<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997 Commission File No. 0-147
HICKOK INCORPORATED
Incorporated in the State of Ohio I.R.S. No. 34-0288470
10514 Dupont Avenue Cleveland, Ohio 44108
Telephone Number (216) 541-8060
Indicated below are the number of shares outstanding of each of the issuer's
classes of Common Stock as of the close of the period covered by this report.
Class A Common 738,984
Class B Common 454,866
Company or Group of Companies for which report is filed:
HICKOK INCORPORATED
SUPREME ELECTRONICS CORP.
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.
Yes X No
---- ----
<PAGE> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS:
HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
------------------------------------- -------------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales
Product Sales $ 3,812,530 $ 5,245,788 $ 7,393,003 $11,046,512
Service Sales 1,031,101 1,349,368 2,101,637 2,767,265
----------- ----------- ----------- -----------
Total Net Sales 4,843,631 6,595,156 9,494,640 13,813,777
Costs and Expenses:
Cost of Product Sold 2,320,680 2,815,401 4,656,869 6,504,046
Cost of Service Sold 891,121 1,253,852 1,862,158 2,482,808
Product Development 875,051 974,189 1,675,770 1,900,797
Operating Expenses 896,436 952,246 1,762,318 1,842,050
Interest Charges 2,047 49,775 4,375 100,470
Other Income (27,035) (38,729) (43,540) (84,580)
----------- ----------- ----------- -----------
4,958,300 6,006,734 9,917,950 12,745,591
----------- ----------- ----------- -----------
Income (Loss) before
Income Taxes (114,669) 588,422 (423,310) 1,068,186
Income (Recovery of)
Income Taxes (42,400) 217,000 (156,600) 395,000
----------- ----------- ----------- -----------
Net Income (Loss) $ (72,269) $ 371,422 $ (266,710) $ 673,186
=========== =========== =========== ===========
Earnings per Common Share:
- --------------------------
Net Income (Loss) $ (.06) $ .31 $ (.22) $ .56
=========== =========== =========== ===========
Weighted Average Shares
of Common Stock Out-
standing 1,193,017 1,192,850 1,192,932 1,192,850
=========== =========== =========== ===========
Dividends per Share $ .20 $ .10 $ .20 $ .10
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
(2)
<PAGE> 3
HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1997 1996 1996
----------- ------------ -----------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 827,600 $ 486,812 $ 459,566
Trade Accounts Receivable - Net 3,400,372 5,357,634 3,912,773
Inventories 4,480,742 4,912,858 6,016,013
Prepaid and Deferred Expenses 174,598 169,625 399,654
Refundable Income Taxes 436,199 267,599 --
----------- ----------- -----------
Total Current Assets 9,319,511 11,194,528 10,788,006
-------------------- ----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 215,495 215,495 139,192
Buildings 1,472,050 1,472,050 1,456,390
Machinery and Equipment 3,666,176 3,404,827 3,605,242
----------- ----------- -----------
5,353,721 5,092,372 5,200,824
Less: Allowance for Depreciation 3,002,619 2,670,111 2,779,320
----------- ----------- -----------
Total Property - Net 2,351,102 2,422,261 2,421,504
-------------------- ----------- ----------- -----------
OTHER ASSETS
Goodwill - Net of Amortization 234,196 243,556 154,000
Deferred Charges - Net of Amortization 151,244 106,712 --
Deposits 13,344 13,744 13,744
----------- ----------- -----------
Total Other Assets 398,784 364,012 167,744
------------------ ----------- ----------- -----------
Total Assets $12,069,397 $13,980,801 $13,377,254
============ =========== =========== ===========
</TABLE>
NOTE: Amounts derived from audited financial statements previously filed with
the Securities and Exchange Commission.
See Notes to Consolidated Financial Statements.
(3)
<PAGE> 4
FORM 10-Q
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1997 1996 1996
----------- ------------- -----------
(Unaudited) (Note) (Unaudited)
<S> <C> <C> <C>
Liabilities
- -----------
Current Liabilities
- -------------------
Notes Payable $ -- $ 1,375,000 $ 1,000,000
Trade Accounts Payable 213,474 360,143 398,578
Accrued Payroll & Related Expenses 685,181 769,600 627,710
Accrued Expenses 256,996 65,032 243,629
Accrued Income Taxes -- -- --
----------- ----------- -----------
Total Current Liabilities 1,155,651 2,569,775 2,269,917
------------------------- ----------- ----------- -----------
Deferred Income Taxes 176,000 176,000 159,000
- --------------------- ----------- ----------- -----------
Stockholders' Equity
- --------------------
Class A, $1.00 par value;
authorized 3,750,000 shares;
738,984 shares outstanding (737,984
shares at September 30, 1996 and
March 31, 1996) excluding 9,586
shares in treasury 738,984 737,984 737,984
Class B, $1.00 par value;
authorized 1,000,000 shares;
454,866 shares outstanding
excluding 20,667 shares
in treasury 454,866 454,866 454,866
Contributed Capital 921,316 914,316 914,316
Retained Earnings 8,622,580 9,127,860 8,841,171
----------- ----------- -----------
Total Stockholders' Equity 10,737,746 11,235,026 10,948,337
-------------------------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $12,069,397 $13,980,801 $13,377,254
==================== =========== =========== ===========
</TABLE>
(4)
<PAGE> 5
HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 11,451,902 $ 16,172,199
Cash paid to suppliers and employees (9,164,725) (12,318,794)
Interest paid (12,785) (113,437)
Interest received 26,245 1,070
Income taxes paid (12,000) (494,344)
------------ ------------
Net Cash Provided by
Operating Activities 2,288,637 3,246,694
Cash Flows from Investing Activities:
Capital expenditures (261,349) (207,165)
Deferred charges (80,250) --
Decrease in deposits 400 --
Purchase of Beacon Gage assets -- (647,103)
------------ ------------
Net Cash Used in Investing
Activities (341,199) (854,268)
Cash Flows from Financing Activities:
Change in short-term borrowing (1,375,000) (2,510,000)
Sale of Class A shares under option 6,920 --
Dividends paid (238,570) (119,285)
------------ ------------
Net Cash Used in
Financing Activities (1,606,650) (2,629,285)
------------ ------------
Net increase (decrease) in cash and
cash equivalents 340,788 (236,859)
Cash and cash equivalents at beginning
of year 486,812 696,425
------------ ------------
Cash and cash equivalents at end
of second quarter $ 827,600 $ 459,566
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE> 6
FORM 10-Q
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net Income (Loss) $ (266,710) $ 673,186
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 377,586 311,764
Non-cash compensation charge
related to stock options 1,080 --
Changes in assets and liabilities:
Decrease (Increase) in accounts
receivable 1,957,262 2,358,422
Decrease (Increase) in inventories 432,116 1,292,282
Decrease (Increase) in prepaid
expenses (4,973) (93,541)
Increase in refundable income
taxes (168,600) --
Increase (Decrease) in trade
accounts payable (146,669) (456,640)
Increase (Decrease) in accrued
payroll and related expenses (84,419) (692,901)
Increase (Decrease) in accrued
expenses 191,964 (110,134)
Increase (Decrease) in accrued
income taxes -- (35,744)
----------- -----------
Total Adjustments 2,555,347 2,573,508
----------- -----------
Net Cash Provided by
Operating Activities $ 2,288,637 $ 3,246,694
=========== ===========
</TABLE>
(6)
See Notes to Consolidated Financial Statements.
<PAGE> 7
FORM 10-Q
HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1997
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30,
1996.
2. Inventories
-----------
Inventories are valued at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
March 31, Sept. 30, March 31,
1997 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Components $ 2,283,980 $ 2,182,723 $ 2,161,908
Work-in-Process 848,043 1,316,622 1,934,601
Finished Product 1,348,719 1,413,513 1,919,504
----------- ----------- -----------
$ 4,480,742 $ 4,912,858 $ 6,016,013
=========== =========== ===========
</TABLE>
3. Capital Stock, Treasury Stock, Contributed Capital and Stock Options
--------------------------------------------------------------------
On February 23, 1995, the number of authorized shares of Class A common
stock and Class B common stock was increased to 3,750,000 from 1,000,000
and 1,000,000 from 295,980, respectively. On April 10, 1995, the Company
distributed to stockholders of record on March 10, 1995, a 2 for 1 stock
split in the form of a 100% share dividend of Class A and Class B common
stock. One share of Class A common stock was issued for each share of
Class A outstanding and one share of Class B common stock was issued for
each share of Class B outstanding.
Under the Company's Key Employees Stock Option Plan and the 1995 Key
Employees Stock Option Plan (collectively the "Employee Plans"), incentive
stock options, in general, are exercisable for up to ten years, at an
exercise price of not less than the market price on the date the option is
granted.
(7)
<PAGE> 8
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
Non-qualified stock options may be granted at such exercise price and such
other terms and conditions as the Compensation Committee of the Board of
Directors may determine. No options may be granted at a price less than
$2.925. Options for 80,400 Class A shares were outstanding at March 31,
1997 (53,850 shares at September 30, 1996 and 53,850 shares at March 31,
1996) at prices ranging from $2.925 to $17.25 per share. Options for
27,550 shares and 14,050 shares were granted during the three month period
ended December 31, 1996 and December 31, 1995 respectively, at a price of
$17.25 and $6.92 per share respectively, all options are exercisable.
During the second quarter period ended March 31, 1997, options for 1,000
Class A shares were exercised at a price of $6.92 per share resulting in
non-cash compensation to the optionee of $1,080. No other options were
granted or exercised during the three or six month periods presented under
the Employee Plans.
On February 23, 1995 the Board of Directors adopted, and shareholders
subsequently approved at the Company's Annual Meeting held on February 21,
1996, the 1995 Outside Directors Stock Option Plan (the "Directors Plan").
The Director's Plan provides for the automatic grant of options to
purchase up to 30,000 shares of Class A Common Stock to members of the
Board of Directors who are not employees of the Company, at the fair
market value on the date of grant. Options for 24,000 Class A shares were
outstanding at March 31, 1997 (18,000 shares at September 30, 1996 and
March 31, 1996) at prices ranging from $16.125 to $18.00 per share.
Options for 6,000 shares were granted under the Director's Plan during
each of the three month periods ended March 31, 1997 and March 31, 1996,
at a price of $18.00 and $8.50 per share respectively. All options under
the Directors Plan become fully exercisable on February 23, 2000.
Unissued shares of Class A common stock (559,266 shares) are reserved for
the share-for-share conversion rights of the Class B common stock and
stock options under the Employee Plans and the Directors Plan.
The Company declared a $.20 per share special dividend on its Class A and
Class B common shares on December 13, 1996 payable January 24, 1997 to
shareholders of record January 3, 1997. A special dividend of $.10 per
share on Class A and Class B common shares, payable January 25, 1996 to
shareholders of record January 3, 1996, was declared on December 6, 1995.
4. Earnings per Common Share
-------------------------
Earnings per common share are based on the weighted average number of
shares outstanding during each period.
(8)
<PAGE> 9
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations, Second Quarter (January 1, 1997 through March 31, 1997)
Fiscal 1997 Compared to Second Quarter Fiscal 1996
- --------------------------------------------------------------------------------
Product sales for the quarter ended March 31, 1997 were $3,812,530 versus
$5,245,788 for the quarter ended March 31, 1996. The 27.3% decrease in product
sales in the current quarter is volume related and due primarily to a $668,000
or 22% drop in automotive diagnostic sales and a $540,000 or 38% drop in
fastening system sales. The Company anticipates that the current level of
product sales experienced in the second quarter will remain at that level in the
third quarter and increase approximately 25% in the fourth quarter.
Service sales for the quarter ended March 31, 1997 were $1,031,101 versus
$1,349,368 for the quarter ended March 31, 1996. The 23.6% decrease during the
current quarter was volume related. Approximately half of the reduction was due
to the expiration of a contract in the second quarter of fiscal 1996 to provide
technical training to Ford Motor Company dealer technicians. The balance of the
reduction was due to a reduction in diagnostic service revenue. The technical
training contract was not renewed because Ford reduced the number of suppliers
of these types of training services. Diagnostic service revenue was lower since
the project on which the service is provided is winding down and requires less
manpower. The current level of service sales is anticipated to continue for the
remainder of the fiscal year.
Cost of product sold in the second quarter of fiscal 1997 was $2,320,680 or
60.9% of product sales as compared to $2,815,401 or 53.7% of product sales in
the second quarter of 1996. This increase in the cost of product sold percentage
was due primarily to a change in product mix and to under-absorbed overhead due
to lower plant activity.
Cost of service sold for the quarter ended March 31, 1997 was $891,121 or 86.4%
of service sales as compared to $1,253,852 or 92.9% of service sales in the
quarter ended March 31, 1996. The change in the cost of services sold percentage
was due to a decrease in labor costs relative to a technical training contract
which was not renewed.
