SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission file number 0-6664
K-TEL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0946588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2605 Fernbrook Lane North, Minneapolis, Minnesota 55447-4736
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 559-6888
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 ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
At November 7, 1996 there were outstanding 3,764,072 shares of common stock,
$.01 par value per share, of K-tel International, Inc.
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the quarter ended September 30, 1996
PART I - FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations
- Three month periods ended September 30, 1996 and 1995 3
Consolidated Balance Sheets
- September 30, 1996 and June 30, 1996 4
Consolidated Statements of Cash Flows
- Three month periods ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBITS
Exhibit 10.43: Seventh Amendment to Revolving Credit Agreement - K-tel
International (USA), Inc. and Dominion Entertainment, Inc. -
attached to this report as Exhibit 10.43
Exhibit 10.44: Employment Agreement - David Weiner - attached to this report
as Exhibit 10.44
Exhibit 10.45: Non-Qualified Stock Option Agreement - David Weiner - attached
to this report as Exhibit 10.45
Exhibit 11: Statement Regarding Computation of Earnings Per Share
Exhibit 27: Financial Data Schedule (SEC use)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN THOUSANDS - EXCEPT PER SHARE DATA)
Three Months Ended
September 30,
1996 1995
-------- --------
NET SALES $ 15,622 $ 16,624
-------- --------
COSTS AND EXPENSES:
Cost of goods sold $ 7,478 $ 8,512
Advertising $ 2,784 $ 2,735
Selling, general & administrative $ 4,391 $ 4,989
-------- --------
Total Costs and Expenses 14,653 16,236
-------- --------
OPERATING INCOME 969 388
-------- --------
NON-OPERATING INCOME (EXPENSE):
Interest income 17 106
Interest expense (18) (75)
Foreign currency transaction gain (loss) (19) 10
-------- --------
Total Non-operating Income (Expense) (20) 41
-------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 949 429
PROVISION FOR INCOME TAXES (97) (124)
-------- --------
NET INCOME $ 852 $ 305
======== ========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .22 $ .08
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,804 3,803
======== ========
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND JUNE 30, 1996
(IN THOUSANDS)
September 30, June 30,
1996 1996
-------- --------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,036 $ 3,255
Accounts receivable, net 16,258 15,028
Inventories 6,387 5,808
Royalty advances 1,191 1,188
Prepaid expenses 1,356 645
Income tax refund receivable 20 89
-------- --------
Total Current Assets $ 27,248 $ 26,013
-------- --------
Property and Equipment 2,697 2,759
Less-Accumulated depreciation and amortization (1,927) (1,966)
-------- --------
Property and Equipment, net 770 793
Other Assets 1,040 989
-------- --------
$ 29,058 $ 27,795
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Line of credit $ 43 $ 1,864
Accounts payable 4,419 4,112
Accrued royalties 11,118 10,866
Reserve for returns 8,021 6,817
Other current liabilities 2,782 2,328
Income taxes payable 259 244
-------- --------
Total Current Liabilities $ 26,642 $ 26,231
-------- --------
Preferred Stock -- --
Common stock 37 37
Contributed capital 7,872 7,870
Accumulated deficit (4,814) (5,666)
Cumulative translation adjustment (679) (677)
-------- --------
Total Shareholders' Investment 2,416 1,564
-------- --------
$ 29,058 $ 27,795
======== ========
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30
(IN THOUSANDS)
September 30,
1996 1995
------- -------
Cash Flows From Operating Activities:
Net income $ 852 $ 305
Adjustments to reconcile net income to
cash used for operating activities:
Depreciation and amortization 114 491
Changes in current operating items:
Restricted Cash -- (194)
Accounts receivable (1,215) (2,464)
Inventories (571) (545)
Royalty advances 1 (207)
Prepaid expenses and other (711) 378
Current liabilities 2,265 1,121
------- -------
Cash used for operating activities 735 (1,115)
------- -------
Cash flows from investing activities:
Property and equipment purchases (79) (163)
Proceeds from sale of property and equipment 41 56
Music catalog additions (91) (493)
Other (9) (15)
------- -------
Cash used for investing activities (138) (615)
------- -------
Cash flows from financing activities:
Proceeds (Repayment) line of credit, net (1,821) 1,321
Proceeds from exercise of stock options 2 21
------- -------
Cash provided by financing activities (1,819) 1,342
Effect of exchange rates on cash and cash equivalents 3 (2)
------- -------
Net decrease in cash and cash equivalents (1,219) (400)
Cash and cash equivalents at beginning of year 3,255 2,154
------- -------
Cash and cash equivalents at period end $ 2,036 $ 1,754
======= =======
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed 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 Rule 10-01 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
adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended September
30, 1996 are not necessarily indicative of the results that may be
expected for the year as a whole. 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 June 30, 1996.
2. RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("Statement 121"), issued in March 1995 and effective for
fiscal years beginning after December 15, 1995, establishes accounting
standards for the recognition and measurement of impairment of
long-lived assets, and goodwill either to be held or disposed of.
Management believes the adoption of Statement 121 will not have a
material impact on the Company's financial position or results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
A. Results of Operations
The following tables set forth, for the periods indicated, certain
items from the Company's consolidated statements of operations
expressed as a percentage of net sales.
K-TEL INTERNATIONAL, INC.
RESULTS OF OPERATIONS BY GEOGRAPHIC REGION
(IN 000'S)
<TABLE>
<CAPTION>
Quarter Ended September 30, 1996
--------------------------------------------------------------------------
North America Europe Total
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 9,648 100% $ 5,974 100% $ 15,622 100%
Costs and expenses
Cost of goods sold 4,801 50% 2,677 45% 7,478 48%
Advertising 1,588 16% 1,196 20% 2,784 18%
Selling, general & administrative 2,387 25% 1,800 30% 4,187 27%
---------- ------- ---------- ------- ---------- --------
Operating Income (Loss) $ 872 9% $ 301 5% $ 1,173 7%
========== ======= ========== ======= ========== ========
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Quarter Ended September 30, 1995
--------------------------------------------------------------------------
North America Europe Total
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 11,626 100% $ 4,998 100% $ 16,624 100%
Costs and expenses
Cost of goods sold 6,085 52% 2,427 48% 8,512 51%
Advertising 1,800 16% 935 19% 2,735 16%
Selling, general & administrative 2,907 25% 1,647 33% 4,554 27%
---------- -------- ---------- -------- ---------- --------
Operating Income (Loss) $ 834 7% $ (11) 0% $ 823 5%
========== ======== ========== ======== ========== ========
</TABLE>
In addition to the operating amounts above for the quarter ended September 30,
1996, the parent holding company recorded $204,000 in expenses. For the quarter
ended September 30, 1995 the parent holding company recorded $435,000 in
expenses. The decrease in costs from the prior year comparable period was the
result of prior year legal and professional fees associated with the proposed
sale of the consumer entertainment business (which was terminated in January of
1996).
<PAGE>
Consolidated net sales for the first quarter ended September 30, 1996,
were $15,622,000 with operating income of $969,000 and net income of
$852,000 or $.22 per share. Consolidated net sales for the same period
in the prior year were $16,624,000 with operating income of $388,000
and net income of $305,000 or $.08 per share.
Consolidated net sales decreased 1,002,000 or 5% for the three months
ended September 30, 1996 from the previous year comparable period.
North American sales were down 17% or $1,978,000 from the prior year
comparable period due to a $2,220,000 decrease in consumer convenience
product sales in the U.S. since there were less new North American
consumer convenience product releases in the current year which was
only partially offset by a $985,000 increase in consumer entertainment
product sales in the U.S.. European sales were up 23% or $976,000 from
the prior year comparable period due mainly to increased budget retail
music sales in the United Kingdom and increased direct response sales
in Germany due to more effective direct response promotions than in the
previous year. Foreign currency conditions were less favorable than in
the comparable prior year period and caused sales to be $188,000 lower
for the three months ended September 30, 1996 than they would have been
had exchange rates remained consistent with the prior year.
For the quarter ended September 30, 1996 cost of goods sold as a
percentage of net sales were 48% as compared to 51% in the prior year
comparable period. North American cost of goods sold were 50% compared
to 52% for the same period last year due mainly to overall higher music
margins driven mainly by a successful line of club dance music
releases. European cost of goods sold decreased from the prior year due
to higher margin direct response promotions than in the prior year.
Consolidated advertising costs as a percent of sales were 18% as
compared to 16% in the previous year comparable period. North American
advertising costs as a percent of sales were 16% compared to 15% in the
previous year. This increase was due to additional U.S. music retail
advertising in support of full price music releases. European
advertising cost as a percentage of sales were 20% compared to 19% in
the previous year. In all current European operations, advertising as a
percent of sales was comparable to prior year.
Selling, general and administrative expenses for the quarter ended
September 30, 1996 were $4,391,000 or 28% of net sales, as compared to
$4,989,000 or 30% of net sales in the previous year comparable period.
North American selling, general and administrative expenses were down
$520,000 from the previous year due mainly to overhead reductions.
European selling, general and administrative expenses were up $153,000
from the previous year due mainly to stronger German direct response
sales and associated variable selling expenses.
Operating income for the quarter ended September 30, 1996 increased to
$969,000 from $388,000 for the same period last year. North American
operating income was $872,000 compared to $834,000 for the prior year
comparable period, the increase was due to current year stronger retail
music sales. European operating income was $301,000 compared to a loss
of $11,000 in the prior year comparable period. The operating income
improvement was due mainly to the United Kingdom and Germany which had
operating income in the current year first quarter versus losses in the
previous year first quarter. The parent holding company had current
operating expenses of $204,000 compared to prior year operating
expenses of $435,000 which was mainly due to prior year legal and
professional fees associated with the proposed sale of the consumer
entertainment business (which was terminated in January 1996).
