SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
..... TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from _________to _________
Commission File Number 1-3410
AMERICAN BANKNOTE CORPORATION
(Exact name of Registrant as specified in its charter)
A Delaware I.R.S. Employer
Corporation No. 13-0460520
200 Park Avenue, New York, New York 10166-4999
Telephone - Area Code 212-557-9100
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 for the
past 90 days. Yes X No
--- ---
At May 14, 1996 - 19,497,380 shares of common stock were outstanding.
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AMERICAN BANKNOTE CORPORATION
FORM 10-Q
I N D E X
PAGE
NO.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995...................... 3
Condensed Consolidated Statements of Operations
For the three months ended March 31, 1996 and 1995........ 4
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 1996 and 1995........ 5
Condensed Consolidated Statement of Stockholders' Equity
For the three months ended March 31, 1996................. 6
Notes to Condensed Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 13
Item 6. Exhibits and Reports on Form 8-K........................ 14
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share data)
March December
31, 1996 31, 1995
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents. ............................ $ 15,837 $ 23,525
Marketable securities - at market...................... 2,825 2,952
Accounts receivable, net of allowance for
doubtful accounts of $551 and $816................... 35,868 32,058
Other receivables...................................... 8,193 7,772
Inventories............................................ 23,240 23,243
Deferred income tax benefits........................... 6,062 5,983
Prepaid expenses....................................... 4,505 4,755
----------- ----------
Total current assets............................ 96,530 100,288
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $50,347 and $46,915.................... 229,310 225,974
Other assets ............................................ 18,330 18,342
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $3,425 and $3,119...................... 34,492 34,798
----------- ----------
$ 378,662 $ 379,402
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portions of long-term debt .................... $ 264 $ 332
Accounts payable and accrued expenses.................. 45,190 44,983
----------- ----------
Total current liabilities....................... 45,454 45,315
Long-term debt, net of unamortized discount
of $1,093 and $1,120................................... 197,403 194,156
Other liabilities......................................... 18,729 20,181
Deferred income taxes ................................... 57,725 60,579
Minority interest......................................... 19,150 18,818
----------- ----------
338,461 339,049
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding ..................... - -
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
19,778,380 shares and 19,391,763 shares.............. 198 194
Capital surplus........................................ 67,737 67,091
Retained-earnings (deficit)............................ (26,263) (25,461)
Treasury stock, at cost (281,000 shares)............... (1,253) (1,253)
Pension liability adjustment........................... (218) (218)
----------- ----------
Total stockholders' equity...................... 40,201 40,353
----------- ----------
$ 378,662 $ 379,402
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Amounts in thousands, except per share data)
Three
Months Ended
March 31
1996 1995
---- ----
<S> <C> <C>
Sales ................................ $ 59,917 $ 49,068
-------- ----------
Costs and expenses
Cost of goods sold................... 42,004 31,949
Selling and administrative .......... 9,080 9,948
Depreciation and amortization........ 3,541 3,245
--------- ----------
54,625 45,142
--------- ----------
5,292 3,926
Other (expense) income
Interest expense..................... (6,068) (5,768)
Foreign exchange gains
(losses), net..................... (54) 68
Other, net........................... (189) 467
--------- ---------
(6,311) (5,233)
Loss before
income taxes...................... (1,019) (1,307)
Income tax benefit..................... (865) (510)
--------- ---------
Loss before
minority interest................. (154) (797)
Minority interest...................... 648 -
--------- ---------
NET LOSS............................. $ (802) $ (797)
========= =========
Weighted average number of
common and common equivalent
shares outstanding................ 19,490 19,010
========= =========
Net loss per share..................... $ (.04) $ (.04)
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Amounts in thousands)
Three Months Ended
------------------
March 31
1996 1995
------------ -----------
<S> <C> <C>
Operating Activities
Net cash from operations, after adjustments
to reconcile net loss to net cash (used in)
or provided by operating activities................. $ 3,578 $ 1,880
