem the Debentures and to
pay dividends, if any, on the Common Stock will be primarily dependent upon
the receipt of dividends or other distributions from such subsidiaries. The
payment of dividends from the subsidiaries to the Company and the payment
of any interest on or the repayment of any principal of any loans or
advances made by the Company to any of its subsidiaries may be subject to
statutory or contractual restrictions and are contingent upon the earnings
of such subsidiaries. Although the Company believes that distributions and
dividends from its subsidiaries will be sufficient to pay interest on the
Debentures as well as to meet the Company's other obligations, there can be
no assurance they will be sufficient.
The Debentures are subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, including all
indebtedness under the Company's credit agreements. By reason of such
subordination, in the event of an insolvency, liquidation or other
reorganization of the Company, the Senior Indebtedness must be paid in full
before the principal of, premium if any, and interest on the Debentures may
be paid. At December 31, 1995, Senior Indebtedness (excluding current
installments) was approximately $2.8 million. Because a majority of the
Company's operations are conducted through subsidiaries, claims of the
creditors of such subsidiaries will have priority with respect to the
assets and earnings of such subsidiaries over the claims of the creditors
of the Company, including holders of the Debentures, even though such
obligations do not constitute Senior Indebtedness, except to the extent the
Company is itself recognized as a creditor of such subsidiary or such other
creditors have agreed to subordinate their claims to the payment of the
Debentures. The Company's subsidiaries had indebtedness (excluding
liability for income taxes) of approximately $16.6 million at December 31,
1995.
The Debentures are not secured by any of the assets of the
Company or its subsidiaries. In addition, certain obligations of the
Company are secured by pledges of certain assets of the Company or its
subsidiaries.
SUBSTANTIAL INDEBTEDNESS
Following the issuance of the Debentures, the Company continues
to have indebtedness that is substantial in relation to its stockholders'
equity. See "Capitalization." The Indenture imposes significant operating
and financial restrictions on the Company. Such restrictions will affect,
and in many respects significantly limit or prohibit, among other things,
the ability of the Company to incur additional indebtedness and pay
dividends. These restrictions, in combination with the leveraged nature of
the Company, could limit the ability of the Company to effect future
financings or otherwise may restrict corporate activities. See "Description
of the Debentures." The Indenture permits the Company to incur additional
indebtedness under certain conditions, and the Company expects to obtain
additional indebtedness as so permitted.
The Company's high degree of leverage could have important
consequences to the holders of the Debentures, including the following:
(i) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired in the future; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to
the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) the
Company's substantial degree of leverage may hinder its ability to adjust
rapidly to changing market conditions; and (iv) could make it more
vulnerable in the event of a downturn in general economic conditions or
its business. See "Description of the Debentures."
COMPETITION
The military electronics industry is characterized by rapid
technological change. The Company's products are sold in markets containing
many competitors which are substantially larger than the Company, devote
substantially greater resources to research and development and generally
have greater resources. Certain of such competitors are also suppliers to
the Company. In the military sector, the Company competes with many first-
and second-tier defense contractors on the basis of product performance,
cost, overall value, delivery and reputation. The Company's future success
will depend in large part upon its ability to improve existing product
lines and to develop new products and technologies in the same or related
fields. The introduction by competitors of new products with greater
capabilities could adversely affect the Company's business.
RELIANCE ON SUPPLIERS
The Company's manufacturing process for its products, excluding
electro-optical products, consists primarily of the assembly of purchased
components and testing of the product at various stages in the assembly
process.
Although materials and purchased components generally are
available from a number of different suppliers, several suppliers are the
Company's sole source of certain components. If a supplier should cease to
deliver such components, other sources probably would be available;
however, added cost and manufacturing delays might result. The Company has
not experienced significant production delays attributable to supply
shortages, but occasionally experiences procurement problems with respect
to certain components, such as semiconductors and connectors. In addition,
with respect to the Company's electro-optical products, certain exotic
materials, such as germanium, zinc sulfide and cobalt, may not always be
readily available.
ATTRACTING AND RETAINING TECHNICAL PERSONNEL
There is a continuing demand for qualified technical personnel,
and the Company believes that its future growth and success will depend
upon its ability to attract, train and retain such personnel. An inability
to maintain a sufficient number of trained personnel could have a material
adverse effect on the Company's contract performance or on its ability to
capitalize on market opportunities.
FUNDING OF REPURCHASE OBLIGATIONS; ABSENCE OF SINKING FUND
There is no sinking fund with respect to the Debentures, and at
maturity the entire outstanding principal amount thereof will become due
and payable by the Company. Also, upon the occurrence of certain events the
Company will be required to offer to repurchase all or a portion of the
outstanding Debentures. The source of funds for any such payment at
maturity or earlier repurchase will be the Company's available cash or cash
generated from operating or other sources, including, without limitation,
borrowings or sales of assets or equity securities of the Company. There
can be no assurance that sufficient funds will be available at the time of
any such event to pay such principal or to make any required repurchase.
See "Description of the Debentures."
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of
Common Stock in the public market could adversely affect the prevailing
market price of the Debentures and the Common Stock into which the
Debentures are convertible and could impair the Company's ability to raise
additional capital through the sale of its securities. The Debentures
offered hereby are convertible at any time prior to maturity, unless
previously redeemed or repurchased, into shares of Common Stock, at a
conversion price of $8.85 per share, subject to adjustment under certain
circumstances. As of April 25, 1996, there was an aggregate of 5,467,632
shares of Common Stock outstanding (excluding 498,434 shares held in
treasury). Of such shares, 1,062,248 are "restricted" under the Securities
Act and are resalable pursuant to the limitations of Rule 144 under the
Securities Act. After giving effect to the application of $5.0 million in
net proceeds acquired by the Company pursuant to the Debenture Offering to
repurchase approximately $5.0 million in principal amount of the Company's
8-1/2% Convertible Subordinated Debentures due August 1, 1998 (the "1998
Debentures"), the remaining outstanding 1998 Debentures will be convertible
into an additional 332,800 shares of Common Stock at $15 per share.
LACK OF PUBLIC MARKET; RESTRICTIONS ON RESALE
At present, the Debentures are owned by a small number of
institutional investors, and prior to this offering there has not been any
public market for the Debentures. The Debentures and the shares of Common
Stock which are issuable upon conversion of the Debentures are listed on
the AMEX. The Debentures are eligible for trading in the PORTAL Market of
the National Association of Securities Dealers, Inc. There can be no
assurance regarding the future development of a market for the Debentures
or the ability of holders of the Debentures to sell their Debentures or the
price at which such holders may be able to sell their Debentures. If such a
market were to develop, the Debentures could trade at prices that may be
higher or lower than the initial offering price depending on many factors,
including prevailing interest rates, the Company's operating results and
the market for similar securities. The Initial Purchaser has advised the
Company that it currently intends to make a market in the Debentures. The
Initial Purchaser is not obligated to do so, however, and any market-making
with respect to the Debentures may be discontinued at any time without
notice. Therefore, there can be no assurance as to the liquidity of any
trading market for the Debentures or that an active public market for the
Debentures will develop.
The Common Stock of the Company is listed on the AMEX. The
market for the Common Stock has historically been characterized by limited
trading volume and a limited number of holders. There can be no assurance
that a more active trading market for the Common Stock will develop.
THE COMPANY
GENERAL
The Company designs, manufactures and markets high-technology
computer workstations for the U.S. Department of Defense, electro-optical
targeting systems for military customers and image and data storage
products for both military and commercial customers. In response to a 1992
mandate by the Joint Chiefs of Staff, the Company focuses on
"commercial-off-the-shelf" ("COTS") product designs, whereby commercial
electronic components are adapted, upgraded and "ruggedized" for
application in harsh military environments. The Company believes that
military expenditures on electronic systems and equipment will grow in
coming years as the nature of modern warfare dictates increasing reliance
on real-time, accurate battlefield information and the electronic content
and sophistication of defense systems increases.
Using COTS designs, the Company develops and delivers its
products with significantly less development time and expense compared to
traditional military product cycles, generally resulting in shorter lead
times, lower costs and the employment of the latest information and
computing technologies. The COTS process entails the purchasing, refitting,
upgrading (of both hardware and software) and "ruggedization" (repackaging,
remounting and stress testing to withstand harsh military environments) of
readily available commercial components. The design and manufacture of
COTS-based products is a complex process requiring specific engineering
capabilities, extensive knowledge of military platforms to which the
equipment will be applied and in-depth understanding of military operating
environments and requirements.
STRATEGY
During its last three fiscal years, the Company has restructured
its management team and implemented strategies to exploit the changing
nature of military procurement programs brought on by the end of the cold
war, military budget constraints and the COTS mandate. The Company's
strategies include:
o expanding and diversifying the Company's technology
and product base into complementary military and
commercial markets primarily through acquisitions and
the forging of strategic relationships;
o increasing revenue opportunities through the design and
adaptation of products for use by all branches of the
military; and
o enhancing financial performance through specific cost
reduction measures and increased manufacturing
efficiencies.
To effect these strategies, the Company has (i) acquired several
businesses with complementary military and commercial products and
technologies over the last three years; (ii) forged strategic relationships
with other defense suppliers such as Lockheed-Martin Tactical Defense
Systems (formerly, Loral Corporation) and Westinghouse Electric
Corporation, among others; (iii) emphasized the development of COTS-based
products as well as products and systems that are easily adapted to similar
weapons platforms for use by all branches of the military; and (iv)
implemented cost reduction programs to reduce its fixed-cost base, allow
for growth and maintain the flexibility of its operations.
The implementation of these strategies has resulted in
increasing revenues and profits over the last three fiscal years. Although
the Company experienced operating losses in fiscal 1990 through 1992,
primarily due to cost overruns on a single fixed-price development
contract, a shift over the last several years in the nature of military
development contracting from fixed-price to cost-type contracts has reduced
the Company's exposure in this area. For the fiscal year ended March 31,
1995, the Company had revenues of $69.9 million, net income of $2.6 million
and earnings per share of $.50, representing increases of 20.9%, 61.2% and
66.7%, respectively, compared with the year ended March 31, 1994. For the
nine months ended December 31, 1995, the Company had revenues of $65.6
million, net income of $2.5 million and fully diluted earnings per share of
$.44, representing increases of 38.4%, 45.7% and 29.4%, respectively,
compared with the same nine-month period ended December 31, 1994.
COMPANY ORGANIZATION
The Company is organized into three operating groups: Electronic
Systems Group ("ESG," 54% of fiscal 1995 revenues), Electro-Optical Systems
Group ("EOSG," 18% of fiscal 1995 revenues) and Media Technology Group
("MTG," 28% of fiscal 1995 revenues). See "Business -- Company Organization
and Products."
ESG designs and manufactures COTS-based computer workstations
designed for military information processing applications. This equipment
is designed to cost-effectively replace and upgrade anti-submarine warfare
("ASW") systems, tactical (combat/attack) workstations and training
equipment. ESG's products are a direct outgrowth of the ASW and Naval
systems expertise that has formed the core of DRS' business base since the
Company's inception. Major products include: (i) computer workstations used
in ASW systems for ship and land-based (harbors and coastal areas)
detection networks, (ii) tactical workstations used to coordinate and
control personnel and weapons systems on the military's most advanced ship,
air and submarine-based platforms, and (iii) military display emulators
("MDE"), which are used for combat system operator training at a fraction
of the cost of fully-militarized, field-ready versions of the display.
ESG's workstation products, which are PC-based, open architecture,
networked systems designed for flexibility and adaptability to a wide
variety of applications, have been developed to replace many of the
mainframe-based systems currently in use, while preserving the U.S. Navy's
existing investment in such technology. ESG's systems process incoming
sonar, radar and other information through complex customized software,
enabling operators to interpret data quickly and relay information to
command personnel. These workstations are an integral part of the U.S.
Navy's Aegis defense program and the U.S. coastal defense strategy. MDE
systems are used for training of combat system operators and to maintain
and improve the operation skills of naval reserve personnel. ESG operates a
field service division for system maintenance, installation and upgrade
services and general product support. ESG's manufacturing division (which
is 80% owned through a partnership) produces ESG's new generation products
and also supplies complex wire harness assemblies and other products to the
military and commercial aerospace industry.
EOSG manufactures precision electro-optical assemblies used in
infrared seeker heads of Stinger, Sidewinder and new generation missiles
and produces proprietary Multiple Platform Boresight Equipment ("MPBE")
used to align the weapons systems with the airframes and pilot sighting
systems on Apache and Cobra helicopters. Originally supplying only the
primary mirror for infrared seeker heads, EOSG now supplies the primary,
secondary, tertiary and fold mirrors, as well as the mirror housing and
nose domes. EOSG is currently under contract to produce infrared components
and subassemblies on many of the next generation infrared missile systems.
The MPBE boresight system was originally deployed on the Army's Apache
attack helicopters and has been adapted for use on Marine Corps' Cobra
helicopters. EOSG is under contract to supply the next generation
laser-based MPBE for these platforms. Due to the inherent flexibility and
economics of MPBE's multiple platform design, EOSG has submitted proposals
to adapt the system for use on fixed-wing aircraft such as the F-15 and
C-130. The Company recently acquired substantially all of the assets of
Opto Mechanik, Inc. through its subsidiary OMI Acquisition Corp. ("OMI").
Through OMI, EOSG now supplies the electro-optical sighting and targeting
systems used on TOW anti-tank missiles, the military's primary anti-tank
weapon, and other electro-optical military products. The Company is also
under contract with the primary contractor for work on the anti-tank
Improved TOW Acquisition System.
MTG manufactures products used by military and commercial
customers for image and data storage. The group designs military recorder
systems by adapting commercial video recording products to operate in and
withstand harsh military environments. With MTG's recorder products, the
COTS process entails the purchasing, refitting, upgrading (hardware and
software) and "ruggedization" (repackaging, remounting and
vibration/thermal stress testing to withstand harsh military operating
environments) of readily available commercial components. These systems are
used to record cockpit video of jet fighter, helicopter and light armored
vehicle missions. MTG's commercial operations manufacture burnish, glide
and test heads which are used in the manufacture of computer hard disks,
listing among its customers many of the major disk drive manufacturers in
the United States. MTG also manufactures specialty recorder heads and
refurbishes the head assemblies of high-end video recording products used
by broadcasters worldwide.
The Company was incorporated in Delaware in June 1968. The
Company's executive offices are located at 5 Sylvan Way, Parsippany, New
Jersey, 07054, and its telephone number is (201) 898-1500.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Debentures or shares of Common Stock offered pursuant to this Prospectus.
The Selling Security Holders will receive all of the net proceeds from any
sale of the Debentures or shares of Common Stock offered hereby.
The net proceeds received by the Company pursuant to the
Debenture Offering (including the exercise of the over-allotment option)
were approximately $23,750,000. On February 16, 1996, the Company used
approximately $5.0 million of such net proceeds to redeem $4,963,000
aggregate principal amount of the Company's 1998 Debentures (of which
$2,463,000 aggregate principal amount was classified as current as of
December 31, 1995), plus accrued and unpaid interest thereon. The balance
will be used for general corporate purposes, including acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition and Liquidity -- The Debenture Offering."
The Company continues to seek acquisition opportunities consistent with its
business strategy and is engaged in preliminary discussions regarding
several potential acquisitions. However, there can be no assurance that
definitive agreements will be reached or that any acquisition will be
consummated.
CAPITALIZATION
The following table sets forth the consolidated capitalization
of the Company at December 31, 1995 as adjusted to give effect to the use
of net proceeds from the Debenture Offering (including the over-allotment
option for $5,000,000 aggregate principal amount of the Debentures which
was exercised on November 3, 1995). The information presented below should
be read in conjunction with the consolidated financial statements of the
Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------
Actual As Adjusted
----------- -------------
Long-term debt, excluding current installments(1):
<S> <C> <C>
Senior Indebtedness(2) .................................... $ 2,819,000 $ 2,819,000
8 1/2% Convertible Subordinated Debentures
due August 1, 1998 ..................................... 7,500,000 5,000,000
Senior Subordinated Convertible Debentures due 2003 ....... 25,000,000 25,000,000
------------ ------------
Total long-term debt ................................. 35,319,000 32,819,000
Stockholders' equity:
Preferred Stock, $10 par value 2,000,000 shares authorized;
no shares issued ....................................... -- --
Class A Common Stock, $.01 par value, 10,000,000 shares
authorized; 3,739,963 shares issued(3) ................ 37,000 37,000
Class B Common Stock, $.01 par value, 20,000,000 shares
authorized; 2,216,353 shares issued(3) ................. 22,000 22,000
Additional paid-in capital ................................ 13,579,000 13,579,000
Retained earnings ......................................... 13,414,000 13,414,000
------------ ------------
27,052,000 27,052,000
Less Treasury Stock -at cost: 432,639 shares of Class A
Common Stock and 21,619 shares of Class B Common
Stock(3) ............................................. (1,918,000) (1,918,000)
Less unamortized restricted stock compensation ......... (227,000) (227,000)
------------ ------------
Net stockholders' equity .................................. 24,907,000 24,907,000
------------ ------------
Total capitalization ......................................... $ 60,226,000 $ 57,726,000
============ ============
</TABLE>
- -----------------
(1) See Note 6 to Consolidated Financial Statements for further
information with respect to the Company's debt obligations.
(2) Consisting of Industrial Revenue Bonds due 1998 and other obligations.
See Note 6 to Consolidated Financial Statements.
(3) Does not give effect to the Reclassification. On April 1, 1996, the
Reclassification became effective pursuant to which each share of the
Class A Common Stock and each share of the Class B Common Stock was
reclassified into one share of the Common Stock. See "Description of
Capital Stock."
MARKET PRICES OF CAPITAL STOCK
Prior to the Reclassification, the Company's Class A Common
Stock and Class B Common Stock traded on the AMEX (Symbols: DRSA and DRSB,
respectively). On April 1, 1996, upon the effectiveness of the
Reclassification, trading of the newly classified Common Stock commenced.
The following table sets forth for each period indicated the high and low
closing sales prices of the Company's Class A Common Stock , Class B Common
Stock and Common Stock, as reported by the American Stock Exchange Monthly
Market Statistics:
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock Common Stock*
High Low High Low High Low
Year Ended March 31, 1994:
<S> <C> <C> <C> <C> <C> <C>
First Quarter......................... $ 4-3/8 $ 2-3/4 $ 4-1/4 $ 2-13/16 $ - $ -
Second Quarter........................ 3-7/8 3-1/16 3-13/16 3 - -
Third Quarter......................... 3-11/16 2-15/16 3-1/2 2-3/4 - -
Fourth Quarter........................ 4-1/16 3 4 3 - -
Year Ended March 31, 1995:
First Quarter......................... 5-1/4 3-5/8 5-1/8 3-3/4 - -
Second Quarter........................ 4-3/4 3-3/4 4-5/8 3-3/4 - -
Third Quarter ........................ 4-5/16 3-15/16 4-3/8 3-7/8 - -
Fourth Quarter........................ 5-1/4 4 5-1/2 3-7/8 - -
Year Ended March 31, 1996:
First Quarter......................... 6-5/8 4-3/4 6-13/16 4-7/8 - -
Second Quarter........................ 7-13/16 6-3/16 7-7/8 5-3/4 - -
Third Quarter......................... 8 7 7-7/8 6-3/4 - -
Fourth Quarter........................ 8-11/16 7-7/16 8-3/4 7-3/8 - -
Year Ended March 31, 1997:
First Quarter
(through April 25, 1996).............. - - - - 7-15/16 7-5/16
</TABLE>
- ----------------
* As of April 25, 1996, the Common Stock was held by 2,113 stockholders
(of which 346 were registered holders and 1,767 were beneficial
holders). See "Risk Factors -- Lack of Public Market; Restrictions on
Resale."
DIVIDEND POLICY
The Company has not paid any cash dividends since 1976. The
Company intends to retain future earnings for use in its business and does
not expect to declare cash dividends in the foreseeable future on the
Common Stock. The Company's 1998 Debentures limit the Company's ability to
pay dividends or make other distributions on its Common Stock. See Note 6
of Notes to Consolidated Financial Statements for information concerning
restrictions on the declaration or payment of dividends. See "Description
of Capital Stock -- Dividends and Distributions." Any future declaration of
dividends will be subject to the discretion of the Board of Directors of
the Company. The timing, amount and form of any future dividends will
depend, among other things, on the Company's results of operations,
financial condition, cash requirements, plans of expansion and other
factors deemed relevant by the Board of Directors.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated statements
of operations and balance sheet data for the periods indicated. The
information for, and as of the end of, each of the twelve months in the
five year period ended March 31, 1995 is derived from the consolidated
financial statements of the Company for such periods which have been
audited by KPMG Peat Marwick LLP. The selected consolidated statements of
operations data for the nine months ended December 31, 1995 and 1994 and
the selected consolidated balance sheet data as of December 31, 1995 are
derived from the unaudited consolidated statements of the Company, which
include all adjustments which management considers necessary for a fair
presentation of the data for such periods and at such dates, all of which
were of a normal recurring nature. The results of the nine months ended
December 31, 1995 are not necessarily indicative of results to be expected
for the full year. The selected consolidated financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements
of the Company and the notes thereto, and other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months
Year Ended March 31, Ended December 31,
1995 1994 1993 1992 1991 1995 1994
------------ ------------ ------------- ------------ ------------- ------------ --------
SUMMARY OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 69,930,000 $ 57,820,000 $ 47,772,000 $ 28,925,000 $ 47,762,000 $ 65,628,000 $ 47,404,000
Costs and Expenses............ 64,836,000 54,372,000 45,461,000 37,032,000 52,812,000 60,289,000 44,143,000
------------ ------------ ------------- ------------ ------------- ------------ -----------
Operating Income (Loss)......... 5,094,000 3,448,000 2,311,000 (8,107,000) (5,050,000) 5,339,000 3,261,000
Interest and Related Expenses... (1,372,000) (1,574,000) (1,735,000) (2,198,000) (2,362,000) (1,675,000) (1,020,000)
Other Income, Net............... 534,000 834,000 1,224,000 944,000 1,677,000 425,000 613,000
------------ ----------- ------------- ------------ ------------- ------------ -----------
Earnings (Loss) before
Income Taxes (Benefit)..... 4,256,000 2,708,000 1,800,000 (9,361,000) (5,735,000) 4,089,000 2,854,000
Income Taxes (Benefit)......... 1,652,000 1,093,000 715,000 (4,006,000) (1,488,000) 1,594,000 1,142,000
------------ ------------ ------------ ------------ ------------- ------------ ------------
Net Earnings (Loss)........... $ 2,604,000 $ 1,615,000 $ 1,085,000 $ (5,355,000) $ (4,247,000) $ 2,495,000 $ 1,712,000
============ ============ ============= ============= ============= ============ ===========
Net Earnings (Loss) per share
of Class A and Class B
Common Stock(1)(2)....... $ .50 $ .30 $ .20 $ (1.01) $ (.79) $ .44 $ .34
OTHER OPERATIONS DATA:
EBITDA(3).................... $ 7,574,000 $ 6,006,000 $ 5,513,000 $ (4,393,000) $ (973,000) $ 7,565,000 $ 5,228,000
Ratio of Earnings to Fixed
Charges(4)(5)............. 2.9x 2.3x 1.8x - - 2.8x 2.7x
Ratio of Earnings to Fixed
Charges, as adjusted(4)(6). 1.8x 2.2x
March 31, December 31, l995
1995 1994 1993 1992 1991 Actual As Adjusted(7)
------------ ------------ ------------- ------------ ------------- -------- -------------
BALANCE SHEET DATA:
Working Capital........... $ 20,317,000 $ 19,803,000 $ 17,994,000 $ 17,747,000 $ 24,833,000 $ 40,585,000 $ 38,085,000
Net Property, Plant and
Equipment............... 9,849,000 8,893,000 9,768,000 11,602,000 13,904,000 14,728,000 14,728,000
Total Assets.............. 64,590,000 58,836,000 51,948,000 53,904,000 58,527,000 90,770,000 85,631,000
Long-Term Debt, Excluding
Current Installments. ... 11,732,000 14,515,000 17,290,000 19,958,000 22,240,000 35,319,000 32,819,000
Net Stockholders' Equity..... 22,509,000 19,759,000 18,115,000 17,047,000 22,300,000 24,907,000 24,907,000
</TABLE>
- --------------------
(1) No cash dividends have been distributed during any of the years in the
five-year period ended March 31, 1995 or the nine months ended
December 31, 1995.
(2) Does not give effect to the Reclassification. On April 1, 1996, the
Reclassification became effective pursuant to which each share of the
Class A Common Stock and each share of the Class B Common Stock was
reclassified into one share of the Common Stock. See "Description of
Capital Stock."
(3) EBITDA is defined as operating income (loss) plus depreciation and
amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service and incur debt. EBITDA should not be
considered in isolation or as a substitute for net income, cash flows
or other consolidated income or cash flow data prepared in accordance
with generally accepted accounting principles or as a measure of a
company's profitability or liquidity.
(4) Earnings used in computing the ratio of earnings to fixed charges
consist of earnings before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of debt issuance
costs and the portion of the Company's rent expense that the Company
believes is representative of the interest factor.
(5) Earnings were inadequate to cover fixed charges in fiscal 1992 and
fiscal 1991. Earnings (Loss) before Income Taxes (Benefit) in fiscal
1992 and fiscal 1991 include fixed charges of approximately $2.7
million and $2.9 million, respectively.
(6) Adjusted to reflect the application of the proceeds from the Debenture
Offering, which was consummated on September 29, 1995 (including the
over-allotment option which was exercised on November 3, 1995). The
ratio also assumes additional interest income was earned on the
proceeds remaining after the redemption of the Company's 1998
Debentures. See "Use of Proceeds."
(7) Adjusted to give effect to the use of the net proceeds from the
Debenture Offering to redeem $4,963,000 of the 1998 Debentures and for
the payment of $176,000 of accrued interest thereon as of December 31,
1995. See "Use of Proceeds."
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial
condition and results of operations of the Company for the nine months
ended December 31, 1995 and 1994, and for each of the years in the three
year period ended March 31, 1995. This section should be read in
conjunction with the Consolidated Financial Statements of the Company and
the notes thereto and other financial information included elsewhere in
this Prospectus.
OVERVIEW
During the last three fiscal years, the Company, in connection
with its strategic plan, acquired several businesses with complementary
military and commercial products and technologies. The businesses of
Technology Applications & Service Company ("TAS"), CMC Technology ("CMC")
and Laurel Technologies ("Laurel"), which joined the Company in the latter
part of fiscal 1994, became an integral part of the fiscal 1995 business
base and significantly contributed to the Company's fiscal 1995 financial
performance. In November 1994, the Company acquired Ahead Technology
Corporation ("Ahead"), located in Los Gatos, California.
RECENT DEVELOPMENTS
Shortly after the close of fiscal 1995, the Company signed a
non-binding letter of intent contemplating the merger of the Company with
NAI Technologies, Inc. ("NAI"), which the Company terminated on July 13,
1995. Currently, the Company does not intend to continue discussions with
NAI regarding any proposed merger.
In August 1995, Mr. Leonard Newman was elected Chairman Emeritus
of the Company and retired as the Chairman of the Board and Secretary of
the Company. In March 1996, the Company entered into an employment,
non-competition and termination agreement with Mr. Leonard Newman.
Pursuant to such agreement, Mr. Newman resigned as Chairman Emeritus
of the Company. See "-- Financial Condition and Liquidity - Certain
Agreements."
RESULTS OF OPERATIONS
The following table sets forth items in the consolidated
statements of operations as a percentage of revenues and the percentage
increase or decrease of those items as compared with the prior period.
<TABLE>
<CAPTION>
Percentage of Revenues Percentage Change
-------------------------------------------------------------- -----------------------------------
NINE MONTHS
ENDED
DECEMBER 31,
1995
VS.
FISCAL FISCAL NINE MONTHS
1995 1994 ENDED
Nine Months VS. VS. DECEMBER 31,
Year Ended March 31, Ended December 31, 1994 1993 1994
------------------------------------- ---------------------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1995 1994
--------- -------- --------- --------- ----------
Revenues....................... 100.0% 100.0% 100.0% 100.0% 100.0% 20.9% 21.0% 38.4%
Costs and Expenses........... 92.7 94.0 95.2 91.9 93.1 19.2 19.6 36.6
---------- -------- --------- --------- ----------
Operating Income ............ 7.3 6.0 4.8 8.1 6.9 47.7 49.2 63.7
Interest and Related Expenses.. (2.0) (2.7) (3.6) (2.5) (2.2) (12.8) (9.3) 64.2
Other Income, Net.............. .8 1.4 2.6 0.6 1.3 (36.0) (31.9) (30.7)
---------- -------- --------- --------- ----------
Earnings before Income Taxes.. 6.1 4.7 3.8 6.2 6.0 57.2 50.4 43.3
Income Taxes .................. 2.4 1.9 1.5 2.4 2.4 51.1 52.9 39.6
---------- -------- --------- --------- ---------
3.7% 2.8% 2.3% 3.8% 3.6%
Net Earnings................... ========== ======= ======== ========= ========= 61.2% 48.8% 45.7%
</TABLE>
COMPARISON OF NINE MONTHS ENDED DECEMBER 31, 1995 WITH NINE MONTHS ENDED
DECEMBER 31, 1994
Revenues for the nine-month period ended December 31, 1995
increased 38.4% to $65.6 million from $47.4 million for the same nine-month
period in fiscal 1995. The revenue growth was due primarily to increased
shipments of display workstations and data storage systems, as well as from
higher commercial product sales. In addition, revenue growth was partly due
to higher sales of electro-optical systems following the acquisition of
substantially all of the assets of Opto Mechanik, Inc. on July 5, 1995 (the
"OMI Asset Acquisition").
Operating income for the nine-month period ended December 31,
1995 increased 63.7% to $5.3 million from $3.3 million for the same
nine-month period in fiscal 1995. Operating income as a percentage of
revenues was 8.1% for the nine-month period ended December 31, 1995 as
compared with 6.9% for the comparable prior year period. Higher operating
income was due primarily to the overall increase in revenues, together with
higher margins on the company's commercial products.
Interest and related expenses were $1.7 million for the nine
months ended December 31, 1995 as compared to $1.0 million for the
comparable prior year period. The increase for the period was primarily due
to the increase in debt associated with the Debenture Offering, offset in
part by a reduction in interest resulting from repurchases of the Company's
1998 Debentures, in satisfaction of the August 1, 1995 sinking fund
requirement for this debt.
Other income, net, was $0.4 million for the nine-month period
ended December 31, 1995, representing a decrease from $0.6 million in the
comparable prior year period. This decrease was due to a gain on the sale
of fixed assets of approximately $0.2 million in the third quarter of
fiscal 1995, offset in part by interest earned on higher average cash
balances this fiscal year, primarily resulting from the net proceeds
generated from the Debentures.
The Company's effective tax rate for the nine-month period ended
December 31, 1995 was 39%, as compared to 40% in the comparable prior year
period. The Company records income tax expense based on an estimated
effective income tax rate for the full fiscal year. The effective income
tax rate and the components of income tax expense for the nine months ended
December 31, 1995 did not significantly change from those of the fiscal
year ended March 31, 1995. The provision for income taxes includes all
estimated income taxes payable to federal and state governments as
applicable.
COMPARISON OF FISCAL 1995 WITH FISCAL 1994
Revenues for fiscal 1995 increased 21% to $69.9 million from
$57.8 million in fiscal 1994. The increase during fiscal 1995 was primarily
attributable to revenues from the display, manufacturing and video
broadcast product lines of TAS, CMC and Laurel, which were included in the
Company's results for the full year. In addition, commercial revenues
increased $4.3 million to approximately $6.4 million in fiscal 1995
primarily as a result of the Company's November 1994 acquisition of Ahead,
which contributed approximately $2.7 million in revenues for the fiscal
1995 period. Revenues from the Company's core signal processing, display,
data storage and optical product lines experienced a slight decrease during
fiscal 1995, as development efforts on several major programs were
substantially completed, and the receipt of certain new awards was delayed
into the latter part of the year.
Operating income for fiscal 1995 increased 48% to $5.1 million
from $3.4 million in fiscal 1994. Operating income as a percentage of
revenues was 7% for fiscal 1995 as compared to 6% in fiscal 1994. Such
increases are attributable to higher fiscal 1995 revenues and the
contribution of higher margin commercial products to the Company's business
base and the positive impact of management's continuing cost reduction
efforts.
Interest and related expenses for fiscal 1995 decreased 13% to
$1.4 million from $1.6 million in fiscal 1994. The decrease was a result of
the reduction in the Company's long-term debt. The Company repurchased
approximately $2.7 million of its 1998 Debentures during fiscal 1995, which
were used principally to satisfy the August 1, 1994 mandatory sinking fund
requirement for the debt.
Other income, net, for fiscal 1995 decreased 36% to $.5 million
from $.8 million in fiscal 1994. This decrease was primarily attributable
to lower gains from the repurchases of 1998 Debentures of $.2 million.
Substantially all 1998 Debentures repurchased during fiscal 1995 were at
prices approximating par value.
The Company's effective income tax rate in fiscal 1995 and 1994
was 39% and 40%, respectively.
COMPARISON OF FISCAL 1994 WITH FISCAL 1993
Revenues for fiscal 1994 increased 21% to $57.8 million from
$47.8 million in fiscal 1993. The revenue increase reflects the
contribution of the recently acquired product lines of TAS, CMC and Laurel.
Revenues from core signal processing, display, recording and optical
product lines shifted to those from contracts awarded primarily within the
1994 and 1993 fiscal years. Revenues from older contracts for such products
were not as significant as in fiscal 1993, as a result of the completion or
near-completion of these contracts during the year.
Operating income for fiscal 1994 increased 49% to $3.4 million
from $2.3 million in fiscal 1993. Operating income as a percentage of
revenues was 6% in fiscal 1994 as compared to 5% in fiscal 1993. Such
increases are attributable to higher fiscal 1994 revenues, lower costs as a
result of improved efficiencies and the substantial completion during
fiscal 1993 of two fixed-price development contracts on which the Company
incurred write-offs for cost overruns.
Interest and related expenses decreased 9% to $1.6 million in
fiscal 1994 from $1.7 million in fiscal 1993. This decrease reflects the
Company's retirement of $2.5 million of principal on its 1998 Debentures
during the first half of fiscal 1994, pursuant to the mandatory sinking
fund requirement for the debt. The Company also repurchased an additional
$.1 million in principal amount of the 1998 Debentures during the latter
half of fiscal 1994.
Other income, net, for fiscal 1994 decreased 32% to $.8 million
from $1.2 million in fiscal 1993. Fiscal 1994 results included gains on the
repurchases of 1998 Debentures, described previously, of approximately $.3
million, while fiscal 1993 gains for similar transactions amounted to $.5
million.
The Company's effective income tax rate in both fiscal 1994 and
1993 was 40%.
FINANCIAL CONDITION AND LIQUIDITY
Cash and Cash Flow. Cash and cash equivalents at December 31,
1995 and March 31, 1995 represented approximately 25% and 17%,
respectively, of total assets. During the nine-month period ended December
31, 1995, cash increased $11.9 million. This increase was primarily the
result of the private placement of $20,000,000 in aggregate principal
amount of the Debentures on September 29, 1995, and the additional
placement of $5,000,000 in aggregate principal amount of the Debentures,
pursuant to an over-allotment option, completed on November 3, 1995. In
addition, approximately $2.4 million was generated from sales of certain
fixed assets. These contributions to cash were offset by uses of: (i)
approximately $4.1 million in the OMI Asset Acquisition; (ii) approximately
$2.2 million for repurchases of outstanding 1998 Debentures in satisfaction
of the August 1, 1995 sinking fund requirement for such debt; and (iii)
approximately $3.7 million for capital expenditures. Additionally,
approximately $3.5 million was used in support of operations, primarily for
material procurement.
Cash and cash equivalents at March 31, 1995 of $11.2 million was
down $4.3 million from the balance at March 31, 1994. Cash represented 17%
of total assets at the end of fiscal 1995, as compared with 26% in fiscal
1994. During fiscal 1995, cash generated by operations amounted to $2.5
million. In comparison, cash generated by operations during fiscal 1994 was
$10.2 million. The reduction in the amount of cash generated by operations
during fiscal 1995 was primarily attributable to the build-up in inventory
which occurred during fiscal 1995 in preparation for the fiscal 1996
production and shipment of products under several significant development
contracts. Cash used in investing and financing activities during fiscal
1995 totalled $3.8 million and $3.0 million, respectively, primarily
attributable to purchases of capital equipment for $2.5 million, the
acquisition of Ahead for $1.5 million and the repurchase of 1998 Debentures
for $2.7 million.
Capital expenditures during fiscal 1996, excluding assets
acquired as a result of the OMI Asset Acquisition, are expected to
approximate $4.4 million. The majority of these expenditures will be for
facilities improvements, as well as for computer and laboratory-related
equipment, which will be required to support the Company's growth.
Working capital as of December 31, 1995 was $40.6 million, as
compared to $20.3 million at March 31, 1995. The increase was primarily due
to higher cash balances resulting from the Debenture Offering. Net proceeds
from the Debenture Offering were used on February 16, 1996 to repurchase
approximately $5.0 million in principal amount of outstanding 1998
Debentures, for working capital requirements and for future
acquisition-related transactions. During the first quarter of fiscal 1996,
the Company obtained a $5.0 million unsecured line of credit from NatWest
Bank, in order to supplement its working capital needs. This line of credit
expired on December 31, 1995 and has not been renewed. As of August 1995,
the Company satisfied its $2.5 million sinking fund obligation under the
1998 Debentures. The Company continues to seek acquisition opportunities
consistent with its business strategy and is engaged in preliminary
discussions regarding several potential acquisitions . However, there can
be no assurance that definitive agreements will be reached or that any
acquisition will be consummated.
On February 5, 1996, the Company received a written commitment
from Mellon Bank, N.A. ("Mellon Bank") for a $15 million unsecured
revolving line of credit. The line of credit will be used for working
capital, stand-by letters of credit, and to refinance certain existing debt
obligations of the Company at more favorable interest rates. Interest on
borrowings under the line of credit will be accrued at the prime rate or
London Interbank Offered Rate plus 175 basis points. The Company has agreed
to maintain certain financial covenants, including the maintenance of: (i)
a certain minimum quarterly ratio of liquid assets to current liabilities,
(ii) a certain minimum interest coverage ratio, calculated on a rolling
four quarter basis and (iii) a certain maximum quarterly ratio of total
liabilities to tangible net worth. This commitment is subject to the
execution of a related loan agreement by and between the Company and Mellon
Bank. The Company expects this agreement to be completed in May 1996.
The Company believes that its current working capital position
is sufficient to support operational needs as well as its near-term
business objectives.
Accounts Receivable and Inventories. Accounts receivable
increased approximately $3.2 million in the nine-month period ended
December 31, 1995, primarily resulting from increased billings associated
with certain contracts and, to a lesser extent, from the OMI Asset
Acquisition. Accounts receivable were approximately $17.4 million at March
31, 1995, an increase of $1.9 million from the balance at March 31, 1994.
This increase was primarily attributable to significant shipments on
several contracts which occurred toward the end of the fiscal year. The
Company receives progress payments on certain contracts from the U.S.
Government of between 80-100% of allowable costs incurred. The remainder,
including profits and incentive fees, is billed to its customers based upon
delivery and final acceptance of all products. In addition, the Company may
bill its customers based upon units delivered. Generally, there are no
contract provisions for retainage, and all accounts receivable are expected
to be collected within one year.
Inventories increased by approximately $4.8 million during the
first nine months of fiscal 1996, primarily due to increased material
procurement related to higher production activity on certain display
workstation programs. The increase in inventories was also due, in part, to
the OMI Asset Acquisition. The net inventory balance at March 31, 1995 was
$11.7 million, an increase of $6.7 million from the balance at March 31,
1994. As mentioned previously, the Company experienced a build-up in
inventory during fiscal 1995 in preparation for production and shipment on
several major development contracts. In addition, the terms of certain
production contracts in process during fiscal 1995, specifically those with
foreign governments, did not provide for progress billings. In such cases,
the Company is required to fund the cost of inventory until such time as
shipments are made.
Long-Term Debt. Long-term debt outstanding increased by
approximately $23.6 million during the nine-month period ended December 31,
1995 to $35.3 million, primarily due to the Debenture Offering. Long-term
debt outstanding decreased by approximately $2.8 million during fiscal
1995. The reduction in outstanding debt during fiscal 1995 was primarily
attributable to the $2.5 million mandatory sinking fund obligation on the
1998 Debentures, as well as the mandatory redemption of $.2 million in
principal amount on the Company's industrial revenue bonds (the "Revenue
Bonds") on January 1, 1995. The Company is subject to annual redemptions on
the Revenue Bonds through 1998. At December 31, 1995 and March 31, 1995,
the Company had approximately $1.9 million in principal amount of Revenue
Bonds outstanding, subject to annual redemptions through 1998. The
principal amount of the Revenue Bonds to be redeemed varies each year in
accordance with the redemption schedule provided in the indenture. Under
the terms of the Revenue Bonds, the Company is a guarantor under a letter
of credit arrangement and has agreed to certain financial covenants (see
Note 6 of Notes to Consolidated Financial Statements). The Company must
realize a certain level of profits during each quarter of fiscal 1996 to be
in compliance with these covenants.
Stockholders' Equity. Net stockholders' equity increased by $2.4
million during the nine-month period ended December 31, 1995 to $24.9
million and increased by $2.8 million during fiscal 1995 to $22.5 million,
primarily as a result of net earnings of $1.6 million and $2.6 million
generated for the respective periods.
In July 1994, pursuant to a stock purchase agreement between the
Company and David E. Gross, its former President and Chief Technical
Officer, the Company purchased 659,220 shares of its Class A Common Stock
and 45,179 shares of its Class B Common Stock owned by Mr. Gross, at a
price of $4.125 and $4.00 per share, respectively, totalling approximately
$2.9 million in cash (the "Buy-back"). On October 18, 1994, the Company
filed a registration statement on form S-2 and on November 10, 1994, the
Company filed Amendment No. 1 to such registration statement with the SEC
for the purpose of selling shares of its common stock purchased in the Buy-
back. The Company sold 650,000 shares of its Class A Common Stock and
45,000 shares of its Class B Common Stock, at prices of $4.125 and $4.00
per share, respectively, totalling approximately $2.9 million pursuant to
the offering.
Backlog. At December 31, 1995, the Company's backlog of orders
was approximately $147 million as compared to $126 million at March 31,
1995. The increase in backlog for the first nine months of the fiscal year
was due to the net effect of bookings, partially offset by revenues, and
the addition of approximately $16 million of backlog from the OMI Asset
Acquisition. New contract awards of approximately $71 million were booked
during the nine-month period ended December 31, 1995. As of February 25,
1996, backlog totalled approximately $148 million, including approximately
$16 million of backlog from the OMI Asset Acquisition.
The Company closed fiscal 1995 with a funded backlog of $126.0
million representing an $8.5 million decrease from backlog at March 31,
1994. Included in the fiscal 1995 year-end backlog is approximately $2.2
million of commercial orders. New business awards during fiscal 1995
totalled approximately $61.4 million and included approximately $5.8
million of new commercial orders. Significant awards received during the
year included $5.9 million in contracts from the Naval Air Systems Command
to produce additional quantities of A/U36M-1(V) Weapons Boresight Equipment
for the Marine Corps' AH-1W Cobra helicopters, approximately $9.4 million
from the Government Systems Group of Unisys Corporation to provide portions
of the AN/UYQ-70 Advanced Display System and a $4.9 million contract with
the U.S. Navy to provide Readiness Trainer Systems for the Mobile In-shore
Undersea Warfare System Upgrade program. Contract awards for the Company's
8mm video recorder products totalled approximately $5.4 million and
included a $3.1 million award from the Naval Air Systems Command to equip
the U.S. Navy's F/A-18 Hornet carrier-based aircraft with WRR-818 8mm video
recorders. The Company also received funding under a $12.5 million
not-to-exceed contract from Lockheed Aeronautical Systems Company to
provide engineering services and modified AN/USH-42 Mission Recording
Systems for deployment on the U.S. Navy's S-3B Viking carrier-based jet
aircraft, as well as additional funding under a multi-year contract with
the U.S. Navy, initially received in fiscal 1994, to provide combat-system
display consoles for land-based applications.
Approximately 84%, 94% and 83% of revenues in fiscal 1995, 1994
and 1993, respectively, were derived directly or indirectly from contracts
or subcontracts with the U.S. Government, principally the U.S. Navy.
Included in revenues for fiscal 1995, 1994 and 1993 were $18.8 million,
$27.5 million and $19.2 million, respectively, of customer-sponsored
research and development, which were the result of contract agreements
directly or indirectly with the U.S. Government.
The Debenture Offering. On September 29, 1995 (the "Debenture
Closing Date"), the Company issued $20,000,000 in aggregate principal
amount of the Debentures pursuant to the Debenture Offering. Net proceeds
from the private placement of these Debentures were approximately
$19,000,000. On November 3, 1995, the Company issued an additional
$5,000,000 in aggregate principal amount of the Debentures, upon exercise
of the over-allotment option pursuant to the Purchase Agreement between the
Company and the Initial Purchaser, dated September 22, 1995. Net proceeds
from the exercise of the over-allotment option were approximately
$4,750,000. Pursuant to the related Registration Rights Agreement dated
September 22, 1995 between the Company and the Initial Purchaser, acting on
behalf of holders of the Debentures (the "Registration Rights Agreement"),
the Company has agreed to file, within ninety (90) days after the Debenture
Closing Date, a shelf registration statement relating to the Debentures and
the shares of Common Stock which are issuable from time to time upon
conversion of the Debentures, and to cause the shelf registration statement
to become effective within one hundred fifty (150) days after the Debenture
Closing Date. In addition, the Company has agreed to use its reasonable
best efforts to keep the shelf registration statement effective until at
least the third anniversary of the issuance of the Debentures. The Company
has filed a registration statement on Form S-1 of which this Prospectus is
a part in compliance with its obligation under the Registration Rights
Agreement to file a shelf registration statement. In connection with these
transactions, the Company expects to incur approximately $625,000 of
professional fees and other costs. These costs, together with the Initial
Purchaser's commissions in connection with the Debenture Offering, will be
amortized ratably through the maturity date of the Debentures. See
"Description of the Debentures."
Letter of Credit. The Company's Revenue Bonds are supported by
an irrevocable, direct-pay letter of credit in an amount equal to the
principal balance plus interest thereon for 45 days. At December 31, 1995,
the contingent liability of the Company as guarantor under the letter of
credit was approximately $1,930,000. The Company has collateralized the
letter of credit with accounts receivable and has also agreed to certain
financial covenants, including the maintenance of: (i) a certain minimum
ratio of consolidated tangible net worth to total debt (the "Debt Ratio"),
(ii) a certain minimum quarterly ratio of earnings before interest and
taxes to interest (the "Interest Ratio"), and (iii) a certain minimum
balance of billed and unbilled accounts receivable ("Eligible
Receivables"). At December 31, 1995, the covenants required: (i) a Debt
Ratio of 0.6:1, (ii) an Interest Ratio of 1.5:1 and (iii) Eligible
Receivables of $2,500,000. As a result of the issuance of $25,000,000
aggregate principal amount of the Debentures, the Debt Ratio at December
31, 1995 was 0.4:1. The Company has obtained a waiver, renewable quarterly,
from the bank of the required debt ratio and is in compliance with all
covenants under the letter of credit.
Contingencies. The books and records of the Company are subject
to audit and post-award review by the Defense Contract Audit Agency. The
Company is not a party to any legal proceedings with the U.S. Government.
Certain Agreements. Effective July 20, 1994, the Company entered
into an Employment, Non-Competition and Termination Agreement (the "Gross
Agreement") and a Stock Purchase Agreement (the "Gross Stock Purchase
Agreement") with David E. Gross, its former President and Chief Technical
Officer. Under the terms of the Gross Agreement, Mr. Gross will receive a
total of $600,000 over a five-year period as compensation for his services
pursuant to a five-year consulting arrangement with the Company and a total
of $750,000 over a five-year period as consideration for a five-year
non-compete arrangement. The payments will be charged to expense over the
term of the Gross Agreement as services are performed and obligations are
fulfilled by Mr. Gross. Mr. Gross will also receive at the conclusion of
such initial five-year period, an aggregate of approximately $1.3 million
payable over a nine-year period as deferred compensation. The net present
value of the payments to be made to Mr. Gross pursuant to the deferred
compensation portion of the Gross Agreement approximated the amount of the
Company's previous deferred compensation arrangement with Mr. Gross. In
addition to the Buy-back, the Gross Stock Purchase Agreement also provides
that (i) the Company has a right of first refusal with respect to the sale
by Mr. Gross of any of the remaining shares of common stock of the Company
held by Mr. Gross in excess of 20,000 shares, (ii) any shares of common
stock of the Company held by Mr. Gross must be voted pro rata in accordance
with the vote of the Company's other stockholders and (iii) in the event of
a change in control of the Company within three years from the date of the
Gross Stock Purchase Agreement, Mr. Gross will receive a percentage of the
difference between the price per share paid to Mr. Gross pursuant to the
Buy-back and the price per share received by the stockholders of the
Company pursuant to the change of control transaction, less an interest
factor, as defined in the Gross Stock Purchase Agreement, on the aggregate
amount paid to Mr. Gross pursuant to the Buy-back.
On March 28, 1996, the Company entered into an employment,
non-competition and termination agreement (the "Newman Agreement") with
Leonard Newman. Pursuant to the Newman Agreement, Mr. Newman received a
lump sum payment of approximately $2.0 million. Under the terms of the
Newman Agreement, Mr. Newman has agreed to provide consulting services,
as required from time to time, to the Company for a five year period
and has also agreed not to compete with the Company during this same
period. This agreement supersedes a previous deferred compensation
agreement with the Company.
In March 1996, Mr. Leonard Newman and certain members of his
immediate family sold an aggregate of 885,924 shares of Common Stock to a
buyer, acting as an investment adviser to several accounts. In connection
with such sale, the Company entered into a registration rights agreement
with such buyer to assist in facilitating such sale. The Company has agreed
to file and cause to become effective a registration statement with the SEC
upon demand, at its expense, relating to such shares for future sale by
such buyer.
Inflation. The Company has experienced the effects of inflation
through increased costs of labor, services and raw materials. Although a
majority of the Company's revenues are derived from long-term contracts,
the selling prices of such contracts generally reflect estimated costs to
be incurred in the applicable future periods.
ACCOUNTING STANDARDS
Income Taxes. In February 1992, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the
asset and liability method of SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Effective April 1, 1993, the Company adopted SFAS 109. Until
March 31, 1993, the Company used the asset and liability method of
accounting for income taxes, as set forth in Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS 96").
Under SFAS 96, deferred income taxes are recognized by applying statutory
tax rates to the difference between the financial statement carrying
amounts and tax bases of assets and liabilities. The statutory tax rates
applied are those applicable to the years in which the differences are
expected to reverse. The cumulative effect of adopting SFAS 109 was not
material to the Company's consolidated results of operations or financial
position.
Postretirement Benefits Other Than Pensions. In December 1990,
the FASB issued Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
("SFAS 106"). The Company adopted SFAS 106 during the first quarter of
fiscal 1994, and its adoption did not have a material impact on the
Company's consolidated results of operations or financial position.
Postemployment Benefits. In November 1992, the FASB issued
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" ("SFAS 112"). The Company adopted SFAS 112
during the first quarter of fiscal 1995, and its adoption did not have a
material impact on the Company's consolidated results of operations or
financial position.
ACQUISITIONS AND RELATED ACTIVITIES
On October 1, 1993, the Company acquired, through TAS
Acquisition Corp., a wholly-owned subsidiary of the Company, a 95.7% equity
interest in TAS, a Maryland corporation, pursuant to a stock purchase
agreement (the "TAS Agreement") dated as of August 6, 1993. TAS,
headquartered in Gaithersburg, Maryland, was a privately-held company
incorporated in early 1991. Under the terms of the TAS Agreement, the
Company paid $15.10 in cash for a total of 97,317 issued and outstanding
shares of common stock, par value $.01 per share, of TAS. The price paid by
the Company for the shares of TAS common stock was obtained from the
Company's working capital. On September 30, 1993, the Company, in
anticipation of the acquisition, advanced $1.8 million to TAS pursuant to a
demand promissory note. Such advance was converted to an intercompany
liability on the date of the acquisition and was eliminated in
consolidation. On November 1, 1993, Articles of Merger were filed in order
to merge TAS into TAS Acquisition Corp. The name TAS Acquisition Corp. was
changed to Technology Applications & Service Company.
The acquisition has been accounted for using the purchase method
of accounting. The excess of cost over the estimated fair value of net
assets acquired was approximately $.4 million and will be amortized on a
straight-line basis over 30 years, or $14,000 annually.
On December 13, 1993, the Company, through its wholly-owned
subsidiary, DRSSMC, entered into a partnership with Laurel Technologies,
Inc. of Johnstown, Pennsylvania. Pursuant to a Joint Venture Agreement
dated November 3, 1993 and a Partnership Agreement dated December 13, 1993,
between DRSSMC and Laurel Technologies, Inc., Laurel was formed for the
purposes of electronic cable and harness manufacturing, military-quality
circuit card assembly and other related activities. The Company's
contribution to Laurel consisted of cash, notes and equipment valued at
approximately $.6 million, representing an 80% controlling interest in
Laurel. As a result, the financial position and results of operations of
Laurel since December 13, 1993 have been consolidated with those of the
Company's. The related minority interest in Laurel has been included in
"Other Liabilities" and "Other Income, Net," respectively, in the Company's
consolidated financial statements for the period ended March 31, 1995 and
1994.
Also during December 1993, the Company acquired certain assets
of CMC, located in Santa Clara, California, for approximately $.4
million. CMC primarily refurbishes magnetic video recording rotary-head
scanner assemblies for post-production facilities and television broadcast
stations worldwide. This acquisition provides the Company with a key
customer base in the commercial video recording systems industry.
On November 17, 1994, the Company acquired, through a
wholly-owned subsidiary of Precision Echo ("Precision Acquisition"), the
net assets of Ahead, pursuant to an asset purchase agreement (the "Ahead
Asset Purchase Agreement"), dated October 28, 1994. Under the terms of the
Ahead Asset Purchase Agreement, Precision Acquisition paid, on the date of
acquisition, approximately $1.1 million for the net assets of Ahead. In
addition, Precision Acquisition entered into a Covenant and Agreement Not
to Compete (the "Covenant"), dated October 28, 1994, with the chairman of
the board of Ahead. Under the terms of the Covenant Agreement, the total
cash consideration to be paid by Precision Acquisition consisted of
approximately $.4 million payable at the acquisition date, and an
additional $.5 million, payable in equal monthly installments over a period
of five years from the acquisition date.
The acquisition has been accounted for using the purchase method
of accounting and, therefore, Ahead's financial statements are included in
the consolidated financial statements of the Company from the date of
acquisition. The excess of cost over the estimated fair value of net assets
acquired was approximately $.9 million and will be amortized on a
straight-line basis over 5 years, or approximately $.2 million annually.
The acquisition had no significant effect on the Company's consolidated
financial position or results of operations.
On July 5, 1995 (the "OMI Closing Date"), Photronics Corp., a
New York corporation and a wholly-owned subsidiary of the Company
("Photronics Corp."), acquired (through OMI, a Delaware corporation and a
wholly-owned subsidiary of Photronics Corp.), substantially all of the
assets of Opto Mechanik, Inc. ("Opto"), a Delaware corporation, pursuant to
an Agreement for Acquisition of Assets dated May 24, 1995, as amended July
5, 1995, between Photronics Corp. and Opto (the "OMI Agreement"), and
approved by the United States Bankruptcy Court for the Middle District of
Florida on June 23, 1995. OMI, now located in Palm Bay, Florida, designs
and manufactures electro-optical sighting and targeting systems used
primarily in military fire control devices and in various weapons systems.
Pursuant to the OMI Agreement, the Company paid a total of
$5,450,000 consisting of (i) $1,150,000 in cash to PNC Bank, Kentucky, Inc.
("PNC"), (ii) a note to PNC in the principal amount of $1,450,000 payable
in forty eight (48) equal monthly installments of principal and interest
commencing with the first day of the month subsequent to the OMI Closing
Date (the "PNC Note"), (iii) $2,550,000 in cash to MetLife Capital
Corporation and (iv) a note in the principal amount of $300,000 to Opto
payable in six (6) equal monthly installments of principal and interest
commencing on August 5, 1995 (the "Opto Note"). The PNC Note bears interest
at a floating rate equal to the lesser of (i) PNC's stated prime interest
rate plus 0.5% or (ii) the prime rate as reported by the Wall Street
Journal plus 0.5%. The Opto Note bears interest at a rate of 9.5% per
annum. Professional fees and other costs associated with the acquisition
were capitalized as part of the total purchase price. Total cash
consideration paid in the acquisition was obtained from the Company's
working capital.
The acquisition of the assets of Opto has been accounted for
under the purchase method. The cost of the acquisition has been allocated
on the basis of the estimated fair market value of the assets acquired and
the liabilities assumed. The fair value of the assets acquired represented
slightly less than 10% of the total assets of the Company as of March 31,
1995.
Prior to the asset acquisition, on October 11, 1994, Opto filed
a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
For the twelve months ended March 31, 1995, Opto had revenues of
approximately $13.9 million and an operating loss of approximately $6.6
million, primarily attributable to excessive labor and overhead costs,
which the Company believes caused significant cost overruns on
substantially all of Opto's contracts.
The operating results of OMI, the acquiring corporation, have
been included in the Company's reported operating results since the date of
acquisition. For the period from the date of acquisition to December 31,
1995, revenues generated in respect of the assets acquired constituted
approximately 10% of the consolidated revenues of the Company for that
period. These assets were operated at a modest profit, which was less than
10% of the consolidated operating income of the Company for such period.
Interest expense for such period incurred in connection with the acquired
assets was immaterial to the Company's consolidated results of operations.
At the present time, there is no single contract being performed or to be
performed with the acquired assets which is expected to significantly
affect the Company's operating results in the foreseeable future. The
business currently being conducted with such assets is subject to risks and
uncertainties similar to those of the Company as a whole.
See "Risk Factors" and "Business -- Industry Consolidation."
Since the asset acquisition, the Company has relocated a portion
of the Electro-Optical Systems Group's manufacturing operations from
Hauppauge, New York to OMI's new location in Palm Bay, Florida. The Company
expects to realize certain cost benefits and other efficiencies as a result
of this consolidation. See "The Company -- Company Organization" and
Business -- Strategy."
On February 6, 1996, pursuant to a Joint Venture Agreement,
dated February 6, 1996, by and among DRS/MS, Inc. ("DRS/MS"), a
wholly-owned subsidiary of the Company, Universal Sonics Corporation
("Universal Sonics"), a New Jersey corporation, Ron Hadani, Howard Fidel
and Thomas S. Soulos, and a Partnership Agreement, dated February 6, 1996,
by and between DRS/MS and Universal Sonics, the Company entered into a
partnership with Universal Sonics (the "Partnership") for the purpose of
developing, manufacturing and marketing medical ultrasound imaging
equipment. The Company's contribution to the Partnership consisted of
$400,000 in cash and certain managerial expertise and manufacturing
capabilities, representing a 90% interest in the Partnership.
On February 9, 1996, Precision Echo acquired (through Ahead
Technology Acquisition Corporation ("Ahead Acquisition"), a Delaware
corporation and a wholly-owned subsidiary of Precision Echo), certain
assets and assumed certain liabilities (principally, obligations under
property leases) of Mag-Head Engineering Company, Inc. ("Mag-Head"), a
Minnesota corporation, pursuant to an Asset Purchase Agreement, dated as of
February 9, 1996, by and among Mag-Head and Ahead Acquisition for
approximately $400,000 in cash. Mag-Head produces audio and flight
recorder heads.
BUSINESS
GENERAL
The Company designs, manufactures and markets high-technology
computer workstations for the U.S. Department of Defense, electro-optical
targeting systems for military customers and image and data storage
products for both military and commercial customers. In response to a 1992
mandate by the Joint Chiefs of Staff, the Company focuses on
"commercial-off-the-shelf" ("COTS") product designs, whereby commercial
electronic components are adapted, upgraded and "ruggedized" for
application in harsh military environments. The Company believes that
military expenditures on electronic systems and equipment will grow in
coming years as the nature of modern warfare dictates increasing reliance
on real-time, accurate battlefield information and the electronic content
and sophistication of defense systems increases.
Using COTS designs, the Company develops and delivers its
products with significantly less development time and expense compared to
traditional military product cycles, generally resulting in shorter lead
times, lower costs and the employment of the latest information and
computing technologies. The COTS process entails the purchasing, refitting,
upgrading (of both hardware and software) and "ruggedization" (repackaging,
remounting and stress testing to withstand harsh military environments) of
readily available commercial components. The design and manufacture of
COTS-based products is a complex process requiring specific engineering
capabilities, extensive knowledge of military platforms to which the
equipment will be applied and in-depth understanding of military operating
environments and requirements.
STRATEGY
During its last three fiscal years, the Company has restructured
its management team and implemented strategies to exploit the changing
nature of military procurement programs brought on by the end of the cold
war, military budget constraints and the COTS mandate. The Company's
strategies include:
o expanding and diversifying the Company's technology
and product base into complementary military and
commercial markets primarily through acquisitions and
the forging of strategic relationships;
o increasing revenue opportunities through the design and
adaptation of products for use by all branches of the
military; and
o enhancing financial performance through specific cost
reduction measures and increased manufacturing
efficiencies.
To effect these strategies, the Company has (i) acquired several
businesses with complementary military and commercial products and
technologies over the last three years; (ii) forged strategic relationships
with other defense suppliers such as Lockheed-Martin Tactical Defense
Systems (formerly, Loral Corporation) and Westinghouse Electric
Corporation, among others; (iii) emphasized the development of COTS-based
products as well as products and systems that are easily adapted to similar
weapons platforms for use by all branches of the military; and (iv)
implemented cost reduction programs to reduce its fixed-cost base, allow
for growth and maintain the flexibility of its operations.
The implementation of these strategies has resulted in
increasing revenues and profits over the last three fiscal years. Although
the Company experienced operating losses in fiscal 1990 through 1992,
primarily due to cost overruns on a single fixed-price development
contract, a shift over the last several years in the nature of military
development contracting from fixed-price to cost-type contracts has reduced
the Company's exposure in this area. For the fiscal year ended March 31,
1995, the Company had revenues of $69.9 million, net income of $2.6 million
and earnings per share of $.50, representing increases of 20.9%, 61.2% and
66.7%, respectively, compared with the year ended March 31, 1994. For the
nine months ended December 31, 1995, the Company had revenues of $65.6
million, net income of $2.5 million and fully diluted earnings per share of
$.44, representing increases of 38.4%, 45.7% and 29.4%, respectively,
compared with the same nine-month period ended December 31, 1994.
Acquisitions. In October 1993 the Company acquired TAS, a
designer and supplier of advanced command and control software and
hardware. TAS' business, which focuses primarily on radar displays,
augments the Company's core expertise in sonar signal processing, allowing
the Company to offer complete command and control system solutions to its
naval customers. In December 1993, the Company purchased its 80% interest
in Laurel, then primarily an assembler of wire harness products for
aerospace customers. The addition of Laurel has provided the Company with
the opportunity to consolidate manufacturing operations at ESG and enables
the Company to solicit and bid effectively for long-term system development
and manufacturing contracts.
The Company acquired CMC in December 1993 and Ahead in November
1994. These acquisitions provide the Company with an established computer
and recorder products commercial base, provide advanced manufacturing
capabilities in the area of magnetic recorder heads and allow the Company
to apply its expertise in high technology recorder products to select
commercial markets. In July 1995, the Company acquired substantially all of
the assets that now constitute OMI. This acquisition enables EOSG to expand
its electro-optical targeting products and manufacturing activities in a
lower cost manufacturing facility, adds backlog in complementary product
areas and allows for expansion of the MPBE program.
Strategic Relationships. The Company has established
relationships with other defense suppliers such as Lockheed-Martin Tactical
Defense Systems (formerly, Loral Corporation) and Westinghouse Electric
Corporation, among others. The Company acts as a subcontractor to these
major contractors and may also engage in other development work with such
contractors. This enables the Company to diversify its program base and
increase its opportunities to participate in larger military procurement
programs.
Adaptable Product Designs. The Company's recent focus has been
on the design and development of products that can be used by all branches
of the military. This enables the Company to increase revenues, reduce
product costs and decrease reliance on U.S. Navy procurement programs. The
Company's systems, originally designed under a U.S. Navy development
contract, are open architecture information processing workstations that
can be applied for use in other branches of the military. Similarly, the
Company's boresight products, originally designed for use with the U.S.
Army's Apache attack helicopter, were specifically designed to be adaptable
to other air, sea or land-based weapons platforms. The boresight system has
been successfully applied to the U.S. Marine Corps' Cobra helicopter and
proposals have been submitted for its use on F-15 and C-130 fixed-wing
platforms.
Cost Reduction Programs. During the last three fiscal years, the
Company has streamlined personnel levels, decreased rent expenses through
facility consolidation and acquired low-cost manufacturing operations. The
Company is also utilizing more efficient manufacturing methods on several
projects that are set to enter full-scale production in fiscal 1996.
COMMERCIAL-OFF-THE-SHELF (COTS) PRODUCT DESIGNS
The concept of designing and manufacturing military products and
systems through the integration and adaptation of existing commercial and
military products was developed in response to both decreasing military
budgets and the increasing pace of technology. Management believes that the
adaptation of available commercial components and existing military systems
to new military applications offers two primary advantages over traditional
military systems development and procurement cycles: (i) it has the
potential to save significant amounts of time and expenditures in the area
of research and development and (ii) as commercial product development and
production cycles become shorter than their military equivalents, the
adaptation of commercial technology to battlefield systems has the
potential to shorten military product cycles. As a result of some of these
advantages, the use of COTS computer hardware and software that can be
integrated in common (open architecture) applications and systems was
mandated by the Joint Chiefs of Staff in 1992.
COTS entails the purchasing, refitting, upgrading and
"ruggedization" (repackaging, remounting and stress-testing to withstand
harsh military operating environments) of available commercial components.
Application of the COTS concept to electronic systems includes open
architecture designs and the customization of software for increased
flexibility, performance and compatibility with existing and future
systems. The Company strives to apply a COTS design to most new product
designs at ESG, EOSG and MTG. For example, the combination of COTS
components integrated in an open architecture design allows ESG to provide
products compatible with existing systems and which provide improved
performance and the ability to upgrade systems at significant cost savings
versus the previous generation military systems they are intended to
replace.
MARKET OVERVIEW
According to a recent Electronics Industry Association survey
(reportedly based on extensive audits, surveys and interviews of Department
of Defense and Congressional records and personnel), U.S. military
expenditures for electronics and related equipment were $37 billion in 1994
and are projected to grow slowly over the next decade. The Company believes
that the market for military electronics and related equipment will grow
slowly in coming years due to two primary factors:
First, the nature of modern warfare dictates increasing reliance
on timely and accurate battlefield information to ensure that increasingly
costly assets are efficiently deployed and to minimize destruction of
nonmilitary targets. In general, military engagements have evolved from
large-scale undertakings, where numerical superiority was the key to
dominance, to "surgical strikes" where the ability to observe and strike
accurately and at will from afar has become a major means of both
deterrence and loss minimization. Advanced technology has been a major
factor enabling the increasing precision strike capability of the U.S.
military and has increased the "per shot" cost of arms. These factors
combine to produce a military, economic and political environment requiring
increased weapons efficiency and accuracy. In addition, real time data is
needed for in-theatre evaluation, damage assessment and training, as well
as to reduce and minimize incidents of U.S. casualties due to friendly
fire.
Second, it is often more cost-effective to refit and upgrade
existing weapons platforms than to replace them. With the development and
unit costs of new platforms increasing rapidly amid a political and
economic environment demanding decreasing overall military expenditures,
Congress and the military have delayed or canceled the implementation of
many proposed weapons systems, opting instead to improve the performance,
and extend the life, of existing weapons through improved battlefield
intelligence and equipment enhancements. This increasing focus on cost
efficiencies has manifested itself in the military's COTS program.
INDUSTRY CONSOLIDATION
As the size of the overall defense industry has decreased in
recent years, there has been an increase in the number of consolidations
and mergers of defense suppliers and this trend is expected to continue. As
the industry consolidates, the large (first-tier) defense contractors are
narrowing their supplier base and awarding increasing portions of projects
to strategic second-and third-tier suppliers, and in the process becoming
oriented more toward system integration and assembly.
As an example of the changing nature of supplier relationships,
Photronics Corp. has been awarded increasing content in the infrared
detector assemblies of several missile systems by its prime contractors. In
1988, Photronics Corp. supplied only the primary mirror for these systems.
Photronics Corp. now supplies the primary, secondary, tertiary and fold
mirrors, as well as the housing and nose domes for the missiles, and is
working directly with these prime contractors on the electro-optical
assemblies for the next generation missiles.
COMPANY ORGANIZATION AND PRODUCTS
The Company is organized into three operating groups: Electronic
Systems Group ("ESG," 54% of fiscal 1995 revenues), Electro-Optical Systems
Group ("EOSG," 18% of fiscal 1995 revenues) and Media Technology Group
("MTG," 28% of fiscal 1995 revenues).
ELECTRONIC SYSTEMS GROUP ("ESG")
ESG consists of DRS Military Systems ("Military Systems"),
located in Oakland, New Jersey, TAS, located in Gaithersburg, Maryland, and
Laurel, located in Johnstown, Pennsylvania. Also, under the direction of
TAS is Technical Services Division ("TSD"), located in Norfolk, Virginia
and San Diego, California.
Military Systems designs, manufactures and markets signal
processors and display workstations which are installed on naval ships for
antisubmarine warfare (ASW) purposes and in land-based surveillance systems
used for underwater surveillance of harbors and coastal locations. These
workstations receive signals from a variety of sonar-type sensors,
processing the information and arranging it in a display format enabling
operators to quickly interpret the data and inform command personnel of
potential threats. Major product lines and contracts include:
o AN/UYQ-65: The AN/UYQ-65 is the first COTS-based
tactical workstation to be qualified by the U.S. Navy
and was designed to comply with the stringent
requirements of the Aegis (DDG-51) shipbuilding
program. Replacing the sensor displays in the SQQ-89
ASW Combat Suite, it employs dual processors enabling
simultaneous I/O and graphics processing. This new
approach allows for required high bandwidth
processing while maintaining response times for
operator/machine interfaces. The system
architecture can be adapted to meet various
interface, cooling, memory, storage and processing
requirements. See "Risk Factors -- Limited Term of
Contracts."
o AN/SQR-17A(V)3: These Mobile In-Shore Undersea Warfare
(MIUW) systems are deployed in land-based vans,
utilizing sonobuoys and anchored passive detectors for
harbor defense, coastal defense and amphibious
operations surveillance, as well as to enhance drug
interdiction efforts. This system is currently being
procured for utilization in 22 field installations.
Military Systems is under contract to provide various
upgrades to these field installations.
o AN/SQQ-TIA: These are portable training systems used
onboard MIUW vans to simulate actual sonar signal
processing sets currently used by the U.S. Navy and
are employed primarily for Navy Reserve training.
TAS produces tactical (e.g., combat/attack) information systems and
training systems. Major product lines and contracts include:
o AN/UYQ-70: The AN/UYQ-70 is an advanced, open
architecture display system designed for widespread
application through software modification, and is to
be deployed on Aegis and other surface ships,
submarines and airborne platforms. This system was
developed for the U.S. Navy under subcontract with
the Government Systems Group of Loral (Unisys)
Corporation (presently, Lockheed-Martin Tactical
Defense Systems). The AN/UYQ-70 is a self-contained,
microprocessor-based unit complete with mainframe
interface software offering advanced computing and
graphic capabilities. These units replace previous
generation units that are dependent upon a ship-
board mainframe computer at approximately 25% of the
cost of the older units. This project is currently in
the pre-production phase. Based upon the size of the
naval surface fleet and the average number of
workstations to be deployed on each ship, the Company
believes that the potential market for this
workstation product may be in excess of 5,000 units
over the next decade.
o Military Display Emulators: These are workstations
that are functionally identical to existing U.S. Navy
Mil-spec shipboard display consoles, but are built
with low cost COTS components suitable for landbased
laboratory environments. These Military Display
Emulators are used in U.S. Navy development, test and
training sites as plug compatible replacements for the
more expensive shipboard qualified units. The Company
is currently delivering these Military Display
Emulators for use in the Aegis and other U.S. Navy
programs.
Laurel, which is 80% owned by DRS through a partnership with
Laurel Technologies, Inc., and was purchased in December 1993, functions as
a low-cost manufacturing facility and focuses on two areas. First, Laurel
provides manufacturing and product integration services for Military
Systems and TAS. ESG's workstation and simulator systems, among other
products, are manufactured in this facility. Second, Laurel manufactures
complex cable and wire harness assemblies for large industrial customers
that are involved in the military and commercial aerospace industry. These
products are then installed by the customers in a wide variety of rotary
blade and fixed-wing aerial platforms.
TSD performs field service and depot level repairs for ESG
products, as well as other manufacturers' systems. Principal locations are
in close proximity to U.S. Naval yards in Norfolk, Virginia and San Diego,
California. Services including equipment and field change installation,
configuration audit, repair, testing and maintenance, are performed for the
U.S. Navy and, to a lesser extent, commercial customers. TSD has also
performed work for foreign navies including those of Australia, the
Republic of China, Egypt, Turkey and Greece.
MEDIA TECHNOLOGY GROUP ("MTG")
MTG consists of Precision Echo, Inc. ("PE") located in Santa
Clara, California, Ahead located in Los Gatos, California and CMC located
in Santa Clara, California. PE manufactures a variety of digital and analog
recording systems utilized for military applications including
reconnaissance, ASW and other information warfare data storage
requirements, and is a predominant U.S. manufacturer of 8 millimeter
military recorders supplied to the U.S. armed forces. PE's products
include:
o AN/USH-42: This system was originally developed for
deployment in the U.S. Navy's A-6E attack aircraft. PE
is currently under contract to modify the USH-42 for
use on the Navy's S-3B ASW aircraft to record radar,
infrared, bus, navigation and voice data.
o WRR-818: This ruggedized video recorder, uses certain
components from commercial video recording equipment,
has been selected for use in U.S. F/A-18 aircraft and
several foreign military aircraft. It has also been
selected by the U.S. Army for use in its Kiowa warrior
reconnaissance helicopters. A similar recorder, the
WRR-812, has been adapted for use in the Canadian
Army's light armored reconnaissance vehicles.
o AN/AQH-9 and AN/AQH-12: These products are
high-quality helicopter mission recording systems
utilized to record sonar and mine hunting information
and other intelligence data.
Ahead manufactures burnish, glide and test heads used in the
production of computer disk drives. These consumable products are used by
many U.S. disk drive manufacturers to hone the surface and ensure the
quality of magnetic disks used in computer hard drives. Customers include
Seagate, Conner, Quantum, Komag, Store Media, Akashic and Western Digital.
CMC manufactures and refurbishes commercial video recording
products for broadcasters operating world-wide. CMC can refurbish pre-1993
head assemblies located on these machines at a significant cost savings
compared to replacement. CMC is developing, in conjunction with Ahead, the
ability to refurbish post-1993 recorders used by its customer base. Ahead
also has the capability to manufacture recording heads for CMC. In order to
foster operational synergies and to allow space for growth, Ahead and CMC
moved into a new joint facility .
ELECTRO-OPTICAL SYSTEMS GROUP ("EOSG")
EOSG consists of Photronics Corp. located in Hauppauge, New York
and OMI located in Melbourne, Florida.
Photronics Corp. produces boresighting equipment (used to align
and harmonize rotary-wing aircrafts', and armored vehicles' navigation,
targeting, and weapon systems, as well as pilots' helmet sighting system)
and electro-optical components used in Sidewinder, Stinger and new
generation air-to-air and surface-to-air missiles. Photronics Corp. has
specialized coating and manufacturing processes for primary mirrors used in
missiles, giving the company a competitive advantage. Photronics Corp.'s
primary lines include:
o Multiple Platform Boresight Equipment (MPBE): These
products can be used on both rotary and fixed-wing
aircraft, as well as armored vehicles. MPBE is
currently used on the Army's Apache helicopters and
Apache Longbow helicopters and the Marine Corps' Cobra
helicopters. Proposals have been submitted to employ
the system on the C-130 transport and the F-15
fighter. This technology is proprietary to the
Company.
o Missile Components: The components produced by
Photronics Corp. originally consisted of primary
mirrors used in the nose-mounted infrared seeker of
Sidewinder and Stinger missiles. Photronics Corp.'s
development efforts have resulted in its ability to
provide increased content to include the secondary,
tertiary and fold mirrors, housing and nose dome.
Photronics Corp. is currently under contract to
produce infrared components and subassemblies on many
of the next generation infrared missile systems.
Photronics Corp. has produced all major electro-optical components such as
MPBE and missile products in Hauppauge since 1986. In July 1995, DRS
acquired substantially all of the assets of Opto previously located in
Melbourne, Florida through OMI. In order to reduce its production costs,
Photronics Corp. consolidated a portion of its manufacturing operations to
OMI's new facility in Palm Bay, Florida. In addition, the move will create
space for the expansion of Photronics Corp.'s MPBE programs in Hauppauge.
Primary product programs at OMI include:
o Gunners Auxiliary Sight: This is an electro-optical
device used as a primary or backup sight on M1 Abrams
battle tanks and contains a very sophisticated
electro-optical train and a laser protective filter.
OMI has produced over 2,000 of these instruments and
continues to operate as a repair and retrofit facility
for the M1A2 upgrade program, which will continue
through 1997, with options through 1999.
o TOW Optical Sight: OMI is currently the only U.S.
qualified producer of this device. This complex
electro-optical system is the main component of the
U.S.'s premier anti-tank weapon system.
o TOW Traversing Unit: This unit provides target
tracking accuracy for the TOW anti-tank weapon, acting
as the mount for the TOW Optical Sight and the missile
launch tube. OMI is currently the only qualified
manufacturer of this tightly toleranced assembly, and
is currently working on modification and retrofit
programs. OMI has also been contracted to modify a
version for use by an overseas customer.
o Day/Night Tank Sighting System: This system was
developed in concert with a major primary contractor.