Interest expense for the quarter ended September 30, 1996 was $12,000
compared to $75,000 for the prior year comparable period. The decrease
in interest expense was due primarily to the reduced usage of the
Company's asset based line of credit.
During the quarter ended September 30, 1996, the Company experienced a
foreign currency transaction loss of $19,000 compared to a gain of
$10,000 experienced during the comparable period in the prior year. In
the first quarter of fiscal 1997, foreign exchange rate fluctuations
have been slightly less favorable to the Company than in the previous
year comparable period. Also, the Company has a policy to reduce its
foreign currency exchange exposure by hedging its exposure through the
use of forward contracts. Most of the Company's foreign currency
transaction exposure is due to its European subsidiaries liabilities
which are payable to the Company's U.S. parent or U.S. Subsidiaries. In
accordance with generally accepted accounting principles the payable
balances are adjusted quarterly to the local currency equivalent of the
U.S. dollar. The majority of the fiscal 1997 first quarter translation
gains were the result of these intercompany liabilities. Gains or
losses resulting from these intercompany liabilities remain unrealized
until such time as the underlying liabilities are settled.
The provision for income taxes for the quarter ended September 30, 1996
was $97,000 compared to a provision of $124,000 in the prior year
comparable period. Variations in the Company's tax provision are a
factor of the country of origin of profits and the availability of net
operating loss carryforwards.
Operating results for the quarter ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year
as a whole.
B. Liquidity and Capital Resources
During the first quarter ended September 30, 1996, cash and cash
equivalents decreased approximately $1,219,000 to $2,036,000 due
primarily to the pay down of the Company's asset based line of credit.
This use of cash was partially offset by net income for the quarter
ended September 30, 1996.
Two of the Company's United States subsidiaries, K-tel International
(USA), Inc. and Dominion Entertainment, Inc. (the "Subsidiaries") have
a revolving credit agreement maturing November 30, 1996. The agreement
provides for an asset based line of credit not to exceed $5,000,000 in
total, with availability based on a monthly borrowing base derived from
the Subsidiaries' accounts receivable and inventory. Borrowings are
collateralized by the assets of the Subsidiaries, including accounts
receivable, inventories, equipment and Dominion Entertainment, Inc.'s
owned music master recordings. The Company has also guaranteed all
borrowings of the Subsidiaries. The amount outstanding under this line
of credit was $43,000 at September 30, 1996. The Subsidiaries are
required to maintain minimum levels of tangible net worth and certain
other financial ratios. As of September 30, 1996 the Subsidiaries were
in compliance or have obtained waivers for these covenants. The
revolving credit agreement expires November 30, 1996. The Company has
initiated discussions with the bank and believes that the line of
credit will be renewed.
During fiscal 1997 the Company plans a computer system upgrade of
approximately $500,000 which will be financed through leases over
multiple years.
During the first quarter of fiscal 1996, the Company purchased
approximately $243,000 of consumer convenience product from an
affiliate controlled by the Chairman of the Board. The Company owed
approximately $41,000 to the affiliate at September 30, 1996. The
Chairman's company purchased approximately $74,000 of products from the
Company during the first quarter ended September 30, 1996 and owed the
Company $25,000 at September 30, 1996. No interest will be charged on
the related outstanding balances during fiscal 1997.
Management considers its cash needs for the current fiscal year to be
adequately covered by its operations, borrowings under the bank line of
credit, assuming it is renewed November 30, 1996 when it expires, or by
funding from a company owned by Mr. Kives, the Chairman of the Board of
Directors of the Company. Although management is not privy to the
financial statements of the Chairman's other companies, he has assured
K-tel International, Inc. that he will fund its operations on an as
needed basis consistent with his past practices which have mainly been
by way of giving the Company open ended payment terms on product
purchased from his affiliate companies.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
10.43 Seventh Amendment to Revolving Credit
Agreement - K-tel USA and Dominion
attached to this report as Exhibit 10.43
10.44 Employment Agreement - David Weiner
attached to this report as Exhibit 10.44
10.45 Non-Qualified Stock Option Agreement - David Weiner
attached to this report as Exhibit 10.45
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule (SEC use)
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K-TEL INTERNATIONAL, INC.