Marketable securities............................... (603)
Accounts and other receivables...................... (4,231) 6,177
Inventories......................................... 2 (2,549)
Prepaid and other assets............................ (70) 359
Accounts payable and accrued expenses............... (2,444) (6,370)
Other............................................... (347) (859)
----------- ----------
Net cash used in Operating Activities.................. (4,115) (1,362)
----------- ----------
Investing Activities
Capital expenditures, net ............................. (6,925) (1,012)
----------- ----------
Net cash used in Investing Activities.................. (6,925) (1,012)
----------- ----------
Financing Activities
Proceeds from borrowings............................... 3,439 -
Payment of other long-term
obligations and other............................... (31) (97)
----------- ----------
Net cash (used in) provided by
Financing Activities................................ 3,408 (97)
----------- ----------
Effect of foreign currency exchange rate
changes on cash and cash equivalents.................. (56) 19
----------- ----------
Increase (decrease) in cash
and cash equivalents................................... (7,688) (2,452)
----------- ----------
Cash and cash equivalents - beginning of period........... 23,525 31,658
----------- ----------
Cash and cash equivalents - end of period ................ $ 15,837 $ 29,206
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
THREE MONTHS ENDED March 31, 1996
(Amounts in thousands)
Common Stock Retained Pension
------------- Capital Earnings Treasury Liability Total
Shares Amount Surplus (Deficit) Stock Adjustment Equity
------------- ------- --------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1996 19,392 $194 $67,091 $(25,461) $(1,253) $ (218) $40,353
Issuance of
common shares 386 4 646 - 650
Net loss (802) (802)
------ ---- ------- -------- ------- -------- -------
Balance -
March 31, 1996 19,778 $198 $67,737 $(26,263) $(1,253) $(218) $40,201
====== ==== ======= ======== ======= ======== =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements do
not contain all disclosures required by generally accepted accounting
principles. Reference should be made to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995. The accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair statement of the results of the interim periods presented and are not
necessarily indicative of the results which may be expected for a full fiscal
year.
Primary and fully-diluted income (loss) per share are the same.
Cash tax payments for the three months ended March 31, 1996 and 1995,
amounted to approximately $2.8 million and $0.2 million, respectively. Cash
interest payments for the three months ended March 31, 1996 and 1995 amounted to
approximately $3.8 million and $3.9 million, respectively. In addition, under
interest rate swap agreements, a cash interest payment of $0.3 million was made
in the three months ended March 31, 1995. The agreement was terminated in the
fourth quarter of 1995.
Note B - Inventories
Inventories consist of the following (in thousands):
March December
31, 1996 31, 1995
-------- --------
Work in process......................... $ 13,292 $ 15,874
Raw materials and supplies.............. 9,948 7,369
---------- -----------
Total inventories.................... $ 23,240 $ 23,243
========== ===========
Note C - Senior Debt
Senior debt consists of the following (in thousands):
March December
31, 1996 31, 1995
-------- --------
10-3/8% Senior Notes, due
June 1, 2002 ........................ $ 126,500 $ 126,500
11-5/8% Senior Notes, due August 1,
2002, net of unamortized
discount of $1,093 and $1,120........ 63,907 63,880
Other long-term obligations............. 7,260 4,108
Less current portion.................... (264) (332)
---------- -----------
Total senior debt.................... $ 197,403 $ 194,156
========== ===========
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<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
March December
31, 1996 31, 1995
-------- --------
Accounts payable........................ $ 12,716 $ 11,335
Accrued expenses........................ 3,686 2,893
Customers' advances..................... 3,514 7,026
Salaries and wages...................... 6,328 5,666
Restructuring and merger -
related accruals..................... 8,698 8,838
Interest payable........................ 5,661 4,291
Other .................................. 4,587 4,934
---------- -----------
Total accounts payable
and accrued expenses............. $ 45,190 $ 44,983
========== ===========
Note E - Investment in Affiliate
As of January 6, 1996, the Company acquired 25% of the outstanding shares
of a company that operates a financial and identification card manufacturing
business for $1.3 million. The purchase price consisted of $.65 million in cash
and 386,617 shares of the Company's Common Stock, valued at $.65 million. The
acquisition was not significant to the operations of the Company.