Product development expenses were $875,061 in the second quarter of fiscal 1997
or 23.0% of product sales as compared to $974,189 or 18.6% of product sales in
the second quarter of fiscal 1996. The percentage increase is due to lower sales
in the current quarter. The level of expenditures incurred during the second
quarter of fiscal 1997 is expected to drop slightly in the last two quarters of
fiscal 1997 as the Company completes development expenditures on several new
products scheduled for introduction in late fiscal 1997 and early fiscal 1998.
Operating expenses in the most recent quarter were $896,436 or 18.5% of total
sales versus $952,246 or 14.4% of total sales for the same period a year ago.
The percentage change is the result of lower shipments in the current quarter
which covered less of the Company's fixed expenses. The current level of
operating expenses is anticipated to continue for the remainder of the fiscal
year.
(9)
<PAGE> 10
FORM 10-Q
Interest expense was $2,047 in the second quarter of fiscal 1997, which compares
with $49,775 in the second quarter of fiscal 1996. This was due to decreased
borrowing in the second quarter versus the same period a year ago. The current
level of interest expense is expected to continue for the remainder of fiscal
1997.
Other income of $27,035 decreased $11,694 compared with the same quarter last
year due to the absence of rental income from a sublease of excess space. The
excess space was eliminated when a new lease took effect in November, 1996.
A net loss of $72,269 was incurred in the second quarter of fiscal 1997 which
compares with net income of $371,422 in fiscal 1996. This decrease was due
primarily to a decrease in product sales and, to a lesser extent, to a decrease
in gross product margin. The Company anticipates that it will break even in the
third fiscal quarter due to a slight improvement in gross product margin and a
slight reduction in product development expenditures.
Unshipped customer orders as of March 31, 1997 were $5,800,000 versus $7,579,000
at March 31, 1996. Approximately $1 million of the decrease relates to a
reduction in a contract to provide diagnostic services to Ford Motor Company for
the balance of calendar 1997. The project on which the diagnostic services are
provided is winding down and requires less manpower than was required last year.
The balance of the reduction in backlog relates to lower orders for automotive
diagnostic products. Approximately half of the shortfall is expected to be made
up by the end of fiscal 1997.
Results of Operations, Six Months Ended March 31, 1997
Compared to Six Months Ended March 31, 1996
------------------------------------------------------
Product sales for the six months ended March 31, 1997 were $7,393,003 versus
$11,046,512 for the same period in fiscal 1996. The decrease is due primarily to
a $2.5 million reduction in automotive diagnostic product sales, and a $500,000
reduction in fastening systems product sales. The current level of product sales
is expected to increase approximately 10% to 15% in the last six months of
fiscal 1997, primarily due to increased automotive diagnostic sales.
During fiscal 1996 the Company initiated a three-year strategic plan to address
the level of reduced sales and income that first occurred in the middle of
fiscal 1996. The strategic plan focuses on introducing new products and services
to new and existing markets, all within the Company's existing product class
structure. Initial sales of new products were originally expected to occur in
mid-fiscal 1997 but have been pushed back to late fiscal 1997 due to longer than
expected product development lead times. It is anticipated that sales of these
new products will add $2,000,000 to $4,000,000 in revenue beginning in fiscal
1998. Product development expenditures associated with these new products are
expected to be approximately $700,000 in fiscal 1997 versus approximately
$950,000 in fiscal 1996. Since the development of these products is expected to
be near completion by the end of fiscal 1997, product development expenditures
in fiscal 1998 on these new products are anticipated to be approximately
$350,000.
(10)
<PAGE> 11
FORM 10-Q
Service sales for the six months ended March 31, 1997 were $2,101,637 compared
with $2,767,265 for the same period in fiscal 1996. The 24.1% decrease during
the current six-month period was volume related and due primarily to a drop in
both technical training revenue and diagnostic service revenue. The current
level of service revenue is expected to continue in the second half of fiscal
1997.
Cost of product sold was $4,656,869 or 63.0% of product sales as compared to
$6,504,046 or 58.9% of product sales for the six months ended March 31, 1996.
This change in the cost of product sold percentage was due to a change in
product mix and to under-absorbed overhead due to lower plant activity, both of
which occurred during the second quarter of fiscal 1997.
Cost of service sold was $1,862,158 or 88.6% of service sales compared with
$2,482,808 or 89.7% of service sales for the six months ended March 31, 1996.
The dollar change in the cost of services sold was due to a decrease in labor
costs relative to a technical training contract that was not renewed.
Product development expenses were $1,675,780 or 22.7% of product sales as
compared to $1,900,797 or 17.2% of product sales for the six months ended March
31, 1996. The percentage increase is due to lower sales in the current six-month
period. The level of expenditures incurred during the six months ended March 31,
1997 decreased approximately $225,000 or 12% over the same period last year
since the Company is nearing completion on the development of several new
products scheduled for introduction in late fiscal 1997 and early fiscal 1998.
Operating expenses were $1,762,318 for the six months ended March 31, 1997 or
18.6% of total sales versus $1,842,050 or 13.3% of total sales for the six
months ended March 31, 1996. The percentage increase is due to lower sales in
the current six-month period.
Interest expense was $4,375 for the six months ended March 31, 1997, and
$100,470 for the same period in 1996. This was due to decreased borrowing to
support lower working capital levels due to lower sales during the period. The
level of interest expense incurred during the current six-month period is
expected to continue for the remainder of the fiscal year.
Other income of $43,540 decreased $41,040 compared with the same period last
year due to the absence of rental income from a sublease of excess space. The
excess space was eliminated when a new lease took effect in November, 1996.
A net loss of $266,710 or 2.8% of total sales was incurred for the six months
ended March 31, 1997 compared with net income of $673,186 or 4.9% of total sales
for the six months ended March 31, 1996. The decrease was due primarily to a
decrease in product sales and, to a lesser extent, to an increase in the cost of
products sold percentage. The Company anticipates that there will be a modest
net profit in the last six months of fiscal 1997 due to an increase in sales, to
a slight improvement in gross product margin, and to a slight reduction in
product development expenditures.
(11)
<PAGE> 12
FORM 10-Q
Liquidity and Capital Resources
-------------------------------
Total current assets were $9,319,511, $11,194,528 and $10,788,006 at March 31,
1997, September 30, 1996 and March 31, 1996, respectively. The decrease from
March to March was due primarily to a $1.5 million reduction in inventory due in
part to an improvement in inventory control procedures. The primary reason,
however, was inventory liquidation given the lower product sales levels that
have occurred in recent quarters. The decrease in inventory along with earnings
retention was used to reduce notes payable and trade accounts payable by $1.2
million in total with the remaining $300,000 used to increase cash and its
equivalents. Between September 1996 and March 1997 current assets dropped by
$1.9 million due primarily to a decrease in accounts receivable. The decrease in
accounts receivable was due to lower sales in the current quarter versus the
quarter ended September 30, 1996. The decrease in accounts receivable net of
losses was used to reduce current liabilities from $2,569,775 at September 30,
1996 to $1,155,651 at March 31, 1997.
Working capital as of March 31, 1997 amounted to $8,163,860. This compares to
$8,518,089 a year earlier. Current assets were 8.1 times current liabilities and
total cash and receivables were 3.7 times current liabilities. These ratios
compare to 4.8 and 1.9, respectively, at March 31, 1996.
Internally generated funds of $2,288,637 during the six months ended March 31,
1997 were adequate to fund the Company's primary non-operating cash requirement
consisting of capital expenditures which amounted to $261,349. Management of the
Company believes that cash and cash equivalents, together with funds generated
by operations and funds available under the Company's credit agreement, will
provide the liquidity necessary to support its current and anticipated capital
expenditures through the end of fiscal 1997.
Shareholders' equity during the six months ended March 31, 1997 decreased by
$497,280 ($.42 per share) resulting primarily from $266,710 net loss and
$238,570 payment of dividends.
In February 1997, the Company renewed its credit agreement with its financial
lender. The agreement expires in February, 1998 and provides for a revolving
credit facility of $5,000,000 with interest at the bank's prime commercial rate
with a LIBOR option and is unsecured. The Company remains in compliance with its
loan covenants.
(12)
<PAGE> 13
FORM 10-Q
PART II. OTHER INFORMATION
- ---------------------------
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on February 19, 1997, the
following individuals were elected to the Board of Directors:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Thomas H. Barton 1,598,446 6,266
Robert L. Bauman 1,598,486 6,226
Harry J. Fallon 1,598,446 6,266
T. Harold Hudson 1,598,446 6,266
George S. Lockwood, Jr. 1,598,486 6,226
Michael L. Miller 1,598,486 6,226
Janet H. Slade 1,598,486 6,226
</TABLE>
For information on how the votes for the above matter have been tabulated, see
the Company's definitive Proxy Statement used in connection with the Annual
Meeting of Shareholders held on February 19, 1997.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
The following exhibits are included herein: (10) Restated Loan Agreement, dated
as of February 28, 1997 by and between the Company and Huntington National Bank.
(11) Statement re: Computation of earnings per share.
The Company did not file any reports on Form 8-K during the three months ended
March 31, 1997.
(13)
<PAGE> 14
FORM 10-Q
SIGNATURE
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.
Date May 13, 1997 HICKOK INCORPORATED
------------ -------------------
(Registrant)
/s/ E. T. Nowakowski
------------------------------------------
E. T. Nowakowski, Chief Financial Officer
(14)
<PAGE> 1
EXHIBIT 10
RESTATED LOAN AGREEMENT
-----------------------
THIS RESTATED LOAN AGREEMENT (the "Loan Agreement") is made effective as
of the 28th day of February, 1997, at Cleveland, Ohio, by and between THE
HUNTINGTON NATIONAL BANK, a national banking association (the "Bank"), whose
principal office is located at 917 Euclid Avenue, Cleveland, Ohio 44115 and
HICKOK INCORPORATED (fka The Hickok Electrical Instrument Company), an Ohio
corporation, whose address is 10514 Dupont Avenue, Cleveland, Ohio 44108 (the
"Borrower").
RECITALS
--------
In order that the terms, covenants and conditions, purpose and intent
of this Loan Agreement may be better understood, the parties recite and declare
that:
(i) Borrower has heretofore borrowed funds from Bank pursuant to a
Credit Agreement originally dated May 20, 1991 (the "Credit
Agreement"), as subsequently amended as of February 28, 1992,
February 28, 1993, February 28, 1994, February 28, 1995, and
February 28,1996.
(ii) The Borrower and Bank both intend this Loan Agreement to
constitute a complete restatement of the terms and provisions of
the credit relationship between them, and to supersede the prior
Credit Agreement, as amended.
(iii) The Borrower and Bank both intend that the Obligations owing
under the original Credit Agreement as amended be and are the
same Obligations described and set forth herein.
(ii) As a material inducement to Bank to make the loan herein
contemplated, Guarantor for good and valuable consideration, is
willing to deliver to Bank a Guarantee Agreement.
(iii) Bank is willing to make the loan herein described, upon the
terms, covenants and conditions herein set forth, and in reliance
upon the representations and warranties of Borrower herein
contained.
NOW, THEREFORE, in consideration of the foregoing Recitals, the terms,
covenants and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS
-----------
As used in this Loan Agreement and the related Loan Documents, the terms
identified below shall have the meanings indicated unless a different and
common meaning of the term is clearly indicated by the context. My reference
to any provision of law, such as the Code, shall include any successor provision
adopted by any amendments, or any applicable regulations, proposed, temporary
<PAGE> 2
or permanent, or other such law modifying, amending, interpreting or otherwise
affecting the application of such provisions. Any reference to any agreement
(such as Guarantee Agreement, etc.) is intended to include any modification,
extension, amendment, substitution, or restatement of such as permitted by the
terms thereof.
1.1. "AFFILIATE" means any Person (a) which, directly or indirectly,
owns or controls (or has the right to acquire or control), including all
beneficial ownership and ownership or control as a trustee, guardian or other
fiduciary, any more than 5%, in the aggregate, of the outstanding capital Stock
of Borrower, (ii) which is controlled by or is under common control with
Borrower or any stockholders of Borrower, or (iii) which is a Subsidiary of
Borrower. For the purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or to cause the direction of
management and policies, whether through the ownership of voting securities, by
contract or otherwise.
1.2. "CODE" means the Internal Revenue Code of 1986, as amended.
1.3. "CONSOLIDATED" means the resultant consolidation of the financial
statements of Borrower and its Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, including, but not limited
to, principles of consolidation consistent with those applied in preparation of
the Consolidated financial statements referred to in Section 5.10 hereof.
1.4. "CURRENT ASSETS" means, at a particular date, the consolidated
current assets of the Borrower and its Subsidiaries, as determined in accordance
with generally accepted accounting principles, consistently applied provided,
however, the term Current Assets shall exclude (i) any loan or other
Indebtedness of any nature whatsoever owing to Borrower from an Affiliate of
Borrower, and (ii) such items as prepaid expenses and any items not attendant to
the primary business and activities of Borrower.
1.5. "CURRENT LIABILITIES" means, at a particular date, the consolidated
current liabilities of the Borrower and its Subsidiaries, as determined in
accordance with generally accepted accounting principles, consistently applied.