OMI is a major subcontractor, currently supplying
three of the major assemblies.
o Eyesafe Laser Rangefinder: OMI competed against the
U.S. Army's historical primary laser supplier for
this contract and was awarded an initial contract for
preproduction units.
o Improved TOW Acquisition System: Working with the
same primary contractor as referred to above, this
antitank system was developed for the U.S. Army's
humvee vehicle.
CUSTOMERS
A significant portion of the Company's products are sold to
agencies of the U.S. Government, primarily the Department of Defense, to
foreign government agencies or to prime contractors or subcontractors
thereof. Approximately 84%, 94% and 83% of total consolidated revenues for
fiscal 1995, 1994 and 1993, respectively, were derived directly or
indirectly from defense contracts for end use by the U.S. Government and
its agencies. See "Export Sales" below for information concerning sales to
foreign governments.
BACKLOG
The following table sets forth the Company's backlog by major
product group (including enhancements, modifications and related logistics
support) at the dates indicated:
March 31, March 31, March 31,
1995 1994 1993
------------- ------------- ------------
Government Products:
U.S. Government...... $115,200,000 $123,700,000 $123,900,000
Foreign Government... 8,600,000 5,800,000 1,000,000
------------- ------------- -------------
123,800,000 129,500,000 124,900,000
Commercial Products....... 2,200,000 5,100,000 1,200,000
------------ ------------ ------------
$126,000,000 $134,600,000 $126,100,000
============ ============ ============
Approximately 54% of the backlog at March 31, 1995 is expected
to result in revenues during the fiscal year ending March 31, 1996.
At December 31, 1995, the Company's backlog of orders was
approximately $147 million compared to $126 million at March 31, 1995. The
increase in backlog for the first nine months of the fiscal year was due to
the net effect of bookings, partially offset by revenues, and the addition
of approximately $16 million of backlog from the OMI Asset Acquisition. New
contract awards of approximately $71 million were booked during the nine-
month period ended December 31, 1995. As of February 25, 1996, backlog
totalled approximately $148 million, which includes approximately $16
million of backlog from the OMI Asset Acquisition.
"Backlog" refers to the aggregate revenues remaining to be
earned at the specified date under contracts held by the Company,
including, for U.S. Government contracts, the extent of the funded amounts
thereunder which have been appropriated by Congress and allotted to the
contract by the procuring Government agency. Fluctuations in backlog
amounts relate principally to the timing and amount of Government contract
awards.
RESEARCH AND DEVELOPMENT
The military electronics industry is subject to rapid
technological changes and the Company's future success will depend in large
part upon its ability to improve existing product lines and to develop new
products and technologies in the same or related fields. Thus, the
Company's technological expertise has been an important factor in its
growth. A portion of its research and development activities has taken
place in connection with customer-sponsored research and development
contracts. All such customer-sponsored activities are the result of
contracts directly or indirectly with the U.S. Government. The Company also
invests in Company-sponsored research and development. Such expenditures
were $800,000, $500,000 and $500,000 for fiscal 1995, 1994 and 1993,
respectively. Revenues recorded by the Company for customer-sponsored
research and development were $18,800,000, $27,500,000 and $19,200,000 for
fiscal 1995, 1994 and 1993, respectively.
CONTRACTS
The Company's contracts are normally for production, service or
development. Production and service contracts are typically of the
fixed-price variety with development contracts currently of the cost-type
variety. Because of their inherent uncertainties and consequent cost
overruns, development contracts historically have been less profitable than
production contracts.
Fixed-price contracts may provide for a firm-fixed price or they
may be fixed-price-incentive contracts. Under the firm-fixed-price
contracts, the Company agrees to perform for an agreed-upon price and,
accordingly, derives benefits from cost savings, but bears the entire risk
of cost overruns. Under the fixed-price-incentive contracts, if actual
costs incurred in the performance of the contracts are less than estimated
costs for the contracts, the savings are apportioned between the customer
and the Company. However, if actual costs under such a contract exceed
estimated costs, excess costs are apportioned between the customer and the
Company up to a ceiling. The Company bears all costs that exceed the
ceiling.
Cost-type contracts typically provide for reimbursement of
allowable costs incurred plus a fee (profit). Unlike fixed-price contracts
in which the Company is committed to deliver without regard to performance
cost, cost-type contracts normally obligate the Company to use its best
efforts to accomplish the scope of work within a specified time and a
stated contract dollar limitation. In addition, U.S. Government procurement
regulations mandate lower profits for cost-type contracts because of the
Company's reduced risk. Under cost-plus-incentive-fee contracts, the
incentive may be based on cost or performance. When the incentive is based
on cost, the contract specifies that the Company is reimbursed for
allowable incurred costs plus a fee adjusted by a formula based on the
ratio of total allowable costs to target cost. Target cost, target fee,
minimum and maximum fee and adjustment formula are agreed upon when the
contract is negotiated. In the case of performance-based incentives, the
Company is reimbursed for allowable incurred costs plus an incentive,
contingent upon meeting or surpassing stated perfor mance targets. The
contract provides for increases in the fee to the extent that such targets
are surpassed and for decreases to the extent that such targets are not
met. In some instances, incentive contracts also may include a combination
of both cost and performance incentives. Under cost-plus-fixed-fee
contracts, the Company is reimbursed for costs and receives a fixed fee,
which is negotiated and specified in the contract. Such fees have statutory
limits.
The percentages of revenues during fiscal 1995, 1994 and 1993
attributable to the Company's contracts by contract type were as follows:
Year Ended March 31,
1995 1994 1993
---- ---- ----
Firm-fixed-price................... 74% 65% 88%
Fixed-price-incentive.............. - 1% -
Cost-plus-incentive-fee............ 6% 17% 10%
Cost-plus-fixed-fee................ 20% 17% 2%
The increased percentage of cost-type contracts between fiscal
1993 and fiscal 1995 reflects the U.S. Government's increased use of
cost-type development contracts, and the continued predominance of
fixed-price contracts reflects the fact that production contracts comprise
a significant portion of the Company's U.S. Government contract portfolio.
The Company negotiates for and, generally, receives progress
payments from its customers of between 80-100% of allowable costs incurred
on the previously described contracts. Included in its reported revenues
are certain amounts which the Company has not billed to customers. These
amounts, approximately $7.9 million, $5.9 million and $8.1 million as of
March 31, 1995, 1994 and 1993, respectively, consist of costs and related
profits, if any, in excess of progress payments for contracts on which
sales are recognized on a percentage-of-completion basis.
Under generally accepted accounting principles, all U.S.
Government contract costs, including applicable general and administrative
expenses, are charged to work-in-progress inventory and are written off to
costs and expenses as revenues are recognized. The Federal Acquisition
Regulations ("FAR"), incorporated by reference in U.S. Government
contracts, provide that Company-sponsored research and development costs
are allowable general and administrative expenses. To the extent that
general and administrative expenses are included in inventory, research
and development costs also are included. Unallowable costs, pursuant to the
FAR, have been excluded from costs accumulated on U.S. Government
contracts. Work-in-process inventory included general and administrative
costs (which include Company-sponsored research and development costs) of
$6.6 million and $3.8 million at March 31, 1995 and 1994, respectively.
All domestic defense contracts and subcontracts to which the
Company is a party are subject to audit, various profit and cost
controls, and standard provisions for termination at the convenience of the
customer. Multi-year U.S. Government contracts and related orders are
subject to cancellation if funds for contract performance for any
subsequent year become unavailable. In addition, if certain technical or
other program requirements are not met in the developmental phases of the
contract, then the follow-on production phase may not be realized. Upon
termination other than for a contractor's default, the contractor normally
is entitled to reimbursement for allowable costs, but not necessarily all
costs, and to an allowance for the proportionate share of fees or earnings
for the work completed. Foreign defense contracts generally contain
comparable provisions relating to termination at the convenience of the
foreign government.
MARKETING
The Company's marketing activities are conducted by its staff of
marketing personnel and engineers. The Company's domestic marketing
approach begins with the development of information concerning the present
and future requirements of its current and potential customers for defense
electronics, as well as those in the security and commercial communities
serviced by the Company's products. Such information is gathered in the
course of contract performance, research into the enhancement of existing
systems and inquiries into advances being made in hardware and software
development, and is then evaluated and exchanged among marketing, research
and engineering groups within the Company to devise proposals responsive to
the needs of customers. The Company markets its products abroad through
independent marketing representatives.
COMPETITION
The military electronics defense industry is characterized by
rapid technological change. The Company's products are sold in markets
containing a number of competitors which are substantially larger than the
Company, devote substantially greater resources to research and development
and generally have greater financial resources. Certain of such competitors
are also suppliers to the Company. The extent of competition for any single
project generally varies according to the complexity of the product and the
dollar volume of the anticipated award. The Company believes that it
competes on the basis of the performance of its products, its reputation
for prompt and responsive contract performance, and its accumulated
technical knowledge and expertise. The Company's future success will depend
in large part upon its ability to improve existing product lines and to
develop new products and technologies in the same or related fields.
In the military sector, the Company competes with many first-
and second-tier defense contractors on the basis of product performance,
cost, overall value, delivery and reputation.
PATENTS
The Company has patents on many of its recording products and
certain commercial products. The Company does not believe patent protection
to be significant to its current operations; however, future programs may
generate the need for patent protection.
MANUFACTURING AND SUPPLIERS
The Company's manufacturing process for its products, excluding
optical products, consists primarily of the assembly of purchased
components and testing of the product at various stages in the assembly
process. Purchased components include integrated circuits, circuit boards,
sheet metal fabricated into cabinets, resistors, capacitors, semiconductors
and insulated wire and cables. In addition, many of the Company's products
use machined castings and housings, motors and recording and reproducing
heads. Many of the purchased components have been fabricated to Company
designs and specifications. The manufacturing process for the Company's
optics products includes the grinding, polishing and coating of various
optical materials and machining of metal components.
Although materials and purchased components generally are
available from a number of different suppliers, several suppliers are the
Company's sole source of certain components. If a supplier should cease to
deliver such components, other sources probably would be available;
however, added cost and manufacturing delays might result. The Company has
not experienced significant production delays attributable to supply
shortages, but occasionally experiences procurement problems with respect
to certain components, such as semiconductors and connectors. In addition,
with respect to the Company's optical products, certain exotic materials,
such as germanium, zinc sulfide and cobalt, may not always be readily
available.
EXPORT SALES
The Company currently sells several of its products and services
in the international marketplace to countries such as Canada, Germany,
Australia and the Republic of China. Foreign sales accounted for
approximately 7%, 3% and 17% of the Company's revenues in fiscal 1995, 1994
and 1993, respectively. Foreign sales are derived under export licenses
granted on a case-by-case basis by the United States Department of State.
The Company's foreign contracts are generally payable in United States'
dollars.
EMPLOYEES
As of February 25, 1996, the Company employed 795 employees.
None of the Company's employees are represented by a labor union, and the
Company has experienced no work stoppages.
There is a continuing demand for qualified technical personnel,
and the Company believes that its future growth and success will depend
upon its ability to attract, train and retain such personnel.
PROPERTIES
The Company leases approximately 6,000 square feet of office
space for its corporate headquarters in an office building at 5 Sylvan Way,
Parsippany, New Jersey under a lease that expires in fiscal 2001. The
Company leases approximately 25,000 square feet of space for administrative
and engineering facilities at 138 Bauer Drive, Oakland, New Jersey. The
Company leases the Oakland building from LDR Realty Co., a partnership
wholly-owned by Leonard Newman and David E. Gross, under a lease which
expires in fiscal 1999. The Company believes that this lease was
consummated on terms no less favorable than those that could have been
obtained by the Company from an unrelated third party in a transaction
negotiated on an arms-length basis.
Precision Echo's engineering and principal operations are
located in a 55,000 square foot building at 3105 Patrick Henry Drive, Santa
Clara, California, under a lease which expires in fiscal 2001. The
operations of CMC and Ahead have recently been consolidated and relocated
to a new facility in San Jose, California, comprising 32,000 square feet
pursuant to a five year lease expiring in fiscal 2001.
Photronics Corp.'s principal and manufacturing facilities are
located in a 45,000 square foot building at 270 Motor Parkway, Hauppauge,
New York. The building, which is owned by the Company, was built in 1983.
See Note 10 to Consolidated Financial Statements.
TAS leases 40,000 square feet in a building at 200 Professional
Drive, Gaithersburg, Maryland that houses its executive offices and
principal engineering and manufacturing facilities under a lease which
expires in fiscal 2000. It also conducts field service operations from
locations in Virginia Beach and Chesapeake, Virginia and National City,
California. These leased facilities, comprising 15,000 square feet, 20,000
square feet and 6,000 square feet, respectively, are covered by leases,
which, with respect to the Virginia locations, expire in fiscal 1997, and
for the California location, expires in fiscal 1999.
Laurel's manufacturing facilities and administrative offices are
located in a 29,000 square-foot building at 423 Walters Avenue in
Johnstown, Pennsylvania. The lease for this facility expires in fiscal
1999. The Company also leases approximately 2,000 square feet of office
space in Arlington, Virginia under a lease which expires in fiscal 1998.
OMI leases approximately 54,000 square feet in a building in
Woodlake Commerce Park, Palm Bay, Florida, for its operations and
administration offices. The related leases expire in fiscal 2006.
Total rent expense aggregated $2.5 million, $1.7 million, $1.5
million and $1.9 million in fiscal 1995, 1994, 1993, and the nine-month
period ended December 31, 1995 (unaudited), respectively.
ENVIRONMENTAL PROTECTION
The Company believes that its manufacturing operations and
properties are in material compliance with existing federal, state and
local provisions enacted or adopted to regulate the discharge of materials
into the environment, or otherwise protect the environment. Such compliance
has been achieved without material effect on the Company's earnings or
competitive position.
LEGAL PROCEEDINGS
The Company is a party to various legal actions and claims
arising in the ordinary course of its business. In the Company's opinion,
the Company has adequate legal defenses for each of the actions and claims
and
believes that their ultimate disposition will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of the directors and executive officers of the
Company, their positions and offices with the Company, and their ages are
set forth below:
NAME POSITIONS WITH THE COMPANY AGE
Mark S. Newman.......... Chairman of the Board, President, Chief 46
Executive Officer and Director
Nancy R. Pitek.......... Controller, Treasurer and Secretary 39
Paul G. Casner, Jr...... Vice President; President of DRS Electronic 58
Systems Group
Stuart F. Platt......... Vice President and Director; President 62
of DRS Media Technology Group
Richard Ross............ Vice President; President of DRS 41
Electro-Optical Systems Group
Leonard Newman.......... Director 71
Jack Rachleff........... Director 82
Theodore Cohn........... Director 72
Mark N. Kaplan.......... Director 65
Donald C. Fraser......... Director 54
Mark S. Newman has been employed by the Company since 1973, was
named Vice President, Finance, Chief Financial Officer and Treasurer in
1980 and Executive Vice President in 1987. Mr. Newman became a Director of
the Company in 1988. In May 1994, Mr. Newman became the President and Chief
Executive Officer of the Company and in August 1995 became Chairman of the
Board. Mark Newman is the son of Leonard Newman.
Nancy R. Pitek joined the Company in 1984 as Manager of
Accounting. She became Assistant Controller in 1985 and Director of
Internal Audit in 1988. Ms. Pitek became Director of Corporate Finance in
1990 and has been the Controller since 1993. In May 1994, she was also
appointed to the position of Treasurer and in August 1995 became Secretary.
Paul G. Casner, Jr. joined the Company in 1993 as President of
TAS. In 1994 he also became President of DRS Electronic Systems Group and a
Vice President of the Company. Mr. Casner has over 30 years of experience
in the defense electronics industry and has held positions in engineering,
marketing and general management. He was the president of TAS prior to its
acquisition by the Company.
Stuart F. Platt has been a Director of the Company since 1991
and became the President of Precision Echo in July 1992. He was named Vice
President of the Company in May 1994. Rear Admiral Platt also serves as
President of DRS Media Technology Group. He is a co-founder and director of
FPBSM Industries, Inc., a holding company and management consulting firm
for defense, aerospace and other technology-based companies, and the
Chairman of Stuart Platt & Partners, a management consulting firm handling
principally defense-related issues. He also serves as director for Harding
Associates, Inc. None of these companies is a parent, subsidiary or
affiliate of the Company. Rear Admiral Platt held various positions as a
military officer in the Department of the Navy, retiring as Competition
Advocate General of the Navy in 1986.
Richard Ross was employed by the Company as Assistant Vice
President and Director, Sales in 1986 and Assistant Vice President,
Corporate Development in 1987. In 1988, he became Vice President of the
Company, and in 1990, he became President of Photronics Corp. Mr. Ross also
serves as President of the DRS Electro-Optical Systems Group.
Leonard Newman has been a Director of the Company since 1968 and
was Chairman of the Board and Secretary of the Company from 1971 until
August 1995. From August 1995 until March 1996, Mr. Newman held the position
of Chairman Emeritus. From 1971 until May 1994, Mr. Newman also served as
the Company's Chief Executive Officer. Leonard Newman is the father of
Mark S. Newman.
Jack Rachleff has been a Director of the Company since 1968. Mr.
Rachleff has been employed since 1952 by Fablok Mills, Inc., a textile
manufacturer, and has been its President since February 1982.
Theodore Cohn has been a Director of the Company since 1980. He
has been an independent management consultant since 1974. Mr. Cohn also
serves as a director of Dynatech Corporation.
Mark N. Kaplan has been a Director of the Company since 1986. Mr.
Kaplan has been a member of the law firm of Skadden, Arps, Slate, Meagher &
Flom since 1979. Mr. Kaplan also serves as director of American Biltrite
Inc., Grey Advertising Inc., Harvey Electronics Inc., REFAC Technology
Inc., Congoleum Corporation, MovieFone, Inc. and Volt Information Sciences,
Inc.
Donald C. Fraser became a Director of the Company in 1993. He
currently serves as director of the Boston University Center for Photronics
Research and as professor of engineering and physics at the university.
From 1991 to 1993, Dr. Fraser was the Principal Deputy Under Secretary of
Defense, Acquisition, with primary responsibility for managing the
Department of Defense acquisition process, including setting policy and
executing programs. He also served as Deputy Director of Operational Test
and Evaluation for Command, Control, Communication and Intelligence, from
1990 to 1991, a position which included top level management and oversight
of the operational test and evaluation of all major Department of Defense
communication, command and control, intelligence, electronic warfare, space
and information management system programs. From 1981 to 1988, Dr. Fraser
was employed as the Vice President, Technical Operations at Charles Stark
Draper Laboratory and, from 1988 to 1990, as its Executive Vice President.
EXECUTIVE COMPENSATION
Summary of Cash and Certain other Compensation. There is shown
below information concerning the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended March
31, 1995, 1994 and 1993, of those persons who were, at March 31, 1995 (i)
the chief executive officer and (ii) the other four most highly compensated
executive officers of the Company (the "Named Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
-----------------
Annual Compensation (i) Awards
--------------------------------------- -----------------
All Other
Name and Principal Position Fiscal Year Salary ($) Bonus ($) Stock Options(#) Compensation($)
- --------------------------------------- ----------- ----------- ---------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Leonard Newman..................... 1995 321,910 0 0 57,000(a)(b)(c)(d)
Chairman of the Board 1994 331,140 100,000 0 52,538(a)(b)(c)(d)
& Secretary 1993 332,294 20,000 0 43,974(a)(b)(c)(d)
Mark S. Newman..................... 1995 281,344 120,000 150,000(f)(j) 19,440(b)(c)(d)
President & Chief 1994 230,767 52,993 0 86,728(b)(c)(d)(e)
Executive Officer 1993 226,083 15,000 0 13,910(b)(c)(d)
Paul G. Casner, Jr................. 1995 198,000 40,000 0 32,201(b)(d)(h)
Vice President &
President-- DRS Electronic
Systems Group
Stuart F. Platt.................... 1995 256,970 50,000 0 4,414(c)(d)
Vice President & 1994 262,854 21,597 5,000(g)(j) 3,664(c)(d)
President-- DRS Media Technology Group 1993 187,889 0 0 2,426(c)(d)
Richard Ross............................... 1995 198,618 36,000 0 9,070(b)(c)(d)
Vice President & 1994 155,596 27,237 5,000(g)(j) 7,010(b)(c)(d)
President-- DRS Electro-Optical
Systems Group 1993 159,166 10,000 0 5,851(b)(c)(d)
</TABLE>
- -------------------
(a) Includes deferred compensation of $25,000 pursuant to a
Deferred Compensation Agreement (as defined herein) between the
Company and Mr. L. Newman. See "-Deferred Compensation
Agreement."
(b) Includes the amounts of employer contributions which vested
pursuant to the Company's Retirement/Savings Plan (as defined
herein) (See"-Retirement/Savings Plan") in the fiscal years
ended March 31, 1995 and 1994, respectively, in the accounts of
the Named Officers, as follows: Mr. L. Newman, $4,292 and
$1,626; Mr. M. Newman, $4,838 and $3,530; Mr. P. Casner, Jr.,
$3,000; and Mr. R. Ross, $3,486 and $2,234. There were no
employer contributions under the Retirement/Savings Plan during
fiscal 1993.
(c) Includes the fixed annual amounts, computed on a fiscal year
basis, provided by the Company for the benefit of the Named
Officers, to reimburse such officers for the amounts of medical
and hospital expenses actually incurred by them, which are not
covered or paid to them under the Company's group medical and
hospitalization plans during the fiscal years ended March 31,
1995, 1994 and 1993, respectively, as follows: Mr. L. Newman,
$4,000, $3,250 and $3,750; Mr. M. Newman, $4,500, $3,250 and
$5,250; Mr. S. Platt, $4,000, $3,250 and $2,150; and Mr. R.
Ross, $4,000, $3,250 and $4,500.
(d) The Company pays the cost of policies of life insurance and
long-term disability insurance, in excess of the amounts
furnished under the group coverage provided to all employees,
for the benefit of the Named Officers. Under certain of the
life insurance policies, the Company is a beneficiary to the
extent of the premiums paid. The total amounts of the premiums
paid by the Company or the economic benefit to the Named
Officers for such insurance policies during the fiscal years
ended March 31, 1995, 1994 and 1993, respectively, were as
follows: Mr. L. Newman, $23,708, $22,662 and $15,224; Mr. M.
Newman, $10,102, $9,948, and $8,660; Mr. P. Casner, Jr., $124;
Mr. S. Platt, $414, $414 and $276; and Mr. R. Ross, $1,584,
$1,526 and $1,350.
(e) Includes $70,000 earned by Mark S. Newman as a consequence of
his involvement in the Company's October 1993 acquisition of
TAS.
(f) Represents non-qualified stock options to purchase 50,000 shares
of Common Stock and incentive stock options to purchase 100,000
shares of Common Stock issued to Mr. M. Newman under the
Company's 1991 Stock Option Plan (the "1991 Stock Option Plan").
Such options, granted on June 9, 1994, became exercisable six
months from the date of grant with respect to 20% of such
options and are further exercisable cumulatively at 20% per year
on each of the first four anniversaries of the date of grant.
(g) Represents incentive stock options to purchase shares of Common
Stock issued to the Named Officers under the Company's 1991
Stock Option Plan. Such options, granted on August 5, 1993,
became exercisable six months from the date of grant with
respect to 20% of such options and are further exercisable
cumulatively at 20% per year on each of the first four
anniversaries of the date of grant.
(h) Includes forgiveness of principal and interest owed pursuant to
the Grid Note (as defined herein) in an amount equal to $29,077.
(i) The dollar value of perquisites and other personal benefits
provided for the benefit of the Named Officers during the fiscal
years ended March 31, 1995, 1994 and 1993, respectively, did not
exceed the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for the Named Officers in those
period. There were no other amounts of compensation required to
be reported as "Other Annual Compensation", by Item 402 of
Regulation S-K, earned by the Named Officers.
(j) In connection with the Reclassification, each option issued or
issuable pursuant to the 1991 Stock Option Plan will be
exercisable for an equal number of shares of the Company's
Common Stock.
Stock Options. The following table contains information
concerning the grant of stock options under the Company's 1991 Stock Option
Plan to the Named Officer during the Company's fiscal year ended March 31,
1995. The following table does not give effect to the Reclassification.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------------- --------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED (#) FISCAL 1995 ($/SH) DATE 0% ($) 5%($)(C) 10%($)(C)
- ----------- -------------- -------------- -------------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark S. Newman 50,000(a) 33.0% $0.01 06/08/99 $224,500 $286,500 $362,000
100,000(b) 67.0% $4.95 06/08/99 --- $79,000 $230,000
(Footnotes on next page)
</TABLE>
- --------------
(a) The options granted were for shares of Class B Common Stock at
an exercise price equal to the par value of the Company's Class
B Common Stock on the date of grant. The options become
exercisable over a five year period in increments of 20%
beginning six months from the date of grant and continuing at an
additional 20% per year on the anniversary of the date of grant.
The grant date of the options was June 9, 1994.
(b) The options granted were for shares of Class B Common Stock at
an exercise price equal to 110% of the fair market value of the
Company's Class B Common Stock on the date of grant. The options
become exercisable over a five year period in increments of 20%
beginning six months from the date of grant and continuing at an
additional 20% per year on the anniversary of the date of grant.
The grant date of the options is June 9, 1994.
(c) The amounts shown under these columns are the result of
calculations at the 5% and 10% rates required by the SEC and are
not intended to forecast future appreciation of the Company's
stock price.
Option Exercises and Fiscal Year-End Values. Shown below is
information with respect to the options exercised during fiscal 1995 by the
Named Officers and the unexercised options to purchase the Company's Class
A and Class B Common Stock granted through March 31, 1995 under the
Company's 1981 Incentive Stock Option Plan, 1981 Non-Qualified Stock Option
Plan and 1991 Stock Option Plan to the Named Officers and held by them at
that date. The following table does not give effect to the
Reclassification.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 1995 AT MARCH 31, 1995(a)
---------------------------------------- -------------------------------
CLASS A CLASS B CLASS A CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
------------------- ----------------- ---------------- ------------
SHARES
ACQUIRED ON VALUE EXER- UNEXER- EXER- UNEXER- EXER- UNEXER- EXER- UNEXER-
NAME EXERCISE (#) REALIZED ($) CISABLE CISABLE CISABLE CISABLE CISABLE CISABLE CISABLE CISABLE
- ------------------ ------------ ------------ ------- -------- -------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Newman...... --- --- --- --- 25,000 --- --- --- $85,925 ---
Mark S. Newman...... --- --- 40,000 --- 30,000 120,000 $105,500 --- $65,900 $263,600
Paul G. Casner, Jr.. --- --- --- --- 20,000 30,000 --- --- $109,800 $164,700
Stuart F. Platt..... --- --- --- --- 2,000 3,000 --- --- $3,750 $5,625
Richard Ross........ 10,600 $32,719 --- --- 2,000 3,000 --- --- $3,750 $5,625
</TABLE>
[FN]
- -------------------
(a) Based on the difference between the exercise price of each grant
and the closing price on the AMEX-Composite Transactions of the
Company's Class A and Class B Common Stock on that date, $5.25
and $5.50, respectively.
DEFERRED COMPENSATION AGREEMENT
In June 1993, pursuant to approval by the Board of Directors,
the Company and Mr. Leonard Newman entered into a deferred compensation
agreement (the "Deferred Compensation Agreement") providing for certain
deferred benefits which would become payable upon the termination of his
employment for any reason including death, and providing for certain
changes to certain insurance policies maintained by the Company. Upon
entering into the Newman Agreement in March 1996, this Deferred
Compensation Agreement was superseded. Under the terms of the Deferred
Compensation Agreement, in the event of termination of employment,
compensation (the "Deferred Benefit") equal to $25,000 multiplied by the
number of complete years of employment from July 1, 1969 through the date
of termination of employment, payable in twenty quarterly installments
commencing on the first day of the month following the date of termination,
was to be provided to Mr. L. Newman or, in the case of death, to his
designated beneficiary. The terms used for computing the Deferred Benefit
were similar in all material respects to those that had been used in the
computation of deferred compensation provided pursuant to an employment
agreement that expired on June 30, 1990, between the Company and Mr. L.
Newman. In the event of permanent disability, as defined in the Deferred
Compensation Agreement, the Company was required to pay the employee an
amount equal to five times the employee's annual base compensation in
effect immediately prior to his permanent disability. Such payments were to
be made on the Company's regular payroll dates during the five-year period
following the permanent disability. In the event of the death of the
employee during the five-year pay-out period, the Company was to pay to the
employee's designated beneficiary the Deferred Benefit described above
reduced by the total of the disability payments previously paid in equal
quarter-annual installments over the remainder of the five-year period. In
addition, pursuant to the terms of the Deferred Compensation Agreement, a
keyman term insurance policy owned by the Company for Mr. L. Newman was
transferred to him. Under the Newman Agreement, the Company will continue
to be required to provide Mr. L. Newman, on an annual basis, the sum
sufficient to pay the schedule premium on such policy.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
In April 1994, the Company entered into an agreement with Mr.
Richard Ross which provided for a severance benefit in the event of (i)
termination of his employment other than for cause, (ii) diminution in
compensation and/or responsibilities and (iii) the change in ownership of
the Company or Photronics. The severance benefit is equal to 30 months of
Mr. Ross' then current salary plus reimbursement of outplacement expenses
up to a maximum of $15,000.
Effective July 20, 1994, the Company entered into the Gross
Agreement and the Gross Stock Purchase Agreement with David E. Gross. Under
the terms of the Gross Agreement, Mr. Gross will receive a total of
$600,000 over a five-year period as compensation for his services pursuant
to a five-year consulting arrangement with the Company and a total of
$750,000 over a five-year period as consideration for a five-year
non-compete arrangement. The payments will be charged to expense over the
terms of the Gross Agreement as services are performed and obligations are
fulfilled by Mr. Gross. Mr. Gross will also receive at the conclusion of
such initial five-year period, an aggregate of approximately $1.3 million
payable over a nine-year period as deferred compensation. The net present
value of the payments to be made to Mr. Gross pursuant to the deferred
compensation portion of the Gross Agreement approximated the amount of the
Company's previous deferred compensation arrangement with Mr. Gross. In
addition to the Buy-Back, the Gross Stock Purchase Agreement also provides
that (i) the Company has a right of first refusal with respect to the sale
by Mr. Gross of any of the remaining shares of common stock of the Company
held by Mr. Gross in excess of 20,000 shares, (ii) any shares of common
stock of the Company held by Mr. Gross must be voted pro rata in accordance
with the vote of the Company's other stockholders and (iii) in the event of
a change in control of the Company within three years from the date of the
Gross Stock Purchase Agreement, Mr. Gross will receive a percentage of the
difference between the price per share paid to Mr. Gross pursuant to the
Buy-back and the price per share received by the stockholders of the
Company pursuant to the change of control transaction, less an interest
factor, as defined in the Gross Stock Purchase Agreement, on the aggregate
amount paid to Mr. Gross pursuant to the Buy-back.
On March 28, 1996, the Company entered into the Newman
Agreement with Leonard Newman. Under the terms of the Newman Agreement, Mr.
Newman has agreed to provide consulting services, as required from time to
time, to the Company for a five year period and has also agreed not to
compete with the Company during this same period. This agreement supersedes
a previous deferred compensation agreement with the Company. In
consideration for the above, Mr. Newman received a lump sum payment of
approximately $2.0 million.
RETIREMENT/SAVINGS PLAN
The Summary Compensation Table above includes amounts deferred
by the Named Officers pursuant to the Company's Retirement/Savings Plan
under Section 401(k) of the Internal Revenue Code of 1986 (the
"Retirement/Savings Plan"). The value of a participant's contributions to
the Retirement/Savings Plan is fully vested at all times; the value of
employer contributions becomes 50% vested after the employee has completed
three years of service, 75% vested after completion of four years of
service, and 100% vested after completion of five years of service.
MEDICAL REIMBURSEMENT PLAN
At the beginning of each calendar year, the Company accrues
fixed annual amounts for the benefit of certain officers to be paid as
needed to reimburse such officers for the amounts of medical and hospital
expenses actually incurred by such officers which are not covered, and
until January 1, 1993, the excess of the amounts of medical and hospital
expenses actually incurred by such officers over the amount paid to them,
under the Company's group medical and hospitalization plans. The amount
accrued for the benefit of each such officer is included in such officer's
compensation for tax purposes regardless of whether such accrued amount is
actually paid to him. The excess of the amount accrued over the amounts paid
is used to offset the administrative expenses payable by the Company to the
medical insurance carrier.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Leonard Newman, who was appointed to the Board of Director's
Executive Compensation Committee (the "Committee") on May 26, 1994, served
as the Chairman of the Board and Secretary of the Company during fiscal
1995 and until his resignation from such offices in August 1995. During the
period in which he served on the Committee, Mr. Newman did not participate
in compensation decisions relating to himself or Mark S. Newman.
SECURITY OWNERSHIP
The following table gives effect to the Reclassification and
shows, as of April 25, 1996, the number of shares of Common Stock held by
each director and executive officer, and by all directors and executive
officers of the Company as a group and the percentage beneficially owned
(within the meaning of Rule 13d-3 of the Exchange Act).
COMMON STOCK (a)
-------------------------------
PERCENT
NAME OF BENEFICIAL OWNER SHARES OF CLASS
Mark S. Newman........................ 194,149(b)(c)(d) 3.5
Theodore Cohn......................... 5,900 0.1
Donald C. Fraser....................... - -
Mark N. Kaplan......................... 1,000 -(e)
Stuart F. Platt....................... 3,000(c) 0.1
Jack Rachleff.......................... 1,000 -(e)
Paul G. Casner, Jr..................... 31,000(c) 0.6
Nancy R. Pitek......................... 14,307(b)(c) 0.3
Richard Ross........................... 3,000(c) 0.1
Leonard Newman......................... 2,700 -(e)
All directors and executive
officers as a group
(10 persons)....................... 388,356(b)(c)(d) 6.9%
- ------------------
(a) As of April 25, 1996, the Company had outstanding
5,467,632 shares of Common Stock (excluding 498,434
shares of Common Stock held in treasury). Unless
otherwise noted, each director and executive officer
had sole voting power and investment power over the
shares of Common Stock indicated opposite such
director's and executive officer's name.
(b) Includes 13,107 shares of Common Stock held by the
trustee of the Company's Retirement/Savings Plan. Mr.
M. Newman and Ms. N. Pitek share the power to direct
the voting of such shares as members of the
administrative committee of such plan. Mr. M. Newman
and Ms. N. Pitek disclaim beneficial ownership as to
and of such shares.
(c) Includes shares of Common Stock which might be
purchased upon exercise of options which were
exercisable on April 25, 1996 or within 60 days
thereafter, as follows: Mr. P. Casner, Jr., 30,000
shares; Mr. Newman, 90,000 shares; Ms. N. Pitek,
1,200 shares; Mr. S. Platt, 3,000 shares; Mr. R.
Ross, 3,000 shares; and all directors and executive
officers as a group, 181,200 shares.
(d) Includes 3,200 shares of Common Stock held by Mr. M.
Newman as custodian for his daughter over which Mr.
M. Newman has sole voting and investment power.
(e) Less than 0.1%.
The following table gives effect to the Reclassification and
sets forth certain information, as of April 25, 1996 with respect to each
person, other than executive officers and directors of the Company, which
has advised the Company that it may be deemed to be the beneficial owner
(within the meaning of Rule 13d-3 of the Exchange Act) of more than five
percent of a class of voting securities of the Company. Such information
has been derived from statements on Schedule 13D or 13G filed with the SEC
by the person(s) listed below.
-------------------------------------------------------
COMMON STOCK
-------------------------------------------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP OF CLASS
OF BENEFICIAL OWNER ---------------------- -----------------
First Pacific Advisors, Inc.
10301 West Pico Blvd.
Los Angeles, CA 90064....... 1,774,452(a) 28.7%
Palisade Capital Management
L.L.C.
One Bridge Plaza
Suite 695
Fort Lee, New Jersey
07024 . ...................... 885,924(b) 16.2
Michael N. Taglich
Taglich Brothers,
D'Amadeo, Wagner &
Company, Incorporated
100 Wall Street
New York, NY 10005 . .......... 529,850(c) 9.7
David E. Gross
27 Cameron Road
Saddle River, NJ 07458 ......... 335,701(d) 6.1
- ------------------
(a) Includes 508,475 shares of Common Stock from
the assumed conversion of $4,500,000 principal amount of
the Debentures , 208,877 shares of Common Stock from the assumed
conversion of $3,133,000 principal amount of the Company's 1998
Debentures and 1,057,100 shares of Common Stock beneficially owned by
First Pacific Advisors, Inc. ("First Pacific") through control of FPA
Capital Fund, Inc. ("FPA"), Source Capital, Inc. ("Source Capital")
and FPA New Income, Inc. ("New Income") to which First Pacific serves
as investment advisor. The Company has been advised that First Pacific
has shared voting power with respect to 300,000 shares and
shared dispositive power with respect to 1,774,452 shares, FPA has sole
voting power and shared dispositive power with respect to 510,000 shares,
Source Capital has sole voting power and shared dispositive
power with respect to 321,527 shares and New Income has sole voting power
and shared dispositive power with respect to 339,328 shares.
(b) Represents shares of Common Stock held by Palisade Capital Management
L.L.C., acting as investment adviser to (i) Crysler Corp. Emp. #1 Pension
Plan Dtd. 4-1-89, (ii) IBM Corp. Retirement Plan Trust Dtd. 12-18-45,
(iii) G.E. Pension Trust, and (iv) Nynex Master Pension Trust Dtd. 1-1-84.
(c) Consists of 312,450 shares of Common Stock held by Lancer Partners, Inc.
("Lancer Partners"), 11,500 shares of Common Stock held by Antrade, N.V.
("Antrade"), 15,200 shares of Common Stock held by Album N.V. ("Album"),
11,600 shares of Common Stock held by Ralco Investments Group ("Ralco"),
156,850 shares of Common Stock held by Lancer Offshore, Inc. ("Lancer
Offshore") and 22,250 shares of Common Stock held by Michael Lauer. The
Company has been advised that Michael Lauer has sole voting power and sole
dispositive power with respect to 22,250 shares. Michael N. Taglich and
Michael Lauer serve as general partners of Lancer Partners and
managing partners of Lancer Offshore. The Company has been advised that
Messrs. Taglich and Lauer also share voting and dispositive authority over
the shares held by Album, Antrade and Ralco resulting in shared voting and
shared dispositive power with respect to a total of 507,600 shares.
(d) Includes 282,381 shares of Common Stock held by Mr. Gross for which he
has sole voting and dispositive power. Also included are 26,000 shares of
Common Stock held by Mr. Gross' wife personally and 27,320 shares of Common
Stock held by her as custodian for her two children. Mr. Gross has neither
voting power nor investment power over the shares of Common Stock held by
his wife, either personally or as custodian for her children, and disclaims
any beneficial interest in such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was a party to a loan agreement, as amended March
30, 1993, entered into with Leonard Newman as the Chairman of the Board,
Chief Executive Officer and Secretary of the Company (the "Newman Loan").
At March 31, 1995, the outstanding principal amount due to the Company was
$160,257. The original Newman Loan in the principal amount of $267,000 was
made in March 1984 to provide financing for the purchase of a new house,
closer to the offices of the Company, during the time required to sell his
old house. The loan was restructured in October 1986 with the Board of
Directors authorizing a new loan to Mr. Newman in the principal amount of
$111,430, which was used to pay all amounts then due and outstanding under
the original Newman Loan. With the concurrence of the Board of Directors
and Mr. Newman, an advance of $77,500 made to Mr. Newman by the Company in
October 1989 against an anticipated bonus was converted subsequently into a
loan in that amount from the Company. In March 1990, the Board of Directors
authorized a consolidation of the then outstanding principal amount and
accrued interest on each of the two outstanding Newman Loans. The
consolidated loan in the principal amount of $160,257 was evidenced by a
promissory note bearing interest at the rate of 1% over the prime
commercial rate of interest as announced from time to time by Morgan
Guaranty Trust Company of New York and was secured by a pledge of 109
shares owned by Mr. Newman in, and an assignment of his interest in a
proprietary lease from, an apartment corporation in New York City. Pursuant
to approval by the Board of Directors effective March 1993, the maturity
date of the consolidated loan was extended from March 30, 1993 to March 30,
1996. Principal and interest on the consolidated loan was due in one
installment at maturity and could be paid in cash or in shares of Class A
Common Stock or Class B Common Stock of the Company, or in any combination
of cash or such shares. At March 31, 1995, the largest aggregate amount of
indebtedness under the consolidated Newman Loans since April 1, 1994 was
$244,355. The loan was repaid as of June 1995.
The Company is currently occupying and leasing a building at 138
Bauer Drive (the "LDR Building") owned by LDR Realty Co. ("LDR"), a
partnership wholly owned, in equal amounts, by Leonard Newman and David E.
Gross, the former President and Chief Technical Officer of the Company.
The current renegotiated lease agreement is for a ten-year term beginning
June 1, 1988 at a monthly rental of $19,439. The Company is required to pay
all real estate taxes and is responsible for all repairs and maintenance,
structural and otherwise, subject to no cumulative limits. The terms of
the LDR lease were determined by the Company and LDR, based on the formal
appraisal of an appraisal firm and informal appraisals from real estate
brokers in the area. Such appraisals indicated that the rental provided for
in the LDR lease is not in excess of the range of fair market rentals in
the relevant area. The Company believes that the LDR lease was consummated
on terms no less favorable than those that could have been obtained by the
Company from an unrelated third party in a transaction negotiated on an
arms-length basis.
Skadden, Arps, Slate, Meagher & Flom, a law firm of which Mark
N. Kaplan, a director, is a member, provided legal services to the Company
during its 1995 fiscal year.
In July 1993, the Company and Donald C. Fraser, a director,
entered into a consulting agreement pursuant to which Dr. Fraser will
provide consultation to the Company concerning defense technologies. Under
the terms of the consulting agreement, as amended, consulting services are
to be provided to the Company through July 5, 1995 on an as-requested
basis, for a fee of $1,500 per day plus approved travel and miscellaneous
expenses. During fiscal 1995, total remuneration paid to Dr. Fraser under
this agreement approximated $9,000.
In October 1993, the Company issued a Demand Grid Note (the
"Grid Note") in the principal amount of $100,000 to Paul G. Casner, Jr. The
loan bears interest at the applicable federal rate necessary under the
Internal Revenue Code of 1986, as amended, to avoid an imputed rate of
interest.
In May 1995, the Company became a party to a loan with Mark S.
Newman, the President and Chief Executive Officer of the Company, to
provide an amount equal to the exercise price of incentive stock options
which had been granted to him under the Company's 1981 Incentive Stock
Option Plan. The loan is evidenced by a promissory note in the principal
amount of $104,500 and bears interest at an annual rate of 8%. The loan is
payable on the earlier of (i) the sale or disposition of the shares of
stock obtained pursuant to the exercise of the stock options, (ii)
cessation of Mr. M. Newman's employment by the Company or (iii) May 25,
2005. Interest is payable on May 25 of each calendar year or at such
earlier time as the loan is repaid.
DESCRIPTION OF THE DEBENTURES
The Debentures were issued under an indenture (the "Indenture")
dated as of September 22, 1995, and as supplemented as of April 1, 1996,
between the Company and The Trust Company of New Jersey, as trustee (the
"Trustee"), a copy of which is available upon request from the Company. The
statements under this caption address the material terms of the Debentures
but are summaries and do not purport to be complete. The summaries make use
of terms defined in the Indenture and are qualified in their entirety by
reference to the Indenture, including the definitions therein of certain
terms. Whenever reference is made to defined terms of the Indenture and not
otherwise defined herein, such defined terms are incorporated herein by
reference.
GENERAL
The Debentures are general unsecured senior subordinated
obligations of the Company, are limited to $25,000,000 aggregate principal
amount and will mature on October 1, 2003. As of April 25, 1996, $25
million aggregate principal amount of the Debentures were outstanding. The
Debentures bear interest at the rate per annum shown on the cover page
hereof from the date of original issue, or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly
provided for, and accrued but unpaid interest will be payable semi-annually
on April 1 and October 1 of each year commencing April 1, 1996 (each, an
"Interest Payment Date"). Interest will be paid to Debentureholders of
record ("Holders") at the close of business on the March 15 or September
15, respectively, immediately preceding the relevant Interest Payment Date
(each, a "Regular Record Date"). Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
Principal of and premium, if any, and interest on the Debentures
will be payable, the transfer of the Debentures will be registrable and the
Debentures will be exchangeable at the office or agency of the Company
maintained for that purpose in Jersey City, New Jersey (which initially
will be the corporate trust office of the Trustee), except that, at the
option of the Company, payment of interest may be made by check mailed to
the address of the Holder entitled thereto as it appears in the Debenture
Register on the related record date.
The Debentures were issued in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof. No
service charge will be made for any transfer or exchange of Debentures, but
the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
All monies paid by the Company to the Trustee or any Paying
Agent for the payment of principal of and premium, if any, and interest on
any Debenture which remain unclaimed for two years after such principal,
premium or interest became due and payable may be repaid to the Company.
Thereafter the Holder of such Debenture may, as an unsecured general
creditor, look only to the Company for payment thereof.
Initially, the Trustee will act as paying agent and registrar of
the Debentures. The Company may change any paying agent and registrar
without notice.
CONVERSION RIGHTS
Holders are entitled, at any time and from time to time prior to
maturity (subject to earlier redemption or repurchase, as described below),
to convert their Debentures (or any portion thereof that is an integral
multiple of $1,000), at 100% of the principal amount thereof, into Common
Stock of the Company at the conversion price set forth on the cover page
hereof, subject to adjustment under certain circumstances as described
below. After a call for redemption of Debentures, through optional
redemption or otherwise, the Debentures or portion thereof called for
redemption will be convertible if duly surrendered on or before, but not
after, the business day preceding the date fixed for redemption in respect
thereof.
The conversion price is subject to adjustment upon certain
events, including: (i) the issuance of Common Stock (including a
distribution of Common Stock held in the Company's treasury) as a dividend
or distribution on any class of Capital Stock of the Company or any
Subsidiary which is not wholly owned by the Company; (ii) a subdivision,
combination or reclassification of outstanding shares of Common Stock;
(iii) the issuance or distribution of Capital Stock of the Company or of
rights or warrants to acquire Capital Stock of the Company at less than the
Current Market Price (as defined below) on the date of issuance or
distribution (provided that the issuance of Capital Stock upon the exercise
of warrants or options will not cause an adjustment in the conversion price
if no such adjustment would have been required at the time such warrant or
option was issued); and (iv) the distribution to the holders of any class
of Capital Stock of the Company generally and to holders of Capital Stock
of any Subsidiary which is not wholly owned by the Company of evidences of
indebtedness or assets (including cash and securities, but excluding
dividends or distributions payable in shares of Common Stock and warrants
and options for which adjustment is made as described above and further
excluding cash dividends paid out of cumulative retained earnings of the
Company arising after the date of the Indenture).
Notwithstanding the foregoing, (a) if the rights or warrants
described in clause (iii) of the preceding paragraph are exercisable only
upon the occurrence of certain triggering events, then the conversion price
will not be adjusted until such triggering events occur and (b) if rights
or warrants expire unexercised, the conversion price shall be readjusted to
take into account only the actual number of such rights or warrants which
were exercised. In addition, the provisions of the preceding paragraph will
not apply to the issuance of Common Stock upon the exercise of the
Company's outstanding stock options under the 1981 Incentive Stock Option
Plan, 1981 Non-Qualified Stock Option Plan and 1991 Stock Option Plan,
unless the exercise price thereof is changed after the date of the
Indenture (other than solely by operation of the anti-dilution provisions
thereof), or the issuance of Common Stock upon the conversion of currently
outstanding 1998 Debentures, unless the conversion price thereof is changed
after the date of the Indenture (other than solely by operation of the
anti-dilution provisions thereof).
No adjustment will be made to the conversion price until
cumulative adjustments to the conversion price amount to at least 1% of the
conversion price, as last adjusted. Except as stated above, the conversion
price will not be adjusted for the issuance of Common Stock, or any
securities convertible into or exchangeable for Common Stock or carrying
the right to purchase any of the foregoing, or the payment of dividends on
the Common Stock.
Fractional shares of Common Stock will not be issued upon
conversion. A person otherwise entitled to a fractional share of Common
Stock upon conversion shall receive cash equal to the equivalent fraction
of the Current Market Price of a share of Common Stock on the business day
prior to conversion. The Company from time to time may, to the extent
permitted by law, reduce the conversion price by any amount for any period
of at least 20 days, in which case the Company shall give at least 15 days'
notice of such reduction to each Holder, if the Board of Directors of the
Company has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive. The
Company is entitled to make such reductions in the conversion price as it
may in its discretion determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights to purchase stock
or securities, or distribution of securities convertible into or
exchangeable for stock shall not be taxable to its stockholders. If at any
time the Company makes a distribution of property to its stockholders which
would be taxable to such stockholders as a dividend for federal income tax
purposes (e.g., distribution of evidence of indebtedness or assets of the
Company, but generally not stock dividends or rights to subscribe for
Common Stock) and, pursuant to the anti-dilution provisions of the
Indenture, the conversion price of the Debentures is reduced or the
conversion price of the Debentures is reduced other than in connection with
certain anti-dilution adjustments, such a reduction may be considered as
resulting in the distribution of a dividend to Holders for federal income
tax purposes.
A Holder who surrenders a Debenture (or portion thereof) for
conversion between the close of business on a Regular Record Date and the
next Interest Payment Date will receive interest on such Interest Payment
Date with respect to such Debenture (or portion thereof) so converted
through such Interest Payment Date. Subject to such payments in the event
of conversion after the close of business on a Regular Record Date, no
payment or adjustment shall be made upon any conversion on account of any
interest accrued but unpaid on the Debentures surrendered for conversion.
Subject to any applicable right of the Holders to cause the
Company to purchase Debentures upon a Change of Control (as described
below), in case of any consolidation or merger to which the Company is a
party, other than a transaction in which the Company is the continuing
corporation, or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another
corporation or other entity, there will be no adjustment of the conversion
price, but each Holder will have the right thereafter to convert such
Holder's Debentures into the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such consolidation, merger, statutory exchange, sale or
conveyance had such Debenture been converted immediately prior to the
effective date of such consolidation, merger, statutory exchange, sale or
conveyance. In the case of a cash merger of the Company with another
corporation or other entity or any other cash transaction of the type
mentioned above, the effect of these provisions would be that the
conversion features of the Debentures would thereafter be limited to
converting the Debentures at the conversion price then in effect into the
same amount of cash that such Holder would have received had such Holder
converted the Debentures into Common Stock immediately prior to the
effective date of such cash merger or transaction. Depending upon the terms
of such cash merger or transaction, the aggregate amount of cash so
received on conversion could be more or less than the principal amount of
the Debentures.
The Company has covenanted under the Indenture to reserve and
keep available at all times out of its authorized but unissued Common
Stock, for the purpose of effecting conversions of Debentures, the full
number of shares of Common Stock deliverable upon the conversion of all
outstanding Debentures.
REDEMPTION
Optional Redemption by the Company. The Debentures are not
redeemable at the option of the Company prior to October 1, 1998.
Thereafter, the Debentures will be redeemable at any time prior to
maturity, at the option of the Company, in whole or from time to time in
part, upon not less than 30 days' nor more than 60 days' prior notice of
the redemption date, mailed by first class mail to each Holder's last
address as it appears in the Debenture Register, at the Redemption Prices
established for the Debentures, together with accrued but unpaid interest,
if any, to the date fixed for redemption. The Redemption Prices for the
Debentures (expressed as a percentage of the principal amount) shall be as
follows:
AFTER OCTOBER 1, PERCENTAGE
1998 105 %
1999 103.75
2000 102.50
2001 101.25
Selection of Debentures Redeemed. If less than all the
Debentures are to be redeemed, selection of the Debentures for redemption
will be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Debentures are
listed, or, if the Debentures are not listed, on a pro rata basis by lot or
by such method that complies with applicable legal requirements and that
the Trustee considers fair and appropriate. The Trustee may select for
redemption portions of the principal of Debentures that have a denomination
larger than $1,000. Debentures and portions thereof will be redeemed in the
amount of $1,000 or integral amounts of $1,000. The Trustee will make the
selection from Debentures outstanding and not previously called for
redemption.
CHANGE OF CONTROL
If a Change of Control occurs, the Company shall offer to
repurchase each Holder's Debentures pursuant to an offer as described below
(the "Change of Control Offer") at a purchase price equal to 100% of the
principal amount of such Holder's Debentures, plus accrued but unpaid
interest, if any, to the date of purchase. The Change of Control purchase
feature of the Debentures may in certain circumstances make more difficult
or discourage a takeover of the Company.
Under the Indenture, a "Change of Control" means the occurrence
of any of the following events: (i) any person (as the term "person" is
used in Section 13(d) or Section 14(d) of the Exchange Act) is or becomes
the direct or indirect beneficial owner of shares of the Company's Capital
Stock representing greater than 50% of the total voting power of all shares
of Capital Stock of the Company entitled to vote in the election of
directors under ordinary circumstances; (ii) the Company sells, transfers
or otherwise disposes of all or substantially all of the assets of the
Company; or (iii) during any period of two consecutive years (or, in the
case this event occurs within the first two years after the date of issue
of the Debentures, such shorter period as shall have commenced on the date
of original issue), Continuing Directors cease for any reason to constitute
a majority of the Board of Directors of the Company then in office.
Within 30 days after any Change of Control, unless the Company
has previously mailed a notice of optional redemption by the Company of all
of the Debentures, the Company shall mail a notice of the Change of Control
Offer to each Holder by first class mail at such Holder's last address as
it appears on the Debenture Register stating: (i) that a Change of Control
has occurred and that the Company is offering to repurchase all of such
Holder's Debentures; (ii) the circumstances and relevant facts regarding
such Change of Control (including, but not limited to, information with
respect to pro forma income, cash flow and capitalization of the Company
after giving effect to such Change of Control); (iii) the repurchase price;
(iv) the expiration date of the Change of Control Offer, which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed; (v) the date such purchase shall be effected, which shall be no
later than 30 days after expiration date of the Change of Control Offer;
(vi) that any Debentures not accepted for payment pursuant to the Change of
Control Offer shall continue to accrue interest; (vii) that, unless the
Company defaults in the payment of the Change of Control Payment, all
Debentures accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(viii) the name and address of the paying agent; (ix) that Debentures must
be surrendered to the paying agent to collect the repurchase price; (x) any
other information required by applicable law to be included therein; and
(xi) the procedures determined by the Company, consistent with the
Indenture, that a Holder must follow in order to have such Debentures
repurchased.
In the event that the Company is required to make a Change of
Control Offer, the Company will comply with any applicable securities laws
and regulations, including, to the extent applicable, Section 14(e), Rule
14e-1 and any other tender offer rules under the Exchange Act which may
then be applicable in connection with any offer by the Company to purchase
Debentures at the option of the Holders thereof.
The Company, could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that
would not constitute a Change in Control under the Debentures, but that
would increase the amount of Senior Indebtedness (or any other
indebtedness) outstanding at such time. The Company's ability to create any
additional Senior Indebtedness or additional Subordinated Indebtedness is
limited as described in the Debentures and the Indenture although, under
certain circumstances, the incurrence of significant amounts of additional
indebtedness could have an adverse effect on the Company's ability to
service its indebtedness, including the Debentures. If a Change in Control
were to occur, there can be no assurance that the Company would have
sufficient funds at the time of such event to pay the Change in Control
purchase price for all Debentures tendered by the Holders. A default by the
Company on its obligation to pay the Change in Control purchase price
could, pursuant to cross-default provisions, result in acceleration of the
payment of other indebtedness of the Company outstanding at that time.
Certain of the Company's existing and future agreements relating
to its indebtedness could prohibit the purchase by the Company of the
Debentures pursuant to the exercise by a Holder of the foregoing option,
depending on the financial circumstances of the Company at the time any
such purchase may occur, because such purchase could cause a breach of
certain covenants contained in such agreements. Such a breach may
constitute an event of default under such indebtedness and thereby restrict
the Company's ability to purchase the Debentures. See "--Ranking."
MAINTENANCE OF CONSOLIDATED NET WORTH
The Company is required to maintain a Consolidated Net Worth of
at least $18 million. The Indenture provides that if the Company's
Consolidated Net Worth is less than $18 million at the end of any fiscal
quarter, the Company is required to furnish to the Trustee an Officer's
Certificate within 45 days after the end of such fiscal quarter (90 days
after the end of any fiscal year) notifying the Trustee that the Company's
Consolidated Net Worth has declined below $18 million. If, at any time or
from time to time, the Company's Consolidated Net Worth at the end of each
of any such two consecutive fiscal quarters (the last day of the second
fiscal quarter being referred to as a "Deficiency Date") is less than $18
million, then the Company shall, in each such event, no later than 50 days
after each Deficiency Date (100 days if a Deficiency Date is also the end
of the Company's fiscal year), mail to the Trustee and each Holder at such
Holder's last address as it appears on the Debenture Register a notice (the
"Deficiency Notice") of the occurrence of such deficiency, which shall
include an offer by the Company (the"Deficiency Offer") to repurchase
Debentures as described below. The Deficiency Notice shall state: (i) that
a deficiency has occurred; (ii) that the Company is offering to repurchase
10% of the aggregate principal amount of Debentures originally issued (or
such lesser amount as may be outstanding at the time of the Deficiency
Notice) (the "Deficiency Repurchase Amount"); (iii) that the repurchase
price shall be 100% of the principal amount of the Debentures repurchased
plus accrued but unpaid interest, if any, to the date of purchase; (iv) the
expiration date of the Deficiency Offer, which shall be no earlier than 30
days nor later than 45 days after the date such notice is mailed; (v) the
date such purchase shall be effected, which shall be no later than 20 days
after expiration date of the Deficiency Offer; (vi) that Debentures not
accepted for payment pursuant to the Deficiency Offer shall continue to
accrue interest; (vii) that, unless the Company defaults in payment of the
Deficiency Repurchase Amount, all Debentures accepted for payment pursuant
to the Deficiency Offer shall cease to accrue interest after the Deficiency
Payment Date; (viii) that if any Debenture is repurchased in part, a new
Debenture or Debentures in principal amount equal to the unrepurchased
portion will be issued; (ix) the name and address of the paying agent; (x)
that Debentures to be repurchased must be surrendered to the paying agent
to collect the repurchase price; (xi) any other information required by
applicable law to be included therein; and (xii) the procedures determined
by the Company, consistent with the Indenture, that a Holder must follow in
order to have such Debentures repurchased.
The Company shall purchase the Deficiency Repurchase Amount of
Debentures or, if less than the Deficiency Repurchase Amount has been
delivered for repurchase, all Debentures delivered for repurchase in
response to the Deficiency Offer. If the aggregate principal amount of
Debentures delivered for repurchase exceeds the Deficiency Repurchase
Amount, the Company will purchase the Debentures delivered to it pro rata
(in $1,000 increments only) among the Debentures delivered based on
principal amount. The Company will comply with all applicable securities
laws and regulations in connection with each Deficiency Offer. In no event
shall the failure to meet the minimum Consolidated Net Worth requirement
set forth above at the end of any fiscal quarter be counted toward the
making of more than one Deficiency Offer.
The Company may credit against the principal amount of
Debentures to be repurchased in any Deficiency Offer 100% of the principal
amount (excluding premium) of Debentures acquired by the Company subsequent
to the Deficiency Date through purchase (otherwise than pursuant to this
provision or a Change of Control Offer), optional redemption, conversion or
exchange and surrendered for cancellation.
If a Consolidated Net Worth deficiency were to occur, there can
be no assurance that the Company would have sufficient funds at the time of
such event to purchase the Deficiency Repurchase Amount of Debentures. A
default by the Company to so purchase the Deficiency Repurchase Amount of
Debentures could, pursuant to cross-default provisions, result in
acceleration of the payment of other indebtedness of the Company
outstanding at that time.
Certain of the Company's existing and future agreements relating
to its indebtedness could prohibit the purchase by the Company of the
Debentures pursuant to the exercise by a Holder of the foregoing option,
depending on the financial circumstances of the Company at the time any
such purchase may occur, because such purchase could cause a breach of
certain covenants contained in such agreements. Such a breach may
constitute an event of default under such indebtedness and thereby restrict
the Company's ability to purchase the Debentures. See "--Ranking."
RANKING
The payment of principal of and premium, if any, and interest on
the Debentures will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below). Upon any payment or distribution of assets
to creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshalling of assets, whether
voluntary, involuntary or in receivership, bankruptcy, insolvency or
similar proceedings, the holders of all Senior Indebtedness will be first
entitled to receive payment in full of all amounts due or to become due
thereon before any payment is made on account of principal of and premium,
if any, and interest on the Debentures or on account of any other monetary
claims under or in respect of the Debentures, and before any distribution
is made to acquire any of the Debentures for any cash, property or
securities. No payments on account of principal of and premium, if any, and
interest on the Debentures shall be made if at the time thereof: (i) there
is a default in the payment of all or any portion of the obligations under
any Senior Indebtedness or (ii) there shall exist a default in any covenant
with respect to the Senior Indebtedness (other than as specified in clause
(i) of this sentence), and, in such event, such default shall not have been
cured or waived or shall not have ceased to exist, the Trustee and the
Company shall have received written notice from any holder of such Senior
Indebtedness stating that no payment shall be made with respect to the
Debentures and such default would permit the maturity of such Senior
Indebtedness to be accelerated, provided that no such default will prevent
any payment on, or in respect of, the Debentures for more than 120 days
unless the maturity of such Senior Indebtedness has been accelerated.
The Holders will be subrogated to the rights of the holders of
the Senior Indebtedness to the extent of payments made on Senior
Indebtedness upon any distribution of assets in any such proceedings out of
the distributive share of the Debentures.
"Senior Indebtedness" is defined to mean the principal of and
premium, if any, and interest on (a) the Debt of the Company or any of its
Subsidiaries which is outstanding on the date of the Indenture and has been
provided by a bank that is not an Affiliate of the Company or by any State
or local government or agency thereof, (b) any Debt incurred after the date
of the Indenture by the Company or any of its Subsidiaries which expressly
states that it is senior in right of payment to the Debentures and is
provided by a bank that is not an Affiliate of the Company, (c) any Debt,
whether outstanding on the date of the Indenture or thereafter incurred,
which evidences the Company's obligation to refund any progress payments or
deposits to the United States or any foreign government or any
instrumentality thereof or any prime contractor for any such government or
instrumentality and (d) amendments, renewals, extensions, modifications and
refundings of any such Debt, whether any such Debt described in (a), (b) or
(c) is outstanding on the date of the Indenture or thereafter created,
incurred or assumed, unless in any case, the instrument creating or
evidencing any such Debt pursuant to which the same is outstanding provides
that such Debt is not superior in right of payment to the Debentures. The
Company's ability to incur Senior Indebtedness after the date of the
Indenture is limited. See "-- Certain Covenants of the Company - Limitation
of Debt and Senior Indebtedness." Only indebtedness of the Company that is
Senior Indebtedness will rank senior to the Debentures in accordance with
the provisions of the Indenture. The Company has agreed that it will not
issue or incur any Debt (other than Senior Indebtedness or Capitalized
Lease Obligations) unless such Debt (other than Senior Indebtedness or
Capitalized Lease Obligations) will be subordinate in right of payment to
the Debentures at least to the same extent that the Debentures are
subordinate to Senior Indebtedness. The Company has also agreed that it
will not permit any of its Subsidiaries to issue or incur any Debt (other
than Senior Indebtedness or Capitalized Lease Obligations) unless such Debt
(other than Senior Indebtedness or Capitalized Lease Obligations) shall
provide that such Debt (other than Senior Indebtedness or Capitalized Lease
Obligations) will be subordinate in right of payment to distributions and
dividends from such Subsidiary to the Company in an amount sufficient to
satisfy the Company's obligations under the Debentures at least to the same
extent the Debentures are subordinate to Senior Indebtedness. The
Debentures are senior in right of payment to the Company's 1998 Debentures.
The Debentures are unsecured obligations of the Company, and,
accordingly, will rank pari passu with all trade debt and obligations of
the Company and its Subsidiaries that arise by operation of law or are
imposed by any judicial or governmental authority, except that any such
trade debt or other obligation may be senior in right of payment to the
Debentures to the extent the same is entitled to any security interest
arising by operation of law.
The Debentures are obligations exclusively of the Company, and
the Debentures, as a practical matter, will be effectively subordinated to
all indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of the Subsidiaries. The right of the
Company, and, therefore, the right of creditors of the Company (including
Holders) to receive assets of any such Subsidiary upon the liquidation or
reorganization of such Subsidiary or otherwise, as a practical matter, will
be effectively subordinated to the claims of such Subsidiary's creditors,
except to the extent the Company is itself recognized as a creditor of such
Subsidiary or such other creditors have agreed to subordinate their claims
to the payment of the Debentures, in which case the claims of the Company
would still be subordinate to any secured claim on the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by
the Company.
At December 31, 1995, Senior Indebtedness (excluding current
installments) was approximately $2.8 million and the indebtedness
(excluding liability for income taxes) of the Company's subsidiaries was
approximately $16.6 million. The Company expects that it will from time to
time incur additional indebtedness constituting Senior Indebtedness.
CERTAIN COVENANTS OF THE COMPANY
The Indenture contains, among others, the covenants summarized
below, which are applicable (unless waived or amended) so long as any of
the Debentures are outstanding.
Limitation on Debt and Senior Indebtedness. The Company will
not, and will not permit any of its Subsidiaries to, create, incur, assume
or directly or indirectly guarantee or in any other manner become directly
or indirectly liable for ("incur") any Debt (including Acquired Debt) or
Senior Indebtedness other than Permitted Debt (as defined); provided,
however, that the Company and, subject to the other limitations set forth
herein, its Subsidiaries may incur Debt or Senior Indebtedness if the Debt
to Operating Cash Flow Ratio of the Company and its Subsidiaries at the
time of incurrence of such Debt, after giving pro forma effect thereto, is
6.5:1 or less; provided that any such Debt incurred by the Company that is
not Senior Indebtedness shall have a Weighted Average Life to Maturity
longer than the Weighted Average Life to Maturity of the Debentures.
Notwithstanding the foregoing, at any time the Debt to Operating Cash Flow
Ratio of the Company exceeds 6.5:1, the Company will be permitted to incur
additional Senior Indebtedness pursuant to lines of credit for working
capital of up to $5 million.
For purposes of the foregoing limitations "Permitted Debt" means
(i) Debt evidenced by the Debentures in an aggregate principal amount not
to exceed $25.0 million, (ii) Debt owed by the Company to any wholly owned
Subsidiary of the Company, (iii) Debt owed by any wholly owned Subsidiary
of the Company to the Company or any other wholly owned Subsidiary of the
Company, (iv) Debt owed to Leonard Newman pursuant to the Newman Agreement,
(v) Capitalized Lease Obligations not in excess of an aggregate of $2
million at any one time outstanding, plus any Capitalized Lease Obligations
from an acquisition outstanding on the date of such acquisition, (vi)
performance bonds or letters of credit incurred in the ordinary course of
business or in connection with government contracts, (vii) deferred income
taxes as defined in accordance with GAAP, (viii) Debt constituting
inter-company payables or receivables between or among the Company and its
Subsidiaries incurred in the ordinary course of business or (ix)
Refinancing Debt.
A calculation of the Debt to Operating Cash Flow Ratio as
required by this covenant shall be made, in each case, for the period of
four full consecutive fiscal quarters next preceding the date on which Debt
is proposed to be incurred ("Reference Period"). In addition, for purposes
of the pro forma calculations required to be made above, (i) (x) the amount
of Debt to be incurred (plus all other Debt previously incurred during such
Reference Period), and the amount (valued at its liquidation value and
including any accrued but unpaid dividends) of Disqualified Stock to be
issued (plus all other Disqualified Stock previously issued during such
Reference Period) will be presumed to have been incurred or issued on the
first day of such Reference Period and (y) the amount of any Debt redeemed,
refinanced or repurchased with the proceeds of the Debt referred to in
clause (x) will be presumed to have been redeemed, refinanced or
repurchased on the first day of such Reference Period, (ii) if any Asset
Disposition occurred during such Reference Period, the calculations
included in the computation of the Debt to Operating Cash Flow Ratio shall
be adjusted to give effect to such Asset Disposition on a pro forma basis
as if such Asset Disposition had occurred on the first day of such
Reference Period, (iii) if an acquisition of a business or entity occurred
during such Reference Period, the calculations included in the computation
of the Debt to Operating Cash Flow Ratio will be adjusted to give effect to
such acquisition on a pro forma basis as if such acquisition had occurred
on the first day of such Reference Period and (iv) if such new Debt is
being incurred in connection with an acquisition, no pro forma effect will
be given to negative operating cash flow or losses attributable to the
assets or business so acquired.
Limitation on Additional Debt After Default. The Company will
not, and will not permit any of its Subsidiaries to, incur any additional
Debt (other than Permitted Debt) or Senior Indebtedness following the
occurrence of an Event of Default (as defined below) unless such Event of
Default (and all other Events of Default then pending) is cured or waived.
Limitation on Preferred Stock. The Company will not, and will
not permit any of its Subsidiaries to, issue any shares of Disqualified Stock.
Limitation on Dividend Restrictions Affecting Subsidiaries. The
Company may not, and may not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction of any kind on the ability of any Subsidiary of the Company to
(a) pay to the Company dividends or make to the Company any other
distribution on its Capital Stock, (b) pay any Debt owed to the Company or
any of its Subsidiaries, (c) make loans or advances to the Company or any
of the Company's Subsidiaries or (d) transfer any of its property or assets
to the Company or any of its Subsidiaries, other than such encumbrances or
restrictions existing or created under or by reason of (i) applicable law,
(ii) the Indenture, (iii) covenants or restrictions contained in any
instrument governing Debt of the Company or any of its Subsidiaries
existing on the date of the Indenture, (iv) customary provisions
restricting subletting, assignment and transfer of any lease governing a
leasehold interest of the Company or any of its Subsidiaries or in any
license or other agreement entered into in the ordinary course of business,
(v) any agreement governing Debt of a person acquired by the Company or any
of its Subsidiaries in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrances or restrictions are
not applicable to any person, or the property or assets of any person,
other than the person, or the property or assets of the person so acquired,
(vi) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into in accordance with the terms of the Indenture for
the sale or disposition of Capital Stock or property or assets of such
Subsidiary, pending the closing of such sale or disposition, (vii) with
respect to any Subsidiary, the terms of any contract with the United States
or any foreign government or any instrumentality thereof or any prime
contractor for any such contract pertaining to retention of funds by such
Subsidiary equivalent to any progress payments or deposits made pursuant to
such contract or (viii) any Refinancing Debt; provided, however, that the
encumbrances or restrictions contained in the agreements governing any such
Refinancing Debt shall be no more restrictive than the encumbrances or
restrictions set forth in the agreements governing the Debt being
refinanced as in effect on the date of the Indenture.
Limitation on Liens. The Company will not, and will not permit
any of its Subsidiaries, directly or indirectly, to create, incur, assume
or permit to exist any Lien (other than Permitted Liens) upon or with
respect to any of the Property of the Company or any such Subsidiary,
whether owned on the date of the Indenture or thereafter acquired, or on
any income or profits therefrom, to secure any Debt which is pari passu
with or subordinate in right of payment to the Debentures.
Limitation on Restricted Payments and Investments. The Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, (i) declare or pay any distribution or dividend on or in
respect of any class of its Capital Stock (except dividends or
distributions payable by wholly owned Subsidiaries of the Company and
dividends or distributions payable in Qualified Stock of the Company or in
options, warrants or other rights to purchase Qualified Stock of the
Company); (ii) purchase, repurchase, prepay, redeem, defease or otherwise
acquire or retire for value (other than in Qualified Stock of the Company
or in options, warrants or other rights to purchase Qualified Stock of the
Company) any Capital Stock in the Company or any of its Subsidiaries (other
than a wholly owned Subsidiary of the Company); (iii) make or permit any
Subsidiary to make an Investment (other than Permitted Investments) in any
of its or their Affiliates or any Related Person, or any payment on a
guaranty of any obligation of any of its or their Affiliates or any Related
Person (other than (a) of any wholly owned Subsidiary or (b) of any other
Subsidiary in an amount equal to the amount of the obligation with respect
to which such guaranty relates multiplied by the fraction whose numerator
is the ownership percentage of such Subsidiary by the Company and its
wholly owned Subsidiaries and whose denominator is 100%); or (iv) repay,
prepay, redeem, defease, retire or refinance, prior to scheduled maturity
or scheduled sinking fund payment, any other Debt which is pari passu with,
or subordinate to, the Debentures (other than (x) by the payment of
Qualified Stock of the Company or of options, warrants or other rights to
purchase Qualified Stock of the Company or (y) up to $10.0 million
aggregate principal amount of the 1998 Debentures) except, in the case of
this clause (iv), if the proceeds used for such repayment, prepayment,
redemption, defeasance, retirement or refinancing are generated from the
issuance of Refinancing Debt (any such declaration, payment, distribution,
purchase, repurchase, prepayment, redemption, defeasance or other
acquisition or retirement or Investment referred to in clauses (i) through
(iv) above being hereinafter referred to as a "Restricted Payment"); unless
at the time of and after giving effect to a proposed Restricted Payment
(the value of any such payment, if other than cash, as determined by the
Board of Directors, including the affirmative vote of the Independent
Directors, whose determination shall be conclusive and evidenced by a board
resolution) (a) no Event of Default (and no event that, after notice or
lapse of time, or both, would become an Event of Default) shall have
occurred and be continuing and, (b) the Company could incur an additional
$1.00 of Debt pursuant to the first sentence under "Limitation on Debt and
Senior Indebtedness" above.
Limitation on Stock Splits, Consolidations and
Reclassifications. The Company will not effect a stock split, consolidation
or reclassification of any class of its Capital Stock unless (a) an
equivalent stock split, consolidation or reclassification is simultaneously
made with respect to each other class of Capital Stock of the Company and
all securities exchangeable or exercisable for or convertible into any
Capital Stock of the Company, and (b) after such stock split, consolidation
or reclassification all of the relative voting, dividend and other rights
and preferences of each class of Capital Stock of the Company are identical
to those in effect immediately preceding such stock split, consolidation or
reclassification. Notwithstanding the foregoing, the Company may combine
its Class A Common Stock and Class B Common Stock into a single class of
Common Stock, such that the holder of each share of Class A Common Stock or
Class B Common Stock outstanding immediately prior to such combination
shall, from and after such combination, be entitled to the same voting,
dividend, liquidation and other rights and preferences with respect to such
share as every other holder of Class A Common Stock or Class B Common
Stock.
Limitation on Sales of Assets and Subsidiary Stock. The Company
will not, and will not permit any of its Subsidiaries to, make any Asset
Disposition having a fair market value or resulting in gross proceeds to
the Company or any such Subsidiary in excess of $1.0 million in any single
transaction or series of related transactions or $5.0 million in the
aggregate over the life of the Debentures, unless the Company or any such
Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the fair market value (as determined by the Board of
Directors of the Company and evidenced by a board resolution) of the
interests and assets subject to such Asset Disposition.
Transactions with Related Persons. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with (a) any beneficial owner of 20% or more of the outstanding
voting securities of the Company (as determined in accordance with Section
13(d) of the Exchange Act) at the time of such transaction, (b) any
officer, director or employee of the Company, of any of its Subsidiaries or
of any such beneficial owner of 20% or more of the outstanding voting
securities of the Company as described in clause (a) above or (c) any
Related Person unless such transaction or series of transactions (i)
involves an amount of $250,000 or less or (ii)(A) is on terms that are no
less favorable to the Company or any such Subsidiary, as the case may be,
than would be available in a comparable transaction with an unrelated third
party and (B)(x) if such transaction or series of related transactions
involve aggregate payments in excess of $400,000, the Company delivers an
officers' certificate to the Trustee certifying that such transaction
complies with clause (ii)(A) above and such transaction or series of
transactions is approved by a majority of the Board of Directors of the
Company including the approval of each of the Independent Directors or (y)
if such transaction or series of related transactions involve aggregate
payments in excess of $1.5 million, the Company obtains an opinion as to
the fairness to the Company or such Subsidiary from a financial point of
view issued by an investment banking firm, appraisal firm or accounting
firm, in each case of national standing. Notwithstanding the foregoing,
this provision will not apply to (i) any transaction entered into between
the Company and Subsidiaries of the Company (but excluding transactions
with any Subsidiary of which more than 20% of the outstanding voting
securities (as determined in accordance with Section 13(d) under the
Exchange Act) are beneficially owned by Persons who are (a) officers,
directors or employees of the Company, of any of its Subsidiaries or of any
beneficial owner of 20% or more of the outstanding voting securities of the
Company (as determined in accordance with Section 13(d) under the Exchange
Act) at the time of such transaction, (b) a beneficial owner of 20% or more
of the outstanding voting securities of the Company (as determined in
accordance with Section 13(d) under the Exchange Act) or (c) Related
Persons), (ii) the payment of compensation and provision of benefits to
officers and employees of the Company and loans and advances to such
officers and employees in the ordinary course of business, or any issuance
of securities, or other payments, awards or grants in cash, securities or
otherwise (including the grant of stock options or similar rights to
officers, employees and directors of the Company or any Subsidiary)
pursuant to, or the funding of, employment arrangements, stock options and
stock ownership plans or other benefit plans approved by the Independent
Directors, (iii) the Newman Agreement and the Gross Agreement and (iv)
transactions with any Person who is a director of the Company or of any of
its Subsidiaries and, who is not (a) the beneficial owner of 20% or more of
the outstanding voting securities of the Company (as determined in
accordance with Section 13(d) under the Exchange Act) or (b) an officer or
employee of the Company, of any of its Subsidiaries or of any such
beneficial owner of 20% or more of the outstanding voting securities of the
Company at the time of such transaction.