Note F - Commitments and Contingencies
The Company is involved in various litigations (reference is made to "Part
II - Other Information, Item 1. Legal Proceedings" herein), the adverse
determination of which could have a material adverse effect on the financial
condition or results of operations of the Company in the event that the
Company's insurance was not available to cover such claims or an award
materially in excess of insurance coverage was made. The Company believes,
however, that it has good and meritorious defenses to the litigations and
intends to vigorously defend against such actions.
Note G - Subsequent Events
On April 11, 1996 the Company signed a definitive agreement to acquire the
Leigh-Mardon Security Group ("Leigh-Mardon") from Amcor Limited ("Amcor") in a
transaction valued at approximately US$95 million (approximately Australian 120
million.) The transaction is expected to be completed during the second quarter
of 1996. Financing of the acquisition will include an investment through an
unrestricted subsidiary of the Company, non-recourse lending and may also
include seller financing. Upon closing, it is presently anticipated that the
Company will acquire approximately 55% equity interest in the Leigh-Mardon
business for a cash investment of approximately $7 million.
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note G - Subsequent Events - Continued
Closing of the transaction is subject to a number of conditions including
completion of documents and financing arrangements.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
In the third quarter of 1995, the Company acquired the printing business
and operations of Grafica Bradesco in exchange for a 22.5% minority interest in
ABN-Brazil. The acquisition was accounted for as a purchase transaction and its
operations have been included since the July 1, 1995 acquisition date. The
acquisition had a significant impact on the operations of the Company since the
acquisition date. As of January 6, 1996, the Company acquired a 25% interest in
a company that operates a financial and identification card manufacturing
business. The acquisition was accounted for as a purchase transaction, and its
operations, recorded from the acquisition date, were not significant to the
consolidated results.
COMPARISON OF RESULTS OF THE THREE MONTHS ENDED MARCH 31, 1996
WITH THE THREE MONTHS ENDED MARCH 31, 1995
Sales of ABN - Brazil represents 63% of consolidated sales for 1996
compared with 36% for 1995. Sales in 1996 increased by $10.8 million (22.1%)
from 1995. Government sales decreased $8.3 million. Corporate and Commercial
sales increased $18.9 million and Holographic sales increased $0.2 million. The
decrease in Government Sales is primarily due to a decrease at ABN in food
coupons ($8.0 million) and currency ($1.2 million) sales. The reduction in food
coupon sales is due in part, to the timing of the award of the fiscal 1996 food
coupon contract in the second quarter of 1996, and the trend in food coupon
volume discussed in "Liquidity and Capital Resources." The increase in Corporate
and Commercial sales is primarily due to increased Printing Services sales
($12.7 million) and increases in prepaid telephone cards ($9.1 million). The
change in various components of sales may be affected by the timing of contract
awards and delivery requirements of customers.
Cost of goods sold increased $10.1 million (31.5%) from 1995 and as a
percentage of sales was 70.1% in 1996 as compared to 65.1% in 1995. The cost of
goods sold increase was due, in part, to the increased sales discussed above.
The increase in the percentage of cost of goods sold is principally due to the
impact on costs of the wind down of the company's Chicago facility and a change
in product mix. As part of an overall restructuring and downsizing of ABN's
domestic operations, the Company is closing its Chicago, Illinois facility and
the first quarter results of operations reflect the impact of some of these
costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Selling and administrative expenses decreased by $0.9 million from 1995
(8.7%) primarily as a result of the reduced commission expenses and reduction of
corporate overheads. As a percentage of sales, selling and administrative
expenses decreased to 15.2% from 20.3%.
Depreciation expense increased $0.3 million in 1996 primarily as a result
of the Grafica Bradesco acquisition.
Interest expense increased $0.3 million in 1996 due to debt incurred in
Brazil to fund the purchase of new equipment.
Other income decreased $0.7 million due in part to an unrealized loss on
marketable securities.
Foreign exchange gain (loss), net, is a result of the Company's translation
of Brazilian local currency financial statements into dollars in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency
Translation." As a result, the translation adjustment is recorded as a period
item.
