UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 2, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
Commission file number: 1-8821
GENERAL MICROWAVE CORPORATION
(Exact name of registrant as specified in its charter)
New York 11-1956350
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5500 New Horizons Boulevard, Amityville, New York 11701
(Address of principal executive offices) (Zip Code)
(516) 226-8900
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of September 22, 1995, there were 1,197,930 shares of common stock
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
------ --------------------
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 2, 1995
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
September 2, 1995 February 28, 1995
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,143,162 $ 1,053,861
Restricted cash 500,000
Investments 757,909
Accounts receivable less allowance for
doubtful accounts of $90,000 3,459,300 5,597,150
Inventories 8,276,370 7,594,526
Prepaid expenses and other current assets 478,808 208,152
Deferred income taxes, net 485,965 485,965
---------- ----------
Total current assets 14,343,605 15,697,563
Property, plant and equipment, net 6,549,007 6,586,563
Costs in excess of fair market value of
net assets acquired, net 962,841 721,149
Debt issuance costs, net 86,060 96,494
Intangible assets, net 194,929 217,291
Other assets 173,569 122,768
---------- ----------
Total assets 22,310,011 23,441,828
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 2, 1995 February 28, 1995
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt 575,000 575,000
Notes payable to bank 198,172 244,712
Accounts payable 1,380,667 847,816
Accrued expenses and other
current liabilities 1,562,015 1,788,585
Income taxes payable - 338,917
---------- ----------
Total current liabilities 3,715,854 3,795,030
---------- ----------
Long term debt, less current installments 2,593,747 2,631,250
Deferred income taxes 612,656 612,656
Minority interest 16,853 65,519
Stockholders' equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized and unissued
Common stock, $.01 par value:
5,000,000 shares authorized, 1,664,492 and
1,661,292 issued 16,645 16,613
Additional paid-in capital 9,549,406 9,531,034
Retained earnings 8,993,499 9,973,909
---------- ----------
18,559,550 19,521,556
---------- ----------
Less: Treasury stock, at cost (467,102
and 466,464 shares) 3,188,649 3,184,183
---------- ----------
15,370,901 16,337,373
---------- ----------
Contingencies
Total liabilities & stockholders' equity 22,310,011 23,441,828
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>STATEMENT OF OPERATIONS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
9/2/95 8/27/94 9/2/95 8/27/94
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $5,390,599 $4,928,685 $9,795,595 $9,962,187
Cost of sales 3,934,290 3,428,922 7,263,226 6,780,610
--------- --------- --------- ---------
Gross profit 1,456,309 1,499,763 2,532,369 3,181,577
Operating expenses:
Selling 780,299 697,157 1,568,810 1,391,989
Research and development 208,980 338,481 616,103 501,264
General and administrative 785,695 751,383 1,567,946 1,452,081
--------- --------- --------- ---------
1,774,974 1,787,021 3,752,859 3,345,334
--------- --------- --------- ---------
Operating loss (318,665) (287,258) (1,220,490) (163,757)
Other expenses (income):
Interest expense 50,968 35,428 102,289 63,633
Investment Income (6,341) (31,132) (34,703) (53,575)
Other - 45,007 - 78,778
Change in minority interest (4,982) - (48,666) -
---------- --------- --------- ----------
39,645 49,303 18,920 88,836
---------- --------- --------- ----------
Loss before recovery
of income taxes (358,310) (336,561) (1,239,410) (252,593)
Recovery of income taxes (259,000) (118,000) (259,000) (88,400)
---------- --------- --------- ---------
Net loss (99,310) (218,561) (980,410) (164,193)
========== ========= ========= =========
Net loss per share $ (0.08) $ (0.18) $ (0.82) $ (0.13)
========== ========= ========= =========
Weighted average number of
common shares outstanding 1,197,057 1,198,991 1,195,974 1,274,139
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>STATEMENT OF CASH FLOWS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
9/2/95 8/27/94
(Unaudited) (Unaudited)
--------- ---------
<S>
Cash flows from operating activities: <C> <C>
Net loss (980,410) (164,193)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 464,303 479,172
Change in minority interest (48,666) -
Changes in assets and liabilities:
Accounts receivable, net 2,137,850 1,037,562
Inventories (681,844) (1,248,536)
Prepaid expenses and other current assets (270,656) 28,392
Income taxes payable (338,918) (346,362)
Other assets (50,801) 4,009
Accounts payable 532,851 168,455
Accrued expenses and other current liabilities (226,570) (347,836)
--------- --------
Total adjustments 1,517,549 (255,144)
Net cash provided by (used in)
operating activities 537,139 (389,337)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of short-term investments 757,909 1,010,220
Purchase of plant & equipment (349,503) (290,787)
Purchase of short-term investments - (43,017)
Purchase of intangible assets (7,139) (15,880)
Purchase of additional interest in subsidiary (279,000) (84,600)
--------- ---------
Net cash provided by investing activities 122,267 575,936
--------- ---------
Cash flows from financing activities:
Payment of long-term borrowings (84,043) (37,500)
Proceeds from exercise of stock options 18,404 2,688
Payments to acquire treasury stock (4,466) (1,425,600)
-------- ---------
Net cash used in financing activities (70,105) (1,460,412)
--------- ---------
Cash and cash equivalents:
Net increase (decrease) during the period 589,301 (1,273,813)
Balance, beginning of the period 1,053,861 1,823,613
--------- ---------
Balance, end of the period 1,643,162 549,800
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (excluding bank charges) 102,288 61,380
Income taxes 108,450 262,382
Liability due to purchase of additional interest in subsidiary 279,000 84,600
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 2, 1995
(Unaudited)
NOTE 1: The consolidated financial statements include the accounts
of General Microwave Corporation, its wholly owned subsidiaries,
General Microwave Foreign Sales Corporation (FSC), Micro-El
Patent Corporation and Math Associates, Inc. (Math), its
indirect wholly-owned subsidiaries, General Microwave Israel
Corporation (GMIC) and General Microwave Israel (1987) Ltd.
(GMIL), and its majority owned subsidiary General Microcircuits
Corporation (GMCC). All intercompany accounts and transactions
have been eliminated in consolidation.
NOTE 2: The information furnished in this report reflects all
adjustments (which include only normal recurring adjustments)
which are, in the opinion of management, necessary for a fair
statement of the results for the interim period. The interim
figures are not necessarily indicative of the results for the
year.
<TABLE>Inventories on hand
<CAPTION>
NOTE 3: Inventories on hand at:
September 2, 1995 February 28, 1995
----------------- -----------------
<S> <C> <C>
Raw materials $3,798,552 3,638,119
Work in process 3,886,661 3,303,562
Finished goods 1,072,939 945,629
--------- ---------
$8,758,152 7,887,310
Less progress billings (481,782) (292,784)
--------- ---------
8,276,370 7,594,526
========= =========
</TABLE>
Inventories are valued at the lower of cost or market on a
first-in, first-out basis.