1.6. "DEFAULT RATE" means a rate of interest that is four percent (4%)
in excess of Bank's Prime Commercial Rate, from time to time in effect, with
each change in the Prime Commercial Rate automatically and immediately changing
the Default Rate, when applicable; provided, however, that at no time shall the
rate of interest upon default be less than eight percent (8%) per annum.
1.7. "ERISA" means the Employee Retirement Security Act of 1974, as
amended from time to time, including regulations thereunder and published
interpretations thereof.
1.8. "GUARANTEE AGREEMENT" means the Guarantee Agreement executed by
Guarantor in favor of Bank to more fully secure the full payment of the
Obligations in the form of Exhibit "B" attached hereto.
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<PAGE> 3
1.9. "GUARANTOR" means SUPREME ELECTRONICS CORP.
1.10. "LOAN" and collectively, "LOANS", means the loans to Borrower in
an aggregate principal amount outstanding at any one time up to but not
exceeding the maximum principal amount of the Revolving Credit Note.
1.11. "LOAN DOCUMENTS" means this Loan Agreement together with all
exhibits and schedules attached hereto, and all other papers now or hereafter
executed by or on behalf of Borrower in connection herewith, including, but not
limited to, any promissory note, Guarantee Agreement, and other instruments or
documents.
1.12. "OBLIGATIONS" means, collectively, all liabilities now owing or
hereafter incurred by Borrower to Bank and includes, without limitation, all
indebtedness, debts and liabilities (including principal, interest, late
charges, collection costs, attorneys' fees) of Borrower to Bank, whether created
by Borrower alone or together with others, whether primary or secondary, joint,
or joint and several capacity, whether secured or unsecured, absolute or
contingent, liquidated or unliquidated, direct or indirect, whether evidenced by
note, draft, overdraft, application for letter of credit, agreements of guaranty
or otherwise, and any and all renewals of, extensions of or substitutes
therefore, whether incurred directly to Bank or acquired by Bank by purchase,
pledge or otherwise.
1.13. "PERSON" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (whether, national, federal, state,
local or otherwise, including, without limitation, any instrumentality,
division, agency or department thereof).
1.14. "PRIME COMMERCIAL RATE" means the fluctuating commercial loan
rate established by Bank from time to time, whether or not such rate is publicly
announced, which interest rate shall automatically change with each new rate
established by Bank, but which interest rate may not necessarily be the lowest
interest rate at which Bank is willing to extend its credit facilities, nor is
it necessarily the interest rate used by Bank for its most credit-worthy
customers.
1.15. "REVOLVING CREDIT NOTE" means the Revolving Credit Note executed
in favor of Bank to evidence an obligation to pay Five Million Dollars
($5,000,000.00), together with interest, according to the terms stated therein,
in substantially the form of Exhibit "A" attached hereto.
1.16. "SUBSIDIARY" or "SUBSIDIARIES" means, collectively, Supreme
Electronics Corp., together with any corporation of which Borrower directly or
indirectly owns or controls at the time a majority of the outstanding voting
stock having power to elect a majority of the board of directors (in the case of
a corporation having directors), or a majority of the voting stock of any
corporation not having directors.
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<PAGE> 4
1.17. "TANGIBLE NET WORTH" means, at a particular date, all amounts
which would be included under total consolidated stockholders' equity of the
Borrower and its Subsidiaries on a consolidated reporting basis, less all
amounts included therein on account of loans or other indebtedness owing to
Borrower from any Subsidiary, goodwill, patents, trademarks, and other
intangible assets, plus Subordinated Indebtedness, all as determined on an
accrual basis in accordance with generally accepted accounting principles,
consistently applied.
2. AMOUNT AND TERMS OF LOAN
------------------------
2.1. AMOUNT. Bank shall lend or otherwise make available to Borrower,
upon the satisfaction of the terms and conditions hereinafter set forth, and
Borrower may borrow from Bank, the aggregate principal sum of Five Million
Dollars and no/100 ($5,000,000.00), on a revolving credit basis, in accordance
with the Revolving Credit Note. Within the limits of the foregoing and subject
to the discretion of Bank in determining whether to make any Advance hereunder,
the Borrower may borrow, repay and reborrow at any time or from time to time
from the date hereof. The Loan, as evidenced by the Revolving Credit Note shall
have an initial one (1) year term and be due and payable in full on February 28,
1998. Notwithstanding any other provision of this Loan Agreement or the other
Loan Documents, Bank shall not be required to lend or otherwise make funds
available under this credit arrangement if it determines in its sole discretion
that it is not in the best interests of Bank to do so.
2.2. REVOLVING CREDIT NOTE. Any and all advances of funds hereunder (an
"Advance") shall be evidenced by the Revolving Credit Note.
2.3. REQUESTS FOR ADVANCES; MAKING THE ADVANCES. In order to request
that Bank make any Advance under this Loan Agreement or the Revolving Credit
Note, the Borrower shall make an oral request to Bank (immediately confirmed in
writing) and/or deliver to Bank a written notice specifying (a) the requested
date of such Advance (which shall not be earlier than two (2) Business Days
after the date of such notice), (b) the requested amount of such Advance, and
(c) such other information relating to such Advance or to the Borrower or any
Loan Party as Bank may request. Prior to or concurrently with the execution
hereof, the Secretary of the Borrower shall certify to Bank those persons
authorized to request advances hereunder (whether orally or in writing),
together with true signatures of such officer or officers and Bank may
conclusively rely on such certification until it shall receive notice in writing
from the Borrower's Secretary to the contrary. Notwithstanding any notice by
Bank to the Borrower that it is willing to make any Advance, Bank's obligation
to make such Advance shall in all events be subject to fulfillment of the
conditions precedent thereto set forth in Sections 5 and 6 of this Loan
Agreement and to any other conditions set forth in such notice to the Borrower.
Upon fulfillment of all such conditions, Bank will on the date scheduled for
such Advance credit to the Borrower immediately available finds in the amount of
such Advance which shall be credited to the Borrower's primary deposit account
maintained at Bank.
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<PAGE> 5
2.4. INTEREST. The Borrower shall pay interest on the unpaid principal
amount of each advance on and from the date of such Advance until such principal
amount shall be paid in full, at either of the interest rates set forth below as
elected by Borrower from time to time at Borrower's option in accordance
herewith:
(a) PRIME COMMERCIAL RATE. Borrower agrees to pay Bank monthly
interest on the unpaid balance of the Loans at a variable rate
of interest equal to the Prime Commercial Rate. Subject to any
maximum interest rate limitation specified by applicable law,
the variable rate of interest provided for herein shall change
automatically without notice to Borrower with each change in the
Prime Commercial Rate. The Prime Commercial Rate shall be
applicable at all times prior to termination date of the Loans
to all the unpaid principal balance of the Loans that is not
subject to the alternative interest rate option as may be
elected by Borrower in accordance with Section 2.5.(b) below. A
"Prime Interest Rate Advance" shall mean any amount borrowed as
part of the Loans that bears interest at the Prime Commercial
Rate.
(b) LIBOR RATE. Borrower may from time to time prior to the
termination date of the Loans, elect to have interest accrue on
all or part of the outstanding principal balance of the Loans at
a rate of interest equal to two and one-half percent (2 1/2%)
per annum in excess of the LIBOR Rate. "LIBOR Rate" shall mean,
with respect to any LIBOR Rate Advance and the related Interest
Period (as hereinafter defined), the per annum rate that is
equal to the quotient of:
(i) the actual or estimated arithmetic mean of the per annum
rates of interest at which deposits in U.S. dollars for
the related Interest Period and in an aggregate amount
comparable to the amount of such LIBOR Rate Advance are
being offered to U.S. banks by one or more prime banks in
the London interbank market, as determined by Bank in its
discretion based upon reference to information appearing
on the display designated as page "LIBOR" on the Reuters
Monitor Money Rate Service (or such other page as may
replace the LIBOR page on that service for the purpose of
displaying London interbank offered rates of major banks)
or any comparable index selected by Bank, the obtaining of
rate quotations, or any other reasonable procedure, at
approximately 11:00 a.m. London, England, time, on the
second LIBOR business day prior to the first day of the
related Interest Period, all as determined by Bank, such
sum to be rounded up, if necessary, to the nearest whole
multiple of 1/16 of 1%; divided by
(ii) a percentage equal to 100% minus the rate (expressed as a
percentage), if any, at which reserve requirements are
imposed on Bank, on the second LIBOR business day prior to
the first day of the related Interest Period, with respect
to any "Eurocurrency liabilities" under Regulation D of
the Board of
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<PAGE> 6
Governors of the Federal Reserve System or any other
regulations of any governmental authority having
jurisdiction with respect thereto (including, without
limitation, any marginal, emergency, supplemental, special
or other reserves) for a term comparable to such Interest
Period. This provision is for the benefit of Bank and is
not Intended to increase the expected yield to Bank above
the rates of interest provided for in this Loan Agreement.
"LIBOR Rate Advance" shall mean any amount borrowed as part of the Loans
that bears interest at a rate calculated with reference to the LIBOR
Rate. "LIBOR business day" shall mean, with respect to any LIBOR Rate
Advance, a day which is both a day on which Bank is open for business
and a day on which dealings in U.S. dollar deposits are carried out in
the London interbank market. Any and all LIBOR Rate Advances shall be
requested by Borrower in a minimum amount not less than Five Hundred
Thousand ($500,000.00).
(c) NOTICE OF ELECTION. Borrower may initially elect to request an
Advance of any type, continue an Advance of one type as an
Advance of the then existing type or convert an Advance of one
type to an Advance of another type, by giving notice thereof to
Bank in writing not later than 10:00 a.m. New York time, three
(3) LIBOR business days prior to the date any such continuation
of or conversion to a LIBOR Rate Advance is to be effective,
PROVIDED, that an outstanding Advance may only be converted on
the last day of the then current Interest Period (if applicable)
with respect to such Advance, and PROVIDED, FURTHER, that upon
the continuation or conversion of an Advance such notice shall
also specify the Interest Period (if applicable) to be
applicable thereto upon such continuation or conversion. If
Borrower shall fail to timely deliver such a notice with respect
to any outstanding Advance, Borrower shall be deemed to have
elected to convert such Advance to a Prime Interest Rate Advance
on the last day of the then current Interest Period with respect
to such Advance.
(d) INTEREST CALCULATION AND INTEREST PAYMENT DATE.
"Interest Period" shall mean:
(i) With respect to any LIBOR Rate Advance, an initial period
commencing, as the case may be, on the day such an Advance
shall be made by Bank, or on the day of conversion of any
then outstanding Advance to an Advance of such type, and
ending on the date thirty (30) days, sixty (60) days or
ninety (90) days thereafter, all as Borrower may elect
pursuant to Section 2.5.(b) of this Loan Agreement,
provided, that (a) any Interest Period with respect to a
LIBOR Rate Advance that shall commence on the last LIBOR
business day of the calendar month (or on any day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the
last LIBOR business day of the appropriate subsequent
calendar
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<PAGE> 7
month; and (b) each Interest Period with respect to a
LIBOR Rate Advance that would otherwise end on a day which
is not a LIBOR business day shall end on the next
succeeding LIBOR business day or, if such next succeeding
LIBOR business day falls in the next succeeding calendar
month, on the next preceding LIBOR business day.
(ii) With respect to a Prime Interest Rate Advance, an initial
period commencing, as the case may be, on the day such an
Advance shall be made by Bank, or on the day of conversion
of any then outstanding Advance to an Advance of such
type, and ending on the day of conversion to an Advance of
a different type.
(e) ADDITIONAL COSTS. In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or
hereafter in effect, or any interpretation or administration
thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by Bank
with any request or directive of any such authority (whether or
not having the force of law), shall (a) affect the basis of
taxation of payments to Bank of any amounts payable by Borrower
for LIBOR Rate Advances under this Loan Agreement (other than
taxes imposed on the overall net income of Bank by the
jurisdiction, or by any political subdivision or taxing
authority of any such jurisdiction, in which Bank has its
principal office), or (b) shall impose, modify or deem
applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of' or
credit extended by Bank, or (c) shall impose any other
condition, requirement or charge with respect to this Loan
Agreement or the Loans (including, without limitation, any
capital adequacy requirement, any requirement which affects the
manner in which Bank allocates capital resources to its
commitments or any similar requirement), and the result of any
of the foregoing is to increase the cost to Bank of making or
maintaining the Loans or any Advance thereunder, to reduce the
amount of any sum receivable by Bank thereon, or to reduce the
rate of return on Bank's capital, then Borrower shall pay to
Bank, from time to time, upon request of Bank, additional
amounts sufficient to compensate Bank for such increased cost,
reduced sum receivable or reduced rate of return to the extent
Bank is not compensated therefor in the computation of the
interest rates applicable to the Loans. A detailed statement as
to the amount of such increased cost, reduced sum receivable or
reduced rate of return, prepared in good faith and submitted by
Bank to Borrower, shall be conclusive and binding for all
purposes relative to Bank, absent manifest error in computation.