Income taxes (benefits) are calculated using estimated annual effective tax
rates for each tax jurisdiction and assume various assumptions such as state and
local taxes, utilization of foreign tax credits and timing of certain
deductions.
The minority interest represents the 22.5% minority interest in ABN-
Brazil.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had approximately $15.8 million in cash and
cash equivalents and approximately $6.5 million of availability under a credit
agreement, after giving effect to $3.0 million of outstanding letters of credit,
$126.5 million of 10-3/8% Senior Notes outstanding, and $63.9 million of 11-5/8%
Senior Notes outstanding.
On April 3, 1996, as part of the agreement to purchase Leigh-Mardon, the
Company invested, in interest bearing securities, $7 million pending final
agreement of sale. The Company does not anticipate any further cash outlays from
closing this investment, other than certain fees and expenses related to the
transaction, nor any cash receipts for the foreseeable future.
Certain states have adopted electronic programs which replace the
traditional methods of distribution of public assistance benefits to recipients,
including replacing food coupons with debit-type cards. Several state-wide
programs have been implemented, while others have recently awarded contracts.
Other states are evaluating such programs. In April 1996, the Food and Nutrition
Division of the USDA awarded the Company a new contract to print food coupons
for the fiscal year ended September 30, 1996, with two one-year renewal options
for the future printing of food coupons. Reference is made to the Company's
Annual Report on Form 10-K the year ended December 31, 1995.
Management of the Company believes that cash flows from operations of the
Company, together with its existing cash balances and borrowings, will be
sufficient to service its working capital and debt service requirements and fund
capital expenditures for the foreseeable future.
IMPACT OF INFLATION
Reference is made to the Company's Form 10-K for the year ended December
31, 1995 "Impact of Inflation."
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<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
------
10.1 Assignment and assumption of lease made 12th day of
February 1996 between AM Industries and
ABN Securities Systems, Inc. **
27 Article 5 Financial Data Schedule **
** Filed electronically herewith
(b) Reports on Form 8-K:
a) Form 8-K filed April 16, 1996 - Item 5 other events
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN BANKNOTE CORPORATION
By: /s/ John T. Gorman
---------------------
John T. Gorman
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: May 14, 1996
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<PAGE>
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit
- -------
10.1 Assignment and assumption of lease made 12th day of February 1996
between AM Industries and ABN Securities Systems, Inc.
27 Article 5 Financial Data Schedule
Page -14-
ASSIGNMENT AND ASSUMPTION OF LEASE
This Agreement is made and entered into to be effective as of the 12 day of
February, 1996 (the "Effective Date") by and between
AM INDUSTRIES, INC.,
A Tennessee corporation, of
3501 West Howard Street,
Skokie, Illinois 60076,
hereinafter called "ASSIGNOR", and
ABN SECURITY SYSTEMS, INC.,
A New York corporation, of
51 West 52nd Street,
New York, New York 10019,
hereinafter called "ASSIGNEE".
Preliminary Statements
ASSIGNOR is the Lessee under that certain Lease dated February 14, 1994, between
AM INDUSTRIES, INC., as the Tenant, HARRIS SYSTEMS, INC., as the Guarantor, and
MAURY COUNTY, TENNESSEE, as Lessor, hereinafter called LESSOR, for certain
premises comprising 50,000 square feet of building in the Maury County
Industrial Park with land on which the building is located, being the same
property described in Deed Book 1110, Page 465, Maury County Register's Office,
hereinafter called the "Property", a copy of which Lease is attached hereto
marked "Exhibit 1" and which is hereinafter referred to as the "Lease". ASSIGNOR
desires to transfer and convey its entire right, title and interest in, to and
under the Lease and the leasehold estate in the Property created thereby
pursuant to this ASSIGNMENT AND ASSUMPTION OF LEASE to ASSIGNEE, with the
consent of LESSOR and GUARANTOR. From and after the Effective Date of this
Agreement, ASSIGNEE shall be primarily responsible for the payment of rent under
the Lease and shall have all of the benefits and burdens flowing therefrom, all
pursuant to this instrument. Pursuant to this instrument, ASSIGNEE also agrees
to purchase from ASSIGNOR and pay ASSIGNOR for certain leasehold improvements on
and to the Property made by ASSIGNOR, and ASSIGNOR and ASSIGNEE further agree
that ASSIGNOR shall deliver and turn over the Property to ASSIGNEE.