NOTE 4: Investments consisting of municipal bond funds, are classified
as securities available for sale under the Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" and are recorded at
fair value. However, unrealized gains and losses have not been
reported as a separate component of stockholders' equity as
they are immaterial as of February 28, 1995.
NOTE 5: Accumulated depreciation and amortization of property, plant
and equipment was $6,954,097 at September 2, 1995 and $6,987,284
at February 28, 1995.
NOTE 6: On March 2, 1995, the minority stockholders of General
Microcircuits (GMCC) exercised their option to require the
Company to purchase, in fiscal 1996, 15,000 shares of GMCC
common stock at a cost of $ 279,000, thereby increasing the
Company's ownership in GMCC from 92% to 97%. This transaction
was accounted for by the purchase method of accounting with
the cost of the additional ownership recorded as costs in excess
of fair value of net assets acquired.
NOTE 7: In connection with the renewal of the letter of credit relating
to the Company's 7-day Demand Industrial Development Revenue
Bonds, the Company granted a security interest in its accounts
receivable to the bondholders and the letter of credit issuer
as additional security for the Company's bond related debt.
The agreements relating to the bonds contain several
restrictive covenants. The agreement with the letter of credit
issuer requires the Company to maintain a minimum level of
tangible net worth as defined. After giving effect to the
results of operations for the quarter ended June 3, 1995, the
Company required and received a waiver that modified this
requirement to the Company's tangible net worth level as defined
in that agreement as of June 3, 1995 until February 28, 1996.
Because management anticipates compliance with the original
tangible net worth covenant as of February 29, 1996, the
Industrial Development Revenue Bonds debt is classified as long
term debt. In connection with this covenant the Company was
required to provide cash collateral of $500,000 for purposes of
securing and meeting the next principal payment on the bonds in
October, 1995, which is indicated as restricted cash on the
accompanying balance sheet. Additionally, the letter of credit
issuer added a covenant requiring the Company to not record a
net loss for the fiscal year ending February 29, 1996. It is
probable that the Company may not meet this new covenant and is
negotiating with the letter of credit issuer concerning a
modification, or waiver, if necessary, of this new covenant.
The Company is otherwise in compliance with the restrictive
covenants contained in the original bond agreements.
NOTE 8: In June 1995 the Company issued a continuing limited guarantee
in an amount of $300,000 to an Israeli bank relating to
indebtedness for its Israeli subsidiary. The Company's
guarantee of $225,000 relating to the mortgage indebtedness
on that subsidiary's facility has been terminated by its terms.
NOTE 9: On May 27, 1994, the Company purchased 178,200 shares of its
Common Stock held by Joseph Falkenstein, a beneficial owner (as
defined by Securities and Exchange Commission regulations) of
more than 5% of the Company's common stock for $1,425,600, the
then prevailing market price on the American Stock Exchange.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Results of Operations
- ---------------------
For the Quarter Ended September 2, 1995 compared with the Quarter Ended August
- ------------------------------------------------------------------------------
27, 1994.
- ---------
During the second quarter of fiscal 1996, net sales were $5,390,599 compared
to $4,928,685 during the comparable quarter of fiscal 1995, a 9.4% increase.
This increase primarily is attributed to significant shipments of fiber optic
products. The loss before recovery of income taxes was $358,310 as compared
with $336,561 for the same quarter last year. However, after giving effect to
the anticipated recovery of income taxes, the net loss for the quarter
amounted to $99,310 compared with a net loss of $218,561 for the same quarter
last year.
Cost of sales, as a percentage of sales, increased to 73.0% in the current
quarter, from 69.6% during the comparable quarter of last year. This increase
is attributed to technical problems and production difficulties with some new
products and certain production programs.
Total operating expenses remained essentially unchanged in the current
quarter compared to the comparable quarter last year. An increase in selling
expenses in an effort to improve sales of microwave products was coupled with
a slight increase in general and administrative expenses. Research and
development expenses decreased due to general reductions and approval of grant
applications which offset research and development expenses. The decrease in
research and development expenses more than offset the increase of selling
and general and administrative expenses. Interest expense increased due to
higher rates and increased short term borrowings, and investment income
declined due to reduced funds available for investing.
During the second quarter of fiscal 1996, sales orders booked were $5.3 million
and the closing backlog was $13.3 million compared with $5.7 million sales
orders booked and a closing backlog of $10.4 million for the second quarter of
fiscal 1995.
For the Six Months Ended September 2, 1995 compared with the Six Months Ended
- -----------------------------------------------------------------------------
August 27, 1994.
- ----------------
During the first half of fiscal 1996, net sales were $9,795,595 compared with
$9,962,187 for the first half of fiscal 1995, representing a 2% decline. A
net loss of $980,410 for the current period compares with a net loss of
$164,193 for the comparable period last year. Sales declined slightly during
the six month period due to decreases in microwave components and hybrid
microcircuits sales which were almost offset by increases in sales of fiber
optic products. Losses increased due to higher cost of sales as a percentage
of sales, as well as increased operating expenses.
Cost of sales, as a percentage of sales, increased to 74.1% in the first half
of fiscal 1996, compared to 68.1% in the first half of fiscal 1995, due
primarily to competitive pricing and technical difficulties on some new
products and in certain production programs.
During the current half the Company increased its selling activities as part of
its effort to promote new and existing products. As a result selling expenses
increased by approximately 13% compared to the comparable half last
year. Research and development expenses increased due to a decrease in
customer funded programs. Interest expenses increased due to higher rates
and increased short term borrowings. Investment income decreased because of
reduced funds available for investment.
A recovery of income taxes, resulting from a loss before income taxes for the
first six months of fiscal 1996, at an effective recovery rate of 20.8%,
compared with a recovery rate of 35% for the comparable period last year. The
tax benefit recorded in the second quarter of fiscal 1996 was limited to the
estimated tax benefit to be recorded for the fiscal year ending February 29,
1996.
During the first half of fiscal 1996, sales orders booked were $13.3 million
and the backlog was $13.3 million compared with $11.8 million and $10.4
million respectively, for the first half of fiscal 1995.
Liquidity and Capital Resources
- -------------------------------
September 2, 1995 compared with February 28, 1995
- -------------------------------------------------
At September 2, 1995, the Company's ratio of current assets to current
liabilities was 3.9 to 1 compared to 4.1 to 1 at February 28, 1995.
During the first half of fiscal 1996, cash flows provided from operations
amounting to approximately $537,000 were utilized principally to purchase
equipment for $350,000, to acquire an additional interest in General
Microcircuits for $279,000 and to fund operations. Accounts receivables
declined $2,138,000 due to reduced first half sales as compared to a high
level of fourth quarter fiscal 1995 sales, which receivables have been
substantially collected. Inventories increased by $682,000 because of lower
than anticipated sales and work in process on increased orders. The Company
expects to spend up to $200,000 during the remainder of the year for capital
equipment.