Limitation of Payments to Affiliates after Default. The Company
shall not enter into any transaction with any Person who is an officer or
director of the Company, or of any of its Subsidiaries, or of any
beneficial owner of 20% or more of the outstanding voting securities of the
Company (as determined in accordance with Section 13(d) under the Exchange
Act) at the time of such transaction (but excluding the Persons identified
below) unless it is provided that the Company's monetary obligations with
respect thereto are subordinate in right of payment to the Debentures at
least to the same extent as the Debentures are subordinate to Senior
Indebtedness. The Company shall not permit any of its Subsidiaries to enter
into any transaction with any Person who is an officer or director of the
Company, or of any of its Subsidiaries or of any beneficial owner of 20% or
more of the outstanding voting securities of the Company (as determined in
accordance with Section 13(d) under the Exchange Act) at the time of such
transaction (but excluding the Persons identified below) unless it is
provided that such Subsidiary's monetary obligations with respect thereto
are subordinate in right of payment to distributions and dividends from
such Subsidiary to the Company in an amount sufficient to satisfy the
Company's obligations under the Debentures at least to the same extent that
the Debentures are subordinate to Senior Indebtedness. Notwithstanding the
foregoing, such limitation shall not apply to (i) the regular compensation
payable to any person who is an employee of the Company, (ii) payments made
pursuant to any pension or other plan made available to employees
(including officers) of the Company and either existing on the date of the
Indenture or thereafter approved by the Independent Directors, (iii)
payments pursuant to the Newman Agreement or the Gross Agreement or (iv)
any payment made to a director of the Company or of any of its Subsidiaries
who is not (a) the beneficial owner of 20% or more of the outstanding
voting securities of the Company (as determined in accordance with section
13(d) under the Exchange Act) or (b) an officer or employee of the Company,
of any of its Subsidiaries or of any such beneficial owner of 20% or more
of the outstanding voting securities of the Company at the time of such
transaction.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the
Debentures, may consolidate with or merge into any other entity or convey,
transfer, sell or lease its assets substantially as an entirety to any
person or entity, provided that: (i) either (a) the Company is the
continuing corporation or (b) the corporation or other entity formed by
such consolidation or into which the Company is merged or the person or
entity to which such assets are conveyed, transferred, sold or leased is
organized under the laws of the United States or any state thereof or the
District of Columbia and expressly assumes all obligations of the Company
under the Debentures and the Indenture, (ii) immediately after and giving
effect to such merger, consolidation, conveyance, transfer, sale or lease
no Event of Default, and no event which, after notice or lapse of time,
would become an Event of Default, under the Indenture shall have occurred
and be continuing, (iii) upon consummation of such consolidation, merger,
conveyance, transfer, sale or lease, the Debentures and the Indenture will
be a valid and enforceable obligation of the Company or such successor and
(iv) the Company has delivered to the Trustee an officer's certificate and
an opinion of counsel, each stating that such consolidation, merger,
conveyance, transfer, sale or lease complies with the provisions of the
Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a)
failure to pay principal of or premium, if any, on any Debenture when due
and payable at maturity, upon redemption, upon a Change of Control Offer,
Deficiency Offer or otherwise, whether or not such payment is prohibited by
the subordination provisions of the Indenture; (b) failure to pay any
interest on any Debenture when due and payable, which failure continues for
30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) failure to perform the other covenants of
the Company in the Indenture, which failure continues for 60 days after
written notice as provided in the Indenture; (d) a default occurs (after
giving effect to any applicable grace periods or any extension of any
maturity date) in the payment when due of principal of and or acceleration
of, any indebtedness for money borrowed by the Company or any of its
Subsidiaries in excess of $1.0 million, individually or in the aggregate,
if such indebtedness is not discharged, or such acceleration is not
annulled, within 10 days after written notice as provided in the Indenture;
and (e) certain events of bankruptcy, insolvency or reorganization of the
Company or any Subsidiary. Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default shall
occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate
principal amount of the outstanding Debentures will have the right to
direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred
on the Trustee.
If an Event of Default shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
then outstanding Debentures may accelerate the maturity of all Debentures;
provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the Holders of a majority in aggregate
principal amount of the then outstanding Debentures may, under certain
circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal, have been
cured or waived as provided in the Indenture. For information as to waiver
of defaults, see "Modification and Waivers."
No Holder of any Debenture will have any right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder unless (i) such
Holder shall have previously given to the Trustee written notice of a
continuing Event of Default, (ii) the Holders of at least 25% in aggregate
principal amount of the then outstanding Debentures shall have made written
request, and offered indemnity satisfactory to the Trustee to institute
such proceeding as trustee, (iii) the Trustee shall have failed to
institute such proceeding within 60 days after the receipt of such notice
and (iv) no direction inconsistent with such request shall have been given
to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the then outstanding Debentures.
The Company will be required to furnish annually to the Trustee
a statement as to the performance by the Company of certain of its
obligations under the Indenture and as to any default in such performance.
MODIFICATIONS AND WAIVERS
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the then outstanding Debentures
held by persons other than Affiliates of the Company; provided, however,
that no such modification or amendment may, without the consent of the
Holder of each outstanding Debenture affected thereby, (i) change the
stated maturity of, or any installment of interest on, any Debenture, (ii)
reduce the principal amount of any Debenture or reduce the rate or extend
the time of payment of interest on any Debenture, (iii) increase the
conversion price (other than in connection with a reverse stock split as
provided in the Indenture), (iv) change the place or currency of payment of
principal of, or premium or repurchase price, if any, or interest on, any
Debenture, (v) impair the right to institute suit for the enforcement of
any payment on or with respect to any Debenture, (vi) adversely affect the
right to exchange or convert Debentures, (vii) reduce the percentage of the
aggregate principal amount of outstanding Debentures, the consent of the
Holders of which is necessary to modify or amend the Indenture, (viii)
reduce the percentage of the aggregate principal amount of outstanding
Debentures, the consent of the Holders of which is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of
certain defaults, (ix) modify the provisions of the Indenture with respect
to the subordination of the Debentures in a manner adverse to the Holders,
(x) modify the provisions of the Indenture with respect to the right to
require the Company to repurchase Debentures in a manner adverse to the
Holders or (xi) modify the provisions of the Indenture with respect to the
vote necessary to amend this provision.
The Holders of a majority in aggregate principal amount of the
outstanding Debentures held by persons other than Affiliates of the Company
may, on behalf of all Holders, waive any past default under the Indenture
or Event of Default, except a default in the payment of principal, premium,
if any, or interest on any of the Debentures or in respect of a provision
which under the Indenture cannot be modified without the consent of the
Holder of each outstanding Debenture.
DISCHARGE OF INDENTURE
The Indenture provides that the Company may defease and be
discharged from its obligations in respect of the Debentures while the
Debentures remain outstanding (except for certain obligations to convert
the Debentures into Common Stock, register the transfer, substitution or
exchange of Debentures, to replace stolen, lost or mutilated Debentures and
to maintain an office or agency and the rights, obligations and immunities
of the Trustee), if all outstanding Debentures will become due and payable
at their scheduled maturity within one year and the Company has irrevocably
deposited, or caused to be deposited, with the Trustee (or another trustee
satisfying the requirements of the Indenture), in trust for such purpose,
(a) money in an amount, (b) U.S. Government Obligations (as defined below)
which through the payment of principal, premium, if any, and interest in
accordance with their terms will provide money in an amount, or (c) a
combination thereof, sufficient in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay the principal of, premium, if any,
and interest on the outstanding Debentures at maturity or upon redemption,
together with all other amounts payable by the Company under the Indenture.
Such defeasance will become effective 91 days after such deposit only if,
among other things, (x) no Default or Event of Default with respect to the
Debentures has occurred and is continuing on the date of such deposit or
occurs as a result of such deposit or at any time during the period ending
on the 91st day after the date of such deposit, (y) such defeasance does
not result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by which
it is bound, and (z) the Company has delivered to the Trustee (A) either a
private Internal Revenue Service ruling or an opinion of counsel that
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount, in the same manner, and
at the same times, as would have been the case if such deposit, defeasance
and discharge had not occurred, (B) an opinion of counsel to the effect
that the deposit shall not result in the Company, the Trustee or the trust
being deemed to be an "investment company" under the Investment Company Act
of 1940, as amended, and (C) an officers' certificate and an opinion of
counsel, each stating that all conditions precedent relating to a
defeasance have been complied with. Notwithstanding the foregoing, the
Company's obligations to pay principal, premium, if any, and interest on
the Debentures shall continue until the Internal Revenue Service ruling or
opinion of counsel referred to in clause (z) (B) above is provided.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act it will continue to furnish the
information required thereby to the Commission. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission or to the Holders, it will nonetheless
continue to furnish information under Section 13 of the Exchange Act to the
Commission and the Trustee as if it were subject to such periodic reporting
requirements.
GOVERNING LAW
The Indenture and the Debentures are governed by, and construed
in accordance with, the laws of the State of New York, without giving
effect to such State's conflicts of law principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its Subsidiaries may maintain deposit accounts
and conduct other banking transactions with the Trustee or its affiliates
in the ordinary course of business, and the Trustee and its affiliates may
from time to time in the future provide the Company and its Subsidiaries
with banking and financial services in the ordinary course of their
businesses.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used
in the Indenture. Reference is made to the Indenture for the
full definition of all such terms and for the definitions of
other defined terms used in the Prospectus and not defined below.
"Acquired Debt" of any specified person means Debt of any
other person existing at the time such other person merged with
or into or became a Subsidiary of such specified person,
including Debt incurred in connection with, or in contemplation
of, such other person becoming a Subsidiary of such specified
person.
"Affiliate" of any specified Person means (i) any other
Person who, directly or indirectly, is in control of, is
controlled by or is under common control with such specified
Person or (ii) any Person who is a director or officer (a) of
such specified Person, (b) of any Subsidiary of such specified
Person or (c) of any Person described in clause (i) above. For
purpose of this definition, control of a person means the power,
directly or indirectly, to direct or cause the direction of the
management and policies of such person whether by contract or
otherwise; and the terms "controlling" or "controlled" have
meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or
dispositions) of Capital Stock of a Subsidiary, property or other
asset (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Subsidiaries other
than (i) any disposition by any Subsidiary of the Company to the
Company or by the Company or any Subsidiary of the Company to a
wholly owned Subsidiary of the Company, (ii) a disposition of
property or assets in the ordinary course of business and (iii)
any issuance or sale by the Company of its Capital Stock,
including any disposition by means of a merger, consolidation or
similar transaction.
"Capital Stock" of any person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in the common or preferred
equity (however designated) of such person, including, without
limitation, partnership interests.
"Capitalized Lease Obligation" means, with respect to any
person for any period, an obligation of such person to pay rent
or other amounts under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount shown
on the balance sheet of such person as determined in accordance
with GAAP.
"Common Stock" as applied to the Capital Stock of any
corporation, means the common equity (however designated) of such
Person; and with respect to the Company, means the Common Stock,
par value $.01 per share, or any successor class of common equity
into which such common stock may thereafter be converted.
"Consolidated Net Income" means, for any fiscal period, the
Net Income or loss of the Company and its Subsidiaries as the
same would appear on a consolidated statement of earnings of the
Company for such fiscal period prepared in accordance with GAAP,
provided that (i) any extraordinary gain (but not loss) and any
gain (but not loss) on sales of assets outside the ordinary
course of business, in each case together with any related
provisions for taxes, realized during such period shall be
excluded, (ii) the results of operations of any person acquired
in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded, (iii) Net Income
attributable to any person other than a Subsidiary that is at
least 50% owned by the Company shall be included only to the
extent of the amount of cash dividends or distributions actually
paid to the Company or a Subsidiary of the Company during such
period, (iv) any extraordinary charge resulting from the
repurchase of the Debentures shall be excluded and (v) the
cumulative effect of a change in accounting principles based upon
the implementation of a change required by the Financial
Accounting Standards Board shall be excluded.
"Consolidated Net Worth" means, for any fiscal period, the
net stockholders' equity of the Company and its Subsidiaries as
the same would appear on the consolidated balance sheet of the
Company as at the end of such fiscal period prepared in
accordance with GAAP.
"Continuing Directors" means any member of the Board of
Directors of the Company who (i) is a member of that Board of
Directors on the date of the Indenture or (ii) was nominated for
election or elected to the Board of Directors with the
affirmative vote of a majority of the Continuing Directors who
were members of the Board at the time of such nomination or
election.
"Current Market Price" means, when used with respect to any
security as of any date, the last sale price, regular way, or, in
case no such sale takes place on such date, the average of the
closing bid and asked prices, regular way, in either case as
reported for consolidated transactions on the New York Stock
Exchange or, if the security is not listed or admitted to trading
on the New York Stock Exchange, as reported for consolidated
transactions with respect to securities listed on the principal
national securities exchange on which such security is listed or
admitted to trading or, if the security is not listed or admitted
to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotations System or such other system then in use or, if the
security is not quoted by any such organization, the average of
the closing bid and asked prices furnished by a New York Stock
Exchange member firm selected by the Company. "Current Market
Price" means, when used with respect to any Property other than a
security as of any date, the market value of such Property on
such date as determined by the Board of Directors of the Company
in good faith, which shall be entitled to rely for such purposes
on the advice of any firm of investment bankers or appraisers
having familiarity with such Property.
"Debt" of any person as of any date means and includes,
without duplication, (i) the principal of and premium, if any, in
respect of indebtedness of such person, contingent or otherwise,
for borrowed money, including, without limitation, all interest,
fees and expenses owed with respect thereto (whether or not the
recourse of the lender is to the whole of the assets of such
person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments, or representing the
deferred and unpaid balance of the purchase price of any property
or interest therein or services, if and to the extent such
indebtedness would appear as a liability (other than a liability
for accounts payable and accrued expenses incurred in the
ordinary course of business) upon a balance sheet of such person
prepared on a consolidated basis in accordance with GAAP, (ii)
all obligations issued or contracted for as payment in
consideration of the purchase by such person of the Capital Stock
or substantially all of the assets of another person or as a
result of a merger or a consolidation (other than any earn-outs
or installment payments), (iii) all Capitalized Lease Obligations
of such person, (iv) all obligations of such person in respect of
letters of credit or similar instruments or reimbursement of
letters of credit or similar instruments (whether or not such
items would appear on the balance sheet of such person), (v) all
net obligations of such person in respect of interest rate
protection and foreign currency hedging arrangements, (vi) all
guarantees by such person of items that would constitute Debt
under this definition (whether or not such items would appear on
such balance sheet), and (vii) the amount of all obligations of
such person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock, but only to the extent such
obligations arise on or prior to January 1, 2004; provided,
however, that Debt issued at a discount from par shall be treated
as if issued at par. The amount of Debt of any person at any
date shall be the outstanding balance on such date of all
unconditional obligations as described above and the maximum
determinable liability, upon the occurrence of the liability
giving rise to the obligation, of any contingent obligations
referred to in clauses (i), (iv), (vi) and (vii) above at such
date.
"Debt to Operating Cash Flow Ratio" means, as of any date of
determination, the ratio of (i) (a) the aggregate principal
amount of all outstanding Debt of the Company and its
Subsidiaries as of such date on a consolidated basis plus (b) the
aggregate par or stated value of all outstanding Preferred Stock
of the Company and its Subsidiaries as reflected on the Company's
most recent consolidated balance sheet prepared in accordance
with GAAP (excluding any such Preferred Stock held by the Company
or a wholly owned Subsidiary of the Company) or, if greater with
respect to any class of Capital Stock which is Disqualified
Stock, the aggregate redemption amount thereof as reflected on
the Company's most recent consolidated balance sheet (excluding
any such Disqualified Stock held by the Company or a wholly owned
Subsidiary of the Company) to (ii) Operating Cash Flow of the
Company and its Subsidiaries on a consolidated basis for the four
most recent full fiscal quarters ending immediately prior to such
date, determined on a pro forma basis as set forth in the
covenant "Limitation on Debt and Senior Indebtedness."
"Disqualified Stock" means any Capital Stock which, by its
terms or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the
holder thereof or mandatorily (except to the extent that such
exchange or conversion right cannot be exercised or such
mandatory conversion cannot occur prior to January 1, 2004), is,
or upon the happening of an event or the passage of time would
be, (a) required to be redeemed or repurchased by the Company or
any of its Subsidiaries, including at the option of the holder,
in whole or in part, or has, or upon the happening of an event or
passage of time would have, a redemption or similar payment due
prior to January 1, 2004 or (b) exchangeable or convertible into
debt securities of the Company or any of its Subsidiaries at the
option of the holder thereof or mandatorily, except to the extent
that such exchange or conversion right cannot be exercised or
such mandatory conversion cannot occur on or prior to January 1,
2004.
"GAAP" means, as of any date, generally accepted accounting
principles in the United States and does not include any
interpretations or regulations that have been proposed but that
have not become effective.
"Independent Directors" means directors that (i) are not 20%
or greater stockholders of the Company or the designee of any
such stockholder, (ii) are not officers or employees of the
Company, any of its Subsidiaries or of a stockholder referred to
above in clause (i), (iii) are not Related Persons and (iv) do
not have relationships that, in the opinion of the Board of
Directors, would interfere with their exercise of independent
judgment in carrying out the responsibilities of the directors.
"Investment" means any loan or advance to any person, any
acquisition of any interest in any other person (including (i)
with respect to a corporation, any and all shares, interests,
rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate
stock, including any Preferred Stock and any securities
convertible or exchangeable for any of the foregoing, bonds,
notes, debentures, loans or other securities or Debt of such
other person and (ii) with respect to a partnership or similar
person, any and all units, interests, rights to purchase,
warrants, options, participations or other equivalents of or
other partnership interests in (however designated) such person
and any securities convertible or exchangeable for any of the
foregoing), any capital contribution to any other person, or any
other investment in any other person, other than (a) advances to
officers and employees in the ordinary course of business, (b)
creation of receivables in the ordinary course of business and
(c) negotiable instruments endorsed for collection in the
ordinary course of business.
"Lien" means any mortgage, lien, pledge, charge, security
interest or other encumbrance of any nature whatsoever (including
any conditional sale or other title retention agreement, any
lease in the nature thereof and any agreement to give any
security interest).
"Net Income" of any person means the net income (or loss) of
such person, determined in accordance with GAAP, excluding,
however, from the determination of Net Income any extraordinary
gain (but not loss) and any gain (but not loss) realized upon the
sale or other disposition (including, without limitation,
dispositions pursuant to sale-leaseback transactions) of any real
property or equipment of such person, which is not sold or
otherwise disposed of in the ordinary course of business, or of
any Capital Stock of a Subsidiary of such person.
"Operating Cash Flow" means, with respect to the Company and
its Subsidiaries for any period, the Consolidated Net Income of
the Company and its Subsidiaries for such period, plus (i)
extraordinary net losses and net losses on sales of assets other
than in the ordinary course of business during such period, to
the extent such losses were deducted in computing Consolidated
Net Income, plus (ii) provision for taxes based on income or
profits, to the extent such provision for taxes was included in
computing such Consolidated Net Income, and any provision for
taxes utilized in computing the net losses under clause (i)
hereof, plus (iii) to the extent deducted in calculating
Consolidated Net Income, Total Interest Expense of the Company
and its Subsidiaries for such period, plus (iv) depreciation,
amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges (excluding
any such non-cash charges to the extent that they require an
accrual of or reserve for cash charges for any future periods)
were deducted in calculating such Consolidated Net Income
(including amortization of goodwill and other intangibles).
"Permitted Investments" means (i) Investments in the Company
or in a Subsidiary of the Company; (ii) Investments by the
Company or any Subsidiary of the Company in a person, if as a
result of such Investment (a) such person becomes or is a wholly
owned Subsidiary of the Company or the Subsidiary making such
Investment or (b) such person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company, the
Subsidiary making such Investment or a wholly owned Subsidiary of
either the Company or such Subsidiary making such Investment
(provided that any subsequent issuance or transfer of any
interests or other transaction which results in any such wholly
owned Subsidiary ceasing to be a wholly owned Subsidiary of the
Company, the Subsidiary making such Investment or another wholly
owned Subsidiary of either the Company or such Subsidiary making
such Investment, or any subsequent transfer of such Permitted
Investment (other than to the Company, the Subsidiary making such
Investment or another wholly owned Subsidiary of either the
Company or such Subsidiary making such Investment) shall be
deemed for the purposes hereof to constitute the making of a new
Investment by the maker thereof and therefore subject to a new
determination of whether such Investment qualifies as a Permitted
Investment); (iii) U.S. Government Obligations maturing within
one year of the date of acquisition thereof; (iv) certificates of
deposit maturing within one year of the date of acquisition
thereof issued by a bank or trust company that is organized under
the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating in excess of
$100,000,000; (v) repurchase agreements with respect to U.S.
Government Obligations; and (vi) Investments in commercial paper
rated at least A1 or the equivalent thereof by Standard & Poor's
Corporation or P1 or the equivalent thereof by Moody's Investor
Services, Inc. and maturing not more than 90 days from the date
of the acquisition thereof.
"Permitted Liens" means (i) Liens for taxes, assessments or
governmental charges or claims that either (a) are not yet
delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP; (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other Liens imposed by law and arising in the
ordinary course of business and with respect to amounts that, to
the extent applicable, either (a) are not yet delinquent by more
than 30 days or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP; (iii) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974, as amended)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security; (iv) judgment or other similar
Liens arising in connection with court proceedings, provided that
(a) the execution or enforcement of each such Lien is effectively
stayed within 30 days after entry of such judgment (or such
judgment has been discharged within such 30 day period), the
claims secured thereby are being contested in good faith by
appropriate proceedings timely commenced and diligently
prosecuted and the aggregate amount of the claims secured thereby
does not exceed $1,000,000 at any time or (b) the payment of
which is covered in full by insurance and the insurance company
has not denied or contested coverage thereof; (v) Liens existing
on property or assets of any entity at the time it becomes a
Subsidiary or existing on property or assets at the time of the
acquisition thereof by the Company or any of its Subsidiaries,
which Liens were not created or assumed in contemplation of, or
in connection with, such entity becoming a Subsidiary or such
acquisition, as the case may be, and which attach only to such
property or assets, provided that the Debt secured by such Liens
is not thereafter increased; (vi) Liens incurred in connection
with Capitalized Lease Obligations otherwise permitted under the
Indenture; (vii) Liens securing Refinancing Debt, provided that
such Liens only extend to the property or assets securing the
Debt being refinanced, such Refinanced Debt was previously
secured by similar Liens on such property or assets and the Debt
or other obligations secured by such Liens is not increased;
(viii) Liens securing the advance of progress payments or
deposits made by the United States or any foreign government or
any instrumentality thereof or any prime contractor for any such
government or instrumentality and received by the Company in the
ordinary course of its business; (ix) the Lien created by the
Master Security Agreement between General Electric Capital
Corporation and OMI Acquisition Corporation dated as of August
28, 1995; and (x) any other Liens existing on the date of the
Indenture.
"Preferred Stock" means, with respect to any person, Capital
Stock of such person of any class or classes (however designated)
which is preferred as to the payments of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
person, over any other class of the Capital Stock of such person.
"Property" of any person means all types of real, personal,
tangible, intangible or mixed property owned by such person
whether or not included on the most recent consolidated balance
sheet of such person in accordance with GAAP.
"Qualified Stock" means Capital Stock of the Company that is
not Disqualified Stock.
"Refinancing Debt" means Debt that refunds, refinances or
extends any Debentures, or other Debt existing on the date of the
Indenture or thereafter incurred by the Company or its
Subsidiaries pursuant to the terms of the Indenture, but only to
the extent that (i) the Refinancing Debt is subordinated to the
Debentures to the same extent as the Debt being refunded,
refinanced or extended, if at all, (ii) the Refinancing Debt is
scheduled to mature either (a) no earlier than the Debt being
refunded, refinanced or extended, or (b) after the maturity date
of the Debentures, (iii) the portion, if any, of the Refinancing
Debt that is scheduled to mature on or prior to the maturity date
of the Debentures has a Weighted Average Life to Maturity at the
time such Refinancing Debt is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the portion
of the Debt being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the
Debentures, (iv) such Refinancing Debt is in an aggregate
principal amount that is equal to or less than the aggregate
principal amount then outstanding under the Debt being refunded,
refinanced or extended, plus customary fees and expenses
associated with refinancing and (v) such Refinancing Debt is
incurred by the same person that initially incurred the Debt
being refunded, refinanced or extended, except that (a) the
Company may incur Refinancing Debt to refund, refinance or extend
Debt of any Subsidiary of the Company, and (b) any Subsidiary of
the Company may incur Refinancing Debt to refund, refinance or
extend Debt of any other wholly owned Subsidiary of the Company.
"Related Person" means an individual related to an officer,
director or employee of the Company or any of its Affiliates
which relation is by blood, marriage or adoption and not more
remote than first cousin.
"Subsidiary" of any person means a corporation or other
entity a majority of whose Capital Stock with voting power, under
ordinary circumstances, entitling holders of such Capital Stock
to elect the board of directors or other governing body, is at
the time, directly or indirectly, owned by such person and/or a
Subsidiary or Subsidiaries of such person.
"Total Interest Expense" means, for any period, the interest
expense of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP,
whether paid or accrued (including amortization of original issue
discount, non-cash interest payments and the interest component
of capital leases, but excluding amortization of debt and
Preferred Stock issuance costs).
"U.S. Government Obligations" means non-callable (i) direct
obligations (or certificates representing an ownership interest
in such obligations) of the United States for which its full
faith and credit are pledged and (ii) obligations of a person
controlled or supervised by, and acting as an agency or
instrumentality of, the United States, the payment of which is
unconditionally guaranteed as a full faith and credit obligation
of the United States.
"Weighted Average Life to Maturity" means, when applied to
any Debt or Preferred Stock or portions thereof (if applicable)
at any date, the number of years obtained by dividing (i) the
then outstanding principal amount or liquidation amount of such
Debt or Preferred Stock or portions thereof (if applicable) into
(ii) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (b) the number
of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Debentures were initially
issued in the form of registered debentures in global form
without coupons (each, a "Global Debenture"). The Global
Debentures were deposited on the date of the closing of the sale
of the Debentures (the "Closing Date") with, or on behalf of, the
Depository Trust Company (the "Depository") and registered in the
name of Cede & Co., as nominee of the Depository. Interests in
the Global Debentures were available for purchase pursuant to the
Debenture Offering only by "qualified institutional buyers," as
defined in Rule 144A under the Securities Act ("QIBs"). The
Debentures to be resold as set forth herein will be initially
issued in global form (the "New Global Debentures").
Debentures that were (i) originally issued to or transferred
to institutional "accredited investors," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an
"Institutional Accredited Investor"), who are not QIBs or to any
other persons who are not QIBs or (ii) issued as described below
under "-- Certificated Debentures," were issued in registered
form without coupons (the "Certificated Debentures").
The Depository has advised the Company that it is (i) a
limited purpose trust company organized under the laws of the
State of New York, (ii) a member of the Federal Reserve System,
(iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The
Depository was created to hold securities for its participants
(collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants
through electronic book-entry changes to the accounts of its
Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants
include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and
certain other organizations. Access to the Depository's system
is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established
by the Depository (i) upon deposit of the Global Debentures or
New Global Debentures, the Depository will credit the accounts of
Participants with an interest in the Global Debenture or New
Global Debentures, as applicable, and (ii) ownership of the
Debentures will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the
Depository (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some
states require that certain persons take physical delivery in
definitive form of securities that they own and that security
interest in negotiable instruments can only be perfected by
delivery of certificates representing the instruments.
Consequently, the ability to transfer Debentures or to pledge the
Debentures as collateral will be limited to such extent.
So long as the Depository or its nominee is the registered
owner of the Global Debentures or the New Global Debentures, as
the case may be, the Depository or such nominee, as the case may
be, will be considered the sole owner or Holder of the Debentures
represented by the Global Debentures or the New Global
Debentures, as the case may be, for all purposes under the
Indenture. Except as provided below, owners of beneficial
interests in the Global Debentures or the New Global Debentures,
as the case may be, will not be entitled to have Debentures
represented by such Global Debentures or New Global Debentures,
registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Debentures, and will
not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to giving of
any directions, instruction or approval to the Trustee
thereunder. As a result, the ability of a person having a
beneficial interest in Debentures represented by a Global
Debenture or a New Global Debenture, as the case may be, to
pledge such interest to persons or entities that do not
participate in the Depository's system or to otherwise take
action with respect to such interest, may be affected by the lack
of a physical certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in a
Global Debenture or a New Global Debenture, as the case may be,
must rely on the procedures of the Depository and, if such holder
is not a Participant or an Indirect Participant, on the
procedures of the Participant through which such holder owns its
interest, to exercise any rights of a Holder under the Indenture
or such Global Debenture or New Global Debenture. The Company
understands that under existing industry practice, in the event
the Company requests any action of Holders that is an owner of a
beneficial interest in a Global Debenture or a New Global
Debenture, as the case may be, desires to take any action that
the Depository, as the Holder of such Global Debenture or New
Global Debenture, is entitled to take, the Depository would
authorize the Participants to take such action and the
Participant would authorize holders owning through such
Participants to take such action or would otherwise act upon the
instruction of such holders. Neither the Company nor the Trustee
will have any responsibility or liability for any aspect of the
records relating to or payments made on account of Debentures by
the Depository, or for maintaining, supervising or reviewing any
records of the Depository relating to such Debentures.
Payments with respect to the principal of, premium, if any,
and interest on any Debentures represented by a Global Debenture
or a New Global Debenture, as the case may be, registered in the
name of the Depository or its nominee on the applicable record
date will be payable by the Trustee to or at the direction of the
Depository or its nominee in its capacity as the registered
Holder of the Global Debenture or a New Global Debenture, as the
case may be, representing such Debentures under the Indenture.
Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Debentures, including the
Global Debentures or the New Global Debentures, as the case may
be, are registered as the owners thereof for the purpose of
receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee
has or will have any responsibility or liability for the payment
of such amounts to beneficial owners of Debentures (including
principal, premium, if any, and interest), or to immediately
credit the accounts of the relevant Participants with such
payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Debentures
or the New Global Debentures, as the case may be, as shown on the
records of the Depository. Payments by the Participants and the
Indirect Participants to the beneficial owners of Debentures will
be governed by standing instructions and customary practice and
will be the responsibility of the Participants or the Indirect
Participants.
CERTIFICATED DEBENTURES
If (i) the Company notifies the Trustee in writing that the
Depository is no longer willing or able to act as a depository
and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee
in writing that it elects to cause the issuance of Debentures in
definitive form under the Indenture, then, upon surrender by the
Depository of its Global Debentures or the New Global Debentures,
as the case may be, Certificated Debentures will be issued to
each person that the Depository identifies as the beneficial
owner of the Debentures represented by the Global Debentures or
the New Global Debentures, as the case may be. In addition,
subject to certain conditions, any person having a beneficial
interest in a Global Debenture or a New Global Debenture, as the
case may be, may, upon request to the Trustee, exchange such
beneficial interest for Certificated Debentures. Upon any such
issuance, the Trustee is required to register such Certificated
Debentures in the name of such person or persons (or the nominee
of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any
delay by the Depository or any Participant or Indirect
Participant in identifying the beneficial owners of the related
Debentures and each such person may conclusively rely on, and
shall be protected in relying on, instructions from the
Depository for all purposes (including with respect to the
registration and delivery, and the respective principal amounts,
of the Debentures to be issued).
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser entered into the
Registration Rights Agreement dated as of September 22, 1995.
Pursuant to the Registration Rights Agreement, the Company has
agreed to file with the Securities and Exchange Commission (the
"Commission") a registration statement under the Securities Act
(the "Shelf Registration Statement") to cover public resales of
the Debentures by Holders and of the Common Stock issuable upon
conversion of the Debentures by holders thereof, in each case who
satisfy certain conditions relating to the providing of
information in connection with the Shelf Registration Statement.
The Company has agreed to use its reasonable best efforts to (a)
cause the Shelf Registration Statement to be filed with the
Commission within 90 days after September 29, 1995 (the "Closing
Date"); (b) cause the Shelf Registration Statement to be declared
effective by the Commission within 150 days after the Closing
Date; and (c) keep the Shelf Registration Statement effective
until at least the third anniversary of the Closing Date or such
shorter period that will terminate when all the shares of the
Common Stock and the Debentures covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration
Statement. The Company has filed a Registration Statement of
which this Prospectus is a part in compliance with its obligation
under the Registration Rights Agreement to file a Shelf
Registration Statement. Notwithstanding the foregoing, the
Company will be permitted to suspend the use of the Shelf
Registration Statement during certain periods under certain
conditions.
The Registration Rights Agreement provides that, if (i) the
Shelf Registration Statement is not filed with the Commission or
is not declared effective by the Commission within the time
periods set forth above or (ii) at any time during which the
Shelf Registration Statement is required to kept effective, it
shall cease to be effective (other than as a result of the
effectiveness of a successor registration statement) and such
effectiveness is not restored within 45 days thereafter (each
such event referred to in clause (i) or (ii), a "Registration
Default"), the Company will pay liquidated damages (the
"Liquidated Damages") to each Holder of Debentures or holder of
Class A Common Stock which are "restricted" securities under the
Securities Act intended to be eligible for resale under the Shelf
Registration Statement and who has complied with its obligations
under the Registration Rights Agreement. During the first 90-day
period immediately following the occurrence of a Registration
Default, such Liquidated Damages shall be in an amount equal to
$.05 per week per $1,000 principal amount of Debentures and $.01
per week per share (subject to adjustment in the event of stock
splits or consolidations, stock dividends and the like) of
Common Stock constituting restricted securities held by such
person. The amount of the Liquidated Damages will increase by an
additional $.05 per week per $1,000 principal amount and $.01 per
week per share (subject to adjustment as set forth above) of
Common Stock constituting restricted securities for each
subsequent 90-day period until the applicable Registration
Default is cured, up to a maximum amount of liquidated damages of
$.20 per week per $1,000 principal amount of Debentures and $.04
per week per share (subject to adjustment as set forth above) of
Common Stock constituting restricted securities. All accrued
Liquidated Damages shall be paid by wire transfer of immediately
available funds or by federal funds check by the Company on each
Damages Payment Date (as defined in the Registration Rights
Agreement). Following the cure of all Registration Defaults, the
payment of Liquidated Damages will cease.
In addition, for so long as the Debentures are outstanding
and during any period in which the Company is not subject to the
Exchange Act, the Company will provide to holders of Debentures
and to prospective purchasers of the Debentures the information
required by Rule 144A(d)(4) under the Securities Act. The
Company will provide a copy of the Registration Rights Agreement
to prospective investors upon request.
DESCRIPTION OF 1998 DEBENTURES
The following summary describes certain provisions of the
indenture governing the 1998 Debentures (the "1998 Indenture")
and the 1998 Debentures. The following summary does not purport
to be complete and is subject to and is qualified in its entirety
by reference to the 1998 Indenture and the form of the 1998
Debentures.
The Company's 1998 Debentures were issued on August 1, 1983
in an aggregate principal amount of $25,000,000. The 1998
Debentures are unsecured obligations of the Company which are
subordinated in right of payment to all existing and future
Senior Indebtedness (as defined below) of the Company. The 1998
Indenture does not contain any restrictions upon the incurrence
of Senior Indebtedness or any other indebtedness by the Company
or by any of its subsidiaries.
The 1998 Debentures bear interest at a rate of 8-1/2% per
annum payable semiannually on February 1 and August 1 of each
year and mature on August 1, 1998. Mandatory sinking fund
payments sufficient to retire $2.5 million principal amount of
the 1998 Debentures annually, which commenced on August 1, 1990,
are calculated to retire 80% of the issue prior to maturity. See
"Capitalization."
The 1998 Debentures are redeemable on not less than 30 days'
notice at the option of the Company, in whole or in part, at a
redemption price of 100% of the principal amount, plus accrued
interest to the date of redemption. The 1998 Debentures are
convertible at any time prior to maturity, unless previously
redeemed, into shares of Common Stock of the Company at a
conversion price of $15.00 per share, subject to adjustment under
certain conditions.
The 1998 Indenture contains certain limitations on the
Company's right to distribute dividends or purchase, redeem or
otherwise acquire or retire any of its capital stock and to merge
or consolidate unless it meets the criteria set forth therein.
Senior Indebtedness is defined in the 1998 Indenture to
include the principal of (and premium, if any) and interest on
(a) all indebtedness of the Company, whether outstanding on the
date of the 1998 Indenture or thereafter created, incurred,
assumed or guaranteed, for borrowed money (other than the 1998
Debentures), whether short-term or long-term and whether secured
or unsecured (including all indebtedness evidenced by notes,
bonds, debentures or other securities sold by the Company for
money), (b) indebtedness incurred by the Company in the
acquisition (whether by way of purchase, merger, consolidation or
otherwise and whether by the Company or another person) of any
business, real property or other assets (except assets acquired
in the ordinary course of the conduct of the acquirer's usual
business), (c) guarantees by the Company of indebtedness for
borrowed money, whether short-term or long-term and whether
secured or unsecured, of any corporation in which the Company
owns, directly or indirectly, 50% or more of the stock having
general voting power and (d) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any
such indebtedness, obligation or guarantee, unless in each case
by the terms of the instrument creating or evidencing such
indebtedness, obligation or guarantee or such renewal, extension,
refunding, deferral, restructuring, amendment or modification it
is provided that such indebtedness, obligation or guarantee is
not superior in right of payment of the 1998 Debentures.
DESCRIPTION OF CAPITAL STOCK
On February 7, 1996, the Board of Directors of the Company
approved and recommended for submission to the stockholders of
the Company by a 6 to 1 vote, with Leonard Newman voting against
such submission, the consideration and approval of an Amended and
Restated Certificate of Incorporation (the "Restated
Certificate"), which amended and restated the Company's
certificate of incorporation (i) to effect a reclassification of
each share of Class A Common Stock and each share of Class B
Common Stock into one share of Common Stock, (ii) to provide
that action by the stockholders may be taken only at a duly
called annual or special meeting, and not by written consent and
(iii) to provide that the stockholders of the Company would have
the right to make, adopt, alter, amend, change or repeal the By-
Laws of the Company only upon the affirmative vote of not less
than 66 2/3% of the outstanding capital stock of the Company
entitled to vote thereon.
On March 26, 1996, the stockholders approved the Restated
Certificate. The Restated Certificate was filed with the
Secretary of State of the State of Delaware and became effective
April 1, 1996. The authorized capital stock of the Company
currently consists of 2,000,000 shares of Preferred Stock and
20,000,000 shares of Common Stock. As of April 25, 1996, there
were 5,467,632 shares of Common Stock issued and outstanding
(exclusive of 498,434 shares held in treasury). No shares of
Preferred Stock have been issued. All outstanding shares of
Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Restated Certificate authorizes 2,000,000 shares of
Preferred Stock each having a par value of $10 per share.
Subject to applicable law, the Board may issue, in its sole
discretion, shares of Preferred Stock without further stockholder
action by resolution at the time of issuance. The Preferred
Stock may be issued in one or more series and may vary as to the
designation and number of shares in such series, the voting power
of the holders thereof, the dividend rate, the redemptive
terms and prices, the voluntary and involuntary liquidation
preferences, the conversion rights and the sinking fund
requirements, if any, of such series. The Board, however, may
not create any series of Preferred Stock with more than one vote
per share.
COMMON STOCK
Voting Rights. As a result of the Reclassification, all
holders of Common Stock have the same preferences, rights, powers
and qualifications, including one vote for each share of Common
Stock held.
The Board was previously divided into two classes; Class A
Directors and Class B Directors. The Class A Directors were
divided into three classes serving staggered terms, the Class A-I
Directors, the Class A-II Directors and the Class A-III
Directors. As a result of the Reclassification, the Board is no
longer divided into Class A Directors and Class B Directors. The
directors who, as of the effective date of the Reclassification,
were designated as Class A-I Directors, Class A-II Directors and
Class A-III Directors are now designated as Class I Directors,
Class II Directors and Class III Directors, respectively, and
will continue to serve out their respective terms. Each of the
former Class B Directors was appointed to serve as either a Class
I Director, Class II Director or Class III Director. Each class
of directors will consist of as nearly an equal number of
directors as possible. At each annual meeting beginning with the
1996 Annual Meeting, one class of directors will be elected to
succeed those whose terms expire by all record holders of the
Common Stock as of the date of determination, with each new
director to serve a three-year term.
In General. Holders of Common Stock have no redemption or
preemptive rights and are not liable for further calls or
assessments. Holders of Common Stock will be entitled, after
satisfaction of the Company's liabilities and payment of the
liquidation preferences, if any, of any outstanding shares of Pre
ferred Stock, to share the remaining assets of the Company, if
any, equally in proportion to the number of shares held.
Subject to the rights of holders of Preferred Stock, if any,
and subject to other provisions of the Restated Certificate,
holders of Common Stock are entitled to receive such dividends
and other distributions in cash, property or shares of stock of
the Company as may be declared from time to time by the Board in
its discretion from any assets of the Company legally available
therefor.
Transfer Agent and Registrar. The Trust Company of New
Jersey, 35 Journal Square, Jersey City, New Jersey, 07306, is the
transfer agent and the registrar of both the Common Stock and
the Debentures.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this
offering. The Selling Security Holders may sell all or a portion
of the Debentures and shares of Common Stock offered hereby
from time to time on terms to be determined at the times of such
sales. The Debentures and shares of Common Stock may be sold
from time to time to purchasers directly by any of the Selling
Security Holders. Alternatively, any of the Selling Security
Holders may from time to time offer the Debentures or shares of
Common Stock through underwriters, including the Initial
Purchaser, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from
the Selling Security Holders and the purchasers of the Debentures
or shares of Common Stock for whom they may act as agent. To
the extent required, the aggregate principal amount of Debentures
and number of shares of Common Stock to be sold, the names of
the Selling Security Holders, the purchase price, the name of any
such agent, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement or, if appropriate, a post-
effective amendment to the Registration Statement of which this
Prospectus is a part. There is no assurance that the Selling
Security Holders will sell any or all of the Debentures or shares
of Common Stock offered hereby. The Selling Security Holders
and any broker-dealers, agents or underwriters that participate
with the Selling Security Holders in the distribution of the
Debentures or shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, in which
event any discounts, commissions or concessions received by such
broker-dealers, agents or underwriter and any profit on the
resale of the Debentures or shares of Common Stock purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Debentures and the shares of Common Stock issued upon
conversion of the Debentures may be sold from time to time in one
or more transactions at fixed offering prices, which may be
changed, or at varying prices determined at the time of sale or
at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders
and underwriters or dealers who may receive fees or commissions
in connection therewith.
To comply with the securities laws of certain states, if
applicable , the Debentures and shares of Common Stock will be
sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition in certain states the Debentures
and shares of Common Stock may not be offered or sold unless
they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification
requirement is available and is complied with.
The Debentures were originally sold to the Initial Purchaser
on September 29, 1995 in a private placement (including the over-
allotment option for $5,000,000 aggregate principal amount of the
Debentures which was exercised on November 3, 1995) at a purchase
price of 95% of their principal amount. The Company agreed to
indemnify the Initial Purchaser against certain liabilities in
connection with the offer and sale of the Debentures, including
liabilities under the Securities Act, and to contribute to
payments that the Initial Purchaser may be required to make in
respect thereof.
The Company will pay substantially all expenses incident to
the offering and sale of the Debentures and Common Stock to the
public other than underwriting discounts and selling commissions
and fees. The Company and the Selling Security Holders have
agreed to indemnify each other against certain liabilities
arising under the Securities Act. In addition, any underwriter
utilized by the Selling Security Holders may be indemnified
against certain liabilities, including liabilities under the
Securities Act. See "Selling Security Holders."
Prior to this offering there has not been any public market
for the Debentures and there can be no assurance regarding the
future development of a market for the Debentures. The
Debentures and the shares of Common Stock which are issuable
upon conversion of the Debentures are listed on the AMEX. The
Debentures are eligible for trading in the PORTAL Market;
however, no assurance can be given as to the liquidity of, or
trading market for, the Debentures. The Company has been advised
by the Initial Purchaser that it intends to make a market in the
Debentures. However, it is not obligated to do so and any
market-making activities with respect to the Debentures may be
discontinued at any time without notice. See "Description of the
Debentures -- Registration Rights; Liquidated Damages."
Accordingly, no assurance can be given as to the liquidity of or
the trading market for the Debentures. See "Risk Factors -- Lack
of Public Market for the Debentures; Restrictions on Resale."
SELLING SECURITY HOLDERS
The following table sets forth information concerning the
principal amount of Debentures beneficially owned by each Selling
Security Holder which may be offered from time to time pursuant
to this Prospectus. Other than as a result of the ownership or
placement of Debentures or Common Stock, none of the Selling
Security Holders has had any material relationship with the
Company within the past three years, except as noted herein. The
table has been prepared based upon information furnished to the
Company by or on behalf of the Selling Security Holders.
Principal
Amount
of Deben- Principal Percent
tures Amount of of
Benef- Debentures Outstand-
icially Being ing
Name Owned Registerd Debentures
BT Holdings . . . . . . . . . . $1,650,000 $1,650,000 6.6%
Castle Convertible Fund Inc. . . 500,000 500,000 2.0
Catholic Mutual Relief
Society of America. . . . . . . 250,000 250,000 1.0
Cincinnati Financial Corp. . . 2,000,000 2,000,000 8.0
CNA Income Shares, Inc. . . . . . 500,000 500,000 2.0
Convertible Holdings, Inc. . . . 1,000,000 1,000,000 4.0
First Pacific Advisers, Inc.1 . . 4,500,000 4,500,000 18.0
Forest Fulcrum Ltd. . . . . . . . 570,000 570,000 2.3
Forest Fulcrum Fund . . . . . . . 980,000 980,000 3.9
Franklin Investors Securities
Trust Convertible Securities
Fund. . . . . . . . . . . . . 750,000 750,000 3.0
ICI American Holdings . . . . . . 250,000 250,000 1.0
IDS Bond Fund, Inc.2 . . . . . . 3,000,000 3,000,000 12.0
Laterman Strategies 90's L.P. . . 300,000 300,000 1.2
Laterman & Co. . . . . . . . . . 200,000 200,000 *
Nalco Chemical Retirement . . . . 100,000 100,000 *
Nesbitt Burns . . . . . . . . . . 400,000 400,000 1.6
Offshore Strategies Ltd. . . . . 500,000 500,000 2.0
Oregon Equity Fund . . . . . . . 1,000,000 1,000,000 4.0
The Putnam Advisory Company, Inc.
on behalf of Boston College
Endowment . . . . . . . . . . . 200,000 200,000 *
The Putnam Advisory Company, Inc.
on behalf of New Hampshire
Retirement System . . . . . . . 525,000 525,000 2.1
The Putnam Advisory Company, Inc.
on behalf of The Museum of
Fine Art, Boston . . . . . . . 90,000 90,000 *
Putnam Convertible Income-Growth
Trust . . . . . . . . . . . . . 1,850,000 1,850,000 7.4
Putnam Convertible Opportunities
and Income Trust. . . . . . . 485,000 485,000 1.9
Putnam High Income Convertible
and Bond Fund . . . . . . . . . 600,000 600,000 2.4
State of Delaware . . . . . . . . 400,000 400,000 1.6
United National Insurance Company. 150,000 150,000 *
Winchester Convertible Plus
Limited . . . . . . . . . . . . 1,000,000 1,000,000 4.0
Zazove Convertible Fund, L.P. . . 500,000 500,000 2.0
Zeneca Holdings . . . . . . . . . 250,000 250,000 1.0
Total . . . . . . . . . . . .$24,500,000 $24,500,000 98%
______________________
* Less than 1%.
1 First Pacific Advisers, Inc. may be deemed to be the
beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than ten percent of the Common Stock
of the Company. Such information has been derived from
statements on Schedule 13D and 13G filed with the SEC by
First Pacific Advisers, Inc.
2 IDS Bond Fund, Inc. is an investment company registered
under the Investment Company Act of 1940, as amended, and is
a fund in the IDS Mutual Fund Group ("IDS Funds"). American
Express Financial Corporation (formerly known as IDS
Financial Corporation) ("AEFC"), an investment adviser
registered under the Investment Advisers Act of 1940, as
amended, provides investment advisory services to each of
the IDS Funds and to certain other registered investment
companies. AEFC is a wholly owned subsidiary of American
Express Company. The information set forth in the table
with respect to IDS Bond Fund, Inc. and the information set
forth in this footnote was provided by AEFC.
Because the Selling Security Holders may sell all or some of
the Debentures which they hold and shares of Common Stock
issued upon conversion thereof pursuant to the offering
contemplated by this Prospectus, no estimate can be given as to
the aggregate amount of Debentures or shares of Common Stock
that are to be offered hereby or that will be owned by the
Selling Security Holders upon completion of this offering to
which this Prospectus relates. Accordingly, the aggregate
principal amount of Debentures offered hereby may decrease. As
of the date of this Prospectus, the aggregate principal amount of
Debentures outstanding is $25,000,000. See "Plan of
Distribution."
LEGAL MATTERS
Certain legal matters in connection with this offering will
be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York 10022. Mark N.
Kaplan, a director and owner of 1,000 shares of the Common
Stock of the Company, is a partner in the firm of Skadden, Arps,
Slate, Meagher & Flom.
EXPERTS
The consolidated financial statements and consolidated
financial statement schedule of the Company as of March 31, 1995
and 1994, and for each of the years in the three-year period
ended March 31, 1995, included herein and in the Registration
Statement, have been included herein and in the Registration
Statement, in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere
herein and in the Registration Statement, and upon the authority
of said firm as experts in accounting and auditing.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of Diagnostic/Retrieval Systems, Inc.
and Subsidiaries
Page
Independent Auditors' Report......................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 1995 and 1994 and
December 31, 1995 (unaudited)...................................... F-3
Consolidated Statements of Earnings for the fiscal years
ended March 31, 1995, 1994 and 1993 and for the nine months
ended December 31, 1995 and 1994 (unaudited)....................... F-4
Consolidated Statements of Stockholders'
Equity for the fiscal years ended March 31, 1995, 1994
and 1993 and for the nine months ended December 31, 1995
(unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the fiscal
years ended March 31, 1995, 1994 and 1993 and for the nine months
ended December 31, 1995 and 1994 (unaudited)..................... F-6
Notes to Consolidated Financial Statements........................... F-7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders,
Diagnostic/Retrieval Systems, Inc.:
We have audited the accompanying consolidated
balance sheets of Diagnostic/Retrieval Systems, Inc. and
subsidiaries as of March 31, 1995 and 1994, and the
related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the
years in the three-year period ended March 31, 1995.
These consolidated financial statements are the responsi-
bility of the Company's management. Our responsibility
is to express an opinion on these consolidated 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 state-
ments are free of material misstatement. An audit in-
cludes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting princi-
ples 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 consolidated financial
statements referred to above present fairly, in all
material respects, the financial position of Diagnos-
tic/Retrieval Systems, Inc. and subsidiaries as of March
31, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-
year period ended March 31, 1995 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Short Hills, New Jersey
May 18, 1995
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
December
31,
March 31, ---------------
-----------------------------
1995 1994 1995
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents...................................... $11,197,000 $15,465,000 $23,069,000
Accounts Receivable (Notes 2 and 6)............................ 17,432,000 15,538,000 20,594,000
Inventories, Net of Progress Payments (Note 3)................. 11,724,000 5,042,000 16,558,000
Other Current Assets........................................... 2,445,000 2,563,000 2,477,000
------------ ------------- ------------
Total Current Assets........................................... 42,798,000 38,608,000 62,698,000
------------ ------------ ------------
Property, Plant and Equipment, at Cost (Notes 4 and 6)........ 33,661,000 32,182,000 39,958,000
Less Accumulated Depreciation and Amortization................. 23,812,000 23,289,000 25,230,000
------------ ------------ ------------
Net Property, Plant and Equipment.............................. 9,849,000 8,893,000 14,728,000
------------ ------------ -------------
Intangible Assets, Less Accumulated Amor-
tization of $3,457,000, $3,008,000 and
$3,883,000 at March 31, 1995 and 1994 and
December 31, 1995, respectively................................ 8,920,000 8,414,000 8,494,000
Other Assets................................................... 3,023,000 2,921,000 4,850,000
------------ ------------ ------------
Total Assets................................................... $64,590,000 $58,836,000 $90,770,000
=========== ============ ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Current Installments of Long-Term Debt
(Note 6) ...................................................... $ 2,492,000 $ 2,664,000 $ 3,436,000
Accounts Payable and Accrued Expenses (Note 5)................. 19,989,000 16,141,000 18,677,000
------------ ------------ -----------
Total Current Liabilities...................................... 22,481,000 18,805,000 22,113,000
Long-Term Debt, Excluding Current Installments (Note 6)........ 11,732,000 14,515,000 35,319,000
Deferred Income Taxes (Note 8)................................. 4,605,000 4,624,000 4,605,000
Other Liabilities (Notes 10 and 11)............................ 3,263,000 1,133,000 3,826,000
------------ ------------ ------------
Total Liabilities.............................................. 42,081,000 39,077,000 65,863,000
------------ ------------ ------------
Stockholders' Equity (Notes 6, 9 and 13):
Class A Common Stock, $.01 par Value per
Share. Authorized 10,000,000 Shares;
Issued 3,699,963 Shares, 3,674,963 Shares
and 3,739,963 Shares at March 31, 1995 and
1994 and December 31, 1995, respectively..................... 37,000 37,000 37,000
Class B Common Stock, $.01 par Value per
Share. Authorized 20,000,000 Shares;
Issued 2,163,253, 2,105,528 and 2,216,353
Shares at March 31, 1995 and 1994, and
December 31, 1995, respectively............................... 22,000 21,000 22,000
Additional Paid-in Capital..................................... 13,435,000 12,970,000 13,579,000
Retained Earnings.............................................. 10,919,000 8,315,000 13,414,000
------------ ------------ ------------
24,413,000 21,343,000 27,052,000
Treasury Stock, at Cost: 432,639 Shares of Class A Common
Stock and 21,619 Shares of Class B Common Stock at
March 31, 1995, 423,419 Shares of Class A Common
Stock and 21,440 Shares of Class B Common Stock at
March 31, 1994, and 432,639 Shares of Class A Common
Stock and 65,795 Shares of Class B Common Stock at
December 31, 1995 (Note 10) ................................... (1,617,000) (1,579,000) (1,918,000)
Unamortized Restricted Stock Compensation...................... (287,000) (5,000) (227,000)
------------ ------------ ------------
Net Stockholders' Equity....................................... 22,509,000 19,759,000 24,907,000
------------ ------------ ------------
Commitments and Contingencies (Note 10)
Total Liabilities and Stockholders' Equity................... $64,590,000 $58,836,000 $90,770,000
=========== =========== ===========
<FN>
- ------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Nine Months Ended
Years Ended March 31, December 31,
------------------------------------------ ------------------------------
1995 1994 1993 1995 1994
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues.................................. $69,930,000 $57,820,000 $47,772,000 $65,628,000 $47,404,000
Costs and Expenses (Note 3)............... 64,836,000 54,372,000 45,461,000 60,289,000 44,143,000
---------- ---------- ---------- ---------- ----------
Operating Income.......................... 5,094,000 3,448,000 2,311,000 5,339,000 3,261,000
Interest and Related Expenses............. (1,372,000) (1,574,000) (1,735,000) (1,675,000) (1,020,000)
Other Income, Net (Notes 7 and 11) 534,000 834,000 1,224,000 425,000 613,000
---------- ---------- ---------- ----------- -----------
Earnings before Income Taxes.............. 4,256,000 2,708,000 1,800,000 4,089,000 2,854,000
Income Taxes (Note 8)..................... 1,652,000 1,093,000 715,000 1,594,000 1,142,000
---------- ---------- ---------- ---------- ----------
Net Earnings.............................. $ 2,604,000 $ 1,615,000 1,085,000 2,495,000 $ 1,712,000
=========== =========== ========= ========= ============
Earnings per Share of Class A and Class B
Common Stock (Note 13):
Primary........................... $ .50 $ .30 $ .20 $ .44 $ .34
Fully diluted..................... $ .50 $ .30 $ .20 $ .44 $ .34
Weighted Average Number of
Shares of Class A and Class
B Common Stock Outstanding (Note 13):
Primary........................... 5,231,000 5,334,000 5,324,000 5,647,000 5,026,000
Fully diluted..................... 5,231,000 5,334,000 5,324,000 6,552,000 5,026,000
<FN>
- -----------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Years Ended March
31, 1995, 1994 and
1993, and Nine
Months Ended
December 31, 1995 Common Stock
(unaudited) --------------------------------
Class A Class B Unamortized Net
----------- ---------- Additional Restricted Stock-
Paid In Retained Treasury Stock holders'
Shares Amount Shares Amount Capital Earnings Stock Compensation Equity
- ----------------------- ------ ------ ------ ------ --------- -------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March
31, 1992................. 3,674,963 $37,000 2,089,528 $21,000 $12,984,000 $5,615,000 $(1,579,000) $(31,000) $17,047,000
Net Earnings............. -- -- -- -- -- 1,085,000 -- -- 1,085,000
Stock Options
Exercised................. -- -- 5,000 -- -- -- -- -- --
Compensation Relating
to Stock Options, Net..... -- -- -- -- (39,000) -- -- 22,000 (17,000)
--------- -------- ---------- ------- ----------- ----------- ---------- -------- -----------
Balances at March
31, 1993................. 3,674,963 37,000 2,094,528 21,000 12,945,000 6,700,000 (1,579,000) (9,000) 18,115,000
Net Earnings............. -- -- -- -- -- 1,615,000 -- -- 1,615,000
Stock Options
Exercised................ -- -- 11,000 -- 2,000 -- -- -- 2,000
Compensation Re-
lating to Stock
Options, Net............. -- -- -- -- 23,000 -- -- 4,000 27,000
--------- ------- --------- -------- ------- ---------- --------- --------- ----------
Balances at March
31, 1994................. 3,674,963 37,000 2,105,528 21,000 12,970,000 8,315,000 (1,579,000) (5,000) 19,759,000
Net Earnings ............ -- -- -- -- -- 2,604,000 -- -- 2,604,000
Stock Options
Exercised................ 25,000 -- 57,725 1,000 188,000 -- -- -- 189,000
Compensation Relating to
Stock Options, Net ....... -- -- -- -- 388,000 -- -- (282,000) 106,000
Purchase of Trea-
sury Stock .............. -- -- -- -- -- -- (2,900,000) -- (2,900,000)
Sale of Treasury
Stock.................... -- -- -- -- (111,000) -- 2,862,000 -- 2,751,000
---------- ------- --------- ------- --------- -------- ---------- --------- -----------
Balances at March
31, 1995................. 3,699,963 37,000 2,163,253 22,000 13,435,000 10,919,000 (1,617,000) (287,000) 22,509,000
Net Earnings (unaudited)... -- -- -- -- -- 2,495,000 -- -- 2,495,000
Stock Options
Exercised (unaudited)..... 40,000 -- 53,100 -- 220,000 -- -- -- 220,000
Expenses relating
to the Sale of
Treasury Stock
(unaudited)............... -- -- -- -- (76,000) -- -- -- (76,000)
Receipt of Stock
Into Treasury
(unaudited)............... -- -- -- -- -- -- (301,000) -- (301,000)
Compensation Re-
lating to Stock
Options Net (unaudited)... -- -- -- -- -- -- -- 60,000 60,000
--------- ------- ---------- -------- -------- --------- -------- --------- ---------
Balances at December 31,
1995 (unaudited)......... 3,739,963 $ 37,000 2,216,353 $ 22,000 $13,579,000 $13,414,000 $(1,918,000) $(227,000) $24,907,000
<FN>
- --------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Nine Months Ended
Years Ended March 31, December 31,
------------------------------------ -----------------------
1995 1994 1993 1995 1994
----------- --------- --------- ----------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings ............................. $ 2,604,000 $ 1,615,000 $ 1,085,000 $ 2,495,000 $ 1,712,000
Adjustments to Reconcile Net
Earnings to Cash Flows from
Operating Activities:
Depreciation and Amortization......... 2,480,000 2,558,000 3,202,000 2,226,000 1,967,000
Deferred Income Taxes ................ 26,000 (15,000) (31,000) -- --
Other, Net ........................... (77,000) (233,000) (446,000) 305,000 (235,000)
Changes in Assets and Liabil-
ities, Net of Effects from
Business Combinations:
(Increase) Decrease in Accounts Receivable. (1,415,000) 1,443,000 (880,000) (2,859,000) 2,265,000
(Increase) Decrease in Inventories......... (6,408,000) 2,069,000 2,186,000 (4,141,000) (5,543,000)
(Increase) Decrease in Other
Current Assets ........................... (7,000) (133,000) 1,400,000 667,000 (130,000)
Increase (Decrease) in Accounts Payable and
Accrued Expenses .......................... 3,640,000 2,928,000 (400,000) (2,381,000) (182,000)
Other, Net ................................ 1,643,000 (62,000) (357,000) 194,000 160,000
---------- ---------- ---------- ---------- ----------
Net Cash Provided by (Used in) Operating
Activities: .................................. 2,486,000 10,170,000 5,759,000 (3,494,000) 14,000
--------- ---------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ......................... (2,543,000) (988,000) (922,000) (3,712,000) (1,014,000)
Sales of Fixed Assets ........................ -- -- -- 2,380,000 --
Payments Pursuant to Business
Combinations, Net of Cash Acquired............ (1,514,000) (696,000) -- (4,140,000) (1,514,000)
Cash Advanced to Company Ac-
quired for Repayment of Debt
Prior to Acquisition ......................... -- (1,800,000) -- -- --
Other, Net ................................... 263,000 11,000 2,000 -- 236,000
---------- ------------ ------------ ------------ ------------
Net Cash Used in Investing activities....... (3,794,000) (3,473,000) (920,000) (5,472,000) (2,292,000)
----------- ----------- --------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Long-Term Debt ................ (275,000) (168,000) (262,000) (374,000) (56,000)
Repurchases of Convertible
Subordinated Debentures ................... (2,667,000) (2,354,000) (1,880,000) (2,242,000) (2,639,000)
Net Proceeds From Issuance of
Senior Subordinated Convertible
Debentures ................................ -- -- -- 23,360,000 --
Other Borrowings .......................... 20,000 325,000 -- 55,000 75,000
Purchase of Treasury Stock ................ (2,900,000) -- -- -- (2,900,000)
Sale of Treasury Stock .................... 2,862,000 -- -- -- 2,625,000
Other, Net ................................ -- -- -- 39,000 --
------------ ----------- ----------- ----------- ----------
Net Cash Used in Financing Activities...... (2,960,000) (2,197,000) (2,142,000) 20,838,000 (2,895,000)
------------ ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Cash and Cash Equivalents................. (4,268,000) 4,500,000 2,697,000 11,872,000 (5,173,000)
Cash and Cash Equivalents,
Beginning of Period ...................... 15,465,000 10,965,000 8,268,000 11,197,000 15,465,000
------------ ----------- ----------- ------------ ------------
Cash and Cash Equivalents, End
of Period ................................. $ 11,197,000 $15,465,000 $10,965,000 $23,069,000 $10,292,000
============ =========== =========== =========== ===========
<FN>
- --------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The Consolidated Financial Statements include
the accounts of Diagnostic/Retrieval Systems, Inc., its
subsidiaries, all of which are wholly owned, and a joint
venture consisting of an 80% controlling partnership
interest (the "Company"). All significant intercompany
transactions and balances have been eliminated in consol-
idation.
The Consolidated Financial Statements include
information as of December 31, 1995 and for the nine
months ended December 31, 1995 and 1994, which is unau-
dited. In the opinion of Management, the accompanying
unaudited consolidated financial statements of the Compa-
ny contain all adjustments (consisting of only normal and
recurring adjustments) necessary for the fair presenta-
tion of the Company's consolidated financial position as
of December 31, 1995, the statements of earnings for the
nine months ended December 31, 1995 and 1994, cash flows
for the nine months ended December 31, 1995 and 1994 and
the statement of stockholders' equity for nine months
ended December 31, 1995. The results of operations for
the nine months ended December 31, 1995 are not necessar-
ily indicative of the results to be expected for the full
year.
B. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid invest-
ments purchased with a maturity of three months or less
to be cash equivalents.
C. REVENUE RECOGNITION
Revenues related to long-term, firm fixed-price
contracts, which principally provide for the manufacture
and delivery of finished units, are recognized as ship-
ments are made. The estimated profits applicable to such
shipments are recorded pro rata based upon estimated
total profit at completion of the contracts.
Revenues on contracts with significant engi-
neering as well as production requirements are recorded
using the percentage-of-completion method measured by the
costs incurred on each contract to estimated total con-
tract costs at completion (cost-to-cost) with consider-
ation given for risk of performance and estimated profit.
Revenues related to incentive-type contracts
also are determined on a percentage-of-completion basis
measured by the cost-to-cost method. Revenues from cost-
reimbursement contracts are recorded, together with the
fees earned, as costs are incurred.
Revenues recognized under the cost-to-cost
percentage-of-completion basis during fiscal 1995, 1994
and 1993 approximated 16%, 26% and 37% of total revenues,
respectively, with remaining revenues recognized as
delivery of finished units is made, or as costs are
incurred under cost-reimbursement contracts. Included in
revenues for fiscal 1995, 1994 and 1993 are $18,771,000,
$27,496,000 and $19,155,000 respectively, of customer-
sponsored research and development.
Revisions in profit estimates are reflected in
the year in which the facts, which require the revisions,
become known, and any estimated losses and other future
costs are accrued in full.
Approximately 84%, 94% and 83% of the Company's
revenues in fiscal 1995, 1994 and 1993, respectively,
were derived directly or indirectly from defense-industry
contracts with the United States Government (principally
the U.S. Navy). In addition, approximately 7%, 3% and
17% of the Company's revenues in fiscal 1995, 1994 and
1993, respectively, were derived directly or indirectly
from sales to foreign governments. Sales to commercial
customers comprised 9% and 3% of revenues in fiscal 1995
and 1994, respectively.
D. INVENTORIES
Costs accumulated under contracts are stated at
actual cost, not in excess of estimated net realizable
value, including, for long-term government contracts,
applicable amounts of general and administrative expens-
es, which include research and development costs, where
such costs are recoverable under customer contracts.
In accordance with industry practice, invento-
ries include amounts relating to contracts having produc-
tion cycles longer than one year, and a portion thereof
will not be realized within one year.
E. DEPRECIATION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
Depreciation and amortization have been provid-
ed on the straight-line method. The ranges of estimated
useful lives are: office furnishings, motor vehicles and
equipment, 3-10 years; building and building improve-
ments, 15-40 years; and leasehold improvements, over the
shorter of the estimated useful lives or the life of the
lease.
Maintenance and repairs are charged to opera-
tions as incurred; renewals and betterments are capital-
ized. The cost of assets retired, sold or otherwise
disposed of are removed from the accounts, and any gains
or losses thereon are reflected in operations.
F. EXCESS OF COST OVER NET ASSETS OF BUSINESSES
ACQUIRED
Intangibles resulting from acquisitions repre-
sent the excess of cost of the investments over the fair-
market values of the underlying net assets at the dates
of investment. All intangibles are being amortized on
the straight-line method, over five to thirty years. The
carrying value of intangible assets periodically is
reviewed by the Company, and impairments are recognized
when the expected undiscounted future operating cash
flows derived from such intangible assets are less than
their carrying value.
G. INCOME TAXES
In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred
tax asset will not be realized. Deferred tax assets and
liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recog-
nized in income in the period that includes the enactment
date. SFAS 109 supersedes Statement of Financial Ac-
counting Standards No. 96, "Accounting for Income Taxes"
("SFAS 96").
Effective April 1, 1993, the Company adopted
SFAS 109. The cumulative effect of adopting SFAS 109 was
not material to the Company's consolidated results of
operations or financial position.
Prior-year financial statements have not been
restated to apply the provisions of SFAS 109. Until
March 31, 1993, the Company used the asset and liability
method of accounting for income taxes, as set forth in
SFAS 96. Under SFAS 96, deferred income taxes are recog-
nized by applying statutory tax rates to the difference
between the financial statement carrying amounts and tax
bases of assets and liabilities. The statutory tax rates
applied are those applicable to the years in which the
differences are expected to reverse. Deferred tax ex-
pense represents the change in the liability for deferred
taxes from year to year.
H. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In December 1990, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS
106"). The Company adopted SFAS 106 during the first
quarter of fiscal 1994, and its adoption did not have a
material impact on the Company's consolidated results of
operations or financial position.
I. POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). The Company
adopted SFAS 112 during the first quarter of fiscal 1995,
and its adoption did not have a material impact on the
Company's consolidated results of operations or financial
position.
J. EARNINGS PER SHARE (UNAUDITED WITH RESPECT TO
THE NINE MONTHS ENDED DECEMBER 31, 1995)
Earnings per share of common stock is computed
by dividing net earnings by the weighted average number
of shares of Class A and Class B Common Stock outstanding
during each period. In fiscal 1995, the computation of
earnings per share included approximately 123,000 shares
from the assumed exercise of dilutive stock options
computed using the treasury stock method. Options out-
standing to purchase shares of common stock are not
included in the computation of earnings per share for
fiscal 1994 and 1993, because their effect was not mate-
rial. Furthermore, additional shares assumed to be
outstanding applicable to the Company's 8-1/2% Convertible
Subordinated Debentures also are not included for any of
the periods presented, because their effect on earnings
per share was antidilutive.
For the nine month period ended December 31,
1995, the computation of primary earnings per share
included approximately 174,000 shares from the assumed
exercise of dilutive stock options computed using the
treasury stock method. Options outstanding to purchase
shares of common stock were excluded from the computation
of earnings per share for the nine month period ended
December 31, 1994, because their effect was not material.
The computation of fully diluted earnings per share for
the nine month period ended December 31, 1995 included
approximately 185,000 shares, also from the assumed
exercise of dilutive stock options and, in addition,
included approximately 894,000 shares from the assumed
conversion of the Company's 9% Senior Subordinated Con-
vertible Debentures (the "Debentures"). Additional
shares assumed to be outstanding applicable to the
Company's 8-1/2% Convertible Subordinated Debentures were
excluded from the computations for the interim periods
presented, as their effect on earnings per share was
antidilutive.
NOTE 2. ACCOUNTS RECEIVABLE
The component elements of accounts receivable
are as follows:
March 31,
__________________________
1995 1994
---- ----
U.S. Government:
Amounts Billed . . . . . $ 5,885,000 $ 5,746,000
Recoverable Costs and Ac-
crued Profit on Progress
Completed, Not Billed . . . 7,264,000 5,374,000
------------ ------------
13,149,000 11,120,000
------------ ------------
Other U.S. Defense Contracts:
Amounts Billed . . . . . 1,418,000 2,981,000
Recoverable Costs and Ac-
crued Profit on Progress
Completed, Not Billed . . . 639,000 537,000
----------- -----------
2,057,000 3,518,000
----------- -----------
Other Amounts Billed . . 2,226,000 900,000
----------- -----------
Total . . . . . . . . . . $ 17,432,000 $ 15,538,000
------------ ------------
Generally, no accounts receivable arise from
retainage provisions in contracts. The Company receives
progress payments on certain contracts from the U.S.
Government of between 80-100% of allowable costs in-
curred; the remainder, including profits and incentive
fees, if any, is billed upon delivery and final accep-
tance of the product. In addition, the Company may bill
based upon units delivered.
NOTE 3. INVENTORIES
Inventories are summarized as follows:
March 31, December 31,
_____________________ ___________________
1995 1994 1995
------ ------ -----
(unaudited)
Work-in-Process . . . $ 23,017,000 $ 14,639,000 $38,356,000
Raw Material . . . . 2,573,000 2,917,000 836,000
------------- ----------- ------------
25,590,000 17,556,000 39,192,000
Less Progress Payments . 13,866,000 12,514,000 22,634,000
----------- ---------- -----------
Total . . . . . . . . $ 11,724,000 $ 5,042,000 $16,558,000
----------- ---------- -----------
General and administrative costs included in work-in-process
were $6,584,000 and $3,753,000 at March 31, 1995 and 1994 and $9,111,000 at
December 31, 1995 (unaudited), respectively. General and administrative
costs included in costs and expenses amounted to $17,681,000, $16,896,000,
$14,028,000 and $14,622,000 in fiscal 1995, 1994, 1993, and for the nine
months ended December 31, 1995 (unaudited), respectively. Included in those
amounts are expenditures for Company-sponsored independent research and
development, amounting to approximately $795,000, $537,000, $470,000 and
$218,000 in fiscal 1995, 1994, 1993, and for the nine months ended December
31, 1995 (unaudited), respectively.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 1995 and 1994 are
summarized as follows:
March 31,
---------------------------
1995 1994
------------ ------------
Land.................................... $ 1,350,000 $ 1,350,000
Building and Building Improvements....... 2,384,000 2,289,000
Office Furnishings and Equipment......... 3,621,000 3,754,000
Laboratory and Production Equipment..... 15,639,000 14,457,000
Motor Vehicles.......................... 235,000 389,000
Computer Equipment...................... 7,246,000 7,323,000
Leasehold Improvements.................. 3,186,000 2,620,000
------------ ------------
Total................................... $33,661,000 $32,182,000
------------ ------------
Depreciation and amortization of plant and equipment
amounted to $1,833,000, $2,061,000 and $2,748,000 in fiscal 1995,
1994 and 1993, respectively.
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The component elements of accounts payable and accrued
expenses are as follows:
March 31,
---------------------------
1995 1994
------------ ------------
Payrolls, Including Payroll Taxes.. $ 648,000 $ 1,753,000
Holiday and Vacation Pay............ 1,102,000 849,000
Income Taxes Payable................ 1,821,000 1,917,000
Losses and Future Costs
Accrued on Uncompleted Contracts.. 4,555,000 3,214,000
Other............................... 3,897,000 4,101,000
----------- -----------
12,023,000 11,834,000
Accounts Payable.................... 7,966,000 4,307,000
------------ ------------
Total............................... $19,989,000 $16,141,000
------------ ------------
NOTE 6. LONG-TERM DEBT
A summary of long-term debt is as follows:
============================================================================
March 31, December 31,
---------------------- -----------
1995 1994 1995
---------- ---------- -----------
(unaudited)
Convertible Subordinated
Debentures, Due 1998............. $ 12,209,000 $14,889,000 $9,963,000
Industrial Revenue Bonds,
Due 1998......................... 1,895,000 2,095,000 1,895,000
Senior Subordinated Convertible
Debentures, Due 2003............. -- -- 25,000,000
Other Obligations................ 120,000 195,000 1,897,000
---------- ---------- -----------
14,224,000 17,179,000 38,755,000
Less Current Installments of
Long-Term Debt................... 2,492,000 2,664,000 3,436,000
---------- ---------- -----------
TOTAL............................ $11,732,000 $14,515,000 $35,319,000
----------- ----------- -----------
============================================================================
The 1998 Debentures bear interest at a rate of 8 1/2% per annum
and are convertible at their face amount any time prior to maturity into
shares of Class B Common Stock, unless previously redeemed, at a conversion
price of $15.00 per share, subject to adjustment under certain conditions.
The 1998 Debentures are redeemable at the option of the Company, in whole
or in part, at face value, together with interest accrued to the redemption
date. As of August 1, 1990 and on August 1 of each year thereafter, to and
including August 1, 1997, the Company is required to provide for the
retirement of the 1998 Debentures by mandatory redemption (the "sinking
fund") in the aggregate annual principal amount of $2,500,000. As of March
31, 1995, the Company had repurchased $12,791,000 of the 1998 Debentures
and has satisfied all sinking fund requirements to date. The Consolidated
Statements of Earnings for fiscal years 1995, 1994 and 1993 reflect gains
resulting from these repurchases of $13,000, $257,000 and $500,000,
respectively.
The 1998 Debentures are subordinate to the prior payment in
full of the principal and interest on all senior indebtedness of the
Company, which amounted to $2,015,000 at March 31, 1995. The indenture
pursuant to which the 1998 Debentures were issued contains certain dividend
and other restrictions. Under such provisions, the Company may not
distribute dividends or purchase, redeem or otherwise acquire or retire any
of its capital stock in excess of an aggregate amount which, at March 31,
1995, was approximately $4,400,000.
On December 19, 1991, the Suffolk County Industrial Development
Agency (the "Agency") issued variable rate demand industrial development
revenue refunding bonds (the "Bonds") in the amount of $2,395,000 to
refinance a prior bond issue which provided funds for the construction of
the manufacturing facilities of Photronics Corp. ("Photronics"), a
wholly-owned subsidiary of the Company. All property, plant and equipment
acquired or constructed from the proceeds of the original bonds
collateralizes the obligation, and payment of the principal and interest
and premium (if any) on the Bonds is further secured by the unconditional
guaranty of the Company. The Bonds are supported by an irrevocable,
direct-pay letter of credit in an amount equal to the principal balance
plus interest thereon for 45 days. At March 31, 1995, the contingent
liability of the Company as guarantor under the letter of credit was
approximately $1,930,000. The Company has collateralized the letter of
credit with accounts receivable and also has agreed to certain financial
covenants, including the maintenance of: (i) a certain minimum ratio of
consolidated tangible net worth to total debt (the "Debt Ratio"), (ii) a
certain minimum quarterly ratio of earnings before interest and taxes to
interest (the "Interest Ratio"), and (iii) a certain minimum balance of
billed and unbilled accounts receivable (the "Eligible Receivables"), all
as defined in the related agreements. At March 31, 1995, the covenants, all
of which the Company was in compliance with, required (i) a Debt Ratio of
0.6:1, (ii) an Interest Ratio of 1.5:1, and (iii) Eligible Receivables of
$2,500,000. The financial covenants also require that the Company realize a
certain level of profits during each quarter of fiscal 1996 in order to be
in compliance. A default under the Bonds constitutes a default on the
Debentures.
Commencing February 1, 1992 and on the first business day of
each month thereafter, interest on the Bonds is payable at that daily rate
determined to be necessary under prevailing market conditions to enable the
Bonds to be sold at a price equal to 100% of the principal amount thereof
plus accrued interest. Such rate was 4.5% at March 31, 1995. At the option
of the Company, the interest rate payable on the Bonds may be changed to a
weekly or fixed rate.