Bank shall promptly notify Borrower of any event occurring after
the date of this Loan Agreement that entitles Bank to additional
compensation pursuant to this Section 2.5.(e).
(f) LIMITATIONS ON REQUESTS AND ELECTIONS. Notwithstanding any other
provision of this Loan Agreement to the contrary, if, upon
receiving a request for an Advance or a
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<PAGE> 8
request for a contribution of an Advance as an Advance of the
then existing type or conversion of an Advance to an Advance of
another type (a) in the case of any LIBOR Rate Advance, deposits
in dollars for periods comparable to the Interest Period elected
by Borrower are not available to Bank in the London interbank or
secondary market, or (b) the LIBOR Rate will not accurately
cover the cost to Bank of making or maintaining the LIBOR Rate
Advance, or (c) by reason of national or international
financial, political or economic conditions or by reason of any
applicable law, treaty, rule or regulation (whether domestic or
foreign) now or hereafter in effect, or the interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance
by Bank with any request or directive of such authority (whether
or not having the force of law), including without limitation
exchange controls, it is impracticable, unlawful or impossible
for Bank (i) to make the LIBOR Rate Advance or (ii) to continue
such Advance as a LIBOR Rate Advance or (iii) to convert an
Advance to a LIBOR Rate Advance, then Borrower shall not be
entitled, so long as such circumstances continue, to request a
LIBOR Rate Advance or a continuation of or conversion to such
Advances from Bank. In the event that such circumstances no
longer exist, Bank shall again consider requests for LIBOR Rate
Advances of the affected type and requests for contributions of
and conversions to such Advances of the affected type.
(g) ILLEGALITY AND IMPOSSIBILITY. In the event that any applicable
law, treaty, rule or regulation (whether domestic or foreign)
now or hereafter in effect, or any interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance
by Bank with any request or directive of such authority (whether
or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for Bank
to maintain any Advance under this Loan Agreement, Borrower
shall upon receipt of notice thereof from Bank, repay in full
the then outstanding principal amount of all Advances made by
Bank together with all accrued interest thereon to the date of
payment and all amounts due to Bank under Section 2.3.(b), (a)
on the last day of the then current Interest Period, if any,
applicable to such Advance, if Bank may lawfully continue to
maintain such Advances to such day, or (b) immediately if Bank
may not continue to maintain such Advance to such day. This
provision is for the benefit of Bank and is not intended to
increase the yield to Bank above the rates of interest provided
for in this Loan Agreement. This Section 2.3.(g) shall apply
only as long as such illegality exists. Bank shall use
reasonable, lawful efforts to avoid the impact of such law,
treaty, rule or regulation. As an alternative to the repayment
obligation provided in this Section 2.3.(g), Borrower may, at
its option, and at the time provided in this Section 2.3.(g),
convert any affected Advance to a Prime Interest Rate Advance.
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<PAGE> 9
(h) INDEMNIFICATION. If Borrower makes any payment of principal with
respect to any Advance on any other date than the last day of an
Interest Period Applicable thereto or if Borrower fails to
borrow any Advance after notice has been given to Bank in
accordance with Section 2.3.(c), or fails to make any payment of
principal or interest in respect of an Advance when due or at
the termination date of the Loans, Borrower shall reimburse Bank
on demand for any resulting loss or expense incurred by Bank,
determined in Bank's reasonable opinion, including without
limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties. A detailed statement as
to the amount of such loss or expense, prepared in good faith
and submitted by Bank to Borrower shall be conclusive and
binding for all purposes absent manifest error in computation.
Bank shall promptly notify Borrower of any event occurring after
the date of this Loan Agreement that entitles Bank to
reimbursement pursuant to this Section 2.3.(h).
(i) SURVIVAL OF OBLIGATIONS. The provisions of Section 2.3.(e) and
2.3.(h) shall survive the termination of this Loan Agreement and
the payment in full of all promissory notes outstanding pursuant
thereto.
(j) PREPAYMENT PREMIUM. Borrower further agrees that if Borrower
shall elect to prepay, upon at least five (5) business days
prior written notice to Bank, all or part of the unpaid balance
of a LIBOR Rate Advance, Borrower shall pay a Prepayment Premium
(as herein defined) in accordance with the following: If (i)
said prepayment shall be made on or before the date that is the
last day of the applicable Interest Period, and (ii) the Rate of
Differential (as defined below) is greater than zero, then the
undersigned shall pay to Bank on the date of prepayment a
Prepayment Premium calculated using the following formula:
Prepayment Premium = RD x Y (AP - AD) x PVF
where:
(i) RD is the Rate Differential and means (a) Bank's cost of
funding for the original term of the obligation evidenced
by the Revolving Credit Note to the last scheduled payment
of principal expressed as a per annum rate of interest, as
determined by Bank, minus (b) the rate at which Bank
re-employs or could re-employ the funds prepaid for the
remaining term of the obligation evidenced by the Note
through the last scheduled payment of principal, expressed
as a per annum rate of interest, as determined by Bank;
(ii) Y is the Years and means the number of years in fractions
of years beginning on the date of the prepayment and
ending on the last day prior to the end of the applicable
Interest Period for a LIBOR Rate Advance;
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(iii) AP is the Amount Paid and means the actual amount of
principal paid on the date of prepayment;
(iv) AD is the Amount Due and means the principal portion of
the Loans paid on the date of the prepayment; and
(v) PVF is the Present Value Factor and means the value of
$1.00 for Y number of years discounted at the per annum
rate of interest at which Bank re-employs or could
re-employ the funds prepaid for the remaining term of the
obligation evidenced by the Revolving Note or the
Supplemental Revolving Note through the last scheduled
payment of principal, expressed as a per annum rate of
interest, as determined by Bank.
Any prepayment of the LIBOR Rate Advance made hereunder shall be
in an amount equal to the sum of (a) the amount of the
prepayment as calculated above; (b) all interest accrued to date
of such prepayment; (c) any late charge or charges then due and
owing; and (d) an amount sufficient to compensate Bank for any
loss, charges, penalties or other sums incurred or suffered by
Bank because of any match funding of all or any part of the
principal amount of the Loans.
Accrued interest on the average daily balance of the aggregate amount of
the Advances shall be payable in arrears on the first day of each month and upon
payment in full of the Advances. Notwithstanding anything contained in this
Agreement to the contrary, the Borrower shall pay interest at the Default Rate
on the unpaid principal amount of the Advances on and from the date any
principal amount is not paid when due, whether at maturity, by acceleration or
otherwise, payable on demand, until payment in full.
2.5. PAYMENTS AND COMPUTATIONS. The Borrower will make each payment
under each Loan Document to which it is a party not later than 4:00 p.m.
(Eastern time) on the day when due, in lawful money of the United States of
America and in immediately available federal funds to Bank at Bank's office
address. The Borrower hereby authorizes Bank to, and Bank may, charge from time
to time against any and all accounts maintained by the Borrower with Bank any
amount due under any Loan Document to which the Borrower is a party. Whenever
any payment to be made under any such Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of interest. All computations of interest under the
Note and of facility fees hereunder shall be made by Bank on the basis of a year
of 360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or fees are
payable.
2.6. SECURITY. The repayment of the Obligations shall be unsecured,
except for the execution and delivery of the Guarantee Agreement (Exhibit "B").
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3. BORROWER'S WARRANTIES AND REPRESENTATIONS
-----------------------------------------
To induce Bank to enter into this Loan Agreement and make the Loan,
Borrower hereby warrants and represents to Bank, upon which Bank materially
relies in making the Loan, that:
3.1. CORPORATE EXISTENCE. Borrower is a corporation duly organized and
validly existing under the laws of the State of Ohio, in good standing, and duly
licensed or qualified as a foreign corporation in all states wherein the nature
of its property owned or business transacted by it makes such licensing or
qualification necessary. Any other corporate signatory to the Loan Documents is
a corporation duly incorporated and validly existing under the laws of the state
of incorporation, and in good standing, with the State of Ohio, and qualified as
a foreign corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification necessary.
3.2. SUBSIDIARIES; NO OTHER BUSINESS RELATIONS. Each of the Borrower's
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite power and authority to own its property and to carry on its business
as now conducted and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions in which its business is conducted or its
ownership or property is such as to require such qualifications. Borrower is not
a partner in any general or limited partnership, nor is Borrower engaged in any
joint venture nor does Borrower own any legal or equitable interest in any other
business enterprise.
3.3. CORPORATE PROCEEDINGS AND AUTHORITY. All necessary corporate
proceedings of the Borrower (and any other corporate signatory to the Loan
Documents) have been duly taken to authorize the execution, delivery and
performance of the Loan Documents by Borrower (and any other corporate signatory
to the Loan Documents) and the consummation of the loan transaction.
3.4. DUE EXECUTION AND ENFORCEABILITY; OBLIGATIONS ABSOLUTE. The
execution and delivery of the Loan Documents to which Borrower is a party are
within the power and authority of Borrower. The Loan Agreement, and the other
Loan Documents to which Borrower is a party will be a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with their
respective terms. The Loan Documents signed by any other third party signatory
and any other agreement or instrument will be a legal, valid and binding
obligation of such third party signatory, enforceable against it in accordance
with the terms of such documents or instruments. The obligation of Borrower to
pay the Obligations, together with all interest accrued thereon and other
charges, is absolute and unconditional, and there exists no right of setoff or
recoupment, counterclaim, cross-claim or defense of any nature whatsoever to
payment of the Obligations.
3.5. NO DEFAULTS. VIOLATIONS OR RESTRICTIONS. Neither the execution nor
delivery of the Loan Agreement, the other Loan Documents, or the consummation of
the loan transaction contemplated hereby, will conflict with or result in a
breach of, or constitute a default under, any of the terms, obligations,
covenants, conditions or provisions of: (i) the governing documents (the
Articles of
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Incorporation, Code of Regulations) of Borrower, or any other corporate
restriction, or (ii) any contract, indenture, mortgage, deed of trust, pledge,
bank loan or credit agreement or instrument to which Borrower is now a party, or
by which its properties may be bound or affected, or (iii) any judgment, order,
writ, injunction, decree or demand of any court, arbitrator, grand jury, or any
governmental agency, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any property or asset of Borrower
under the terms or provisions of any of the foregoing. Borrower is not in
default of the performance, observance or fulfillment of any of the terms,
obligations, covenants, conditions or provisions contained in any indenture or
other agreement creating, evidencing or securing any liability or pursuant to
which any liability is issued, or other agreement or instrument to which
Borrower is a party or by which it or its properties may be bound or affected.
3.6. TRUTHFUL INFORMATION. The information set forth on Borrower's loan
application, if any, and all other information or documents provided to Bank, in
connection with this Loan Agreement, is true and complete in all material
respects.
3.7. FINANCIAL CONDITIONS; NO ADVERSE CHANGE. The balance sheets and
statements of income and retained earnings and statement of cash flows of
Borrower, previously furnished to Bank, are complete and correct and fairly
represent the financial condition of Borrower as at the dates of said financial
statements and the results of their operations for the periods ending on said
dates. Borrower does not have any material contingent obligations, liabilities
for taxes, long-term leases, or unusual forward or long-term commitments not
disclosed by, or reserved against in, said balance sheets or the notes thereto;
and at the present time there are no material unrealized or anticipated losses
from any unfavorable commitments of Borrower. Said financial statements were
prepared in accordance with generally accepted accounting procedures
consistently applied. Since the date of the latest of such statements there has
been no material adverse change in the financial condition of Borrower from that
set forth in said balance sheets as at that date.
3.8. BORROWER'S STOCK. All outstanding share of capital stock or other
equities of Borrower and each Subsidiary have been duly authorized and are
validly issued, fully paid for and non-assessable and have been issued in
compliance with all applicable federal and state laws rules and regulations,
including, without limitation, all so-called "Blue-Sky" laws.
3.9. GOOD TITLE TO ASSETS. Excepting those assets and properties of
Borrower sold in the ordinary course of business subsequent to the date hereof'
Borrower has good and marketable title to all of its properties and assets, and,
except as set forth in Schedule 3.9, Borrower has free and clear of any liens,
charges, encumbrances or other adverse claims, whether legal or equitable.
3.10. NO INTELLECTUAL PROPERTY CONFLICTS. Borrower owns or possesses all
of the patents, trademarks, service marks, tradenames, copyrights, and licenses
and rights with respect to the foregoing necessary for the conduct of its
business, without any known conflict with the valid rights of others which could
be inconsistent with the conduct of its business substantially as now conducted
or as proposed to be conducted.