In connection with obtaining the waiver of the tangible net worth covenant
contained in one of the agreements relating to the Company's 7-day Demand
Industrial Development Revenue Bonds, the Company was required to provide cash
collateral of $500,000 for purposes of securing and meeting the next principal
payment on the bonds in October 1995, which is indicated as restricted cash on
the balance sheet. Additionally the letter of credit issuer added a covenant
requiring the Company to not record a net loss for the fiscal year ending
February 29, 1996. It is probable that the Company may not meet this new
covenant and is negotiating with the letter of credit issuer concerning a
modification or waiver, if necessary, of this new covenant. The Company is
otherwise in compliance with the restrictive covenants contained in the
original bond agreements. Based on the tangible net worth covenants, the
Company had no unrestricted funds available for the payment of cash dividends
at September 2, 1995.
The Company believes that its present resources, including available credit,
are sufficient to meet its needs for the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ------- ------------------
On or about May 3, 1995, Roy Grant v. General Microwave Corporation, and Russ
Gulotta, Director of Operations and individually was commenced in the United
States District Court for the Eastern District of New York by Roy Grant
against General Microwave Corporation and Russ Gulotta. On or about October
16, 1995 a stipulation discontinuing the action with predjudice was filed with
the court.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
General Microwave Corporation held its Annual Meeting of
Stockholders on June 27, 1995.
At that meeting, the persons listed below who were the nominees
of the Board of Directors listed in the Corporation's proxy statement for the
meeting were elected as the entire Board of Directors of General Microwave
Corporation, and the votes of the number of shares of Common Stock set forth
below were cast as set forth below with respect to each of them. There were
no other nominees for director of General Microwave Corporation at that
meeting. There were no broker non-votes with respect to the election of
directors.
Authority to
For Vote Withheld
--- -------------
Frederick Zissu 1,101,757 6,137
Sherman A. Rinkel 1,101,982 5,912
Moe Wind 1,102,257 5,637
Winton Charlop 1,101,757 6,137
Stanley Simon 1,102,257 5,637
Mitchell Tuckman 1,102,482 5,412
Edmond D. Franco 1,101,982 5,912
Michael I. Stolzar 1,101,982 5,912
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
---------
The following exhibits are filed with this Quarterly Report
on Form 10-Q.
10.1 Security Agreement dated as of July 20, 1995 between
General Microwave Corporation and Shawmut Bank N.A., as Trustee.
10.2 Security Agreement dated as of July 20, 1995 between
General Microwave Corporation and Natwest Bank N.A.
10.3 Amendment and Waiver of Reimbursement Agreement
dated July 17, 1995 between Natwest Bank, N.A. and General
Microwave Corporation.
27 Financial Data Schedule (filed with electronically
filed copy only)
(b) Reports on Form 8-K:
--------------------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GENERAL MICROWAVE CORPORATION
-----------------------------
(Registrant)
Date: October 16, 1995 By: Arnold H. Levine
_____________________________
Arnold H. Levine, Vice
President-Finance, Treasurer,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
<PAGE>
Exhibit Index
-------------
Page Number in
Sequential
Exhibit No. Numbering
- ----------- --------------
10.1 Security Agreement dated as of July
20, 1995 between General Microwave
Corporation and Shawmut Bank N.A.,
as Trustee.
10.2 Security Agreement dated as of July
20, 1995 between General Microwave
Corporation and Natwest Bank N.A.
10.3 Amendment and Waiver of Reimbursement
Agreement dated July 17, 1995 between
Natwest Bank, N.A. and General
Microwave Corporation.
27 Financial Data Schedule
(Filed with electronically
filed copy only)
<PAGE>
Exhibit 10.1
------------
CONTINUING GENERAL SECURITY AGREEMENT
-------------------------------------
THIS SECURITY AGREEMENT, dated as of July 20, 1995
between GENERAL MICROWAVE CORPORATION (the "Debtor") and SHAWMUT BANK N.A., as
Trustee, a national banking association duly organized and existing under the
laws of the United States of America (the "Trustee"):
WHEREAS, at the request of the Debtor, the Town of Babylon
Industrial Development Agency (the "Issuer") issued $6,000,000 in the aggregate
principal amount of 1984 Variable Rate 7-Day Demand Industrial Development
Revenue Bonds (General Microwave Corporation Facility) (the "Bonds") in order
to finance the costs of acquisition, construction and equipping of an
industrial development facility, together with machinery and equipment to be
used therein or in connection therewith, to be located in the Town of Babylon,
Suffolk County, New York (the "Facility"); and
WHEREAS, pursuant to the Indenture Of Mortgage And Trust
dated as of October 1, 1984 (the "Indenture") between the Issuer and NatWest
Bank N.A. (formerly National Westminster Bank USA) ("NatWest") NatWest was
appointed Trustee for the holders of the Bonds; and
WHEREAS, Shawmut Bank N.A. has succeeded NatWest as such
Trustee and is now the successor Trustee for the holders of the Bonds under
the Indenture; and
WHEREAS, pursuant to the Reimbursement Agreement dated as
of October 1, 1984 between the Debtor and NatWest (the "Reimbursement
Agreement"), NatWest issued, for the account of the Debtor, its irrevocable,
transferable letter of credit (the "Letter of Credit") in the amount of
$6,595,890.41 to support payment when due of the principal of, premium, if any,
and interest not in excess of seven months on the Bonds; and
WHEREAS, the Letter of Credit remains outstanding in favor
of the Trustee and the unpaid principal amount of the Bonds as of July 1, 1995
is $2,876,589.05 and the Debtor has therefore agreed that in addition to the
collateral described in Section 3 of the Reimbursement Agreement (being the
same collateral described in the Granting Clauses of the Indenture), it will
further secure its obligations to NatWest arising under the Reimbursement
Agreement and its obligations to the Trustee, as Trustee, by granting to the
Bank and to the Trustee a security interest in all of its present and future
accounts receivable upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration the receipt of which is hereby
acknowledged by the Debtor, it is hereby agreed as follows:
l. As security for the due and punctual payment of any
and all of the present and future Obligations of the Debtor (as defined in
Section 2 below), the Debtor hereby grants to the Trustee a continuing security
interest in (a) all of the Collateral (as defined in Section 3 below), whether
now or hereafter existing or acquired, and (b) all present and future products
and proceeds of the Collateral.
2. As used herein, the term "Obligations" means all
liabilities of the Debtor for the payment of principal and interest on the
Bonds and for the payment of all other obligations to the Trustee arising
under the Indenture, absolute or contingent, now or hereafter existing, due
or to become due.
3. As used herein, the term "Collateral" means the
property described below in this Section 3:
Accounts and Chattel Paper. All of the Debtor's present and
future rights to the payment of money arising out of the sale (or lease) of
goods or services including, but not limited to, accounts, general intangibles
and chattel paper (hereinafter collectively referred to in the plural as
"Accounts" and in the singular as "Account"), all proceeds thereof and all
liens, securities, guarantees, remedies, and privileges pertaining thereto,
together with all rights and liens of the Debtor in and to such goods,
including returned or repossessed goods, and all rights and property of any
kind forming the subject matter of any of the Accounts, including the right of
stoppage in transit.