Agreements
NOW, THEREFORE, in consideration of the premises as described in the
foregoing Preliminary Statements and of the mutual promises herein set forth,
the parties do hereby agree as follows:
1. Assignment ASSIGNOR hereby assigns and transfers to ASSIGNEE,
effective as of the Effective Date hereof, all of the ASSIGNOR's right, title
and interest in, to and under the Lease and the leasehold estate in the Property
created by the Lease, and ASSIGNEE shall, from and after the Effective Date, be
responsible for the performance of all terms and conditions under the Lease
arising from and after the Effective Date. Additionally, ASSIGNEE shall be
entitled to all options and other rights at law and under the Lease, including
but not limited to the right to purchase the Property from Lessor and to
exercise the right of first refusal as to adjacent property set forth in
Sections 8 and 9 of the Lease and ASSIGNOR waives all of its rights thereto.
For purposes of this Agreement, the Effective Date shall mean February 15,
1996 or such later date as all consents to this Agreement have been obtained. In
the event the Effective Date shall not have occurred on or before February 29,
1996, ASSIGNEE may terminate this Agreement without further obligation to
ASSIGNOR or LESSOR.
2. Assumption ASSIGNEE hereby assumes the Lease as of the Effective
Date hereof, and agrees to perform and observe all of the covenants and
conditions therein contained on the Lessee's part to be performed and observed
from and after the Effective Date hereof.
3. Possession ASSIGNOR shall deliver and turn over possession of
the Property to ASSIGNEE, as follows:
(a) On the Effective Date, 20% of the 50,000 square feet building on the
Property, and the balance of said building within two months thereafter.
ASSIGNOR may retain and utilize 40,000 square feet of said building through
April 15, 1996.
(b) Not later than May 1, 1996, the entire metal lean-to addition on the
Property. ASSIGNOR may retain and utilize said metal lean-to addition through
April 30, 1996.
4. Improvements ASSIGNOR hereby assigns to ASSIGNEE the entire right,
title and interest in and to the Leasehold Improvements made by ASSIGNOR to the
Property which are on and form a part of the premises, in an as-is and where-is
condition, except for clean-up of the Property as specified in this instrument.
<PAGE>
5. Payments ASSIGNEE shall make the payments pursuant to this
Agreement, as follows:
(a) For the period from February 15, 1996 through February 29, 1996,
payable to ASSIGNOR upon the execution of this Agreement by the parties, a sum
equal to 20% of the monthly rent, $833.34, plus reimbursement of taxes,
insurance and operating expenses for the property for such period (upon
submission of customary documentation thereof).
(b) For the period from and after March 1, 1996, rent and other payments
as provided in paragraphs 1 and 2 of the Lease, which shall be paid directly to
the LESSOR.
(c) For ASSIGNOR's Leasehold Improvements to the Property, payments as
provided in that certain Installment Note executed by ASSIGNEE in favor of
ASSIGNOR and delivered contemporaneously with the execution of this Agreement.
6. Clean-up of Property In consideration of this Agreement, ASSIGNOR hereby
agrees to perform at its expense the following clean-up tasks on the Property
prior to June 1, 1996:
(a) ASSIGNOR shall clean and pressure wash the inside of the buildings on
the Property;
(b) ASSIGNOR shall clean up and remove from the property all debris on the
land forming a part of the Property.
7. Security Deposit Contemporaneously with the execution of this
Agreement, ASSIGNEE has deposited with ASSIGNOR a Security Deposit of $8,333.34
to be retained by ASSIGNOR in an interest bearing insured bank account to ensure
that ASSIGNEE shall fully perform each and every term and obligation provided in
the Lease and this instrument. If ASSIGNEE fully performs all its obligations
provided in the Lease and pays all sums due LESSOR and otherwise performs this
instrument, then ASSIGNOR, after ASSIGNEE has surrendered possession of the
Property or has acquired the Property from LESSOR and the Lease is cancelled and
terminated or March 15, 1999, whichever event shall be first in time, ASSIGNOR
shall refund the Security Deposit to ASSIGNEE. If ASSIGNEE fails to perform or
comply with any provisions in the Lease or this instrument, ASSIGNOR may deduct
any damages from the Security Deposit. The Security Deposit shall not be treated
as an advance payment of rent and ASSIGNEE may not apply the Security Deposit as
rent.