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3.11. NO LITIGATION PROCEEDINGS, OR ADVERSE EVENTS. There is no pending
or threatened action, suit, proceeding or governmental investigation or audit
affecting the Borrower, at law or in equity, which involves the possibility of
any judgment of liability not fully covered by insurance (subject to the
deductible of such insurance) or which might, if determined adversely to
Borrower, have a material adverse effect upon Borrower's business, or otherwise
impair the value of the Borrower's assets. There are no outstanding or unpaid
judgments, arbitration awards or mediation awards against Borrower, nor is
Borrower in default of any order, writ, judgment or decree of any court or other
governmental authority. Excluding matters of general application to all
comparable or similarly situated businesses, Borrower has not experienced any
material loss, material interruption or any indication of any interruption in
the operation of the business of Borrower, that has had, or might be expected to
have, a material adverse affect upon such business, or Borrower's properties,
and to the best of Borrower's knowledge and belief' no such adverse event will
occur subsequent to the closing of the loan transaction contemplated herein.
3.12. ERISA COMPLIANCE. Borrower and its Subsidiaries are in compliance
in all material respects with ERISA. No Reportable Event or Prohibited
Transaction has occurred or is continuing with respect to any Plan; no
circumstances exist which would entitle the PBGC to institute proceedings to
terminate or appoint a trustee to administer a Plan; the PBGC has instituted no
such proceedings; neither Borrower nor any Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; Borrower and each
Commonly Controlled Entity have met their respective minimum funding
requirements under ERISA with respect to all of their Plans, and the present
value of all vested benefits under each Plan does not exceed the fair market
value of all Plan assets allocable to such benefits, as determined on the most
recent valuation date of the Plan in accordance with ERISA; and neither Borrower
nor any Commonly Controlled Entity has incurred any liability to the PBGC.
3.13. INSURANCE. Borrower is not in default under any policies of
insurance in force and effect with respect to Borrower's business, properties
and assets, and such policies will be continued in full force and effect up to
and including the loan closing. Such insurance policies are sufficient in
nature, scope and amounts to insure adequately (and, in any event, amounts
sufficient to prevent Borrower from becoming a co-insurer within the terms of
such policies) Borrower's business, properties and assets. To the best of its
knowledge, Borrower has never been refused insurance by any insurance carrier to
which it has applied for insurance. With respect to any pending claims for which
Borrower has notified its insurance carrier, Borrower has not received any
reservation of rights letter.
3.14. COMPLIANCE WITH LAW. Borrower is in compliance and conformity, in
all material respects, with all laws (including without limitation all
applicable foreign, federal, state and local laws, including environmental laws,
safety laws, pension laws and employment or labor laws), ordinances, rules,
regulations and all other legal requirements, the violation of which would have
a material adverse effect on Borrower's business, operations, properties, assets
or financial condition. Borrower has not received any notice or order of any
violation or claim of violation of any such law, ordinance, rule, regulation, or
requirement from any governmental authority wherein the effect of
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any such violation or violations in the aggregate may have a material adverse
effect on the business, properties, operations, or financial condition of
Borrower.
3.15. COMPLIANCE WITH AGREEMENTS. Borrower is not in default under, and
has not breached in any material respect any agreement or instrument to which
Borrower is a party or by which Borrower may be bound.
3.16. COMPLETENESS AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in the Loan Agreement shall be of a
continuing nature and survive the termination of this Loan Agreement and full
payment and performance of the Obligations, it being intended by the parties
that the so-called "Doctrine of Merger" shall not be applicable to this Loan
Agreement. The representations and warranties shall be deemed to be repeated
whenever Borrower makes a request for a Loan or an advance hereunder. No
warranty or representation made herein, and no statement contained in any
document, instrument, schedule or exhibit otherwise delivered to Bank in
connection with the loan transaction contains, or will contain, any untrue
statement of any material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein, in the light of
the circumstances in which they are made, not misleading.
3.17. NO REPRESENTATIONS OR WARRANTIES OF BANK. Borrower acknowledges
and agrees that no loan officer, employee or agent for or on behalf of Bank has
made any representation, warranty or commitment, either oral or in writing, to
Borrower or any of its shareholders, officers, directors, employees or agents
with respect to the loan transaction herein contemplated, including without
limitation, any statement regarding the willingness or unwillingness of Bank to
exercise any of the rights set forth in these Loan Documents for the benefit of
Bank. Borrower warrants that it relies solely upon the terms, covenants and
conditions set forth in the Loan Documents, and Borrower has no expectation or
anticipation that Bank will act (or refrain from action) in any manner other
than as may be permitted or required by the Loan Documents or by law.
4. CONDITIONS PRECEDENT TO CLOSING
-------------------------------
The obligation of Bank to loan the funds herein contemplated in Section
2 above or otherwise perform any covenants imposed upon Bank by the Loan
Agreement, shall be subject to the satisfaction, at the option of Bank, of each
of the following conditions precedent prior to the loan closing;
4.1. EXECUTION AND DELIVERY OF LOAN DOCUMENTS. Borrower shall duly
execute and/or deliver to Bank each and every one of the Loan Documents,
including without limitation, Revolving Credit Note, Guarantee Agreement.
4.2. CERTIFICATE OF INCUMBENCY. Bank shall have received a Certificate
of Incumbency in accordance with Exhibit" C " attached hereto.
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4.3. CERTIFICATE OF BOARD OF DIRECTORS BORROWING RESOLUTIONS. Bank shall
have received a Certificate of Board of Directors Borrowing Resolutions in
accordance with Exhibit "D" attached hereto.
4.4. NO LITIGATION OR GOVERNMENT PROCEEDING. No litigation or government
proceeding of any kind shall have been instituted and, at what would otherwise
have been the closing date, remain pending before any court or government agency
to restrain, prohibit or otherwise challenge the transaction contemplated by the
Loan Agreement or related transaction. No government agency shall have notified
Borrower or Bank, in writing, that the consummation of the transaction
contemplated by the Loan Agreement or related transaction would violate any law,
and accordingly said government agency intends to commence a proceeding to
restrain the consummation of said transaction, to force divestiture if the same
is consummated or to modify the terms or results of such transaction unless such
government agency shall have withdrawn such notice prior to what otherwise would
have been the date of closing.
4.5. PERFORMANCE OF COVENANTS. Borrower shall have performed each and
every covenant on its part to be performed prior to Bank advancing the funds
contemplated hereunder, including without limitation, the payment of the
Facility Fee hereinafter specified.
4.6. FEES; COST AND EXPENSES. Borrower shall have paid to Bank all loan
or other facility fees, together with all of Bank's costs and expenses
(including, but not limited to, Bank's appraisal and attorney fees) incurred in
connection with the negotiation, preparation and execution of the Loan Documents
and the satisfaction of the conditions precedent.
4.7. EXCLUSIVE BENEFIT. These conditions precedent exist solely for the
Bank's benefit, and Bank, in its sole discretion, shall determine whether they
have been satisfied.
4.8. OTHER DOCUMENTS. Bank shall received such other documents or
instruments, duly executed and delivered by Borrower, as Bank may reasonably
request in order to effectuate the transaction contemplated by this Loan
Agreement.
5. BORROWER'S AFFIRMATIVE COVENANTS
--------------------------------
Borrower covenants and agrees with Bank that from the date hereof and
until payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower shall perform the following;
5.1. CORPORATION EXISTENCE. Borrower shall remain validly existing and
in good standing under the laws of the State of Ohio, and shall remain, or shall
become, as required, duly licensed or qualified as a foreign corporation in all
states wherein the nature of its property owned or business transacted makes
such licensing or qualification necessary.
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5.2. PAYMENT OF OBLIGATIONS; PERFORMANCE OF COVENANTS. Borrower shall
timely pay the Obligations owed to Bank pursuant to the Loan Documents,
according to their terms, and otherwise shall perform and obey each and every
duty, covenant, and agreement imposed upon Borrower by the Loan Documents,
according to their terms.
5.3. USE OF PROCEEDS. Borrower shall use the proceeds of the loan solely
for payment of expenses set forth in this Loan Agreement and for Borrower's
working capital needs.
5.4. PAYMENT OF FACILITY FEE; COSTS AND EXPENSES. Borrower shall pay to
Bank, at closing, a facility fee of $5,000.00, together with all other
miscellaneous and incidental costs and expenses incurred by Bank in connection
with the loan transaction herein contemplated. At the option of Bank, Bank may
withhold the same from the loan proceeds to be delivered to Borrower, at closing
of the loan transaction. Furthermore, upon receipt of invoice from Bank's
outside legal counsel, Garfield, Lasko & Rokakis Co., L.P.A., legal fees
incurred by Bank in connection with the loan transaction shall be paid by
Borrower forthwith. Furthermore, Borrower shall pay or otherwise reimburse Bank
for any costs, expenses or fees incurred by Bank until the Obligations are paid
in full, including without limitation, audit fees and filing fees of
Continuation Statements.
5.5. TAXES. Borrower shall pay all taxes, assessments, governmental
charges or levies or claims for labor, supplies, rent, water and sewer charges
or other obligations made against Borrower which, if unpaid, may become a lien
or charge against Borrower or on its property, except Borrower may in good faith
and by proper legal action, contest payment of the same, provided that Borrower
shall establish on its books, or deposit cash with Bank (as Bank may elect), a
reserve for the payment thereof in such amount as Bank may require, provided
that such contest operates to prevent collection, and is maintained in good
faith and prosecuted with diligence, and shall not have been terminated or
discontinued adversely to Borrower; and in any event, no lien shall be permitted
to attach to the assets of Borrower.
5.6. INSURANCE. Borrower will maintain, and shall cause each of its
Subsidiaries to maintain, insurance to protect Borrower's and its Subsidiaries'
properties and business against loss, damage or hazards of the kind customarily
insured against by similar businesses and similarly situated, including, but not
limited to (a) adequate fire and extended coverage insurance in amounts and
issued by insurers acceptable to Bank , (b) necessary workmen's compensation
insurance, (c) adequate public liability and product liability insurance, and
(d) such other insurance as may be required by law or as may be reasonably
required in writing by Bank. Borrower shall give Bank prompt written notice of
each material change in Borrower's insurance coverage and the details of the
change, and upon Bank's written request, furnish to Bank such schedules and
information about Borrower's insurance as Bank, from time to time, may
reasonably request, such information to be prepared in form and detail
satisfactory to Bank and certified by an officer of Borrower. If Borrower shall
acquire additional insurable assets, Borrower shall cause such insurance
coverage to be increased or amended in such manner and to such extent as prudent
business judgment would dictate or as may be satisfactory to Bank.
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All risk of loss of, damage to, or destruction of the Borrower's assets
shall at all times remain with Borrower. All policies covering such assets are
to be made payable to Bank, in case of loss, under a standard noncontributory
"lender's" clause and are to contain such other provisions as Bank may
reasonably require. All policies, or certificates thereof, shall be delivered to
Bank, premium prepaid, and shall provide for not less then thirty (30) days'
prior written notice to Bank of any cancellation, change or modification in any
term, condition or amount of protection provided therein, and shall provide that
the coverage is "primary coverage" for the protection of Borrower and Bank
notwithstanding any other coverage carried by Borrower or Bank protecting
against similar risks.
Borrower shall deliver to Bank upon Bank's request the insurance
policies required to be issued in accordance with this Section 5.6. Such
insurance policy shall be issued by insurance carriers and Bank may reject any
insurance carrier with a "Best Insurance Report" rating of less than A, and a
financial size category of less than Class X. These policies or acceptable
binders shall be prepaid at least thirty (30) days prior to the expiration date
of any policy, and Borrower shall deliver to Bank prepaid renewal policies in
form satisfactory to Bank.
Borrower shall promptly notify any appropriate insurer, Bank and any
such assignee of all material casualty events and of each and every occurrence
which may become the basis of a claim or cause of action against the insured and
provide Bank and any such assignee with all data pertinent to such occurrence.
5.7. COMPLIANCE WITH LAW. Borrower shall, at all times, conduct its
business in such a manner as to be in material compliance with all applicable
foreign, federal, state and local laws, including without limitation, and as
applicable any, environmental laws, ERISA, and safety laws.
5.8. NOTIFICATION. Without intending to limit the duty to deliver other
notices as specifically required herein, or by the Loan Documents in general,
Borrower, from time to time, shall notify Bank by written notice, as soon as
practicable, such notice to be certified by an officer of Borrower, as to the
occurrence of any one or more of the following events;
(a) The commencement of any material action, suit, claim,
counterclaim or proceeding against or investigation or audit of Borrower
relating to its respective assets or business. The term "material" as
used herein shall be deemed to include, but not limited to matters
involving potential liability or loss aggregating $100,000.00 or more in
excess of liability insurance coverage, if any, or the receipt of a
letter of reservation or rights from the applicable insurance carrier in
conjunction with a matter involving more than $100,000.00 in potential
liability;
(b) Any material adverse change in the financial condition of
Borrower, or Guarantor, or the occurrence of any event which results in
a material adverse affect upon the Borrower's assets;
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(c) The receipt of any notification from any governmental agency
regarding the violation of any federal, state or local law;
(d) The occurrence of any event which would make any warranty or
representation herein, for any reason, to cease, in any material
respect, to be true and complete; or
(e) The occurrence of any event, or the failure to act on the
part of Borrower when action is required, which results in the breach of
any covenants imposed upon Borrower by the Loan Documents, or which with
the giving of notice or passage of time would result in a breach of such
covenants, including specifically, but without limitation, the failure
of Borrower to maintain any of the key financial ratios specified below.