4. The Debtor represents and warrants that: (a) except
for such Financing Statements that may be filed by NatWest, no Financing
Statement is on file (other than any which may have been filed on behalf of
the Trustee) relating to any of the Collateral is on file in any public office;
and (b) the Chief Executive Office of Debtor, and the Collateral are
respectively located at the address(es) set forth at the end of this Agreement
and Debtor will not change such location without prior written notice to and
consent of the Trustee; and (c) except for the security interest created by the
Debtor in favor of NatWest, Debtor has not created and is not aware of any
security interest, lien or encumbrance on or affecting the Collateral other
than created hereby.
5. The Debtor assumes all liability and responsibility in connection
with all Collateral acquired by Debtor; and the obligation of the Debtor to
pay all Obligations shall in no way be affected or diminished by reason of the
fact that any such Collateral may be lost, destroyed, stolen, damaged or for
any reason whatsoever unavailable to the Debtor.
6. As long as this Agreement shall remain in effect, the Debtor agrees:
(a) that, if the Trustee so demands in writing at any time after
the occurrence of an Event of Default (defined in Section 9 hereof) which is
continuing (i) all proceeds of the Collateral shall be delivered to the Trustee
promptly upon their receipt in a form satisfactory to the Trustee, and (ii)
all chattel paper, instruments and documents pertaining to the Collateral
shall be delivered to the Trustee at the time and place and in the manner in
which specified in the Trustee's demand;
(b) in order to enable the Trustee to comply with the law of any
jurisdiction, including state, federal and foreign, applicable to any security
interest granted hereby or to the Collateral, to execute and deliver upon
request, in form acceptable to the Trustee, any Financing Statement, notice,
statement, instrument, document, agreement or other paper and/or to perform
any act requested by the Trustee which may be necessary to create, perfect,
preserve, validate or otherwise protect such security interest or to enable
the Trustee to exercise and enforce the Trustee's rights hereunder or with
respect to such security interest;
(c) promptly to pay any filing fees or other costs in connection
with (i) the filing or recordation of such Financing Statements or any other
papers described above and (ii) such searches of the public records as the
Trustee in its sole discretion shall require;
(d) that the Trustee is authorized to file or record any such
Financing Statements or other papers without the signature of the Debtor if
permitted by applicable law;
(e) the Trustee may file a photographic or other reproduction of
this Agreement in lieu of a Financing Statement in any filing office where it
is permissible to do so;
(f) except for the security interest granted hereby and the security
interest of NatWest, the Debtor shall keep the Collateral and proceeds thereof
free and clear of any security interest, liens or encumbrances of any kind, the
Debtor shall promptly pay, when due, all taxes and transportation, storage and
warehousing charges and fees affecting or arising out of the Collateral and
shall defend the Collateral against all claims and demands of all persons at
any time claiming the same or any interest therein adverse to the Trustee;
(g) that the Trustee's duty with respect to the Collateral shall
be solely to use reasonable care in the custody and preservation of collateral
in its possession; the Trustee shall not be obligated to take any steps
necessary to preserve any rights in any of the Collateral against prior
parties, and the Debtor hereby agrees to take such steps; the Debtor shall pay
to the Trustee all costs and expenses, including filing and reasonable
attorney's fees, incurred by the Trustee in connection with the custody, care,
preservation or collection of the Collateral; the Trustee may, but is not
obligated to, exercise any and all rights of conversion or exchange or similar
rights, privileges and options relating to the Collateral; the Trustee shall
have no obligation to sell or otherwise realize upon any of the Collateral as
herein authorized and shall not be responsible for any failure to do so or for
any delay in so doing; in the event of any litigation, with respect to any
matter connected with this Agreement, the Obligations, the Collateral, or any
other instrument, document or agreement applicable hereto or to any one or
more of them in any respect, Debtor hereby waives the right to trial by jury
and all defenses, rights of setoff and rights to interpose counterclaims of
any nature;
(h) to provide the Trustee with such information as the Trustee may
from time to time reasonably request with respect to the location of the
Collateral and any of its places of business;
(i) that the Trustee will be notified promptly in writing of any
change in any office as set forth below;
(j) that the Debtor will permit the Trustee, by it officers and
agents, to have access to and examine at all reasonable times the properties,
minute books and other corporate records, and books of account and financial
records of the Debtor; and
(k) that the Debtor will promptly notify the Trustee upon the
occurrence of any default, as provided in this Agreement, of which the Debtor
has knowledge.
7. The Debtor further agrees as follows:
A. Upon the occurrence of an Event of Default (defined in Section 9
hereof) which is continuing the Debtor agrees as follows: (i) the Debtor will
not, without first obtaining the written consent of the Trustee, renew or
extend the time of payment of any Account; (ii) the Debtor will promptly
notify the Trustee in writing of any compromise, settlement or adjustment
with respect to an Account and will forthwith account therefor to the Trustee
in cash for the amount thereof without demand or notice; (iii) the Debtor will
stamp, in form and manner satisfactory to the Trustee, its accounts
receivable ledger and other books and records pertaining to the Accounts, with
an appropriate reference to the security interest of the Trustee in the
Accounts; (iv) upon request, the Debtor will furnish the Trustee original or
other papers relating to the sale of merchandise or the performance of
labor or services which created any Account; (v) the Debtor may collect the
Accounts, subject to the discretion and control of the Trustee, but the
Trustee may, without cause or notice, curtail or terminate such authority at
any time; (vi) the proceeds of the Accounts, when collected by the Debtor,
whether consisting of cash, checks, notes, drafts, money orders, commercial
paper of any kind whatsoever, or other documents, received in payment of the
Accounts shall be promptly remitted by the Debtor to the Trustee, in precisely
the form received, except for endorsement by the Debtor when required; (vii)
such proceeds until remitted to the Trustee, as aforesaid, shall be held in
trust by the Debtor for, and as the property of, the Trustee and shall not be
commingled with other funds, money or property; (viii) proceeds of the
Accounts will be received by the Trustee subject to final collection and
receipt of proceeds in cash or by unconditional credit to and accepted by the
Trustee; (ix) the Trustee shall apply in its absolute discretion, all
collections received by it on the Accounts, toward the payment of any of the
Obligations whether due or not due; (x) the Debtor will promptly notify the
Trustee in writing of the return or rejection of any merchandise represented
by the Accounts and the Debtor will receive and hold all such merchandise
separate and apart, in trust for and subject to the security interest in favor
of the Trustee; (xi) the Trustee is authorized to sell, for the Debtor's
account and sole risk, all or any part of such merchandise in the manner and
under the terms and conditions hereinafter set forth.
B. The Debtor represents and warrants to the Trustee that the Debtor is
the sole owner of the Accounts and no one has or claims to have an interest of
any kind therein or thereto; each of the debtors named in every such Account
is indebted to the Debtor in the amount and on the terms indicated in the
invoice and schedule of Accounts; each Account is bona fide and arises out of
the performance of labor or services or the sale and delivery or lease of
merchandise or both; and none of the Accounts is now, nor will at any time in
the future become, contingent upon the fulfillment of any contract or
conditions whatsoever, nor subject to any defense, offset or counterclaim.