Commencing February 1, 1992 and until such time as the Bonds
may be converted to fixed-rate obligations, the Bonds are subject to
redemption, in whole or in part, at the option of the Company at a price
equal to their principal amount plus accrued interest. On or after the
second anniversary of a conversion, Bonds bearing interest at a fixed rate
are subject to the redemption, in whole on any date or in part on any
interest payment date, at the option of the Company at an annual redemption
rate of 102% at the second anniversary of such conversion and diminishing
by one percent each year to 100% on or after the fourth anniversary of such
conversion. Commencing January 1, 1993 and on each January 1 thereafter, to
and including January 1, 1998, the Bonds are subject to a schedule of
mandatory sinking fund redemptions at a price equal to 100% of the
principal amount of the Bonds redeemed plus accrued interest. The principal
amount of the Bonds redeemed at January 1, 1995 was $200,000.
Cash payments for interest during fiscal 1995, 1994 and 1993
were $1,237,000, $1,448,000 and $1,687,000, respectively.
The aggregate maturities of long-term debt for the five years
ending March 31, 2000 are as follows: 1996, $2,492,000; 1997, $2,637,000;
1998, $4,095,000; 1999, $5,000,000; and 2000, $0.
NOTE 7. OTHER INCOME, NET
Other income, net includes:
================================================================
Years Ended March 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
Interest Income...... $439,000 $370,000 $585,000
Royalty Income....... 63,000 157,000 221,000
Gain on Repurchase of
Subordinated
Debentures........... 13,000 257,000 500,000
Other................ 19,000 50,000 (82,000)
---------- ---------- ----------
TOTAL................ $534,000 $834,000 $1,224,000
---------- ---------- ----------
================================================================
NOTE 8. INCOME TAXES
Income tax expense consists of:
=========================================================
Years Ended March 31,
------------------------------------
1995 1994 1993
----------- ----------- -----------
CURRENT:
Federal..... $ 1,498,000 $884,000 $688,000
State....... 128,000 224,000 58,000
----------- -------- ---------
1,626,000 1,108,000 746,000
---------- --------- ---------
DEFERRED:
Federal..... 172,000 33,000 (103,000)
State....... (146,000) (48,000) 72,000
--------- --------- ---------
26,000 (15,000) (31,000)
--------- --------- ---------
TOTAL....... $1,652,000 $1,093,000 $715,000
----------- ----------- ----------
=========================================================
Deferred income taxes at March 31, 1995 and 1994 reflect the
impact of temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws.
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities at March
31, 1995 and 1994 are as follows:
==========================================================================
March 31,
-----------------------
DEFERRED TAX ASSETS: 1995 1994
---- ----
State Net Operating Loss Carryforwards...... $ 3,977,000 $5,849,000
Inventory Capitalization.................... 1,687,000 1,888,000
Costs Accrued on Uncompleted Contracts...... 2,627,000 2,163,000
Other....................................... 2,287,000 1,846,000
------------ ---------
Total Gross Deferred Tax Assets............. 10,578,000 11,746,000
Less Valuation Allowance.................... (2,279,000) (3,575,000)
------------ ----------
Net Deferred Tax Assets..................... 8,299,000 8,171,000
------------ ---------
DEFERRED TAX LIABILITIES:
Depreciation and Amortization............... (5,048,000) (5,540,000)
General and Administrative Costs............ (4,325,000) (2,740,000)
Federal Impact of the State Benefits........ (1,136,000) (1,986,000)
Other ...................................... (828,000) (917,000)
------------ ---------
Total Gross Deferred Tax Liabilities........ (11,337,000) (11,183,000)
------------ -----------
Net Deferred Tax Liabilities................ $ (3,038,000) $(3,012,000)
------------ -----------
==========================================================================
A valuation allowance is provided when it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The
Company has established a valuation allowance for the deferred tax asset
attributable to state net operating loss carryforwards, due to the
uncertainty of future Company earnings attributable to various states and
the status of applicable statutory regulations that could limit or preclude
utilization of these benefits in future periods. A deferred tax asset of
$1,567,000 and $1,612,000 is included in Other Current Assets in the
Consolidated Balance Sheets at March 31, 1995 and 1994, respectively.
Approximately $47,647,000 of state net operating loss carryforwards were
available in various tax jurisdictions at March 31, 1995. Of that amount,
$29,655,000 will expire between fiscal years 1997 and 2002; the remaining
$17,992,000 will expire between fiscal years 2005 and 2010.
A reconciliation of the statutory federal income tax rate to
the effective tax rate follows:
========================================================================
Years Ended March 31,
------------------------
1995 1994 1993
------- -------- -------
Statutory Tax Rate.......... 34% 34% 34%
State Income Tax, Net of
Federal Income Tax Benefit.. 3 4 5
Amortization of Intangible
Assets...................... 1 2 3
Other....................... 1 -- (2)
------- -------- -------
Total....................... 39% 40% 40%
========================================================================
The provision for income taxes includes all estimated income
taxes payable to federal and state governments, as applicable.
Cash payments for income taxes during fiscal 1995, 1994 and
1993 amounted to $1,723,000, $311,000 and $303,000, respectively.
NOTE 9. COMMON STOCK, STOCK OPTION PLANS AND EMPLOYEE BENEFIT PLANS
The Company has three authorized classes of stock: A class
consisting of 10,000,000 shares of Class A Common Stock, a class consisting
of 20,000,000 shares of Class B Common Stock, and a class consisting of
2,000,000 shares of Preferred Stock (none of which has been issued). The
holders of Class A and Class B Common Stock are entitled to one vote per
share and one-tenth vote per share, respectively.
On February 7, 1991, the Board of Directors (the "Board")
adopted the 1991 Stock Option Plan (the "Stock Option Plan"), which
authorizes the issuance of up to 600,000 shares of Class B Common Stock.
The Stock Option Plan was approved by the Company's stockholders on August
8, 1991. The Stock Option Plan is the successor to the Company's 1981
Non-Qualified Stock Option Plan (the "Non-Qualified Plan") that expired on
May 12, 1991 and to the 1981 Incentive Stock Option Plan (the "Incentive
Plan") that expired on October 31, 1991. Under the terms of the Stock
Option Plan, options to purchase shares of Class B Common Stock may be
granted to key employees, directors and consultants of the Company. Options
granted under the Stock Option Plan are at the discretion of the Stock
Option Committee of the Board (the "Stock Option Committee") and may be
incentive stock options or non-qualified stock options, except that
incentive stock options may be granted only to employees. The option price
is determined by the Stock Option Committee and must be a price per share
which is not less than the par value per share of the Class B Common Stock,
and in the case of an incentive stock option, may not be less than the
fair-market value of the Class B Common Stock on the date of the grant.
Options may be exercised during the exercise period, as determined by the
Stock Option Committee, except that no option may be exercised within six
months of its grant date, and in the case of an incentive stock option,
generally, the exercise period may not exceed ten years from the date of
the grant. At March 31, 1995, 286,250 shares of Class B Common Stock were
reserved for future grants under the Stock Option Plan.
The Non-Qualified Plan, as amended, provided for the grant of
options to purchase a total of 100,000 shares of Class A Common Stock and
50,000 shares of Class B Common Stock through May 12, 1991. Under the
Non-Qualified Plan, the Stock Option Committee had discretion to grant
options to employees, consultants and directors of the Company. The
exercise price of an option granted under the Non-Qualified Plan was the
price, as determined by the Stock Option Committee, but was not less than
the aggregate par value of the shares subject to the option. Options
granted under the Non-Qualified Plan are exercisable in accordance with the
terms of the grant during a specified period, which did not exceed five
years. Upon the expiration of the Non-Qualified Plan, a total of 87,600
shares of Class A Common Stock and a total of 10,300 shares of Class B
Common Stock remained ungranted.
The Incentive Plan, as amended, provided for the grant of
options to purchase a total of 150,000 shares of Class A Common Stock and
475,000 shares of Class B Common Stock through October 31, 1991. Under the
Incentive Plan, options were granted at the discretion of the Stock Option
Committee only to employees of the Company. Options are exercisable in
accordance with the terms of the grant within a specified period, which may
not exceed ten years. Each option granted provided for the purchase of a
specified number of shares of Class A Common Stock or Class B Common Stock,
or both, at an exercise price not less than the fair-market value of the
shares subject to the option on the date of grant. Upon the expiration of
the Incentive Plan, options representing a total of 23,665 shares of Class
A Common Stock and a total of 269,832 shares of Class B Common Stock
remained ungranted.
Under the Stock Option Plan, pursuant to the terms of exercise
under the grant, the excess of the fair-market value of shares under option
at the date of grant over the option price may be charged to unamortized
restricted stock compensation or to earnings as compensation expense and
credited to additional paid-in capital. The unamortized restricted stock
compensation, if any, is charged to expense as the options become
exercisable, in accordance with the terms of the grant. Under the
Non-Qualified Plan, pursuant to the restriction periods on the exercise of
options as stated in the stock option agreements, the excess of the
fair-market value of shares under option at the date of grant over the
option price was charged to unamortized restricted stock compensation and
credited to additional paid-in capital. The unamortized restricted stock
compensation is charged to expense as services are performed during the
periods of restriction. As restricted options expire, the amount of
unamortized restricted stock compensation relating to the options is
credited and eliminated through a charge to additional paid-in capital. In
addition, the total amount of compensation previously charged to expense is
credited. The amount of compensation charged (credited) to earnings for all
plans in fiscal 1995, 1994 and 1993 was $106,000, $27,000 and ($17,000),
respectively.
When stock is issued on exercise of options, the par
value of each share ($.01) is credited to common stock and the
remainder of the option price is credited to paid-in capital. No
charge is made to operations.
A summary of all transactions under the Stock Option, Incentive
and Non-Qualified Plans follows:
============================================================================
Number of Number of
Shares of Shares of Option
Class A Option Price Class B Price per
Common Stock per Share Common Stock Share
- ----------------------------------------------------------------------------
OUTSTANDING AT MARCH
31, 1992 (of Which
16,250 Shares and
77,238 Shares of
Class A and Class B,
Respectively,
Were Exercisable). 65,000 $2.61 205,450 $ .01-4.75
Granted........... -- -- 10,000 $ .01
Exercised......... -- -- (5,000) $ .01
Expired.......... -- -- (35,600) $ .01-4.75
--------- --------- --------- ----------
OUTSTANDING AT MARCH
31, 1993 (of Which
32,500 Shares and
111,925 Shares of
Class A and Class
B, Respectively,
Were Exercisable). 65,000 $2.61 174,850 $ .01-4.75
Granted........... -- -- 142,750 $ .01-3.63
Exercised......... -- -- (11,000) $ .01-2.25
Expired........... -- -- (32,250) $2.13-2.25
--------- --------- --------- ----------
OUTSTANDING AT MARCH
31, 1994 (of Which
48,750 Shares and
111,163 Shares of
Class A and Class
B, Respectively,
Were Exercisable). 65,000 $2.61 274,350 $ .01-4.75
Granted........... -- -- 150,000 $ .01-4.95
Exercised......... (25,000) $2.61 (57,725) $ .01-3.63
Expired........... -- -- (17,000) $ .01-3.63
--------- --------- --------- ----------
OUTSTANDING AT
MARCH 31, 1995
(of Which 40,000
Shares and
145,425 Shares of
Class A and Class
B, Respectively,
Were Exercisable). 40,000 $2.61 349,625 $ .01-4.95
=============================================================================
The Company also maintains defined contribution plans covering
substantially all full-time eligible employees. The Company's contributions
to these plans, which are discretionary, for fiscal 1995 and 1994 amounted
to $365,000 and $203,000, respectively. The Company did not make any
contributions to these plans during fiscal 1993.
NOTE 10. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
At March 31, 1995, the Company was party to various
noncancellable operating leases (principally for administration,
engineering and production facilities) with minimum rental payments as
follows:
1996 $1,909,000
1997 1,555,000
1998 1,133,000
1999 811,000
2000 695,000
Thereafter 72,000
-----------
Total $6,175,000
It is not certain as to whether the Company will negotiate new
leases as existing leases expire. Determinations to that effect will be
made as existing leases approach expiration and will be based on an
assessment of the Company's capacity requirements at that time.
Total rent expense aggregated $2,490,000, $1,703,000 and
$1,492,000 in fiscal 1995, 1994 and 1993, respectively.
In April 1984, the Board of Directors approved a lease
agreement with LDR Realty Co. (wholly owned by the Chairman of the Board of
Directors and former President) for additional office and manufacturing
space for the Company. The LDR lease, which expired on May 31, 1988, was
renegotiated for a ten-year term commencing June 1, 1988 at a net annual
rental of $233,000. The Company is required to pay all real-estate taxes,
maintenance and repairs to the facility.
Effective July 20, 1994, the Company entered into an
Employment, Non-Competition and Termination Agreement (the "Gross
Agreement") and a Stock Purchase Agreement (the "Stock Purchase Agreement")
with David E. Gross, who retired as President and Chief Technical Officer
of the Company on May 12, 1994. Under the terms of the Gross Agreement, Mr.
Gross will receive a total of $600,000 as compensation for his services
under a five-year consulting agreement with the Company and a total of
$750,000 as consideration for a five-year non-compete arrangement. The
payments will be charged to expense over the term of the Gross Agreement as
services are performed and obligations are fulfilled by Mr. Gross. He will
also receive, at the conclusion of such initial five-year period, an
aggregate of approximately $1.3 million payable over a nine-year period as
deferred compensation. The net present value of the payments to be made to
Mr. Gross, pursuant to the deferred compensation portion of the Gross
Agreement, approximated the amount of the Company's previous deferred
compensation arrangement with Mr. Gross. On July 28, 1994, pursuant to
the Stock Purchase Agreement, the Company purchased 659,220 shares of Class
A Common Stock and 45,179 shares of Class B Common Stock owned by Mr. Gross
for $4.125 and $4.00 per share, respectively, totaling approximately $2.9
million in cash (the "Buy-back"). The Stock Purchase Agreement also
includes certain provisions regarding the sale and voting of Mr. Gross'
remaining shares of stock in the Company, as well as the adjustment which
would have been made in the purchase price paid to Mr. Gross pursuant to
the Buy-back should a change in control of the Company occur within three
years from the date of the Stock Purchase Agreement.
On October 18, 1994, the Company filed a Registration Statement
on Form S-2, and on November 10, 1994, the Company filed Amendment No. 1 to
such Registration Statement (the "Registration Statement") with the
Securities and Exchange Commission for the purpose of selling shares of its
common stock purchased by the Company in the Buy-back. Pursuant to the
Registration Statement, the Company offered to sell 650,000 shares of its
Class A Common Stock at a purchase price of between $3.92 per share and
$4.33 per share and 45,000 shares of its Class B Common Stock at a purchase
price of between $3.80 per share and $4.20 per share. As of March 31, 1995,
all shares of Class A and Class B Common Stock offered for sale under the
Registration Statement had been sold at a price of $4.125 per share and
$4.00 per share, respectively, totaling approximately $2.9 million.
As of March 31, 1995, the Company was in the process of
finalizing an Employment, Non-Competition and Termination Agreement (the
"Newman Agreement") between the Company and Leonard Newman, the Chairman of
the Board and Secretary of the Company. Pursuant to the Newman Agreement,
it is expected that Mr. Newman will receive certain compensation from the
Company over a five-year period for consulting services and a non-compete
arrangement. In addition, Mr. Newman will receive certain retirement
benefits payable over a ten-year period at the conclusion of such initial
five-year period. Results of operations for fiscal 1995 reflect a charge of
$1.5 million representing the estimated net present value of the Company's
obligation under the Newman Agreement. The corresponding amount was
included in Other Liabilities in the Consolidated Balance Sheet at March
31, 1995 as an addition to the accrual which had been established to cover
the Company's liability to Mr. Newman under a previous deferred
compensation arrangement.
The Company is a party to various legal actions and claims
arising in the ordinary course of its business. In management's opinion,
the Company has adequate legal defenses for each of the actions and claims
and believes that their ultimate disposition will not have a material
adverse effect on the Company's consolidated financial position or results
of operations.
Since substantially all of the Company's revenues are derived
from contracts or subcontracts with the U.S. Government, future revenues
and profits will be dependent upon continued contract awards, Company
performance and volume of Government business. The books and records of the
Company are subject to audit and post-award review by the Defense Contract
Audit Agency.
NOTE 11. BUSINESS COMBINATIONS
On October 1, 1993, the Company acquired (through TAS
Acquisition Corp., a wholly-owned subsidiary) a 95.7% equity interest in
Technology Applications and Service Company ("TAS"), a Maryland
corporation, pursuant to a Stock Purchase Agreement (the "Agreement") dated
as of August 6, 1993. Under the terms of the Agreement, the Company paid
$15.10 in cash for a total of 97,317 issued and outstanding shares of
common stock, par value $.01 per share, of TAS. TAS, headquartered in
Gaithersburg, Maryland, was a privately held company incorporated in 1991.
It applies state-of-the-art technology to produce emulators that can
replace display consoles and computer peripherals used by the military. TAS
also produces simulators, stimulators and training products used primarily
for testing and training at military land-based sites, as well as provides
technical services to both Department of Defense and commercial customers.
On September 30, 1993, the Company, in anticipation of the acquisition,
advanced $1,800,000 to TAS pursuant to a demand promissory note. Such
advance was converted to an intercompany liability on the date of the
acquisition and is eliminated in consolidation. On November 1, 1993,
Articles of Merger were filed in order to merge TAS into TAS Acquisition
Corp. The name TAS Acquisition Corp. was changed to Technology Applications
& Service Company ("TAS").
The acquisition has been accounted for using the purchase
method of accounting. The excess of cost over the estimated fair value of
net assets acquired was approximately $405,000 and is being amortized on a
straight-line basis over 30 years, or $14,000 annually. The Consolidated
Statements of Earnings include the operations of TAS from October 1, 1993.
The following unaudited pro forma financial information shows
the results of operations for the years ended March 31, 1994 and 1993 as
though the acquisition of TAS had occurred at the beginning of each period
presented. In addition to combining the historical results of operations of
the two companies, the pro forma calculations include: the amortization of
the excess of cost over the estimated fair value of net assets acquired;
the effect of a reduction in interest expense arising from the assumed
repayment by TAS prior to the acquisition date of its outstanding
borrowings under a bank line of credit; the effect of a reduction in
interest income from the assumed decrease in cash associated with the
$1,800,000 advanced to TAS prior to the acquisition and the funding of the
TAS operating loss for the periods presented; and the adjustment to income
taxes (benefit) to reflect the effective income tax (benefit) rate assumed
for the Company and TAS on a combined basis for each pro forma period
presented:
============================================================================
Years Ended March 31,
------------------------------
1994 1993
---- ----
Revenues.................................. $ 65,944,000 $ 56,652,000
Net Earnings (Loss) before Extraordinary
Item...................................... $ 1,291,000 $ (2,364,000)
Net Earnings (Loss) per Share before
Extraordinary Item........................ $ .24 $ (.44)
============================================================================
The unaudited pro forma financial information is not
necessarily indicative either of the results of operations that would have
occurred had the acquisition been made at the beginning of the period, or
of the future results of operations of the combined companies.
On December 13, 1993, pursuant to a Joint Venture Agreement
dated November 3, 1993 and a Partnership Agreement dated December 13, 1993,
by and between DRS Systems Management Corporation, a wholly-owned
subsidiary of the Company, and Laurel Technologies, Inc. ("Laurel") of
Johnstown, Pennsylvania, the Company entered into a partnership with Laurel
(the "Partnership") for the purposes of electronic cable and harness
manufacturing, military-quality circuit card assembly and other related
activities. The Company's contribution to the Partnership consisted of
cash, notes and equipment valued at approximately $600,000, representing an
80% controlling interest in the Partnership. As a result, the financial
position of the Partnership has been consolidated with that of the
Company's, and the Consolidated Statements of Earnings include the
operations of Laurel from December 13, 1993. The related minority interest
in the Partnership has been included in Other Liabilities and Other Income,
Net, respectively, in the Company's consolidated financial statements for
the periods ended March 31, 1995 and 1994.
The Company also made one other asset acquisition in December
1993 which was not significant to the Company's consolidated financial
statements.
On November 17, 1994, Precision Echo, Inc., a wholly-owned
subsidiary of the Company, acquired, through its wholly-owned subsidiary
("Precision Echo"), the net assets of Ahead Technology Corporation
("Ahead"), pursuant to an Asset Purchase Agreement dated October 28, 1994.
Under the terms of the Asset Purchase Agreement, Precision Echo paid, on
the date of acquisition, approximately $1,100,000 for the net assets of
Ahead. In addition, Precision Echo entered into a Covenant and Agreement
Not to Compete ("Covenant"), dated October 28, 1994, with the chairman of
the board of Ahead. Under the terms of the Covenant, the total cash
consideration to be paid by Precision Echo consisted of approximately
$400,000 payable at the acquisition date, and an additional $540,000
payable in equal monthly installments over a period of five years from the
acquisition date. Ahead, located in Los Gatos, California, designs and
manufactures a variety of consumable magnetic head products used in the
production of computer disk drives. It products include burnish heads,
glide heads and specialty test heads.
The acquisition has been accounted for using the purchase
method of accounting and, therefore, Ahead's financial statements are
included in the consolidated financial statements of the Company from the
date of acquisition. The excess of cost over the estimated fair value of
net assets acquired was approximately $940,000 and will be amortized on a
straight-line basis over five years, or approximately $188,000 annually.
The financial position and results of operations of Ahead were not
significant to those of the Company's at the date of acquisition.
NOTE 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth unaudited quarterly financial
information for the fourth quarter of fiscal 1994, each quarter of fiscal
1995 and the first, second and third quarters of fiscal 1996:
============================================================================
First Quarter Second Quarter
------------------------ ------------------------
1996 1995 1996 1995
------------ ------------ ------------ -----------
Revenues.......... $ 17,279,000 $ 16,012,000 $ 22,786,000 $ 15,650,000
Operating
Income............ $ 1,314,000 $ 1,076,000 $ 1,844,000 $ 1,180,000
Income
Taxes............. $ 420,000 $ 382,000 $ 584,000 $ 335,000
Net Earnings...... $ 656,000 $ 508,000 $ 915,000 $ 570,000
Net Earnings per
Share............. $ .12 $ .10 $ .16 $ .12
============================================================================
============================================================================
Third Quarter Fourth Quarter
------------------------- --------------------------
1996 1995 1995 1994
----------- ------------ ------------ ----------
Revenues........... $ 25,563,000 $ 15,742,000 $ 22,526,000 $ 22,451,000
Operating
Income............. $ 2,181,000 $ 1,005,000 $ 1,833,000 $ 1,275,000
Income
Taxes.............. $ 590,000 $ 425,000 $ 510,000 $ 413,000
Net Earnings....... $ 924,000 $ 634,000 $ 892,000 $ 617,000
Net Earnings per
Share.............. $ .16 $ .13 $ .16 $ .12
Primary and fully diluted net earnings per share amounts are
the same for each of the periods presented above.
NOTE 13. SUBSEQUENT EVENTS AND OTHER MATTERS (UNAUDITED)
On July 5, 1995 (the "OMI Closing Date"), Photronics Corp., a
New York corporation and a wholly-owned subsidiary of the Company
("Photronics Corp."), acquired (through OMI Acquisition Corp. ("OMI"), a
Delaware corporation and a wholly-owned subsidiary of Photronics Corp.),
substantially all of the assets of Opto Mechanik, Inc. ("Opto"), a Delaware
corporation, pursuant to an Agreement for Acquisition of Assets dated May
24, 1995, as amended July 5, 1995, between Photronics Corp. and Opto (the
"OMI Agreement"), and approved by the United States Bankruptcy Court for
the Middle District of Florida on June 23, 1995. OMI, now located in Palm
Bay, Florida, designs and manufactures electro-optical sighting and
targeting systems used primarily in military fire control devices and in
various weapons systems.
Pursuant to the OMI Agreement, the Company paid a total of
$5,450,000 consisting of (i) $1,150,000 in cash to PNC Bank, Kentucky, Inc.
("PNC"), (ii) a note to PNC in the principal amount of $1,450,000 payable
in forty eight (48) equal monthly installments of principal and interest
commencing with the first day of the month subsequent to the OMI Closing
Date (the "PNC Note"), (iii) $2,550,000 in cash to MetLife Capital
Corporation and (iv) a note in the principal amount of $300,000 to Opto
payable in six (6) equal monthly installments of principal and interest
commencing on August 5, 1995 (the "Opto Note"). The PNC Note bears interest
at a floating rate equal to the lesser of (i) PNC's stated prime interest
rate plus 0.5% or (ii) the prime rate as reported by the Wall Street
Journal plus 0.5%. The Opto Note bears interest at a rate of 9.5% per
annum. Professional fees and other costs associated with the acquisition
were capitalized as part of the total purchase price. Total cash
consideration paid in the acquisition was obtained from the Company's
working capital.
The acquisition of the assets of Opto has been accounted for
under the purchase method. The operating results of OMI, the acquiring
corporation, have been included in the Company's reported operating results
since the date of acquisition. The cost of the acquisition has been
allocated on the basis of the estimated fair market value of the assets
acquired and the liabilities assumed.
On September 29, 1995 (the "Debenture Closing Date"), the
Company issued $20,000,000 in aggregate principal amount of the Company's
9% Senior Subordinated Convertible Debentures due 2003 (the "Senior
Subordinated Convertible Debentures") pursuant to a private placement. Net
proceeds from the private placement of these Senior Subordinated
Convertible Debentures were approximately $19,000,000. On November 3, 1995,
the Company issued an additional $5,000,000 in aggregate principal amount
of the Senior Subordinated Convertible Debentures, upon exercise of the
over-allotment option pursuant to the Purchase Agreement between the
Company and Forum Capital Markets L.P. ("Forum") , dated September 22,
1995. Net proceeds from the exercise of the over-allotment option were
approximately $4,750,000. Pursuant to the related Registration Rights
Agreement dated September 22, 1995 between the Company and Forum, acting on
behalf of holders of the Senior Subordinated Convertible Debentures (the
"Registration Rights Agreement"), the Company has agreed to file, within
ninety (90) days after the Debenture Closing Date, a shelf registration
statement relating to the Senior Subordinated Convertible Debentures and
the shares of Common Stock which are issuable from time to time upon
conversion of the Senior Subordinated Convertible Debentures, and to cause
the shelf registration statement to become effective within one hundred
fifty (150) days after the Debenture Closing Date. In addition, the Company
has agreed to use its reasonable best efforts to keep the shelf
registration statement effective until at least the third anniversary of
the issuance of the Senior Subordinated Convertible Debentures. The Company
filed a Registration Statement on Form S-1 (No. 33-64641) with the
Securities and Exchange Commission (the "Commission"), pursuant to the
terms of the Registration Rights Agreement. In connection with these
transactions, the Company expects to incur approximately $625,000 of
professional fees and other costs. These costs, together with Forum's
commissions in connection with the private placement of the Senior
Subordinated Convertible Debentures, will be amortized ratably through the
maturity date of the Senior Subordinated Convertible Debentures. <R/>
The Company's Bonds are supported by an irrevocable, direct-pay
letter of credit in an amount equal to the principal balance plus interest
thereon for 45 days. At December 31, 1995, the contingent liability of the
Company as guarantor under the letter of credit was approximately
$1,930,000. The Company has collateralized the letter of credit with
accounts receivable and has also agreed to certain financial covenants,
including the maintenance of: (i) a certain minimum ratio of consolidated
tangible net worth to total debt (the "Debt Ratio"), (ii) a certain minimum
quarterly ratio of earnings before interest and taxes to interest (the
"Interest Ratio"), and (iii) a certain minimum balance of billed and
unbilled accounts receivable ("Eligible Receivables"). At December 31,
1995, the covenants required: (i) a Debt Ratio of 0.6:1, (ii) an Interest
Ratio of 1.5:1 and (iii) Eligible Receivables of $2,500,000. As a result of
the issuance of $25,000,000 aggregate principal amount of the Senior
Subordinated Convertible Debentures on September 29, 1995, the Debt Ratio
at December 31, 1995 was 0.4:1. The Company has obtained a waiver,
renewable quarterly, from the bank of the required debt ratio and is in
compliance with all covenants under the letter of credit.
On February 6, 1996, pursuant to a Joint Venture Agreement,
dated February 6, 1996, by and among DRS/MS, Inc. ("DRS/MS"), a
wholly-owned subsidiary of the Company, Universal Sonics Corporation
("Universal Sonics"), a New Jersey corporation, Ron Hadani, Howard Fidel
and Thomas S. Soulos, and a Partnership Agreement, dated February 6, 1996,
by and between DRS/MS and Universal Sonics, the Company entered into a
partnership with Universal Sonics (the "Partnership") for the purpose of
developing, manufacturing and marketing medical ultrasound imaging
equipment. The Company's contribution to the Partnership consisted of
$400,000 in cash and certain managerial expertise and manufacturing
capabilities, representing a 90% interest in the Partnership.
On February 9, 1996, Precision Echo acquired (through Ahead
Technology Acquisition Corporation ("Ahead Acquisition"), a Delaware
corporation and a wholly-owned subsidiary of Precision Echo), certain
assets and assumed certain liabilities (principally, obligations under
property leases) of Mag-Head Engineering Company, Inc. ("Mag-Head"), a
Minnesota corporation, pursuant to an Asset Purchase Agreement, dated as of
February 9, 1996, by and among Mag-Head and Ahead Acquisition for
approximately $400,000 in cash. Mag-Head produces audio and flight recorder
heads.
On February 7, 1996, the Board of Directors of the Company
approved and recommended for submission to the stockholders of the Company
by a majority vote the consideration and approval of an Amended and
Restated Certificate of Incorporation (the "Restated Certificate"), which
amended and restated the Company's certificate (i) to effect a
reclassification (the"Reclassification") of each share of Class A Common
Stock and each share of Class B Common Stock into one share of common
stock, par value $.01 per share (the "Common Stock"), of the Company, (ii)
to provide that action by the stockholders may be taken only at a duly
called annual or special meeting, and not by written consent and (iii) to
provide that the stockholders of the Company would have the right to make,
adopt, alter, amend, change or repeal the By-Laws of the Company only upon
the affirmative vote of not less than 662/3% of the outstanding capital
stock of the Company entitled to vote thereon. On March 26, 1996, the
stockholders approved the Restated Certificate. The Restated Certificate
was filed with the Secretary of State of the State of Delaware and became
effective April 1, 1996. As a result of the Reclassification, the Senior
Subordinated Convertible Debentures and the 1998 Debentures are convertible
into shares of Common Stock and each option issued or issuable pursuant to
the Company's stock option plans (See Note 9) are exercisable for an equal
number of shares of the Common Stock. <R/>
On March 28, 1996, the Company entered into an Employment,
Non-Competition and Termination Agreement (the "Newman Agreement") with
Leonard Newman. Pursuant to the Newman Agreement, Mr. Newman received a
lump sum payment of approximately $2.0 million. Under the terms of the
Newman Agreement, Mr. Newman has agreed to provide consulting services,
as required from time to time, to the Company for a five year period and
has also agreed not to compete with the Company during this same period.
This agreement supersedes a previous deferred compensation agreement
with Mr. Newman. <R/>
In March 1996, Mr. Leonard Newman and certain members of his
immediate family sold an aggregate of 885,924 shares of Common Stock to a
buyer, acting as an investment adviser to several accounts. In connection
with such sale, the Company entered into a registration rights agreement
with such buyer to assist in facilitating such sale. The Company has agreed
to file and cause to become effective a registration statement with the
Securities and Exchange Commission upon demand, at its expense, relating to
such shares for future sale by such buyer.
<R/>
NO PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT
CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS,
AND ANY INFORMATION OR $25,000,000
REPRESENTATION NOT CONTAINED OR
INCORPORATED BY REFERENCE
HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY DIAGNOSTIC/RETRIEVAL
THE COMPANY OR ANY UNDERWRITER. SYSTEMS, INC.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY
SECURITY OTHER THAN THE
REGISTERED SECURITIES TO WHICH 9% SENIOR SUBORDINATED CONVERTIBLE
IT RELATES OR AN OFFER TO ANY DEBENTURES DUE 2003
PERSON IN ANY JURISDICTION
WHERE SUCH OFFER WOULD BE
UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY _______________
IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE PROSPECTUS
COMPANY SINCE THE DATE HEREOF. ______________
_____________
TABLE OF CONTENTS
Page
Available Information . . . 2
Prospectus Summary . . . . 3
Risk Factors . . . . . . . 7
The Company . . . . . . . . 11
Use of Proceeds . . . . . . 13
Capitalization . . . . . . 13
Market Prices of Capital
Stock . . . . . . . . . 15
Dividend Policy . . . . . 15
Selected Consolidated
Financial Data . . . . 16
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations . . . . . . 18
Business . . . . . . . . 27
Management . . . . . . . 39
Security Ownership . . . 46
Certain Relationships and
Related Transactions . . 48
Description of the
Debentures . . . . . . . 49
Description of 1998
Debentures . . . . . . . 70
Description of Capital
Stock . . . . . . . . . 71
Plan of Distribution . . 73
Selling Security Holders 75
Legal Matters . . . . . . 77
Experts . . . . . . . . . 77
Index to Financial , 1996
Statements . . . . . . . F-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses (other than
underwriting discounts and commissions) payable by the Company in
connection with the sale of the Debentures and the Common Stock
being registered. All amounts (other than the registration fee)
are estimated.
Item Amount
Securities and Exchange Commission
registration fee . . . . . . . . . . $ 8,620.69
AMEX listing fee . . . . . . . . . . . 22,500.00
Blue Sky fees and expenses . . . . . . 2,500.00
Accountants' fees and expenses . . . . 120,000.00
Legal fees and expenses . . . . . . . 350,000.00
Trustee's fees . . . . . . . . . . . . 12,500.00
Transfer agent and registrar fees
and expenses . . . . . . . . . . . . 2,500.00
Miscellaneous . . . . . . . . . . . . 106,379.31
Total . . . . . . . . . . . . . . $625,000.00
_____________________________________
ITEM 14. Indemnification of Directors and Officers.
Set forth below is a description of certain provisions of
the Company's Restated Certificate of Incorporation, as amended
(the "Restated Certificate of Incorporation"), the Amended and
Restated Bylaws (the "Bylaws") of the Company and the General
Corporation Law of the State of Delaware, as such provisions
relate to the indemnification of the directors and officers of
the Company. This description is intended only as a summary and
is qualified in its entirety by reference to the Restated
Certificate of Incorporation, Bylaws, and the General Corporation
Law of the State of Delaware.
The Company's Restated Certificate of Incorporation provides
that the Company shall, to the full extent permitted by Sections
102 and 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto and eliminates the
personal liability of its directors to the full extent permitted
by Section 102(b)(7) of the General Corporation Law of the State
of Delaware, as amended from time to time.
Section 145 of the General Corporation Law of the State of
Delaware permits a corporation to indemnify its directors and
officers against expenses (including attorney's fees), judgments,
fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or
proceeding brought by third parties, if such directors or
officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in
connection with the defense or settlement of an action or suit,
and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made if such person shall
have been adjudged liable for negligence or misconduct in the
performance of his respective duties to the corporation, although
the court in which the action or suit was brought may determine
upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Section 102(b)(7) of the General Corporation Law of the
State of Delaware provides that a corporation may eliminate or
limit the personal liability of a director to the corporation or
its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach
of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision
shall eliminate or limit the ability of a director for any act or
omission occurring prior to the date when such provision becomes
effective.
ITEM 15. Recent Sales of Unregistered Securities.
Other than the Debenture Offering, there were no recent
sales by the Registrant of securities which were not registered
under the Securities Act.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Certain of the following exhibits, designated with an
asterisk (*), have been previously filed and certain of the
following exhibits, designated with two asterisks (**), are filed
herewith. The exhibits not so designated have been previously
filed with the Commission and are incorporated herein by
reference to the documents indicated in brackets following the
descriptions of such exhibits.
Exhibit Description
No.
*1.1 - Purchase Agreement, dated September
22, 1995 between the Company and
Forum Capital Markets L.P.
3.1 - Restated Certificate of
Incorporation of the Company
[Registration Statement No. 2-
70062-NY, Amendment No. 1, Exhibit
2(a)]
3.2 - Certificate of Amendment of the
Restated Certificate of
Incorporation of the Company, as
filed July 7, 1983 [Registration
Statement on Form 8-A of the
Company, dated July 13, 1983,
Exhibit 2.2]
3.3 - Composite copy of the Restated
Certificate of Incorporation of the
Company, as amended [Registration
Statement No. 2-85238, Exhibit 3.3]
**3 .4 - Amended and Restated Certificate of
Incorporation of the Company, as
filed April 1, 1996
3.5 - By-laws of the Company, as amended
to November 7, 1994 [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 3.4]
3.6 - Certificate of Amendment of the
Certificate of Incorporation of
Precision Echo Acquisition Corp.,
as filed March 10, 1995 [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 3.5]
3.7 - Form of Advance Notice By-Laws of
the Company [Form 10-Q, quarter
ended December 31, 1995, File No.
1-8533, Exhibit 3]
**3.8 - Amended and Restated By-Laws of the
Company, as of April 1, 1996
*4.1 - Indenture, dated as of September
22, 1995, between the Company and
The Trust Company of New Jersey, as
Trustee, in respect of the
Company's 9% Senior Subordinated
Convertible Debentures Due 2003
*4.2 - Form of 9% Senior
Subordinated Convertible
Debenture Due 2003 (included
as part of Exhibit 4.1)
*4.3 - Registration Rights Agreement,
dated as of September 22, 1995
between the Company and Forum
Capital Markets L.P.
4.4 - Indenture, dated as of
August 1, 1983, between the
Company and Bankers Trust
Company, as Trustee [Form
10-Q, quarter ended
September 30, 1983, File No.
1-8533, Exhibit 4.2]
4.5 - Indenture of Trust, dated December
1, 1991, among Suffolk County
Industrial Development Agency,
Manufacturers and Traders Trust
Company, as Trustee and certain
bond holders [Form 10-K, fiscal
year ended March 31, 1992, File No.
1-8533, Exhibit 4.2]
4.6 - Reimbursement Agreement, dated
December 1, 1991, among Photronics
Corp., the Company and Morgan
Guaranty Trust Company of New York
[Form 10-K, fiscal year ended March
31, 1992, File No. 1-8533, Exhibit
4.3]
**4.7 - Registration Rights Agreement,
dated as of March 27, 1996, by and
between the Company and Palisade
Capital Management L.L.C., acting
as investment adviser to the
accounts named therein
**4.8 - First Supplemental Indenture, dated
as of April 1, 1996, to Indenture,
dated as of September 22, 1995,
between the Company and The Trust
Company of New Jersey, as Trustee
*5 .1 - Opinion of Skadden, Arps, Slate,
Meagher & Flom
10.1 - Stock Purchase Agreement, dated as
of August 6, 1993, among TAS
Acquisition Corp., Technology
Applications and Service Company,
Paul G. Casner, Jr. and Terrence L.
DeRosa [Form 10-Q, quarter ended
December 31, 1993, File No. 1-8533,
Exhibit 6(a)(1)]
10.2 - Waiver Letter, dated as of
September 30, 1993, among TAS
Acquisition Corp., Technology
Applications and Service Company,
Paul G. Casner, Jr. and Terrence L.
DeRosa [Form 10-Q, quarter ended
December 31, 1993, File No. 1-8533,
Exhibit 6(a)(2)]
10.3 - Joint Venture Agreement, dated as
of November 3, 1993, by and between
DRS Systems Management Corporation
and Laurel Technologies, Inc. [Form
10-Q, quarter ended December 31,
1993, File No. 1-8533, Exhibit
6(a)(3)]
10.4 - Waiver Letter, dated as of December
13, 1993, by and between DRS
Systems Management Corporation and
Laurel Technologies, Inc. [Form 10-
Q, quarter ended December 31, 1993,
File No. 1-8533, Exhibit 6(a)(4)]
10.5 - Partnership Agreement, dated
December 13, 1993, by and between
DRS Systems Management Corporation
and Laurel Technologies, Inc. [Form
10-Q, quarter ended December 31,
1993, File No. 1-8533, Exhibit
6(a)(5)]
10.6 - Lease, dated June 28, 1979, between
the Company and J.L. Williams &
Co., Inc. ("Williams")
[Registration Statement No. 2-
70062-NY, Exhibit 9(b)(4)(i)]
10.7 - Lease, dated as of June 1, 1983,
between LDR Realty Co. and the
Company [Form 10-K, fiscal year
ended March 31, 1984, File No. 1-
8533, Exhibit 10.7]
10.8 - Renegotiated Lease, dated June 1,
1988, between LDR Realty Co. and
the Company [Form 10-K, fiscal year
ended March 31, 1989, File No. 1-
8533, Exhibit 10.8]
10.9 - Lease, dated July 20, 1988, between
Precision Echo, Inc. and Bay 511
Corporation [Form 10-K, fiscal year
ended March 31, 1991, File No. 1-
8533, Exhibit 10.9]
10 .10 - Amendment to Lease, dated July 1,
1993, between Precision Echo, Inc.
and Bay 511 Corporation [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.12]
*10.11 - Second Amendment to Lease,
dated October 17, 1995
between Precision Echo, Inc.
and Bay 511 Corporation
10.12 - Lease Modification Agreement, dated
February 22, 1994, between
Technology Applications and Service
Company and Atlantic Real Estate
Partners II [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.13]
10.13 - Amendment to Lease Modification,
dated June 1, 1994, between
Technology Applications and Service
Company and Atlantic Estate
Partners II [Form 10-K, fiscal year
ended March 31, 1995, File No. 1-
8533, Exhibit 10.11]
10.14 - Triple Net Lease, dated October 22,
1991, between Technology
Applications and Service Company
and Marvin S. Friedberg [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.14]
10.15 - Lease, dated November 10,
1993, between DRS Systems
Management Corp. and
Skateland Roller Rink, Inc.
[Form 10-K, fiscal year
ended March 31, 1994, File
No. 1-8533, Exhibit 10.17]
10.16 - Lease, dated March 23, 1992,
between Ahead Technology
Corporation and Vasona Business
Park [Form 10-K, fiscal year ended
March 31, 1995, File No. 1-8533,
Exhibit 10.15]
10.17 - Amendment to Lease, dated May 21,
1992, between Ahead Technology
Corporation and Vasona Business
Park [Form 10-K, fiscal year ended
March 31, 1995, File No. 1-8533,
Exhibit 10.16]
10.18 - Revision to Lease Modification,
dated August 25, 1992, between
Ahead Technology Corporation and
Vasona Business Park [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 10.17]
10.19 - Lease, dated January 13,
1995, between the Company
and Sammis New Jersey
Associates [Form 10-K,
fiscal year ended March 31,
1995, File No.-8533, Exhibit
10.18]
10.20 - Memorandum of Understanding, dated
March 23, 1995, between Laurel
Technologies and West Virginia Air
Center [Form 10-K, fiscal year
ended March 31, 1995, File No. 1-
8533, Exhibit 10.19]
10.21 - 1991 Stock Option Plan of the
Company [Registration Statement No.
33-42886, Exhibit 28.1]
10.22 - Contract No. N00024-92-C-6102,
dated September 28, 1992, between
the Company and the Navy [Form 10-
K, fiscal year ended March 31,
1993, File No. 1-8533, Exhibit
10.45]
10.23 - Modification No. P00005, dated
August 24, 1994, to Contract No.
N00024-92-C-6102 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.22]
10.24 - Modification No. P00006, dated
September 7, 1994, to Contract No.
N00024-92-C6102 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.23]
10.25 - Contract No. N00024-92-C-6308,
dated April 1, 1992, between the
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1993,
File No. 1-8533, Exhibit 10.46]
10.26 - Modification No. P00001, dated July
30, 1992, to Contract No. N00024-
92-C-6308 [Form 10-K, fiscal year
ended March 31, 1993, File No. 1-
8533, Exhibit 10.47]
10.27 - Modification No. P00002, dated
September 25, 1992, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.48]
10.28 - Modification No. P00003, dated
October 22, 1992, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.49]
10.29 - Modification No. P00004, dated
February 24, 1993, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.50]
10.30 - Modification No. P00005, dated June
11, 1993, to Contract No. N00024-
92-C-6308 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.26]
10.31 - Modification No. P00006, dated
March 26, 1993, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.51]
10.32 - Modification No. P00007, dated May
3, 1993, to Contract No. N00024-92-
C-6308 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.28]
10.33 - Modification No. PZ0008, dated June
11, 1993, to Contract No. N00024-
92-C-6308 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.29]
10.34 - Contract No. N39998-94-C-2228,
dated November 30, 1993, between
the Company and the Navy [Form 10-
K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.30]
10.35 - Order No. 87KA-SG-51484, dated
December 10, 1993, under Contract
No. N00024-93-G-6336, between the
Company and Westinghouse Electric
Corporation Oceanic Division [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.31]
10.36 - Purchase Order Change Notice Order
No. 87KA-SX-51484-P, dated April
21, 1994, under Contract No.
N00024-93-G-6336, between the
Company and Westinghouse Electric
Corporation Oceanic Division [Form
10-K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit
10.35]
10.37 - Letter Subcontract No. 483901(L),
dated February 18, 1994, under
Contract No. N00024-94-D-5204,
between the Company and Unisys
Government Systems Group [Form 10-
K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.32]
10.38 - Subcontract No. 483901(D), dated
June 24, 1994, under Contract No.
N00024-94-D-5204, between the
Company and Unisys Corporation
Government Systems Group [Form 10-
K, fiscal year ended March 31,
1995, File No. 1-8533,
Exhibit 10.37]
10.39 - Contract No. N00019-90-G-0051,
dated March 1, 1990, between
Precision Echo, Inc. and the Navy
[Form 10-K, fiscal year ended March
31, 1994, File No. 1-8533, Exhibit
10.35]
10.40 - Amendment 1A, dated February 26,
1992, to Contract No. N00019-90-G-
0051 [Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
Exhibit 10.36]
10.41 - Amendment 1B, dated April 23, 1993,
to Contract No. N00019-90-G-0051
[Form 10-K, fiscal year ended March
31, 1994, File No. 1-8533, Exhibit
10.37]
10.42 - Contract No. N00019-93-C-0041,
dated January 29, 1993, between
Photronics Corp. and the Navy [Form
10-K, fiscal year ended March 31,
1993, File No. 1-8533, Exhibit
10.54]
10.43 - Modification No. P00001, dated
March 29, 1993, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.39]
10.44 - Modification No. PZ0002, dated
November 12, 1993, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.40]
10.45 - Modification No. P00003, dated
February 1, 1994, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.41]
*10.46 - Modification No. P00004, dated
January 29, 1993, to Contract No.
N00019-93-C-0041 [P]
*10.47 - Modification No. P00005, dated
January 29, 1993, to Contract No.
N00019-93-C-0041 [P]
10.48 - Contract No. N00019-93-C-0202,
dated August 30, 1993, between
Photronics Corp. and the Navy [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.42]
10.49 - Modification No. P00001, dated
March 30, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.43]
10.50 - Modification No. P00002, dated
April 29, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.44]
10.51 - Modification No. P00003, dated
August 9, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.55]
10.52 - Modification No. P00004, dated
March 30, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.56]
*10.53 - Modification No. P00005, dated
August 30, 1993, to Contract No.
N00019-93-C-0202 [P]
*10.54 - Modification No. P00006, dated
August 30, 1993, to Contract No.
N00019-93-C-0202 [P]
10.55 - Contract No. N00024-93-C-5204,
dated November 18, 1992, between
Technology Applications and Service
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.53]
10.56 - Modification No. P00001, dated May
6, 1993, to Contract No. N00024-93-
C-5204 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.54]
10.57 - Modification No. P00002, dated
August 24, 1993, to Contract No.
N00024-93-C-5204 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.55]
10.58 - Modification No. PZ0003, dated
September 30, 1993, to Contract No.
N00024-93-C-5204 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.56]
10.59 - Contract No. N00174-94-D-0006,
dated February 17, 1994, between
Technology Applications & Service
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.57]
10.60 - Modification No. P00001,
dated March 7, 1994, to
Contract No. N00174-94-D-
0006 [Form 10-K, fiscal year
ended March 31, 1994, File
No. 1-8533, Exhibit 10.58]
10.61 - Modification No. P00003, dated May
19, 1994, to Contract No. N00174-
94-D-0006 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.59]
10.62 - Purchase Order No. N538010, dated
March 28, 1994, between Laurel
Technologies, Inc. and Short
Brothers PLC [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.60]
10.63 - Purchase Order No. 2285, dated June
6, 1994, between Photronics Corp.
and International Precision
Products N.V. [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.73]
10.64 - Amendment No. 1, dated December 1,
1994, to Purchase Order No. 2285
[Form 10-K, fiscal year ended March
31, 1995, File No. 1-8533, Exhibit
10.74]
10.65 - Purchase Order No. 2286, dated
June 6, 1994, between Photronics
Corp. and International Precision
Products N.V. [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.75]
10.66 - Purchase Order No. CN74325, dated
December 14, 1994, between
Precision Echo and Lockheed
Aeronautical Systems Company [Form
10-K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit
10.76]
*10.67 - Amendment, dated February 14,
1995, to Purchase Order No.
CN74325, between Precision Echo and
Lockheed Aeronautical Systems
Company [P]
*10.68 - Amendment, dated April 4, 1995, to
Purchase Order No. CN74325, between
Precision Echo and Lockheed
Aeronautical Systems Company [P]
*10.69 - Amendment, dated June 20, 1995, to
Purchase Order No. CN74325, between
Precision Echo and Lockheed
Aeronautical Systems Company [P]
*10.70 - Amendment, dated September 28,
1995, to Purchase Order No.
CN74325, between Precision Echo and
Lockheed Aeronautical Systems
Company [P]
*10.71 - Amendment, dated November 7, 1995,
to Purchase Order No. CN74325
between Precision Echo and Lockheed
Aeronautical Systems Company [P]
10.72 - Contract No. N39998-94-C-2239,
dated July 26, 1993, between the
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 10.77]
10.73 - Contract No. N00019-95-C-0057,
dated December 16, 1994, between
Precision Echo, Inc. and Naval Air
Systems Command [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.78]
10.74 - Employment, Non-Competition and
Termination Agreement, dated July
20, 1994, between
Diagnostic/Retrieval Systems, Inc.
and David E. Gross [Form 10-Q,
quarter ended June 30, 1994, File
No. 1-8533, Exhibit 1]
10.75 - Stock Purchase Agreement, dated as
of July 20, 1994, between
Diagnostic/Retrieval Systems, Inc.
and David E. Gross [Form 10-Q,
quarter ended June 30, 1994, File
No. 1-8533, Exhibit 2]
10.76 - Asset Purchase Agreement, dated
October 28, 1994, Acquisition by PE
Acquisition Corp., a subsidiary of
Precision Echo, Inc. of all of the
Assets of Ahead Technology
Corporation [Form 10-Q, quarter
ended December 31, 1994, File No.
1-8533, Exhibit 1]
10 .77 - Amendment to Agreement for
Acquisition of Assets, dated July
5, 1995, between Photronics Corp.
and Opto Mechanik, Inc. [Form 8-K,
Amendment No. 1, July 5, 1995, File
No. 1-8533, Exhibit 1]
*10.78 - Contract No. N00421-95-D-1067,
dated September 30, 1995, between
the Company and the Navy [P]
*10.79 - Lease, dated August 17, 1995,
between Ahead Technology, Inc. and
South San Jose Interests
*10.80 - Contract No. DAAH01-95-C-0308,
dated July 21, 1995, between
Photronics Corp. and the Army [P]
*10.81 - Lease, dated May 25, 1995, between
Technology Applications and Service
Company and Sports Arena Village,
Ltd., L.P.
*10.82 - Contract No. 2025, dated December
20, 1993, between Opto Mechanik,
Inc. and the Government of Israel,
Ministry of Defense [P]
*10.83 - Amendment to Contract No. 2025,
dated August 31, 1995 between Opto
Mechanik, Inc. and the Government
of Israel, Ministry of Defense [P]
*10.84 - Lease, dated August, 1995, by and
between OMI Acquisition Corp. and
Fred E. Sutton and Harold S. Sutton
d/b/a Sutton Properties
*10.85 - Lease, dated August, 1995, by and
between OMI Acquisition Corp and
Fred E. Sutton and Harold S. Sutton
d/b/a Sutton Properties
*10.86 - Lease, dated August, 1995, by and
between OMI Acquisition Corp. and
Fred E. Sutton and Harold S. Sutton
d/b/a Sutton Properties
*10 .87 - Memorandum of Lease, dated August,
1995, by and between OMI
Acquisition Corp. and Fred E.
Sutton and Harold S. Sutton d/b/a
Sutton Properties
**10.88 - Master Lease, dated August 31,
1995, between OMI Acquisition Corp.
and General Electric Capital Corp.
**10.89 - Schedule No. 001, dated September
1, 1995, to Master Lease between
OMI Acquisition Corp. and General
Electric Capital Corp.
*10.90 - Schedule No. 002, dated October
20, 1995, to Master Lease between
OMI Acquisition Corp. and General
Electric Capital Corp.
*10.91 - Joint Venture Agreement, dated as
of February 6, 1996, by and among
DRS/MS, Inc., Universal Sonics
Corporation, Ron Hadani, Howard
Fidel and Thomas S. Soulos
*10.92 - Partnership Agreement, dated as of
February 6, 1996, by and between
DRS/MS, Inc. and Universal Sonics
Corporation
**10.93 - Asset Purchase Agreement, dated as
of February 9, 1996, by and among
Mag-Head Engineering Company, Inc.
and Ahead Technology Acquisition
Corporation, a subsidiary of
Precision Echo, Inc.
**10.94 - Employment, Non-Competition and
Termination Agreement, dated March
28, 1996, between the Company and
Leonard Newman
11.1 - Computation of earnings (loss) per
share [Form 10-K, fiscal year ended
March 31, 1995, File No. 1-8533,
Exhibit 11]
11.2 - Computation of earnings per share
[Form 10-Q, quarter ended December
31, 1995, File No. 1-8533, Exhibit
11]
13.1 - 1994 Annual Report to Stockholders
(for the fiscal year ended March
31, 1994). Except for the portions
of the Annual Report which are
incorporated expressly by reference
in the Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
this Annual Report was furnished
for the information of the
Commission and is not to be deemed
"filed" as part of the report [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit 13]
22.1 - List of subsidiaries of the Company
[Form 10-K, fiscal year ended March
31, 1995, File No. 1-8533, Exhibit
21]
**23.1 - Accountants' Consent and Report on
Schedules
* 23.2 - Consent of Skadden, Arps, Slate,
Meagher & Flom, contained in their
opinion filed as Exhibit 5.1
*24.1 - Power of Attorney (included in
signature page to Registration
Statement)
*25.1 - Form T-1 Statement of Eligibility
and Qualification of the Trustee
under the Trust Indenture Act of
1939
________________________
* Previously filed.
** Filed herewith.
(b) Financial Statements:
Financial Statements filed as part of this Registration
Statement are listed in the Index to Financial Statements on page
F-1.
(c) Financial Statement Schedules:
Consolidated Financial Statement Schedules as part of
this Registration Statement are listed in the Index to the
Consolidated Financial Schedules on page S-1.
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold as of the termination of the offering.
The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as a part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES AND POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THE REGISTRANT HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO.
1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK ON, MAY 10, 1996.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
By: /s/Mark S. Newman
_______________________________
Mark S. Newman
Chairman of the Board, President,
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
Signature Title Date
/s/Mark S. Newman President,Chief Executive May 10, 1996
____________________ Officer, Chairman of the
Mark S. Newman Board and Director (Principal
Executive Officer)
/s/Nancy R. Pitek Controller, Treasurer May 10, 1996
_____________________ and Secretary
Nancy R. Pitek (Principal Financial
Officer and Principal
Accounting Officer)
* Vice President, President of May 10, 1996
_____________________ Precision Echo and Director
Stuart F. Platt
*
_____________________ Director May 10, 1996
Leonard Newman
* Director May 10, 1996
_____________________
Theodore Cohn
* Director May 10, 1996
______________________
Donald C. Fraser
* Director May 10, 1996
______________________
Mark N. Kaplan
* Director May 10, 1996
______________________
Jack Rachleff
*By /s/Mark S. Newman
___________________
Mark S. Newman
Attorney-in-Fact
DIAGNOSTIC/RETRIEVAL
SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED
FINANCIAL STATEMENT SCHEDULES
Years ended March 31, 1995, 1994 and 1993
Page
Schedule II. Valuation and Qualifying Accounts . . . . . S-2
<TABLE>
<CAPTION>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Schedule II. Valuation and Qualifying Accounts
Years Ended March 31, 1995, 1994 and 1993
_________________________________________________________________________________________________________________________________
Col. A. Col. B Col. C Col. D Col. E
_________________________________________________________________________________________________________________________________
Description Balance at Additions (a) Deductions (b) Balance
Beginning of _____________________________ _________________________________ at End of
Period (1) (2) (1) (2) Period
Charged to Charged to Credited to Credited to
Costs and Other Cost and Other
Expenses Accounts - Expenses Accounts -
Describe Describe
<S> <C> <C> <C> <C> <C> <C>
Inventory Reserve
Year ended March 31, 1995 $ 2,409,000 $ 439,000 $ - $ 83,000(d) $ 1,365,000(c) $ 1,400,000
Year ended March 31, 1994 $ 2,620,000 $ 674,000 $ - $ 885,000(e) $ - $ 2,409,000
Year ended March 31, 1993 $ 8,200,000 $ 2,277,000 $ 33,000(c) $7,648,000(d) $ 242,000(c) $ 2,620,000
Losses & Future Costs
Accrued on
Uncompleted Contracts
Year ended March 31, 1995 $ 3,214,000 $ 2,168,000 $ - $ 291,000 $ 536,000(c) $ 4,555,000
Year ended March 31, 1994 $ 3,722,000 $ 1,735,000 $254,000(g) $2,497,000(f) $ - $ 3,214,000
Year ended March 31, 1993 $ 3,835,000 $ 2,665,000 $242,000(c) $2,987,000 $ 33,000(c) $ 3,722,000
OTHER
Year ended March 31, 1995 $ 290,000 $ - $ - $ - $ - $ 290,000
Year ended March 31, 1994 $ 290,000 $ - $ - $ - $ - $ 290,000
Year ended March 31, 1993 $ 290,000 $ - $ - $ - $ - $ 290,000
<FN>
(a) Represents, on a full-year basis, net credits to reserve accounts.
(b) Represents, on a full-year basis, net charges to reserve accounts.
(c) Represents amounts reclassified.
(d) Represents amounts credited to costs and expenses associated with the corresponding write-off of related inventory costs.
(e) Includes $801,000 representing amounts credited to costs and expenses associated with the
corresponding write-off of related inventory costs.
(f) Includes $2,302,000 representing amounts credited to costs and expenses associated with the
corresponding write-off of related inventory costs.
(g) Includes an increase to reserves of $111,000 as a result of business combinations and a
charge of $143,000 to revenues.
</TABLE>
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk
(*), have been previously filed and certain of the following exhibits,
designated with two asterisks (**), are filed herewith. The exhibits
not so designated have been previously filed with the Commission and
are incorporated herein by reference to the documents indicated in
brackets following the descriptions of such exhibits.
Page No.
Exhibit Description in This
No. Filing
*1.1 - Purchase Agreement, dated September
22, 1995 between the Company and
Forum Capital Markets L.P. . . . .
3.1 - Restated Certificate of
Incorporation of the Company
[Registration Statement No. 2-
70062-NY, Amendment No. 1, Exhibit
2(a)]
3.2 - Certificate of Amendment of the
Restated Certificate of
Incorporation of the Company, as
filed July 7, 1983 [Registration
Statement on Form 8-A of the
Company, dated July 13, 1983,
Exhibit 2.2]
3.3 - Composite copy of the Restated
Certificate of Incorporation of the
Company, as amended [Registration
Statement No. 2-85238, Exhibit 3.3]
**3.4 - Amended and Restated Certificate of
Incorporation of the Company, as
filed April 1, 1996 . . . . . . .
3.5 - By-laws of the Company, as amended
to November 7, 1994 [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 3.4]
3.6 - Certificate of Amendment of the
Certificate of Incorporation of
Precision Echo Acquisition Corp.,
as filed March 10, 1995 [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 3.5]
3.7 - Form of Advance Notice By-Laws of
the Company [Form 10-Q, quarter
ended December 31, 1995, File No.
1-8533, Exhibit 3]
**3.8 - Amended and Restated By-Laws of the
Company, as of April 1, 1996 . . .
*4.1 - Indenture, dated as of September
22, 1995, between the Company and
The Trust Company of New Jersey, as
Trustee, in respect of the
Company's 9% Senior Subordinated
Convertible Debentures Due 2003 .
*4.2 - Form of 9% Senior Subordinated Con
vertible Debenture Due 2003
(included as part of Exhibit 4.1)
*4.3 - Registration Rights Agreement,
dated as of September 22, 1995
between the Company and Forum
Capital Markets L.P. . . . . . . .
4.4 - Indenture, dated as of August 1,
1983, between the Company and
Bankers Trust Company, as Trustee
[Form 10-Q, quarter ended September
30, 1983, File No. 1-8533, Exhibit
4.2]
4.5 - Indenture of Trust, dated December
1, 1991, among Suffolk County
Industrial Development Agency,
Manufacturers and Traders Trust
Company, as Trustee and certain
bondholders [Form 10-K, fiscal year
ended March 31, 1992, File No. 1-
8533, Exhibit 4.2]
4.6 - Reimbursement Agreement, dated
December 1, 1991, among Photronics
Corp., the Company and Morgan
Guaranty Trust Company of New York
[Form 10-K, fiscal year ended March
31, 1992, File No. 1-8533, Exhibit
4.3]
**4.7 - Registration Rights Agreement,
dated as of March 27, 1996, by and
between the Company and Palisade
Capital Management L.L.C., acting
as investment adviser to the ac
counts named therein . . . . . . .
**4.8 - First Supplemental Indenture, dated
as of April 1, 1996, to Indenture,
dated as of September 22, 1995,
between the Company and The Trust
Company of New Jersey, as Trustee
*5.1 - Opinion of Skadden, Arps, Slate,
Meagher & Flom . . . . . . . . . .
10.1 - Stock Purchase Agreement, dated as
of August 6, 1993, among TAS
Acquisition Corp., Technology
Applications and Service Company,
Paul G. Casner, Jr. and Terrence L.
DeRosa [Form 10-Q, quarter ended
December 31, 1993, File No. 1-8533,
Exhibit 6(a)(1)]
10.2 - Waiver Letter, dated as of
September 30, 1993, among TAS
Acquisition Corp., Technology
Applications and Service Company,
Paul G. Casner, Jr. and Terrence L.
DeRosa [Form 10-Q, quarter ended
December 31, 1993, File No. 1-8533,
Exhibit 6(a)(2)]
10.3 - Joint Venture Agreement, dated as
of November 3, 1993, by and between
DRS Systems Management Corporation
and Laurel Technologies, Inc. [Form
10-Q, quarter ended December 31,
1993, File No. 1-8533, Exhibit
6(a)(3)]
10.4 - Waiver Letter, dated as of December
13, 1993, by and between DRS
Systems Management Corporation and
Laurel Technologies, Inc. [Form 10-
Q, quarter ended December 31, 1993,
File No. 1-8533, Exhibit 6(a)(4)]
10.5 - Partnership Agreement, dated
December 13, 1993, by and
between DRS Systems
Management Corporation and
Laurel Technologies, Inc.
[Form 10-Q, quarter ended
December 31, 1993, File No.
1-8533, Exhibit 6(a)(5)]
10.6 - Lease, dated June 28, 1979, between
the Company and J.L. Williams &
Co., Inc. ("Williams")
[Registration Statement No. 2-
70062-NY, Exhibit 9(b)(4)(i)]
10.7 - Lease, dated as of June 1, 1983,
be tween LDR Realty Co. and the
Company [Form 10-K, fiscal year
ended March 31, 1984, File No. 1-
8533, Exhibit 10.7]
10.8 - Renegotiated Lease, dated June 1,
1988, between LDR Realty Co. and
the Company [Form 10-K, fiscal year
ended March 31, 1989, File No. 1-
8533, Exhibit 10.8]
10.9 - Lease, dated July 20, 1988,
between Precision Echo, Inc. and
Bay 511 Corporation [Form 10-K,
fiscal year ended March 31, 1991,
File No. 1-8533, Exhibit 10.9]
10.10 - Amendment to Lease, dated July 1,
1993, between Precision Echo, Inc.
and Bay 511 Corporation [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.12]
*10.11 - Second Amendment to Lease, dated
October 17, 1995 between Precision
Echo, Inc. and Bay 511 Corporation
10.12 - Lease Modification Agreement, dated
February 22, 1994, between
Technology Applications and Service
Company and Atlantic Real Estate
Partners II [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.13]
10.13 - Amendment to Lease Modification,
dated June 1, 1994, between
Technology Applications and Service
Company and Atlantic Estate
Partners II [Form 10-K, fiscal year
ended March 31, 1995, File No. 1-
8533, Exhibit 10.11]
10.14 - Triple Net Lease, dated October 22,
1991, between Technology
Applications and Service Company
and Marvin S. Friedberg [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.14]
10.15 - Lease, dated November 10, 1993,
between DRS Systems Management
Corp. and Skateland Roller Rink,
Inc. [Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
Exhibit 10.17]
10.16 - Lease, dated March 23, 1992,
between Ahead Technology
Corporation and Vasona Business
Park [Form 10-K, fiscal year ended
March 31, 1995, File No. 1-8533,
Exhibit 10.15]
10.17 - Amendment to Lease, dated May 21,
1992, between Ahead Technology
Corporation and Vasona Business
Park [Form 10-K, fiscal year ended
March 31, 1995, File No. 1-8533,
Exhibit 10.16]
10.18 - Revision to Lease Modification,
dated August 25, 1992, between
Ahead Technology Corporation and
Vasona Business Park [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 10.17]
10 .19 - Lease, dated January 13, 1995,
between the Company and Sammis New
Jersey Associates [Form 10-K,
fiscal year ended March 31, 1995,
File No.-8533, Exhibit 10.18]
10.20 - Memorandum of Understanding, dated
March 23, 1995, between Laurel
Technologies and West Virginia Air
Center [Form 10-K, fiscal year
ended March 31, 1995, File No. 1-
8533, Exhibit 10.19]
10.21 - 1991 Stock Option Plan of the
Company [Registration Statement No.
33-42886, Exhibit 28.1]
10.22 - Contract No. N00024-92-C-6102,
dated September 28, 1992, between
the Company and the Navy [Form 10-
K, fiscal year ended March 31,
1993, File No. 1-8533, Exhibit
10.45]
10.23 - Modification No. P00005, dated
August 24, 1994, to Contract No.
N00024-92-C-6102 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.22]
10 .24 - Modification No. P00006, dated
September 7, 1994, to Contract No.
N00024-92-C6102 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.23]
10.25 - Contract No. N00024-92-C-6308,
dated April 1, 1992, between the
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1993,
File No. 1-8533, Exhibit 10.46]
10.26 - Modification No. P00001, dated July
30, 1992, to Contract No. N00024-
92-C-6308 [Form 10-K, fiscal year
ended March 31, 1993, File No. 1-
8533, Exhibit 10.47]
10.27 - Modification No. P00002, dated
September 25, 1992, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.48]
10.28 - Modification No. P00003, dated
October 22, 1992, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.49]
10 .29 - Modification No. P00004, dated
February 24, 1993, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.50]
10.30 - Modification No. P00005, dated June
11, 1993, to Contract No. N00024-
92-C-6308 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.26]
10 .31 - Modification No. P00006, dated
March 26, 1993, to Contract No.
N00024-92-C-6308 [Form 10-K, fiscal
year ended March 31, 1993, File No.
1-8533, Exhibit 10.51]
10.32 - Modification No. P00007, dated May
3, 1993, to Contract No. N00024-92-
C-6308 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.28]
10 .33 - Modification No. PZ0008, dated June
11, 1993, to Contract No. N00024-
92-C-6302 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.29]
10.34 - Contract No. N39998-94-C-2228,
dated November 30, 1993, between
the Company and the Navy [Form 10-
K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.30]
10 .35 - Order No. 87KA-SG-51484, dated
December 10, 1993, under Contract
No. N00024-93-G-6336, between the
Company and Westinghouse Electric
Corporation Oceanic Division [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.31]
10.36 - Purchase Order Change Notice Order
No. 87KA-SX-51484-P, dated April
21, 1994, under Contract No.
N00024-93-G-6336, between the
Company and Westinghouse Electric
Corporation Oceanic Division [Form
10-K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit
10.35]
10.37 - Letter Subcontract No. 483901(L),
dated February 18, 1994, under
Contract No. N00024-94-D-5204,
between the Company and Unisys
Government Systems Group [Form 10-
K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.32]
10.38 - Subcontract No. 483901(D), dated
June 24, 1994, under Contract No.
N00024-94-D-5204, between the
Company and Unisys Corporation
Government Systems Group [Form 10-
K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit
10.37]
10.39 - Contract No. N00019-90-G-0051,
dated March 1, 1990, between
Precision Echo, Inc. and the Navy
[Form 10-K, fiscal year ended March
31, 1994, File No. 1-8533, Exhibit
10.35]
10.40 - Amendment 1A, dated February 26,
1992, to Contract No. N00019-90-G-
0051 [Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
Exhibit 10.36]
10.41 - Amendment 1B, dated April 23,
1993, to Contract No. N00019-90-G-
0051 [Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
Exhibit 10.37]
10.42 - Contract No. N00019-93-C-0041,
dated January 29, 1993, between
Photronics Corp. and the Navy [Form
10-K, fiscal year ended March 31,
1993, File No. 1-8533, Exhibit
10.54]
10.43 - Modification No. P00001, dated
March 29, 1993, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.39]
10 .44 - Modification No. PZ0002, dated
November 12, 1993, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.40]
10.45 - Modification No. P00003, dated
February 1, 1994, to Contract No.
N00019-93-C-0041 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.41]
*10.46 - Modification No. P00004, dated
January 29, 1993, to Contract No. P
N00019-93-C-0041 . .
*10.47 - Modification No. P00005, dated
January 29, 1993, to Contract No. P
N00019-93-C-0041 . . . . . . . . .
10.48 - Contract No. N00019-93-C-0202,
dated August 30, 1993, between
Photronics Corp. and the Navy [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit
10.42]
10 .49 - Modification No. P00001, dated
March 30, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.43]
10.50 - Modification No. P00002, dated
April 29, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.44]
10 .51 - Modification No. P00003, dated
August 9, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.55]
10.52 - Modification No. P00004, dated
March 30, 1994, to Contract No.
N00019-93-C-0202 [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.56]
*10.53 - Modification No. P00005, dated
August 30, 1993, to Contract No.
N00019-93-C-0202 . . . . . . . . . P
*10.54 - Modification No. P00006, dated
August 30, 1993, to Contract No.
N00019-93-C-0202 . . . . . . . . . P
10.55 - Contract No. N00024-93-C-5204,
dated November 18, 1992, between
Technology Applications and Service
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.53]
10.56 - Modification No. P00001, dated May
6, 1993, to Contract No. N00024-93-
C-5204 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.54]
10.57 - Modification No. P00002, dated
August 24, 1993, to Contract No.
N00024-93-C-5204 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.55]
10 .58 - Modification No. PZ0003, dated
September 30, 1993, to Contract No.
N00024-93-C-5204 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.56]
10.59 - Contract No. N00174-94-D-0006,
dated February 17, 1994, between
Technology Applications & Service
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1994,
File No. 1-8533, Exhibit 10.57]
10.60 - Modification No. P00001, dated
March 7, 1994, to Contract No.
N00174-94-D-0006 [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.58]
10.61 - Modification No. P00003, dated May
19, 1994, to Contract No. N00174-
94-D-0006 [Form 10-K, fiscal year
ended March 31, 1994, File No. 1-
8533, Exhibit 10.59]
10.62 - Purchase Order No. N538010, dated
March 28, 1994, between Laurel
Technologies, Inc. and Short
Brothers PLC [Form 10-K, fiscal
year ended March 31, 1994, File No.
1-8533, Exhibit 10.60]
10.63 - Purchase Order No. 2285, dated June
6, 1994, between Photronics Corp.
and International Precision
Products N.V. [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.73]
10.64 - Amendment No. 1, dated December 1,
1994, to Purchase Order No. 2285
[Form 10-K, fiscal year ended March
31, 1995, File No. 1-8533, Exhibit
10.74]
10.65 - Purchase Order No. 2286, dated June
6, 1994, between Photronics Corp.
and International Precision
Products N.V. [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.75]
10.66 - Purchaser Order No. CN74325, dated
December 14, 1994, between
Precision Echo and Lockheed
Aeronautical Systems Company [Form
10-K, fiscal year ended March 31,
1995, File No. 1-8533, Exhibit
10.76]
*10.67 - Amendment, dated February 14, 1995,
to Purchase Order No. CN74325,
between Precision Echo and Lockheed
Aeronautical Systems Company . . . P
*10.68 - Amendment, dated April 4, 1995, to
Pur chase Order No. CN74325,
between Precision Echo and Lockheed
Aeronautical Systems Company . . . P
*10.69 - Amendment, dated June 20, 1995, to
Purchase Order No. CN74325, between
Precision Echo and Lockheed
Aeronautical Systems Company . . . P
*10.70 - Amendment, dated September 28,
1995, to Purchase Order No.
CN74325, between Precision Echo and
Lockheed Aeronautical Systems
Company . . . . . . . . . . . . . P
*10.71 - Amendment, dated November 7, 1995,
to Purchase Order No. CN74325,
between Precision Echo and Lockheed
Aeronautical Systems Company . . . P
10.72 - Contract No. N39998-94-C-2239,
dated July 26, 1993, between the
Company and the Navy [Form 10-K,
fiscal year ended March 31, 1995,
File No. 1-8533, Exhibit 10.77]
10.73 - Contract No. N00019-95-C-0057,
dated December 16, 1994, between
Precision Echo, Inc. and Naval Air
Systems Command [Form 10-K, fiscal
year ended March 31, 1995, File No.
1-8533, Exhibit 10.78]
10.74 - Employment, Non-Competition and
Termination Agreement, dated July
20, 1994, between
Diagnostic/Retrieval Systems, Inc.
and David E. Gross [Form 10-Q,
quarter ended June 30, 1994, File
No. 1-8533, Exhibit 1]
10.75 - Stock Purchase Agreement, dated as
of July 20, 1994, between
Diagnostic/Retrieval Systems, Inc.
and David E. Gross [Form 10-Q,
quarter ended June 30, 1994, File
No. 1-8533, Exhibit 2]
10.76 - Asset Purchase Agreement, dated
October 28, 1994, Acquisition by PE
Acquisition Corp., a subsidiary of
Precision Echo, Inc. of all of the
Assets of Ahead Technology
Corporation [Form 10-Q, quarter
ended December 31, 1994, File No.
1-8533, Exhibit 1]
10.77 - Amendment to Agreement for
Acquisition of Assets, dated July
5, 1995, between Photronics Corp.
and Opto Mechanik, Inc. [Form 8-K,
Amendment No. 1, July 5, 1995, File
No. 1-8533, Exhibit 1]
*10.78 - Contract No. N00421-95-D-1067,
dated September 30, 1995, between
the Company and the Navy . . . . . P
*10.79 - Lease, dated August 17, 1995,
between Ahead Technology, Inc. and
South San Jose Interests . . . . .
*10.80 - Contract No. DAAH01-95-C-0308,
dated July 21, 1995, between
Photronics Corp. and the Army . . P
*10 .81 - Lease, dated May 25, 1995, between
Technology Applications and Service
Company and Sports Arena Village,
Ltd., L.P. . . . . . . . . . . . .
*10.82 - Contract No. 2025, dated December
20, 1993, between Opto Mechanik,
Inc. and the Government of Israel,
Ministry of Defense . . . . . . . P
*10.83 - Amendment to Contract No. 2025,
dated August 31, 1995 between Opto
Mechanik, Inc. and the Government
of Israel, Ministry of Defense . . P
*10.84 - Lease, dated August, 1995,
by and between OMI
Acquisition Corp. and Fred
E. Sutton and Harold S.
Sutton d/b/a Sutton
Properties . . . . . . . .
*10.85 - Lease, dated August, 1995, by and
between OMI Acquisition Corp. and
Fred E. Sutton and Harold S. Sutton
d/b/a Sutton Properties . . . . .
*10.86 - Lease, dated August, 1995, by and
between OMI Acquisition Corp. and
Fred E. Sutton and Harold S. Sutton
d/b/a Sutton Properties . . . . .
*10.87 - Memorandum of Lease, dated August,
1995, by and between OMI
Acquisition Corp. and Fred E.
Sutton and Harold S. Sutton d/b/a
Sutton Properties . . . . . . . .
**10.88 - Master Lease, dated August 31,
1995, between OMI Acquisition Corp.
and General Electric Capital Corp.
**10.89 - Schedule No. 001, dated September
1, 1995, to Master Lease between
OMI Acquisition Corp. and General
Electric Capital Corp . . . . . .
*10.90 - Schedule No. 002, dated October 20,
1995, to Master Lease between OMI
Acquisition Corp. and General
Electric Capital Corp. . . . . . .
*10.91 - Joint Venture Agreement, dated as
of February 6, 1996, by and among
DRS/MS, Inc., Universal Sonics
Corporation, Ron Hadani, Howard
Fidel and Thomas S. Soulos . . . .
*10.92 - Partnership Agreement, dated as of
February 6, 1996, by and between
DRS/MS, Inc. and Universal Sonics
Corporation . . . . . . . . . . .
**10.93 - Asset Purchase Agreement, dated as
of February 9, 1996, by and among
Mag-Head Engineering, Company, Inc.
and Ahead Technology Acquisition
Corporation, a subsidiary of
Precision Echo, Inc. . . . . . . .
**10.94 - Employment, Non-Competition and
Termination Agreement, dated March
28, 1996, between the Company and
Leonard Newman . . . . . . . . . .