REGISTRANT
/S/ PHILIP KIVES
PHILIP KIVES
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/S/ DAVID WEINER
DAVID WEINER
PRESIDENT
/S/ MARK DIXON
MARK DIXON
CHIEF FINANCIAL OFFICER
(principal accounting officer)
Exhibit 10.43
SEVENTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Seventh Amendment is made as of this 9th day of October,
1996, by and among K-TEL INTERNATIONAL (USA), INC., a Minnesota corporation,
having its principal place of business in Plymouth, Minnesota ("K-Tel USA"),
DOMINION ENTERTAINMENT, INC., a Minnesota corporation, having its principal
place of business in Plymouth, Minnesota ("Dominion"; K-Tel USA and Dominion are
sometimes herein collectively referred to as the "Borrowers" and each is
sometimes individually referred to as a "Borrower"), and TCF BANK MINNESOTA FSB,
a federally chartered stock savings bank (the "Bank").
RECITALS
A. The Borrowers and the Bank have entered into a Revolving
Credit Agreement dated as of July 22, 1994, as amended by a First Amendment to
Revolving Credit Agreement dated as of January 30, 1995, by a Second Amendment
to Revolving Credit Agreement and to Revolving Note dated as of July 20, 1995,
by a Third Amendment to Revolving Credit Agreement dated as of October 2, 1995,
by a Fourth Amendment to Revolving Credit Agreement and to Revolving Note dated
as of November 28, 1995, by a Fifth Amendment to Revolving Credit Agreement and
to Revolving Note dated as of December 28, 1995 and by a Sixth Amendment to
Revolving Credit Agreement dated as of August 23, 1996 (as amended, the "Credit
Agreement"), pursuant to which the Bank, subject to the terms and conditions set
forth therein, agreed to make revolving advances to the Borrowers in the
aggregate amount of up to $2,750,000.
B. The Borrowers' joint and several obligation to repay the
revolving advances made by the Bank under the Credit Agreement is evidenced by
the Borrowers' Revolving Note dated August 23, 1996, payable to the Bank's order
in the original principal amount of $5,000,000 (the "Note").
C. The Borrowers have requested, among other things, that the
Bank waive certain Events of Default on the part of K-Tel USA and Dominion.
D. The Bank is willing to grant the Borrowers' requests
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used in this Seventh Amendment,
unless specifically defined herein, shall have the meanings given to such terms
in the Credit Agreement.
2. Events of Default have occurred under Section 7.1(c) of the
Credit Agreement because (i) K-Tel USA did not have the required minimum Capital
Base of at least $1,500,000 during certain periods through the date of this
Amendment as required by Section 5.10 of the Credit Agreement, (ii) Dominion did
not have the required minimum Capital Base of at least $1,800,000 during certain
periods through the date of this Amendment as required by Section 5.11 of the
Credit Agreement, (iii) K-Tel USA did not have the required Debt to Capital Base
Ratio of not more than 13.0 to 1.0 during certain periods through the date of
this Amendment as required by Section 5.8 of the Credit Agreement and (iv)
Dominion did not have the required minimum Debt to Capital Base Ratio of not
less than 0.50 to 1.0 during certain periods through the date of this Amendment
as required by Section 5.9 of the Credit Agreement. Upon the terms and subject
to the conditions set forth in this Seventh Amendment, the Bank hereby waives
the foregoing Events of Default and the Bank hereby prospectively waives future
Events of Default arising from the Borrowers failure to comply with the
requirements of Sections 5.8, 5.9, 5.10 and 5.11 through November 30, 1996. This
waiver shall be effective only in this specific instance and for the specific
purpose for which it is given, and this waiver shall not entitle the Borrower to
any other or further waiver in any similar or other circumstances.
3. Section 1.1 of the Credit Agreement is hereby amended by
deleting the existing definition of "Interest Rate Spread" and by substituting
therefor the following new definition:
"'Interest Rate Spread' means (i) one and three-quarters of
one percent (1.75%) through and including October 31, 1996 and (ii) two
percent (2.00%) from and after November 1, 1996."
4. Section 1.1 of the Credit Agreement is hereby amended by
adding the following new definition of "Seventh Amendment" in the appropriate
alphabetical location:
"'Seventh Amendment' means that certain Seventh Amendment to
Revolving Credit Agreement dated as of October 9, 1996, between the
Bank and the Borrowers."
5. This Seventh Amendment shall not become effective until the
Bank shall have received each of the following in form and substance acceptable
to the Bank:
(a) The Acknowledgment and Agreement of Guarantor attached
below.
(b) A copy of the Articles of Merger, certified by the
Minnesota Secretary of State, pursuant to which K-Tel, Inc. was merged
into K-Tel USA, with K-Tel USA as the surviving corporation.
(c) Such other items as the Bank may require.
6. References. From and after the date of this Seventh
Amendment all references in the Credit Agreement to "this Agreement" shall be
deemed to refer to the Credit Agreement as amended by this Seventh Amendment.
7. No Other Changes. Except as explicitly amended by this
Seventh Amendment, all of the original terms and conditions of the Credit
Agreement shall remain in full force and effect.