C. The Debtor will maintain accurate and complete records of the
Accounts and will make the same available to the Trustee upon reasonable
notice and at such reasonable times as the Trustee may reasonably require.
8. Upon the occurrence of any of the following (and provided any
required notice has been given and any applicable grace or cure period has
lapsed): the occurrence of an "Event of Default" or other event so defined or
described in any instrument or agreement relating to any of the Obligations
which entitles the Trustee to accelerate payment thereof; or non-payment of
any of the Obligations when due; or failure of the Debtor to perform any
agreement on its part to be performed hereunder, then, in any such event,
(each an "Event of Default"), (a) all Obligations shall become at once due and
payable, without notice, presentment, demand for payment or protest, which are
hereby expressly waived; (b) the Trustee is authorized to take possession of
the Collateral and for that purpose may enter, with the aid and assistance of
any person or persons, any premises where the Collateral, or any part thereof
is, or may be, placed and remove same; (c) the Trustee may proceed to apply to
the Obligations, any and all deposits or other sums described in Section 4
hereof; (d) the Trustee may collect the Accounts and apply the proceeds
thereof to the Obligator; (e) the Trustee shall have the right from time to
time to sell, resell, assign, transfer and deliver all or any part of the
Collateral, at public or private sale, at the option of the Trustee, for cash
or on credit for future delivery, in such parcel or parcels and at such times
or times and at such place or places, and upon such terms, and conditions as
the Trustee, may deem proper, and in connection therewith may grant options
and may impose reasonable conditions, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon the
Debtor or right of redemption to the Debtor, which are hereby expressly waived;
the Trustee will give the Debtor reasonable notice of the time and place of
any such public sale or of the time after which any private sale or any other
intended disposition thereof is to be made and Debtor agrees that ten (10)
days prior notice shall be deemed reasonable notice; (f) upon each such sale,
the Trustee may, unless prohibited by applicable statute which cannot be
waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, rights of redemption and equities of the
Debtor, which are hereby waived and released; (g) the Trustee's obligations,
if any, to give additional (or to continue) financial accommodations of any
kind to the Debtor shall immediately terminate; and (i) in addition to the
rights and remedies given to the Trustee hereunder or otherwise, the Trustee
shall have all of the rights and remedies of a secured party under the New
York Uniform Commercial Code.
9. In the case of each such sale or of any proceedings to collect any
of the Obligations, the Debtor shall pay all costs and expenses of every kind
for collection, sale or delivery, including reasonable attorneys' fees, and
after deducting such costs and expenses from the proceeds of sale or
collection, the Trustee shall apply any residue to pay any of the Obligations
and the Debtor will continue liable to the Trustee for any deficiency with
interest.
10. The Trustee may, but is not obligated to, (a) demand, sue for,
collect or receive any money or property at any time due, payable or
receivable on account of or in exchange for any obligations securing any of
the Obligations, (b) compromise and settle with any person liable on such
obligation, and/or (c) extend the time of payment of or otherwise change the
terms thereof, as to any party liable thereon; all without incurring
responsibility to the undersigned or affecting any of the Obligations.
11. In order to effectuate the terms and provisions hereof, Debtor
hereby designates and appoints Trustee and its designees or agents as
attorney-in-fact of Debtor, irrevocably and with power of substitution, with
authority to receive, open and dispose of all mail addressed to Debtor, to
notify the Post Office authorities to change the address for delivery of mail
addressed to Debtor to such address as Trustee may designate; to endorse the
name of Debtor on any notes, acceptances, checks, drafts, money orders,
instruments or other evidence of payment or proceeds of the Collateral
that may come into Trustee's possession; to sign the name of Debtor on any
invoices, documents, drafts against and notices (which also may direct, among
other things, that payment be made directly to the Trustee) to Account debtors
or obligors of Debtor, assignments and requests for verification of Accounts;
to execute proofs of claim and loss; to execute any endorsements, assignments,
or other instruments of conveyance or transfer, to adjust and compromise any
claims under insurance policies; to execute releases; and to do all other acts
and things necessary and advisable in the sole discretion of Trustee to carry
out and enforce this Agreement. All acts of said attorney or designee are
hereby ratified and approved and said attorney or designee shall not be
liable for any acts of commission or omission, nor for any error of judgment
or mistake of fact or law. This power of attorney being coupled with an
interest is irrevocable while any of the Obligations shall remain unpaid;
provided, however, that the powers described in the preceding Section 10
hereof and in this Section 11 shall be exercised only after the occurrence of
an Event of Default which is counting.
12. All options, powers and rights granted to the Trustee hereunder or
under any promissory note, instrument, document or other writing delivered to
the Trustee shall be cumulative and shall be in addition to any other options,
powers or rights which the Trustee may now or hereafter have as a secured
party under the New York Uniform Commercial Code or under any other applicable
law or otherwise.
13. No delay on the part of the Trustee in exercising any of its
options, powers, or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. Neither this Agreement nor any provision
hereof may be modified, changed, waived, discharged or terminated orally, but
only by an instrument in writing, signed by the party against whom enforcement
of the modification, change, waiver, discharge or termination is sought. The
Trustee shall have the right, for and in the name, place and stead of the
Debtor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to any of the Collateral.
14. Notice of acceptance of this Agreement by the Trustee is hereby
waived. This Agreement shall be immediately binding upon the Debtor and its
successors and assigns, whether or not the Trustee signs this Agreement.
15. It is the intention of the parties (a) that, this Agreement shall
constitute a continuing agreement applying to any and all future, as well as
existing Obligations of the Debtor to the Trustee; and (b) that the security
interest provided for herein shall attach to after-acquired as well as
existing Collateral.
16. Unless the context otherwise requires, all terms used herein which
are defined in the New York Uniform Commercial Code shall have the meanings
therein stated.
17. Mailing Address of Debtor. For the purpose of Section 9.402(1) of
the Uniform Commercial Code, the following address of the Debtor is its "Chief
Executive Office" and shall be the Debtor's mailing address:
General Microwave Corporation
5500 New Horizons Boulevard
Amityville, New York 11701
18. Section 15(a) of the Reimbursement Agreement provides that
for so long as the Letter of Credit remains outstanding, NatWest will not take
additional collateral to secure the obligations of the Debtor arising under
the Reimbursement Agreement without providing at least a co-equal security
interest therein to the Trustee for the benefit of the holders of the Bonds.
Accordingly, the Trustee agrees that its security interest in the Collateral
shall be of equal priority with that of NatWest. The Trustee further agrees
that upon payment in full of the Obligations whether pursuant to the Letter
of Credit or otherwise, or the release of the Bank's security interest in the
Accounts, whichever occurs first, the Trustee will release its security
interest in the Collateral described herein and will then execute and deliver
the appropriate UCC-3 termination statements to the Debtor.