8. REPRESENTATIONS
(a) OF ASSIGNOR AND GUARANTOR ASSIGNOR and GUARANTOR have all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance by ASSIGNOR and
GUARANTOR of this Agreement and the consummation of the transactions
contemplated hereby, have been authorized by all necessary action of the
ASSIGNOR and GUARANTOR and do not require any consent, waiver, approval, license
or authorization (except as provided in the Agreement or already obtained) and
do not conflict with or result in a breach, termination, default or acceleration
under, or result in the creation of any lien or encumbrance upon the Property or
the Leasehold Improvements under any mortgage, deed of trust, indenture or other
agreement or instrument or any order, judgment, decree, statute, regulation or
any other restriction of any kind or character, to which ASSIGNEE or GUARANTOR
is a party.
ASSIGNOR has paid all rental payments under the Lease through and including
the month of February 1996 and is in material compliance with all the terms and
conditions of the Lease with respect to the period of its tenancy. ASSIGNOR
agrees to indemnify and hold ASSIGNEE harmless from and against all claims and
liabilities with respect to any and all matters arising prior to the Effective
Date relating to the Lease, and its occupancy and use of the Property as
provided in paragraph 3(a) and 3(b) hereof.
ASSIGNOR has good title to all of the items of the Leasehold Improvements,
free and clear of all liens and encumbrances.
To the best of ASSIGNOR's knowledge and belief, the conduct of business by
ASSIGNOR with respect to the Property which is the subject of this instrument
has not violated in any material respect any federal, state, local, foreign or
other laws, statutes, ordinances or regulations or any order, writ, injunction
or decree of any court, commission, board, bureau, agency or instrumentality and
ASSIGNOR has materially complied with the provisions of all federal, state and
local environmental, health and safety laws, and all rules and regulations
promulgated thereunder. ASSIGNOR has no knowledge that it has done anything to
cause nor has ASSIGNOR received any notice of any fact which could constitute
the basis for the assertion of liability against the ASSIGNOR or violative of
any federal, state or local environmental, health or safety laws.
B. OF ASSIGNEE ASSIGNEE has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance by ASSIGNEE and the consummation of the
transactions contemplated hereby, have been authorized by all necessary action
of the ASSIGNEE and do not require any consent, waiver, approval, license or
authorization (except as provided in the Agreement or already obtained).
With respect of ASSIGNEE's operations under the Lease after the Effective
Date, during the term of the Lease for which ASSIGNOR has responsibility to the
LESSOR, to the best of ASSIGNEE's knowledge, ASSIGNEE shall use its best
efforts to not violate in any material respect any federal, state, local,
foreign or other laws, statutes, ordinances or regulations or any order, writ,
injunction or decree of any court, commission, board, bureau, agency or
instrumentality and to materially comply with the provisions of all federal,
state and local environmental, health and safety laws, and all rules and
regulations promulgated thereunder .
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
to be effective as of the Effective Date of this Assignment and Assumption of
Lease.