8. No Other Waiver. Except as explicitly set forth in
paragraph 2 of this Seventh Amendment, the execution of this Seventh Amendment
and acceptance of any documents related thereto shall not be deemed to be a
waiver of any existing or future Default or Event of Default under the Credit
Agreement or any other Loan Document, whether or not known to the Bank and
whether or not such Default or Event of Default exists on the date of this
Seventh Amendment.
9. Release. The Borrowers and K-Tel International, Inc. by
signing the Acknowledgment and Agreement of Guarantor set forth below, each
hereby absolutely and unconditionally releases and forever discharges the Bank,
and any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrowers or any Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Seventh Amendment, whether such claims, demands and causes of action are matured
or unmatured or known or unknown.
10. Expenses. The Borrowers hereby reaffirm their agreement
under Section 8.5 of the Credit Agreement. Without limiting the generality of
the foregoing, the Borrowers specifically agree to pay all fees and
disbursements of counsel to the Bank for the services performed by such counsel
in connection with the preparation of this Seventh Amendment and the documents
and instruments incidental thereto.
11. Counterparts. This Seventh Amendment and the
Acknowledgment and Agreement of Guarantor may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Seventh Amendment to be duly executed as of the date first above written.
K-TEL INTERNATIONAL (USA), INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
DOMINION ENTERTAINMENT, INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
TCF BANK MINNESOTA fsb
By /S/ Richard D. Larson
-------------------------------------
Its Vice President
And
By /S/ Milli A. Navara
-------------------------------------
Its Assistant Vice President
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, K-Tel International, Inc., a guarantor of the
indebtedness of K-Tel International (USA), Inc. and Dominion Entertainment, Inc.
(together, the "Borrowers") to the Bank pursuant to its Guaranty dated as of
July 22, 1994 (the "Guaranty), hereby (i) acknowledges receipt of the foregoing
Seventh Amendment; (ii) consents to the terms (including without limitation the
release set forth in paragraph 9 of the foregoing Seventh Amendment) and
execution thereof; (iii) reaffirms its obligations to the Bank pursuant to the
terms of its Guaranty, its Amended and Restated Collateral Pledge Agreement (the
"Pledge Agreement") dated as of January 30, 1995 and its Amended and Restated
Security Agreement dated as of January 30, 1995 (the "Security Agreement"); and
(iv) acknowledges and agrees that the Bank may amend, restate, extend, renew or
otherwise modify the Credit Agreement and any indebtedness or agreement of the
Borrowers, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under its Guaranty,
Pledge Agreement and/or its Security Agreement for all of the present and future
indebtedness of the Borrowers to the Bank.
K-TEL INTERNATIONAL, INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
Exhibit 10.44
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of September 16, 1996, by and
between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
DAVID WEINER, a California resident ("Executive"),
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive and Executive is
willing to accept employment on the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and agreements hereinafter contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Employment. The Company hereby employs Executive as President, to
perform the duties and have the responsibilities set forth in Schedule 1
attached hereto, together with such other duties and responsibilities consistent
with Executive's position as President as may be directed by the Chairman and
Chief Executive Officer or the Board of Directors of the Company may, from time
to time, assign to Executive and Executive hereby accepts such employment on the
terms and conditions set forth in this Agreement. The Executive shall report to
the Chairman and Chief Executive Officer of the Company and shall be subject to
his direction and supervision and the direction and supervision of the Board of
Directors.
2. Duties. Executive hereby agrees to devote his full time, attention
and best efforts to the performance of his duties hereunder and to the business
affairs of the Company, including its subsidiaries, and to perform his duties in
an efficient, trustworthy and business-like manner. During the term of this
Agreement, Executive shall not be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage except with the prior written consent of the Company which
the Company may withhold in its sole discretion and except for several hours
each month for Executive's involvement with Crossroads School.
3. Compensation. While Executive is employed by the Company under this
Agreement, Executive shall receive as full compensation for his services to the
Company the following:
(a) Base Salary. Executive will be paid a base salary at the rate of
Two Hundred Thousand and no/100 Dollars ($200,000.00) per annum for the
first year of the Term (as defined below), payable consistent with the
customary payroll practices of the Company. The base salary shall be
increased on each anniversary date of Executive's employment by five
percent (5%) or, if the Company's Board of Directors determines a
greater percentage increase is warranted based on Executive's
performance, such greater percentage.