11.1 - Computation of earnings per share
[Form 10-K, Amendment No. 1, July
5, 1995, File No. 1-8533, Exhibit
11]
11.2 - Computation of earnings per share
[Form 10-Q, quarter ended December
31, 1995, File No. 1-8533, Exhibit
11]
13.1 - 1994 Annual Report to Stockholders
(for the fiscal year ended March
31, 1994). Except for the portions
of the Annual Report which are
incorporated expressly by reference
in the Form 10-K, fiscal year ended
March 31, 1994, File No. 1-8533,
this Annual Report was furnished
for the information of the
Commission and is not to be deemed
"filed" as part of the report [Form
10-K, fiscal year ended March 31,
1994, File No. 1-8533, Exhibit 13]
22.1 - List of subsidiaries of the Company
[Form 10-K, fiscal year ended March
31, 1995, File No. 1-8533, Exhibit
21]
**23.1 - Accountants' Consent and
Report on Schedules . . . .
*23.2 - Consent of Skadden, Arps, Slate,
Meagher & Flom, contained in their
opinion filed as Exhibit 5.1 . . .
*24.1 - Power of Attorney (included in
signature page to Registration
Statement) . . . . . . . . . . . .
*25.1 - Form T-1 Statement of Eligibility
and Qualification of the Trustee
under the Trust Indenture Act of
1939 . . . . . . . . . . . . . . .
___________________
* Previously filed.
** Filed herewith.
Exhibit 3.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
We, the President and Secretary of
Diagnostic/Retrieval Systems, Inc., a corporation
existing under the laws of the State of Delaware, do
hereby certify as follows:
The original Certificate of Incorporation
of Diagnostic/Retrieval Systems, Inc. (the
"Corporation") was filed with the Secretary of State
of the State of Delaware on November 8, 1968.
This Amended and Restated Certificate of
Incorporation restates, integrates and further
amends the provisions of the Restated Certificate of
Incorporation of the Corporation.
This Amended and Restated Certificate of
Incorporation has been duly adopted, all in
accordance with the provisions of Sections 242 and
245 of the Delaware General Corporation Law.
Upon the filing (the "Effective Time") of
this Amended and Restated Certificate of
Incorporation pursuant to the Delaware General
Corporation Law, each share of the Company's Class A
Common Stock, par value $.01 per share (the "Class A
Common Stock"), and each share of the Company's
Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), shall be reclassified as
and changed into one validly issued, fully paid and
non-assessable share of Common Stock authorized by
subparagraph (a) of Article FOURTH, without any
action by the holder thereof. Each certificate that
theretofore represented a share or shares of Class A
Common Stock or Class B Common Stock shall
thereafter represent that number of shares of Common
Stock into which the share or shares of Class A
Common Stock or Class B Common Stock represented by
such Certificate shall have been reclassified.
FIRST: The name of the corporation
(hereinafter called the "corporation") is
Diagnostic/Retrieval Systems, Inc.
SECOND: The address, including street,
number, city and county of the registered office of
the corporation in the State of Delaware is
Wilmington, County of New Castle (19805); and the
name of the registered agent of the corporation in
the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of
the purposes to be conducted and promoted by the
corporation, which shall be in addition to the
authority of the corporation to conduct any lawful
business, to promote any lawful purpose, and to
engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of the State of Delaware, is as
follows:
To carry on a general mercantile,
industrial, investing, and trading business in all
its branches; to devise, invent, manufacture,
fabricate, assemble, install, service, maintain,
alter, buy, sell, import, export, license as
licensor or licensee, lease as lessor or lessee,
distribute, job, enter into, negotiate, execute,
acquire, and assign contracts in respect of, as
principal, and as sales, business, special, or
general agent, representative, broker, factor,
merchant, distributor, jobber, advisor, and in any
other lawful capacity, goods, wares, merchandise,
commodities, and unimproved, improved, finished,
processed, and other real, personal, and mixed pro-
party of any and all kinds, together with the
components, resultants, and by-products thereof.
To purchase, receive, take by grant, gift,
devise, bequest or otherwise, lease or otherwise
acquire, own, hold, improve, employ, use and
otherwise deal in and with real or personal
property, or any interest therein, wherever
situated, and to sell, convey, lease, exchange,
transfer or otherwise dispose of, or mortgage or
pledge, all or any of its property and assets, or
any interest therein, wherever situated.
To engage generally in the real estate
business as principal, agent, broker, and in any
lawful capacity, and generally to take, lease,
purchase, or otherwise acquire, and to own, use,
hold, sell, convey, exchange, mortgage, work, clear,
improve, develop, divide, and otherwise handle,
manage, operate, deal in, and dispose of, real
estate, real property, lands, multiple-dwelling
structures, houses, buildings and other works and
any interest or right therein; to take, lease,
purchase or otherwise acquire, and to own, use,
hold, sell, convey, exchange, hire, pledge,
mortgage, and otherwise handle, and deal in and
dispose of, as principal, agent, broker, and in any
lawful capacity, such personal property, chattels,
chattels real, rights, easements, privileges,
chooses in action, notes, bonds, mortgages, and
securities as may lawfully be acquired, held, or
disposed of, and to acquire, purchase, sell, assign,
transfer, dispose of, and generally deal in and
with, as principal, agent, broker, and in any lawful
capacity, mortgages and other interests in real,
personal, and mixed properties; to carry on a
general construction, contracting, building, and
realty management business as principal, agent,
representative, contractor, sub-contractor, and in
any other lawful capacity.
To apply for, register, obtain, purchase,
lease, take licenses in respect of, or otherwise
acquire, and to hold, own, use, operate, develop,
enjoy, turn to account, grant licenses, franchises
and immunities in respect of, manufacture under and
to introduce, sell, assign, mortgage, pledge or
otherwise dispose of, and, in any manner, deal with
and contract with reference to:
(a) inventions, devices,
formulae, processes and any
improvements and modifications
thereof;
(b) letters patent, patent
rights, patented processes,
copyrights, designs, and similar
rights, trade-marks, trade names,
trade symbols and other indications
of origin and ownership granted by or
recognized under the laws of the
United States of America, the
District of Columbia, any state or
subdivision thereof, and any
commonwealth, territory, possession,
dependency, colony, agency or
instrumentality of the United States
of America and of any foreign
country, and all rights connected
therewith or appertaining thereunto;
(c) franchises, licenses,
grants and concessions.
To guarantee, purchase, take, receive,
subscribe for, and otherwise acquire, own, hold,
use, and otherwise employ, sell, lease, exchange,
transfer, and otherwise dispose of, mortgage, lend,
pledge, and otherwise deal in and with, securities
(which term, for the purpose of this Article THIRD,
includes, without limitation of the generality
thereof, any shares of stock, bonds, debentures,
notes, mortgages, other obligations, and any
certificates, receipts or other instruments
representing rights to receive, purchase or
subscribe for the same, or representing any other
rights or interests therein or in any property or
assets) of any persons, domestic and foreign firms,
associations, and corporations, and by any
government or agency or instrumentality thereof; to
make payment therefor in any lawful manner; and,
while owner of any such securities, to exercise any
and all rights, powers and privileges in respect
thereof, including the right to vote.
To make, enter into, perform and carry out
contracts of every kind and description with any
person, firm, association, corporation or government
or agency or instrumentality thereof.
To acquire by purchase, exchange or
otherwise, all, or any part of, or any interest in,
the properties, assets, business and good will of
any one or more persons, firms, associations or
corporations heretofore or hereafter engaged in any
business for which a corporation may now or
hereafter be organized under the laws of the State
of Delaware; to pay for the same in cash, property
or its own or other securities; to hold, operate,
reorganize, liquidate, sell or in any manner dispose
of the whole or any part thereof; and in connection
therewith, to assume or guarantee performance of any
liabilities, obligations or contracts of such
persons, firms, associations or corporations, and to
conduct the whole or any part of any business thus
acquired.
To lend money in furtherance of its
corporate purposes and to invest and reinvest its
funds from time to time to such extent, to such
persons, firms, associations, corporations,
governments or agencies or instrumentalities
thereof, and on such terms and on such security, if
any, as the Board of Directors of the corporation
may determine.
To make contracts of guaranty and
suretyship of all kinds and endorse or guarantee the
payment of principal, interest or dividends upon,
and to guarantee the performance of sinking fund or
other obligations of, any securities, and to
guarantee in any way permitted by law the
performance of any of the contracts or other
undertakings in which the corporation may otherwise
be or become interested, of any person, firm,
association, corporation, government or agency or
instrumentality thereof, or of any other
combination, organization or entity whatsoever.
To borrow money without limit as to amount
and at such rates of interest as it may determine;
from time to time to issue and sell its own
securities, including its shares of stock, notes,
bonds, debentures, and other obligations, in such
amounts, on such terms and conditions, for such
purposes and for such prices, now or hereafter
permitted by the laws of the State of Delaware and
by this certificate of incorporation, as the Board
of Directors of the corporation may determine; and
to secure any of its obligations by mortgage, pledge
or other encumbrance of all or any of its property,
franchises and income.
To be a promoter or manager of other
corporations of any type or kind; and to participate
with others in any corporation, partnership, limited
partnership, joint venture, or other association of
any kind, or in any transaction, undertaking or
arrangement which the corporation would have power
to conduct by itself, whether or not such
participation involves sharing or delegation of
control with or to others.
To draw, make, accept, endorse, discount,
execute, and issue promissory notes, drafts, bills
of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments and evidences
of indebtedness whether secured by mortgage or
otherwise, as well as to secure the same by mortgage
or otherwise, so far as may be permitted by the laws
of the State of Delaware.
To purchase, receive, take, reacquire or
otherwise acquire, own and hold, sell, lend,
exchange, reissue, transfer or otherwise dispose of,
pledge, use, cancel, and otherwise deal in and with
its own shares and its other securities from time to
time to such an extent and in such manner and upon
such terms as the Board of Directors of the
corporation shall determine; provided that the
corporation shall now use its funds or property for
the purchase of its own shares of capital stock when
its capital is impaired or when such use would cause
any impairment of its capital, except to the extent
permitted by law.
To organize, as an incorporator, or cause
to be organized under the laws of the State of
Delaware, or of any other state of the United States
of America, or of the District of Columbia, or of
any commonwealth, territory, dependency, colony,
possession, agency or instrumentality of the United
States of America, or of any foreign country, a
corporation or corporations for the purpose of
conducting and promoting any business or purpose for
which corporations may be organized, and to
dissolve, wind up, liquidate, merge or consolidate
any such corporation or corporations or to cause the
same to be dissolved, wound up, liquidated, merged
or consolidated.
To conduct its business, promote its
purposes, and carry on its operations in any and all
of its branches and maintain offices both within and
without the State of Delaware, in any and all States
of the United States of America, in the District of
Columbia, and in any or all commonwealths,
territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States
of America and of foreign governments.
To promote and exercise all or any part of
the foregoing purposes and powers in any and all
parts of the world, and to conduct its business in
all or any of its branches as principal, agent,
broker, factor, contractor, and in any other lawful
capacity, either alone or through or in conjunction
with any corporations, associations, partnerships,
firms, trustees, syndicates, individuals,
organizations, and other entities in any part of the
world, and, in conducting its business and promoting
any of its purposes, to maintain offices, branches
and agencies in any part of the world, to make and
perform any contracts and to do any acts and things,
and to carry on any business, and to exercise any
powers and privileges suitable, convenient, or
proper for the conduct, promotion, and attainment of
any of the business and purposes herein specified or
which at any time may be incidental thereto or may
appear conducive to, or expedient for, the
accomplishment of any of such business and purposes
and which might be engaged in or carried on by a
corporation incorporated or organized under the
General Corporation Law of the State of Delaware,
and to have and exercise all of the powers conferred
by the laws of the State of Delaware upon
corporations incorporated or organized under the
General Corporation Law of the State of Delaware.
The foregoing provisions of this Article
THIRD shall be construed both as purposes and powers
and each as an independent purpose and power. The
foregoing enumeration of specific purposes and
powers shall not be held to limit or restrict in any
manner the purposes and powers of the corporation,
and the purposes and powers herein specified shall,
except when otherwise provided in this Article
THIRD, be in no way limited or restricted by
reference to, or inference from, the terms of any
provision of this or any other Article of this
certificate of incorporation; provided, that the
corporation shall not conduct any business, promote
any purpose, or exercise any power or privilege
within or without the State of Delaware which, under
the laws thereof, the corporation may not lawfully
conduct, promote, or exercise.
FOURTH: (a) The aggregate number of
shares of capital stock which the corporation is
authorized to issue is 22,000,000 consisting of
20,000,000 shares of Common Stock each having a par
value of $0.01 per share and 2,000,000 shares of
Preferred Stock each having a par value of $10.00
per share.
(b) No holder of shares of
stock of the corporation of any class now or
hereafter authorized shall be entitled as of right
to purchase or subscribe for any part of any
unissued shares of stock of the corporation of any
class now or hereafter authorized or any additional
shares of stock to be issued by reason of any
increase of the authorized capital stock of the
corporation of any class, or any bonds, certificates
of indebtedness, debentures or other securities
convertible into stock of the corporation of any
class now or hereafter authorized, but any such
unissued stock or such additional authorized issue
of new stock, or such securities convertible into
stock, may be issued and disposed of, pursuant to
resolutions of the Board of Directors, to such
persons, firms, corporations or associations, and
upon such terms, as may be deemed advisable by the
Board of Directors in the exercise of its
discretion.
(c) The Board of Directors
hereby is vested with the authority to provide for
the issuance of the Preferred Stock, at any time and
from time to time, in one or more series, each of
such series to have such powers, designations,
preferences and relative, participating or optional
or other special rights and such qualifications,
limitations or restrictions thereon as expressly
provided in the resolution or resolutions duly
adopted by the Board of Directors providing for the
issuance of shares of such series. The authority
which hereby is vested in the Board of Directors
shall include, but not be limited to, the authority
to provide for the following matters relating to
each series of the Preferred Stock:
(1) the number of shares
to constitute such series and the designations
thereof;
(2) the voting power, if
any, of holders of shares of such series and,
if voting power is limited, the circumstances
under which such holders may be entitled to
vote; provided, however, that the Board of
Directors shall not create any series of
Preferred Stock with more than one vote per
share;
(3) the rate of dividends,
if any, and the extent of further participation
in dividend distributions, if any, and whether
dividends shall be cumulative or non-
cumulative;
(4) whether or not such
series shall be redeemable, and, if so, the
terms and conditions upon which shares of such
series shall be redeemable;
(5) the extent, if any, to
which such series shall have the benefit of any
sinking fund provision for the redemption or
purchase of shares;
(6) the rights, if any, of
such series, in the event of the dissolution of
the corporation, or upon any distribution of
the assets of the corporation; and
(7) whether or not the
shares of such series shall be convertible,
and, if so, the terms and conditions upon which
shares of such series shall be convertible.
FIFTH: The corporation is to have
perpetual existence.
SIXTH: Whenever a compromise or
arrangement is proposed between this corporation and
its creditors or any class of them and/or between
this corporation and its stockholders or any class
of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a
summary way of this corporation or of any creditor
or stockholder thereof or on the application of any
receiver or receivers appointed for this corporation
under the provisions of section 291 of Title 8 of
the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers
appointed for this corporation under the provisions
of section 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders
of this corporation, as the case may be, to be
summoned in such manner as the said court directs.
If a majority in number representing three-fourths
in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders
of this corporation, as the case may be, agree to
any compromise or arrangement and to any
reorganization of this corporation as consequence of
such compromise or arrangement, the said compromise
or arrangement and the said reorganization shall, if
sanctioned by the court to which the said
application has been made, be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this
corporation, as the case may be, and also on this
corporation.
SEVENTH: For the management of the
business and for the conduct of the affairs of the
corporation, and in further definition, limitation
and regulation of the powers of the corporation and
of its directors and of its stockholders or any
class thereof, as the case may be, it is further
provided:
1. The management of the business
and the conduct of the affairs of the
corporation, including the election
of the Chairman of the Board of
Directors, if any, the President, the
Treasurer, the Secretary, and other
principal officers of the
corporation, shall be vested in its
Board of Directors. The number of
directors which shall constitute the
whole Board of Directors shall be
fixed by, or in the manner provided
in, the By-Laws. The phrase "whole
Board" and the phrase "total number
of directors" shall be deemed to have
the same meaning, to wit, the total
number of directors which the
corporation would have if there were
no vacancies. No election of
directors need be by written ballot.
2. Directors are and shall continue
to be divided into three subclasses.
As of the date hereof, the subclasses
Class A-I, Class A-II and Class A-III
shall be designated Class I, Class II
and Class III, respectively. The
number of directors in each subclass
shall continue to be determined by
the Board of Directors and shall
consist of as nearly equal a number
of directors as possible. The term
of Class I directors initially shall
expire at the annual meeting of
stockholders held in 1996; the term
of Class II directors initially shall
expire at the next ensuing annual
meeting of stockholders; and the term
of Class III directors initially
shall expire at the second ensuing
annual meeting of stockholders. In
the case of each class, the directors
shall serve until their respective
successors are duly elected and
qualified. At each annual meeting of
stockholders, directors of the
respective class whose term expires
shall be elected, and the directors
chosen to succeed those whose terms
shall have expired shall be elected
to hold office for a term to expire
at the third ensuing annual meeting
of stockholders after their election,
and until their respective successors
are elected and qualified.
Any vacancy in the office of a
director may be filled by the vote of
the majority of the remaining
directors, regardless of any quorum
requirements set forth in the By-Laws
of the corporation. Any director
elected to fill a vacancy in the
office of director shall serve until
the next annual meeting of
stockholders at which directors of
the class for which such director
shall have been chosen are to be
elected, and until his or her
successor is elected and qualified.
Newly created directorships may be
filled by the Board of Directors.
3. In furtherance and not in
limitation of the powers conferred by
statute, the power to adopt, alter,
or repeal the By-Laws of the
Corporation shall be vested in the
Board of Directors as well as the
stockholders; stockholders may not
make, adopt, alter, amend, change or
repeal the By-Laws of the Corporation
except upon the affirmative vote of
not less than sixty-six and two-
thirds percent (66 2/3%) of the
outstanding stock of the Corporation
entitled to vote thereon.
4. Whenever the corporation shall be
authorized to issue only one class of
stock, each outstanding share shall
entitle the holder thereof to notice
of, and the right to vote at, any
meeting of stockholders. Whenever
the corporation shall be authorized
to issue more than one class of
stock, no outstanding share of any
class of stock which is denied voting
power under the provisions of the
certificate of incorporation shall
entitle the holder thereof to notice
of, and the right to vote at, any
meeting of stockholders, except as
required by law; provided, that no
share of any such class which is
otherwise denied voting power shall
entitle the holder thereof to vote
upon the increase or decrease in the
number of authorized shares of said
class.
5. Notwithstanding any other
provisions of this Certificate of
Incorporation or the By-Laws of the
Corporation to the contrary, any
action required or permitted to be
taken by the stockholders of the
Corporation must be effected at a
duly called annual or special meeting
of such stockholders and may not be
taken by written consent without such
a meeting.
6. No director shall be personally
liable to the Corporation or its
stockholders for monetary damages for
any breach of fiduciary duty by such
director as a director.
Notwithstanding the foregoing
sentence, a director shall be liable
to the extent provided by applicable
law (i) for breach of the director's
duty of loyalty to the Corporation or
its stockholders, (ii) for acts or
omissions not in good faith or which
involve intentional misconduct or a
knowing violation of law, (iii)
pursuant to Section 174 of the
Delaware General Corporation Law or
(iv) for any transaction from which
the director derived an improper
personal benefit. No amendment to or
repeal of this subsection 6 to
Article SEVENTH shall apply to or
have any effect on the liability or
alleged liability of any director of
the corporation for or with respect
to any acts or omissions of such
director occurring prior to such
amendment.
EIGHTH: (a) No contract or transaction
between the corporation and one or more of its
directors or officers, or between the corporation
and any other corporation, partnership, association,
or other organization in which one or more of its
directors or officers are directors or officers, or
have a financial interest, shall be void or voidable
solely for this reason, or solely because the
director or officer is present at, or participates
in, the meeting of the Board of Directors or a
committee thereof which authorizes the contract or
transaction, or solely because his or their votes
are counted for such purpose, if:
(1) The material facts as to
his relationship or interest and as
to the contract or transaction are
disclosed or are known to the Board
of Directors or the committee, and
the Board or committee in good faith
authorizes the contract or
transaction by the affirmative votes
of a majority of the disinterested
directors, even though the
disinterested directors be less than
a quorum; or
(2) The material facts as to
his relationship or interest and as
to the contract or transaction are
disclosed or are known to the
stockholders entitled to vote
thereon, and the contract or
transaction is specifically approved
in good faith by vote of the
stockholders; or
(3) The contract or transaction
is fair as to the corporation as of
the time it is authorized, approved
or ratified, by the Board of
Directors, a committee thereof, or
the stockholders.
(b) Common or interested
directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or
transaction.
NINTH: (a) The corporation shall have
power to indemnify any person who was or is a party
or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the
right of the corporation) by reason of the fact that
he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the
request of the corporation as a director, officer,
employee or agent of another corporation,
partnership, joint venture, trust or other
enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding
if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect
to any criminal action or proceeding, had no
reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create an
assumption that the person did not act in good faith
and in a manner which he reasonably believed to be
in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation shall have
power to indemnify any person who was or is a party
or is threatened to be made a party to any
threatened, pending or completed action or suit by
or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request
of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or
settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the
corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be
liable for negligence or misconduct in the
performance of his duty to the corporation unless,
and only to the extent that, the Court of Chancery
or the court in which such action or suit was
brought shall determine upon application that,
despite the adjudication of liability but in view of
all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other
court shall deem proper.
(c) To the extent that a
director, officer, employee or agent of the
corporation has been successful on the merits or
otherwise in defense of any action, suit or
proceeding referred to in paragraphs (a) and (b), or
in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under
paragraphs (a) and (b) (unless ordered by a court)
shall be made by the corporation only as authorized
in the specific case upon a determination that
indemnification of the director, officer, employee
or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth
in paragraphs (a) and (b). Such determination shall
be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or
(2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses incurred in
defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors
in the specific case upon receipt of any undertaking
by or on behalf of the director, officer, employee
or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this
Article.
(f) The indemnification
provided by this Article shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under any By-Law,
agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his
official capacity and as to action in another
capacity while holding such office, and shall
continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and
administrators of such a person.
(g) The corporation shall have
power to purchase and maintain insurance on behalf
of any person who is or was a director, officer,
employee or agent of the corporation, or is or was
serving at the request of the corporation as a
director, officer, employee or agent of another
corporation, partnership, joint venture, trust or
other enterprise against any liability asserted
against him and incurred by him in any such capacity
or arising out of his status as such, whether or not
the corporation would have the power to indemnify
him against such liability under the provisions of
this Article.
TENTH: From time to time any of the
provisions of this certificate of incorporation may
be amended, altered or repealed, and other
provisions authorized by the laws of the State of
Delaware at the time in force may be added or
inserted in the manner and at the time prescribed by
said laws and by this certificate of incorporation.
All rights at any time conferred upon the
stockholders of the corporation by this certificate
of incorporation are granted subject to the
provisions of this Article TENTH.
IN WITNESS WHEREOF, we have duly executed this
certificate on behalf of the corporation this 29th day of
March, 1996.
/s/ Mark S. Newman
Mark S. Newman
Chairman of the Board,
President and Chief
Executive Officer
Exhibit 3.8
AMENDED AND RESTATED
BY-LAWS
OF
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
(a Delaware corporation)
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered
office of the Corporation shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may
also have offices at such other places both within and
without the State of Delaware as the Board of Directors
may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Annual meetings
and special meetings of the stockholders shall be held at
such time and place, either within or without the State
of Delaware, as shall be fixed from time to time by the
Board of Directors. Whenever the directors shall fail to
fix such place, the meeting shall be held at the
registered office of the Corporation in the State of
Delaware.
Section 2. Annual Meetings. The annual
meeting shall be held on the date and at the time fixed,
from time to time, by the Board of Directors, provided,
each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding
annual meeting. Annual meetings may be called by the
Board of Directors or by any officer instructed by the
Board of Directors to call the meeting.
Section 3. Special Meetings. Special meetings
shall be held on the dates and at the time fixed by the
Board of Directors. Special meetings may be called by
the Board of Directors or by any officer instructed by
the Board of Directors to call the meeting.
Section 4. Notice or Waiver of Notice.
Written notice of all meetings shall be given, stating
the place, date and hour of the meeting and stating the
place within the city or other municipality or community
at which the list of stockholders of the Corporation may
be examined. The notice of an annual meeting shall state
that the meeting is called for the election of directors
and for the transaction of other business which may
properly come before the meeting, and shall (if any other
action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or
purposes. The notice of a special meeting in all
instances shall state the purpose or purposes for which
the meeting is called. If any action is proposed to be
taken which would, if taken, entitle stockholders to
receive payment for their shares of stock, the notice
shall include a statement of that purpose and to that
effect.
Section 5. Conduct of Meeting. Meetings of
the stockholders shall be presided over by one of the
following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any,
the Vice-Chairman of the Board, if any, the President, a
Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the Corporation, or in
his or her absence, an Assistant Secretary, shall act as
secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the chairman of the
meeting shall appoint a secretary of the meeting.
Section 6. Proxy Representation. Every
stockholder may authorize another person or persons to
act for such stockholder by proxy in all matters in which
a stockholder is entitled to participate, whether by
waiving notice of any meeting, voting or participating at
a meeting. Every proxy must be signed by the stockholder
or by such stockholder's attorney-in-fact. No proxy
shall be voted or acted upon after three years from its
date unless such proxy provides for a longer period. A
duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it is
coupled is an interest in the stock itself or an interest
in the Corporation generally.
Section 7. Nature of Business. No business
may be transacted at an annual meeting of Stockholders,
other than business that is either: (a) specified in the
notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors (or any duly
authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized
committee thereof) or (c) otherwise properly brought
before the annual meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the
date of the giving of the notice provided for in this
Section 7 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and
(ii) who complies with the notice procedures set forth in
this Section 7.
In addition to any other applicable
requirements, for business to be properly brought before
an annual meeting by a stockholder, such stockholder must
have given timely notice thereof in proper written form
to the Secretary of the Corporation.
To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at
the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual
meeting of the stockholders; provided, however, that in
the event that the annual meeting is called for a date
that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to
be timely must be so received not later than the close of
business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the
annual meeting was made, whichever occurs first.
To be in proper written form, a stockholder's
notice to the Secretary must set forth as to each matter
such stockholder proposes to bring before the annual
meeting: (a) a brief description of the business desired
to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting; (b)
the name and record address of such stockholder; (c) the
class or series and number of shares of capital stock
which are owned beneficially or of record by such
stockholder; (d) a description of all arrangements or
understandings between such stockholder and any other
person or persons (including their names) in connection
with the proposal of such business by such stockholder
and any material interest of such stockholder in such
business; and (e) a representation that such stockholder
intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual
meeting of stockholders except business brought before
the annual meeting in accordance with this Section 7;
provided, however, that, once business has been properly
brought before the annual meeting in accordance with such
procedures, nothing in this Section 7 shall be deemed to
preclude discussion by any stockholder of any such
business. If the Chairman of an annual meeting
determines that business was not properly brought before
the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting
that the business was not properly brought before the
meeting and such business shall not be transacted.
Section 8. Nomination of Directors. Only
persons who are nominated in accordance with the
following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any
annual meeting of stockholders, or at any special meeting
of stockholders called for the purpose of electing
directors, (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or
(b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the
notice provided for in this Section 8 and on the record
date for the determination of stockholders entitled to
vote at such meeting and (ii) who complies with the
notice procedures set forth in this Section 8.
In addition to any other applicable
requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at
the principal executive offices of the Corporation (a) in
the case of an annual meeting, not less than sixty (60)
days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that
is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to
be timely must be so received not later than the close of
business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b)
in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the
day on which notice of the date of the special meeting
was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's
notice to the Secretary must set forth (a) as to each
person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business
address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of
record by the person and (iv) any other information
relating to the person that would be required to be
disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of
shares of capital stock of the Company which are owned
beneficially or of record by such stockholder, (iii) a
description of all arrangements or understandings between
such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to
which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice and (v) any
other information relating to such stockholder that would
be required to be disclosed in a proxy statement or other
filings required to be made in connection with
solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must
be accompanied by a written consent of each proposed
nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a
director of the Corporation unless nominated in
accordance with the procedures set forth in this Section
8. If the Chairman of the meeting determines that a
nomination was not made in accordance with the foregoing
procedures, the Chairman shall declare to the meeting
that the nomination was defective and such defective
nomination shall be disregarded.
Section 9. Inspectors and Judges. The
directors, in advance of any meeting, shall appoint one
or more inspectors of election or judges of the vote, as
the case may be, to act at the meeting or any adjournment
thereof. The directors may designate one or more persons
as alternate inspectors or judges to replace any
inspector or judge who fails to act. If no inspector or
judge or alternate inspector or judge is able to act at a
meeting of stockholders, the person presiding at the
meeting shall appoint one or more inspectors or judges to
act at the meeting. Each inspector, or judge, if any,
before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the
duties of inspector or judge at such meeting with strict
impartiality and according to the best of his or her
ability. The inspectors or judges, if any, shall
determine the number of shares of stock outstanding and
the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and
questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the
meeting, the inspector or inspectors or judge or judges,
if any, shall make a report in writing of any challenge,
question or matter determined by him, her or them and
execute a certificate of any fact found by him, her or
them.
Section 10. Quorum. The holders of a majority
of the outstanding shares of common stock of the
Corporation issued, outstanding and entitled to vote,
present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders for the
transaction of any business. However, the foregoing
shall not be deemed to permit a vote upon any transaction
as to which the certificate of incorporation or these By-
Laws require approval by a vote of the holders of more
than a majority of the outstanding shares of common stock
of the Corporation, or by more than a majority of the
outstanding votes to which the holders of the outstanding
shares of common stock of the Corporation are entitled,
unless the holders of such portion of the outstanding
shares of common stock of the Corporation, or the holders
of shares entitled to such portion of votes, as the case
may be, are present, whether in person or by proxy. The
stockholders present may adjourn the meeting to some
future time, without notice other than announcement at
the meeting, despite the absence of a quorum.
Section 11. Voting. Each share of common
stock shall entitle the holder thereof to one vote with
respect to any matters presented at any meeting of
stockholders. In the election of each class of
directors, a plurality of the votes cast with respect to
each respective class shall elect. Any other action
shall be authorized by a majority of the votes cast
except where the Delaware General Corporation Law
prescribes a different percentage of votes and/or a
different exercise of voting power and except as
otherwise provided in these By-Laws or the certificate of
incorporation. In the election of directors, voting need
not be by ballot. Voting by ballot shall not be required
for any other corporate action except as otherwise
provided by the Delaware General Corporation Law.
Section 12. Stockholder List. The officer of
the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of
the stockholders showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination
of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place
within the city or other municipality or community where
the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is
present.
Section 13. Stock Ledger. The stock ledger of
the Corporation shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger,
the list required by Section 11 of this Article II or the
books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Duties and Powers. The business of
the Corporation shall be managed by or under the
direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the
certificate of incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
The use of the phrase "whole Board" herein refers to the
total number of directors which the corporation would
have if there were no vacancies.
Section 2. Number and Qualifications of
Directors. The number of directors which shall
constitute the whole Board shall be such number, not less
than five nor more than nine, as shall be determined from
time to time by a resolution adopted by the directors
then in office or by the remaining director if there be
only one. Until such time as action shall be taken by
the Board to determine a different number, the number of
directors which shall constitute the whole Board shall be
five. Directors need not be stockholders of the
Corporation, citizens of the United States, or residents
of the State of Delaware.
Section 3. Meetings. Meetings of the Board of
Directors of the Corporation shall be held at such place
within or without the State of Delaware as shall be fixed
by the Board of Directors. Meetings of the Board of
Directors shall be held at such time as the Board of
Directors shall fix, except that the first meeting of a
newly elected Board shall be held as soon after its
election as the directors may conveniently assemble. No
call shall be required for regular meetings of the Board
of Directors for which the time and place have been
fixed. Special meetings of the Board of Directors may be
called by or at the direction of the Chairman of the
Board, if any, the Vice-Chairman of the Board, if any, or
the President, or of a majority of the directors in
office.
Section 4. Notice or Waiver of Notice. No
notice shall be required for regular meetings for which
the time and place have been fixed. Written, oral or any
other mode of notice of the time and place shall be given
for special meetings in sufficient time for the
convenient assembly of the directors thereat. The notice
of any meeting need not specify the purpose of the
meeting. Any requirements of furnishing a notice shall
be waived by any director who signs a written waiver of
such notice before or after the time stated therein.
Section 5. Quorum. Except as may be otherwise
specifically provided by law, the certificate of
incorporation or these By-Laws, a majority of the whole
Board shall constitute a quorum except when a vacancy or
vacancies prevents such majority, whereupon a majority of
the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least
one-third of the whole Board. A majority of the
directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except
as otherwise provided in the certificate of incorporation
or these By-Laws, and except as otherwise provided by the
Delaware General Corporation Law, the act of the Board
shall be the act by vote of a majority of the directors
present at a meeting, a quorum being present. The quorum
and voting provisions herein stated shall not be
construed as conflicting with any provisions of the
Delaware General Corporation Law, the certificate of
incorporation or these By-Laws which govern a meeting of
directors held to fill vacancies and newly created
directorships in the Board.
Section 6. Action in Writing. Any action
required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or
committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 7. Meetings by Means of Conference
Telephone. Unless otherwise provided by the certificate
of incorporation or these By-Laws, members of the Board
of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in
a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications
equipment by means of which all persons participating in
the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Chairman of the Meeting. The
President if present and acting, shall preside at all
meetings. Otherwise, any other officer chosen by the
Board, shall preside.
Section 9. Committees. The Board of Directors
may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee
to consist of two or more of the directors of the
Corporation. The Board may designate one or more
directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent
provided in the resolution of the Board, shall have and
may exercise the powers of the Board of Directors in the
management of the business and affairs of the
Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require
it. In the absence or disqualification of any member of
any such committee or committees, the member or members
thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute
a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Section 10. Compensation. The directors may
be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such
payment shall preclude any director from serving the
Corporation in any other capacity and receiving
compensation therefor. Members of special or standing
committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the
Corporation shall be chosen by the Board of Directors and
shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors, a Vice-Chairman
thereof and one or more Vice-Presidents, Assistant
Secretaries and Assistant Treasurers, and may elect or
appoint such other officers and agents as are desired.
Any number of offices may be held by the same person,
unless otherwise prohibited by law, the certificate of
incorporation or these By-Laws.
Section 2. Election. Unless otherwise
provided in the resolution of election or appointment,
each officer shall hold office until the meeting of the
Board of Directors following the next annual meeting of
stockholders and until such officer's successor has been
elected and qualified, or until their earlier resignation
or removal. Any officer may resign at any time upon
written notice. The Board of Directors may remove any
officer for cause or without cause. Any vacancy
occurring in any office of the Corporation shall be
filled by the Board of Directors.
Section 3. Chairman of the Board of Directors.
Except where by law the signature of the President is
required, the Chairman of the Board of Directors shall
possess the power, as from time to time may be authorized
by the Board of Directors or by the President, to sign
all contracts, certificates and other instruments of the
Corporation. During the absence or disability of the
President, the Chairman of the Board of Directors shall
exercise all the powers and discharge all the duties of
the President as may be authorized by the Board of
Directors or President. The Chairman of the Board of
Directors shall also perform such other duties and may
exercise such other powers as from time to time may be
assigned to him or her by the President, these By-Laws or
by the Board of Directors.
Section 4. President. The President shall,
subject to the control of the Board of Directors, have
general supervision of the business of the Corporation
and shall see that all orders and resolutions of the
Board of Directors are carried into effect. He shall
execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under
the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may
sign and execute documents when so authorized by these
By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board
of Directors. The President shall be the Chief Executive
Officer of the Corporation. The President shall also
perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her
by these By-Laws or by the Board of Directors.
Section 5. Vice-Presidents. At the request of
the President or in his or her absence or in the event of
the President's inability or refusal to act (and if there
be no Chairman of the Board of Directors), the Vice-
President or the Vice-Presidents if there is more than
one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice-
President shall perform such other duties and have such
other powers as the Board of Directors from time to time
may prescribe. If there be no Chairman of the Board of
Directors and no Vice- President, the Board of Directors
shall designate the officer of the Corporation who, in
the absence of the President or in the event of the
inability or refusal of the President to act, shall
perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President.
Section 6. Secretary. The Secretary shall
attend all meetings of the Board of Directors and all
meetings of stockholders and record all of the
proceedings thereat in a book or books to be kept for
that purpose; the Secretary shall also perform like
duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or
President, under whose supervision the Secretary shall
be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the
stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose
another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary,
if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it
may be attested by the signature of the Secretary or by
the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other
officer to affix the seal of the Corporation and to
attest the affixing by such officer's signature. The
Secretary shall see that all books, reports, statements,
certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as
the case may be.
Section 7. Treasurer. The Treasurer shall
have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such
depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so
requires, an account of all his or her transactions as
Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of
the duties of the office of Treasurer and for the
restoration to the Corporation, in case of his or her
death, resignation, retirement or removal from office, of
all books, papers, vouchers, money and other property of
whatever kind in his or her possession or under this
control belonging to the Corporation.
Section 8. Assistant Secretaries. Except as
may be otherwise provided in these By-Laws, Assistant
Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any
Vice-President, if there be one, or the Secretary, and in
the absence of the Secretary or in the event of the
Secretary's disability or refusal to act, shall perform
the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 9. Assistant Treasurers. Assistant
Treasurers, if there be any, shall perform such duties
and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any
Vice-President, if there be one, or the Treasurer, and in
the absence of the Treasurer or in the event of the
Treasurer's disability or refusal to act, shall perform
the duties of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the
restrictions upon the Treasurer. If required by the
Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of
the office of Assistant Treasurer and for the restoration
to the Corporation, in the case of his or her death,
resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of
whatever kind in his or her possession or under his or
her control belonging to the Corporation.
Section 10. Other Officers. Such other
officers as the Board of Directors may choose shall
perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors.
The Board of Directors may delegate to any other officer
of the Corporation the power to choose such other
officers and to prescribe their respective duties and
powers.
Section 11. Voting Securities Owned by the
Corporation. Powers of attorney, proxies, waivers of
notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be
executed in the name of and on behalf of the Corporation
by the President or any Vice President and any such
officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may
deem advisable to vote in person or by proxy at any
meeting of security holders of any corporation in which
the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights
and power incident to the ownership of such securities
and which, as the owner thereof, the Corporation might
have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder
of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of, the Corporation
(i) by the Chairman or Vice-Chairman of the Board of
Directors if any, or by the President or a Vice-President
and (ii) by the Treasurer or any Assistant Treasurer, or
the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by
such holder in the Corporation.
Section 2. Signatures. Any or all of the
signatures on a certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same
effect as if the signator were such officer, transfer
agent or registrar at the date of issue.
Section 3. Notations on Certificates.
Whenever the Corporation shall be authorized to issue
more than one class of stock or more than one series of
any class of stock, and whenever the Corporation shall
issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or
series or of any such partly paid stock shall set forth
thereon the statements prescribed by the Delaware General
Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any
class or series shall be noted conspicuously on the
certificate representing such shares.
Section 4. Lost Certificates. The Corporation
may issue a new certificate of stock in place of any
certificate theretofore issued by it alleged to have been
lost, stolen or destroyed, and the Board of Directors may
require the owner of any lost, stolen or destroyed
certificate, or such owner's legal representative, to
give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it
on account of the alleged loss, theft or destruction of
any such certificate or the issuance of any such new
certificate.
Section 5. Fractional Share Interests. The
Corporation may, but shall not be required to, issue
fractions of a share. In lieu thereof it shall either
arrange for the disposition of fractional interests by
those entitled thereto, pay in cash the fair value of
fractions of a share, as determined by the Board of
Directors, to those entitled thereto or issue scrip or
fractional warrants in registered or bearer form over the
manual or facsimile signature of an officer of the
Corporation or of its agent, exchangeable as therein
provided for full shares, but such scrip or fractional
warrants shall not entitle the holder to any rights of a
stockholder except as therein provided. Such scrip or
fractional warrants may be issued subject to the
condition that the same shall become void if not
exchanged for certificates representing full shares of
stock before a specified date, or subject to the
condition that the shares of stock for which such scrip
or fractional warrants are exchangeable may be sold by
the Corporation and the proceeds thereof distributed to
the holders of such scrip or fractional warrants, or
subject to any other conditions which the Board of
Directors may determine.
Section 6. Transfers. Upon compliance with
provisions restricting the transfer or registration of
transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the
Corporation shall be made only on the stock ledger of the
Corporation by the registered holder thereof, or by such
registered holder's attorney thereunto authorized by
power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer agent or
a registrar, if any, and on surrender of the certificate
or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
Section 7. Record Date. For the purpose of
determining the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment
thereof, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled
to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix,
in advance, a date as the record date for any such
determination of stockholders. Such date shall not
precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and
shall not be more than sixty days or less than ten days
before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed:
the record date for the determination of stockholders
entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; and
the record date for determining stockholders when prior
action by the Board of Directors is necessary shall be at
the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. When a
determination of stockholders of record entitled to
notice of or to vote at any meeting of stockholders has
been made as provided in this paragraph, such
determination shall apply to any adjournment thereof;
provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
Section 8. Beneficial Owners. The Corporation
shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person,
whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 9. Meaning of Certain Terms. As used
herein in respect of the right to notice of a meeting of
stockholders or a waiver thereof or to participate or
vote thereat, as the case may be, the term "share" or
"shares" or "share of stock" or "shares of stock" or
"stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of
record of outstanding shares of stock when the
Corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to
include any outstanding share or shares of stock and any
holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the
certificate of incorporation confers such rights where
there are two or more classes or series of shares of
stock or upon whom the Delaware General Corporation Law
confers such rights notwithstanding that the certificate
of incorporation may provide for more than one class or
series of shares of stock, one or more of which are
limited or denied such rights thereunder; provided,
however, that no such right shall vest in the event of an
increase or decrease in the authorized number of shares
of stock of any class or series which otherwise is denied
voting rights under the provisions of the certificate of
incorporation.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice
is required by law, the certificate of incorporation or
these By-Laws, to be given to any director, member of a
committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee
or stockholder, at his or her address as it appears on
the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United
States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any
notice is required by law, the certificate of
incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver
thereof in writing, signed, by the person or persons
entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the
capital stock of the Corporation, subject to the
provisions of the certificate of incorporation, if any,
may be declared by the Board of Directors at any regular
or special meeting, and may be paid in cash, in property,
or in shares of the capital stock. Before payment of any
dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation,
or for any proper purpose, and the Board of Directors may
modify or abolish any such reserve.
Section 2. Disbursements. All checks or
demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person
or persons as the Board of Directors may from time to
time designate.
Section 3. Fiscal Year. The fiscal year of
the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
Section 4. Corporate Seal. The corporate seal
shall be in such form as the Board of Directors shall
prescribe.
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of
March 27, 1996, by and between Palisade Capital
Management L.L.C. ("Palisade"), acting as investment adviser
to (i) Chrysler Corp. Emp. #1 Pension Plan Dtd. 4-1-89,
(ii) IBM Corp. Retirement Plan Trust Dtd. 12-18-45,
(iii) G.E. Pension Trust, and (iv) Nynex Master Pension
Trust Dtd. 1-1-84 (each, an "Account" and collectively,
the "Accounts") and Diagnostic/Retrieval Systems, Inc.
(the "Company").
WHEREAS, in connection with entering into this Agreement,
Palisade privately purchased 649,200 shares of the Company's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") and 236,724
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock") pursuant to a letter agreement (the "Letter
Agreement"), dated March 27, 1996, between Palisade and Leonard Newman;
WHEREAS, on March 26, 1996, the stockholders of the Company
approved the reclassification of each share of Class A Common Stock and
each share of Class B Common Stock into one share of Common Stock, par
value $.01 per share (the "Common Stock") and effective on April 1, 1996
the 649,200 shares of Class A Common Stock and the 236,724 shares of Class
B Common Stock privately purchased pursuant to the Letter Agreement by
Palisade, as investment adviser to the Accounts, will be reclassified and
exchanged for 885,924 shares of the Company's new Common Stock;
WHEREAS, the Company believes it is in the best interests of
the Company and its stockholders that Palisade, as investment adviser to
the Accounts, purchase the shares of Common Stock and Palisade would not
consummate the purchase, as investment adviser to the Accounts, without
appropriate registration rights in order to be in a position to own shares
which could be freely traded;
WHEREAS, the Company believes it is in the best interests of
the stockholders of the Company to have additional stock registered under
the Securities Act and sold into the public market to establish a more
liquid and active trading market for the stock;
WHEREAS, the Board of Directors of the Company has authorized
the officers of the Company to execute and deliver this Agreement in the
name and on behalf of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties to this Agreement hereby agree as
follows:
1. Definitions - As used in this Agreement,
the following terms shall have the following meanings:
"Holder" means Palisade as investment adviser to the Accounts,
and each Account, each in its capacity as a registered holder of
Registrable Securities. For purposes of this Agreement, the Company may
deem and treat the registered holder of a Registrable Security as the
Holder and absolute owner thereof, and the Company shall not be affected by
any notice to the contrary.
"Person" means a corporation, partnership, business, an
association, organization, a governmental or political subdivision thereof
or a governmental agency.
"Registrable Securities" means the 885,924 shares of Common
Stock purchased by Palisade, as investment adviser to the Accounts,
pursuant to the Letter Agreement dated March 27, 1996. For purposes of this
Agreement, a Registrable Security ceases to be a Registrable Security
when (x) it has been effectively registered under the Securities Act and
sold or distributed to the public in accordance with an effective
registration statement covering it, or (y) it is sold or distributed to the
public pursuant to Rule 144 (or any successor or similar provision) under
the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
2. Demand Registration. (a) Subject to the limitations hereof,
if at any time one or more Holders of Registrable Securities holding in the
aggregate at least 51% of the total number of Registrable Securities then
outstanding shall request the Company in writing to register under the
Securities Act all or a part of the Registrable Securities held by such
Holder or Holders (a "Demand Registration"), the Company shall use, subject
to the terms of this Agreement, all reasonable efforts to cause to be filed
and declared effective as soon as reasonably practicable a registration
statement, on such appropriate form as the Company in its discretion shall
determine, to effect the registration under the Securities Act of (i) the
Registrable Securities which the Company has been so requested to register
by such Holder or Holders for disposition in accordance with the intended
method of disposition stated in the written request by such Holder or
Holders and (ii) all Common Stock or other securities of the Company which
the Company may elect to register on behalf of itself or others in
connection with the offering of the Registrable Securities pursuant to this
Section 2. The Company agrees to use its best efforts to keep any such
registration statement continuously effective and usable for resale of
Registrable Securities for the applicable period specified in Section
3(a)(ii), subject to subparagraph (c) of this Section 2. The Company shall
be obligated to effect one (1) registration statement pursuant to this
Section 2(a). A registration requested pursuant to this Section 2(a) shall
not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective, provided that a registration
which does not become effective after the Company has filed a registra-
tion statement with respect thereto solely by reason of the refusal to
proceed of the Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company) shall
be deemed to have been effected by the Company at the request of such
Holder unless the Holder shall have elected to pay all expenses (pursuant
to Section 3(e) hereof) in connection with such registration, (ii) if,
after it has become effective, such registration becomes subject to any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason, or (iii) the conditions to
closing specified in the purchase agreement or underwriting agreement
entered into in connection with such registration are not satisfied, other
than by reason of some act or omission by such Holder. Each registration
statement filed pursuant to this Section 2(a) is hereinafter referred to as
a "Demand Registration Statement."
(b) The Company agrees (i) not to effect any public or
private sale, distribution or purchase of any of its securities which are
the same as or similar to the Registrable Securities, including a sale
pursuant to Regulation D under the Securities Act, during the 15-day period
prior to, and during the 45-day period beginning on, the closing date of
each underwritten offering under any Demand Registration Statement (with
the exception of Common Stock or other securities of the Company sold in
connection with the Demand Registration Statement pursuant to Section 2(e)
hereof), and (ii) to use reasonable best efforts to cause each holder of
its securities purchased from the Company, at any time on or after the date
of this Agreement (other than in a registered public offering) to agree not
to effect any public sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144 under the Securities
Act.
(c) The Company may postpone for a reasonable period of
time the filing or the effectiveness of any Demand Registration Statement
and the Company shall not be required to maintain the effectiveness of or
amend or supplement any Demand Registration Statement if the Board of
Directors of the Company in good faith determines that (A) such
registration might have a material adverse effect on any plan or proposal
by the Company with respect to any financing, acquisition, merger,
recapitalization, reorganization or other material transaction (a
"Transactional Delay Period"), or (B) the Company is in possession of
material non-public information that, if publicly disclosed, could result
in a material disruption of a corporate development or transaction then
pending or in progress or in other material adverse consequences to the
Company (an "Informational Delay Period"). The Company will give prompt
written notice to each Holder of each Transactional Delay Period and
Informational Delay Period. Such notice shall state to the extent, if any,
as is practicable, an estimate duration of such Transactional Delay Period
or Informational Delay Period. Each Holder, as holder of Registrable
Securities, agrees that (i) upon receipt of such notice of an Informational
Delay Period or Transactional Delay Period it will forthwith discontinue
disposition of any Registrable Securities pursuant to the Demand
Registration Statement and (ii) it will not deliver any prospectus forming
a part of the Demand Registration Statement in connection with any sale of
Registrable Securities until the expiration of such Informational Delay
Period or Transactional Delay Period, as the case may be. The Company shall
have the right to file a post-effective amendment to any Demand
Registration Statement to change the form of registration statement from a
long form to a short form in accordance with the rules and regulations of
the Securities Act.
(d) If at any time any Holder of Registrable Securities
to be covered by a Demand Registration Statement desires to sell
Registrable Securities in an underwritten offering, the Company shall have
the right to select any nationally recognized investment banking firm(s) to
administer the offering, and the Company shall enter into underwriting
agreements with the underwriter(s) of such offering, which agreements shall
contain such representations and warranties by the Company, and such other
terms and conditions as are at the time customarily contained in
underwriting agreements for similar offerings. Such underwriting agreement
shall contain indemnities consistent with Section 3(f) hereof.
(e) The Company may also elect to register Common Stock
or other securities of the Company on behalf of itself or others in
connection with the offering of Registrable Securities pursuant to this
Section 2.
(f) If a requested registration pursuant to this Section
2 involves an underwritten offering, and the managing underwriter shall
advise the Company in writing (with a copy to each Holder of Registrable
Securities requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities) exceeds the
number which can be sold in such offering, the Company will include in such
registration, to the extent of the number which the Company is so advised
can be sold in such offering, (i) first, Registrable Securities requested
to be included in such registration by the Holder or Holders of Registrable
Securities, pro rata among such Holders requesting such registration on the
basis of the number of such securities requested to be included by such
Holders and (ii) second, securities the Company proposes to sell and other
securities of the Company included in such registration by the holders
thereof.
3. Registration Procedures. (a) Whenever the Company is
required to use all reasonable efforts to effect the registration of any
Registrable Securities under the Securities Act pursuant to the terms and
conditions of Section 2 (such Registrable Securities being hereinafter
referred to as "Subject Shares"), the Company will use all reasonable
efforts to effect the registration and sale of the Subject Shares in
accordance with the intended method of disposition thereof. Without
limiting the generality of the foregoing, the Company will as expeditiously
as practicable:
(i) prepare and file with the SEC a registration
statement with respect to the Subject Shares to effect the
registration thereof, and thereafter use all reasonable efforts to
cause such registration statement to become effective; provided,
however, that the Company may discontinue any registration of its
securities which are not Registrable Securities at any time prior to
the effective date of the registration statement relating thereto;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Subject Shares
and other securities covered by such registration statement until the
earlier of (a) such time as all of such securities have been disposed
of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement or
(b) the expiration of three years after such registration becomes
effective;
(iii) furnish each Holder covered by such registration
statement, without charge, such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits if requested by a Holder
in writing), such number of copies of the prospectus included in such
registration statement (including such preliminary prospectus), such
documents incorporated by reference in such registration statement or
prospectus, and such other documents, as such Holders may reasonably
request;
(iv) use all reasonable efforts to register or qualify
the Subject Shares covered by such registration statement under the
securities or blue sky laws of such jurisdictions as any seller
thereof and the managing underwriter(s) of the Securities being sold
by such seller shall reasonably recommend, and do any and all other
acts and things which may be reasonably necessary or advisable to
enable the Holders to consummate the disposition in such
jurisdictions of the Subject Shares covered by such registration
statement, except that the Company shall not for any such purpose be
required to (A) qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, (B)
subject itself to taxation in any jurisdiction wherein it is not so
subject, or (C) consent to general service of process in any such
jurisdiction or otherwise take any action that would subject it to
the general jurisdiction of the courts of any jurisdiction in which
it is not so subject;
(v) otherwise use its best efforts
to comply with all applicable rules and regula-
tions of the SEC;
(vi) furnish, at the Company's expense, unlegended
certificates representing ownership of the securities being sold in
such denominations as shall be requested and instruct the transfer
agent to release any stop transfer orders with respect to the Subject
Shares being sold;
(vii) notify each Holder at any time when a prospectus
relating to the Subject Shares is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein (in the case of a prospectus
or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, and the Company will, as
promptly as practicable thereafter, prepare and file with the SEC and
furnish a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of Subject Shares such
prospectus will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(viii) if requested by the underwriters for any
underwritten offering by the Holders of Registrable Securities
pursuant to a registration requested under Section 2, the Company
will enter into with such underwriters for such offering, an
underwriting agreement in customary form in the case of an
underwritten offering in form and substance satisfactory to the
Company, each such Holder and the underwriters; make such
representations and warranties to the sellers and underwriters as
in form and substance and scope are customarily made by issuers to
underwriters in underwritten offerings and take such other actions
as the Holders or the managing underwriter or agent, if any,
reasonably require in order to expedite or facilitate the disposition
of such Subject Shares and the Holders of the Registrable Secu-
rities will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided
that nothing herein contained shall diminish the foregoing
obligations of the Company;
(ix) make available for inspection by the Holder, any
underwriter or agent participating in any disposition pursuant to
such registration statement, and any attorney, account or other
similar professional advisor retained by any such Holders or
underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with such registration statement. The Holders
agree that Records and other information which the Company
determines, in good faith, to be confidential and of which
determination the Inspectors are so notified shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
registration statement, (ii) the release of such Records is ordered
pursuant to a subpoena, court order or regulatory or agency request
or (iii) the information in such Records has been generally
disseminated to the public. Each Holder agrees that it will, upon
learning that disclosure of such Record is sought in a court of
competent jurisdiction or by a governmental agency, give notice to
the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(x) obtain for delivery to the Company, the underwriter
or agent which satisfy the conditions for receipt of a "comfort"
letter, with copies to the Holders, a "comfort" letter from the
Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "comfort"
letters as the Holders or the managing underwriter reasonably
request;
(xi) obtain for delivery to the Holders and the
underwriter or agent an opinion or opinions from counsel for the
Company in customary form and reasonably satisfactory to the Holders
and their counsel;
(xii) make available to its security holders earnings
statements, which need not be audited, satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days after the
end of the 12-month period beginning with the first month of the
Company's first quarter commencing after the effective date of
registration statement, which earnings statements shall cover said
12-month period;
(xiii) make every reasonable effort to prevent the
issuance of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the
effectiveness of such registration statement at the earliest possible
moment;
(xiv) cause the Subject Shares to be registered with or
approved by such other governmental agencies or authorities within
the United States as may be necessary to enable the sellers thereof
or the underwriter or underwriters, if any, to consummate the
disposition of such securities;
(xv) cooperate with the Holders and the managing
underwriter or underwriters if any, or any other interested party
(including any interested broker-dealer) in making any filings or
submission required to be made, and the furnishing of all appropriate
information in connection therewith, with the National Association of
Securities Dealers, Inc.
("NASD");
(xvi) cause its subsidiaries to take action necessary to
effect the registration of the Subject Shares contemplated hereby,
including filing any required financial information;
(xvii) effect the listing of the Subject Shares on the
American Stock Exchange or such other national securities exchange on
which shares of the Common Stock shall then be listed; and
(xviii) take all other steps necessary to effect the
registration of the Subject Shares contemplated hereby.
(b) The Holders shall provide (in writing and signed by
the Holders and stated to be specifically for use in the related
registration statement, preliminary prospectus, prospectus or other
document incident thereto) all such information and materials and take all
such action as may be required in order to permit the Company to comply
with all applicable requirements of the SEC and any applicable state
securities laws and to obtain any desired acceleration of the effective
date of any registration statement prepared and filed by the Company
pursuant to this Agreement.
(c) The Holders shall, if requested by the Company or the
managing underwriter(s) in connection with any proposed registration and
distribution pursuant to this Agreement, (i) agree to sell the Subject
Shares on the basis provided in any underwriting arrangements entered into
in connection therewith, (ii) become a party to any such underwriting
agreements and (iii) complete and execute all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
(d) Upon receipt of any notice from the Company that the
Company has become aware that the prospectus (including any preliminary
prospectus) included in any registration statement filed pursuant to
Section 2(a), as then in effect, contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, the
Holders shall forthwith discontinue disposition of Subject Shares pursuant
to the registration statement covering the same until the Holders' receipt
of copies of a supplemented or amended prospectus and, if so directed by
the Company, deliver to the Company (at the Company's expense) all copies
other than permanent file copies then in such Holder's possession, of the
prospectus covering the Subject Shares that was in effect prior to such
amendment or supplement.
(e) The Company shall pay the out-of-pocket expenses
incurred in connection with any Demand Registration Statement pursuant to
Section 2(a) of this Agreement prior to the time at which one such
registration shall have been effected, including, without limitation, all
SEC and blue sky registration and filing fees (including NASD fees),
printing expenses, transfer agents and registrars' fees, fees and
disbursements of the Company's counsel and accountants and fees and
disbursements of experts used by the Company in connection with such
registration statement, provided that the Holders shall pay all
underwriting discounts, commissions and expenses attributable to securities
sold for the account of the Holders pursuant to such registration statement
and the fees and disbursements of the Holders' counsel and accountants and
fees and disbursements of experts used by the Holders in connection with
such registration statement, provided, further, that the Company shall pay
all underwriting discounts, commissions and expenses attributable to Common
Stock or other securities of the Company sold pursuant to Section 2(e) in
connection with such Demand Registration Statement.
(f) In connection with any sale of Subject Shares that
are registered pursuant to this Agreement, the Company will, and hereby
does agree to, indemnify and hold harmless in the case of any registration
statement filed pursuant to Section 2 hereof, the Holder of any Registrable
Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such Holder or any such director or officer or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse such Holder and each such
director, officer, underwriter and controlling person for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such Holder or
underwriter specifically stating that it is for use in the preparation
thereof and, provided further that the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, within the time required by the Securities
Act to the Person asserting the existence of an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director,
officer, underwriter or controlling person and shall survive the transfer
of such securities by such holder.
(g) (i) In the case of any registration statement filed
pursuant to Section 2 hereof, the sellers of such Registrable Securities
covered by such registration statement in consideration for being included
in such registration will, jointly and severally, indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subdivision (f) above of this Section 3) the Company, each director of the
Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Any such indemnity shall
remain in full force and effect, regardless of any investigation made by or
on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(h) Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions (f) or (g) of this Section 3,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions (f) or (g) of
this Section 3, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability, or a covenant not to
sue, in respect to such claim or litigation. No indemnified party shall
consent to entry of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an indemnifying party
without the consent of such indemnifying party.
(i) If the indemnification provided for in the preceding
subdivisions of this Section 3 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the Holder or underwriter, as the case may be, on the other in connection
with the statements or omissions which resulted in such expense, loss,
damage or liability, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of
the Holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission to state a material
fact relates to information supplied by the Company, by the Holder or by
the underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission, provided that the foregoing contribution agreement shall not
inure to the benefit of any indemnified party if indemnification would be
unavailable to such indemnified party by reason of the provisions contained
in the first sentence of subdivision (f) of this Section 3, and in no event
shall the obligation of any indemnifying party to contribute under this
subdivision (i) exceed the amount that such indemnifying party would have
been obligated to pay by way of indemnification if the indemnification
provided for under subdivisions (f) or (g) of this Section 3 had been
available under the circumstances.
Notwithstanding the provisions of this subdivision (i), no
Holder of Registrable Securities or underwriter shall be required to
contribute any amount in excess of the amount by which (i) in the case of
any such Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total
price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the
amount of any damages that such Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(j) Prior to any transfer of any restricted Common Stock
which are not registered under an effective registration statement under
the Securities Act, the Holder thereof will give written notice to the
Company of such Holder's intention to effect such transfer and to comply in
all other respects with this subdivision (j). Each such notice (i) shall
describe the manner and circumstances of the proposed transfer in
sufficient detail to enable counsel to render the opinions referred to
below, and (ii) shall designate counsel for the Holder giving such notice
(who may be house counsel for such Holder). The Holder giving such notice
will submit a copy thereof to the counsel designated in such notice and the
Company will promptly submit a copy thereof to its counsel. The following
provisions shall then apply:
(x) If (A) in the opinion of such counsel for the Holder the
proposed transfer may be effected without registration of such
restricted Common Stock under the Securities Act, and (B) counsel for
the Company shall not have rendered an opinion within 30 days after
receipt by the Company of such written notice that such registration
is required, such Holder shall thereupon be entitled to transfer such
restricted Common Stock in accordance with the terms of the notice
delivered by such Holder to the Company and the Securities Act.
Each certificate, if any, issued upon or in connection with such
transfer shall bear the appropriate restrictive legend, unless in the
opinion of each such counsel such legend is no longer required to
insure compliance with the Securities Act.
(y) If in the opinion of either or both of such counsel the
proposed transfer may not legally be effected without registration of
such restricted Common Stock under the Securities Act (such opinion
or opinions to state the basis of the legal conclusions reached
therein), the Company will promptly so notify the Holder thereof and
thereafter such Holder shall not be entitled to transfer such
restricted Common Stock until receipt of a further notice from the
Company under clause (x) above or until registration of such
restricted Common Stock under the Securities Act has become
effective.
Notwithstanding the foregoing provisions of this subdivision (j), the
purchaser of the restricted Common Stock shall be permitted to transfer any
restricted Common Stock to a limited number of institutional investors,
provided that (A) each such investor represents in writing that it is
acquiring such restricted Common Stock for investment and not with a view
to the distribution thereof (subject, however, to any requirement of law
that the disposition thereof shall at all times be within the control of
such transferee), (B) each such investor agrees in writing to be bound by
all the restrictions on transfer of such restricted Common Stock contained
in this subdivision (j) and (C) the purchaser of the restricted Common
Stock delivers to the Company an opinion of counsel satisfactory to the
Company, stating that such transfer may be effected without registration
under the Securities Act.
4. Notices. Any notice or other
communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) upon hand delivery or delivery by telex
(with correct answer back received), telecopy or facsimile at the address
or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business
day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on
the third business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing whichever shall first occur. The addresses for such communications
shall be:
If to the Company:
Diagnostic/Retrieval Systems, Inc.
5 Sylvan Way
Parsippany, New Jersey 07054
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Mark N. Kaplan, Esq.
If to Palisade:
One Bridge Plaza
Suite 695
Fort Lee, New Jersey 07024
Attention: Mark Hoffman
If to any other Holder:
to such name at such address as such Holder shall have
indicated in a written notice delivered to the other parties of
this Agreement.
Any party hereto may from time to time change its address for notices under
this Section 4 by giving at least 10 days' notice of such changes to the
other parties hereto.
5. Waivers. No waiver by any party of any default with respect
to any provision, condition or requirement hereof shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement hereof; nor shall any delay or omission of any
party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
6. Headings. The headings herein are for
convenience only, do not constitute a part of this Agree-
ment and shall not be deemed to limit or affect any of
the provisions hereof.
7. No Third Party Beneficiaries. This Agree-
ment is intended for the benefit of the parties hereto
and their respective permitted successors and assigns
and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
8. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance
with the internal laws of the State of New York without
regard to the principles of conflicts of laws.
9. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
10. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
11. Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become affective when counterparts have been signed by each party
and delivered to the other party, it being understood that the parties need
not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed. This
Agreement as of the date first written above.
DIAGNOSTIC/RETRIEVAL
SYSTEMS, INC.
By /s/ Nancy R. Pitek
Name: Nancy R. Pitek
Title: Controller, Treasurer
and Secretary
PALISADE CAPITAL MANAGEMENT
L.L.C.
By /s/ Mark S. Hoffman
Name: Mark S. Hoffman
Title: Senior Vice President
EXHIBIT 4.8
FIRST SUPPLEMENTAL INDENTURE, dated as of April
1, 1996 between Diagnostic/Retrieval Systems, Inc., a
Delaware corporation (the "Company"), and The Trust
Company of New Jersey, as trustee (the "Trustee").
WHEREAS, the Company heretofore executed and
delivered to the Trustee an Indenture dated as of Septem-
ber 22, 1995 (the "Original Indenture" and, as it may be
amended or supplemented from time to time by one or more
indentures supplemental thereto entered into pursuant to
the applicable provisions thereof, the "Indenture"),
providing for the issuance of the Company's 9% Senior
Subordinated Convertible Debentures due 2003(the "Deben-
tures");
WHEREAS, on March 26, 1996, the stockholders of
the Company approved, effective as of April 1, 1996, the
reclassification of each share of Class A Common Stock,
par value $.01 per share, and each share of Class B
Common Stock, par value $.01 per share, into one share of
a new single class of common stock, par value $.01 per
share; and
WHEREAS, Section 10.5 of the Original Indenture
provides that in the event of any reclassification of
Class A Common Stock, the Company shall enter into a
supplemental indenture providing that each Debenture
shall be convertible into the kind and amount of securi-
ties receivable upon such reclassification by a holder of
Class A Common Stock issuable upon conversion of such
Debentures immediately prior to such reclassification.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDEN-
TURE WITNESSETH, that, for and in consideration of the
promises, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all holders of Deben-
tures, as follows:
ARTICLE ONE
Amendment to Original Indenture
SECTION 1.1.
(a) The definition of the defined term "Class
A Common Stock" that appears in Article 1., Section 1.1
of the Indenture is hereby deleted.
(b) The definition of the defined term "Common
Stock" that appears in Article 1., Section 1.1 of the
Indenture is hereby amended in its entirety to read:
"Common Stock" as applied to the Capital Stock
of any corporation, means the common equity (however
designated) of such Person, and with respect to the
Company, means the Common Stock, par value $.01 per
share, or any successor class of common equity into which
such common stock may hereafter be converted.
(c) Any and all references in the Indenture to
"Class A Common Stock" shall be read as referring to
"Common Stock".
ARTICLE TWO
Miscellaneous
SECTION 2.1 Instruments to be Read Together.
This First Supplemental Indenture is an indenture supple-
mental to and in implementation of the Original Inden-
ture, and the Original Indenture and this First Supple-
mental Indenture shall henceforth be read together.
SECTION 2.2 Confirmation. The Original
Indenture as amended and supplemented by this First
Supplemental Indenture is in all respects confirmed and
preserved.
SECTION 2.3 Terms Defined. Capitalized
terms used in this First Supplemental Indenture and not
otherwise defined herein shall have the respective mean-
ings set forth in the Original Indenture.
SECTION 2.4 Headings. The headings of the
Articles and Sections of this First Supplemental Inden-
ture have been inserted for convenience of reference
only, and are not to be considered a part hereof and
shall in no way modify or restrict any of the terms and
provisions hereof.
SECTION 2.5 Governing Law. The laws of the
State of New York shall govern this First Supplemental
Indenture, without regard to the conflicts of laws provi-
sions thereof.
SECTION 2.6 Counterparts. This First Sup-
plemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed
to be an original, but all such counterparts shall to-
gether constitute but one and the same instrument.
SECTION 2.7 Effectiveness. The provisions
of this First Supplemental Indenture will take effect
immediately upon its execution and delivery by the Trust-
ee in accordance with the provisions of Section 9.01 and
9.06 of the Indenture.
SECTION 2.8 Acceptance by Trustee. The
Trustee accepts the amendments to the Indenture effected
by the First Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have
caused this First Supplemental Indenture to be duly
executed, all as of the date first written above.
Attest: DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
By: By: /s/ Mark S. Newman
Name: Name: Mark S. Newman
Title: Title: Chief Executive Officer
and President
THE TRUST COMPANY OF NEW JERSEY
By: /s/ John D. Cherry
Name: John D. Cherry
Title: Vice President
Trust Officer
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of 8-31-95 ("Agreement"), between
General Electric Capital Corporation, with an office at 303 International Circle
Suite 300, Hunt Valley, MD 21031 (hereinafter called, together with its
successors and assigns, if any, "Lessor"), and OMI Acquisition Corp., a
corporation organized and existing under the laws of the State of Delaware with
its mailing address and chief place of business at 425 North Drive, Melbourne,
FL 32935 (hereinafter called "Lessee").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor agrees to
lease to Lessee, and Lessee agrees to lease from Lessor, the equipment
("Equipment") described in Annex A to any schedule hereto ("Schedule"). Terms
defined in a Schedule and not otherwise defined herein shall have the meanings
ascribed to them in such Schedule.
(b) The obligation of Lessor to purchase from the manufacturer or supplier
thereof ("Supplier") and to lease the same to Lessee under any Schedule shall
be subject to receipt by Lessor, prior to the Lease Commencement Date (with
respect to such Equipment), of each of the following documents in form and
substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then
to be leased hereunder, (ii) a Purchase Order Assignment and Consent in the form
of Annex B to the applicable Schedule, unless Lessor shall have delivered its
purchase order for such Equipment, (iii) evidence of insurance which complies
with the requirements of Section X, and (iv) such other documents as Lessor may
reasonably request. As a further condition to such obligations of Lessor, Lessee
shall, upon delivery of such Equipment (but not later than the Last Delivery
Date specified in the applicable Schedule) execute and deliver to Lessor a
Certificate of Acceptance (in the form of Annex C to the applicable Schedule)
covering such Equipment, and deliver to Lessor a bill of sale therefor (in form
and substance satisfactory to Lessor). Lessor hereby appoints Lessee its agent
for inspection and acceptance of the Equipment from the Supplier. Upon execution
by Lessee of any Certificate of Acceptance, the Equipment described thereon
shall be deemed to have been delivered to, and irrevocably accepted by, Lessee
for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the Equipment
shall commence on the date of execution by Lessee of the Certificate of
Acceptance for such Equipment ("Lease Commencement Date"). The term of this
Agreement shall be the period specified in the applicable Schedule. If any term
is extended, the word "term" shall be deemed to refer to all extended terms, and
all provisions of this Agreement shall apply during any extended terms, except
as may be otherwise specifically provided in writing.
(b) Rent shall be paid to Lessor at its address stated above, except as
otherwise directed by Lessor. Payments of rent shall be in the amount set forth
in, and due in accordance with, the provisions of the applicable Schedule. If
one or more Advance Rentals are payable, such Advance Rental shall be (i) set
forth on the applicable Schedule, (ii) due upon acceptance by Lessor of such
Schedule, and (iii) when received by Lessor, applied to the first rent payment
and the balance, if any, to the final rental payment(s) under such Schedule. In
no event shall any Advance Rental or any other rent payments be refunded to
Lessee. If rent is not paid within ten days of its due date, Lessee agrees to
pay a late charge of five cents ($.05) per dollar on, and in addition to, the
amount of such rent but not exceeding the lawful maximum, if any.
III. RENT ADJUSTMENT:
(a) The periodic rent payments in each Schedule have been calculated on the
assumption (which, as between Lessor and Lessee, is mutual) that the maximum
effective corporate income tax rate (exclusive of any minimum tax rate) for
calendar-year taxpayers ("Effective Rate") will be thirty-five percent (35%)
each year during the lease term.
(b) If, solely as a result of Congressional enactment of any law
(including, without limitation, any modification of, or amendment or addition
to, the Internal Revenue Code of 1986, as amended, (the "Code")), the Effective
Rate is higher than thirty-five percent (35%) for any year during the lease
term, then Lessor shall have the right to increase such rent payments by
requiring payment of a single additional sum equal to the product of (i) the
Effective Rate (expressed as a decimal) for such year less .35 (or, in the event
that any adjustment has been made hereunder for any previous year, the Effective
Rate (expressed as a decimal) used in calculating the next previous adjustment)
times (ii) the adjusted Termination Value divided by the difference between the
new Effective Tax Rate (expressed as a decimal) and one (1). The adjusted
Termination Value shall be the Termination Value (calculated as of the first
rental due in the year for which such adjustment is being made) less the Tax
Benefits that would be allowable under Section 168 of the Code (as of the first
day of the year for which such adjustment is being made and all subsequent years
of the lease term). Lessee shall pay to Lessor the full amount of the additional
rent payment on the later of (i) receipt of notice or (ii) the first day of the
year for which such adjustment is being made.
(c) Lessee's obligations under this Section III shall survive any
expiration or termination of this Agreement.
IV. TAXES: Except as provided in Section III and XV(c), Lessee shall have no
liability for taxes imposed by the United States of America or any State or
political subdivision thereof which are on or measured by the net income of
Lessor. Lessee shall report (to the extent that it is legally permissible) and
pay promptly all other taxes, fees and assessments due, imposed, assessed or
levied against any Equipment (or the purchase, ownership, delivery, leasing,
possession, use or operation thereof), this Agreement (or any rentals or
receipts hereunder), any Schedule, Lessor or Lessee by any foreign, federal,
state or local government or taxing authority during or related to the term of
this Agreement, including, without limitation, all license and registration
fees, and all sales, use, personal property, excise, gross receipts, franchise,
stamp or other taxes, imposts, duties and charges, together with any penalties,
fines or interest thereon (all hereinafter called "Taxes"). Lessee shall (i)
reimburse Lessor upon receipt of written request for reimbursement for any Taxes
charged to or assessed against Lessor, (ii) on request of Lessor, submit to
Lessor written evidence of Lessee's payment of Taxes, (iii) on all reports or
returns show the ownership of the Equipment by Lessor, and (iv) send a copy
thereof to Lessor.
V. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) days after any
tax or other lien shall attach to any Equipment, of the full particulars thereof
and of the location of such Equipment on the date of such notification.
(b) Lessee will within ninety (90) days of the close of each fiscal year of
Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss statement,
certified by a recognized firm of certified public accountants. Upon request
Lessee will deliver to Lessor quarterly, within ninety (90) days of the close of
each fiscal quarter of Lessee, in reasonable detail, copies of Lessee's
quarterly financial report certified by the chief financial officer of Lessee.
<PAGE>
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<PAGE>
(a) Lessor may in writing this Agreement in default if: Lessee breaches its
obligation to pay rent or any other sum when due and fails to cure the breach
within ten (10) days; Lessee breaches any of its insurance obligations under
Section X; Lessee breaches any of its other obligations and fails to cure that
breach within thirty (30) days after written notice thereof; any representation
or warranty made by lessee in connection with this Agreement shall be false or
misleading in any material respect; Lessee becomes insolvent or ceases to do
business as a going concern; any Equipment is illegally used; or a petition is
filed by or against Lessee or any guarantor of Lessee's obligations to Lessor
under any bankruptcy or insolvency laws. Such declaration shall apply to all
Schedules except as specifically excepted by Lessor.
(b) After default, at the request of Lessor, Lessee shall comply with the
provisions of Section XI(a). Lessee hereby authorizes Lessor to enter, with or
without legal process, any premises where any Equipment is believed to be and
take possession thereof. Lessee shall, without further demand, forthwith pay to
Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the
Stipulated Loss Value of the Equipment (calculated as of the rental next
preceding the declaration of default), and (ii) all rentals and other sums then
due hereunder. Lessor may, but shall not be required to, sell Equipment at
private or public sale, in bulk or in parcels, with or without notice and
without having the Equipment present at the place of sale; or Lessor may, but
shall not be required to, lease, otherwise dispose of or keep idle all or part
of the Equipment; and Lessor may use Lessee's premises for any or all of the
foregoing without liability for rent, costs, damages or otherwise. The proceeds
of sale, lease or other disposition, if any, shall be applied in the following
order of priorities: (1) to pay all of Lessor's costs, charges and expenses
incurred in taking, removing, holding, repairing and selling, leasing or
otherwise disposing of Equipment; then, (2) to the extent not previously paid by
Lessee, to pay Lessor all sums due from Lessee hereunder; then (3) to reimburse
to Lessee any sums previously paid by Lessee as liquidated damages; and (4) any
surplus shall be retained by Lessor. Lessee shall pay any deficiency in (1) and
(2) forthwith.
(c) The foregoing remedies are cumulative, and any or all thereof may be
exercises in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
hereunder, or if prohibited by law, such lesser sum as may be permitted. Waiver
of any default shall not be a waiver of any other or subsequent default.
(d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.
XIII. ASSIGNMENT: Lessor may, without the consent of Lessee, assign this
Agreement or any Schedule. Lessee agrees that if Lessee receives written notice
of an assignment from Lessor, Lessee will pay all rent and all other amounts
payable under any assigned Equipment Schedule to such assignee or as instructed
by Lessor. Lessee further agrees to confirm in writing receipt of the notice of
assignment as may be reasonably requested by assignee. Lessee hereby waives and
agrees not to assert against any such assignee any defense, set-off, recoupment
claim or counterclaim which Lessee has or may at any time have against Lessor
for any reason whatsoever.