AM INDUSTRIES, INC., ABN SECURITY SYSTEMS, INC.,
A Tennessee Corporation A New York Corporation
By: /s/ James E. Harris By: /s/ Harvey J. Kesner
(Print Name: James E. Harris) (Print Name: Harvey J. Kesner)
Title: President Title: Sr. Vice President
Attest: /s/ Steve Haramaras Attest: /s/ Patricia Jones
(Print Name: Steve Haramaras) (Print Name: Patricia Jones)
Title: Secretary Title: Executive Assistant
Assignor Assignee
<PAGE>
The undersigned Guarantor consents to the foregoing
ASSIGNMENT AND ASSUMPTION OF LEASE:
HARRIS SYSTEMS, INC.,
An Illinois Corporation
By: /s/ James E. Harris
(Print Name: James E. Harris)
Title: President
Attest: /s/Steve Haramaras
(Print Name: Steve Haramaras)
Title: Secretary
<PAGE>
ACCEPTANCE OF ASSIGNMENT AND ASSUMPTION OF LEASE
For good and valuable consideration, the receipt of which is
hereby acknowledged, the undersigned, MAURY COUNTY, TENNESSEE, being LESSOR
pursuant to that certain Lease which is attached hereto and made a part hereof
identified as Exhibit 1, does hereby accept said Assignment and Assumption of
Lease set out above and does hereby agree to hereafter look to said ASSIGNEE as
LESSEE and to said GUARANTOR under said Lease, but the undersigned LESSOR does
not release or discharge said ASSIGNOR or said GUARANTOR under said Lease.
LESSOR acknowledges that prior to and up to the date of this Acceptance,
ASSIGNOR and LESSOR have fully and faithfully performed all of the terms and
conditions of the Lease and that the Lease is in full force and effect. LESSOR
agrees that provided there is not at the time of exercise any material default
under the Lease that ASSIGNEE (or its parent, subsidiary or affiliated company)
shall have the full right to exercise the option and right of first refusal
granted Lessee under the Lease set forth in paragraphs 8 and 9 thereof.
MAURY COUNTY, TENNESSEE
Dated:
2-21, 1996 By: s/Ed Harlan
(Print Name: Ed Harlan)
Title: County Executive
Approved: s/ Norma J. Rosson
(Print Name: Norma J. Rosson)
Title: Notary Public
<PAGE>
GUARANTEE BY AMERICAN BANK NOTE COMPANY
AMERICAN BANK NOTE COMPANY, a corporation, being the owner of all of the
issued and outstanding shares of ABN Security Systems, Inc., a New York
Corporation, the ASSIGNEE under the foregoing ASSIGNMENT AND ASSUMPTION OF
LEASE, hereby guarantees AM INDUSTRIES, INC., ASSIGNOR under the foregoing
ASSIGNMENT AND ASSUMPTION OF LEASE, the full, timely and faithful performance by
said ABN Security Systems, Inc. of all of the terms and conditions by ABN
Security Systems, Inc. to be performed under the said ASSIGNMENT AND ASSUMPTION
OF LEASE, including the making of all rental payments under the Lease referred
to therein through and including the full term thereof, and further guarantees
material compliance with all the terms and conditions of said Lease with respect
to the period of tenancy of ABN Security Systems, Inc. AMERICAN BANK NOTE
COMPANY agrees to indemnify and hold said AM INDUSTRIES, INC. harmless from and
against all claims and liabilities for which said AM INDUSTRIES, INC. shall
become liable with respect to any and all matters arising after the Effective
Date from ASSIGNEE's activities under said Lease or said ASSIGNMENT AND
ASSUMPTION OF LEASE.
AMERICAN BANK NOTE COMPANY,
A New York corporation
By: /s/ Harvey J. Kesner
(Print Name: Harvey J. Kesner)
Attest: /s/ Patricia Jones
Title: Sr. Vice President
(Print Name: Patricia Jones)
Title: Assistant Secretary
<PAGE>
EXHIBIT 1
` L E A S E
---------
This lease is entered into between Maury County, hereinafter
referred to as Lessor and AM Industries, Inc., an Illinois Corporation to be
formed hereinafter referred to as Lessee for the Leasing of Lessors 50,000
square foot building in the Maury County Industrial Park with land on which the
building is located being the same property described in Deed Book 1110, Page
465, Maury County Register's Officer.
1. Lessor hereby agrees to lease to Lessee the building. Lessor will
complete all additional improvements described in the plans as Bid 1/12/94 at
Lessors' expense except that the sprinkler system contract will be deleted from
said bid and contracted separately at Lessees' expense. The lease shall be for
five years and the rent shall be $2083.33 per month for the first and second
year and $4,166.67 per month for the third through fifth years payable monthly
in advance with the first and last rental payment on the lease payable upon
execution of the lease. Lessee will also within 30 days from signing the Lease
pay $7,500.00 to Lessor for a portion of the bid plan construction costs.