(b) Annual Bonus. Executive will participate in the annual management
incentive plan based on the targeted operating income of the Company as
established by the Company's Board of Directors for each fiscal year
(excluding the results of operations in United Kingdom and Finland and
the consumer products division for the fiscal year ended June 30,
1997). The amount of annual bonus will be 40% of base salary earned for
the respective fiscal year if the maximum performance target (after
taking into account all bonuses earned and excluding any extraordinary
income items, including litigation proceeds or sales of assets outside
the ordinary course of business, and excluding any expenses associated
with such extraordinary items) is achieved and, if the maximum
performance target is exceeded, such bonus amount plus 2% of the
operating income (after taking into account all bonuses earned and
excluding any extraordinary income items, including litigation proceeds
or sales of assets outside the ordinary course of business) in excess
of the maximum performance target for operating income. The annual
bonus shall be paid on November 1st following the end of the fiscal
year if Executive is employed on such payment date, except for the
fiscal year ended June 30, 1999 and for such fiscal year Executive
shall only be required to be employed by the Company through the end of
the term of this Agreement to receive the bonus for such fiscal year on
November 1, 1999.
(c) Non-Qualified Stock Option. The Company will, upon execution of
this Agreement, grant Executive a non-qualified option covering 200,000
shares of the Company's common stock pursuant to the Non-Qualified
Stock Option Agreement attached hereto as Exhibit A.
(d) Benefits. The Company will provide Executive such fringe benefits
as the Company from time to time provides generally to its management
employees, such as vacation, health and life insurance. In determining
the length of employment with the Company for the purpose of
calculating the amount of vacation to which Executive is entitled, the
period of the prior service of Executive as an employee of the Company
shall be included. In addition, the Company will provide Executive the
following additional benefits: (i) domestic travel will be coach class
with upgrades when possible and international travel will be business
class, (ii) a utility type vehicle will be leased for Executive's use
in Minneapolis, Minnesota at a cost to the Company not to exceed $500
per month, and (iii) the Company will lease an apartment for
Executive's use in Minneapolis, Minnesota during the first six months
of the Term at a cost to the Company not to exceed $1,000 per month.
4. Term. The employment (the "Term") of Executive under this Agreement
shall commence on the date hereof and shall continue for a period of three years
from the date hereof unless the Executive's employment is sooner terminated as
follows:
(a) The death of Executive or the disability of the Executive which
prevents Executive from performing his duties for a period of sixty
days.
(b) The voluntary termination of employment by Executive upon thirty
(30) days prior written notice to the Company or such shorter period as
the Company may determine after receiving such voluntary termination
notice.
(c) The termination of employment by the Company for "Cause" upon
written notice to Executive. The term "Cause" shall mean: (i) an act or
acts of personal dishonesty taken by the Executive and intended to
result in substantial personal enrichment of the Executive at the
expense of the Company, (ii) repeated violations by the Executive of
the Executive's obligations under paragraph 2 of this Agreement which
are demonstrably willful and deliberate on the Executive's part and
which are not remedied in a reasonable period of time after receipt of
written notice from the Company, or (iii) the conviction of the
Executive of a felony.
(d) The termination of Executive's employment by the Company without
Cause upon written notice by the Company.
In the event that the Executive's employment is terminated for any reason, the
Executive shall be entitled to his accrued base salary and vacation pay through
the date of termination. The Executive shall also be entitled to the annual
bonus under paragraph 3(b) with respect to any fiscal year of the Company if
such termination occurs after the end of such year and before the payment of
such annual bonus. In addition, in the event of a termination under paragraph
4(d), then the Executive shall also be entitled to a continuation of his base
salary from the date of termination of his employment through the third
anniversary of the date hereof.
5. Confidentiality. The Executive agrees that, at all times, both
during and after his employment with the Company, he will not disclose any
confidential or proprietary information obtained by him as a result of his
employment with the Company or any of its subsidiaries other than as required to
other employees in the normal operation of the Company's business. The Executive
agrees that upon the termination of his employment, regardless of the reason
therefor, all records and other information pertaining to the Company or its
subsidiaries, including any computer disks or files, customer lists and other
confidential or proprietary information in his possession, shall be returned to
the Company, whether those records were prepared by Executive or by others.
6. Patent Rights and Inventions. The Executive shall immediately
disclose to the Company any and all improvements and inventions that he may
conceive and/or reduce to practice solely or jointly or commonly with others,
either while employed by the Company, or within a period one year from the
termination of such employment, with respect to (a) any methods, processes or
apparatus concerned with the use or production of any type of goods or materials
sold or used by the Company and (b) any type of products, goods or materials
sold or used by the Company. The Executive shall also immediately assign,
transfer and set over to the Company his entire right, title and interest in and
to any and all of such inventions as are specified in this paragraph 6 and in
and to any and all applications for letters patent that may be filed on such
inventions and in and to all letters patent that may issue, or be issued, upon
such applications. In connection therewith and for no additional consideration,
the Executive agrees:
(a) to sign any and all instruments deemed necessary by the Company for
the filing and prosecution of any applications for letters patent of
the United States or of any foreign country that the Company may desire
to file upon such inventions as are specified in this paragraph 6;
(b) to sign all instruments necessary for filing and prosecuting any
divisional, continuation, continuation-in-part or reissue applications
that the Company may desire upon such applications for letters patent;
and
(c) to sign all instruments deemed necessary by the Company for
reviving, re-examining or renewing any of such applications for letters
patent.