5.9. MAINTENANCE OF PROPERTIES. Borrower will at all times maintain,
preserve, protect and keep its assets and properties used in the conduct of its
business in good repair and condition and make all necessary repairs, renewals,
replacements, and improvements thereto.
5.10. FINANCIAL INFORMATION. Borrower shall furnish to Bank, from time
to time, as hereafter required, the following described financial information,
certified to be true and complete by an officer of Borrower;
(a) As soon as available, but not more than 30 days after the
end of each month, unaudited interim financial statements of Borrower
and its Subsidiaries as at the end of such month, including a balance
sheet and statements of income and retained earnings, and statements of
cash flows of Borrower for such month, in each case certified by an
authorized financial or accounting officer of Borrower; and
(b) As soon as available, but not more than 90 days after the
end of each fiscal year of Borrower, audited Consolidated financial
statements of Borrower and its Subsidiaries as at the end of such fiscal
year prepared in accordance with generally accepted accounting practices
consistently applied by independent certified public accountants
selected by Borrower and satisfactory to Bank, which financial
statements shall include a balance sheet, statements of income and
surplus, statements of sources and uses of funds, a reconciliation of
capital accounts and any management letters written by such accountants;
and
(c) From time to time, such further information regarding the
business affairs, and financial condition of Borrower and the Guarantor
as Bank may reasonably request.
All financial statements delivered hereunder or otherwise to Bank shall
be prepared in accordance with generally accepted principals
consistently applied.
5.11. MAINTENANCE OF KEY FINANCIAL REQUIREMENTS. Borrower shall, at all
times, maintain the following financial requirements:
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(a) WORKING CAPITAL. Borrower will at all times maintain
consolidated Current Assets of Borrower and its Subsidiaries in excess
of their consolidated Current Liabilities (including the Revolving
Credit Note) of at least Seven Million Dollars ($7,000,000.00).
(b) TANGIBLE NET WORTH. Borrower shall at all times maintain its
consolidated Tangible Net Worth in an amount not less than Nine Million
Five Hundred Thousand Dollars ($9,500,000.00). For purposes of this
section the Revolving Credit Notes shall be included in total
liabilities and deferred expenses of Borrower and its Subsidiaries shall
be treated as intangibles.
5.12. PROPER BOOKS AND RECORDS. Borrower shall maintain proper books of
record and account in a manner reasonably satisfactory to Bank.
5.13. INSPECTION AND AUDIT. At Borrower's cost, Borrower will permit
Bank at any reasonable time and from time to time, to enter Borrower's places of
business and inspect and appraise any of Borrower's assets, examine and audit
any of Borrower's books and records, make copies or extracts from such books and
records, and discuss Borrower's assets and affairs with Borrower and its
accountants.
5.14. FURTHER ASSURANCES. Borrower will execute such other and further
documents and instruments as Bank may request to implement the provisions of
this Agreement.
6. BORROWER'S NEGATIVE COVENANTS.
-----------------------------
Borrower covenants and agrees with Bank that from the date hereof and
until payment in full of the Obligations, unless Bank shall first give its
consent in writing, Borrower shall refrain from any of the following:
6.1. CAPITAL EXPENDITURES. Make capital expenditures (expenditures which
should be capitalized pursuant to generally accepted accounting principals
consistently applied, and which shall include, but not be limited to, so-called
financing or capitalized leases) in excess of $1,500,000.00 in the aggregate
during any one fiscal year.
6.2. TRADE PAYABLES. Permit ten percent (10%) or more of its trade
accounts payable to be past due for more than 60 days.
6.3. NO INDEBTEDNESS. Incur, create, assume or permit to exist any
indebtedness or liability for borrowed money, or any other indebtedness or
liability evidenced by note, bonds, debentures or similar obligations except;
(a) Indebtedness incurred pursuant to this Loan Agreement or
otherwise with Bank; or
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(b) Indebtedness incurred in the ordinary and usual course of
Borrower's business in connection with purchase money transactions which
do not exceed in the aggregate, at any time $100,000.00.
6.4. NO LIENS. Incur, create, assume or permit to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of
Borrower's assets, now or hereafter owned, other than:
(a) Liens imposed by laws such as carriers, warehousemen or
mechanic's liens incurred in good faith in the ordinary course of
business and liens arising out of judgment or award, all of which, in
the aggregate shall not exceed $100,000.00 at any time; or
(b) Liens for current taxes which are not yet due and payable.
6.5. ERISA REPORTS. Immediately after Borrower (1) knows or has reason
to know of any circumstances which may allow the PBGC to commence proceedings to
terminate a Plan, (2) receives notice that the PBGC intends to terminate a Plan
or appoint a trustee therefor, and (3) receives notice concerning imposition of
withdrawal liability with respect to Borrower or any Commonly Controlled Entity,
Borrower shall forthwith give Bank a written statement of all relevant details
and the steps Borrower proposes to take with respect thereto.
6.6. NO INVESTMENTS. (a) purchase or carry any "margin security," or
otherwise permit the proceeds of the loan hereunder to be used for any purpose
which might constitute a violation of Regulation G, T, U, or X of the Board of
Governors of the Federal Reserve System; (b) create, acquire or hold any
subsidiaries; (c) make or hold any investment in any stocks, bonds or securities
of any kind; (d) be or become a party to any joint venture, partnership or other
business enterprise; (e) make or keep outstanding any advance or loan, except as
expressly permitted in the Loan Agreement; or (f) be or become a Guarantor or
Surety of any kind; provided, however, that nothing contained herein shall
restrict Borrower from (i) any endorsement of a check or similar transaction in
the normal course of Borrower's business, (ii) any investment in direct
obligations of the United States of America or in certificates of deposits
issued by a member bank of the Federal Reserve System, or (iii) any investment
in commercial paper which at the time of such investment is assigned the highest
quality rating in accordance with the rating systems employed by either Moody's
Investors Service, Inc. or Standard & Poor's Corporation.
6.7. NO CHANGE OF BUSINESS OR BUSINESS NAME. Engage in any business
activities other than the business presently conducted by Borrower. Furthermore,
Borrower shall not change its name or do business under any other name.
6.8. NO ACQUISITIONS, MERGERS, ETC.. If an Event of Default would exist
(or if, with the passage of time or giving or notice, an Event of Default would
exist) as a result thereof, engage in (a) any consolidation, merger,
reorganization, or any transaction similar thereto, including those contemplated
by Section 368 of the Code, (b) purchase all or a substantial part of the assets
of any
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corporation or other business enterprise, or (c) lease, sell or otherwise
transfer any assets except in the normal course of Borrower's present business.
6.9. NO SHAREHOLDER DISTRIBUTIONS. Make any distributions of property or
assets of Borrower to a shareholder of Borrower, on account of or with respect
to his or her stock (other than dividends payable solely in shares of Stock and
dividends from the Subsidiaries to Borrower) if an Event of Default would exist
(or if' with the passage of time or giving of notice, an Event of Default would
exist) as a result thereof' or purchase acquire or retire any of its Stock
outstanding at any time, other than by issuance of its Stock in exchange
therefore.
6.10. NO VIOLATION OF MULTIEMPLOYER PLAN REQUIREMENTS. At any time
permit or fail to comply with any Obligation or applicable law relating, in any
material respect, to any Multiemployer Plan for which Borrower is deemed to be
an "Employer".
7. DEFAULT
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7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an "Event of Default":
(a) PAYMENT OF PRINCIPAL OR INTEREST. Borrower fails to make any
payment of principal or interest on any Note executed in connection with
this Loan Agreement when the same shall become due, either by the terms
thereof or as otherwise provided herein.
(b) PAYMENT OF FACILITY FEE. Borrower fails to make any payment
of the facility fee on any Note executed in connection with this Loan
Agreement when the same shall become due, and such default shall
continue for ten (10) days after the due date.
(c) TAXES, INSURANCE, ETC Borrower fails to perform or observe
any other covenant involving the payment of taxes, insurance, fees, or
any other Document to which it is a party.
(d) REPRESENTATIONS AND WARRANTIES. Any representation, warranty
or statement made in or pursuant to the Loan Documents or any report,
record, certification, financial statement and other material furnished
by Borrower or Guarantor to Bank, shall be false or misleading in any
material respect.
(e) OTHER TERMS AND AGREEMENTS. Borrower shall default in the
observance or performance of any other covenant or agreement on the part
of Borrower to be observed or performed pursuant to this Loan Agreement,
and the other Loan Documents, and such default shall continue unremedied
for fifteen (15) days after the giving of written notice thereof by Bank
to Borrower specifying such default.
(f) OTHER AGREEMENTS. Any Event of Default as defined in any
loan or similar agreement to which Borrower any Subsidiary or any
Guarantor is now or hereafter a party,
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or any other event thereunder or upon the occurrence of which any holder
or holders of indebtedness outstanding thereunder may declare the same
due and payable, shall occur and shall continue for more than the grace
or cure period, if any, provided therein.
(g) VOLUNTARY ACTIONS. If Borrower shall apply for or consent to
the appointment of a receiver, trustee or liquidator for itself or by
any of its properties or assets; admit in writing the inability to pay
debts as they mature; make any general assignment for the benefit of
creditors; be adjudicated a bankrupt or an insolvent; file a voluntary
petition in bankruptcy, or a petition or answer seeking reorganization
or any arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment debt, dissolution
or liquidation law or statute, or any answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law affecting any of the foregoing; or enter into any plan of
complete or partial liquidation or dissolution.
(h) INVOLUNTARY ACTIONS. A petition or application is filed, or
any such proceeding is commenced, against the Borrower, or an order for
relief is entered in an involuntary case against the Borrower under the
bankruptcy laws of the United States, and such petition, application or
proceeding remains pending and in effect for more than forty-five (45)
days; and/or, an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any Court of competent
jurisdiction approving a petition seeking reorganization of Borrower or
of all or a substantial part of the properties or assets of Borrower or
appointing a receiver, custodian, trustee or liquidator of Borrower and
such order, judgment, or decree shall continue in effect and unstayed
for a period of forty-five (45) days or more; and/or, the filing of a
proceeding requesting judicial dissolution of Borrower.
(i) JUDGMENT. A judgment for the payment of any sum of money in
excess of One Hundred Thousand Dollars ($100,000.00) shall be rendered
against Borrower and the same shall remain undischarged or unbonded for
a period of thirty (30) days or more during which period execution shall
not be effectively stayed.
(j) TERMINATION OF CORPORATE GUARANTOR. The dissolution,
liquidation (partial or complete), merger, consolidation or
reorganization of any corporate guarantor.
(k) GUARANTY REVOKED. Any Guaranty is revoked, terminated, or
otherwise becomes non-operative, and the Guaranty is not replaced by
another guaranty (or other security) satisfactory to Bank.
(l) LENDER DEEMED INSECURE. Bank for any reason deems itself
insecure with respect to the repayment or performance of the Loan.
(m) MATERIALLY ADVERSE CHANGE. The occurrence of a materially
adverse change in the financial condition of the Borrower or Guarantor.
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7.2. REMEDIES. If an Event of Default shall have occurred and be
continuing, then (a) all of Bank's obligations to make any further advances
shall cease (if Bank so elects), (b) Bank may declare the entire principal and
all interest accrued on or under the Note to be immediately due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by Borrower, and/or (c) Bank may immediately
exercise any other right, power or remedy permitted to Bank by law, including
but not limited to the right of set-off. If Bank advances its own funds in
connection with (c) above, such funds shall be part of the obligations of the
Borrower owed to Bank and shall be secured by the Loan Agreement and shall
accrue interest as set forth in the Revolving Credit Note. Each of the foregoing
remedies is distinct and cumulative to all the other rights or remedies under
this Loan Documents or afforded by law or equity, and may be exercised
concurrently, independently or successively, in any order whatsoever. Interest
shall accrue at the Default Rate when the Event of Default occurs,
automatically, and without any need of notification on the part of Bank, and
shall continue until all Events of Default are cured.
No course of dealing on the part of Bank and no delay or failure on the
part of Bank to exercise any right shall operate as a waiver of such right or
otherwise prejudice Bank's rights, powers and remedies.
7.3. RIGHTS AND REMEDIES CUMULATIVE. Each and every right, power and
remedy herein specifically given to Bank under the Loan Documents, including but
not limited to the right of set-off; shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by Bank and the exercise or the beginning of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy. No
delay or omission by Bank in the exercise of any right, power or remedy or in
the pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of Borrower or to be an
acquiescence therein.
8. INDEMNIFICATION
---------------
Borrower shall indemnify, defend, and does hereby agree to hold Bank
harmless against and in respect to any Damages. Damages, as used herein, shall
mean and include any claim, action, demand, loss, cost, expense, liability,
penalty and interest, including without limitation, reasonable legal counsel
fees, reasonable accounting fees and other costs of litigation or collection,
including those incurred in investigating or attempting to avoid the same or
opposing the imposition of the same, resulting to Bank from the occurrence of
any Event of Default.