XIV. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's
obligation to pay rent and other amounts due hereunder shall be absolute and
unconditional. Lessee shall not be entitled to any abatement or reductions of,
or set-offs against, said rent or other amounts, including, without limitation,
those arising or allegedly arising out of claims (present or future, alleged or
actual, and including claims arising out of strict tort or negligence of Lessor)
of Lessee against Lessor under this Agreement or otherwise. Nor shall this
Agreement terminate or the obligations of Lessee be affected by reason of any
defect in or damage to, or loss of possession, use or destruction of, any
Equipment from whatsoever cause. It is the intention of the parties that rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
XV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature, in contract or tort, whether caused by
the active or passive negligence of Lessor or otherwise, and including, but not
limited to, Lessor's strict liability in tort, arising out of (i) the selection,
manufacture, purchase, acceptance or rejection of Equipment, the ownership of
Equipment during the term of this Agreement, and the delivery, lease,
possession, maintenance, uses, condition, return or operation of Equipment
(including, without limitation, latent and other defects, whether or not
discoverable by Lessor or Lessee and any claim for patent, trademark or
copyright infringement or environmental damage) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or employees of
Lessee. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for all of
the items of deduction and credit specified in Section C of the applicable
Schedule ("Tax Benefits") in the hands of Lessor (all references to Lessor in
this Section XV include Lessor and the consolidated taxpayer group of which
Lessor is a member), and (ii) at no time during the term of this Agreement will
Lessee take or omit to take, nor will it permit any subleasee or assignee to
take or omit to take, any action (whether or not such act or omission is
otherwise permitted by Lessor or the terms of this Agreement), which will result
in the disqualification of any Equipment for, or recapture of, all or any
portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warrant or covenant
of the Lessee contained in this Agreement or any Schedule (x) tax counsel of
Lessor shall determine that Lessor is not entitled to claim on its Federal
income tax return all or any portion of the Tax Benefits with respect to any
Equipment, or (y) any such Tax Benefit claimed on the Federal income tax return
of Lessor is disallowed or adjusted by the Internal Revenue Service, or (z) any
such Tax Benefit is recomputed or recaptured (any such determination,
disallowance, adjustment, recomputation or recapture being hereinafter called a
"Loss"), then Lessee shall pay to Lessor, as an indemnity and as additional
rent, such amount as shall, in the reasonable opinion of Lessor, cause Lessor's
after-tax economic yields and cash flows, computed on the same assumptions,
including tax rates (unless any adjustment has been made under Section III
hereof, in which case the Effective Rate used in the next preceding adjustment
shall be substituted), as were utilized by Lessor in originally evaluating the
transaction (such yields and flows being hereinafter called the "Net Economic
Return") to equal the Net Economic Return that would have been realized by
Lessor if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount.
(d) All of Lessor's rights, privileges and indemnities contained in this
Section XV shall survive the expiration or other termination of this Agreement
and the rights, privileges and indemnities contained herein are expressly made
for the benefit of, and shall be enforceable by Lessor, its successors and
assigns.
XVI. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT
ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee.
<PAGE>
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<PAGE>
LESSEE AND LESSOR RELATING TO THE SUBJECT-MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS LEASE
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Unless and until Lessee exercises its rights under Section XIX above,
nothing herein contained shall give or convey to Lessee any right, title or
interest in and to any Equipment except as a lessee. Any cancellation or
termination by Lessor, pursuant to the provision of this Agreement, any
Schedule, supplement or amendment hereto, or the lease of any Equipment
hereunder, shall not release Lessee from any then outstanding obligations to
Lessor hereunder. All Equipment shall at all times remain personal property of
Lessor regardless of the degree of its annexation to any real property and shall
not by reason of any installation in, or affixation to, real or personal
property become a part thereof.
(c) Time is of the essence of this Agreement. Lessor's failure at any time
to require strict performance by Lessee of any of the provisions hereof shall
not waive or diminish Lessor's right thereafter to demand strict compliance
therewith. Lessee agrees, upon Lessor's request, to execute any instrument
necessary or expedient for filing, recording or perfecting the interest of
Lessor. All notices required to be given hereunder shall be deemed adequately
given if sent by registered or certified mail to the addressee at its address
stated herein, or at such other place as such addressee may have designated in
writing. This Agreement and any Schedule and Annexes thereto constitute the
entire agreement of the parties with respect to the subject matter hereof. NO
VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS
PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
(d) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.
(e) Any rent or other amount not paid to Lessor when due hereunder shall
bear interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
Any provision in this Agreement and any Schedule which are in conflict with any
statute, law or applicable rule shall be deemed omitted, modified or altered to
conform thereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their duly authorized representative as of the date first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation OMI Acquisition Corp.
By: /s/ KEVIN G. WORTMAN By: /s/ RICHARD ROSS
-------------------------------- --------------------------------
Title: Sr. Credit Analyst Title: President
----------------------------- -----------------------------
- ------------------------------------------------------------------
AMENDMENT NO. 1
TO
MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
THIS AMENDMENT amends and supplements the above lease (the "Lease"),
between GENERAL ELECTRIC CAPITAL CORPORATION ("Lessor") and OMI ACQUISITION
CORP. ("Lessee") and is hereby incorporated into the Lease as though fully set
forth therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
The Lease is hereby amended as follows:
1. Section III(c). After "Lessee's" add "and Lessor's"
2. The following is added as paragraph two to Section III(b):
If, solely as a result of congressional enactment of any law (including,
without limitation, an modification of, or amendment or addition to, the
Internal Revenue code of 1986, as amended, (the "Code")), the Effective Rate is
lower than thirty-five percent (35%) for any year during the lease term, then
Lessee shall have the right to request a decrease in the rent payments by
requiring the Lessor to make a payment of a single sum equal to the product of
(i) the Effective Rate (expressed as a decimal) for such year less .35 (or, in
the event that any adjustment has been made hereunder for any previous year, the
Effective Rate (expressed as a decimal) used in calculating the next previous
adjustment) times (ii) the adjusted Termination Value divided by the difference
between the new Effective Tax Rate (expressed as a decimal) and one (1). The
adjusted Termination Value shall be the Termination Value (calculated as of the
first rental due in the year for which such adjustment is being made) less the
Tax Benefits that would be allowable under Section 168 of the code (as of the
first day of the year for which such adjustment is being made and all subsequent
years of the lease term). Lessor shall pay to Lessee the full amount of the
reduction rent payment on the later of (i) receipt of notice or (ii) the first
day of the year for which such adjustment is being made.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OMI ACQUISITION CORP.
CORPORATION
(Sig.) (Sig.)
By:______________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
Attest:
(Sig.)
By: ________________________________
Name: ______________________________
<PAGE>
AMENDMENT NO. 2
TO
MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
THIS AMENDMENT amends and supplements the above lease (the "Lease"),
between GENERAL ELECTRIC CAPITAL CORPORATION ("Lessor") and OMI ACQUISITION
CORP. ("Lessee") and is hereby incorporated into the Lease as though fully set
forth therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
The Lease is hereby amended as follows:
1. Section IV, line 2. After "measured by" delete the remainder of the
sentence and substitute the following: "the Lessor's net income, profits,
receipts, franchise, or conduct of business, and taxes on capital, equity
or net worth relating to any payment to Lessor under this Agreement."
2. Section X, line 5. The sentence that begins with "Lessee hereby
appoints Lessor..." is deleted in its entirety and replaced by the
following: "Lessee shall cause all insurers to issue checks for payments
covering casualty losses to the Equipment payable to the order of Lessor
only, and no other payee. If Lessee fails to do so, or if notwithstanding
Lessee's instructions the insurer issues any check payable jointly to
Lessee and Lessor, then Lessee shall upon Lessor's request promptly endorse
any and every such check as directed by Lessor. Lessee and Lessor agree
that the foregoing provision may be specifically enforced by a court of
competent jurisdiction."
3. Section XV(a), line 8. After "foregoing." Add "Anything in the
foregoing to the contrary notwithstanding, Lessee shall have no obligation
to indemnify, defend or hold harmless Lessor from and against any claims
which are the direct and proximate result of any gross negligence or
willful misconduct of Lessor, its employees or agent (excluding Lessee and
its employees and agents)."
4. Section XVIII(a), line 1. After "hereunder," delete the remainder
of the sentence and substitute the following: "(i) terminate this Agreement
as to any item of Equipment (provided, however, that the aggregate original
Capitalized Lessor's Cost of all items of the Equipment so terminated
pursuant to this Section XVIII shall not exceed twenty-five (25) percent of
the aggregate original Capitalized Lessor's Cost of all Equipment described
on all Schedules executed hereunder) which have not previously been
terminated, or (ii) terminate this Agreement as to all items of the
Equipment then leased pursuant to an individual Schedule, as of a rent
payment date ("Termination Date") upon at least 90 days prior written
notice to Lessor.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OMI ACQUISITION CORP.
CORPORATION
(Sig.) (Sig.)
By:______________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
<PAGE>
AMENDMENT NO. 3
TO
MASTER LEASE AGREEMENT
DATED AUGUST 31, 1995 (the "Lease")
BY AND BETWEEN
OMI ACQUISITION CORP. ("Lessee")
AND
GENERAL ELECTRIC CAPITAL CORPORATION ("Lessor")
DATED AUGUST 31, 1995
WHEREAS, Lessor and Lessee desire to amend certain provisions of the Lease
as hereinafter provided;
NOW THEREFORE, for good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, Lessor and Lessee hereby agree to amend the
Lease by adding the following language:
Section XII of the Lease is amended in the following manner:
(e) Lessee shall be deemed to be in default hereunder if Lessee
shall be in default under any material obligation for the payment
of borrowed money, for the deferred purchase price of property or
for the payment of any rent under any material lease agreement, and
the applicable grace period with respect thereto shall have expired.
This Amendment shall be deemed to have been entered into contemporaneously with
and integrated into the terms and conditions of the Lease.
Except as set out herein, the terms and conditions of the Lease shall
remain in full force and effect as entered into by the parties on or prior to
the date hereof.
Dated: August 31, 1995
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OMI ACQUISITION CORP.
CORPORATION
By:______________________________ By: _______________________________
Name: ___________________________ Name: _____________________________
Title: __________________________ Title: ____________________________
CORPORATE GUARANTY
Date: August 31, 1995
General Electric Capital Corporation
303 International Circle Suite 300
Hunt Valley, MD 21031
To induce you to enter into, purchase or otherwise acquire, now or at any
time hereafter, any promissory notes, security agreements, chattel mortgages,
pledge agreements, conditional sale contracts, lease agreements, and/or any
other documents or instruments evidencing, or relating to, any lease, loan,
extension of credit or other financial accommodation (collectively "Account
Documents" and each an "Account Document") to OMI Acquisition Corp., a
corporation organized and existing under the laws of the State of Delaware
("Customer"), but without in any way binding you to do so, the undersigned, for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby guarantee to you, your successors and assigns, the due
regular and punctual payment of any sum or sums of money which the Customer may
owe to you now or at any time hereafter, whether evidenced by an Account
Document, on open account or otherwise, and whether it represents principal,
interest, rent, late charges, indemnities, an original balance, an accelerated
balance, liquidated damages, a balance reduced by partial payment, a deficiency
after sale or other disposition of any leased equipment, collateral or security,
or any other type of sum of any kind whatsoever that the Customer may owe to you
now or at any time hereafter, and does hereby further guarantee to you, your
successors and assigns, the due, regular and punctual performance of any other
duty or obligation of any kind or character whatsoever that the Customer may owe
to you now or at any time hereafter (all such payment and performance
obligations being collectively referred to as "Obligations"). Undersigned does
hereby further guarantee to pay upon demand all losses, costs, attorneys' fees
and expenses which may be suffered by you by reason of Customer's default or
default of the undersigned.
This Guaranty is a guaranty of prompt payment and performance (and not
merely a guaranty of collection). Nothing herein shall require you to first seek
or exhaust any remedy against the Customer, its successors and assigns, or any
other person obligated with respect to the Obligations, or to first foreclose,
exhaust or otherwise proceed against any leased equipment, collateral or
security which may be given in connection with the Obligations. It is agreed
that you may, upon any breach of default of the Customer, or at any time
thereafter, make demand upon the undersigned and receive payment and performance
of the Obligations, with or without notice or demand for payment of performance
by the Customer, its successors or assigns, or any other person. Suit may be
brought and maintained against the undersigned, at your election, without
joinder of the Customer or any other person as parties thereto. The obligations
of each signatory to this Guaranty shall be joint and several.
The undersigned agrees that its obligations under this Guaranty shall be
primary, absolute, continuing and unconditional, irrespective of and unaffected
by any of the following actions or circumstances (regardless of any notice to or
consent of the undersigned): (a) the genuineness, validity, regularity and
enforceability of the Account Documents or any other document; (b) any
extension, renewal, amendment, change, waiver or other modification of the
Account Documents or any other document; (c) the absence of, or delay in, any
action to enforce the Account Documents, this Guaranty or any other document;
(d) your failure or delay in obtaining any other guaranty of the Obligations
(including, without limitation, your failure to obtain the signature of any
other guarantor hereunder); (e) the release of, extension of time for payment
or performance by, or any other indulgence granted to the Customer or any other
person with respect to the Obligations by operation of law or otherwise; (f) the
existence, value, condition, loss, subordination or release (with or without
substitution) of, or failure to have title to or perfect and maintain a security
interest in, or the time, place and manner of any sale or other disposition of
any leased equipment, collateral or security given in connection with the
Obligations, or any other impairment (whether intentional or negligent, by
operation of law or otherwise) of the rights of the undersigned; (g) the
Customer's voluntary or involuntary bankruptcy, assignment for the benefit of
creditors, reorganization, or similar proceedings affecting the Customer or any
of its assets; or (h) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or grantor.
This Guaranty may be terminated upon delivery to you (at your address
shown above) of a written termination notice from the undersigned. However, as
to all Obligations (whether matured, unmatured, absolute, contingent or
otherwise) incurred by the Customer prior to your receipt of such written
termination notice (and regardless of any subsequent amendment, extension or
other modification which may be made with respect to such Obligations), this
Guaranty shall nevertheless continue and remain undischarged until all such
Obligations are indefeasibly paid and performed in full.
The undersigned agrees that this Guaranty shall remain in full force and
effect or be reinstated (as the case may be) if at any time payment or
performance of any of the Obligations (or any part thereof) is rescinded,
reduced or must otherwise be restored or returned by you, all as though such
payment or performance had not been made. If, by reason of any bankruptcy,
insolvency or similar laws effecting the rights of creditors, you shall be
prohibited from exercising any of your rights or remedies against the Customer
or any other person or against any property, then, as between you and the
undersigned, such prohibition shall be of no force and effect, and you shall
have the right to make demand upon, and receive payment from, the undersigned of
all amounts and other sums that would be due to you upon a default with respect
to the Obligations.
Notice of acceptance of this Guaranty and of any default by the Customer or
any other person is hereby waived. Presentment, protest demand, and notice of
protest, demand and dishonor of any of the Obligations, and the exercise of
possessory, collection or other remedies for the Obligations, are hereby waived.
The undersigned warrants that it has adequate means to obtain from the Customer
on a continuing basis financial data and other information regarding the
Customer and is not relying upon you to provide any such data or other
information. Without limiting the foregoing, notice of adverse change in the
Customer's financial condition or of any other fact which might materially
increase the risk of the undersigned is also waived. All settlements,
compromises, accounts stated and agreed balances made in good faith between the
Customer, its successors or assigns, and you shall be binding upon and shall not
effect the liability of the undersigned.
Payment of all amounts now or hereafter owed to the undersigned by the
Customer or any other obligor for any of the Obligations is hereby subordinated
in right of payment to the indefeasible payment in full to you of all
Obligations and is hereby assigned to you as a security therefor. The
undersigned hereby irrevocably and unconditionally waives and relinquishes all
statutory, contractual, common law, equitable and all other claims against the
Customer, any other obligor for any of the Obligations, any collateral therefor,
or any other assets of the Customer or any such other obligor, for subrogation,
reimbursement, exoneration, contribution, indemnification, setoff or other
recourse in respect of sums paid or payable to you by the undersigned hereunder,
and
<PAGE>
the undersigned hereby further irrevocably and unconditionally waives and
relinquishes any and all other benefits which it might otherwise directly or
indirectly receive or be entitled to receive by reason of any amounts paid by,
or collected or due from, it, the Customer or any other obligor for any of the
Obligations, or realized from any of their respective assets.
THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER HEREOF OR
THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN US. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).
THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, OR ANY
RELATED DOCUMENTS. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
As used in this Guaranty, the word "person" include any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or any government or any political
subdivision thereof.
This Guaranty is intended by the parties as a final expression of the
guaranty of the undersigned and is also intended as a complete and exclusive
statement of the terms thereof. No course of dealing, course of performance or
trade usage, nor any paid evidence of any kind, shall be used to supplement or
modify any of the terms hereof. Nor are there any conditions to the full
effectiveness of this Guaranty. This Guaranty and each of its provisions may
only be waived, modified, varied, released, terminated or surrendered, in whole
or in part, by a duly authorized written instrument signed by you. No failure by
you to exercise your rights hereunder shall give rise to any estoppel against
you, or excuse the undersigned from performing hereunder. Your waiver of any
right to demand performance hereunder shall not be a waiver of any subsequent or
other right to demand performance hereunder.
This Guaranty shall bind the undersigned's successors and assigns and the
benefits thereof shall extend to and include your successors and assigns. In the
event of default hereunder, you may at any time inspect undersigned's records,
or at your option, undersigned shall furnish you with a current independent
audit report.
If any provisions of this Guaranty are in conflict with any applicable
statute, rule or law, then such provisions shall be deemed null and void to the
extent that they may conflict therewith, but without invalidating any other
provisions hereof.
Each signatory on behalf of a corporate guarantor warrants that he had
authority to sign on behalf of such corporation and by so signing, to bind said
guarantor corporation hereunder.
IN WITNESS WHEREOF, this Guaranty is executed the day and year above
written.
Photronics Corp.
By: _____________________________
(Signature)
Title: __________________________
(Officer's Title)
ATTEST: _____________________________
Secretary/Assistant Secretary
<PAGE>
Stockholders Certification
We, the undersigned, being all of the stockholders of ____________________
("Guarantor"), the corporation which is about to execute a guaranty of the
obligations of OMI Acquisition Corp. ("Customer") in favor of General Electric
Capital Corporation (the "GECC Corporation"), do hereby certify to such GECC
Corporation that it is to the benefit of the Guarantor to execute such guaranty,
that the benefit to be received by the Guarantor from such guaranty is
reasonably worth the obligations thereby guaranteed, that the Guarantor is
authorized to execute said guaranty, and that the persons executing the same on
behalf of the Guarantor are duly authorized to do so in their named capacity
and to thereby bind the Guarantor to the terms of said instrument as therein set
forth.
Dated: __________________________, 19___ _____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
Certified Resolution
The undersigned hereby certifies that he is Secretary of ________________,
that the following resolution was passed at a meeting of the Board of Directors
of said corporation held on __________________________, 19___ duly called, a
quorum being present, that said resolution has not since been revoked or
amended, and that the form of guaranty referred to therein is the form
attached hereto:
"RESOLVED that it is to the benefit of this corporation that it execute a
guaranty of the obligations of OMI Acquisition Corp. ("Customer") to General
Electric Capital Corporation (the "GECC Corporation") and that the benefit to
be received by this corporation from such guaranty is reasonably worth the
obligations thereby guaranteed, and further that such guaranty shall be
substantially in the form annexed to these minutes, and further that the
______________________ and ______________________ (Title of Officers) of this
corporation are authorized to execute such guaranty on the behalf of this
corporation."
WITNESS my hand and the seal of this corporation on this _______________
day of _______________________, 19___.
_____________________________
[Seal] Secretary
Certification and Representation by Signing Officers
We, the undersigned, ______________________ and ____________________ being
the ____________________ and ____________________ of ___________________, the
corporation which executed the guaranty hereto, hereby jointly and severally
certify and represent to General Electric Capital Corporation that each of the
undersigned executed the guaranty for and on behalf of said corporation and
that in so executing said instrument the undersigned were duly authorized to do
so in their named capacity as officers and by so executing to hereby bind said
guarantor corporation to the terms of said instrument as therein set forth.
_____________________________ (L.S.) _____________________________ (L.S.)
Date: ______________________________ Date: ______________________________
<PAGE>
Stockholders Certification
We, the undersigned, being all of the stockholders of ____________________
("Guarantor"), the corporation which is about to execute a guaranty of the
obligations of OMI Acquisition Corp. ("Customer") in favor of General Electric
Capital Corporation (the "GECC Corporation"), do hereby certify to such GECC
Corporation that it is to the benefit of the Guarantor to execute such
guaranty, that the benefit to be received by the Guarantor from such guaranty
is reasonably worth the obligations thereby guaranteed, that the Guarantor is
authorized to execute said guaranty, and that the persons executing the same on
behalf of the Guarantor are duly authorized to do so in their named capacity
and to thereby bind the Guarantor to the terms of said instrument as therein
set forth.
Dated: __________________________, 19___ _____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
Certified Resolution
The undersigned hereby certifies that he is Secretary of ________________,
that the following resolution was passed at a meeting of the Board of Directors
of said corporation held on __________________________, 19___ duly called, a
quorum being present, that said resolution has not since been revoked or
amended, and that the form of guaranty referred to therein is the form
attached hereto:
"RESOLVED that it is to the benefit of this corporation that it execute a
guaranty of the obligations of OMI Acquisition Corp. ("Customer") to General
Electric Capital Corporation (the "GECC Corporation") and that the benefit to
be received by this corporation from such guaranty is reasonably worth the
obligations thereby guaranteed, and further that such guaranty shall be
substantially in the form annexed to these minutes, and further that the
______________________ and ______________________ (Title of Officers) of this
corporation are authorized to execute such guaranty on the behalf of this
corporation."
WITNESS my hand and the seal of this corporation on this _________________
day of _______________________, 19___.
_____________________________
[Seal] Secretary
Certification and Representation by Signing Officers
We, the undersigned, ____________________ and _____________________ being
the ____________________ and _____________________ of __________________, the
corporation which executed the guaranty hereto, hereby jointly and severally
certify and represent to General Electric Capital Corporation that each of the
undersigned executed the guaranty for and on behalf of said corporation and
that in so executing said instrument the undersigned were duly authorized to
do so in their named capacity as officers and by so executing to hereby bind
said guarantor corporation to the terms of said instrument as therein set
forth.
____________________________ (L.S.) _____________________________ (L.S.)
Date: _____________________________ Date: ______________________________
<PAGE>
CORPORATE GUARANTY
Date: August 31, 1995
General Electric Capital Corporation
303 International Circle Suite 300
Hunt Valley, MD 21031
To induce you to enter into, purchase or otherwise acquire, now or at any
time hereafter, any promissory notes, security agreements, chattel mortgages,
pledge agreements, conditional sale contracts, lease agreements, and/or any
other documents or instruments evidencing, or relating to, any lease, loan,
extension of credit or other financial accommodation (collectively "Account
Documents" and each an "Account Document") to OMI Acquisition Corp., a
corporation organized and existing under the laws of the State of Delaware
("Customer"), but without in any way binding you to do so, the undersigned, for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby guarantee to you, your successors and assigns, the due
regular and punctual payment of any sum or sums of money which the Customer may
owe to you now or at any time hereafter, whether evidenced by an Account
Document, on open account or otherwise, and whether it represents principal,
interest, rent, late charges, indemnities, an original balance, an accelerated
balance, liquidated damages, a balance reduced by partial payment, a deficiency
after sale or other disposition of any leased equipment, collateral or security,
or any other type of sum of any kind whatsoever that the Customer may owe to you
now or at any time hereafter, and does hereby further guarantee to you, your
successors and assigns, the due, regular and punctual performance of any other
duty or obligation of any kind or character whatsoever that the Customer may owe
to you now or at any time hereafter (all such payment and performance
obligations being collectively referred to as "Obligations"). Undersigned does
hereby further guarantee to pay upon demand all losses, costs, attorneys' fees
and expenses which may be suffered by you by reason of Customer's default or
default of the undersigned.
This Guaranty is a guaranty of prompt payment and performance (and not
merely a guaranty of collection). Nothing herein shall require you to first seek
or exhaust any remedy against the Customer, its successors and assigns, or any
other person obligated with respect to the Obligations, or to first foreclose,
exhaust or otherwise proceed against any leased equipment, collateral or
security which may be given in connection with the Obligations. It is agreed
that you may, upon any breach of default of the Customer, or at any time
thereafter, make demand upon the undersigned and receive payment and performance
of the Obligations, with or without notice or demand for payment of performance
by the Customer, its successors or assigns, or any other person. Suit may be
brought and maintained against the undersigned, at your election, without
joinder of the Customer or any other person as parties thereto. The obligations
of each signatory to this Guaranty shall be joint and several.
The undersigned agrees that its obligations under this Guaranty shall be
primary, absolute, continuing and unconditional, irrespective of and unaffected
by any of the following actions or circumstances (regardless of any notice to or
consent of the undersigned): (a) the genuineness, validity, regularity and
enforceability of the Account Documents or any other document; (b) any
extension, renewal, amendment, change, waiver or other modification of the
Account Documents or any other document; (c) the absence of, or delay in, any
action to enforce the Account Documents, this Guaranty or any other document;
(d) your failure or delay in obtaining any other guaranty of the Obligations
(including, without limitation, your failure to obtain the signature of any
other guarantor hereunder); (e) the release of, extension of time for payment
or performance by, or any other indulgence granted to the Customer or any other
person with respect to the Obligations by operation of law or otherwise; (f) the
existence, value, condition, loss, subordination or release (with or without
substitution) of, or failure to have title to or perfect and maintain a security
interest in, or the time, place and manner of any sale or other disposition of
any leased equipment, collateral or security given in connection with the
Obligations, or any other impairment (whether intentional or negligent, by
operation of law or otherwise) of the rights of the undersigned; (g) the
Customer's voluntary or involuntary bankruptcy, assignment for the benefit of
creditors, reorganization, or similar proceedings affecting the Customer or any
of its assets; or (h) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or grantor.
This Guaranty may be terminated upon delivery to you (at your address
shown above) of a written termination notice from the undersigned. However, as
to all Obligations (whether matured, unmatured, absolute, contingent or
otherwise) incurred by the Customer prior to your receipt of such written
termination notice (and regardless of any subsequent amendment, extension or
other modification which may be made with respect to such Obligations), this
Guaranty shall nevertheless continue and remain undischarged until all such
Obligations are indefeasibly paid and performed in full.
The undersigned agrees that this Guaranty shall remain in full force and
effect or be reinstated (as the case may be) if at any time payment or
performance of any of the Obligations (or any part thereof) is rescinded,
reduced or must otherwise be restored or returned by you, all as though such
payment or performance had not been made. If, by reason of any bankruptcy,
insolvency or similar laws effecting the rights of creditors, you shall be
prohibited from exercising any of your rights or remedies against the Customer
or any other person or against any property, then, as between you and the
undersigned, such prohibition shall be of no force and effect, and you shall
have the right to make demand upon, and receive payment from, the undersigned
of all amounts and other sums that would be due to you upon a default with
respect to the Obligations.
Notice of acceptance of this Guaranty and of any default by the Customer or
any other person is hereby waived. Presentment, protest demand, and notice of
protest, demand and dishonor of any of the Obligations, and the exercise of
possessory, collection or other remedies for the Obligations, are hereby waived.
The undersigned warrants that it has adequate means to obtain from the Customer
on a continuing basis financial data and other information regarding the
Customer and is not relying upon you to provide any such data or other
information. Without limiting the foregoing, notice of adverse change in the
Customer's financial condition or of any other fact which might materially
increase the risk of the undersigned is also waived. All settlements,
compromises, accounts stated and agreed balances made in good faith between the
Customer, its successors or assigns, and you shall be binding upon and shall
not effect the liability of the undersigned.
Payment of all amounts now or hereafter owed to the undersigned by the
Customer or any other obligor for any of the Obligations is hereby subordinated
in right of payment to the indefeasible payment in full to you of all
Obligations and is hereby assigned to you as a security therefor. The
undersigned hereby irrevocably and unconditionally waives and relinquishes all
statutory, contractual, common law, equitable and all other claims against the
Customer, any other obligor for any of the Obligations, any collateral therefor,
or any other assets of the Customer or any such other obligor, for subrogation,
reimbursement, exoneration, contribution, indemnification, setoff or other
recourse in respect of sums paid or payable to you by the undersigned
hereunder, and
<PAGE>
the undersigned hereby further irrevocably and unconditionally waives and
relinquishes any and all other benefits which it might otherwise directly or
indirectly receive or be entitled to receive by reason of any amounts paid by,
or collected or due from, it, the Customer or any other obligor for any of the
Obligations, or realized from any of their respective assets.
THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER HEREOF OR
THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN US. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).
THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, OR ANY
RELATED DOCUMENTS. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
As used in this Guaranty, the word "person" include any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or any government or any political
subdivision thereof.
This Guaranty is intended by the parties as a final expression of the
guaranty of the undersigned and is also intended as a complete and exclusive
statement of the terms thereof. No course of dealing, course of performance or
trade usage, nor any paid evidence of any kind, shall be used to supplement or
modify any of the terms hereof. Nor are there any conditions to the full
effectiveness of this Guaranty. This Guaranty and each of its provisions may
only be waived, modified, varied, released, terminated or surrendered, in whole
or in part, by a duly authorized written instrument signed by you. No failure by
you to exercise your rights hereunder shall give rise to any estoppel against
you, or excuse the undersigned from performing hereunder. Your waiver of any
right to demand performance hereunder shall not be a waiver of any subsequent or
other right to demand performance hereunder.
This Guaranty shall bind the undersigned's successors and assigns and the
benefits thereof shall extend to and include your successors and assigns. In the
event of default hereunder, you may at any time inspect undersigned's records,
or at your option, undersigned shall furnish you with a current independent
audit report.
If any provisions of this Guaranty are in conflict with any applicable
statute, rule or law, then such provisions shall be deemed null and void to the
extent that they may conflict therewith, but without invalidating any other
provisions hereof.
Each signatory on behalf of a corporate guarantor warrants that he had
authority to sign on behalf of such corporation and by so signing, to bind said
guarantor corporation hereunder.
IN WITNESS WHEREOF, this Guaranty is executed the day and year above
written.
Diagnostic/Retrieval Systems, Inc.
By: _____________________________
(Signature)
Title: __________________________
(Officer's Title)
ATTEST: _____________________________
Secretary/Assistant Secretary
Stockholders Certification
We, the undersigned, being all of the stockholders of ____________________
("Guarantor"), the corporation which is about to execute a guaranty of the
obligations of OMI Acquisition Corp. ("Customer") in favor of General Electric
Capital Corporation (the "GECC Corporation"), do hereby certify to such GECC
Corporation that it is to the benefit of the Guarantor to execute such guaranty,
that the benefit to be received by the Guarantor from such guaranty is
reasonably worth the obligations thereby guaranteed, that the Guarantor is
authorized to execute said guaranty, and that the persons executing the same on
behalf of the Guarantor are duly authorized to do so in their named capacity
and to thereby bind the Guarantor to the terms of said instrument as therein set
forth.
Dated: __________________________, 19___ _____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
_____________________________ (L.S.)
Certified Resolution
The undersigned hereby certifies that he is Secretary of _________________,
that the following resolution was passed by unanimous written consent of the
Board of Directors of said corporation on __________________________, 19___
duly called, a quorum being present, that said resolution has not since been
revoked or amended, and that the form of guaranty referred to therein is the
form attached hereto:
"RESOLVED that it is to the benefit of this corporation that it execute a
guaranty of the obligations of OMI Acquisition Corp. ("Customer") to General
Electric Capital Corporation (the "GECC Corporation") and that the benefit to be
received by this corporation from such guaranty is reasonably worth the
obligations thereby guaranteed, and further that such guaranty shall be
substantially in the form annexed to these minutes, and further that the
______________________ and ______________________ (Title of Officers) of this
corporation are authorized to execute such guaranty on the behalf of this
corporation."
WITNESS my hand and the seal of this corporation on this __________________
day of _______________________, 19___.
_____________________________
[Seal] Secretary
Certification and Representation by Signing Officers
We, the undersigned, ______________________ and _____________________ being
the _____________________ and _______________________ of ______________________,
the corporation which executed the guaranty hereto, hereby jointly and severally
certify and represent to General Electric Capital Corporation that each of the
undersigned executed the guaranty for and on behalf of said corporation and that
in so executing said instrument the undersigned were duly authorized to do so in
their named capacity as officers and by so executing to hereby bind said
guarantor corporation to the terms of said instrument as therein set forth.
_____________________________ (L.S.) _____________________________ (L.S.)
Date: ______________________________ Date: ______________________________
MACHINE TOOLS EQUIPMENT SCHEDULE
SCHEDULE NO. 001
DATED THIS SEPTEMBER 1, 1995
TO MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital Corporation OMI Acquisition Corp.
303 International Circle Suite 300 425 North Drive
Hunt Valley, MD 21031 Melbourne, FL 32935
Capitalized terms not defined herein shall have the meanings assigned to them in
the Master Lease Agreement identified above ("Agreement"; said Agreement and
this Schedule being collectively referred to as "Lease").
A. Equipment
Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee
the Equipment listed on Annex A attached hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $30,777.53.
2. Capitalized Lessor's Cost: $1,900,000.00.
3. Basic Term Lease Rate Factor: 1.61987%.
4. Daily Lease Rate Factor: 0.053996%.
5. Basic Term (No. of Months): 72.
6. Basic Term Commencement Date: September 1, 1995.
7. Equipment Location: 425 North Drive, Melbourne, FL 32935.
8. Lessee Federal Tax ID No.: 59-3321536.
9. Last Delivery Date: September 1, 1995.
10. First Termination Date: Thirty-six (36) months after the Basic Term
Commencment Date.
C. Tax Benefits
Depreciation Deductions
a. Depreciation Method (check one):
[x] The 200% declining balance method, switching to straight line method
for the 1st taxable year for which using the straight line method with
respect to the adjusted basis as of the beginning of such year will
yield a larger allowance; OR
[ ] The method determined by applying to the unadjusted basis the
applicable percentages set forth in Section 168(b)(1) of the Code, as
in effect prior to the adoption of the Tax Reform Act of 1986.
b. Recovery Period: 7 years
c. Basis: 100% of Capitalized Lessor's Cost.
D. Term and Rent
1. Interim Rent. For the period from and including the Lease Commencement
Date to the Basic Term Commencement Date ("Interim Period"), Lessee shall pay
as rent ("Interim Rent") for each unit of Equipment, the product of the Daily
Lease Rate Factor times the Capitalized Lessor's Cost of such unit times the
number of days in the Interim Period. Interim Rent shall be due on N/A.
2. Basic Term Rent. Commencing on September 1, 1995 and on the same day of
each month thereafter (each, a "Rent Payment Date") during the Basic Term,
Lessee shall pay as rent ("Basic Term Rent") the product of the Basic Term
Lease Rate Factor times the Capitalized Lessor's Cost of all Equipment on
this Schedule.
3. Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no
more than ten percent (10%) to account for equipment change orders, equipment
returns, invoicing errors, and similar matters. Leseee acknowledges and
agrees that the Rent shall be adjusted as a result of such change in the
Capitalized Lessor's Cost (Pursuant to paragraphs 1 and 2 above). Lessor
shall send Lessee a written notice stating the final Capitalized Lessor's
cost, if different from that disclosed on this Schedule.
<PAGE>
Except as expressly modified hereby, all terms and provisions of the Agreement
shall remain in full force and effect. This Schedule is not binding or effective
with respect to the Agreement or Equipment until executed on behalf of Lessor
and Lessee by authorized representatives of Lessor and Lessee, respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OMI ACQUISITION CORP.
CORPORATION
By: /S/ KEVIN G. WORTMAN By: /S/ RICHARD ROSS
-------------------------------- --------------------------------
Name: Kevin G. Wortman Name: Richard Ross
------------------------------ ------------------------------
Title: Sr. Credit Analyst Title: President
----------------------------- -----------------------------
Attest:
By: Nancy R. Pitek
---------------------------------
Name: Nancy R. Pitek
--------------------------------
<PAGE>
ADDENDUM NO. 01
TO EQUIPMENT SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
THIS AMENDMENT amends and supplements the above schedule (the "Schedule")
to the above lease (the "Lease"), between GENERAL ELECTRIC CAPITAL CORPORATION
("Lessor") and OMI Acquisition Corp ("Lessee") and is hereby incorporated into
the Schedule as though fully set forth therein. Capitalized terms not otherwise
defined hrein shall have the meanings set forth in the Lease.
The Schedule is hereby amended as follows:
Section D3. is deleted in its entirety.
Except as expressly modified hereby, all terms and provisions of the
Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OMI ACQUISITION CORP.
CORPORATION
By: /S/ KEVIN G. WORTMAN By: /S/ RICHARD ROSS
-------------------------------- --------------------------------
Name: Kevin G. Wortman Name: Richard Ross
------------------------------ ------------------------------
Title: Sr. Credit Analyst Title: President
----------------------------- -----------------------------
Attest:
By: Nancy R. Pitek
---------------------------------
Name: Nancy R. Pitek
--------------------------------
<PAGE>
ADDENDUM NO. 02
TO SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF AUGUST 31, 1995
THIS ADDENDUM (this "Addendum") amends and supplements the above referenced
schedule (the "Schedule") to the above referenced lease (the "Lease"), between
General Electric Capital Corporation ("Lessor") and OMI Acquisition Corp.
("Lessee") and is hereby incorporated into the Schedule as though fully set
forth therein. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease.
For purposes of this Schedule only, the Lease is authorized by adding the
following thereto:
EARLY PURCHASE OPTION.
(a) Provided that the Lease has not been earlier terminated and provided
further that Lessee is not in default under the Lease or any other agreement
between Lessor and Lessee, Lessee may, UPON AT LEAST 30 DAYS BUT NO MORE THAN
270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE ELECTION TO
EXERCISE SUCH OPTION, purchase all (but not less than all) of the Equipment
listed and described in this Schedule on the rent payment date (the "Early
Purchase Date") which is 60 months from the Basic Term Commencement Date of the
Schedule for a price equal to $680,067.00 (the "FMV Early Option Price"), plus
all applicable sales taxes on an AS IS BASIS. Lessor and Lessee agree that the
FMV Early Option Price is a reasonable prediction of the Fair Market Value (as
such term is defined in Section XIX(b) hereof) of the Equipment at the time the
option is exercisable. Lessor and Lessee agree that if Lessee makes any
non-severable improvement to the Equipment which increases the value of the
Equipment and is not required or permitted by Section VII or XI of the Lease
prior to lease expiration, then at the time of such option being exercised,
Lessor and Lessee shall adjust the purchase price to reflect any addition to the
price to reflect any addition to the price anticipated to result from such
imProvement. (The purchase option granted by this subsection shall be referred
to herein as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with respect to the
Equipment leased hereunder, then on the Early Purchase Option Date, Lessee shall
pay to Lessor any Rent and other sums due and unpaid on the Early Purchase
Option Date and Lessee shall pay the FMV Early Option Price, plus all applicable
sales taxes, to Lessor in cash.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect. This Addendum is not binding nor
effective with respect to the Lease or the Equipment until executed on behalf of
Lessor and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation OMI Acquisition Corp.
By: /S/ KEVIN G. WORTMAN By: /S/ RICHARD ROSS
-------------------------------- --------------------------------
Name: Kevin G. Wortman Name: Richard Ross
------------------------------ ------------------------------
Title: Sr. Credit Analyst Title: President
----------------------------- -----------------------------
<PAGE>
GE Capital
- ------------------------------------------------------------------------
(Article 2A notice letter) Electronics Financial Services
General Electric Capital Corporation
2200 Powell Street, Suite 600, Emeryville, CA 94608
August 28, 1995
OMI Acquisition Corp.
425 North Drive
Melbourne, FL 32935
Attn: Ms. Diane Maroney
Dear Ms. Maroney:
General Electric Capital Corporation is entering into a financing
Agreement dated ________________ (the "Agreement") with OMI Acquisition Corp.
for the lease of certain equipment set forth on the attached Annex A (the
"Equipment") to the Agreement. In accordance with the requirements of Article 2A
of the Uniform Commercial Code, Lessor hereby makes the following disclosures to
Lessee prior to execution of the Agreement, (a) the person supplying the
Equipment is various--more fully described on Annex A to Schedule No. 001
attached hereto and made a part hereof, (the "Supplier"), (b) Lessee is entitled
to the promises and warranties, including those of any third party, provided to
the Lessor by Supplier, which is supplying the Equipment in connection with or
as part of the contract by which Lessor acquired the Equipment and (c) with
respect to such Equipment, Lessee may communicate with Supplier and receive an
accurate and complete statement of such promises and warranties, including any
disclaimers and limitations of them or of remedies.
General Electric Capital Corporation
By: /s/
---------------------------------
Its: Documentation Specialist
---------------------------------
Acknowledged and Agrees:
OMI Acquisition Corp.
By: /s/
--------------------------------
Its: President
--------------------------------
<PAGE>
ANNEX
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF 8-31-95
DESCRIPTION OF EQUIPMENT
- --------------------------------------------------------------------------------
QTY DESCRIPTION S/N# FMV
- --------------------------------------------------------------------------------
2640 Gages & Measuring Devices: 250 plug pins & $1,000,000.00
ring cages; 100 spectrometers;
collimator, projectors, microscopes,
telescopes, rotary tables, environmental
chambers, granite surface plates,
spectrophotometer; 50 test jigs, stands,
and fixtures; 120 pressure test sets,
V-block, angle plates; 20 freq counters,
meters, power supplies; 100 precision
gages, ID/OD gages, calipers, bore gages,
dial indicators; 2000 test plates.
1 Okuma LC30-2ST chucker, 2 turrets, #3497 1197 $ 75,000.00
1 Matsuura MC1500 vertical machining center, 7191083 1987 $ 120,000.00
40 station ATC, 1987, #5207
1 Matsuura MC560V vertical machining center, 871006315 $ 65,000.00
20 station, ATC, #5208
1 LOH RTM 3 axis CNC milling machine #6728 5307 $ 60,000.00
2 LOH LZ80 laser centering OD grinders, 2651 & 2677 $ 100,000.00
#4679 & 6821
1 Balzers coating chamber BAK 760, #3925 $ 120,000.00
1 Leybold heraeus coating chamber, #6674 7088 $ 60,000.00
1 Howard Strasbaugh planetary polisher, 31087 $ 80,000.00
model 6CX, #5257
1 Thermotron environmental chamber, model 19857 $ 80,000.00
FX-82CHV-25-25, #6658
1 Screening system, #5927 712-060 $ 80,000.00
1 Numerex coordinate measuring machine, X-1125 $ 60,000.00
model 2428-18, #6524
- --------------------------------------------------------------------------------
Total $1,900,000.00
- --------------------------------------------------------------------------------
Equipment listed on Annex A more fully
described in the 7/5/95 Appraisal Report,
performed by Mr. Barry Savage, ASA for Asset
Control Services Equipment Currently Located
at 425 North Dr., Melbourne, FL
Initial
LESSOR: LESSEE:
------------------------------- -------------------------------
<PAGE>
ANNEX
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF 8-31-95
BILL OF SALE
OMI Acquisitions Corp. (the "Seller"), in consideration of the sum of One
Million Nine Hundred Thousand Dollars ($1,900,000.00) plus sales taxes in the
amount of Zero Dollars ($0.00) (if exemption from sales tax is claimed, an
exemption certificae must be furnished to Buyer herewith), paid by General
Electric Capital Corporation (the "Buyer"), receipt of which is acknowledged,
hereby grants, sells, assigns, transfers and delivers to Buyer the equipment
(the "Equipment") described in the above schedule (said schedule and related
lease being collectively referred to as "Lease"), along with whatever claims
and rights Seller may have against the manufacturer and/or supplier of the
Equipment (the "Supplier"), including but not limited to all warranties and
representations. At Buyer's request, Seller will cause Supplier to execute the
attached Acknowledgment.
Buyer is purchasing the Equipment for leasing back to Seller pursuant to the
Lease. Seller represents and warrants to Buyer that (1) Buyer will acquire by
the terms of this Bill of Sale good title to the Equipment free from all liens
and encumbrances whatsoever, (2) Seller has the right to sell the Equipment;
and (3) the Equipment has been delivered to Seller in good order and condition,
and conforms to the specifications, requirements and standards applicable
thereto; and (4) the equipment has been accurately labeled, consistent with the
requirements of 40 CFR part 82 Subpart E, with respect to products manufactured
with a controlled (ozone-depleting) substance.
Seller agrees to save and hold harmless Buyer from and against any and all
federal, state, municipal and local license fees and taxes of any king or
nature, including, without limiting the generality of the foregoing, any and all
excise, personal property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions and suits
resulting therefrom and imposed upon, incurred by or asserted against Buyer as a
consequence of the sale of the Equipment to Buyer.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this 31st day of
August, 1995.
SELLER:
OMI Acquisition Corp.
By:
-----------------------------
Title: President
-----------------------------
<PAGE>
ANNEX C
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF 8-31-95
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation ("Lessor")
Pursuant to the provisions of the above schedule and lease (collectively,
the "Lease"), Lessee hereby certifies and warrants that (a) all Equipment listed
in the related Bill of Sale is in good condition and appearance, installed (if
applicable) and in working order; and (b) Lessee accepts the Equipment for all
purposes of the Lease, the purchase documents and all attendant documents.
Lessee does further certify that as of the date hereof (i) Lessee is not in
default under the Lease; (ii) the representations and warranties made by Lessee
pursuant to or under the Lease are true and correct on the date hereof and (iii)
Lessee has reviewed and approves of the purchase documents for the Equipment, if
any.
DESCRIPTION OF EQUIPMENT
Type of Model Number Cost
Manufacturer Serial Numbers of Equipment of Units Per Unit
See Annex A to Equipment Schedule No. 001 Attached hereto and made a part
hereof.
/s/
---------------------------------
Authorized Representative
Dated: 8/29/95
<PAGE>
ANNEX D
TO
SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF 8-31-95
STIPULATED LOSS AND TERMINATION VALUE TABLE
-------------------------------------------
TERMINATION VALUE STIPULATED LOSS
RENTAL PERCENTAGE VALUE PERCENTAGE
------ ----------------- ----------------
1 103.807 107.835
2 102.977 107.032
3 102.136 106.220
4 101.284 105.395
5 100.419 104.558
6 99.544 103.710
7 98.659 102.854
8 97.763 101.985
9 96.855 101.105
10 95.935 100.213
11 95.004 99.310
12 94.063 98.396
13 93.110 97.471
14 92.145 96.534
15 91.170 95.587
16 90.183 94.628
17 89.185 93.657
18 88.176 92.676
19 87.157 91.684
20 86.128 90.684
21 85.090 89.673
22 84,042 88.653
23 82.984 87.623
24 81.917 86.583
25 80.839 85.533
26 79.752 84.474
27 78.654 83.404
28 77.546 82.324
29 76.428 81.234
30 75.300 80.133
31 74.161 79.022
32 73.013 77.902
33 71.858 76.774
34 70.694 75.638
35 69.521 74.494
36 68.338 73.338
37 67.147 72.174
38 65.947 71.002
39 64.735 69.819
40 63.516 68.627
41 62.287 67.426
42 61.048 66.214
43 59.797 64.991
44 58.538 63.761
45 57.272 62.522
46 55.999 61.277
47 54.718 60.023 cont.
<PAGE>
PAYMENT AUTHORIZATION
General Electric Capital Corporation
303 International Circle Suite 300
Hunt Valley, MD 21031
You are hereby authorized to pay the proceeds from our sale to you of
certain Equipment as evidenced on the attached Bill of Sale to the following
parties in the amount(s) designated below.
OMI Acquisition Corp. $1,900,000.00
425 North Drive, Melbourne, FL 32925
Reimbursement for funds previously paid for Equipment
listed on Annex A to Equipment Schedule No. 001
attached hereto and made a part hereof.
Very truly yours,
OMI Acquisition Corp.
(Sig)
By: ___________________________________
President
Title: ________________________________
8/29/95
Date: _________________________________
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation
To insure Lessee's compliance with the provisions of a Master Lease
Agreement dated as of 8-31-95 (the "lease") by and between the undersigned as
Lessee and General Electric Capital Corporation as Lessor, Lessee hereby agrees
to one of the following options with respect to the payment of personal property
taxes on the Equipment described in Annex A to the Lease, such agreement to be
conclusively evidenced by the initials and signature of an authorized agent of
Lessee in the appropriate spaces provided below:
Please choose one of the options below by placing an "X" in the appropriate box
and initialing where indicated. Initial ONLY ONE Choice of Option
----------------------------------
OPTION 1 Lessee's Initials:
----------------------------------
(Applicable in Jurisdictions Requiring Lessor to List Equipment): Lessee agrees
that it will not list any of such Equipment for property tax purposes or report
any property tax assessed against such Equipment until otherwise directed in
writing by Lessor. Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay such tax
and will invoice Lessee for the expense. Upon receipt of such invoice,
Lessee will promptly reimburse Lessor for such expense;
----------------------------------
OPTION 2 Lessee's Initials:
----------------------------------
(Applicable in Jurisdictions Permitting Lessee to List Equipment): Lessee
agrees that it will (a) list all such Equipment, (b) report all property
taxes assessed against such Equipment and (c) pay all such taxes
when due directly to the appropriate taxing authority until Lessor
shall otherwise direct in writing.
LESSEE:
OMI Acquisition Corp.
(Sig)
By: ___________________________________
President
Title: ________________________________
8/29/95
Date: _________________________________
AMENDMENT NO. 01
TO
MASTER SECURITY AGREEMENT
DATED AS OF AUGUST 31, 1995, 1994
THIS AMENDMENT amends and supplements the above Master Security Agreement
(the "Agreement"), between GENERAL ELECTRIC CAPITAL CORPORATION ("Secured
Party") and OMI Acquisition Corp ("Debtor") and is hereby incorporated into the
Agreement as though fully set forth therein. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Agreement.
The Agreement is hereby amended as follows:
1. Section 2(i), line 1. After "will remain, in" delete "good condition and
repair" and substitute "a state of condition and repair consistent with the like
evaluation in the Asset Control Services Appraisal dated July 5, 1995,"
2. Section 3(f), line 1. After "Secured Party" delete "may, but shall in no
event be" and substitute "would be"
3. Section 3(f), line 2. after "Collateral" and before "." Insert "so long
as the substitutions and exchanges of property for property, and additions to
property, would not diminish the value or impair the original intended use of
the collateral as determined by a new equipment appraisal ordered at the sole
discretion of Secured Party and paid for by the Debtor.
4. Section 4, line 9. Delete "Secured Party" and insert "Debtor"
5. Section 6(c), line 2. after "limitation," delete "related" and insert
"reasonable"
6. Section 7(h), line 1. after "consolidation" insert "(excepting merger or
consolidation whereby Debtor remains the wholly owned subsidiary of Photronics
Corp and Diagnostic/Retrieval Systems, Inc.)"
7. Section 9(c), line 1. delete "consistent"
8. Section 9(f), line 1. Delete the second sentence in its entirety.
Except as expressly modified hereby, all terms and provisions of the
Agreement shall remain in full force and effect.
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT, made as of August 31, 1995 ("Agreement"),
by and between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation with
an address at 303 International Circle Suite 300, Hunt Valley, MD ("Secured
Party"), and OMI Acquisition Corp., a corporation organized and existing under
the laws of the State of Delaware with its chief executive offices located at
425 North Drive, Melbourne, FL ("Debtor").
In consideration of the promises herein contained and of certain other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and secured Party hereby agree as follows:
1. CREATION OF SECURITY INTEREST.
Debtor hereby gives, grants and assigns to Secured Party, its successors
and assigns forever, a security interest in and against any and all property
listed on any collateral schedule now or hereafter annexed hereto or made a part
hereof ("Collateral Schedule"), and in and against any and all additions,
attachments, accessories and accessions thereto, any and all substitutions,
replacements or exchanges therefor, and any and all insurance and/or other
proceeds thereof (all of the foregoing being hereinafter individually and
collectively referred to as the "Collateral"). The foregoing security interest
is given to secure the payment and performance of any and all debts, obligations
and liabilities of any kind, nature or description whatsoever (whether primary,
secondary, direct, contingent, sole, joint or several, or otherwise, and whether
due or to become due) of Debtor to Secured Party, now existing or hereafter
arising, including but not limited to the payment and performance of certain
Promissory Notes from time to time identified on any Collateral Schedule
(collectively "Notes" and each a "Note"), and any renewals, extensions and
modifications of such debts, obligations and liabilities (all of the foregoing
being hereinafter referred to as the "Indebtedness").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor hereby represents, warrants and covenants as of the date hereof and
as of the date of execution of each Collateral Schedule hereto that:
(a) Debtor is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the first paragraph of this
Agreement, has its chief executive offices at the location set forth in such
paragraph, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations;
(b) Debtor has adequate power and capacity to enter into, and to perform
its obligations, under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all of the
foregoing being hereinafter referred to as the "Debt documents");
(c) This Agreement and the other Debt Documents have been duly authorized,
executed and delivered by Debtor and constitute legal, valid and binding
agreements enforceable under all applicable laws in accordance with their terms,
except to the extent that the enforcement of remedies may be limited under
applicable bankruptcy and insolvency laws;
(d) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into, or
performance by, Debtor of any of the Debt documents, except such as may have
already been obtained;
(e) The entry into, and performance by, Debtor of the Debt Documents will
not (i) violate any of the organizational documents of Debtor or any judgment,
order, law or regulations applicable to Debtor, or (ii) result in any breach of,
constitute a default under, or result in the creation of any lien, claim or
encumbrance on any of Debtor's property (except for liens in favor of Secured
Party) pursuant to, any indenture mortgage, deed of trust, bank loan, credit
agreement, or other agreement or instrument to which Debtor is a party;
(f) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or
affecting Debtor which could, in the aggregate, have a material adverse effect
on Debtor, its business or operations, or its ability to perform its
obligations under the Debt Documents;
(g) All financial statements delivered to Secured Party in connection with
the Indebtedness have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change;
(h) The Collateral is not, and will not be, used by Debtor for personal,
family or household purposes;
(i) The Collateral is, and will remain, in good condition and repair and
Debtor will not be negligent in the care and use thereof;
(j) Debtor is, and will remain the sole and lawful owner, and in possession
of, the Collateral, and has the sole right and lawful authority to grant the
security interest described in this Agreement; and
(k) The Collateral is, and will remain, free and clear of all liens, claims
and encumbrances of every kind, nature and description, except for (i) liens in
favor of Secured Party, (ii) liens for taxes not yet due or for taxes being
contested in good faith and which do not involve, in the reasonable judgment of
Secured Party, any risk of the sale, forfeiture or loss of any of the
Collateral, and (iii) inchoate materialmen's, mechanic's, repairmen's and
similar liens arising by operation of law in the normal course of business for
amounts which are not delinquent (all of such permitted liens being hereinafter
referred to as "Permitted Liens").
3. COLLATERAL
(a) Until the declaration of any default hereunder, Debtor shall remain in
possession of the Collateral; provided, however, that Secured Party shall have
the right to possess (i) any chattel paper or instrument that constitutes a part
of the Collateral, and (ii) any other Collateral which because of its nature may
require that Secured Party's security interest therein be perfected by
possession. Secured Party, its successors and assigns, and their respective
agents, shall have the right to examine and inspect any of the Collateral at any
time during normal business hours. Upon any request from Secured Party, Debtor
shall provide Secured Party with notice of the then current location of the
Collateral.
(b) Debtor shall (i) use the collateral only in its trade or business, (ii)
maintain all of the Collateral in good condition and working order, (iii) use
<PAGE>
TO COME
<PAGE>
(a) Debtor fails to pay any installment or other amount due or coming due
under any of the Debt Documents within ten (10) days after its due date;
(b) Any attempt by Debtor, without the prior written consent of Secured
Party, to sell, rent, lease, mortgage, grant a security interest in, or
otherwise transfer or encumber (except for Permitted Liens) any of the
Collateral;
(c) Debtor fails to procure, or maintain in effect at all times, any of the
insurance on the Collateral in accordance with Section 4 of this Agreement;
(d) Debtor breaches any of its other obligations under any of the Debt
Documents and fails to cure the same within thirty (30) days after written
notice thereof;
(e) Any warranty, representation or statement made by Debtor in any of the
Debt Documents or otherwise in connection with any of the Indebtedness shall be
false or misleading in any material respect;
(f) Any of the Collateral being subjected to, or being threatened with,
attachment, execution, levy, seizure or confiscation in any legal proceeding or
otherwise;
(g) Any default by Debtor under any other agreement between Debtor and
Secured Party;
(h) Any dissolution, termination of existence, merger, consolidation,
change in controlling ownership, insolvency, or business failure of Debtor or
any guarantor or other obligor for any of the Indebtedness (collectively
"Guarantor"), or if Debtor or any Guarantor is a natural person, any death or
incompetency of Debtor or such Guarantor;
(i) The appointment of a receiver for all or of any part of the property of
Debtor or any Guarantor, or any assignment for the benefit of creditors by
Debtor or any Guarantor; or
(j) The filing of a petition by Debtor or any Guarantor under any
bankruptcy, insolvency or similar law, or the filing of any such petition
against Debtor or any Guarantor if the same is not dismissed within thirty (30)
days of such filing.
8. REMEDIES ON DEFAULT.
(a) Upon the occurrence of an Event of Default under this Agreement, the
Secured Party, at its option, may declare any or all of the Indebtedness,
including without limitation the Notes, to be immediately due and payable,
without demand or notice to Debtor or any Guarantor. The obligations and
liabilities accelerated thereby shall bear interest (both before and after any
judgment) until paid in full at the lower of eighteen percent (18%) per annum or
the maximum rate not prohibited by applicable law.
(b) Upon such declaration of default, Secured Party shall have all of the
rights and remedies of a Secured Party under the Uniform Commercial Code, and
under any other applicable law. Without limiting the foregoing, Secured Party
shall have the right to (i) notify any account debtor of Debtor or any obligor
on any instrument which constitutes part of the Collateral to make payment to
the Secured Party, (ii) with or without legal process, enter any premises where
the Collateral may be and take possession and/or remove said Collateral from
said premises, (iii) sell the Collateral at public or private sale, in whole or
in part, and have the right to bid and purchase at said sale, and/or (iv) lease
or otherwise dispose of all or part of the Collateral, applying proceeds
therefrom to the obligations then in default. If requested by Secured Party,
Debtor shall promptly assemble the Collateral and make it available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties. Secured Party may also render any or all of the
Collateral unusable at the Debtor's premises and may dispose of such Collateral
on such premises without liability for rent or costs. Any notice which Secured
Party is required to give to Debtor under the Uniform Commercial Code of the
time and place of any public sale or the time after which any private sale or
other intended disposition of the Collateral is to be made shall be deemed to
constitute reasonable notice if such notice is given to the last known address
of Debtor at least five (5) days prior to such action.
(c) Proceeds from any sale or lease or other disposition shall be applied:
first, to all costs of repossession, storage, and disposition including without
limitation attorneys', appraisers', and auctioneers' fees; second, to discharge
the obligations then in default; third, to discharge any other Indebtedness of
Debtor to Secured Party, whether as obligor, endorsor, guarantor, surety or
indemnitor; fourth, to expenses incurred in paying or settling liens and claims
against the Collateral; and lastly, to Debtor, if there exists any surplus.
Debtor shall remain fully liable for any deficiency.
(d) In the event this Agreement, any Note or any other Debt Documents are
placed in the hands of an attorney for collection of money due or to become due
or to obtain performance of any provision hereof, Debtor agrees to pay all
reasonable attorneys' fees incurred by Secured Party, and further agrees that
payment of such fees is secured hereunder. Debtor and Secured Party agree that
such fees to the extent not in excess of twenty percent (20%) of subject amount
owing after default (if permitted by law, or such lesser sum as may otherwise be
permitted by law) shall be deemed reasonable.
(e) Secured Party's rights and remedies hereunder or otherwise arising are
cumulative and may be exercised singularly or concurrently. Neither the failure
nor any delay on the part of the Secured Party to exercise any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. Secured
Party shall not be deemed to have waived any of its rights hereunder or under
any other agreement, instrument or paper signed by Debtor unless such waivers be
in writing and signed by Secured Party. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future
occasion.
(f) DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY,
THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED
HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
<PAGE>
TO COME
<PAGE>
COLLATERAL SCHEDULE
THIS COLLATERAL SCHEDULE is annexed to and made a part of that certain Security
Agreement dated as of August 31, 1995, between General Electric Capital
Corporation as Secured Party and OMI Acquisition Corp., as Account Party and
describes collateral in which Account Party has granted Secured Party a security
interest in connection with the Indebtedness (as defined in the Security
Agreement) including without limitation that certain Master Lease Agreement
dated August 31, 1995.
<TABLE>
<CAPTION>
QTY DESCRIPTION S/N# FMV
- --- ----------- ---- ---
<S> <C> <C> <C>
Fixed tooling & fixtures; #40 taper holders; 24 lg; 149 small;
177 extended; 34 roller lock; 60 collet holders; 21 tapers; #45
taper tool holder; 214 lg; 38 small; 43 roller lock; 50 Jacob &
Ericson chucks; 63 mill arbors; 32 lg borring heads; 18 small
boring heads; 146 tappers; 99 extended holders; other tooling;
1160 collets; 7 speed tappers; 2 shepherd right angle heads;
5 roller burnishers; 72 indexable carbide tools; 25 adjustable
boring bars; 7 rotary indexers; 13 CNC vertical index tables,
10"-16"; 8 sets angle plates; 15 machine viser; 18" face
mill; hardinge lathe tooling; dekel tooling. ........................ 800,000.00
Heavy duty racks, including cantilevered ............................ 28,000.00
Yale electric forklift, 5000 lbs .................................... N451919 8,000.00
Yale electric forklift, 3000 lbs .................................... N451786 8,000.00
Black & Webster drill grinder ....................................... 27654 3,000.00
Harshaw environmental chamber, #0249 ................................ 22A027 4,000.00
Thermotron vibration control, #6892 ................................. 8,000.00
MRAD pneumatic shock machine, #0758 ................................. Z18-32 12,000.00
Profile projector, model PJ311, #6221 ............................... 302-11 9,000.00
Minolta microfiche printer, model RP603, #6558 ...................... 360733 7,000.00
3M microfiche reader, model 630, #5202 .............................. 735777 12,000.00
Brunning blueprint machine, #0832 ................................... 7780798 3,000.00
Brunning copier, #4676 .............................................. 1524 5,000.00
Assembly tables and equipment ....................................... 25,000.00
12436, 16875 867167
Meles griot air balance tables ...................................... & 85106 12,000.00
LOH puddle bench polishing machine, model OLP 200, #3852 ............ 2681 3,000.00
LOH polishers, model LP75, #4680 & 4687 ............................. 2952, 2949 & 2953 24,000.00
LOH polisher, model PLM 400, #4678 .................................. 3035 10,000.00
Walter rotary table, #6751 .......................................... 2617 800.00
Sonicor sonic cleaner, #6295 ........................................ 3,000.00
Branson parts cleaner, #1067 ........................................ Z-6-11389-79 3,000.00
Rite-Hete parts cleaner, #6943 ...................................... 4,000.00
International centrifuge, #1548 ..................................... 800.00
Tennant floor scrubber .............................................. 27012 5,000.00
EZ Go electric lift truck, #5274 .................................... 59351187 800.00
Nord polishing machine, P582VCT, #5141 .............................. 8712P582585 12,000.00
Hand polisher, #6844 ................................................ 1,000.00
547-9-75, 183-6-78,592
9-76, 295-69, 568-3-76,
62-568, 187-678 & 98-8
Howard Strasbaugh grinding machines; 4 four spindle; 4 one spindle .. 69 32,000.00
Meles griot air leveling tables ..................................... 77529, 6296, & 132740 9,000.00
Mikron black body heat source for calibration, #5976, 5702 .......... 36588, 38453 & 35462 12,000.00
Rockwell drill ...................................................... 300.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QTY DESCRIPTION S/N# FMV
- --- ----------- ---- ---
<S> <C> <C> <C>
LOH engine lathe, model DSM, 6" swing, 18" CC ....................... 2275 1,600.00
Beck ealing base optical colimators, #1771 & 1772 ................... 7,500.00
Branson ultrasonic cleaner, model PSD 1216R, #4004 .................. 7995517 5,000.00
Poly cold cryogenerators ............................................ 55126, 55125, 501300 24,000.00
Precision scientific ovens, #1517 & 1546 ............................ 12,000.00
Bridgeport vertical turret mill, #4808 .............................. 270098 4,000.00
Cincinnati vertical turret mill, #4041 .............................. 6J2F1ACF53 2,500.00
Rogers Clark radius cutting machine, #6871 .......................... 01028601 16,000.00
LOH radius cutting machine, #6818 ................................... RF154028 12,000.00
LOH beveling machine, #4045 ......................................... 513 3,000.00
Howard Strasbaugh spherical radius grinders ......................... 88265, 294669 4,800.00
Universal ID/OD grinder, AE100, #3819 ............................... 383 4,800.00
LOH radius cutting machine, 5VC2MI, #4042 ........................... 15737532 14,000.00
Special tools ....................................................... 16,000.00
Shelving ............................................................ 9,000.00
Nint blast cabinet with hopper, 2 hole, #6820 ....................... 916750 1,000.00
476591189Y,
Bridgeport vertical turret mills, accurite III DRO .................. 476591189Y 16,000.00
Diacro hand brake, #3590 ............................................ 100.00
Hand shear, #3718 ................................................... 70.00
Arbor presses ....................................................... 200.00
Makino Universal tool grinder, #3445 ................................ D53-8073 8,000.00
Optical comparator, 10", #3444 ...................................... 8011 2,500.00
Miller DIA-ARC AC/DC welder, HF, #3456 .............................. 8011 300.00
Lincoln 225 AMP ARC welder, #4290 ................................... 150.00
Precision quincy solvent drying oven, 450 degrees, 6'x7'x9', #3513 .. 32-450TDD 7,000.00
Diagraph stencil cutters, #4895 & 4920 .............................. 6,000.00
Binks paint spray booths, PBS 1 & 2, water curtain .................. 10,000.00
Baron-Blakeslee degreaser, #3514 .................................... D-58125 BH320 2,500.00
Sullair 40 HP air compressor, rotary, #5271 & 3502 .................. 20,000.00
Delta drill, #3475 .................................................. 162640 300.00
Ealing electro optic table, 4'x8', #6599 ............................ 867167 2,500.00
Delta drills, #3443, 3474, 3481, 3472, 3476, 3501 ................... 11,500.00
High speed bench drill, #4262 ....................................... 50.00
3 Chamber deburring machine (stone) ................................. 1,500.00
1" belt sander, #3468 ............................................... 50.00
Herrblitz punch ..................................................... 029244 500.00
Trinco blast cabinet, 2 hole, #3448 ................................. 6146-3 2,000.00
Bridgeport vertical turret mills #3466 .............................. 167360 & 2J48179 3,500.00
Electro-ARC disintegrator, #3443 .................................... 3710 1,000.00
Troyke rotary table, 15", vertical & horizontal ..................... 500.00
Powermatic duel head floor type drill, #3478 ........................ 300.00
Jib crane, 1 ton model #B288 ........................................ 10199 1,500.00
Hardinge engine lathe, 10" swing, 2' CC, #3442 ...................... 6,000.00
Mazak engine lathe, 16" swing, 5' CC steady rest, #3437 ............. 29080W 10,000.00
Bridgeport vertical turret mill, #3477 .............................. BR99035 J97012 3,000.00
Rolling racks ....................................................... 6,000.00
Dual wheel bench grinders ........................................... 1,400.00
1" belt sander, #3498 ............................................... 50.00
6" belt sander, #6966 ............................................... 150.00
Lift table, #6633 ................................................... 500.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QTY DESCRIPTION S/N# FMV
- --- ----------- ---- ---
<S> <C> <C> <C>
Pedal type metal shear, #1064 ....................................... 500.00
Powermatic band saw, 20" throat, with welder, #1038 ................. 2,500.00
Methods slant jr. universal lathe, chip conveyor, #3518 ............. 11249 40,000.00
Ro-Tab rotary table calibration device, #6647 ....................... 2,400.00
Shop furniture and equipment ........................................ 100,000.00
Office furniture, including panels .................................. 25,000.00
Office equipment .................................................... 20,000.00
Computer equipment .................................................. 50,000.00
Zygo laser interometer & spheres, #4181 ............................. 7948-126 18,000.00
Ovens, hotpack, FECO, 2 blue M, national, 2 industrial .............. 10,000.00
Do-all C260A band saw with roller, conveyor & clamp, #5669 .......... 459-88291 28,000.00
Matsuura MC500V vertical machining center, 20 station ATC, #3429 .... 85034648 40,000.00
?? Diamond wheels ...................................................... 35,000.00
LOH WG optical centering OD grinders, #4005, 4006 ................... 33,333.33
UV spectro photometer, #7090 ........................................ 2071119 36,000.00
594-9-76, 571-3-76, 591
9-76, 593-9-76, 642-9-
77,567-3-76, 570-3-76,
554-10-75, 185-6-79,
151-4-76, 153-5-76, 18-
12-68, 172-4-76, 164-6-
78, 67-7-68, 22-2-70, 81
Howard Strasbaugh polishing machines, 10 one spindle, 2 ten spindle, 12-68, 82-12-68, 99-8-
21 9 four spindle ...................................................... 60, 186-6-78 72,000.00
3703, 3702, 4115 &
LOH polishers/grinders, model PM250 ................................. 4116 32,000.00
Enirotronics environmental chamber, #6704 ........................... 03911624 10,000.00
13160, 25-2890-04 & 25
Thermotron mini-max environmental chambers .......................... 1661-09 36,000.00
Zygo laser interferometer, model 4, #6530 ........................... 55,000.00
------------
TOTAL ............................ 1,972,753.33
============
</TABLE>
Equipment listed on Collateral Schedule more fully described in the 7/5/95
Appraisal Report, performed by Mr. Barry Savage, ASA for Asset Control
Services Equipment Currently Located at: 425 North Dr., Melbourne, FL
SECURED PARTY: ACCOUNT PARTY:
General Electric Capital Corporation OMI Acquisition Corp
By: By: Richard Ross
------------------------------ ----------------------------
Title: Sr. Credit Analyst Title: President
--------------------------- -------------------------
Date: August 31, 1995 Date: August 31, 1995
---------------------------- --------------------------
REORDER FROM
INSTRUCTIONS 1. PLEASE TYPE ALL INFORMATION, and sign REGISTRE, INC.
with ball point pen. Signature must be 514 PIERCE ST.
legible on Filing Officer Copies. P.O. BOX 218
2. Contact Filing Officer for fee ANOKA, MIN. 55303
schedule or additional information. (612) 421-1713
- --------------------------------------------------------------------------------
STATE OF FLORIDA
UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 REV. 1981
THIS FINANCING STATEMENT is presented to a filing officer for
filing pursuant to the Uniform Commercial Code:
================================================================================
(Last Name First if a Person) Lessee THIS SPACE FOR USE OF FILING OFFICER
NAME OMI Acquisition corporation Date, Time, Number & Filing Office
1A
MAILING ADDRESS 425 North Drive
CITY Melbourne STATE FL 32935
- --------------------------------------------------------------------------------
ONLY ONE NAME PER BOX
MULTIPLE DEBTOR (IF ANY) (Last Name First if a Person)
NAME
1B
MAILING ADDRESS
CITY STATE
- --------------------------------------------------------------------------------
MULTIPLE DEBTOR (IF ANY) (Last Name First if a Person)
NAME
1C
MAILING ADDRESS
CITY STATE
- --------------------------------------------------------------------------------
(Last Name First if a Person) Lessor
NAME General Electric Capital Corporation
2A
MAILING ADDRESS International Circle
Suite 300
CITY Hunt Valley STATE MD 20131
- --------------------------------------------------------------------------------
MULTIPLE SECURED PARTY (IF ANY) (Last Name First if a Person)
NAME
2b
MAILING ADDRESS AUDIT UPDATE
CITY STATE
- --------------------------------------------------------------------------------
ASSIGNEE OF SECURED PARTY (IF ANY) (Last Name First if a Person)
NAME VALIDATION INFORMATION
3
MAILING ADDRESS
CITY STATE
- --------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record
when required). If more space is required, attach additional sheets
81/2" x 11".
All equipment wherever located as more fully described on Annex A attached
hereto and made a part hereof. Including all other attachments, accessories,
* additions, replacements and substitutions and proceeds now or hereafter
attached hereto.
Equipment located at: 425 North Drive; Melbourne, FL 32935
5. Proceeds of collateral are covered as provided in Sections 679.203 and
679.306, F.S.
6. Filed with: Secretary of State-FL
7. No. of additional Sheets presented:
8. (Check [ ]) [ ] All documentary stamp taxes due and payable or to become due
and payable pursuant to Section 201.22, F.S., have been paid.
[X] Florida Documentary Stamp Tax is not required.
9. This statement is filed without the debtor's signature to perfect a security
interest in collateral (Check [ ] if so)
[ ] already subject to a security interest in another jurisdiction when it
was brought into this state or debtor's location changed to this state.
[ ] which is proceeds of the original collateral described above in which
a security interest was perfected.
[ ] as to which the filing has lapsed.
[ ] acquired after a change of name, identify, or corporate structure of the
[ ] debtor or [ ] secured party.
10. (Check [ ] if so)
[ ] Debtor is a transmitting utility
[ ] Products of collateral are covered
11. SIGNATURE(S) OF LESSEE
OMI Acquisition Corporation
13. Return copy to;
Name {Sig)
NAME AND ADDRESS OF PREPARER
REORDER FROM
INSTRUCTIONS: 1. PLEASE TYPE ALL INFORMATION, and sign REGISTRE, INC.
with ball point pen. Signature must be 514 PIERCE ST.
legible on Filing Officer Copies. P.O. BOX 218
2. Contract Filing Officer for fee ANOKA, MN. 55303
schedule or additional information. (612) 421-1713
- --------------------------------------------------------------------------------
STATE OF FLORIDA
UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 REV. 1981
THIS FINANCING STATEMENT is presented to a filing officer for
filing pursuant to the Uniform Commercial Code:
================================================================================
DEBTOR(Last Name First if a Person) THIS SPACE FOR USE OF FILING OFFICER
NAME OMI Acquisition corporation Date, Time, Number & Filing Office
1A
MAILING ADDRESS 425 North Drive
CITY Melbourne STATE FL 32935
- --------------------------------------------------------------------------------
ONLY ONE NAME PER BOX
MULTIPLE DEBTOR (IF ANY) (Last Name First if a Person)
NAME
1B
MAILING ADDRESS
CITY STATE
- --------------------------------------------------------------------------------
MULTIPLE DEBTOR (IF ANY) (Last Name First if a Person)
NAME
1C
MAILING ADDRESS
* CITY STATE
- --------------------------------------------------------------------------------
SECURED PARTY (Last Name First if a Person)
NAME General Electric Capital Corporation
2A
MAILING ADDRESS 303 International Circle
Suite 300
CITY Hunt Valley STATE MD 20131
- --------------------------------------------------------------------------------
MULTIPLE SECURED PARTY (IF ANY) (Last Name First if a Person)
NAME
2B
MAILING ADDRESS AUDIT UPDATE
CITY STATE
- --------------------------------------------------------------------------------
ASSIGNEE OF SECURED PARTY (IF ANY) (Last Name First if a Person)
NAME VALIDATION INFORMATION
3
MAILING ADDRESS
CITY STATE
- --------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record
when required). If more space is required, attach additional sheets
81/2" x 11".
All equipment wherever located as more fully described on Collateral
Schedule to Master Security Agreement dated as of _______________attached
hereto and made a part hereof. Including all other attachments, accessories,
* additions, replacements and substitutions and proceeds now or hereafter
attached hereto. Equipment located at: 425 North Dr.; Melbourne, FL 32935
5. Proceeds of collateral are covered as provided in Sections 679.203 and
679.306, F.S.
6. Filed with: Secretary of State-FL
7. No. of additional Sheets presented:
8. (Check [ ]) [ ] All documentary stamp taxes due and payable or to become due
and payable pursuant to Section 201.22, F.S., have been paid.
[X] Florida Documentary Stamp Tax is not required.
9. This statement is filed without the debtor's signature to perfect a security
interest in collateral (Check [ ] if so)
[ ] already subject to a security interest in another jurisdiction when it
was brought into this state or debtor's location changed to this state.
[ ] which is proceeds of the original collateral described above in which
a security interest was perfected.
[ ] as to which the filing has lapsed.
[ ] acquired after a change of name, identify, or corporate structure of the
[ ] debtor or [ ] secured party.
10. (Check [ ] if so)
[ ] Debtor is a transmitting utility
[ ] Products of collateral are covered
11. SIGNATURE(S) OF Debtor(s)
OMI Acquisition Corporation
13. Return copy to:
Name {Sig)
NAME AND ADDRESS OF PREPARER
[LOGO]
GE Cap
- --------------------------------------------------------------------------------
Electronics Financial Services
General Electric Capital Corporation
2200 Powell Street, Suite 600, Emeryville, CA 94608
3013 (3/91)
August 28, 1995
Fred Sutton
2174 Harris Avenue, Northeast, Suite 5
Palm Bay, FL 32905
Gentlemen/Ladies:
General Electric Capital Corporation ("Lessor") has entered into, or is
about to enter into, a lease agreement, security agreement, chattel mortgage or
similar agreement ("Financing Agreement") with OMI Acquisition Corp. ("Lessee"),
pursuant to which the Lessee has granted, or will grant, to Lessee a security
interest in certain personal property described in the attached Annex A and
Collateral Schedule (such property, together with any replacements thereof,
being the "Personal property"). Some or all of the Personal Property is, or will
be, located at certain premises known as Woodlake Commerce Park Building 2330,
Suite 8, 2330 Commerce Park Drive in the City or Town of Palm Bay, County of
Brevard and State of FL ("Premises"). This letter is being sent to you because
of your interest in the Premises.
By your signature below, you hereby agree (and we shall rely on your
agreement) that: (i) the Personal Property is, and shall remain, personal
property regardless of the method by which it may be, or become, affixed to the
Premises; (ii) your interest in the Personal Property and any proceeds thereof
(including, without limitation, proceeds of any insurance therefor) shall be,
and remain, subject and subordinate to the interests of Lessor; (iii) Lessor,
and its employees and agents, shall have the right, from time to time, to enter
into the Premises for the purpose of inspecting the Personal Property; and (iv)
Lessor Party, and its employees and agents, shall have the right, upon any
default by the Lessee under the Financing Agreement, to enter into the Premises
and to remove the Personal Property from such Premises. Lessor agrees to
reimburse you for any damages actually caused to the Premises or it employees or
agents, during any such removal. These agreements shall be binding upon, and
shall inure to the benefit of, any successors and assigns of the parties hereto.
We appreciate your cooperation in this matter of mutual interest.