Section 181.79 of the Minnesota Statutes provides that the agreement of
Executive contained in this paragraph 6 does not apply, and written notification
is hereby given to the Executive that this paragraph 6 does not apply to an
invention for which no equipment, supplies, facility or trade secret information
of the Company was used and which was developed entirely on Executive's own
time, and (i) which does not relate (A) directly to the business of the Company,
or (B) to the Company's actual or demonstrably anticipated research or
development, or (ii) which does not result from any work performed by the
Executive for the Company.
7. No Hiring or Soliciting of Executives. For a period of two years
after termination of Executive's employment for any reason, the Executive shall
not directly or indirectly employ, solicit or otherwise seek to hire, whether on
his behalf or on the behalf of another person, any person employed by the
Company or any of its subsidiaries.
8. Covenant Not to Compete. While Executive is employed by the Company
and, in the event of a termination of employment other than a termination by the
Company without Cause pursuant to paragraph 4(d), for a period of one year after
such termination of the Executive's employment, the Executive agrees that he
will not directly or indirectly compete with the Company or any of its
subsidiaries. The Executive shall be deemed to be competing with the Company or
any of its subsidiaries if, without the prior written approval of the Board of
Directors of the Company, he becomes an officer, employee, agent, partner,
director, consultant, investor or lender to or of any person or entity engaged
in or otherwise provides any services or advice to any person or entity engaged
in either (i) the direct response marketing or distribution for retail sale of
pre-recorded music products or (ii) any consumer convenience products which the
Company or its subsidiaries has marketed during the period of Executive's
employment, within the United States, Canada, United Kingdom, Germany or any
other foreign country in which the Company or any of its subsidiaries has
conducted such business during the period of Executive's employment with the
Company. In addition, in the event of a termination by the Company without
Cause, of employee under paragraph 4(d), Executive shall be bound by the
provisions of this paragraph 8 for a period of one year following such
termination if the Company agrees in writing at the time such termination to pay
Executive the sum of $100,000 in addition to any other amounts due to Executive
which sum shall be payable in twelve equal consecutive monthly installments
commencing on the date of termination of Executive's employment.
9. Severability. Should any covenant, term or condition contained in
this Agreement or portion thereof, become or be declared invalid or
unenforceable by a court of competent jurisdiction, the parties request that
such court judicially modify such unenforceable provision consistent with the
intent of this paragraph so that it shall be enforceable to the fullest extent
possible, and in any event the invalidity of any provision of this Agreement
shall not affect the validity of any other provision elsewhere in this
agreement.
10. Specific Enforcement. The Executive understands and agrees that a
breach by him of any provisions contained in paragraphs 5, 6, 7 or 8 of this
Agreement may cause the Company irreparable injury and damage which cannot be
compensable by receipt of money damages. The Executive, therefore, expressly
agrees that the Company shall be entitled, in addition to any other remedies
legally available, to injunctive and/or other equitable relief or prevent a
breach of this Agreement or any part hereof.
11. Modification and Construction. This Agreement supersedes any prior
agreements relating to Executive's employment by the Company, whether oral or in
writing, and any such agreements are hereby terminated and revoked, except that
Executive's consulting arrangement with Dominion Vertriebs, a subsidiary of the
Company, will continue until an aggregate of $25,000 has been paid to Executive
thereunder. This Agreement may only be changed or modified in a writing signed
by both parties. The failure by any party to insist upon strict compliance by
the other party with respect to any of the terms or conditions hereof shall not
be deemed a waiver of any of such terms or conditions nor shall any waiver or
relinquishment of any right or power hereunder at one or more times be deemed a
waiver or relinquishment of such right or power at any other time or times.
12. Assignment. The rights and obligations of the parties hereof shall
inure to the benefit of the other and shall be binding upon their respective
successors and assigns or heirs and legal representatives, except that the
Executive may not assign his obligations hereunder.
13. Attorney's Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret the provisions
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and all other costs and expenses of litigation from the other
party, which amounts may be set by the court in the trial of such action or may
be enforced in a separate action brought for that purpose, and which amounts
shall be in addition to any other relief which may be awarded.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
K-TEL INTERNATIONAL, INC.
By: /S/ Philip Kives
------------------------------------
Philip Kives, Chairman and
Chief Executive Officer
/S/ David Weiner
---------------------------------------
David Weiner
Schedule 1
Description of Duties and Responsibilities
Executive shall be the President of the Company. Executive shall report
directly to the Chairman of the Board/Chief Executive Officer. All managers in
all divisions, domestic and international operations shall report directly to
the Executive. Executive shall be responsible for the day to day management of
the operations of the Company's businesses and shall have the authority to
delegate management responsibilities in Executive's prudent business judgment,
subject to the ultimate direction of Company's business affairs remaining with
the Chairman of the Board/Chief Executive Officer and the Board of Directors.