9. APPLICATION OF FUNDS; PREPAYMENT
--------------------------------
9.1. APPLICATION OF FUNDS. Unless applicable law provides otherwise, all
payments received by Bank under the Loan Documents may be applied by Bank in its
sole discretion as follows:
23
<PAGE> 24
(a) First, to reimburse Bank for any expenses or costs due under
the Loan Documents by reason of Bank's right of indemnification set
forth above, or otherwise.
(b) Second, to accrued but unpaid interest.
(c) Last, to the remaining principal balance due.
Any statement by Borrower delivered with any payment made by Borrower as to the
application of funds, without the written consent of Bank, shall be null and
void.
9.2. RIGHT OF PREPAYMENT. Borrower shall have the right to prepay the
principal of a Prime Interest Rate Advance without penalty, at any time;
provided, however, that the pre-payment penalty set forth in Section 2.5(j)
shall be due and payable in the event Borrower prepays a LIBOR Rate Advance.
10. MISCELLANEOUS
-------------
10.1. LAW GOVERNING. The parties intend that the Loan Documents and all
transactions, assignments, transfers and rights of the parties hereunder shall
be governed in all respects, by the internal laws of the State of Ohio.
10.2. MODIFICATION AND WAIVER. The modification or waiver of any of
Borrower's obligations or Bank's rights under this Agreement or the other Loan
Documents must be contained in a writing signed by Bank. Bank may perform any of
Borrower's obligations or delay or fail to exercise any of its rights without
causing a waiver of those obligations or rights. A waiver on one occasion shall
not constitute a waiver on any other occasion. Borrower's obligations under this
Loan Agreement and the other Loan Documents shall not be affected if Bank
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations owed by any Borrower or Guarantor or any of its rights against
any Borrower or Guarantor. No notice to or demand upon Borrower in any case
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
10.3. WAIVER OF JURY TRIAL. Bank AND BORROWER KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THE
NOTE, THIS AGREEMENT, AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OR EITHER PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR Bank MAKING THE LOAN EVIDENCED BY THE NOTE. BORROWER
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE
OF OHIO AND AGREES THAT VENUE SHALL BE PROPER IN SUCH COURT.
24
<PAGE> 25
10.4. ENTIRE AGREEMENT. The Loan Documents constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersedes and cancels all prior or contemporaneous understandings, agreements
and discussions between the parties, including any loan commitment letter, if
any. Accordingly, the parties do hereby anticipate and agree to request that any
court or other tribunal (including any arbitrator or mediator) shall strictly
apply the so-called "Parol Evidence Rule" with respect to the interpretation of
the Loan Documents.
10.5. NOTICES. Any notice shall be deemed to have been received on the
third business day after the day on which such notice was mailed if sent by
certified U.S. Mail, return receipt requested, postage prepaid, addressed to
such party at the following address (or at such other addresses such parties
shall hereafter specify in writing);
If to Borrower: Robert L. Bauman, President and CEO
HICKOK INCORPORATED
10514 Dupont Avenue
Cleveland, Ohio 44108
If to Bank: Herbert Werner, Vice President
HUNTINGTON NATIONAL BANK
917 Euclid Avenue
Cleveland, Ohio 44115
10.6. TIME OF THE ESSENCE. In the performance of the Obligations and
covenants contemplated by and contained within the Loan Documents, the parties
hereby declare that TIME IS OF THE ESSENCE.
10.7. EXTENSIONS AND RENEWALS. The Loan Documents shall be applicable to
all modifications, extensions, substitutions and renewals, if any, of any or all
Obligations incurred hereunder, or otherwise, and the terms and conditions of
the Loan Documents shall apply to all Obligations owed by Borrower to Bank.
10.8. FURTHER ACTS. The parties agree to perform any further acts and to
execute and deliver any additional documents which may be reasonably necessary
to carry out the intent and provisions of this Loan Agreement.
10.9. SEVERABILITY. If any provision of this Loan Agreement is invalid
or is held illegal or unenforceable, then notwithstanding any such invalidity,
illegality, or unenforceability of such provision, the remainder of this Loan
Agreement shall subsist and shall be in full force and effect as though such
invalid, illegal or unenforceable provision had been omitted from this Loan
Agreement.
10.10. EFFECTIVE DATE. This Loan Agreement shall be effective February
28, 1997.
25
<PAGE> 26
10.11. JURISDICTION AND VENUE OF LEGAL ACTIONS. The parties agree that
any suit, action or proceeding with respect to the Loan Documents based upon any
state of facts, transactions or occurrence in connection with the loan
transaction herein contemplated shall be instituted and maintained in any state
or federal court of competent jurisdiction sitting in the State of Ohio. Upon
execution and delivery of this Loan Agreement, Borrower irrevocably submits to
the jurisdiction of Ohio Courts for that purpose.
10.12. INTERPRETATION. The headings herein are for convenience only, and
shall not be used for interpreting this Agreement Wherever the context requires,
the singular shall include the plural, and the masculine shall include the
feminine and neuter.
10.13. BINDING. This Loan Agreement shall bind and inure to the benefit
of the parties hereto, their respective successors and assigns. No other Person
shall be entitled to claim any right or benefit hereunder as third-party
beneficiary or otherwise.
10.14. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, all of which, taken together, shall constitute an original
Agreement.
IN WITNESS WHEREOF, the parties have signed this Loan Agreement,
intending to be legally bound thereby as of the Effective Date.
Signed in the presence of: BORROWER:
(as to all signatures)
HICKOK INCORPORATED
/s/ E. Nowakowski By: /s/ Robert L. Bauman
- ---------------------------- -----------------------------------
Robert L. Bauman, President and CEO
/s/ Carmelita Gerome
- ----------------------------
THE HUNTINGTON NATIONAL BANK
/s/ E. Nowakowski By: /s/ Herbert A. Werner
- ---------------------------- -----------------------------------
Herbert A. Werner, Vice President
/s/ Carmelita Gerome
- ----------------------------
<PAGE> 27
EXHIBIT A
REVOLVING CREDIT NOTE
---------------------
$5,000,000.00 February 28, 1997
FOR VALUE RECEIVED, the undersigned HICKOK INCORPORATED (fka The Hickok
Electrical Instrument Company) an Ohio Corporation (hereinafter called the
"Borrower") promises and agrees to pay to the order of THE HUNTINGTON NATIONAL
BANK, a bank chartered under the Federal laws of the United States (hereinafter
called "Bank"), the sum of Five Million Dollars and no/100 ($5,000,000.00) or,
if less, the aggregate unpaid principal amount of all loans or advances by Bank
to or for the benefit of the Borrower on or after the date hereof in accordance
with the terms hereof' together with interest on the unpaid principal balance
outstanding from time to time hereon, computed from the date of each advance.
The interest rate shall be established as of the date of each advance hereunder,
in accordance with the interest rate options elected by the Borrower as provided
in Section 2.4 of the Loan Agreement (as defined below). All interest hereunder
shall be computed using the applicable interest rate on the basis of the actual
number of days elapsed over a 360 day year.
PAYMENT SCHEDULE. Borrower shall pay all accrued interest on the first
day of each month, commencing on April 1, 1997. Subject to an Occurrence of
Default described below, and the provisions of Loan Agreement, the outstanding
principal balance, together with any accrued but unpaid interest, shall be due
and payable in full on February 28, 1998. Any installment of principal and/or
interest due hereunder which is not received on or before the 10th day of the
month in which it is due shall be subject to a late payment fee of 5% of the
amount owed on such installment (but not less than $50.00) for the purpose of
defraying the expense incident to handling such delinquent payment
APPLICATION OF PAYMENTS. All amounts received by Bank shall be applied
first to any unpaid late charges and expenses due from Borrower, second to
accrued but unpaid interest, and third to principal.
LOAN AGREEMENT. The terms of this Note shall be subject to a certain
Restated Loan Agreement by and between Borrower and Bank, entered into effective
as of February 28, 1997, including any partial or total extension, restatement,
renewal, amendment, and substitution thereof or therefor (hereinafter
collectively referred to as the "Loan Agreement"). Reference is made to the Loan
Agreement for certain provisions concerning rights of Bank and its successors
and assigns with respect to this Note, capitalized terms not defined herein, and
related matters.
CONDITIONS FOR ADVANCES. This Note possesses a revolving feature. Upon
satisfaction of the conditions set forth in this Note and the Loan Agreement,
Borrower shall be entitled to borrow up to the full principal amount of the Note
and to repay and reborrow from time to time during the term of this Note.
1
<PAGE> 28
Continuing for the duration of the Loan Agreement and any extensions thereof
and/or hereof, the Bank, at its option, may refuse to advance sums hereunder
when the total amount due hereunder would exceed $5,000,000.00
In order to request that the Bank make any advance under this Note,
Borrower shall make an oral request (to be immediately confirmed in writing) to
the Bank and/or deliver to the Bank a written notice specifying (a) the
requested date of such advance, (b) the requested amount of such advance, and
(c) such other information relating to such advance or to Borrower as the Bank
may request. Any request by Borrower for a LIBOR Rate Advance shall be for a
minimum of $500,000.00. The Secretary of the Borrower shall certify to the Bank
those persons authorized to request advances hereunder (whether orally or in
writing) from time to time. Notwithstanding any notice by the Bank to the
Borrower that it is willing to make any advance, the Bank's obligation to make
such advance shall in all events be subject to fulfillment of the conditions
precedent thereto set forth herein and in the Loan Agreement and to any other
conditions set forth in such notice to the Borrower. Upon fulfillment of all
such conditions, the Bank will on the date scheduled for such advance make
available to the Borrower same day funds in the amount of such advance.
PREPAYMENT PREMIUM. There shall be no premium due for the prepayment
before maturity of any Prime Commercial Rate Advances. However, there shall be a
prepayment premium due for the prepayment before maturity of any LIBOR Rate
Advances due under this Note or the Loan Agreement, which premium shall be
calculated pursuant to the terms of Section 2.5(j) of the Loan Agreement. Any
loan prepayment shall be applied first to any unpaid late charges and expenses
due from Borrower, second to accrued but unpaid interest, and third to
principal.
OCCURRENCE OF DEFAULT. Upon (i) the failure of Borrower to make any
payment on this Note or any other indebtedness to Bank when due, or (ii) the
occurrence of any one or more Events of Default as defined in the Loan
Agreement, which have not been waived or cured, any and all Obligations shall,
at the option of the Bank, immediately become due and payable without demand,
presentment, protest, or notice of any kind, all as provided in such Agreements.
In the event of a default, at the sole option of Bank, for so long as a default
exists, interest on the outstanding principal balance hereof shall accrue and
will be paid at the Bank's Prime Commercial Rate in effect from time to time
hereunder, PLUS an additional 4% per annum, not to exceed, however, the maximum
rate permitted by law.
AMENDMENT AND RESTATEMENT. This Note constitutes an amendment and
restatement of that certain Revolving Note originally dated May 20, 1991, as
subsequently amended as of February 28, 1992, February 28, 1993, February
28, 1994, February 28, 1995, and February 28, 1996 (the "Original Note"). The
Borrower and Bank both expressly intend that the Obligations owing under the
Original Note as amended
2
<PAGE> 29
be and are the same Obligations described and set forth herein. This Note shall
not constitute a novation, waiver or an accord and satisfaction.
WAIVERS. Borrower, any co-borrower, any endorser hereof or any other
party hereto or any guarantor hereof, and each of them (j) expressly waives
presentment, demand, notice, protest, and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
of this Note, of any endorsement or guaranty of this Note or of any document or
instrument evidencing any security for payment of this Note; (ii) consents and
assents to any extension, renewal, modification, amendment, substitution of this
Note, or postponement of the time of payment or any other indulgence, waiver,
delay or forbearance, to any substitution, exchange or release of collateral,
and to the addition or release of any other person primarily or secondarily
liable; (iii) consents and assents to the failure of Bank to act or any
indulgence shown by Bank from time to time and in one or more instances (without
notice to or assent from any Borrower, co-borrower, endorser or guarantor), and
agree(s) that no such action, failure to act or failure to exercise any right
or remedy, on the part of the Bank shall in any way affect or impair the
obligations of any Borrower, co-borrower, endorser or guarantor or be construed
as a waiver by Bank or otherwise affect any of Bank's rights under this Note or
under any endorsement or guaranty of this Note or under any document or other
instrument evidencing any security for payment of this Note; and (iv) (jointly
and severally, if more than one) agree(s) to pay on demand all costs and
expenses of collection of this Note or of any endorsement or any guaranty hereof
and/or the enforcement of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization upon, any property
securing payment hereof, including reasonable attorney's fees.