General Electric Capital Corporation
By: Patricia A. Favier
Title: Credit Analyst
AGREED TO AND ACCEPTED BY:
Fred Sutton
By: Fred Sutton
Title: President, Sutton Properties
Date: 8-30-95
Interest in the Premises (check applicable box)
[X] Owner
[ ] Morgage
[X] Landlord
[ ] Realty Manager
A GE Capital Services Company
<PAGE>
CORPORATE LESSEE'S
BOARD OF DIRECTORS RESOLUTION
The undersigned hereby certifies (i) that she/he is the Secretary of OMI
Acquisition Corp. (ii) that the following is a true and correct copy of
resolutions duly adopted by unanimous written consent of the Board of
Directors of said Corporation duly held on the 29 day of August, 1995 and
(iii) that the resolutions have not been amended, rescinded, modified or
revoked, and are in full force and effect:
"RESOLVED, that each of the officers of this Corporation, whose name
appears below:
(Sig) (Sig)
---------------------------- -----------------------------
President Controller
---------------------------- -----------------------------
Vice President Secretary
or the duly elected or appointed successor in office of any or all of them, be,
and hereby is, authorized and empowered in the name and on behalf of this
Corporation to enter into, execute and deliver a master lease agreement with
General Electric Capital Corporation ("Lessor") as Lessor, providing for the
leasing to (or sale and leaseback by) this Corporation, from time to time, of
certain equipment, and further providing for this Corporation to indemnify said
lessor against certain occurrences and against the loss of contemplated tax
treatment; and
FURTHER RESOLVED, that each officer of this Corporation be, and hereby is,
authorized and empowered in the name and on behalf of this Corporation to enter
into, execute and deliver any documents and to do and perform all other acts and
deeds which may be necessary and appropriate to effectuate the lease (or sale
and leaseback) for equipment from Lessor, and
FURTHER RESOLVED, that the Lessor may rely upon the aforesaid resolutions
until receipt by it of written notice of any change.
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this __________ day of _____________, 19 __.
(CORPORATE SEAL)
(Sig)
- -------------------------------
Secretary
<PAGE>
CERTIFIED COPY OF RESOLUTION OF BOARD OF DIRECTORS
The undersigned hereby certifies: that he/she is the Secretary of OMI
Acquisition Corp., a Delaware corporation; that the following is a true,
accurate and complete transcript of resolutions duly adopted by unanimous
written consent of the Board of Directors of said Corporation duly held on the
29 day of August, 1995, at which a quorum was present, and that the proceedings
were in accordance with the Articles and by-laws of said Corporation: and that
said resolutions have not been amended or revoked, and are in full force and
effect:
"RESOLVED, that each of the officers of this Corporation, whose name appears
below, or the duly elected or appointed successor in office of any or all of
them, be and hereby is authorized and empowered in the name and on behalf of
this Corporation to borrow from General Electric Capital Corporation
(hereinafter referred so as "GE Capital") from time to time, such sum or sums
of money as in the judgment of such officer or officers the Corporation may
require and to execute on behalf of the Corporation and to deliver to GE
Capital in the form required by GE Capital a promissory note or notes of
this Corporation evidencing the amount or amounts borrowed or any renewals
and/or extensions thereof, such note or notes to bear such rate of interest
and be payable in such installments and on such terms and conditions as such
officer may agree to by his signature thereon.
FURTHER RESOLVED, that any of the aforesaid officers, or his duly elected or
appointed successor in office, be and hereby is authorized and empowered to do
any acts, including, but not limited to, the mortgage, pledge, or hypothecation
from time to time with GE Capital of any or all the assets of this Corporation
to secure such loan or loans and any other indebtedness or obligations, now
existing or hereafter arising, of this Corporation to GE Capital, and to expect
in the name of and on behalf of this Corporation, any chattel mortgages, notes,
security agreements, financing statements, renewal, extension or consolidation
agreement, and any other instruments or agreements deemed necessary or proper by
GE Capital in respect of the collateral securing any indebtedness of this
Corporation, and to affix the seal of this Corporation to any mortgage, pledge,
or other such instrument if so required or requested by GE Capital.
FURTHER RESOLVED, that each said officer of this Corporation is hereby
authorized to do and perform all other acts and deeds that may be requisite or
necessary to carry fully into effect the foregoing resolutions.
FURTHER RESOLVED, that the officers referred to in the foregoing resolutions,
their names and signatures are as follows:
NAME TITLE SIGNATURE
---- ----- ---------
Richard Ross President Richard Ross
Diane M. Maroney Controller Diane M. Maroney
FURTHER RESOLVED, that GE Capital is authorized to rely upon the aforesaid
resolutions until receipt by it of written notice of any change, which changes
of whatever nature shall not be effective as to GE Capital to the extent that it
has theretofore relied upon the aforesaid resolutions in the above form."
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said Corporation
this ____ day of _____________, 19__.
(Sig)
- ----------------------------------
Secretary
(CORPORATE SEAL)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement")
is made as of February ___, 1996, by and among Mag-Head
Engineering Company, Inc., a Minnesota corporation
("Seller"), and Ahead Technology Acquisition Corporation,
a Delaware corporation ("Purchaser"). Seller is
sometimes referred to in this Agreement as "Selling
Party" or "Selling Parties."
RECITALS
A. Seller is in the business of manufacturing,
selling and distributing magnetic recording heads (the
"Business").
B. Seller desires to sell certain specified
property and assets and to assign certain specified
agreements to Purchaser, and Purchaser desires to acquire
such property and assets, and assume such agreements, on
the terms and conditions specified in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants, agreements, representations and warranties
contained in this Agreement, the parties hereto agree as
follows:
1. Purchase and Sale of Assets: Assumption of
Certain Liabilities.
1.1 Assets Purchased. Upon the terms and
subject to the conditions of this Agreement, Purchaser
shall purchase, and Seller shall sell, assign, transfer
and convey to Purchaser at the Closing (as defined in
Section 9 hereof), all of the following tangible and
intangible assets, properties, licenses, and rights
(collectively the "Assets"), free and clear of all liens,
claims, options, rights of third parties and
encumbrances, whether contingent or otherwise:
1.1.1 All equipment, machinery,
furniture, fixtures, leasehold improvements, tools, trade
fixtures, and other tangible property of Seller (whether
such property constitutes real, personal or mixed
property), listed on Schedule 1.1.1 hereof ("Fixed
Assets").
1.1.2 All inventory, work in progress,
and stock in trade of Seller as of the Closing Date.
1.1.3 All rights of Seller under all
accounts receivable, customer sales/purchase orders for
Seller's products, distributor agreements, supply and
maintenance contracts, personal property leases (and the
remaining term under the Lease (as defined in Section
1.3.2 below)), purchase orders and barter arrangements,
and the rights of Seller to all prepaid expenses and
benefits under the foregoing, as set forth in Schedule
1.1.3 attached hereto.
1.1.4 All service marks, patents,
trademarks, copyrights, designs, brand names, trade
names, know-how, processes, symbols, inventions,
programs, trade secrets, logos and telephone numbers
related to or connected with the Business, including,
without limitation, the product catalogues used or
distributed by Seller in connection with the Business and
the names "MEC" and "Mag-Head Engineering Company," and
all derivations thereof, all lists of suppliers,
customers and prospects, all Federal and state
applications for protection or registration of any of the
foregoing and all intangibles appurtenant thereto, and
all rights and properties listed on Schedule 1.1.4
("Proprietary Rights").
1.1.5 All files and correspondence
pertaining to customers, prospects and suppliers,
including, without limitation, customer service, sales,
manufacturing and warranty files and records, and all
other documents, materials and supplies related to the
Business ("Business Records").
1.2 Excluded Assets. It is expressly agreed
that Purchaser shall purchase only those Assets described
in this Agreement (including without limitation, the
Schedules attached hereto). In particular, and without
otherwise limiting or reducing the scope of the preceding
sentence, the parties specifically acknowledge that
Purchaser shall not purchase any of the following
("Excluded Assets"): (i) any tangible or intangible
assets listed in Schedule 1.2 hereof.
1.3 Assumption of Certain Liabilities.
Purchaser shall assume no liabilities or obligations of
Seller whatsoever, except for the following liabilities
("Assumed Liabilities") which Purchaser shall assume,
discharge, perform when due, and indemnify Seller
against:
1.3.1 Seller's obligations from and after
the Closing Date with respect to the personal property
leases and agreements identified on Schedule 1.3 hereto.
1.3.2 Seller's obligations from and after
the Closing Date with respect to the real property lease
covering the premises on which Seller conducted the
Business and identified on Schedule 1.3 hereto (the
"Lease"), pursuant to an Assignment of Lease, executed by
Seller and the landlord for such premises, and in
substantially the form set forth in Schedule 1.3.
1.3.3 Those certain accounts payable of
Seller identified on Schedule 1.3 attached hereto.
1.4 Liabilities Not Assumed. Notwithstanding
anything in this Agreement to the contrary, Purchaser
shall not assume, discharge or indemnify Seller against
any debt, obligation or liability of any kind not
expressly assumed pursuant to Section 1.3 hereof. In
particular, and without otherwise limiting or reducing
the scope of the preceding sentence, the parties
specifically acknowledge that Purchaser shall not assume,
discharge, or indemnify Seller against any of the
following:
1.4.1 Debts, liabilities, obligations or
commitments arising out of or related to or created by
this Agreement or the transactions contemplated hereby
(including, without limitation, any federal or state
income or franchise tax liabilities or sales or use tax
liabilities).
1.4.2 Debts, liabilities, obligations or
commitments arising out of, or related to the Assets
(unless expressly assumed pursuant to this Agreement) or
the Business of Seller, including, without limitation,
debts, liabilities, obligations or commitments arising
out of or related to Seller's payroll obligations
(including, without limitation, vacation pay, severance
pay, bonuses, etc.), utilities, leases of real property,
retirement or profit sharing plans, medical plans,
insurance policies, and worker's compensation
obligations.
2. Purchase Price; Adjustments.
2.1 Purchase Price. The purchase price (the
"Purchase Price") for the Assets shall consist of the sum
of (a) $225,000, and (b) the amount of (x) cash and
accounts receivable less (y) accounts payable and accrued
payroll expenses, as indicated on the October 31, 1995
balance sheet of Seller, which is one of the Financial
Statements (as defined in Section 3.3, below). Purchaser
shall be entitled to a credit against the Purchase Price
for an amount equal to the accrued but unused vacation
pay of Seller's employees, which accrued prior to
November 1, 1995, but was paid by Seller between November
1, 1995 and the Closing Date.
2.2 Payment. At Closing, Purchaser shall pay
to Seller the Purchase Price in cash, subject to credits
and adjustments under this Agreement.
2.3 Adjustment to Purchase Price. The
Purchase Price shall be adjusted as follows:
2.3.1 The Purchase Price shall be reduced
to reflect certain changes in the accounts receivable and
accounts payable of the Seller and payments made by
Seller not in the ordinary course of business of Seller
(including, without limitation, (i) costs arising in
connection with the consummation of the transactions
under this Agreement, and (ii) payroll and other employee
expenses arising from Seller's termination of employees)
between October 31, 1995 and the Closing Date, and such
other adjustments as mutually agreed by the parties in
good faith.
2.3.2 Purchaser shall be entitled to a
credit against the Purchase Price equal to the amount of
cash of Seller on hand at Closing (as defined in Section
9), as certified by Seller, in form and substance
acceptance to Purchaser, that is not surrendered to
Purchaser at Closing.
2.4 Allocation. The Purchase Price and the
Assumed Liabilities shall be allocated among the Assets
in the manner set forth in Schedule 2.4 hereof, as may be
required pursuant to Section 1060 of the Internal Revenue
Code of 1986, as amended. Purchaser and Seller shall
report this transaction for federal and state income tax
purposes in accordance with such allocation.
3. Representations and Warranties of Seller.
Seller represents and warrants to Purchaser as
follows:
3.1 Corporate Existence and Organization.
Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Minnesota. Seller has the requisite corporate power and
authority to own, lease and operate its properties and
assets, including without limitation the Assets, and to
carry on its Business as is now being conducted.
3.2 Authority. Seller has full corporate
power and authority to execute and to deliver this
Agreement and all other agreements executed and delivered
or to be executed and delivered by Seller in connection
with the transactions contemplated hereby, including,
without limitation, the documents specified in Section 9
hereof to be executed and delivered by Seller. The
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of
Directors of Seller and approved by the vote of the
shareholders of Seller, and no other corporate
proceedings on the part of Seller and no approvals or
consents of any other persons are necessary to authorize
the execution and delivery of this Agreement and to
consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding
agreement of Seller, enforceable against Seller in
accordance with its terms. Seller has the number of
shares of a single class of common stock ("Shares") set
forth on Schedule 3.2 hereto. Schedule 3.2 sets forth
the total number of Shares issued and outstanding and the
sole beneficial and record owners of all such Shares.
3.3 Financial Statements; Absence of Certain
Changes. Seller has heretofore delivered to Purchaser
the following financial statements for the period ending
October 31, 1995 (the "Financial Statements") set forth
on Schedule 3.3 attached hereto. The Financial
Statements present fairly the financial position of
Seller as of their respective dates. The Seller's
outside accountant has performed an overview of the
Financial Statements, and, shall represent in writing to
Purchaser, in a form satisfactory to Purchaser, that such
accountant is unaware of any material circumstance or
event resulting in the Financial Statements not fairly
presenting the financial condition of Seller, and that
the accountant is not aware of any material event that
would adversely affect the financial condition of Seller
as so presented. Since October 31, 1995, Seller has not:
(i) materially increased the compensation of any employee
or altered its policies with respect to employee
compensation; (ii) sold, leased or otherwise transferred
any Assets (except in the ordinary course of business),
or (iii) incurred any debts or liabilities (except in the
ordinary course of business).
3.4 Assumed Liabilities. Seller has delivered
to Purchaser a true, complete, and correct copy of each
written instrument or document governing the Assumed
Liabilities. All of the Assumed Liabilities of Seller
are set forth in Schedule 1.3, attached hereto, none of
which have been amended or modified except as disclosed
in Schedule 1.3. Seller is not in default under any of
the Assumed Liabilities and is not aware of any actions
or omissions which might result in such default upon
notice or the passage of time, or both.
3.5 No Default; Consents and Approvals.
Neither the execution and delivery of this Agreement, nor
the consummation of any of the transactions contemplated
herein will (i) violate any provision of the Articles of
Incorporation or Bylaws of Seller (true and complete
copies of which have heretofore been delivered to
Purchaser by Seller); (ii) violate, conflict with or
result in the breach or termination of, or otherwise give
any other contracting party the right to terminate, or
constitute a default (by way of substitution, novation or
otherwise) under the terms of, any agreement, lease,
indenture or instrument to which the Seller is a party,
including, without limitation, the Assumed Liabilities,
or by which it or any of the Assets may be bound; (iii)
result in the creation of any lien, charge or encumbrance
upon the Assets; (iv) violate any judgment, order,
injunction, decree or award against, or binding upon,
Seller, the Assets or Assumed Liabilities; or (v)
constitute a violation by Seller of any law or regulation
applicable to Seller, the Assets or the Assumed
Liabilities. All consents, releases or waivers from
third parties (including, without limitation,
governmental and regulatory authorities) which may be
necessary to prevent the transactions provided for herein
causing a breach, acceleration or default of the type
specified in this Section 3.5 have been obtained.
3.6 Intentionally Deleted.
3.7 Title to Assets. Seller has good and
marketable title to all Assets, whether real, personal or
mixed, all of which are free and clear of any
restrictions on or conditions to transfer or assignment
and free and clear of any mortgages, liens, security
interests, encumbrances, claims, charges or adverse
interests of any kind or character (collectively,
"Encumbrances") of any other person or entity. All work-
in-progress and Inventory has been fully paid for (except
for any Assumed Liabilities) and is not subject to any
conditional sales contract, consignment or other
Encumbrances whatsoever, nor does any third party have
any interest or claim therein.
3.8 Condition of Assets. Except for ordinary
wear and tear, to Seller's knowledge, all of the Fixed
Assets are in good operating condition and repair,
adequate for the uses to which they are being put in the
Business. All property and excise taxes for the Assets
have been fully paid for all tax years, except for any
installment not yet due and payable with respect to the
current tax year.
3.9 Compliance With Laws. The conduct of the
Business by Seller, the condition and Seller's occupancy
of the Premises, and the condition and use of the Assets
have not violated any material applicable federal, state
and local statutes, laws and regulations, including
(without limitation) any material applicable laws and
regulations relating to building, zoning, environmental,
health and safety, employee safety and the employment of
labor (including those laws and regulations relating to
wages, workers' compensation, hours, collective
bargaining, non-discrimination in employment and the
withholding and payment of taxes and contributions).
Seller has not received any notice of any such violation.
3.10 Real Property. Schedule 3.10 to this
Agreement contains the common description of the
Premises. Seller has no knowledge that the zoning for
the Premises prohibits the existing improvements or
continuation of the Business being conducted on such
Premises. Seller has not commenced, nor has Seller
received notice of the commencement of, any proceeding
that would affect the present zoning classification of
such Premises. There are no unrecorded easements
(including prescriptive easements), subleases, licenses
or other rights of occupancy existing with respect to the
Premises granted by Seller.
3.11 Hazardous Substances. Except as set
forth in Schedule 3.11 hereto, neither the Assets nor the
Premises contain, to the best knowledge of Seller after
diligent review and inquiry, any Hazardous Substances (as
defined below), whether located upon or beneath Premises,
and no debris has been buried beneath the surface of the
Premises. Seller has not discharged, and has no
knowledge that any other person has discharged, any
Hazardous Substances on Premises. Seller is in
compliance with the terms and conditions of all statutes,
use ordinances and regulations, federal, state and local,
pertaining to the Assets and the sanitization or cleanup
of the Premises with respect to Hazardous Substances.
Seller has provided access to and copies of any data
and/or documents dealing with potentially Hazardous
Substances used at the Premises and any disposal
practices followed. Buyer shall have the right to make
inquiries of governmental agencies regarding such
matters, without liability for the outcome of such
discussions.
"Hazardous Substances" means any material or
substance that is (a) a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. SECTION 9601(14),
Section 311 of the Federal Water Pollution Control Act,
33 U.S.C. SECTION 1321; (b) a "hazardous waste" pursuant to
Section 1004 or Section 1001 of the Resource Conservation
and Recovery Act, 42 U.S.C. SECTIONSECTION 6903, 6921; (c) a toxic
pollutant under Section 307(a)(1) of the Federal Water
Pollution Act, 33 U.S.C. SECTION 1317(a)(1); (d) a "hazardous
air pollutant" under Section 112 of the Clean Air Act, 42
U.S.C. SECTION 7412; (e) a "hazardous material" under the
Hazardous Materials Transportation Uniform Safety Act of
1990, 49 U.S.C. App. SECTION 1802(4); (f) toxic or hazardous
pursuant to regulations promulgated under the
aforementioned laws; or (g) a risk to the environment
that is a toxic or hazardous substance, material,
pollutant or waste under any other applicable federal,
state or local laws, ordinances or regulations.
3.12 Employee Agreements. Except as set forth
on Schedule 3.12, Seller is not a party to any collective
bargaining agreement or other similar labor agreements,
or any medical, life insurance, pension, retirement,
deferred compensation, profit sharing or other incentive
or fringe benefit plan, agreements or arrangements
providing for employee remuneration or benefits. Seller
represents and warrants that Paul Michael is an employee-
at-will of Seller.
3.13 Customers. Seller has not received
notification and has no reason to believe that any of the
current customers or suppliers of the Business,
including, without limitation, the customers and
suppliers designated in Schedule 3.13 attached hereto,
will cease doing business, or will reduce the amount of
business such suppliers and customers currently conduct
with respect to the Business.
3.14 Bulk Sales Information. Seller has
complied, any and all steps have been taken and all
waiting periods have expired for compliance, with any and
all applicable bulk sales laws; and as a consequence
thereof, neither Seller nor Purchaser are liable to any
creditor of Seller with respect thereto.
3.15 Proprietary Rights. The Proprietary
Rights, including, without limitation, the Proprietary
Rights listed or described in Schedule 1.1.4 hereto, are
the sole and exclusive property of Seller. No licenses,
sublicenses, or other rights have been granted or entered
into by Seller with respect to the Proprietary Rights.
All of the Proprietary Rights, including without
limitation, the Proprietary Rights listed in Schedule
1.1.4, are current, unexpired and in good standing and
free and clear of all security interests, liens,
encumbrances, and other restrictions. Seller has not at
any time knowingly taken, or permitted to be taken, any
action, or permitted any use, nor is Seller aware of any
such action or use that would impair the validity or
enforceability of any of the Proprietary Rights, or
Purchaser's exclusive ownership thereof.
3.16 Litigation. There is no suit or action
(equitable, legal, administrative or otherwise),
proceeding or investigation of any kind pending (or to
the knowledge of Seller threatened) against Seller, or
which relates to the Assets or Assumed Liabilities, nor
is there any factual basis of which Seller is aware for
any such suit, action, proceeding or investigation
(including, without limitation, any relating to
environmental, health, safety or Hazardous Substances
matters) against Seller or which could affect the Assets,
the Assumed Liabilities or the Premises, or which could
affect the ability of Seller to carry out the
transactions contemplated hereunder in accordance with
the terms hereof.
3.17 Books and Records. The books and records
of Seller accurately reflect all material transactions
and correctly account for all material receipts,
disbursements and expenditures in connection with the
Assets and the Assumed Liabilities.
3.18 Certain Pre-Closing Representations and
Warranties of Seller.
3.18.1 Information. Seller has furnished
or caused to be furnished to Purchaser all data and
information concerning the Premises, the Assets, the
Assumed Liabilities, existing insurance policies, and all
manufacturer's warranties pertaining to the Assets that
have been requested by Purchaser.
3.18.2 Maintenance of Insurance. From
November 1, 1995 to the Closing, Seller has continued to
carry its existing insurance for the Premises and the
Assets.
3.18.3 Third Party Consents. Seller has
obtained and delivered to Purchaser the written consent
of any persons, to the extent the consent of such persons
is required, in order to validly convey good, marketable
and unencumbered title to the Assets to Purchaser.
3.18.4 Conduct of Business. From
November 1, 1995 through the Closing, Seller has carried
on the Business in substantially the same manner as
carried out prior to November 1, 1995, and did not
institute any unusual or novel methods of inventory
purchase, management, accounting or operation, or incur
or pay any liability or expense, that varied materially
from the ordinary course of business of Seller as of
November 1, 1995.
3.18.5 Employees. Seller agrees that
Purchaser shall have no obligation whatsoever to employ
any person employed by Seller with respect to the
Business. Notwithstanding the foregoing, Seller has used
its best efforts to keep available to Purchaser Seller's
employees to the extent that Purchaser advised Seller
that it desired to employ one or more of the persons
currently employed by Seller with respect to the
Business. Any such persons employed by Purchaser, if
any, will be treated and deemed as "new hires" by
Purchaser for all purposes. Seller agrees that Purchaser
shall have the right, but not the obligation, to employ
any one or more of Seller's employees, and between
November 1, 1995 and the Closing, Seller has not made any
change in compensation payable or which became or will
become payable to any employee (including severance or
vacation pay, and compensation payable pursuant to bonus
or pension plans or other employee plans or other
benefits to such employees).
3.18.6 Capitalization of Seller. From
November 1, 1995 until the Closing, Seller did not make
or pay any distribution or dividend to any shareholder,
issue any additional shares of its capital stock, or
issue or create any warrants, obligations, subscriptions,
options, convertible securities or other commitments
under which any additional shares of its capital stock
could be issued, nor did it agree to do any such acts.
3.18.7 Dispositions of Assets. From
November 1, 1995 until the Closing, Seller did not (a)
sell, assign, transfer, distribute or encumber any of the
Assets, or agree to do so (except for the use of raw
materials, work-in-progress and inventory in the regular
course of business), or (b) sell, transfer, assign, lease
or otherwise grant any right to any third party to lease
the Premises in any respect, nor agree to do so.
3.19 Full Disclosure; Knowledge. None of the
representations and warranties made by Seller in this
Agreement, or in any certificate or document furnished or
to be furnished by Seller, or any officer thereof, or any
of them, or on their behalf, contains or will contain any
untrue statement of a material fact, or omit or state a
material fact necessary to make the statements made, in
light of the circumstances under which they were made,
not misleading. All of Seller's representations and
warranties contained in Section 3.8 through 3.18 are
being made hereunder solely to the best knowledge of
Seller, after due inquiry and review of its officers,
directors and employees.
4. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller as
follows:
4.1 Corporate Existence and Organization.
Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to
own, lease and otherwise operate its properties and
assets.
4.2 Authority. Purchaser has full corporate
power and authority to execute and to deliver this
Agreement and all other agreements executed and delivered
or to be executed and delivered by Purchaser in
connection with the transactions contemplated hereby,
including, without limitation, the documents specified in
Section 9 hereof to be executed and delivered by
Purchaser. The execution and delivery of this Agreement
and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board
of Directors of Purchaser, and no other corporate
proceedings on the part of Purchaser and no approvals or
consents of any other persons are necessary to authorize
the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and
delivered by Purchaser and constitutes a valid and
binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms.
5. Certain Seller Obligations.
5.1 Manufacturer's Warranties. Seller
covenants and warrants that it shall use its best efforts
to obtain a transfer to Purchaser of all manufacturer's
warranties relating to the Assets.
5.2 Sales Tax. Seller shall be responsible
for and bear the cost of all Minnesota sales, excise,
transfer and use taxes arising by virtue of the purchase
and sale of Assets hereunder.
5.3 Payment of Creditors. Seller shall pay
all amounts owing its creditors when due.
5.4 Further Assurances. Seller represents,
warrants and covenants that, from and after the Closing
Date, Seller shall furnish any additional information,
execute and deliver such documents and do all such things
as may be reasonably necessary or appropriate to carry
out the intent and accomplish the purposes of this
Agreement, or otherwise consummate the transactions
contemplated by this Agreement according to its terms,
and will do all things necessary or appropriate to effect
compliance with the requirement of any laws of the United
States or any state arising from the transactions
contemplated hereby.
6. Purchaser's Conditions to Closing.
The obligation of Purchaser to purchase the
Assets and consummate the related transactions provided
for under this Agreement are subject to the fulfillment
or waiver by Purchaser in writing, at or prior to
Closing, of each and all of the conditions precedent
listed below to be delivered by any Seller at Closing.
6.1 Execution and Delivery of Documents.
Seller shall have executed and delivered to Purchaser all
of the documents and agreements specified in Section 9
below, to be delivered by Seller at Closing.
6.2 Performance. Seller shall have performed,
satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed or
complied with by Seller on or before the Closing Date.
6.3 Consents. All necessary agreements and
consents of any third parties to the consummation of the
transactions contemplated by this Agreement shall have
been obtained by Seller and delivered to Purchaser.
6.4 Proceedings. All corporate and other
proceedings in connection with the transactions
contemplated hereby and all documents and instruments
incident to such transactions shall be in form and
substance satisfactory to Purchaser and its counsel, and
Purchaser shall have received counterpart originals or
certified copies of such documents as it may reasonably
request.
6.5 Bulk Transfer. Seller shall have complied
with all applicable transferor requirements of all
applicable bulk sales laws.
6.6 No Material Adverse Change. During the
period from the date of balance sheet included in the
Financial Statements to the Closing Date, none of the
Assets shall have sustained any material loss or damage
(whether or not such damage or loss is insured) nor shall
there have been any material adverse change in the
financial condition or prospects of the Seller.
6.7 Accuracy of Representations and
Warranties. All warranties and representations by Seller
in this Agreement, or in any schedule, exhibit, document
or certificate furnished to Purchaser in connection with
the transactions contemplated by this Agreement, shall be
true in all material respects on and as of the Closing
Date.
7. Other Covenants; Post-Closing Obligations.
7.1 Additional Agreements with Seller.
7.1.1 Non-Competition Agreement. Seller,
and Paul Michael and Willy Schrepfer, shall enter into a
covenant not to compete substantially in the form set
forth at Schedule 7.1.1 hereto (the "Non-Competition
Agreement") and providing that during the period
specified in the Non-Competition Agreement neither Seller
nor such parties shall, directly or indirectly, within
any areas identified in the Non-Competition Agreement,
compete in the business of the manufacturing, marketing,
or sale of products or goods sold by, or substantially
similar in style to the products or goods sold by, Seller
as of the Closing Date, all as more fully set forth in
the Non-Competition Agreement.
7.2 Use of Name. On the Closing Date, Seller
shall take all actions necessary to cause its name to be
changed to a name which bears no resemblance to its
current name, including, without limitation, deletion of
the words "Mag-Head" from its name, and shall file with
the Office of the Minnesota Secretary of State a
certificate of amendment to Seller's Articles of
Incorporation reflecting such change of name. Neither
Seller nor Shareholder shall use the name "Mag-Head" or
"MEC," in connection with any business operated by Seller
or Shareholder after the Closing without the prior
written consent of Purchaser. Seller shall cooperate
with any application by Purchaser to use the name "Mag-
Head" or "MEC," or any similar name, in connection with
Purchaser's operation of the Business acquired by
Purchaser.
7.3 Receipt of Mail. From and after the
Closing Date, Purchaser shall have the sole and exclusive
right to receipt of all mail addressed to Seller.
Purchaser shall forward to Seller any such mail not
applicable to the Assets or the Business, within four (4)
business days of Purchaser's receipt thereof.
7.4 Certain Discounts. Schedule 7.4 hereto
contains a list of Seller's suppliers who have agreed to
provide price or other discounts or concessions to Seller
with respect to merchandise or services purchased from
such suppliers and a description of each such
arrangement, including the amounts involved and the terms
thereof. Seller and Purchaser agree that the benefit of
all such discounts and concessions shall inure to the
benefit of Purchaser and the parties hereto agree to take
such steps as are necessary to effect such agreement.
7.5 Further Assurances. Purchaser and Seller
each represents, warrants and covenants to the other that
if at any time after the execution of this Agreement, the
other party shall reasonably consider or be advised that
any further assignments or assurances in law are
necessary or desirable to carry out the intent and
accomplish the purposes of this Agreement according to
its terms, such party shall execute and make all such
proper assignments and assurances and do all things
necessary or appropriate to carry out the intent and
accomplish the purposes of this Agreement and to
consummate the transactions contemplated by this
Agreement according to its terms.
8. Seller's Conditions to Closing. The
obligations of Seller to sell the Assets and consummate
the related transactions provided for under this
Agreement are subject to the fulfillment or waiver by
Seller in writing, at or prior to Closing, of each and
all of the conditions precedent listed below.
8.1 Execution and Delivery of Documents;
Performance. Purchaser shall have executed and delivered
to Seller all of the documents and agreements specified
in Section 9 below to be executed and delivered by
Purchaser, and performed and complied with all covenants
and agreements of Purchaser required to be performed or
complied with prior to Closing.
8.2 Accuracy of Representations and
Warranties. All representations and warranties of
Purchaser contained in this Agreement shall be true on
and as of the Closing Date as though such representations
and warranties were made on and as of that date.
9. Closing.
9.1 Time of Closing. The closing of the
transactions contemplated herein (the "Closing") shall be
at 10:00 A.M., on February 7, 1996, or at such other time
as the parties hereto shall mutually agree to (the
"Closing Date"). This Agreement and all agreements and
documents to be executed and delivered in connection with
the Closing may be executed in counterparts, each of
which shall be an original of such respective agreement
and document, but all counterparts of which shall
together constitute one instrument thereof, respectively.
Delivery by a party of an executed counterpart by
facsimile may be relied on by the other party as an
original, and any party delivering a counterpart by
facsimile shall promptly deliver an executed original to
the other party. The failure by a party to do so shall
not invalidate any prior facsimile delivery of such
counterpart by such party. The parties mutually
acknowledge and agree for the purposes of this Agreement
that time is of the essence. If the Closing does not
occur on or before the Closing Date by reason of any
default of Seller under this Agreement, in addition to,
and not by way of limitation of any other right or remedy
of Purchaser, Purchaser shall be relieved of its
obligation to consummate the Closing.
9.2 Delivery of Cash and Documents. On the
Closing Date, the parties shall deliver to each other the
following respective documents:
9.2.1 Two original, fully executed copies
of a Warranty Bill of Sale in the form of Schedule 9.2.1
hereto, signed by Seller and Purchaser, together with
such other instruments and documents as Purchaser shall
reasonably require to vest Purchaser with marketable
title to the Assets, free and clear of all liens,
charges, and encumbrances.
9.2.2 Two original, fully executed copies
of an Assignment of Intangibles in the form of Schedule
9.2.2 hereto, signed by Seller and Purchaser.
9.2.3 Two original, fully executed copies
of an Assignment and Assumption of Contracts in the form
of Schedule 9.2.3 hereto, signed by Seller and Purchaser.
9.2.4 Intentionally deleted.
9.2.5 Two originals of an affidavit,
signed by Seller, to the effect that Seller is not a
foreign corporation, foreign partnership, foreign trust
or foreign estate within the meaning of the Internal
Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, substantially in the form of
Schedule 9.2.5 hereto.
9.2.6 The Purchase Price, to be paid by
Purchaser in accordance with Section 2.2, subject to
applicable adjustments and credits hereunder.
9.2.7 Two original, executed certificates
in the form of Schedule 9.2.7(a) and 9.2.7(b), signed by
officers of the Seller and Purchaser, respectively.
9.2.8 Two original, fully executed copies
of the Non-Competition Agreement in the form of Schedule
7.1.1 hereto, signed by Seller and Purchaser.
9.2.9 An original opinion of legal
counsel for Seller, in the form set forth in Schedule
9.2.9 hereto, to be delivered by Seller.
9.2.10 Two original, executed copies of
an Assignment of the Lease (with executed Consent of
Landlord), in the form of Schedule 1.3.1 hereto, and
signed by Seller, the landlord under the Lease and
Purchaser.
9.3 Actions at Closing. All requirements with
respect to Closing shall be considered as having taken
place simultaneously, and no delivery shall be considered
as having been made until all deliveries and closing
transactions have been accomplished.
9.4 Allocation. Except as otherwise provided
in Sections 10 and 11, the parties' responsibility for
personal and real property taxes, utilities and other
similar charges relating to the Assets, shall be
allocated between the parties with Seller paying all such
expenses applicable to ownership of the Assets prior to
the Closing Date and Purchaser paying all such expenses
applicable to ownership of the Assets thereafter.
10. Indemnity.
10.1 Seller's Indemnity. Seller hereby,
agrees to indemnify, defend and hold harmless Purchaser
against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities,
damages, recoveries and deficiencies, including, without
limitation, interest, penalties and reasonable attorneys'
fees and court costs (collectively "Claim(s)"), that
Purchaser shall incur or suffer, which arise, result
from, or relate to (i) any breach of, or failure by
Seller to perform, any of its representations,
warranties, covenants or agreements in this Agreement or
in any schedule, certificate, document, exhibit or other
instrument furnished or to be furnished by Seller under
this Agreement, and (ii) except as otherwise expressly
assumed by Purchaser as an Assumed Liability hereunder
(and in such case solely to the extent of such
assumption), any actual or alleged tort, breach of
contract, wrongdoing, cause of action or Claim arising in
connection with, incurred with respect to or relating to
(a) the conduct of the Business of Seller, or (b) the
Premises or the Assets (and any Hazardous Substances with
respect any of the foregoing) prior to the Closing Date.
10.2 Purchaser's Indemnity. Purchaser hereby
agrees to indemnify, defend and hold harmless Seller,
against and in respect of any and all Claims that Seller
shall incur or suffer, which arise, result from or relate
to (i) any breach of, or failure by Purchaser to perform,
any of its representations, warranties, covenants or
agreements in this Agreement or in any schedule,
certificate, document, exhibit or other instrument
furnished or to be furnished by Purchaser under this
Agreement, and (ii) any actual or alleged tort, breach of
contract, wrongdoing, cause of action or Claim (a)
incurred or relating to the conduct by Purchaser after
the Closing Date of its business (and any Hazardous
Substances with respect thereto) on the Premises, or (b)
incurred by Purchaser following the Closing Date with
respect to the Assets or the Assumed Liabilities.
11. Taxes. Any and all Minnesota sales, excise,
transfer and use taxes applicable to the conveyance and
transfer to Purchaser of the Assets shall be borne and
paid for solely by Seller. Seller represents and
warrants that all personal property taxes arising prior
to the Closing with regard to the Assets have been timely
and fully paid. Purchaser shall have no responsibility
or liability for any income, excise, property, business,
occupation, withholding or similar tax, or for taxes of
any other kind or type on the Business or Seller's
operations and activities at the Premises, related to any
period prior to the Closing Date, and Seller shall
indemnify Purchaser under Section 10.1 with respect to
any such liability.
12. Miscellaneous Provisions.
12.1 Expenses. Except as otherwise provided
in this Agreement, each party hereto shall pay its own
expenses (including, without limitation, legal and
accounting fees) incident to the origination, negotiation
and execution of this Agreement and the consummation of
the transactions contemplated hereby, regardless of
whether such transactions are consummated.
12.2 Schedules and Exhibits. Each of the
schedules and exhibits attached hereto are incorporated
herein by reference and made a part hereof for all
purposes.
12.3 Amendments or Waivers. Except as
otherwise specifically stated herein, any provision of
this Agreement may be amended by, and only by, a written
agreement executed by Purchaser, on the one hand, and
Seller, on the other. Either party may extend the time
for or waive the performance of any obligation of the
other party, waive any inaccuracies in the
representations or warranties of the other party, waive
fulfillment of any conditions or contingencies to such
party's obligations to consummate the transactions
provided for hereunder, or waive compliance by the other
party with any of the terms and conditions contained in
this Agreement; provided that, each and every such
extension or waiver shall be in writing.
12.4 Further Assurances. From and after the
Closing Date, the parties shall, on request, cooperate
with one another by furnishing any additional
information, executing and delivering any additional
documents and instruments, and taking any and all other
actions as may reasonably be required by the parties or
their respective counsel to consummate or otherwise
implement the transactions provided for in this
Agreement.
12.5 Successors and Assigns. This Agreement
shall apply to, and inure to the benefit of, and be
binding upon and enforceable against the parties hereto
and their respective successors and permitted assigns.
12.6 Governing Law; Venue. This Agreement,
and the ancillary agreements and documents executed and
delivered in connection herewith, and the rights and
obligations of the parties hereto and thereunder shall be
governed by and construed in accordance with the laws of
the State of Minnesota.
12.7 Notices. Any notice, demand, approval,
consent, request, waiver or other communication which may
be given or which is required to be given pursuant to
this Agreement shall be in writing and shall be deemed
given on the earlier of the day actually received or on
the close of business on the third business day following
the date deposited in the United States mail, postage
pre-paid, certified or registered, addressed to the party
at the address set forth after its respective name below,
or at such different address as such party shall have
theretofore advised the party of in writing, with copies
sent to the persons indicated:
To Seller: MHD Minnesota, Inc.
11278 65th Place North
Maple Grove, Minnesota 55369
Attn: Mr. Willy Schrepfer
To Purchaser: Ahead Technology Acquisition
Corporation
c/o 3105 Patrick Henry Drive
Santa Clara, California 95054
Attn: Steve Conlisk
or to such other address as such party shall have
specified by notice in writing to the other.
12.8 Invalid Provisions. If any provision
hereof shall be held to be illegal, invalid or
unenforceable under present or future laws effective
during the term hereof, such provision shall be fully
severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, with the
remaining provisions hereof remaining in full force and
effect and unaffected by the illegal, invalid or
unenforceable provision or by its severance herefrom. In
lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part hereof a
provision as similar in terms as the illegal, invalid or
unenforceable provision as may be possible and, at the
same time, be legal, valid and enforceable.
12.9 Entirety of Agreement. This Agreement
(including exhibits, schedules and agreements referenced
herein) and any other agreements and instruments
delivered at the Closing (or after the Closing pursuant
hereto) contain the entire Agreement between the parties.
No representations, inducements, promises or agreements,
whether oral or otherwise, which are not embodied herein
or therein shall be of any force or effect.
12.10 No Commission or Finder's Fee. Seller
and Purchaser each represent and warrant that no
brokerage, finder's or similar fee or commission has been
incurred by them or it in connection with the
transactions provided for in this Agreement. Seller, on
the one hand, and Purchaser, on the other, hereby
indemnify and hold harmless the other party under Section
10 hereof from any brokerage, finder's or similar fee or
commission incurred by such identifying party in
connection with the transactions contemplated by this
Agreement.
12.11 Joint and Several Liabilities.
Intentionally deleted.
12.12 Counterparts; Effectiveness. This
Agreement may be executed in counterparts, each of which
shall be deemed an original for all purposes and all of
which shall be deemed, collectively, one Agreement. This
Agreement shall become effective when executed and
delivered by all parties hereto.
12.13 Confidentiality. Seller and Seller's
officers, directors and other representatives shall hold
in strict confidence the terms and condition of this
Agreement, except to the extent required to be provided
to any tax or other governmental authority. Seller
waives any cause of action, right or claim arising out of
the access of Purchaser or its representatives to any
trade secrets or other confidential information of
Purchaser from the date of this Agreement until the
Closing Date, except for the intentional, competitive
misuse by Purchaser of such trade secrets or other
confidential business information if the Closing does not
take place.
12.14 Parties In Interest. Nothing in this
Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this
Agreement on any persons or entities other than the
parties hereto, and their respective successors and
assigns, nor is anything in this Agreement intended to
relieve or discharge the liability or obligation of any
third persons to any party to this Agreement or give any
third persons any right of subrogation or action over
against any party to this Agreement.
12.15 Attorneys' Fees. If any legal action or
other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or
prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other
relief to which it or they may be entitled.
12.16 Nature and Survival of Representations
and Warranties. Representations and warranties made by
the parties to this Agreement shall be deemed to be
continuing and shall survive the Closing.
12.17 Purchaser's Right of Specific
Performance. The Assets to be transferred under this
Agreement cannot be readily purchased or sold, as the
case may be, in the open market and for that reason,
among others, it is agreed that Purchaser will be
irreparably damaged by a failure of consummation of the
transactions contemplated by this Agreement resulting
from a breach by Seller of its obligations hereunder.
Accordingly, in the event of any default by Seller under
this Agreement, the rights of Purchaser shall be
enforceable by decree of specific performance. Such
remedy, however, shall be cumulative and not exclusive,
and shall be in addition to any other remedies that
Purchaser may have.
12.18 Counsel. Each party hereto acknowledges
and agrees that such party has been represented by
counsel of his or its choice in connection with execution
and delivery of this Agreement and this Agreement has
been reviewed by such counsel to such party's
satisfaction.
IN WITNESS WHEREOF, this Agreement has been
signed by duly authorized representatives on behalf of
each of the parties hereto on the date first written
above.
MAG-HEAD ENGINEERING COMPANY,
INC.
By: /s/ Paul S. Michael
Paul S. Michael, President
By: /s/ Willy Schrepfer
Willy Schrepfer, Secretary
AHEAD TECHNOLOGY ACQUISITION
CORPORATION
By: /s/ Steve Conlisk
Title: V.P. Finance
Schedule 1.1.1
Description of Fixed Assets
See Attached.
MC Software, Inc.
MAG-HEAD ENGINEERING COMPANY, INC. 11/30/95
GREP11 Account Details Report Page 1
All Departments
All Periods
Account Dept Description
Date Per PR JB Reference Amount Balance
1500 00 LEASEHOLD IMPROVEMENTS
02/28/95 01 511 GL Balance Forward Year 489.78 489.78
1550 00 MACHINERY & EQUIPMENT
02/28/95 01 511 GL Balance Forward Year 269400.04 269400.04
RECORD MARSHALL
06/30/95 04 550 GL IND PURCS 397.70 269797.74
08/31/95 06 562 AP A/P Capital 3 1570.00 271367.74
1570 00 OFFICE EQUIPMENT
02/28/95 01 511 GL Balance Forward Year 5874.36 5874.36
05/31/95 03 529 AP A/P 4 Office Eq 1795.87 7670.23
08/31/95 06 562 AP A/P 4 Office Eq 716.26 8386.49
MEC ENGINEERING, INC.
FIXED ASSETS - BOOK
METHOD/ A/D A/D
DATE DESCRIPTION LIFE COST 2/28/95 EXPENSE 2/28/96
LEASEHOLD IMPROVEMENTS:
9/18/86 BUILDING SIGN SL 7YR 244.00 244.00 244.00
9/1/87 W.W. SL 7YR 245.78 245.78 ___ 245.78
GRAINGER
TOTAL 489.78 489.78 0.00 489.78
MACHINERY & EQUIPMENT:
1986 Various SL 7YR 43,951.22 43,951.22 43,951.22
1987 Various SL 7YR 81,208.97 81,208.97 81,208.97
1988 Various SL 7YR 45,168.67 41,942.40 3,226.27 45,168.67
1989 Various SL 7YR 28,886.10 22,696.22 4,126.59 26,822.81
2/90 Equipment SL 7YR 886.26 633.04 126.61 759.65
4/90 Finishing SL 7YR 10,000.00 7,023.81 1,428.57 8,452.38
Machines(2)
4/90 Tooling-X- SL 7YR 1,066.00 748.74 152.29 901.02
Talk
5/90 X-Talk SL 7YR 275.00 189.88 39.29 229.17
Fixture
5/90 Microscope SL 7YR 848.00 585.52 121.14 706.67
5/90 MEC Lapping SL 7YR 2,400.00 1,657.14 342.86 2,000.00
Blocks
6/90 OMICRON Tools SL 7YR 700.00 475.00 100.00 575.00
8/90 Impedence SL 7YR 755.53 494.69 107.93 602.63
Bridge
10/90 6-Finishing SL 7YR 5,207.00 3,285.37 743.86 4,029.23
Machines
10/90 Grinding SL 7YR 565.32 356.69 80.76 437.45
Wheel Hub
10/90 Hull SL 7YR 330.00 208.21 47.14 255.36
Amplifier
5/90 Chest SL 7YR 5,614.42 3,074.56 802.06 3,876.62
Council
Improvement
(5-90)
12/90 A/R SL 7YR 695.00 421.96 99.29 521.25
Software
1/91 High SL 7YR 1,010.00 601.18 144.29 745.47
Voltage
Power
Supply
3/91 12- SL 7YR 2,400.00 1,371.43 342.86 1,714.29
Position
Finishing
Holders
(2)
3/91 Blank Die- SL 7YR 447.20 255.54 63.89 319.43
Wrap
Shield
3/91 Cabinet SL 7YR 280.00 153.33 40.00 193.33
4/91 Casing SL 7YR 728.00 398.67 104.00 502.67
Shim Die
7/91 Scopes & SL 7YR 1,524.89 762.45 217.84 980.29
Stations
8/91 Laminator SL 7YR 1,700.00 870.24 242.86 1,113.10
Mold
8/91 Bobbin SL 7YR 650.00 332.74 92.86 425.60
Mold
9/91 Rebuilt SL 7YR 470.20 235.10 67.17 302.27
Core
Holder
Insert
9/91 Temporary SL 7YR 1,100.00 550.00 157.14 707.14
Case Die
10/91 Heat Treat SL 7YR 3,131.66 1,528.55 447.38 1,975.93
Furnace
10/91 Various SL 7YR 1,715.00 837.08 245.00 1,082.08
Electronic
Equipment
10/91 Lapping SL 7YR 250.00 122.02 35.71 157.74
Machine
(Modified)
11/91 Merlyn SL 7YR 650.03 309.54 92.86 402.40
Phone
System
11/91 Drafting SL 7YR 350.00 166.67 50.00 216.67
Table
11/91 Precision SL 7YR 262.38 124.94 37.48 162.43
Oven
1/92 Four SL 7YR 3,200.00 1,447.62 457.14 1,904.76
Cavity
Bobin Mode
1/92 Equipment SL 7YR 329.18 148.91 47.03 195.94
2/92 Equipment SL 7YR 1,395.00 614.46 199.29 813.74
3/92 Window Die SL 7YR 860.00 368.57 122.86 491.43
(SCI)
3/92 Permanent SL 7YR 4,800.00 2,057.14 685.71 2,742.86
Tooling
Case
(SCI)
3/92 Assembly SL 7YR 490.00 210.00 70.00 280.00
Fixtures
(SCI)
3/92 Finishing SL 7YR 580.00 248.57 82.86 331.43
Fixture
(SCI)
3/92 Positioning SL 7YR 596.45 255.62 85.21 340.83
Fixtures
for
Write &
Read
(SCI)
3/92 Winding SL 7YR 350.00 150.00 50.00 200.00
Chuck
Flash
Taping
Fixture
(SCI)
4/92 4 Cavity SL 7YR 250.00 104.17 35.71 139.88
Cable
Potting
Mold
4/92 Ganged SL 7YR 1,975.47 823.11 282.21 1,105.32
Arbor Saws
7/92 4 Position SL 7YR 600.00 228.57 85.71 314.29
Form
Grinding
Fixture (7
Track)
8/92 Slotting & SL 7YR 490.00 180.83 70.00 250.83
Drilling
Fixtures &
Gang Saws
9/92 Equipment SL 7YR 1,010.00 360.71 144.29 505.00
9/92 Refrigerat SL 7YR 393.81 140.65 56.26 196.91
or
9/92 Equipment SL 7YR 290.00 103.57 41.43 145.00
10/92 Equipment SL 7YR 405.00 139.82 57.86 197.68
11/92 Punch SL 7YR 927.03 309.01 132.43 441.44
Press
11/92 Large SL 7YR 1,000.00 333.33 142.86 476.19
Winder
11/92 Small SL 7YR 400.00 133.33 57.14 190.48
Winder
11/92 Mill SL 7YR 250.00 83.33 35.71 119.05
12/92 Software SL 7YR 1,711.00 549.96 244.43 794.39
1/93 Window Die SL 7YR 965.00 298.68 137.86 436.54
5/94 4 Station SL 7YR 905.25 107.77 129.32 237.09
Grind
Fixture
TOTAL 269,400.04 226,970.68 17,379.29 244,349.97
OFFICE EQUIPMENT:
1986 Various SL 7YR 376.30 376.30 376.30
1987 Various SL 7YR 744.65 744.65 744.65
1989 Various SL 7YR 2,381.16 1,870.91 340.17 2,211.08
8/90 G/L SL 7YR 695.00 438.51 99.29 537.80
Software
8/90 A/P SL 7YR 695.00 438.51 99.29 537.80
Software
8/90 Bookcase, SL 7YR 413.40 260.84 59.06 319.89
Computer
Stand,
Metal
Shelving,
Black
Cabinet
5/91 Office SL 7YR 196.10 107.39 28.01 135.40
Equipment
4/92 Computer SL 7YR 372.75 155.22 53.25 208.47
TOTAL 5,874.36 4,392.33 679.06 5,071.39
Schedule 1.1.3
Description of Orders and Agreements
1. Lease, dated September 12, 1990 (as amended by a
certain (i) Rider, dated September 12, 1990, (ii) Amendment to
Lease, dated November 19, 1990, and (iii) Agreement to Extend
Lease, dated January 14, 1994), between Lutheran Brotherhood, a
Minnesota corporation, and Mag-Head Engineering, Inc. (now known
as Mag-Head Engineering Company, Inc.), a Minnesota corporation,
by which the premises therein commonly described as 684-686
Mendelssohn Avenue North, Golden Valley, Minnesota are demised
for a term commencing on September 12, 1990 and ending on January
31, 1997, a copy of which has been provided by Seller to
Purchaser. Also, all lease deposits thereunder.
2. All Accounts Receivable Trade (including, without
limitation, those identified on attached pages hereto) of Seller.
3. All GPT - A/R (including, without limitation, those
identified on attached pages hereto) of Seller.
4. Copier lease with "Imaging Systems," provided to
Purchaser by Seller.
5. All customer sales/purchase orders (including,
without limitation, those identified on attached pages hereto) of
Seller.
MAG-HEAD ENGINEERING
CUSTOMER SHIPPING SCHEDULE
NOVEMBER 1995
MEC DUE DATE INV.
# CUSTOMER QTY. $ VALUE DATE SHIPPED QTY. $ VALUE #
1096 DOD 15 $1,480.50 10-25
1014 B.E. 25 875.00 10-30
1014 B.E. 50 1,750.00 10-30
1205 GEORGENS 43 2,401.55 11-06 11-20 153 $8,545.05 3756
1041 ITC 11-21 2 264.00 3759
1084 HALL 3 195.00 11-10
1003 LORAL 100 6,430.00 11-15
1014 FIDELIPA 35 1,292.20 11-15
C
1004 LORAL 100 6,430.00 11-15
1082 PR&E 11-21 5 675.00 3758
1076 B&D 10 3,600.00 11-17
1084 ITC 64 2,459.52 11-20
1206 GEORGENS 100 5,585.00 11-20
1043 FIDELIPA 20 691.00 11-20
C
1206 GEORGENS 100 5,585.00 11-27
1119 LOCKHEED 42 6,827.52 11-29 11-21 8 1,300.45 3757
9 CH 3M 2 3,624.44 11-30
$49,226.73 SHIPPED: $10,784.53
TO BE SHIPPED: $49,226.73
NOV TOTAL: $60,011.26
DECEMBER 1995
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1206 GEORGENS 100 $5,585.00 12-4
1014 B.E. 50 1,750.00 12-7
1206 GEORGENS 40 2,234.00 12-11
1014 FIDELIPAC 35 1,292.20 12-15
1003 LORAL 120 7,716.00 12-15
1004 LORAL 100 6,430.00 12-15
1076 B&D 10 3,600.00 12-15
1084 ITC 80 3,074.40 12-18
2 GAP BRANDT 10 1,700.00 12-19
1043 FIDELIPAC 20 691.00 12-20
1096 DOD 200 19,740.00 12-24
TOOL PRECISION 1 815.00 12-27
REFURB PRECISION 2 600.00 12-27
1003 DOD 40 4,720.00 12-29
9 CH 3M 2 3,624.44 12-30
??1069 SYGNETRON 3 250.00 12-30
7
$63,822.04
JANUARY 1996
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1004 LORAL 150 $10,117.50 1-3
SPACER 3M 200 3,116.00 1-4
S
1035 B.E. 25 695.00 1-8
1072 B.E. 15 483.75 1-8
1014 FIDELIPAC 35 1,292.20 1-15
1076 B&D 10 3,600.00 1-19
1043 FIDELIPAC 20 691.00 1-20
1084 ITC 80 3,074.40 1-22
1096 DOD 200 19,740.00 1-24
9 CH 3M 2 3,624.44 1-30
1157 PRIMUS 10K 48,800.00 1-30
$95,234.29
FEBRUARY 1996
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1014 B.E. 50 $1,750.00 2-7
1004 LORAL 150 10,117.50 2-9
1003 LORAL 100 6,745.00 2-9
1076 B&D 10 3,600.00 2-16
1157 PRIMUS 5000 24,400.00 2-13
1084 ITC 80 3,074.40 2-26
9 CH 3M 2 3,624.44 2-29
1157 PRIMUS 5000 24,400.00 2-27
$77,711.34
MARCH 1996
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1003 LORAL 100 $6,745.00 3-15
1076 B&D 10 3,600.00 3-15
9 CH 3M 2 3,624.44 3-30
$13,969.44
APRIL 1996
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1003 LORAL 100 $6,745.00 4-12
1004 LORAL 100 6,745.00 4-16
1076 B&D 10 3,600.00 4-19
$17,090.00
MAY 1996
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
1003 LORAL 100 $6,745.00 5-10
1076 B&D 10 3,600.00 5-17
$10,345.00
TOTAL BACKLOG 95-
96
$236,767.6
7
TOTAL BACKLOG:
$278,172.1
1
UNSCHEDULED:
DUE
MEC # CUSTOMER QTY. $ VALUE DATE
CASES MOS 3825 $5,163.75
1072 B.E. 170 5,482.50
1035 B.E. 325 9,035.00
1014 B.E. 400 14,000.00
$33,681.25
Schedule 1.1.4
Proprietary Rights
All proprietary rights, service marks, patents,
trademarks, copyrights, designs, brand names, trade
names, processes, know-how, symbols, inventions,
programs, trade secrets, logos and telephone numbers
related to or connected with the Business, including,
without limitation, the product catalogues used or
distributed by Seller in connection with the Business and
the names "MEC" and "Mag-Head Engineering Company," and
all derivations thereof, all lists of suppliers,
customers and prospects, all Federal and state
applications for protection or registration of any of the
foregoing and all intangibles appurtenant thereto.
Schedule 1.2
Excluded Assets
Prepaid insurance premiums and other prepaid
expenses (excluding lease deposits).
Schedule 1.3
Assumed Liabilities
1. Lease, dated September 12, 1990 (as amended by
a certain (i) Rider, dated September 12, 1990, (ii)
Amendment to Lease, dated November 19, 1990, and (iii)
Agreement to Extend Lease, dated January 14, 1994),
between Lutheran Brotherhood, a Minnesota corporation,
and Mag-Head Engineering, Inc. (now known as Mag-Head
Engineering Company, Inc.), a Minnesota corporation, by
which the premises therein commonly described as 684-686
Mendelssohn Avenue North, Golden Valley, Minnesota are
demised for a term commencing on September 12, 1990 and
ending on January 31, 1997, a copy of which has been
provided by Seller to Purchaser. Also, all lease
deposits thereunder.
2. Copier lease with "Imaging Systems," provided
to Purchaser by Seller.
3. All accounts payable identified on the attached
pages hereto (unless otherwise paid for by Seller prior
to the Closing) and all other unpaid accounts payable
(which shall not, in any circumstance include (i) costs
arising in connection with the consummation of the
transactions under this Agreement and (ii) payroll and
other employee expenses arising from Seller's termination
of employees) incurred in the ordinary course of business
of Seller from February 6, 1996 to the Closing.
<TABLE>
<CAPTION>
MC Software, Inc. MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
PREP05 Accounts Payable - Aged Trial Balance Page 1
Aged on 10/31/95
ACCOUNT BALCURRENT DUE PAST DUE CREDIT 1-30 31-60 61-90 91-120 PRIOR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABR001 Abrasive Systems, Inc. 612-424-7400
175.90 0.00 175.90 0.00 87.95 87.95 0.00 0.00 0.00
AEI001 AEI Electronics Inc. 612-338-4754
21.48 0.00 21.48 0.00 0.00 21.48 0.00 0.00 0.00
AMP001 AMP Incorporated 708-351-5030
48.99 0.00 48.99 0.00 48.99 0.00 0.00 0.00 0.00
BAC001 Bacon Industries 617-926-2560
202.10 0.00 202.10 0.00 202.10 0.00 0.00 0.00 0.00
BOB-LESKO BOB LESKO 412-746-0899
225.60 0.00 225.60 0.00 0.00 225.60 0.00 0.00 0.00
BRO001 Browning Ferris Ind. 612-941-8394
104.42 0.00 104.42 0.00 104.42 0.00 0.00 0.00 0.00
BOS001 BT Office Products Intn'l 612-553-9500
30.98 0.00 30.98 0.00 30.98 0.00 0.00 0.00 0.00
CIMCO CIMCO 714-546-4460
360.05 0.00 360.05 0.00 0.00 360.05 0.00 0.00 0.00
COP001 Copy Duplicating Products 612-861-2412
115.02 0.00 115.02 0.00 115.02 0.00 0.00 0.00 0.00
DAC001 Dacon Manufacturing Co. 612-785-1400
15672.95 0.00 15672.95 0.00 14966.15 706.80 0.00 0.00 0.00
DEM001 Dempsey Industries, Inc.
90.92 0.00 90.92 0.00 90.92 0.00 0.00 0.00 0.00
EAS001 Eastech Chemical Inc. 215-537-1000
50.11 0.00 50.11 0.00 50.11 0.00 0.00 0.00 0.00
EEM001 Eemus Manufacturing Corp. 818-331-1776
2019.39 0.00 2019.39 0.00 2019.39 0.00 0.00 0.00 0.00
ELE003 Electrical Insulations 414-251-9650
268.22 0.00 268.22 0.00 157.82 110.40 0.00 0.00 0.00
EIT ENHANCED TELEMANAGEMENT 342-2255
266.61 266.61 0.00 0.00 0.00 0.00 0.00 0.00 0.00
EXP001 Express Messenger 612-623-5900
28.05 0.00 28.05 0.00 28.05 0.00 0.00 0.00 0.00
FID001 Fidelity Products Co. 612-536-6500
37.97 0.00 37.97 0.00 37.97 0.00 0.00 0.00 0.00
AMERICAN FUNDS SERVICE CO
1353.06 0.00 1353.06 0.00 1353.06 0.00 0.00 0.00 0.00
GOLFSMITH GOLFSMITH 800-456-5344
194.55 0.00 194.55 0.00 89.35 105.20 0.00 0.00 0.00
GRA001 W.W. Grainger, Inc. 612-559-0406
22.91 0.00 22.91 0.00 0.00 22.91 0.00 0.00 0.00
GRANT GRANT THORNTON 332-0001
425.00 425.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
GTE GTE DIRECTORIES 831-5553
16.20 16.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00
HARDCOAT HARDCOAT, INC. 612-935-5715
70.00 0.00 70.00 0.00 70.00 0.00 0.00 0.00 0.00
HONEYWELL HONEYWELL EMPLOYEE'S CLUB
31.99 0.00 31.99 0.00 31.99 0.00 0.00 0.00 0.00
IND002 Industrial Plastics, Mpls 612-721-6444
445.20 0.00 445.20 0.00 445.20 0.00 0.00 0.00 0.00
INVEST INVEST CAST INC 788-6965
2295.11 0.00 2295.11 0.00 2295.11 0.00 0.00 0.00 0.00
KUI001 Kuipers Hardware 612-545-9627
32.43 11.91 20.52 0.00 20.52 0.00 0.00 0.00 0.00
116.75 0.00 116.75 0.00 116.75 0.00 0.00 0.00 0.00
NEW001 New England Electric Wire 803-838-6628
486.10 0.00 486.10 0.00 486.10 0.00 0.00 0.00 0.00
NOR002 Northern Airgas, Inc. 612-421-8980
26.64 13.54 13.10 0.00 0.00 13.10 0.00 0.00 0.00
OMI001 Omicron Tool 612-856-4142
1685.30 130.00 1556.30 0.00 227.50 1327.80 0.00 0.00 0.00
PACKNET PACKNET LTD 612-884-7517
771.26 432.62 338.64 0.00 338.64 0.00 0.00 0.00 0.00
PATRYAN PAT RYAN GOLF PRODUCTS 922-6924
62.46 0.00 128.46 -66.00 62.46 0.00 0.00 0.00 66.00
PRECISION PRECISION REPAIR, INC 612-784-1704
269.25 0.00 269.25 0.00 269.25 0.00 0.00 0.00 0.00
TADSON TADSON INC 612-441-4410
336.00 0.00 336.00 0.00 336.00 0.00 0.00 0.00 0.00
TWI001 Twin City Oxygen Co. 612-628-4848
42.66 25.06 17.60 0.00 0.00 17.60 0.00 0.00 0.00
UNI002 United Parcel Service 800-378-0700
188.36 0.00 188.36 0.00 188.36 0.00 0.00 0.00 0.00
US-WEST US WEST DIRECT 800-422-1234
38.80 0.00 38.80 0.00 38.80 0.00 0.00 0.00 0.00
VISA BANKCARD CENTER800-344-5696
254.83 0.00 254.83 0.00 254.83 0.00 0.00 0.00 0.00
WAR001 Warner Industrial Supply 612-378-7300
242.98 0.00 242.98 0.00 34.62 208.36 0.00 0.00 0.00
WIFFLER MARK WIFFLER
10.97 10.97 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WLG001 W.L. Gore & Associates 512-276-7800
2078.02 0.00 2078.02 0.00 0.00 2078.02 0.00 0.00 0.00
31205.59 1331.91 29839.68 -66.00 24596.41 5275.27 0.00 0.00 66.00
</TABLE>
<TABLE>
<CAPTION>
MC Software, Inc. MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
PREP07 Accounts Payable Invoice Register Page 1
OPEN INVOICES
DISC.
INVOICE # TYPE P/ORDER DATE DUE DATE AMOUNT BALANCE DIS DATE AMOUNT TOTAL PAY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABR001 Abrasive Systems, Inc.
0018867 INVOICE 5048 09/11/95 10/11/95 87.95 87.95 0.00 87.95
0020318 INVOICE 5048 10/09/95 11/08/95 87.95 87.95 0.00 87.95
________ ________ _______ _______
175.90 175.90 0.00 175.90
AEI001 AEI Electronics Inc.
094008-0 INVOICE 5078 09/26/95 10/26/95 21.48 21.48 0.00 21.48
________ ________ _______ _______
21.48 21.48 0.00 21.48
AMP001 AMP Incorporated
F1450373 INVOICE 10/01/95 10/31/95 48.99 48.99 0.00 48.99
________ ________ _______ ________
48.99 48.99 0.00 48.99
BAC001 Bacon Industries
0076730 INVOICE 5057 10/19/95 11/18/95 202.10 202.10 0.00 202.10
________ ________ _______ ________
202.10 202.10 0.00 202.10
BOB-LESKO BOB LESKO
COMM-PAY INVOICE 09/29/95 09/29/95 225.60 225.60 0.00 225.60
________ ________ _______ ________
225.60 225.60 0.00 225.60
BRO001 Browning Ferris Ind.
9001049873 INVOICE 10/01/95 10/31/95 104.42 104.42 0.00 104.42
________ ________ _______ ________
104.42 104.42 0.00 104.42
001 BT OFFICE PRODUCTS INTN'L
2948530 INVOICE 5101 10/24/95 11/23/95 30.98 30.98 0.00 30.98
________ ________ _______ ________
30.98 30.98 0.00 30.98
CIMCO CIMCO
0044896 INVOICE 5034 09/26/95 10/26/95 350.05 350.05 0.00 350.05
________ ________ _______ ________
350.05 350.05 0.00 350.05
COP001 Copy Duplicating Products
2207660 INVOICE 10/01/95 10/31/95 115.02 115.02 0.00 115.02
________ ________ _______ ________
115.02 115.02 0.00 115.02
DAC001 Dacon Manufacturing Co.
0031673 INVOICE 5053 09/21/95 10/21/95 706.80 706.80 0.00 706.80
0031720 INVOICE 5000 10/01/95 10/31/95 3075.60 3075.60 0.00 3075.60
0031721 INVOICE 4729 10/01/95 10/31/95 3510.00 3510.00 0.00 3510.00
0031746 INVOICE 5056 10/06/95 11/05/95 1728.23 1728.23 0.00 1728.23
0031816 INVOICE 4764 10/20/95 11/19/95 485.40 485.40 0.00 485.40
0031817 INVOICE 4764 10/20/95 11/19/95 510.30 510.30 0.00 510.30
0031855 INVOICE 4729 10/27/95 11/26/95 1029.60 1029.60 0.00 1029.60
0031856 INVOICE 4729 10/27/95 11/26/95 1006.20 1006.20 0.00 1006.20
0031857 INVOICE 5000 10/27/95 11/26/95 1782.45 1782.45 0.00 1782.45
0031858 INVOICE 5000 10/27/95 11/26/95 1838.37 1838.37 0.00 1838.37
________ ________ _______ ________
15672.95 15672.95 0.00 15672.95
IBM001 Dempsey Industries, Inc.
0085582 INVOICE 5082 10/01/95 10/31/95 90.92 90.92 0.00 90.92
________ ________ _______ ________
90.92 90.92 0.00 90.92
EAS001 Eastech Chemical Inc.
0086450 INVOICE 5071 10/24/95 11/23/95 50.11 50.11 0.00 50.11
________ ________ _______ ________
50.11 50.11 0.00 50.11
EEM001 Eemus Manufacturing Corp.
I-94582 INVOICE 5001 10/02/95 11/01/95 2019.39 2019.39 0.00 2019.39
________ ________ _______ ________
2019.39 2019.39 0.00 2019.39
ELE008 Electrical Insultations
6598905 INVOICE 5079 09/26/95 10/26/95 110.40 110.40 0.00 110.40
6638755 INVOICE 5097 10/26/95 11/25/95 157.82 157.82 0.00 157.82
________ ________ _______ ________
268.22 268.22 0.00 268.22
ETI ENHANCED TELEMANAGEMENT
DUE110995 INVOICE 10/31/95 11/09/95 266.61 266.61 0.00 266.61
________ ________ _______ ________
266.61 266.61 0.00 266.61
EXP001 Express Messenger
08-169229 INVOICE 10/15/95 11/14/95 28.05 28.05 0.00 28.05
________ ________ _______ ________
28.05 28.05 0.00 28.05
FID001 Fidelity Products Co.
0512918 INVOICE 5080 10/04/95 11/03/95 37.97 37.97 0.00 37.97
________ ________ _______ ________
37.97 37.97 0.00 37.97
K AMERICAN FUNDS SERVICE CO
0100695 INVOICE 10/06/95 10/06/95 676.53 676.53 0.00 676.53
102095-401 INVOICE 10/20/95 10/20/95 676.53 676.53 0.00 676.53
________ ________ _______ ________
1363.06 1363.06 0.00 1363.06
GOLFSMITH GOLFSMITH
4146018 INVOICE 09/20/95 10/20/95 105.20 105.20 0.00 105.20
4211113 INVOICE 10/24/95 11/23/95 89.35 89.35 0.00 89.35
________ ________ _______ ________
194.55 194.55 0.00 194.55
GRA001 W.W. Grainger, Inc.
4952971663 INVOICE 5081 09/25/95 10/25/95 22.91 22.91 0.00 22.91
________ ________ _______ ________
22.91 22.91 0.00 22.91
GRANT GRANT THORNTON
401K-SEMI INVOICE 10/31/95 11/30/95 425.00 425.00 0.00 425.00
________ ________ _______ ________
425.00 425.00 0.00 425.00
GTE GTE DIRECTORIES
GPT-AD INVOICE 10/31/95 11/15/95 16.20 16.20 0.00 16.20
________ ________ _______ ________
16.20 16.20 0.00 16.20
HARDCOAT HARDCOAT, INC.
10239683 INVOICE 5096 10/23/95 11/22/95 70.00 70.00 0.00 70.00
________ ________ _______ ________
70.00 70.00 0.00 70.00
HONEYWELL HONEYWELL EMPLOYEE'S CLUB
GPT795 INVOICE H 10/19/95 11/03/95 31.99 31.99 0.00 31.99
________ ________ _______ ________
31.99 31.99 0.00 31.99
IND002 Industrial Plastics, Mpls
0022871 INVOICE 5066 10/04/95 11/03/95 445.20 445.20 0.00 445.20
________ ________ _______ ________
445.20 445.20 0.00 445.20
INVEST INVEST CAST INC
0026761 INVOICE 5033 10/01/95 10/31/95 2295.11 2295.11 0.00 2295.11
________ ________ _______ ________
2295.11 2295.11 0.00 2295.11
KUI001 Kuipers Hardware
0010276 INVOICE 10/27/95 11/26/95 2.08 2.08 0.00 2.08
0100295 INVOICE 10/02/95 11/01/95 2.32 2.32 0.00 2.32
0100495 INVOICE 10/04/95 11/08/95 16.12 16.12 0.00 16.12
0103095 INVOICE 10/31/95 11/30/95 11.91 11.91 0.00 11.91
________ ________ _______
________ 32.43 32.43 0.00 32.43
DUE110895 INVOICE 10/19/95 11/03/95 116.75 116.75 0.00 116.75
________ ________ _______ ________
116.75 116.75 0.00 116.75
NEW001 New England Electric Wire
0009606 INVOICE 5059 10/01/95 10/31/95 486.10 486.10 0.00 486.10
________ ________ _______ ________
486.10 486.10 0.00 486.10
NOR002 Northern Airgas, Inc.
0835355 INVOICE 09/30/95 10/30/95 13.10 13.10 0.00 13.10
0837254 INVOICE 10/31/95 11/30/95 13.54 13.54 0.00 13.54
________ ________ _______ ________
26.64 26.64 0.00 26.64
OMI001 Omicron Tool
0009909 INVOICE 5040 09/01/95 10/01/95 150.00 150.00 0.00 150.00
0009922 INVOICE 5024 09/14/95 10/14/95 125.00 125.00 0.00 125.00
0009923 INVOICE 4731 09/14/95 10/14/95 150.00 150.00 0.00 150.00
0009924 INVOICE 4631 09/14/95 10/14/95 187.50 187.50 0.00 187.50
0009925 INVOICE 5054 09/14/95 10/14/95 95.00 95.00 0.00 95.00
0009926 INVOICE 5075 09/18/95 10/18/95 195.30 195.30 0.00 195.30
0009927 INVOICE 5011 09/18/95 10/18/95 425.00 425.00 0.00 425.00
0009940 INVOICE 5085 10/12/95 11/11/95 86.00 86.00 0.00 86.00
0009941 INVOICE 5075 10/17/95 11/16/95 141.50 141.50 0.00 141.50
9XXXX-1914 INVOICE 5103 10/31/95 11/30/95 130.00 130.00 0.00 130.00
________ ________ _______ ________
1685.30 1685.30 0.00 1685.30
PACKNET PACKNET LTD
0041177 INVOICE 10/03/95 10/23/95 137.12 137.12 0.00 137.12
0041408 INVOICE 10/25/95 11/14/95 201.52 201.52 0.00 201.52
0041417 INVOICE 5068 10/31/95 11/20/95 432.62 432.62 0.00 432.62
________ ________ _______ ________
771.26 771.26 0.00 771.26
PATRYAN PAT RYAN GOLF PRODUCTS
0000746 INVOICE 10/19/95 11/18/95 24.46 24.46 0.00 24.46
0000756 INVOICE 10/30/95 11/29/95 38.00 38.00 0.00 38.00
0001486 INVOICE 04/11/95 05/11/95 66.00 66.00 0.00 66.00
0001486 CREDIT 04/30/95 04/30/95 -66.00 -66.00 0.00 -66.00
________ ________ _______ ________
62.46 62.46 0.00 62.46
PRECISION PRECISION REPAIR, INC
0102232 INVOICE 4781 10/01/95 10/16/95 240.00 240.00 0.00 240.00
0102320 INVOICE 4781 10/05/95 10/20/95 29.25 29.25 0.00 29.25
________ ________ _______ ________
269.25 269.25 0.00 269.25
TADSON TADSON INC
0006572 INVOICE 5084 10/04/95 11/03/95 336.00 336.00 0.00 336.00
________ ________ _______ ________
336.00 336.00 0.00 336.00
TWI001 Twin City Oxygen Co.
0362958 INVOICE 09/29/95 10/29/95 17.60 17.60 0.00 17.60
0364520 INVOICE 10/31/95 11/30/95 25.06 25.06 0.00 25.06
________ ________ _______ ________
42.66 42.66 0.00 42.66
UNI002 United Parcel Service
0102195 INVOICE 10/21/95 10/31/95 129.43 129.43 0.00 129.43
0102895 INVOICE 10/28/95 11/07/95 58.93 58.93 0.00 58.93
________ ________ _______ ________
188.36 188.36 0.00 188.36
US-WEST US WEST DIRECT
1756178000 INVOICE 10/22/95 11/06/95 38.80 38.80 0.00 38.80
________ ________ _______ ________
38.80 38.80 0.00 38.80
VISA BANKCARD CENTER
QUALITY= INVOICE 5980 10/24/95 11/13/95 254.83 254.83 0.00 254.83
________ ________ _______ ________
254.83 254.83 0.00 254.83
WAR001 Warner Industrial Supply
1173980-01 INVOICE 5077 09/26/95 10/26/95 208.36 208.36 0.00 208.36
1173980-02 INVOICE 5077 10/24/95 11/23/95 34.62 34.62 0.00 34.62
________ ________ _______ ________
242.98 242.98 0.00 242.98
WIFFLER MARK WIFFLER
COMM INVOICE 10/31/95 11/05/95 10.97 10.97 0.00 10.97
________ ________ _______ ________
10.97 10.97 0.00 10.97
WLG001 W.L. Gore & Associates
36083-10 INVOICE 5023 09/25/95 09/25/95 2078.02 2078.02 0.00 2078.02
________ ________ _______ ________
2078.02 2078.02 0.00 2078.02
========= ========= ======= ========
31205.59 31205.59 0.00 31205.59
</TABLE>
<TABLE>
<CAPTION>
MC Software, Inc. MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
PREP05 Accounts Receivable - Aged Trial Balance Page 1
Aged on 10/31/95
ACCOUNT BALCURRENT DUE PAST DUE CREDIT 1-30 31-60 61-90 91-120 PRIOR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3-M 3M ACCOUNTS PAYABLE
9422.55 4122.55 5300.00 0.00 300.00 5000.00 0.00 0.00 0.00
AIWA AIWA CO., LTD TECH CENTER ###-##-####
1091.00 0.00 1091.00 0.00 0.00 1091.00 0.00 0.00 0.00
B&D B. & D. INSTRUMENTS INC. 316-786-1223
7208.50 0.00 7208.50 0.00 0.00 7208.50 0.00 0.00 0.00
BRO001 Broadcast Electronics Inc 217-224-9600
3585.75 1184.72 2401.03 0.00 0.00 2401.03 0.00 0.00 0.00
FT MEAD ACCOUNTS PAYABLE 301-859-5710
56764.90 19641.30 37123.60 0.00 21830.00 15293.60 0.00 0.00 0.00
ESI001 ELECTRO SOUND INC.
899.09 899.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00
FID001 FIDELIPAC CORPORATION 609-235-3900
152.68 152.68 0.00 0.00 0.00 0.00 0.00 0.00 0.00
GEORGENS GEORGENS INDUSTRIES INC 619-481-8114
34712.55 13944.63 20767.72 0.00 13298.54 7469.18 0.00 0.00 0.00
HAL001 HALL ELECTRONICS 804-964-4255
717.18 197.93 519.25 0.00 0.00 519.25 0.00 0.00 0.00
ICT001 ICT, Ltd. Unit 74 01144932572215
3212.95 0.00 3212.95 0.00 0.00 3212.95 0.00 0.00 0.00
ITC001 International Tapetronics 309-828-1381
9191.32 0.00 9191.32 0.00 1818.38 4621.97 2750.97 0.00 0.00
LOR001 Loral Fairchild Corp. 813-376-6922
35345.50 22485.50 12860.00 0.00 0.00 12860.00 0.00 0.00 0.00
OTA001 Otari Corporation 415-341-6900
773.25 0.00 773.25 0.00 0.00 773.25 0.00 0.00 0.00
PAC001 Pacific Recorders & Eng. 619-436-3911
681.25 0.00 681.25 0.00 0.00 681.25 0.00 0.00 0.00
SCI001 SCI Systems, Inc. 205-882-4800
36106.25 0.00 36106.25 0.00 0.00 36106.25 0.00 0.00 0.00
SEAGATE SEAGATE
66.00 0.00 66.00 0.00 0.00 66.00 0.00 0.00 0.00
XEL001 XEL COMMUNICATIONS, INC. 303-369-7000
24.40 0.00 24.40 0.00 0.00 24.40 0.00 0.00 0.00
199965.12 62628.60 137326.52 0.00 37246.92 97328.63 2750.97 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 1995
HONEYWELL SALES INVOICE COMM COMM AMOUNT DATE A/R HOW
DIV # CUSTOMER SALE AMOUNT SALES $ TAX LABOR FREIGHT TOTAL TOTAL % PAID PAID DUE PAY??