19. This Agreement shall be construed in accordance with and
be governed by the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this 20 day of July l995.
GENERAL MICROWAVE CORPORATION
-------------------------
By: s/ ARNOLD H. LEVINE
V.P. Finance Title
SHAWMUT BANK N.A., as Trustee
By:
-------------------------
<PAGE>
Exhibit 10.2
------------
CONTINUING GENERAL SECURITY AGREEMENT
-------------------------------------
THIS SECURITY AGREEMENT, dated as of July 20, 1995 between GENERAL
MICROWAVE CORPORATION (the "Debtor") and NATWEST BANK N.A. (formerly NATIONAL
WESTMINSTER BANK USA), a national banking association duly organized and
existing under the laws of the United States of America (the "Bank"):
WHEREAS, at the request of the Debtor, the Town of Babylon Industrial
Development Agency (the "Issuer") issued $6,000,000 in the aggregate
principal amount of 1984 Variable Rate 7-Day Demand Industrial Development
Revenue Bonds (General Microwave Corporation Facility) (the "Bonds") in order
to finance the costs of acquisition, construction and equipping of an
industrial development facility, together with machinery and equipment to be
used therein or in connection therewith, to be located in the Town of Babylon,
Suffolk County, New York (the "Facility"); and
WHEREAS, pursuant to the Reimbursement Agreement dated as of October
1, 1984 between the Debtor and the Bank (the "Reimbursement Agreement"), the
Bank issued, for the account of the Debtor, its irrevocable, transferable
letter of credit (the "Letter of Credit") in the amount of $6,595,890.41 to
support payment when due of the principal of, premium, if any, and interest
not in excess of seven months on the Bonds; and
WHEREAS, the Letter of Credit remains outstanding in favor of Shawmut
Bank N.A., as Trustee (the "Trustee") for the holders of the Bonds, and as
successor to the Bank as the original Trustee, (the original expiration date
of September 15, 1994 having been extended by the Bank at the request of the
Debtor) and the unpaid principal amount of the Bonds as of July 1, 1995 is
$2,876,589.05 and the Debtor has therefore agreed that in addition to the
collateral described in Section 3 of the Reimbursement Agreement, it will
further secure its obligations arising under the Reimbursement Agreement by
granting to the Bank a security interest in all of its present and future
accounts receivable upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged by the
Debtor, it is hereby agreed as follows:
l. As security for the due and punctual payment of any and all of the
present and future Obligations of the Debtor (as defined in Section 2 below),
the Debtor hereby grants to the Bank a continuing security interest in (a) all
of the Collateral (as defined in Section 3 below), whether now or hereafter
existing or acquired, and (b) all present and future products and proceeds of
the Collateral.
2. As used herein, the term "Obligations" means all liabilities of the
Debtor to the Bank arising under the Reimbursement Agreement, absolute or
contingent, now or hereafter existing, due or to become due including, without
limitation, the obligation of the Debtor to reimburse the Bank for amounts
drawn under the Letter of Credit and to pay the Bank's fees for the issuance
and maintenance thereof.
3. As used herein, the term "Collateral" means the property described
below in this Section 3 together with the property described in Section 4
hereof:
Accounts and Chattel Paper. All of the Debtor's present and future
rights to the payment of money arising out of the sale (or lease) of goods or
services including, but not limited to, accounts, general intangibles and
chattel paper (hereinafter collectively referred to in the plural as
"Accounts" and in the singular as "Account"), all proceeds thereof and all
liens, securities, guarantees, remedies, and privileges pertaining thereto,
together with all rights and liens of the Debtor in and to such goods,
including returned or repossessed goods, and all rights and property of any
kind forming the subject matter of any of the Accounts, including the right of
stoppage in transit.
4. Subject to the provisions of Section 15(b) of the Reimbursement
Agreement, any and all deposits or other sums at anytime credited by or due
from the Bank to the Debtor; and any and all monies, securities and other
property of the Debtor, and the proceeds thereof now or hereafter held or
received by or in transit to the Bank from or for the Debtor, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, shall at
all times constitute security for any and all Obligations.
5. The Debtor represents and warrants that: (a) except for such
Financing Statements that may be filed by the Trustee, no Financing Statement
is on file (other than any which may have been filed on behalf of the Bank)
relating to any of the Collateral is on file in any public office; and (b) the
Chief Executive Office (or Major Executive Office) of Debtor (if any), and the
Collateral are respectively located at the address(es) set forth at the end of
this Agreement and Debtor will not change such location without prior written
notice to and consent of the Bank; and (c) except for the security interest
created by the Debtor in favor of the Trustee, Debtor has not created and is
not aware of any security interest, lien or encumbrance on or affecting the
Collateral other than created hereby.
6. The Debtor assumes all liability and responsibility in connection
with all Collateral acquired by Debtor; and the obligation of the Debtor to
pay all Obligations shall in no way be affected or diminished by reason of the
fact that any such Collateral may be lost, destroyed, stolen, damaged or for
any reason whatsoever unavailable to the Debtor.
7. As long as this Agreement shall remain in effect, the Debtor agrees:
(a) that, if the Bank so demands in writing at any time after the
occurrence of an Event of Default (as defined in Section 9 hereof) which is
continuing (i) all proceeds of the Collateral shall be delivered to the Bank
promptly upon their receipt in a form satisfactory to the Bank, and (ii) all
chattel paper, instruments and documents pertaining to the Collateral shall be
delivered to the Bank at the time and place and in the manner in which
specified in the Bank's demand;
(b) in order to enable the Bank to comply with the law of any
jurisdiction, including state, federal and foreign, applicable to any security
interest granted hereby or to the Collateral, to execute and deliver upon
request, in form acceptable to the Bank, any Financing Statement, notice,
statement, instrument, document, agreement or other paper and/or to perform
any act requested by the Bank which may be necessary to create, perfect,
preserve, validate or otherwise protect such security interest or to enable
the Bank to exercise and enforce the Bank's rights hereunder or with respect
to such security interest;
(c) promptly to pay any filing fees or other costs in connection
with (i) the filing or recordation of such Financing Statements or any other
papers described above and (ii) such searches of the public records as the
Bank in its sole discretion shall require;
(d) that the Bank is authorized to file or record any such
Financing Statements or other papers without the signature of the Debtor if
permitted by applicable law;
(e) the Bank may file a photographic or other reproduction of this
Agreement in lieu of a Financing Statement in any filing office where it is
permissible to do so;
(f) except for the security interest granted hereby and the
security interest of the Trustee, the Debtor shall keep the Collateral and
proceeds thereof free and clear of any security interest, liens or
encumbrances of any kind, the Debtor shall promptly pay, when due, all taxes
and transportation, storage and warehousing charges and fees affecting or
arising out of the Collateral and shall defend the Collateral against all
claims and demands of all persons at any time claiming the same or any
interest therein adverse to the Bank;
(g) that the Bank shall not be obligated to take any steps
necessary to preserve any rights in any of the Collateral against prior
parties, and the Debtor hereby agrees to take such steps; the Debtor shall
pay to the Bank all costs and expenses, including filing and reasonable
attorney's fees, incurred by the Bank in connection with the custody, care,
preservation or collection of the Collateral; the Bank may, but is not
obligated to, exercise any and all rights of conversion or exchange or similar
rights, privileges and options relating to the Collateral; the Bank shall have
no obligation to sell or otherwise realize upon any of the Collateral as
herein authorized and shall not be responsible for any failure to do so or for
any delay in so doing; in the event of any litigation, with respect to any
matter connected with this Agreement, the Obligations, the Collateral, or any
other instrument, document or agreement applicable hereto or to any one or
more of them in any respect, Debtor hereby waives the right to trial by jury
and all defenses, rights of setoff and rights to interpose counterclaims of
any nature;
(i) to provide the Bank with such information as the Bank may from
time to time reasonably request with respect to the location of the Collateral
and any of its places of business;
(j) that the Bank will be notified promptly in writing of any
change in any office as set forth below;
(k) that the Debtor will permit the Bank, by it officers and
agents, to have access to and examine at all reasonable times the properties,
minute books and other corporate records, and books of account and financial
records of the Debtor; and
(l) that the Debtor will promptly notify the Bank upon the
occurrence of any default, as provided in this Agreement, of which the Debtor
has knowledge.