GOVERNING LAW. Borrower understands and agrees that this Note is subject
to and shall be construed according to the laws of the State of Ohio. Headings
used herein are for convenience only, and are not to be referred to in
interpreting the terms of this Note. If any provision of this Note is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
WAIVER OF JURY TRIAL. BORROWER AND BANK EACH WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN BANK AND BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTION RELATED HERETO. This waiver
shall not in any way affect, waive, limit, amend or modify Bank's ability to
pursue remedies pursuant to any confession of judgment or cognovit provision
contained in this Note or any
3
<PAGE> 30
other instrument, document or agreement between Bank and Borrower. This
provision is a material inducement to Bank to make the loan represented by the
Note.
COGNOVIT PROVISION. Borrower authorizes any attorney-at-law, including
any attorney engaged by Bank or any holder of this Note, to appear for Borrower
in any court of record, in the county in which this Note is executed or where
Borrower has its principal place of business, in the State of Ohio after this
Note becomes due by declaration or otherwise and waive the issuing and service
of process and confess judgment against Borrower in favor of Bank or holder for
the amount then appearing due, together with interest at the default rate and
costs of suit, and thereupon to waive and release all errors in said proceedings
and judgment and all rights of appeal from said judgment and stay of execution.
The foregoing warrant of attorney shall survive any judgment, and if
any judgment is vacated for any reason, the Bank nevertheless may thereafter use
the foregoing warrant of attorney to obtain an additional judgment or judgments
against the Borrower. Borrower expressly waives any conflict of interest arising
from, and expressly agrees that Bank's attorney may confess judgment pursuant to
the foregoing warrant of attorney. Borrower further agrees that the attorney
confessing judgment pursuant to the foregoing warrant of attorney may receive a
legal fee or other compensation from Bank.
WARNING: BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
HICKOK INCORPORATED
By:
-------------------------------------
Robert L. Bauman, President and CEO
4
<PAGE> 31
EXHIBIT B
GUARANTOR: SUPREME ELECTRONICS CORP.
10514 Dupont Avenue
Cleveland, Ohio 44108
DEBTOR: HICKOK INCORPORATED
10514 Dupont Avenue
Cleveland, Ohio 44108
CONTINUING GUARANTY
UNLIMITED
Executed and delivered at Cleveland, Ohio, effective as of the 28th day of
February, 1997.
For the purpose of inducing THE HUNTINGTON NATIONAL BANK (hereinafter referred
to as "Bank") to lend money or advance credit to, or renew, extend or forbear
from demanding immediate payment of the Obligations of HICKOK INCORPORATED, an
Ohio Corporation (hereinafter referred to as "Debtor"), the undersigned
(hereinafter referred to as "Guarantor"), hereby unconditionally guarantees,
jointly and severally with any other Guarantors which have evidenced or may in
the future evidence their undertaking by executing this Guaranty, by co-signing
one or more promissory notes or other instruments of indebtedness or by
executing one or more separate agreements of guaranty of any or all of the
Obligations referred to herein, or otherwise, the prompt and full payment to
Bank when due, whether by acceleration or otherwise, of all Obligations of any
kind for which Debtor is now or may hereafter become liable to Bank in any
manner.
The word "Obligation" is used in its most comprehensive sense and means and
includes, without limitation, collectively, all indebtedness, debts and
liabilities now owing or hereafter incurred by Borrower to Bank, whether or not
currently contemplated, and includes, without limitation, all indebtedness,
debts and liabilities (including principal, interest, late charges, collection
costs, attorneys' fees and the like) of Borrower to Bank, either created by
Borrower alone or together with another or others, whether primary or secondary,
joint, or joint and several capacity, whether secured or unsecured, absolute or
contingent, liquidated or unliquidated, direct or indirect, whether evidenced by
note, draft, overdraft, application for letter of credit, agreements of guaranty
or otherwise, and any and all renewals of' extensions of or substitutes
therefore, whether incurred directly to Bank or acquired by Bank by purchase,
pledge or otherwise. The word "Obligations" shall include BUT NOT BE LIMITED TO,
all indebtedness owed by Debtor to Bank by reason of a credit extended or to be
extended to Debtor in the principal amount of Five Million Dollars and no/100
($5,000,000.00), pursuant to one or more instruments or indebtedness and
related loan documents (the "Loan Documents").
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, it will, upon request of Bank, pay the Obligations to Bank,
irrespective of any action or lack of action on Bank's part in connection with
the acquisition, perfection, possession, enforcement or disposition of any or
all Obligations or any or all security therefor or otherwise, and further
<PAGE> 32
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, and this whether such Obligations are reduced or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain in
effect as to any and all Obligations of Debtor incurred or arising prior to
receipt by the loan officer of Bank who is handling Debtor's Obligations of
written notice of termination of this Guaranty. No revocation will in any way
affect the duties of Guarantor to Bank with respect to Obligations of Debtor
incurred prior to the receipt of such notice by such loan officer of Bank.
Revocation by any one or more of Guarantors will not affect the duties of the
remaining Guarantor or Guarantors.
Guarantors hereby waive presentment, demand, protest, notice of protest and
notice of dishonor or other nonpayment of any and all Obligations and further
waive notice of sale or other disposition of any collateral or security now held
or hereafter acquired by Bank. Guarantors agree that no extension of time,
whether one or more, nor any other indulgence granted by Bank to Debtor, or to
Guarantors and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantors, or any of them, will release, discharge or modify
the duties of Guarantors. Guarantors agree that Bank may, without notice to or
further consent from Guarantors, release or modify any collateral, security or
other guaranties now held or hereafter acquired, or substitute other collateral,
security or other guaranties, and no such action will release, discharge or
modify the duties of Guarantors hereunder; Guarantors further agree that Bank
will not be required to pursue or exhaust any of its rights or remedies against
Debtor or Guarantors, or any of them, with respect to payment of any of the
Obligations, or to pursue, exhaust or preserve any of its rights or remedies
with respect to any collateral, security or other guaranties given to secure the
Obligations, or to take any action of any sort, prior to demanding performance
from or pursuing its remedies against Guarantors.
Guarantors agree to furnish true and complete financial statements from time to
time on request of Bank and agree that failure to furnish such financial
statements may constitute or be deemed to constitute a default or event of
default of the Obligations. Guarantors will not transfer any major assets, or
take any act the effect of which would reduce Guarantors' net worth, without
Bank's consent Guarantors agree that any legal suit, action or proceeding
arising out of or relating to this Guaranty may be instituted in a state or
federal court of appropriate subject matter jurisdiction in the State of Ohio;
waive any objection which they may have now or hereafter to the laying of venue
of any such suit, action or proceeding; and irrevocably submit to the
jurisdiction of any such court in any such suit, action or proceeding.
The Obligations shall continue to be effective, or be reinstated, as the case
may be, if any amount paid by or on behalf of the Debtor to the Bank with
regard to any such Obligations is rescinded, restored, or returned in connection
with the insolvency, bankruptcy, dissolution, liquidation, or reorganization of
the Debtor, or as a result of the appointment of a receiver, intervenor or
conservator of' or trustee or similar officer for, the Debtor or any part of its
property, or otherwise, all as though such payment had not been made.
<PAGE> 33
If Guarantors should make any payment or perform any act pursuant to this
Guaranty, Guarantors will not thereby by subrogated to any right or remedy of
Lender against Borrower or thereby acquire any right or interest in, under or to
this Guaranty, any of the Loan Documents or any other document now or hereafter
executed and delivered by Borrower to Lender in connection with the Loan
Documents until thirteen (13) months after the Obligations have been paid in
full. Guarantors hereby irrevocably waive all legal and equitable rights to
recover from Borrower, until thirteen (13) months after the Obligations have
been paid in full, any sums paid by any Guarantor under the terms of this
Guaranty, including without limitation, all rights of subrogation and all other
rights that would result in any Guarantor being deemed a creditor of Borrower
under the federal Bankruptcy Code or any other law.
If any obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantors, or any of them, from any duty to Bank hereunder
with respect to any unassigned Obligation. In the event that any one or more of
the provisions contained in this Guaranty or any application thereof shall be
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and any
other applications thereof shall not in any way be affected or impaired thereby.
This Guaranty shall be binding upon the heirs, executors, administrators,
successors and assigns of the undersigned. This Guaranty shall be construed in
accordance with the law of the State of Ohio. In interpreting this Guaranty, the
singular shall include the plural and masculine pronouns shall include the
feminine and neuter.
WAIVER OF JURY TRIAL. GUARANTOR AND BANK EACH WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN BANK AND GUARANTOR ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITh THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTION RELATED HERETO.
This waiver shall not in any way affect, waive, limit, amend or modify Bank's
ability to pursue remedies pursuant to any confession of judgment or cognovit
provision contained in this Guaranty or any other instrument, document or
agreement between Bank and Guarantor.
Guarantor authorizes any attorney-at-law, including any attorney engaged
by Bank or any holder of this Guaranty, to appear for Guarantor in any court of
record, in the county in which this Guaranty is executed or where Guarantor has
its principal place of business, in the State of Ohio after this Guaranty
becomes due by declaration or otherwise and waive the issuing and service of
process and confess judgment against Guarantor in favor of Bank or holder for
the amount then appearing due, together with interest at the default rate and
costs of suit, and thereupon to waive and release all errors in said proceedings
and judgment and all rights of appeal from said judgment and stay of execution.
The foregoing warrant of attorney shall survive any judgment, and if any
judgment is vacated for any reason, the Bank nevertheless may thereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the Guarantor. Guarantor expressly waives any conflict of interest
arising from, and expressly agrees that Bank's attorney may confess judgment
pursuant to the foregoing warrant of attorney. Guarantor further agrees that the
attorney confessing
<PAGE> 34
judgment pursuant to the foregoing warrant of attorney may receive a legal fee
or other compensation from Bank. No such judgment or judgments against less than
all of Guarantors shall be a bar to a subsequent judgment or judgments against
anyone or more of Guarantors against whom judgment has not been obtained hereon,
this being a joint and several warrant of attorney to confess judgment.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS. FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT. OR ANY
OTHER CAUSE.
GUARANTOR:
SUPREME ELECTRONICS CORP.
By:
-------------------------------
Its:
------------------------------
<PAGE> 35
EXHIBIT C
CERTIFICATE OF INCUMBENCY
-------------------------
The undersigned, ____________, the duly elected and acting Secretary of
Hickok Incorporated, an Ohio corporation, does hereby certify that the following
named individuals are duly elected officers of said Corporation and hold the
offices set forth opposite their names, effective as of this date, and that the
signatures appearing next to the names of such officers are the genuine
signatures of said officers.
Name Title Signature
---- ----- ---------
President
- ----------------------- ---------------------------
Vice President
- ----------------------- ---------------------------
Treasurer
- ----------------------- ---------------------------
Secretary
- ----------------------- ---------------------------
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incumbency as of this ___ day of March, 1997.
----------------------------
, Secretary
-----------------
<PAGE> 1
FORM 10-Q
EXHIBIT 11
HICKOK INCORPORATED
STATEMENT RE: COMPUTATION OF PER COMMON SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
PRIMARY
- -------
Average shares outstanding 1,193,017 1,192,850 1,192,932 1,192,850
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price 19,407 27,750 19,928 29,879
----------- ---------- ----------- ----------
Total Shares 1,212,424 1,220,600 1,212,860 1,222,729
----------- ---------- ----------- ----------
Net Income (Loss) $ (72,269) $ 371,422 $ (266.710) $ 673,186
----------- ---------- ----------- ----------
Per Share $ (0.06) $ 0.30 $ (0.22) $ 0.55
=========== ========== =========== ==========
FULLY DILUTED
- -------------
Average shares outstanding 1,193,017 1,192,850 1,192,932 1,192,850
Net effect of dilutive
stock options - based
on the treasury stock
method using year-end
market price, if
higher than average
market price 19,407* 27,750* 19,928* 29,879*
----------- ---------- ----------- ----------
Total Shares 1,212,424 1,220,600 1,212,860 1,222,729
----------- ---------- ----------- ----------
Net Income (Loss) $ (72,269) $ 371,422 $ (266,710) $ 673,186
=========== ========== =========== ==========
Per Share $ (0.06) $ 0.30 $ (0.22) $ 0.55
=========== ========== =========== ==========
</TABLE>
*Period-end market price is less than average market price, use same as primary
shares.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 827,600
<SECURITIES> 0
<RECEIVABLES> 3,400,372
<ALLOWANCES> 0
<INVENTORY> 4,480,742
<CURRENT-ASSETS> 9,319,511
<PP&E> 5,353,721
<DEPRECIATION> 2,351,102
<TOTAL-ASSETS> 12,069,397
<CURRENT-LIABILITIES> 1,155,651
<BONDS> 0
<COMMON> 1,193,850
0
0
<OTHER-SE> 9,543,896
<TOTAL-LIABILITY-AND-EQUITY> 12,069,397
<SALES> 9,494,640
<TOTAL-REVENUES> 9,494,640
<CGS> 6,519,027
<TOTAL-COSTS> 9,913,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,375
<INCOME-PRETAX> (423,310)
<INCOME-TAX> (156,600)
<INCOME-CONTINUING> (266,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (266,710)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