____ __________ ___________ ________ _____ _____ _______ _______ _____ _____ _______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
609 ROD WALK 7-6-95 $200.22
769 TOM RAPPO 9-20-95 $202.50 10-20-95 AMP CHECK
AMP SERVICES
774 EDITH KLAUSER 9-95 130.50 10-31-95 CHECK 5743
781 EDITH KLAUSER $67.00 $0.00 $0.00 $0.00 $67.00 $4.69 $0.07 67.00 10-31-95 CHECK 5743
782 TONY PRICE 8.58 0.56 0.00 0.00 8.14 0.60 0.07 9.14 10-4-95 CASH
783 WIILY 25.71 1.67 0.00 0.00 27.38 1.50 0.07 27.38 10-4-95 CASH
784 DOUG SWANSON 0.00 0.00 0.00 0.00 5.00 0.35 0.07 6.00 10-17-95 CASH
785 COLETTE OSBERG 150.00 9.75 0.00 0.00 159.75 10.50 0.07 159.75 10-11-95 CHECK 7111
786 JERRY AUGESON 0.00 0.00 25.00 0.00 25.00 1.75 0.07 25.00 10-11-95 CHECK 8382
787 COLETTE OSBERG 12.00 0.78 4.50 0.00 17.28 1.16 0.07 17.28 10-11-95 CHECK 7111
788 BOB RETHSEN 10.00 0.65 4.00 0.00 14.65 0.98 0.07 14.65 10-13-95 CASH
789 WILLY 13.65 0.89 0.00 0.00 14.54 0.96 0.07 14.54 10-13-95 VISA
790 VOID VOID VOID VOID VOID VOID VOID VOID VOID VOID VOID VOID VOID VOID
791 RON ROOFES 23.50 1.53 0.00 0.00 25.08 1.65 0.07 25.08 10-24-95 CHECK 4138
792 GUY FIRAS 100.00 6.50 0.00 0.00 106.50 7.00 0.07 106.50 10-16-95 CHECK 1086
793 AL INGALLS 18.00 1.17 4.00 0.00 23.17 1.54 0.07 23.17 10-18-95 CHECK 5309
794 BOB RETHSEN 8.75 0.57 7.50 0.00 16.82 1.14 0.07 16.82 10-18-95 CASH
795 DOUG HECQUIST 158.00 $199.99 13.00 0.00 0.00 181.00 11.76 0.07 212.98 10-20-95 CHECK 3677
(31.99) HONEYWELL $
796 DOUG HECQUIST 165.00 10.73 0.00 0.00 175.73 11.56 0.07 175.73 10-20-95 CHECK 3677
797 DOUG HECQUIST 78.50 5.10 0.00 0.00 83.60 5.50 0.07 83.80 10-25-95 CHECK 3632
798 GENE BERGSTROM 424.50 0.00 0.00 0.00 424.50 29.72 0.07 424.50 10-25-95 VISA
799 ART HONEGGER 336.00 0.00 0.00 17.00 362.00 23.45 0.07 $352.00
800 JIM BUDLA 75.00 4.88 0.00 0.00 79.88 5.25 0.07 79.88 10-27-95 CHECK 5672
801 JIM JOROAN 338.00 0.00 0.00 0.00 338.00 23.66 0.07 338.00
802 BEN S LER 268.00 17.42 0.00 0.00 285.42 18.76 0.07 VISA IN 10-31-95 285.42 VISA 10-31
TRANSIT
$2,289.19 $199.99 $75.18 $50.00 $17.00 $2,431.37 $163.74 7% $1,788.96 $1,175.64
CLAYTON
</TABLE>
Schedule 1.3.1
Assignment of Lease
See attached.
ASSIGNMENT OF LEASE
Assignment of the Lease ("Lease"), dated September
12, 1990 (as amended by a certain (i) Rider, dated
September 12, 1990, (ii) Amendment to Lease, dated
November 19, 1990, and (iii) Agreement to Extend Lease,
dated January 14, 1994), between Lutheran Brotherhood, a
Minnesota corporation ("Landlord"), and Mag-Head
Engineering, Inc. (now known as Mag-Head Engineering
Company, Inc.), a Minnesota corporation ("Tenant"), by
which the premises herein commonly described as 684-686
Mendelssohn Avenue North, Golden Valley, Minnesota (the
"Premises") are demised for a term commencing on
September 12, 1990 and ending on January 31, 1997.
ASSIGNMENT BY TENANT
For value received, Tenant does hereby assign all of
Tenant's right, title and interest in and to the Lease
from and after February __, 1996 (the "Assignment Date")
unto Ahead Technology Acquisition Corporation, a Delaware
corporation ("Assignee"). The Premises are to be used
and occupied for office, warehouse and manufacturing
purposes in connection with the electrical component,
magnetic recording head and golf club business, and all
related or reasonably comparable purposes, and for no
other purpose. Tenant shall not be liable for
obligations arising under the Lease following the
Assignment Date. Notwithstanding the foregoing, it is
expressly agreed that this assignment shall not release
or relieve Tenant from any liability under the Lease for
any obligations or events incurred or arising, or
activities conducted on or condition of the Premises,
prior to the Assignment Date.
Dated: February __, 1996 TENANT:
MAG-HEAD ENGINEERING, INC.
(not known as MAG-HEAD
ENGINEERING COMPANY, INC.)
By: ______________________
Its: ______________________
ACCEPTANCE OF TENANT'S ASSIGNMENT
In consideration of the above Assignment and of the
written consent of Landlord thereto, Assignee (binding
also Assignee's heirs, successors and assigns) hereby
assumes and agrees to make all payments and to perform
and keep all promises, covenants and conditions and
agreements of the Lease by Tenant to be made, kept and
performed from and after the Assignment Date.
Notwithstanding the foregoing, it is expressly agreed
that Assignee shall not be liable under the Lease for any
obligations or events incurred or arising, or activities
conducted on or condition of the Premises, prior to the
Assignment Date.
Dated: February __, 1996 ASSIGNEE:
AHEAD TECHNOLOGY ACQUISITION
CORPORATION
By: ______________________
Its: ______________________
CONSENT TO TENANT'S ASSIGNMENT
Landlord hereby consents to the foregoing assignment
of the Lease by Tenant to Assignee in consideration of
the Tenant's promises, covenants and agreements herein
above expressed, and upon the express condition that
Tenant shall remain liable for any obligations or events
incurred or arising, or activities conducted on or
condition of the Premises, prior to the Assignment Date,
and in consideration likewise of the covenants, promises
and agreements of Assignee above set forth. Landlord
does not consent to any further assignment of the Lease
nor to any subletting of the Premises or any part
thereof.
Landlord has not at any time in the past engaged in
nor permitted, and has no knowledge that any third person
or entity engaged in or permitted any operations or
activities upon, or any use or occupancy of the Premises,
or any portion thereof, for the purpose of or in any way
involving the handling, manufacturing, treatment,
storage, use, transportation, spillage, leakage, dumping,
discharge or disposal (whether legal or illegal,
accidental or intentional) of any hazardous substances,
materials or wastes, or any wastes regulated under any
local, state or federal law.
Dated: February __, 1996 LANDLORD:
LUTHERAN BROTHERHOOD
By: ______________________
Its: ______________________
Schedule 2.4
Allocation
Asset Allocation
Cash $ 72,503.00
Deposits 1,685.00
Accounts Receivable 201,130.00
Inventory 175,643.00
Fixed Assets 36,030.00
$486,991.00
Less: Accounts Payable
as of 10/31/95 30,965.00
Purchase Price $456,026.00
Schedule 3.2
Capitalization
See Attached.
Sheet 1
MEC stockholders as provided [9/28/95]
Total shares 561,362
outstanding
Initial
Capitalization @
$1/ea. 561,362
Employees: # Shares Initial $ Value/ea. Loss
Paul Michael 120,000 120,000 84,994.80 35,005.20
(President)
Willy Schrepfer 38,000 38,000 26,915.02 11,084.98
(Operations)
Outsiders:
Dave Johnson 220,000 220,000 155,823.80 64,176.19
Haley 68,000 68,000 48,163.72 19,836.28
Christensen 66,000 66,000 46,747.14 19,252.86
Vladimir 50,000 50,000 35,414.50 14,585.50
Total shares 562,000
Present Networth 396,059 398,059 163,941
Present
price/share 0.70829
Schedule 3.3
Financial Statements
See Attached.
MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
Balance Sheet Page 1
Tuesday, October 31, 1995
CURRENT ASSETS
PETTY CASH 50
CASH-CHECKING 72453
CASH-SAVINGS 0
RENT DEPOSITS 1685
MED-GPT RENT/REVEIVABLE 0
ACCOUNTS RECEIVE TRADE 199955
GPT-A/R 1175
GPT-INVENTORY 20759
GPT-F/G 11211
INVENTORY - P/P 78133
INVENTORY - WIP 59251
INVENTORY - F/G 32673
SUSPENSE ACCOUNT 0
PREPAID EXPENSES 2356
TOTAL CURRENT ASSETS 479701
FIXED ASSETS
LEASEHOLD IMPROVEMENTS 490
MACHINERY & EQUIPMENT 271368
OFFICE EQUIPMENT 8386
ACCUMULATED DEPRECIATE 244214
TOTAL FIXED ASSETS: 36030
OTHER ASSETS
TOTAL ASSETS 515731
MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
Balance Sheet Page 2
Tuesday, October 31, 1995
CURRENT LIABILITIES
ACCOUNTS PAYABLE 30965
GPT-A/P 0
ACCRUED PAYROLL 12822
NOTE PAYABLE-1ST BANK 0
MISC PAYROLL DEDUCTION ( 1)
DIVIDENDS PAYABLE 0
FED/FICA TAX 0
STATE TAX 0
401K PAYABLE 386
GPT COMMISSIONS PAYABLE ( 1)
GPT-EMPLOYEE COMM 1
GPT-HONEYWELL COMM 0
MEC SALES TAX PAYABLE 0
GPT-SALES TAX PAYABLE 75
________
TOTAL CURRENT LIABIL 44247
LONG TERM LIABILITIES:
TOTAL LONG-TERM LIA 0
TOTAL LIABILITIES 44247
EQUITY
COMMON STOCK 5614
PAID IN CAPITAL 543386
RETAINED EARNINGS ( 150854)
EARNINGS CURRENT 73360
TOTAL EQUITY 471495
TOTAL LIAB & EQUITY 615743
MAG-HEAD ENGINEERING COMPANY, INC. 10/31/95
Income Statement Page 1
Tuesday, October 31, 1995
Period %SALES Year to Date %SALES
REVENUE
SALES MANUFACTURED HEAD 99718 97.71 566524 75.66
SALES RETURNS 0 0.00 44 0.01
SALES-NOT MFG MEC 0 0.00 90009 12.02
GPT-SALES 2339 2.29 92238 12.32
TOTAL REVENUE 102057 100.00 748815 100.00
COST OF GOODS SOLD
COST OF MATERIALS 28645 28.07 140970 18.83
GPT-COGS 1156 1.13 64722 8.64
DIRECT LABOR 15144 14.84 105619 14.10
GPT-DIRECT LABOR 0 0.00 7305 0.98
MFG ENG SALARY 5415 5.31 41561 5.55
OUTSIDE LABOR 200 0.20 8586 1.15
PRODUCTION SALARY 2877 2.82 22673 3.03
PAYROLL TAXES 1892 1.85 20104 2.68
OUTSIDE ENG SUPPORT 0 0.00 120 0.02
WORKERS COMP INS 845 0.83 3946 0.53
GENERAL INS 496 0.49 3968 0.53
HEALTH INS 1413 1.38 10690 1.43
BUILDING RENT 4583 4.49 36110 4.82
UTILITIES 485 0.48 4521 0.60
EQUIPMENT RENTAL 164 0.16 1742 0.23
SMALL TOOLS 0 0.00 296 0.04
PACKAGING SUPPLIES 771 0.76 3904 0.52
GPT-PACKAGING 0 0.00 0 0.00
GPT-PRODUCTION SUPPLIES 7 0.01 547 0.07
PRODUCTION SUPPLIES 257 0.25 6109 0.82
TOOLING MAINTENANCE 270 0.26 1803 0.24
BUILDING MAINTENANCE 242 0.24 1944 0.26
POSTAGE & FREIGHT 274 0.27 1068 0.14
GPT-FREIGHT 0 0.00 0 0.00
DEPRECIATION 1423 1.39 12361 1.65
OTHER PROD EXPENSES 0 0.00 0 0.00
COGS-NOT MFG MEC 0 0.00 69729 9.31
TOTAL COGS SOLD: 66559 65.22 570398 76.17
OPERATION EXPENSES
ADMINISTRATIVE SALARIES 0 0.00 0 0.00
OFFICE SUPPLIES 12 0.01 525 0.07
GPT-OFFICE SUPPLIES 19 0.02 1550 0.21
PAYROLL TAXES 919 0.90 8296 1.11
TRAVEL 812 0.80 1903 0.25
TELEPHONE 373 0.37 3820 0.51
BAD DEBT EXPENSE 2487 2.44 2487 0.33
ENTERTAINMENT 0 0.00 161 0.02
CONSULTING 0 0.00 0 0.00
CONTRIBUTIONS 0 0.00 0 0.00
DUES & SUBSCRIPTIONS 24 0.02 519 0.07
GPT-SUBSCRIPTIONS 0 0.00 15 0.00
DESIGN ENG SALARIES 2178 2.13 27545 3.68
ACCOUNTING 93 0.09 2252 0.30
OFFICE SALARIES 1667 1.63 13395 1.79
SALES SALARIES 3470 3.40 26385 3.52
GPT SALES SALARIES 3215 3.15 10877 1.45
LEGAL 0 0.00 691 0.09
MISC ADMINISTRATIVE EXP 0 0.00 85 0.01
GPT-VISA SERVIC CHARGE 27 0.03 788 0.11
TOTAL OPER EXPENSES: 15494 15.18 102258 13.66
OTHER INCOME & EXPENSE
401K EXPENSE 663 0.65 2799 0.37
INTEREST INCOME 0 0.00 0 0.00
INTEREST EXPENSE 0 0.00 0 0.00
INCOME TAXES 0 0.00 0 0.00
LEGAL SETTLEMENT 0 0.00 0 0.00
TOTAL OTHER IN & EXP: ( 663) (0.65)( 2799) ( 0.37)
NET INCOME (LOSS) 19342 18.95 73360 9.80
Schedule 3.10
Real Property
1. Lease, dated September 12, 1990 (as amended by a certain (i)
Rider, dated September 12, 1990, (ii) Amendment to Lease, dated
November 19, 1990, and (iii) Agreement to Extend Lease, dated
January 14, 1994), between Lutheran Brotherhood, a Minnesota
corporation, and Mag-Head Engineering, Inc. (now known as Mag-
Head Engineering Company, Inc.), a Minnesota corporation, by
which the premises therein commonly described as 684-686
Mendelssohn Avenue North, Golden Valley, Minnesota are demised
for a term commencing on September 12, 1990 and ending on January
31, 1997, a copy of which has been provided by Seller to
Purchaser. Also, all lease deposits thereunder.
Schedule 3.11
Hazardous Substances
Seller shall be solely responsible for the prompt and lawful
removal from the Premises, disposal and required registration of
the freon parts cleaner and freon degreaser identified on the
attached page. Seller shall additionally be responsible for the
payment of all expenses, fines, penalties and taxes related
thereto.
* Presence of a partially filled drum of spent freon parts
cleaner at the loading dock area. Although Mag-Head stopped
the use of freon for parts cleaning several years ago, the
waste solvent has been stored at the site since that time.
* A flammable material storage locker in the golf club
fabrication area contained two five gallon cans of freon
degreaser, one of which was labeled as "new" and the other as
"used."
This spent freon must be properly managed as a hazardous waste
and is further subject to the requirements of management as an
ozone depleting chemical (ODC). Proper disposal will include:
* Mag-Head must register through Hennepin County as a small
quantity hazardous waste generator.
* After registration and obtaining an ID#, Mag-Head must
arrange for proper pick-up, transport, and disposal of the
spent freon.
* There may be some liability for back taxes on the freon as an
ODC (26 CFR 52).
Schedule 3.12
Employee Agreements
See Attached.
August 1, 1995
Subject: Simplified Pay System For Clayton
From: Paul Michael
Pay Clayton $32,000.00/26 pay periods = $1,230.77/per pay period.
We will review sales quarterly to determine where we stand
regarding commission sales. The next review will be at the end
of October.
Our salary package with Clayton is $2,000.00 per month plus $7%
of all golf sales. We also agreed to $32,000.00 per year as a
minimum salary.
We need to sell $115,000.00 per year in order to break even with
the $1,230.77 per pay period for Clayton.
I believe that we can exceed $115,000.00 and therefore the need
for tracking sales will be to determine the extra pay that
Clayton will receive.
This will eliminate the need for a complicated accounting method
to determine Clayton's pay.
Schedule 3.13
Key Suppliers/Customers
Local
Primus
U.S. Department of Justice
Schedule 7.1.1
Form of Non-Competition Agreement
Non-Competition Agreement
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made and
entered into as of February __, 1996, by and among Ahead
Technology Acquisition Corporation, a Delaware corporation
("Purchaser"), Mag-Head Engineering Company, Inc., a Minnesota
corporation ("Seller"), and Paul Michael and Willy Schrepfer
(each, a "Shareholder" and, together, "Shareholders")
(Shareholders and Seller are sometimes referred to herein as
"Selling Parties"), with reference to the following:
A. Seller is engaged in the business of the
manufacture, production and sale of magnetic recording heads.
B. Concurrent with the execution and delivery of this
Agreement, Selling Parties have conveyed and assigned to
Purchaser certain of the assets and properties of Seller and
Purchaser has assumed certain liabilities of Seller pursuant to a
certain Asset Purchase Agreement, dated as of February __, 1996,
among Purchaser, and Selling Parties (the "Asset Purchase
Agreement"). Capitalized terms used but not defined herein shall
have the respective meanings attributed to such terms in the
Assets Purchase Agreement.
C. Shareholders are the holders of the respective
shares of capital stock of Seller listed below, and hold the
following respective offices of Seller:
Shares of
Shareholder Common Stock Office
Paul Michael 120,000 President
Willy Schrepfer 38,000 Vice President
& Secretary
Each Shareholder also is actively engaged in all aspects
of Seller's operations. Each Shareholder knows or has
access to confidential information which is
competitively valuable and/or trade secrets associated
with the operations of Seller.
NOW, THEREFORE, in consideration of the
respective covenants of the parties set forth in this
Agreement and as an inducement for Purchaser to enter
into, and consummate the transactions under, the
Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Non-Competition. Selling Parties, jointly
and severally, agree that, for a period of eighteen (18)
months after the Closing Date, within the territory set
forth in Schedule 1 hereto, none of the Selling Parties,
either jointly or severally, nor any of their respective
associates or affiliates, shall directly or indirectly
own, operate, become interested in, or carry on or
become involved in any manner whatsoever in any business
which is similar or competitive with any aspect of the
business of Seller as conducted on or prior to the
Closing, including, without limitation, the manufacture,
production or sale of products similar in nature or type
to that offered for sale by Seller on or prior to the
Closing. Without limiting any of the foregoing, the
parties agree that this covenant is intended to prohibit
such Selling Parties, either jointly or severally, from
engaging in such proscribed activities, either, as the
case may be, as an individual, owner, partner, employee,
consultant, stockholder (except as a holder of stock in
a corporation whose stock is publicly traded and which
is subject to the reporting requirements of the
Securities Exchange Act of 1934, and then only to the
extent of owning not more than one percent (1%) of the
issued and outstanding stock of such corporation), agent
or salesman for any person, firm or corporation, or
otherwise.
2. Interference; Confidentiality. Selling
Parties, jointly and severally, agree that:
2.1 For a period of eighteen (18) months
after the Closing Date, neither the Selling Parties nor
any of their associates or affiliates shall hire,
directly or indirectly, any employee employed by Seller
as of the Closing Date who is subsequently employed by
Purchaser during the term hereof, or attempt to induce
any such employee to leave such employ and to work,
directly or indirectly, for or with the Selling Parties
or any such associates or affiliates thereof.
2.2 For a period of eighteen (18) months
after the Closing Date, neither the Selling Parties nor
any of their associates or affiliates shall solicit,
induce or attempt to induce any customer of Seller at
the Closing Date to cease doing business in whole or in
part with Purchaser.
2.3 All documents, inventions, customer,
supplier and prospect lists, business, marketing and
sales information and plans, catalogues, trademarks,
processes, drawings, programs, designs, names,
copyrights, customer requirements, price and cost
information, records, techniques, know-how, business
secrets and other information which has come into the
possession of any of the Selling Parties from time to
time in the course of and for the business of Seller
prior to the Closing Date shall be deemed to be the
confidential and proprietary information of Purchaser.
Each of the Selling Parties shall keep confidential, and
shall not divulge to any other party or use following
the date of this Agreement, any confidential information
or business secrets of Seller existing prior to the
Closing Date, including, but not limited to, any matters
deemed confidential and proprietary as provided in this
section.
3. Separate Covenants. The parties intend
that the covenants and subparagraphs contained in
Paragraphs 1 and 2 hereof shall be construed as a series
of separate covenants, one for each jurisdiction
specified. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to
the covenant contained in the immediately preceding
subparagraph. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants
deemed included in the immediately preceding
subparagraph, then such unenforceable covenants shall be
deemed eliminated from these provisions for the purpose
of those proceedings solely to the extent necessary to
permit the remaining separate covenants to be enforced.
4. Remedies. In the event that any party
breaches any of its covenants under this Agreement, it
is agreed that the non-defaulting party or parties shall
be entitled to obtain from a court of competent
jurisdiction injunctive relief (including but not
limited to specific performance) directing that such
defaulting party cease and desist from such prohibited
conduct and enforcing the agreements of the defaulting
party hereunder. Such right to injunctive relief shall
be in addition to all other legal and equitable rights
and remedies available to such non-defaulting party.
5. Miscellaneous
5.1 Notices. Any notice to Purchaser
required or permitted under this Agreement shall be
given in accordance with the provisions of the Asset
Purchase Agreement.
5.2 Severability. If any provision of
this Agreement is held invalid or unenforceable, the
remainder of this Agreement shall nevertheless remain in
full force and effect. If any provision is held invalid
or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
5.3 Entire Agreement. This Agreement
contains the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all
prior oral and written agreements, understandings,
commitments and practices among the parties with respect
thereto. No amendments, modifications or supplements to
this Agreement may be made except by a writing signed by
the party to be bound.
5.4 Governing Law. This Agreement and
the rights and obligations of the parties hereto shall
be governed by and construed in accordance with the laws
of the State of Minnesota.
5.5 Further Assurances. Each of the
parties hereto shall execute and deliver any and all
additional instruments, documents and other assurances,
and shall do any and all acts and things reasonably
necessary in connection with the performance of their
respective obligations hereunder, to carry out the
intent of the parties hereto.
5.6 Waiver. No delay or omission on the
part of any party hereto in exercising any right under
this Agreement shall operate as a waiver of such right
or any other right, and no waiver of any right conferred
by this Agreement shall be binding unless signed by or
on behalf of each such party. A waiver on one occasion
shall not be construed as a bar to or a waiver of any
party's right to enforce any rights hereunder on any
future occasion.
5.7 Successors and Assigns. This
Agreement shall apply to, and inure to the benefit of,
and be binding upon and enforceable against the parties
hereto and their respective successors and permitted
assigns.
5.8 Attorneys' Fees. If any legal action
or other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful
or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to
any other relief to which it or they may be entitled.
AGREED TO AND ACCEPTED by the parties hereto
as of the day and year first above written.
MAG-HEAD ENGINEERING COMPANY, INC.
By:_____________________________
Paul Michael, President
By:_____________________________
Willy Schrepfer, Secretary
__________________________________
PAUL MICHAEL ("Shareholder")
__________________________________
WILLY SCHREPFER ("Shareholder")
AHEAD TECHNOLOGY ACQUISITION
CORPORATION
By:_____________________________
____________________________,
Title:______________________
Schedule 1
Geographic Territory
All cities, counties and jurisdictions within the United
States and worldwide within which or to Seller has
conducted its business or made sales on or prior to the
date hereof, including, without limitation, the City of
Golden Valley, in the Sate of Minnesota.
Schedule 7.4
Discounts/Concessions
None.
Schedule 9.2.1
Warranty Bill of Sale
This Warranty Bill of Sale is given with
respect to and in accordance with the Asset Purchase
Agreement, dated as of February __, 1996 (the "Purchase
Agreement"), between Mag-Head Engineering Company, Inc.,
a Minnesota corporation ("Seller"), and Ahead Technology
Acquisition Corporation, a Delaware corporation
("Purchaser"), among others. Capitalized terms not
otherwise defined in this Warranty Bill of Sale shall
have the meanings given to them in the Purchase
Agreement.
1. For good and valuable consideration, the
receipt and adequacy of which is acknowledged, Seller
hereby sells, transfers and assigns to Purchaser (and to
Purchaser's successors and assigns forever) all of
Seller's rights, title and interest in and to the
Assets, including, without limitation, all Fixed Assets
listed in Schedule 1.1.1 of the Purchase Agreement and
all inventory, work-in-progress and stock-in-trade of
Seller.
2. Seller represents and warrants to
Purchaser that (i) Seller has good and marketable title
to all of the Assets, and (ii) the assets are not
subject to any mortgage, pledge, lien, conditional sale
agreement, security agreement, encumbrance or charge of
any kind or nature.
IN WITNESS WHEREOF, Seller and Purchaser have
executed this Warranty Bill of Sale, effective as of
February __, 1996.
MAG-HEAD ENGINEERING COMPANY, INC.
By:_____________________________
Paul Michael, President
By:_____________________________
Willy Schrepfer, Secretary
[Acknowledgement]
AHEAD TECHNOLOGY ACQUISITION
CORPORATION
By:______________________________
_________________________,
Title:________________________
[Acknowledgement]
Schedule 9.2.2
Assignment of Intangibles
This Assignment is given with respect to and
in accordance with the Asset Purchase Agreement, dated
as of February __, 1996 (the "Purchase Agreement"),
between Mag-Head Engineering Company, Inc., a Minnesota
corporation ("Seller"), and Ahead Technology Acquisition
Corporation, a Delaware corporation ("Purchaser"), among
others. Capitalized terms not otherwise defined in this
Assignment shall have the respective meanings given to
them in the Purchaser Agreement.
Seller, for good and valuable consideration,
the receipt and adequacy of which is acknowledged,
hereby sells, assigns and transfers to Purchaser all of
its right, title and interest in and to the goodwill and
other intangibles of Seller listed in Schedules 1.1.3,
1.1.4 and 1.1.5 of the Purchase Agreement and sold
pursuant thereto, including, without limitation, the
Proprietary Rights.
IN WITNESS WHEREOF, Seller and Purchaser have
executed this Assignment of Intangibles as of February
__, 1996.
MAG-HEAD ENGINEERING COMPANY, INC.
By:_____________________________
Paul Michael, President
By:_____________________________
Willy Schrepfer, Secretary
[Acknowledgement]
AHEAD TECHNOLOGY ACQUISITION
CORPORATION
By:______________________________
_____________________________,
Title:________________________
[Acknowledgement]
SCHEDULE 9.2.3
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
This Assignment and Assumption of Contracts is
given with respect to and in accordance with the Asset
Purchase Agreement, dated as of February __, 1996 (the
"Purchase Agreement"), between Mag-Head Engineering
Company, Inc., a Minnesota corporation ("Assignor"), and
Ahead Technology Acquisition Corporation, a Delaware
corporation ("Assignee"), among others. Capitalized
terms not otherwise defined in this Assignment and
Assumption of Contracts shall have the respective
meanings given to them in the Purchase Agreement.
1. Assignor, for good and valuable consideration,
the receipt and adequacy of which is
acknowledged, hereby assigns and transfers to
Assignee all of Assignor's right, title and
interest in and to all of the contracts and
commitments listed on Exhibit "A" attached
hereto (the "Assigned Contracts").
2. Assignee hereby assumes and agrees to perform
all of the obligations of Assignor under the
Assigned Contracts from and after the Closing
Date.
3. Assignee is not assuming any liability or
obligation of Assignor relating to or arising
from Assignor's performance of or failure to
perform any obligation under any Assigned
Contracts prior to the Closing Date.
4. This Assignment and Assumption of Contracts
will not affect Assignee's right to assert any
defense under any Assigned Contract, at law,
in equity or otherwise against the validity or
enforceability of any liability or obligation
under any Assigned Contract.
IN WITNESS WHEREOF, Assignor and Assignee have
executed this Assignment and Assumption of Contracts as
of February __, 1996.
MAG-HEAD ENGINEERING COMPANY, INC.
By:_______________________________
Paul Michael, President
By:_______________________________
Willy Schrepfer, Secretary
AHEAD TECHNOLOGY ACQUISITION CORPORATION
By:___________________________________
_________________________,
Title:____________________________
Exhibit "A"
1. Lease, dated September 12, 1990 (as amended by a
certain (i) Rider, dated September 12, 1990, (ii)
Amendment to Lease, dated November 19, 1990, and (iii)
Agreement to Extend Lease, dated January 14, 1994),
between Lutheran Brotherhood, a Minnesota corporation,
and Mag-Head Engineering, Inc. (now known as Mag-Head
Engineering Company, Inc.), a Minnesota corporation, by
which the premises therein commonly described as 684-686
Mendelssohn Avenue North, Golden Valley, Minnesota are
demised for a term commending on September 12, 1990 and
ending on January 31, 1997.
2. All Accounts Receivable Trade (including,
without limitation, those identified in Schedule 1.1.3 to
the Purchase Agreement) of Seller.
3. All GPT - A/R (including, without limitation,
those identified in Schedule 1.1.3 to the Purchase
Agreement) of Seller.
4. Copier lease with "Imaging Systems," provided to
Purchaser by Seller.
5. All customer sales/purchase orders (including,
without limitation, those identified in Schedule 1.1.3 to
the Purchase Agreement) of Seller.
SCHEDULE 9.2.5
AFFIDAVIT OF SELLER
See Attached.
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
To inform Ahead Technology Acquisition Corporation,
a Delaware corporation ("Transferee"), that withholding
of tax under Section 1445 of the Internal Revenue Code of
1986, as amended ("Code"), will not be required upon the
consummation of transactions under that certain Asset
Purchase Agreement, dated as of February __, 1996, by and
between Transferee and Mag-Head Engineering Company,
Inc., a Minnesota corporation ("Transferor"), Transferor
hereby certifies to the following on behalf of the
Transferor:
1. The Transferor is not a foreign corporation,
foreign partnership, foreign trust, or foreign estate (as
those terms are defined in the Code and the Income Tax
Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification
number is ________________; and
3. The Transferor's office residence address is 686
Mendelssohn Avenue, Golden Valley, Minnesota 55427.
The Transferor understands that this Certification
may be disclosed to the Internal Revenue Service by the
Transferee and that any false statement contained herein
could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is
relying on this Certification in determining whether
withholding is required upon said transfer.
Under penalty of perjury I declare that I have
examined this Certification and to the best of my
knowledge and belief it is true, correct and complete,
and I further declare that I have authority to sign this
document on behalf of the Transferor.
Dated: February __, 1996 MAG-HEAD ENGINEERING
COMPANY, INC.
By:____________________________
Paul Michael, President
By:____________________________
Willy Schrepfer, Secretary
SCHEDULE 9.2.7.(a)
SELLER'S OFFICER'S CERTIFICATE
SELLER CERTIFICATE
Reference is made to that certain Asset Purchase
Agreement (the "Asset Purchase Agreement"), dated as of
February __, 1996, by and between Mag-Head Engineering
Company, Inc., a Minnesota corporation ("Seller"), and
Ahead Technology Acquisition Corporation, a Delaware
corporation ("Purchaser"), among others. Capitalized
terms used but not defined herein have the respective
meanings assigned to such terms in the Asset Purchase
Agreement. Seller hereby certifies that:
1. The undersigned, Willy Schrepfer, executing this
Certificate on behalf of Seller, is the duly elected and
acting officer of Seller holding the office of Secretary
of Seller.
2. Attached hereto as Exhibit A is a copy of the
Articles of Incorporation of Seller.
3. Attached hereto as Exhibit B is a true and
correct copy of the Bylaws of Seller in effect as of the
date hereof.
4. Attached hereto is a true and correct copy of
(i) resolutions of the Board of Directors of Seller
adopted by unanimous written consent of the Board on
February __, 1996, which resolutions have not been
revoked, modified, amended or rescinded and are still in
full force and effect, and pursuant to which the Asset
Purchase Agreement and Seller's sale of the Assets to
Purchaser have been duly approved and adopted by such
Board of Directors; and (ii) resolutions of the
shareholders of Seller adopted by unanimous written
consent of such shareholders on February __, 1996, which
resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect, and
pursuant to which the Asset Purchase Agreement and
Seller's sale of the Assets to Purchaser have been duly
approved and adopted by such shareholders.
5. There is currently no proceeding for the
dissolution or liquidation of Seller or threatening its
existence.
6. The representations and warranties of each of
Seller and Shareholder set forth in the Asset Purchase
Agreement and the Assignment, and each other agreement,
document, instrument, exhibit and schedule thereto and
delivered in connection therewith, are true and accurate
as of the date hereof, which date shall be deemed to be
the Closing Date for the purposes of the Asset Purchase
Agreement, and all of each of Seller's and Shareholder's
obligations set forth in Paragraphs 5, 6 and 7 of the
Asset Purchase Agreement have been completed, satisfied
and complied with.
7. The Asset Purchase Agreement and each other
agreement, document, instrument, exhibit and schedule
thereto and delivered in connection therewith, to which
any of the undersigned is a party, is in full force and
effect with respect to such party, and enforceable
against each party, in accordance with its terms.
8. Seller's conditions to Closing set forth in
Section 8 of the Asset Purchaser Agreement are either
satisfied or deemed waived.
Executed at _____________, ________, on this _____
day of February, 1996.
MAG-HEAD ENGINEERING COMPANY, INC.
By:________________________________
Willy Schrepfer, Secretary
EXHIBIT A
ARTICLES OF INCORPORATION
EXHIBIT B
BYLAWS
SCHEDULE 9.2.7(B)
PURCHASER'S OFFICER'S CERTIFICATE
PURCHASER CERTIFICATE
Reference is made to that certain Asset Purchase
Agreement (the "Asset Purchase Agreement"), dated as of
February __, 1996, by and between Mag-Head Engineering
Company, Inc., a Minnesota corporation ("Seller"), and
Ahead Technology Acquisition Corporation, a Delaware
corporation ("Purchaser"), among others. Capitalized
terms used but not defined herein have the respective
meanings assigned to such terms in the Asset Purchase
Agreement. Purchaser hereby certifies that:
1. The undersigned, Steve Conlisk, executing this
Certificate on behalf of Purchaser, is the duly elected
and acting officer of Treasurer of Purchaser.
2. Attached hereto as Exhibit A is a copy of the
Articles of Incorporation of Purchaser.
3. Attached hereto as Exhibit B is a true and
correct copy of the Bylaws of Purchaser in effect as of
the date hereof.
4. Attached hereto is a true and correct copy of
(i) the resolutions duly adopted by the Board of
Directors of Purchaser by unanimous written consent on
January __, 1996, which resolutions have not been
revoked, modified, amended or rescinded and are still in
full force and effect, and pursuant to which the Asset
Purchase Agreement and Purchaser's purchase of the Assets
from Seller have been duly approved and adopted by such
Board of Directors.
5. There is no proceeding for the dissolution or
liquidation of Purchaser or threatening its existence.
6. The representations and warranties of Purchaser
set forth in the Asset Purchase Agreement and the
Assignment, and each other agreement, document,
instrument, exhibit and schedule thereto and delivered in
connection therewith, are true and accurate as of the
date hereof, which date shall be deemed to be the Closing
Date for the purposes of the Asset Purchase Agreement,
and all of each of Purchaser's obligations set forth in
Paragraph 8 of the Asset Purchase Agreement have been
completed, satisfied and complied with.
7. The Asset Purchase Agreement and each other
agreement, document, instrument, exhibit and schedule
thereto and delivered in connection therewith, to which
the Purchaser is a party, is in full force and effect,
with respect to such party, and enforceable against each
such party, in accordance with its terms.
8. Purchaser's conditions to Closing set forth in
Section 6 of the Asset Purchaser Agreement are satisfied
or deemed waived.
Executed at Santa Clara, California, on this _____
day of February, 1996.
AHEAD TECHNOLOGY ACQUISITION CORPORATION
By:____________________________________
___________________________________,
Title:_____________________________
EXHIBIT A
ARTICLES OF INCORPORATION
EXHIBIT B
BYLAWS
SCHEDULE 9.2.9
FORM OF SELLER'S COUNSEL OPINION
See attached.
Exhibit 10.94
EMPLOYMENT, NON-COMPETITION AND TERMINATION AGREEMENT
EMPLOYMENT, NON-COMPETITION AND TERMINATION AGREEMENT (the
"Agreement"), dated March 28, 1996, between Diagnostic/Retrieval Systems,
Inc., a Delaware corporation having its principal place of business at 5
Sylvan Way, Parsippany, New Jersey (the "Corporation"), and Leonard
Newman ("Employee").
W I T N E S S E T H
WHEREAS, the Corporation and Employee desire to modify their
existing employment relationship and resolve all issues existing between
them; and
WHEREAS, the Corporation and Employee desire to enter into a
new contractual arrangement, superseding any prior agreement between the
parties, whereby, inter alia, the Corporation will utilize Employee on a
consulting basis upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and intending to be legally bound hereby, the Corporation
and Employee agree as follows:
1. EFFECTIVE DATE
Employee shall continue as an employee of the Corporation until
March 31, 1996 with all of his current rights and benefits and shall
perform such duties consistent with those of a senior executive of the
Corporation as may be assigned to him from time to time by the
Corporation's Chief Executive Officer. This Agreement shall become
effective on the date hereof (the "Effective Date").
2. TERM OF AGREEMENT
This Agreement shall commence on the Effective Date and
terminate on the fifth anniversary of March 31, 1996.
3. INDEMNIFICATION
Employee shall continue to be indemnified by the Corporation
for his past and future actions taken (or omitted to be taken) as an
officer, director or employee of the Corporation, and shall be indemnified
by the Corporation for his future actions taken (or omitted to be taken) as
a Consultant (as such term is defined in paragraph 5(a) hereof), consistent
with the Corporation's Bylaws and Certificate of Incorporation.
4. RELEASE
(a) Release by Employee. Employee hereby releases (the
"Release") and forever discharges the Corporation, its past and present
directors, managers, officers, shareholders, employees, agents, attorneys,
servants, affiliates, successors and assigns (collectively, the
"Releasees") from any and all claims, charges, complaints, liens, demands,
causes of action, obligations, damages and liabilities, known or unknown,
that he had, now has, or may claim hereafter to have against the Releasees
by reason of any matter, cause or things whatsoever arising on or before
the Effective Date, whether or not previously asserted before any state or
federal court, agency or governmental entity. This Release includes,
without limitation, any rights or claims relating in any way to
Employee's employment relationship with the Corporation under any statute,
including the federal Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act, as amended, The New Jersey Law Against
Discrimination, as amended or any other federal, state or local laws.
Notwithstanding the above, this Release does not include or effect
Employee's right to indemnification as an officer, director, employee or
Consultant or his rights pursuant to this Agreement. Employee further
acknowledges that the Corporation has satisfied fully any and all
obligations whatsoever owed to Employee arising out of his employment
relationship with the Corporation, or the modification thereof, prior to
the Effective Date and that no further sums are owed to him by the
Corporation, except as provided in this Agreement. This Release shall not
survive the wrongful termination of this Agreement by the Corporation.
(b) No Action. Except as set forth in paragraph 4(a), Employee
shall not commence or join in any claim, charge or action against
Releasees, or any of them, arising out of or relating in any way to
Employee's employment with the Corporation during the period prior to the
Effective Date, including, but not limited to, the modification of his
duties and responsibilities as an employee, or to any other matter or event
occurring prior to the Effective Date. Employee represents that he has not
brought or joined in any such claim, charge or action against any of the
Releasees.
(c) Consultation with Attorney; Voluntary Agreement. Employee
acknowledges that the Corporation has advised him to consult with any
attorney of his choosing prior to signing this Agreement. Employee further
acknowledges and understands that he has the right and has been given the
opportunity to review this Agreement and, specifically, paragraph 4 hereof
(regarding the Release by Employee), with any attorney of Employee's
choice. Employee further represents that he understands that the
Corporation is under no obligation to offer the consulting relationship
provided for in paragraph 5 hereof, and that Employee is under no obliga-
tion to consent to the release, and that he has entered into this Agreement
freely and voluntarily. Employee shall have twenty-one (21) days to
consider this Agreement and once he has signed this Agreement, Employee
shall have seven (7) additional days from the date of its execution to
revoke his consent to the Release. Any such revocation shall be made in
writing pursuant to paragraph 17 hereof. If no such revocation occurs, the
release and this Agreement shall become effective eight (8) days from the
date first set forth above. If Employee revokes his Release within such
period, this Agreement shall be null and void and shall not become
effective.
(d) Release by Corporation. The Corporation hereby releases and
forever discharges Employee from any and all claims, charges, complaints,
liens, demands, causes of action, obligations, damages and liabilities,
known or unknown, that it had, now has, or may claim hereafter to have
against Employee, by reason of any matter, cause or thing whatsoever
arising on or before the Effective Date, whether or not previously asserted
before any state or federal court, agency or governmental entity; provided,
however, that this release of the Employee by the Corporation shall not
apply to any claim arising as a result of any unlawful conduct by the Em-
ployee. This release includes, without limitation, any rights or claims
relating in any way to Employee's employment relationship with the
Corporation under any statute, rule, regulation or the common law. Notwith-
standing the above, this release does not include or effect the
Corporation's rights under this Agreement. This release shall not survive
the wrongful termination of this Agreement by Employee.
5. ENGAGEMENT OF EMPLOYEE ON CONSULTING BASIS
(a) General. The Corporation hereby engages Employee as
Co-Founder and Senior Adviser and as a consultant ("Consultant") to perform
such duties as are assigned to him by the Corporation's Chief Executive
Officer pursuant to paragraph 5(b). Employee accepts such engagement and
shall perform such duties on behalf of the Corporation in accordance with
the terms of this Agreement. Employee's obligations under this paragraph 5
shall commence on April 1, 1996 and shall continue until March 31, 2001
unless terminated earlier pursuant to paragraph 5(h) or paragraph 5(k) (the
"Consulting Period"). During the Consulting Period, Employee shall con-
tinue to be an employee of the Corporation. At the end of Consulting
Period, Employee's employment with the Corporation shall terminate.
(b) Duties. The services rendered to the Corporation by
Employee during the Consulting Period pursuant to this Agreement shall
consist of consulting with the Corporation as the Corporation's Chief
Executive Officer may reasonably request from time to time and such duties
shall be consistent with those of a senior executive of the Corporation.
Such consulting shall be with respect to the operation of the Corporation's
business and such other matters as may be agreed upon between the
Corporation and Employee and may include, without limitation, attendance
at meetings, briefings, seminars, conferences, depositions, trials, tax
audits or other proceedings. If Employee requires access to secretarial
services in connection with the performance of his duties pursuant to this
paragraph 5(b) during the Consulting Period, the Corporation shall provide
the Employee with reasonable access to secretarial services as the Employee
may reasonably require from time-to-time and such access may be terminated
by the Corporation if it is determined in the sole discretion of the
Corporation's Chief Executive Officer that the use of such secretarial
services by Employee is neither reasonable nor in connection with the
performance of Employee's duties pursuant to this paragraph 5(b).
(c) Reasonable Efforts. Employee shall devote
his reasonable efforts, talents and skills to the duties
which the Corporation may reasonably request of him during
the Consulting Period.
(d) Limitations. The duties which the Corporation may assign to
Employee during the Consulting Period pursuant to this Agreement shall not
require an average of more than twenty (20) hours of service by Employee
per week throughout the term of the Consulting Period and shall not exceed
more than 40 hours in any given week.
(e) Compensation. For Employee's services to the Corporation
under paragraph 5(a), the Corporation shall pay Employee, consistent with
the Corporation's regular payroll practices, the amount of $6,000.00, less
all applicable withholding taxes, for each calendar year of the Consulting
Period. Any such payment covering less than a full-calendar year shall be
pro-rated. If the Corporation wants to utilize Employee's services for more
than the number of hours of service specified in paragraph 5(d), the
Corporation and Employee shall meet and negotiate in good faith to reach an
agreement regarding the appropriate compensation for additional work. If no
agreement is reached, Employee shall not be required to perform any
additional services.
(f) Benefits. During the Consulting Period, Employee shall
receive the health care (including flex benefits), disability, life
insurance and 401(k) plan benefits set forth in the plans listed on Exhibit
A. Employee's participation in any benefit plan shall be subject to the
terms and conditions set forth in the relevant plan documents, any
amendments thereto adopted from time to time and any agreements relating
thereto. In addition, the Corporation shall pay to Employee on an annual
basis during the Consulting Period an amount equal to the scheduled premium
for the Banner Life Insurance Policy No. 010618131 with the specified face
value of such policy as $250,000. The Corporation has been advised by the
insurance broker for its health care, disability and life insurance
benefit plans that an employee with the title of Co-Founder is eligible to
participate in the health care, disability and life insurance benefit plans
set forth in this paragraph 5(f). The Corporation shall take all actions
which are commercially reasonable to continue Employee's eligibility under
such plans. To the extent permitted under the Corporation's relevant health
care, life and disability policies, upon termination of the Consulting
Period, Employee may assume said policies upon terms mutually agreed to
between the Corporation and Employee. During the Consulting Period, the
Employee may submit a request to the Corporation's Chief Executive Officer
that the Corporation pay for certain memberships or subscriptions
which the Corporation had previously paid for prior to the Effective Date
relating to Employee's duties under this Agreement and the Corporation
may pay for such memberships or subscriptions which are approved by the
Corporation's Chief Executive Officer in his sole discretion. On the
Effective Date, the Corporation shall sell to Employee for $1,000 the
Corporation's vehicle he is currently using. Notwithstanding the
foregoing, the Corporation shall have no further obligation to provide
Employee with an automobile or to reimburse Employee for any expenses
incurred after the Effective Date relating to any automobile. Also on the
Effective Date, the Corporation shall transfer ownership to Employee of
its computer and associated equipment that Employee has at his home as of
the date of this Agreement and of the furniture currently in the Employee's
office, and the Corporation shall bear the cost of moving the furniture to
the address for Employee set forth in paragraph 17 of this Agreement.
(g) Termination for Cause. The Corporation may terminate
Employee's consulting services under this Agreement at any time for "Cause"
after compliance with the provisions of paragraph 5(h). The term "Cause"
shall be defined solely as follows:
i) Employee's failure or refusal to
perform materially the duties set forth in paragraph 5(b),
except if such non-performance is due to Employee's
inability, due to medical reasons, to so perform;
ii) Employee's conviction of a felony, or conviction of
any other violation of any law that results in material injury to the
Corporation (either monetarily or to its reputation); or
iii) Any material breach (not covered by clauses (i) and
(ii) above) of any material provisions of this Agreement.
(h) Decision as to Breach and Opportunity to Cure. Any decision
by the Corporation as to whether "Cause" exists shall be made by a majority
of the entire Board after Employee and his counsel have had an opportu-
nity to appear before the Board. If thereafter the Corporation desires to
terminate Employee's consulting services for Cause, it shall first provide
Employee with written notice of termination specifying the basis for
terminating his consulting services, and shall allow Employee no less than
thirty (30) days to remedy, cure or rectify the situation giving rise to
the alleged Cause.
(i) Compensation if Terminated for Cause. If Employee's
consulting services under this Agreement are terminated for Cause, the
Corporation's sole obligation under paragraph 5 shall be to pay Employee
any unpaid but accrued compensation owed to him pursuant to paragraph 5(e)
through the date of termination and provide Employee with benefits pursuant
to paragraph 5(f) through the date of termination.
(j) Termination by Employee. Employee may elect to terminate
the Consulting Period at any time after the second anniversary of the
Effective Date by providing the Corporation with written notice of such
election. If Employee's consulting services under this Agreement are
terminated pursuant to this paragraph 5(j), the Corporation's sole
obligation under this paragraph 5 shall be to pay Employee any unpaid but
accrued compensation owed pursuant to paragraph 5(e) through the date of
termination and provide Employee with benefits pursuant to paragraph 5(f)
through the date of termination.
(k) Termination by Employee's Death. If Employee dies during
the Consulting Period, his estate shall be entitled to receive any amounts
that would have become payable pursuant to paragraph 5(e) had Employee
survived, provided that the schedule for making such payments shall not
be accelerated unless the Corporation and Employee's estate both agree to a
"present value" lumpsum payment.
(l) Disability. During any period of disability, Employee shall
continue to receive his compensation pursuant to paragraph 5(e) and all
benefits pursuant to paragraph 5(f), less any amounts paid to Employee
pursuant to the Corporation's disability plan. Employee may resume his
consulting services pursuant to this paragraph 5 at any time during the
Consulting Period if Employee is no longer disabled and is able to resume
his duties hereunder, provided that in no event shall the Consulting Period
be extended beyond March 31, 2001.
6. COVENANT NOT TO COMPETE
(a) Non-Competition. For the five-year period commencing on
March 31, 1996 (the "Non-Compete Period"), Employee shall not, directly or
indirectly, own, manage, operate, control, be employed by or participate in
the ownership, management, operation or control of, or be connected in any
manner with any business that offers products or services comparable to
those offered by the Corporation on the Effective Date or during the Non-
Compete Period, as described in the Corporation's annual reports on Form
10-K (a "Competitive Business"). The restrictions contained in this
paragraph 6(a) shall not be construed to prohibit Employee from being
employed by or from providing services to any entity or enterprise which
directly competes with the Corporation, provided that Employee does not
work in or otherwise provide advice or assistance to an area of any such
entity or enterprise that competes with the Corporation and Employee
complies with paragraph 6(b). Nothing in this paragraph 6 shall be deemed
to prevent Employee from owning securities of any publicly owned
corporation that is a Competitive Business, provided the total amount of
securities owned by Employee in such publicly owned corporation does
not exceed one percent (1%) of the outstanding securities of such class.
(b) Non-interference. During the Non-Compete
Period, Employee shall not, directly or indirectly, take
any of the following actions:
(i) persuade or attempt to persuade
any client of the Corporation to cease doing business with
the Corporation, or to reduce the amount of business it
does with the Corporation;
(ii) persuade or attempt to persuade any potential client
to which the Corporation has made a presentation, or with which the
Corporation has been negotiating, not to hire the Corporation or to hire a
competitor;
(iii) persuade or attempt to persuade any employee of the
Corporation to leave the Corporation's employ or to become employed by
any person, firm, corporation, partnership, association or entity other
than the Corporation; or
(iv) persuade or attempt to persuade or assist any
person, firm, corporation, partnership, association or entity in any
attempt to procure a sale of all or substantially all of the Corporation's
stock or assets.
(c) Covenants are Reasonable and Necessary. Employee
acknowledges and agrees that due to the uniqueness of his skills and
abilities and the uniqueness of the confidential information he possesses,
the covenants set forth herein are reasonable and necessary for the
protection of the Corporation's goodwill and business. Employee further
agrees that enforcement of the covenants herein will not deprive him of his
ability to earn a livelihood.
(d) Payments to Employee. In consideration of Employee's
covenants set forth in this paragraph 6, the Corporation shall pay Employee
an amount of $50,000.00 which amount is included in the sum set forth in
paragraph 7(a).
(e) Breach of Covenant Not to Compete. If Employee breaches his
obligations under subparagraphs 6(a) or 6(b) above, the Corporation shall
provide the Employee with a notice specifying the basis for its belief that
such a breach has occurred, and shall allow the Employee no less than five
(5) business days to remedy, cure or rectify the breach. Thereafter, if
Employee has failed to remedy, cure or rectify the breach, the Corporation
may pursue any legal or equitable remedies it deems appropriate.
(f) Opportunity to Consult. The Corporation agrees that at
Employee's request the parties shall consult regarding whether any activity
proposed by Employee violates this paragraph 6. If the parties are unable
to reach an agreement regarding whether Employee's proposed activity would
violate this paragraph 6, the dispute may be resolved pursuant to paragraph
12.
(g) Limitation. Notwithstanding anything to the contrary in
paragraphs 6(a), 6(b)(i) and 6(b)(ii), if after the Effective Date,
Employee, directly or indirectly, owns, manages, operates, controls, is
employed by or participates in the ownership, management, operation or
control of a business that as of the Effective Date was not a Competitive
Business, Employee's activity will not violate paragraphs 6(a), 6(b)(i) and
6(b)(ii), provided that (i) Employee did not obtain information about such
business as a result of the performance of his duties for the Corporation,
including, without limitation, his duties performed during the Consulting
Period and (ii) the Corporation does not intend to utilize such informa-
tion in maintaining its existing business or soliciting new business.
7. ADDITIONAL PAYMENTS AND BENEFITS
(a) On the Effective Date, the Corporation shall pay the
Employee $2,023,186.66, less all applicable withholding taxes.
(b) Payment of Bonus. On the Effective Date, the Corporation
shall pay Employee the sum of $75,000.00. This sum represents the bonus
earned by Employee for the Corporation's fiscal year ended March 31, 1995.
On the Effective Date, all payments under this Section 7 and Section 13 of
this Agreement shall be paid by the Corporation to Employee by wire
transfer to an account designated by Employee. In the event that Employee
revokes his consent pursuant to paragraph 4(c) of this Agreement, Employee
shall, on the immediately succeeding business day, transfer to the
Corporation by wire all amounts received by Employee pursuant to this
Agreement including interest on such amounts. Such interest shall be
computed at a rate of 1% over the prime commercial rate of interest as
announced from time to time by Morgan Guaranty Trust Company of New York.
(c) Termination of Employment and Release. At the end of the
Consulting Period, Employee's employment with the Corporation shall
terminate. At that time, Employee and the Corporation will execute mutual
releases substantially in the form set forth in Exhibit B. The form of the
release set forth in Exhibit B may be modified by the Corporation or
Employee to comply with all legal requirements then necessary to ensure
reasonably a valid release of all claims. This paragraph does not require a
release of claims that may arise under this Agreement.
(d) Corporation Property. Except as set forth in paragraphs
5(b) and 5(f), Employee shall, at the end of the Consulting Period, return
to the Corporation all other property which came into his possession during
his employment with the Corporation, including, without limitation,
reports, files, memoranda, records and software, credit cards, cardkey
passes, door and file keys, computer access codes or disks and
instructional manuals, parking passes, and other physical or personal
property that he received or prepared or helped prepare in connection
with his employment with the Corporation and its affiliates. To the extent
that he retains any copies, duplicates, reproductions, or excerpts thereof,
Employee will provide the Corporation with a list of the information that
has been retained and agrees to comply with paragraph 8 (regarding
confidentiality) in relation to such property or information.
(e) Medicare Supplementary Insurance. The Corporation shall
assist with the funding of Employee's purchase of Medicare Supplementary
Insurance, when, as and if available at the time of Employee's
qualification for Medicare subject to the terms and conditions set forth
below. The Corporation shall make payments, commencing upon termination
of Employee's employment with the Corporation, to Employee or his surviving
spouse, Ruth Newman, as the case may be, in an amount not to exceed $2,000
per annum for each of Employee and his present spouse, Ruth Newman, (if she
is eligible to obtain such coverage) to assist Employee with the cost of
purchasing and maintaining Medicare Supplementary Insurance. Coverage may
include Employee and Ruth Newman, if she was covered under the
Corporation's health care insurance program. Payment will be made upon
presentation of evidence of coverage under such Medicare Supplementary
Insurance. Payments shall continue for the life of each covered person.
Responsibility to obtain such coverage shall rest solely with Employee with
no guarantee by the Corporation of availability or suitability of any
coverage. If Employee is unable to secure such coverage, the Corporation
shall have no obligation to make any payments under this paragraph 7(e).
8. CONFIDENTIALITY AND INVENTIONS
(a) Employee shall not, either directly or indirectly, disclose
or make available to any person, firm, corporation, partnership,
association or other entity, other than with the written consent of the
Corporation and in the proper performance of duties contemplated by
this Agreement, any knowledge or information of any type whatsoever of a
confidential nature which he acquired during his employment by the
Corporation or may acquire in his performance of duties pursuant to this
Agreement that relate to the business of the Corporation or any of its
affiliates, or any customers, clients or prospective clients thereof,
including, without limitation, all types of trade secrets, any facts
concerning the systems, methods, procedures, formula or plans developed
by or for or used by the Corporation, but not including information that
is lawfully within the public domain or is already lawfully in the
possession of a third party. The obligations and the rights of the parties
under this paragraph 8 shall survive any termination of this Agreement.
(b) Any systems, programs, inventions and discoveries made,
developed or perfected by Employee, in whole or in part, or conceived by
Employee, alone or with others, at any time during his employment with the
Corporation prior to the Effective Date, or during the Consulting
Period in connection with his performance of services for the Corporation,
shall be the exclusive property of the Corporation, whether patented or
not, and Employee shall, without charge to the Corporation, assign to the
Corporation all of his rights, title and interest in such systems,
programs, inventions and discoveries, and execute, acknowledge and deliver
any instruments requested by the Corporation to confirm the complete
ownership by the Corporation of such systems, programs, inventions and
discoveries. Employee hereby appoints the Corporation as his
attorney-in-fact to execute all appropriate and relevant documents to
accomplish such result in the event he is unwilling or unable to do so.
Employee shall, at the request and expense of the Corporation, assist the
Corporation in obtaining patents for such systems, programs, inventions and
discoveries in all countries throughout the world. Employee shall not at
any time, except as properly required in the conduct of the business of the
Corporation, publish, disclose or authorize anyone to publish or disclose
any such invention or discovery to any person, firm or corporation other
than the Corporation or its authorized employees or agents.
9. RESIGNATION AND DESIGNATION
Employee hereby acknowledges that he was not elected as
Chairman of the Board of Directors, Secretary or to any other office of the
Corporation following the annual meeting of the Board held in August 1995,
and that he was designated Chairman Emeritus of the Board. Employee
hereby resigns as Chairman Emeritus of the Board as of the Effective Date.
10. ANNOUNCEMENTS
Employee and the Corporation agree to issue a press release in
a form to be mutually agreed upon regarding Employee's change in status at
the Corporation. All announcements and/or statements by either party
regarding the change of Employee's status shall be consistent with said
press release. Employee further agrees not to make any public or private
statements which disparage the Corporation, its affiliates or their
respective businesses, officers and directors. The Corporation agrees to
use its best efforts to not permit its officers and directors from making
any public or private statements which disparage the Employee.
11. IRREPARABLE INJURY; INJUNCTIVE RELIEF
Employee hereby acknowledges that, by virtue of his intimate
knowledge of the business and affairs of the Corporation, its policies,
methods, plans, trade secrets, systems and personnel policies, and his
prior position as a key executive of the Corporation, the Corporation would
be injured irreparably and damaged by his breach of any of the provisions
of paragraph 6, 7(d) and 8, and the Corporation shall be entitled, in
addition to any other rights and remedies, to seek injunctive or other
equitable relief, without the posting of any bond or security, enjoining
or restraining him from any such violations or threatened violation.
12. DISPUTES
Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof (including whether, with respect to
paragraph 5(h), termination for Cause has been established), shall be
settled by submitting the matter to one arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. The
award may be entered into any court of competent jurisdiction.
Each party shall pay its own attorney's fees and expenses in
connection with the arbitration and the parties shall share equally the
costs of the arbitrator. Notwithstanding the foregoing, nothing in this
paragraph 12 shall limit the Corporation's right to seek an injunction or
other equitable relief in any court of competent jurisdiction for breach of
any provisions of paragraphs 6, 7(d) and 8.
13. ATTORNEY'S FEES FOR NEGOTIATION
On the Effective Date, the Corporation shall pay to the
Employee his attorney's fees incurred by him in the preparation, revision
and negotiation of this Agreement in an amount not to exceed $20,000.00.
14. GOVERNING LAW
This Agreement and all rights, duties and remedies hereunder
shall be governed by and construed and enforced in accordance with the laws
of the State of Delaware, without regard to the conflicts of law rules of
any jurisdiction.
15. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior agreements,
arrangements and understandings, written or oral, between the parties
including, without limitation, the letter agreement between Employee and
the Corporation dated as of June 30, 1990. Notwithstanding the foregoing,
the Split-Dollar Insurance Agreement between the Corporation and Employee,
dated as of July 1, 1994 and attached hereto as Exhibit C, shall remain in
full force and effect.
16. EFFECT OF INVALIDITY
The parties intend that the provisions of this Agreement shall
be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If
any one or more of the provisions contained in this Agreement is held
to be excessively broad as to duration, scope, activity or subject, such
provisions will be construed by limiting and reducing them so as to be
enforceable to the maximum extent compatible with applicable law. In case
any provision in this Agreement shall be invalid, illegal or unenforceable,
the validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
17. NOTICES
All notices, claims, certificates, requests, demands and other
communications hereunder will be given in writing and will be deemed to
have been duly given if delivered personally or sent by hand-delivery,
telecopy or registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
addresses as shall be specified by like notice; provided, that notices of a
change of address shall be effective only upon receipt thereof):
If to the Corporation, to:
Diagnostic/Retrieval Systems, Inc.
5 Sylvan Way
Parsippany, New Jersey 07436
Attention: Chief Executive Officer
If to Employee, to:
Mr. Leonard Newman
8 Toboggan Ridge Road
Saddle River, New Jersey 07458
If a notice is sent to any of the above, copies shall be sent
to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
York, New York l0022
Attention: Mark N. Kaplan, Esq.
and
Pepper, Hamilton & Scheetz
450 Lexington Avenue, Suite 1600
New York, New York 10017-3904
Attention: John B. Glendon, Esq.
Any notice given by hand-delivery or by mail shall be effective when
received. Any notice given by telecopy shall be effective when the
appropriate telecopy answer back or confirmation is received.
18. MODIFICATIONS AND WAIVERS
No provisions of this Agreement may be modified or discharged
unless such modification or discharge is authorized and agreed to in a
writing signed by the Corporation and Employee. No waiver by either party
of any breach by the other party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
any other provision or condition at the time of any such breach or at any
prior or subsequent time.
19. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit
of the parties to this Agreement and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended or
shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or
any provision contained herein.
20. COUNTERPARTS
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
21. HEADINGS
All descriptive headings in this Agreement are inserted for
convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
22. DRAFTING
This Agreement reflects the joint drafting efforts of all
parties to this Agreement and any ambiguities in this Agreement shall not
be construed against any party hereto.
IN WITNESS WHEREOF, the Corporation and Employee have
executed this Agreement, on and as of the date and year first above
written.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
By:/s/ Mark S. Newman
Name: Mark S. Newman
Title: Chairman of the Board,
President and Chief
Executive Officer
/s/ Leonard Newman
Leonard Newman
INSURANCE POLICY# TYPE ORIGINAL FACE
CARRIER (BENEFICIARY) AMOUNT
New York Life 35305833 Life (Split)* $300,000
New York Life 35305834 Life (Split)* $200,000
New York Life 40800926 Life (Split)* $750,000
New York Life 41910920 Life (Split)* $500,000
Banner Life 10618131 Life (Fam.) $250,000
Northwest GL, X, Z- Life (Fam.) o Benefit = 2x
National Life 18395 (Group) annual salary
to maximum of
$275,000
o 65% of benefit
to age 75
o 45% of benefit
at age 75 and
beyond
INSURANCE POLICY# TYPE MONTHLY DISABILITY
CARRIER BENEFIT
New York Life H2364237 Disability $1,000**
Union Mutual N727219 Disability $2,500**
Paul Revere G-28258 Disability o 66.67% of basic
(Group) monthly earnings
to maximum of
$10,000/mo.
o Benefit period
for over 69 is
twelve months
Northwest GRA0022089
National Life 18396-2 Flex-Healthcare ***
401K
DRS Retirement/Savings Plan
Any group policy listed above will be available to the extent the
Corporation continues to provide such policy or group benefits to
substantially all its employees
- --------
* Subject to Split Dollar Agreement dated July 1, 1994.
** Ends at age 72.
*** Flex benefits will be provided to the same extent as
all other corporate executives.
Exhibit B
Release
Pursuant to paragraph 7(c) of the Employment, Non-Competition
and Termination Agreement dated March 28, 1996, between
Diagnostic/Retrieval Systems, Inc. (the "Corporation") and Leonard Newman
(the "Employee") (hereinafter referred to as the "Agreement"), Employee
shall release and forever discharge the Corporation, its past and present
directors, managers, officers, shareholders, employees, agents, attorneys,
servants and affiliates, successors and assigns (collectively "Releasees")
from any and all claims, charges, complaints, liens, demands, causes of
action, obligations, damages, and liabilities, known or unknown, that he
had, now has, or may hereafter claim to have against the Releasees by
reason of any matter, cause of things whatsoever arising on or before March
31, 2001, whether or not previously asserted before any state or federal
court or before any state or federal agency or governmental entity (the
"Release"). The Release includes, without limitation, any rights or claims
relating in any way to Employee's employment relationship with the
Corporation and the termination of his employment under any statute,
including the federal Age Discrimination in Employment Act, as amended,
Title VII of the Civil Rights Act, as amended, The New Jersey Law Against
Discrimination, as amended, or any other federal, state or local law.
Employee further agrees and acknowledges that the Corporation has fully
satisfied any and all obligations whatsoever owed to Employee arising out
of his employment relationship with the Corporation, or the termination
thereof, and that no further sums are owed to him by the Corporation. The
Release shall survive the termination of the Agreement.
Employee shall not in any way commence or join in any claim,
charge or action against Releasees, or any of them, arising out of or
relating in any way to Employee's employment with the Corporation for the
period prior to March 31, 2001, including, but not limited to, the
termination of his employment with the Corporation, or to any other matter
or event occurring prior to March 31, 2001. Employee represents that he has
not brought or joined in any such claim, charge or action against any of
the Releasees.
Employee represents that the Corporation has advised him to
consult with an attorney of his choosing prior to signing this Release.
Employee further represents that he understands and agrees that he has the
right and has been given the opportunity to review this Release with an
attorney of Employee's choice. Employee is under no obligation to consent
to the Release, and he has executed this Release freely and voluntarily.
Employee shall have twenty-one (21) days to consider this Release and once
he has executed this Release, Employee shall have seven (7) additional days
from the date of execution to revoke his consent to this Release. Any such
revocation shall be made in writing pursuant to paragraph 17 of the
Agreement. If no such revocation occurs, the Release shall become effective
eight (8) days from the date set forth below.
Dated: March 31, 2001
---------------------------
Leonard Newman
Exhibit C
SPLIT-DOLLAR INSURANCE AGREEMENT BETWEEN
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND
LEONARD NEWMAN
This Agreement entered into as of the first day of July, 1994,
by and between DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. (the "Employer") and
LEONARD NEWMAN, an employee of the Employer (the "Employee");
WHEREAS, the Employee has been employed by the Employer since
3/1/69 and has discharged his duties in a capable and efficient manner to
the benefit of the Employer; and
WHEREAS, the Employer wishes to retain the services of the
Employee through the inducement of a split-dollar arrangement designed to
provide insurance protection for the benefit of the Employee; and
WHEREAS, the Employee agrees to participate in
such plan as hereinafter provided, as such;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. PURCHASE OF INSURANCE. This Agreement is made in
---------------------
connection with certain life insurance policies pur-
chased by the Employer from New York Life Insurance
Company (the "Insurer") on the life of the Employee
(each, a "Policy" and, collectively, the
"Policies") with an aggregate face amount of $1,750,000. The
Employer is the sole owner of the Policies. A de-
scription of such Policies is attached hereto as
Schedule A.
The Employer shall not exercise any of its ownership rights in the
Policies, except the right to make Policy loans, without the written
consent of the Employee. The Employer shall not permit the
indebtedness on each Policy to exceed the Employer's interest in such
Policy. The interest of the Employer at any time shall be the sum of
premiums paid from the Employer's funds less any indebtedness on such
Policy previously incurred.
The Employer shall give the Employee written notice if the Employer
makes application for a Policy loan. If at any time the indebtedness
on the Policy would result in termination of the Policy, the Employee
shall have the right to take any steps required by the Policy to
prevent such termination.
2. EVIDENCE OF INSURABILITY. The Employee has
answered questions concerning his insurability and has sub-
mitted such evidence of insurability as was
required by Insurer.
3. PREMIUMS. The Employer shall forward directly to
the respective insurer each premium due in accor-
dance with the mode of premium payment as provided
in the Policy on or before the due date with such
payments continuing for the Employee's life.
The premiums will be paid by the Employer on an annual mode. The
Employer shall have the right to pay annual premiums on the Policies
by taking loans against its interests in the respective Policies.
4. DIVIDENDS. All dividends credited to a Policy in
---------
each year during which it remains in force, if any,
shall remain with the respective Insurer and shall
be applied to purchase additional insurance on the
life of the Employee. The Employee shall not have
the right to borrow against or surrender dividend
accumulations or additions without the consent of
the Employer.
5. BENEFICIARY DESIGNATION. The Employer shall be
-----------------------
designated as creditor beneficiary as its interest
may appear. For the balance, if any, of the
amounts payable under the terms of a POLICY, the Employer
shall request the Insurer to designate such benefi-
ciary and manner of payment as may be directed in
writing by the Employee from time to time and the
change shall become effective as provided by the
terms of the policy.
6. TERMINATION OF AGREEMENT. Either party hereto, with or without the
consent of the other, may terminate this Agreement by giving the
other party sixty days' written notice of such termination. In the
event of the termination of the Employee's employment with the
Employer, this Agreement shall terminate.
Upon the termination of this Agreement prior to the death of the
Employee, the Employee shall pay to the Employer an amount equal to
the aggregate premiums advanced by the Employer with respect to such
Policy or Policies, reduced, in each case, by all outstanding
indebtedness, if any, incurred by the Employer and relating to such
Policy or Policies, including interest thereon. The receipt of such
amounts by the Employer shall discharge completely all obligations
owing from the Employee to the Employer under this Agreement with
respect to the Policy or Policies related thereto. Upon the receipt
of such amounts by the Employee, the Employer shall execute such
documents as may be required by the Insurer to transfer ownership of
the policy to the Employer.
7. DEATH OF THE INSURED. Upon the death of the Employ-
--------------------
ee prior to either surrender of all of the Polices
or termination of this Agreement, the beneficiary
designated by the Employee shall pay to the
Employer an amount equal to the aggregate premiums advanced
by the Employer with respect to such Policy then
owned by the Employee, reduced by all outstanding
indebtedness, if any, incurred by the Employer and
relating to such Policies, including interest there-
on. Such payment shall discharge completely all
obligations owing from the Employee to the Employer
under this Agreement. All proceeds payable with
respect to the Policies which are in excess of said
amount shall be paid to the beneficiary designated
by the Employee.
8. AGREEMENT BINDING. This agreement shall be binding
upon the parties hereto, their heirs, legal repre-
sentatives or successors.
9. AMENDMENTS. Amendments may be made to this Agree-
ment only by a written agreement signed by each of
the parties and attached hereto. Additional poli-
cies of insurance on the life of the Employee may
be purchased under this Agreement by amendment to
Article 1 hereof.
10. STATE LAW. This Agreement may be subject to and
governed by the laws of the State of New Jersey.
11. INSURANCE COMPANY NOT A PARTY TO AGREEMENT. Not-
------------------------------------------
withstanding the provisions of this Agreement, the
Insurer is hereby authorized to act in accordance
with the terms of any Policy issued by it as if
this Agreement did not exist and payment or other
performance of its contract obligations by the Insurer
in accordance with the terms of any such Policy shall
completely discharge the insurer from all claims,
suits and demands of all persons whatsoever.
12. FIDUCIARY PROVISIONS. The Employer is hereby desig-
--------------------
nated as the "Named Fiduciary" for the "split-dol-
lar" arrangement established by this Agreement and
shall have the authority to control and manage the
operation and administration of such arrangement;
provided, however, that the Insurer shall be the
fiduciary of the split-dollar arrangement as to a
Policy issued by it solely with regard to the
review and final decision on a claim for benefits under
that Policy, as provided in Article 14 of this
Agreement.
13. ALLOCATION OF FIDUCIARY RESPONSIBILITIES. The
----------------------------------------
Named Fiduciary may allocate its responsibilities for
the operation and administration of the split-dollar
arrangement, including the designation of persons to
carry out fiduciary responsibilities under any such
plan. The Named Fiduciary shall effect such alloca-
tion of its responsibilities by delivering to the
Employee a written instrument signed by the Named
Fiduciary that specified the nature and extent of
the responsibilities allocated, including the
person or persons designated to carry them out, and
signed as well by the designee or designees in acceptance
of those responsibilities.
14. CLAIMS PROCEDURE. The following claims procedure
shall apply to the split-dollar arrangement.
(A) Filing of Benefit Claims.
1. When the Employee, beneficiary, or his duly authorized
representative (hereinafter referred to as the "Claimant") have
a claim which may be covered under the provisions of the
insurance policy described in the attached Schedule A, he or
she should contact the Insurer.
2. Claim forms and claim information can be
obtained from the Insurer.
3. The claim must be in writing on the
Insurer's Claim Form and delivered, along with
a certified copy of the death certificate, to
the above named fiduciary either in person or by mail, postage
paid. The above named fiduciary will forward the claim form to
the authorized representative of the Insurer.
(B) Initial Disposition of Benefit Claims.
1. Within ninety (90) days after receipt of a claim, the
Insurer shall send to the Claimant, by mail, postage prepaid, a
notice granting or denying, in whole or in part, a claim for
benefits.
2. If a claim for benefits is denied, the Insurer shall provide
to the Claimant written notice setting forth in a manner
calculated to be understood by the Claimant.
a. The specific reason or reasons for
denial;
b. Specific reference to pertinent
policy provisions on which the denial is based;
c. A description of any additional mate-
rial or information necessary for the
Claimant to perfect the claims and an ex-
planation of why such material or informa-
tion in necessary; and
d. Approximate information as to the
steps to be taken if the Claimant wishes
to submit his or her claim for review.
3. If the claim is payable, a benefit check
will be issued to the Claimant.
4. The ninety (90) day period may be extended if special
circumstances require an extension of time to process the claim
for benefits.
5. Written notice of the extension shall be furnished to the
Claimant prior to the termination of the initial 90-day period
by the Insurer.
6. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by
which the Insurer expects to render the final decision.
7. In no event shall such extension exceed a period of 90 days
from the end of the initial 90-day period.
8. If a notice of denial is not received within 90 days of the
claim being filed, the claim shall be deemed denied and the
Claimant shall be permitted to proceed to the review stage.
(C) Review Procedure.
1. Within sixty (60) days of:
a. The receipt by the Claimant of
written notification denying, in whole or in
part, his or her claim, or
b. A deemed denial resulting from the Insurer's failure
to provide the Claimant with written notice of denial
within 90 days of the claim being filed, the Claimant
upon written application to the Insurer, delivered in
person or by certified mail, postage prepaid, may request
an opportunity to appeal a denied claim to the Insurer or
a person designated by the Insurer.
2. The Claimant may:
a. Request a review upon written applica-
tion to the Insurer.
b. Review pertinent documents; and
c. Submit issues and comments in writing.
3. The decision on review shall be made within sixty (60) days
of the Insurers receipt of a request for review.
4. The Sixty (60) day period may be extended
if special circumstances require an extension
of time to process the review.
5. If an extension is required:
a. Written notice of the extension shall
be furnished to the Claimant prior to the
commencement of the extension, and
b. A decision shall be rendered as soon as possible but
no later than 120 days after the Insurer received the
request for review.
6. The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner
calculated to be understood by the Claimant, as well as
specific references to the policy provision on which the
decision is based.
7. If the decision on review is not rendered within 60 days or
within 120 days if an extension is granted, then the claim
shall be deemed denied on review.
(D) Other Remedies.
After exhaustion of the claims procedures, nothing shall
prevent any person from pursuing any other legal or equitable remedy
otherwise available.
15. POLICY LOANS. The Employer shall have the right to borrow that
portion of its interest in a Policy equal in amount to the aggregate
premiums on such Policy advanced by the Employer on behalf of the
Employee. Interest on such Policy loan shall be the responsibility of
the Employer as such interest becomes due.
IN WITNESS WHEREOF, the parties hereto have set their hands and
seals, or by its duly authorized officer, as of the day and year above
written, to this Agreement.
DIAGNOSTIC/RETRIEVAL
SYSTEMS, INC.
BY: /s/ Mark S. Newman
Name: Mark S. Newman
President & CEO
/s/ Leonard Newman
Acknowledgements
SCHEDULE A
It is agreed, pursuant to the foregoing Split Dollar Insurance Agreement
that the following described Policies of life insurance shall be subject to
the provisions of said Agreement.
Policy # Carrier Face Amount
35305833 New York Life $300,000
35305834 New York Life $200,000
40800926 New York Life $750,000
41910920 New York Life $500,000
EXHIBIT 23.1
Accountants' Consent and Report on Schedule
The Board of Directors
Diagnostic/Retrieval Systems, Inc.:
The audits referred to in our report dated May 18, 1995, included the
related financial statement schedule for each of the years in the
three-year period ended March 31, 1995, included in the Registration
Statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic con-
solidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data" and
"Experts" in the prospectus.
KPMG Peat Marwick LLP
Short Hills, New Jersey
May 10, 1996