8. The Debtor further agrees as follows:
A. Upon the occurrence of an Event of Default (defined in Section 9
hereof) which is continuing, the Debtor agrees as follows: (i) the Debtor will
not, without first obtaining the written consent of the Bank, renew or extend
the time of payment of any Account; (ii) the Debtor will promptly notify the
Bank in writing of any compromise, settlement or adjustment with respect to an
Account and will forthwith account therefor to the Bank in cash for the amount
thereof without demand or notice; (iii) the Debtor will stamp, in form and
manner satisfactory to the Bank, its accounts receivable ledger and other
books and records pertaining to the Accounts, with an appropriate reference
to the security interest of the Bank in the Accounts; (iv) upon request, the
Debtor will furnish the Bank original or other papers relating to the sale of
merchandise or the performance of labor or services which created any Account;
(v) the Debtor may collect the Accounts, subject to the discretion and control
of the Bank, but the Bank may, without cause or notice, curtail or terminate
such authority at any time; (vi) the proceeds of the Accounts, when collected
by the Debtor, whether consisting of cash, checks, notes, drafts, money orders,
commercial paper of any kind whatsoever, or other documents, received in
payment of the Accounts shall be promptly remitted by the Debtor to the Bank,
in precisely the form received, except for endorsement by the Debtor when
required; (vii) such proceeds until remitted to the Bank, as aforesaid, shall
be held in trust by the Debtor for, and as the property of, the Bank and shall
not be commingled with other funds, money or property; (viii) proceeds of the
Accounts will be received by the Bank subject to final collection and receipt
of proceeds in cash or by unconditional credit to and accepted by the Bank;
(ix) the Bank shall apply in its absolute discretion, all collections received
by it on the Accounts, toward the payment of any of the Obligations whether
due or not due; (x) the Debtor will promptly notify the Bank in writing of the
return or rejection of any merchandise represented by the Accounts and the
Debtor will receive and hold all such merchandise separate and apart, in trust
for and subject to the security interest in favor of the Bank; (xi) the Bank
is authorized to sell, for the Debtor's account and sole risk, all or any part
of such merchandise in the manner and under the terms and conditions
hereinafter set forth.
B. The Debtor represents and warrants to the Bank that the Debtor is
the sole owner of the Accounts and no one has or claims to have an interest of
any kind therein or thereto; each of the debtors named in every such Account
is indebted to the Debtor in the amount and on the terms indicated in the
invoice and schedule of Accounts; each Account is bona fide and arises out of
the performance of labor or services or the sale and delivery or lease of
merchandise or both; and none of the Accounts is now, nor will at any time in
the future become, contingent upon the fulfillment of any contract or
conditions whatsoever, nor subject to any defense, offset or counterclaim.
C. The Debtor will maintain accurate and complete records of the
Accounts and will make the same available to the Bank upon reasonable notice
and at such reasonable times as the Bank may reasonably require.
9. Upon the occurrence of any of the following (and provided any
required notice has been given and any applicable grace or cure period has
lapsed): the occurrence of an "Event of Default" under and as defined in the
Reimbursement Agreement; or failure of the Debtor to perform any agreement on
its part to be performed hereunder, then, in any such event, (each an "Event
of Default"), (a) all Obligations shall become at once due and payable,
without notice, presentment, demand for payment or protest, which are hereby
expressly waived; (b) the Bank is authorized to take possession of the
Collateral and for that purpose may enter, with the aid and assistance of any
person or persons, any premises where the Collateral, or any part thereof is,
or may be, placed and remove same; (c) the Bank may proceed to apply to the
Obligations, any and all deposits or other sums described in Section 4 hereof;
(d) the Bank may collect the Accounts and apply the proceeds thereof to the
Obligators; (e) the Bank shall have the right from time to time to sell,
resell, assign, transfer and deliver all or any part of the Collateral, at
public or private sale, at the option of the Bank, for cash or on credit for
future delivery, in such parcel or parcels and at such times or times and at
such place or places, and upon such terms, and conditions as the Bank, may
deem proper, and in connection therewith may grant options and may impose
reasonable conditions, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon the Debtor or right
of redemption to the Debtor, which are hereby expressly waived; the Bank will
give the Debtor reasonable notice of the time and place of any such public
sale or of the time after which any private sale or any other intended
disposition thereof is to be made and Debtor agrees that ten (10) days prior
notice shall be deemed reasonable notice; (f) upon each such sale, the Bank
may, unless prohibited by applicable statute which cannot be waived, purchase
all or any part of the Collateral being sold, free from and discharged of all
trusts, claims, rights of redemption and equities of the Debtor, which are
hereby waived and released; (g) the Bank's obligations, if any, to give
additional (or to continue) financial accommodations of any kind to the Debtor
shall immediately terminate; and (i) in addition to the rights and remedies
given to the Bank hereunder or otherwise, the Bank shall have all of the
rights and remedies of a secured party under the New York Uniform Commercial
Code.
10. In the case of each such sale or of any proceedings to collect any
of the Obligations, the Debtor shall pay all costs and expenses of every kind
for collection, sale or delivery, including reasonable attorneys' fees, and
after deducting such costs and expenses from the proceeds of sale or
collection, the Bank shall apply any residue to pay any of the Obligations and
the Debtor will continue liable to the Bank for any deficiency with interest.
11. The Bank may, but is not obligated to, (a) demand, sue for, collect
or receive any money or property at any time due, payable or receivable on
account of or in exchange for any obligations securing any of the Obligations,
(b) compromise and settle with any person liable on such obligation, and/or
(c) extend the time of payment of or otherwise change the terms thereof, as to
any party liable thereon; all without incurring responsibility to the
undersigned or affecting any of the Obligations.