1
<PAGE>
2. This is a net lease and Lessee is responsible for its insurance
and all building maintenance but shall not pay real estate property taxes during
the lease. Lessee will be responsible for any applicable personal property
taxes. Lessee shall receive as a credit (or set-off) against lease payments any
amounts paid by lessee upon any asserted ad valoram tax on Lessee's leasehold
interest in said real property.
3. Harris Systems, Inc., of Illinois will guarantee lease rental
payments and other liabilities under the lease but not to exceed the
following amounts on a decreasing schedule as follows: During first year
$200,000.00
After year one personal guarantee is $175,000.00; After year two
personal guarantee is $150,000.00; After year three personal guarantee
is $100,000.00; After year four personal guarantee is $50,000.00; Year
five there is no personal guarantee.
4. Lessee will maintain the building at its expense in its present
condition during the term of the lease except for normal wear and tear.
5. Lessor will at its expense obtain an environmental survey of the
property prior to occupancy by Lessee. Lessee will then be responsible for the
2
<PAGE>
environmental condition of the property during its occupancy except for any
environmental exceptions or problems noted in the initial environmental report.
Lessee shall comply with all applicable environmental regulations during the
lease term and shall hold Lessor harmless from any claims or liabilities related
to environmental regulations and will clean up at Lessees expense any portions
of the property having violations of environmental laws or regulation; except
for existing environmental conditions noted in the environmental assessment
report prior to occupancy by Lessee.
6. Lessee may improve or modify the use of the building upon and with
approval of Lessor.
7. The property may be subleased or assigned provided that the Corporate
guarantee of Harris Systems, Inc. will remain in effect.
8. During the term of the lease Lessee shall have the option to buy the
property for $700,000.00 cash upon notifying the County Executive of Lessor in
writing prior to expiration to the lease.
9. Lessee shall have the right of first refusal to purchase a adjacent
tract of land east of this building about 1.9 acres during the lease term and
shall have thirty days after being notified by lessor of proposed sale terms
3
<PAGE>
of the tract to equal the proposed sale terms and thus have the right to
purchase this property.
10. Lessee shall maintain general liability insurance of at least
$1,000,000.00 and fire and extended coverage casualty insurance of the buildings
of $600,000.00 with Lessor as an additional insured and current certificate of
insurance shall be furnished to lessor during the lease.
11. Rental payments not made within fifteen days of their monthly due date
shall be subject to a 5% late fee. First regular monthly payment (excluding the
first and last months rent paid upon execution of the lease) shall be due 30
days after issuance of a certificate of occupancy for the improved building and
on the same day monthly thereafter during the lease term the five year lease
term. If rental payments are delinquent for thirty days the Lessor shall have
the right of re-entry to the premises. Lessee shall be responsible for all cost
expense and attorney fee if it defaults on the lease and 10% interest on overdue
rent.
4
<PAGE>
Entered this __ day of ______, 1996.
MAURY COUNTY, TENNESSEE
By:
A M INDUSTRIES, INC.
By:
HARRIS SYSTEMS, INC.
By:
James E. Harris, President
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 15,837
<SECURITIES> 2,825
<RECEIVABLES> 36,419
<ALLOWANCES> 551
<INVENTORY> 23,240
<CURRENT-ASSETS> 96,530
<PP&E> 279,657
<DEPRECIATION> 50,347
<TOTAL-ASSETS> 378,662
<CURRENT-LIABILITIES> 45,454
<BONDS> 197,403
0
0
<COMMON> 198
<OTHER-SE> 40,003
<TOTAL-LIABILITY-AND-EQUITY> 378,662
<SALES> 59,917
<TOTAL-REVENUES> 59,917
<CGS> 42,004
<TOTAL-COSTS> 42,004
<OTHER-EXPENSES> 9,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,068
<INCOME-PRETAX> (1,019)
<INCOME-TAX> (865)
<INCOME-CONTINUING> (802)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (802)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