12. In order to effectuate the terms and provisions hereof, Debtor
hereby designates and appoints Bank and its designees or agents as attorney-in-
fact of Debtor, irrevocably and with power of substitution, with authority to
receive, open and dispose of all mail addressed to Debtor, to notify the Post
Office authorities to change the address for delivery of mail addressed to
Debtor to such address as Bank may designate; to endorse the name of Debtor on
any notes, acceptances, checks, drafts, money orders, instruments or other
evidence of payment or proceeds of the Collateral that may come into Bank's
possession; to sign the name of Debtor on any invoices, documents, drafts
against and notices (which also may direct, among other things, that payment
be made directly to the Bank) to Account debtors or obligors of Debtor,
assignments and requests for verification of Accounts; to execute proofs of
claim and loss; to execute any endorsements, assignments, or other instruments
of conveyance or transfer, to adjust and compromise any claims under insurance
policies; to execute releases; and to do all other acts and things necessary
and advisable in the sole discretion of Bank to carry out and enforce this
Agreement. All acts of said attorney or designee are hereby ratified and
approved and said attorney or designee shall not be liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact or
law. This power of attorney being coupled with an interest is irrevocable
while any of the Obligations shall remain unpaid; provided, however, that the
powers described in the preceding Section 11 hereof and in this Section 12
shall be exercised only after the occurrence of an Event of Default which is
continuing.
13. All options, powers and rights granted to the Bank hereunder or
under any promissory note, instrument, document or other writing delivered to
the Bank shall be cumulative and shall be in addition to any other options,
powers or rights which the Bank may now or hereafter have as a secured party
under the New York Uniform Commercial Code or under any other applicable law
or otherwise.
14. No delay on the part of either party hereto in exercising any of
its options, powers, or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. Neither this Agreement nor any provision hereof
may be modified, changed, waived, discharged or terminated orally, but only by
an instrument in writing, signed by the party against whom enforcement of the
modification, change, waiver, discharge or termination is sought. The Bank
shall have the right, for and in the name, place and stead of the Debtor, to
execute endorsements, assignments or other instruments of conveyance or
transfer with respect to any of the Collateral.
15. Notice of acceptance of this Agreement by the Bank is hereby waived.
This Agreement shall be immediately binding upon the Debtor and its successors
and assigns, whether or not the Bank signs this Agreement.
16. It is the intention of the parties (a) that, this Agreement shall
constitute a continuing agreement applying to any and all future, as well as
existing Obligations of the Debtor to the Bank; and (b) that the security
interest provided for herein shall attach to after-acquired as well as
existing Collateral.
17. Unless the context otherwise requires, all terms used herein which
are defined in the New York Uniform Commercial Code shall have the meanings
therein stated.
18. Mailing Address of Debtor. For the purpose of Section 9.402(1) of
the Uniform Commercial Code, the following address of the Debtor is its "Chief
Executive Office" and shall be the Debtor's mailing address:
General Microwave Corporation
5500 New Horizons Blvd.
Amityville, N.Y. 11701
19. Section 15(a) of the Reimbursement Agreement provides that for so
long as the Letter of Credit remains outstanding, the Bank will not take
additional collateral to secure the obligations of the Debtor arising under
the Reimbursement Agreement without providing at least a co-equal security
interest therein to the Trustee for the benefit of the holders of the Bonds.
Accordingly, the Bank agrees that its security interest in the Collateral
shall be of equal priority with that of the Trustee.
20. This Agreement shall be construed in accordance with and be
governed by the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
20 day of July l995.
GENERAL MICROWAVE CORPORATION
By: s/ ARNOLD H. LEVINE
--------------------------
V. P. Finance Title
NATWEST BANK N.A.
By: s/ PETER G. BRANDEL
--------------------------
V. P.
<PAGE>
Exhibit 10.3
------------
AMENDMENT AND WAIVER OF
REIMBURSEMENT AGREEMENT
THIS AMENDMENT is dated the 17th day of July, 1995 by and between NATWEST
BANK N.A. (formerly known an NATIONAL WESTMINSTER BANK USA), a national
banking association, having an office at 600 Broad Hollow Road, Melville, New
York 11747 (the "Bank") and GENERAL MICROWAVE CORPORATION, a New York
corporation having an office at 550 New Horizons Boulevard, Amityville, New
York 11701 (the "Company").
W I T N E S S E T H :
WHEREAS, the Company and the Bank entered into a reimbursement agreement
dated as of October 1, 1984 (the "Agreement") in connection with a letter of
credit issued by the Bank in support of the Town of Babylon Industrial
Development Agency $6,000,000.00 Variable Rate 7-Day Demand Industrial
Development Revenue Bonds (General Microwave Corporation Facility) Series
1984;
WHEREAS, the Company has requested certain modifications and certain
waivers to the Agreement and the Bank has agreed to such modifications and
waivers provided that the Company enters into this agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Bank hereby
agree as follows:
1. As used in this agreement, capitalized terms not defined herein
shall have the meaning set forth in the Agreement.
2. As an inducement for the Bank to enter into this Agreement, the
Company represents and warrants as follows:
A. That with respect to the Agreement and any other documents
executed in connection therewith:
(i) There are currently no defenses or offsets to the
Company's obligations under the Agreement or any other documents executed in
connection with the Agreement, and if any such defenses or offsets currently
exist without the knowledge of the Company, the same are hereby waived.
(ii) All of the representations and warranties made by the
Company in the Agreement are true and correct in all material respects as if
made on the date hereof.
3. The Bank hereby waives until February 28, 1996 any Default or Event
of Default resulting from the failure by the Company to maintain a minimum
tangible net worth of $14,660,000.00 as at the fiscal quarter end June 3, 1995
provided the tangible net worth is at least $14,200,000.00 until February 28,
1996 and provided further, as at February 29, 1996, the Company shall be
required to maintain a minimum tangible net worth in an amount not less than
$14,660,000.00 which shall be increased by an amount equal to 50% of the net
income earned by the Company during the immediately preceding fiscal year end.
4. The following subsection (d) is hereby added to Section 9 of the
Agreement:
"(d) the Company will not have a fiscal loss at fiscal year end
February 29, 1996."
5. The Company shall pay to the Bank and shall be otherwise
responsible for all fees, costs, expenses and disbursements incurred by the
Bank of any kind and description relating to the negotiation, preparation,
enforcement or interpretation of this amendment and any other documents
contemplated hereby, including without limitation, the reasonable fees and
expenses of the Bank and the Bank's legal counsel.
6. Except as hereby amended, the Agreement and any other document
executed in connection therewith are in all respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
as of the year and date first above written.
GENERAL MICROWAVE CORPORATION
By:s/ ARNOLD H. LEVINE
--------------------------
Name: Arnold H. Levine
Title: V.P. Finance
NATWEST BANK N.A.
By:s/ PETER G. BRANDEL
-------------------------
Peter G. Brandel
Vice President
<PAGE>
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