The Executive shall have full power and authority to hire and fire all employees
of the Company subject to the approval of the Chairman of the Board/Chief
Executive Officer if such decisions affect any employee or prospective employee
whose annual savings are reasonably expected to exceed $100,000 and to manage
and conduct all the business of Company subject to expenditure and other
strategic policies set by the Chairman of the Board/Chief Executive Officer or
the Company's Board of Directors.
Executive's duties, responsibilities and authorities shall be
commensurate with such duties, responsibilities and authorities generally given
to a president of like-size companies. Subject to policies set by the Board of
Directors, Executive's duties and responsibilities shall include, but not be
limited to the following:
* The Executive shall provide strategic and tactical direction
to increase the Company's profitability and business growth,
including maximization of shareholder value.
* Executive shall provide leadership to senior management team,
including international managers in developing new markets and
business opportunities for the company's products and to
either phase out, restructure and/or dispose of businesses
that do not meet Company's profitability targets and/or do not
fit strategically with Company's core business, provided that
any major decisions having a potential long term effect shall
be approved by the Chairman of the Board/Chief Executive
Officer.
* The Executive shall plan, direct and coordinate the marketing
of the company's products and services, assuring that products
are marketed in accordance with budgeted objectives to obtain
maximum profitability and volume in relation to preset
standards and to general and specific trends within the
industry and economy.
It is understood that Executive may perform his duties from Los
Angeles, California for up to five working days a month to be used with
discretion.
Exhibit 10.45
K-TEL INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of September 16, 1996, by and
between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company"), AND
DAVID WEINER, a California resident (the "Optionee");
W I T N E S S E T H:
WHEREAS, the Optionee has consented to serving as the Company's
President; and
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of its common stock, par value $.01, (the "Common Stock"),
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate of two hundred thousand (200,000) shares of Common Stock (the "Option
Shares") (such number being subject to adjustment as provided in Paragraph 4
hereof) on the terms and conditions herein set forth. The Option is a
non-qualified stock option under the Internal Revenue Code of 1986, as amended.
2. Purchase Price. Subject to the provisions of Paragraph 4 hereof, the
purchase price for the Option Shares shall be $4.00 per share, which has been
determined to be the fair market value of the Option Shares at the date of grant
of the Option.
3. Term and Vesting of Option. The Option shall expire (the "Expiration
Date") upon the earlier to occur of: (a) the close of business on the tenth
anniversary of the date hereof or (b) five (5) years after the date on which the
Optionee is no longer employed by the Company, unless such termination of
employment is by Optionee or by the Company for Cause as defined in the
employment agreement dated the date hereof between Optionee and the Company, in
which case the Option will expire ninety (90) days after such termination. Prior
to the Expiration Date, the Optionee shall be entitled to exercise the Option as
to all or any part of the Option Shares which have theretofore become vested.
The Option Shares shall vest and become exercisable as follows: (1) 100,000
shares upon the date hereof, (2) 33,000 shares upon the first anniversary of the
date hereof, (3) 33,000 shares upon the second anniversary of the date hereof,
and (4) 34,000 shares upon the third anniversary of the date hereof; provided,
however, in the event of the sale of all or substantially all of the assets of
the Company or a merger, consolidation or other reorganization of the Company in
which the shareholders of the Company immediately prior to such merger,
consolidation or reorganization constitute less than fifty-one percent (51%) of
the voting power of the surviving corporation (a "Sale Transaction") on or after
the first anniversary of this Agreement, then all of the Option Shares shall be
vested and exercisable upon the occurrence of such closing; provided further, in
the event a Sale Transaction occurs before the first anniversary of the date of
this Agreement, then the number of Option Shares shall be reduce to the 100,000
shares which vest on the date hereof. Notwithstanding the foregoing, the Option
may in no event be exercised by anyone to any extent in the event of a voluntary
dissolution, liquidation or winding up of the affairs of the Company, after the
close of business on the later of (i) the date of the twentieth day after the
mailing of written notice of such dissolution, liquidation or winding up, and
(ii) the record date for determination of holders of Common Stock entitled to
participate therein.
4. Adjustments for Changes in Capital Structure. If all or any portion
of this Option shall be exercised subsequent to any share dividend,
recapitalization, merger, consolidation, exchange of shares or reorganization as
a result of which shares of any class shall be issued in respect to outstanding
Common Stock, or if Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes, the person so
exercising this Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares to which they would have been
entitled if Common Stock (as authorized at the date hereof) had been purchased
at the date hereof for the same aggregate price (on the basis of the price per
share set forth in Paragraph 2 hereof) and had not been disposed of. No
fractional share shall be issued upon any such exercise and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued.
5. Method Exercise. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at its
principal office and place of business in the State of Minnesota. Such notice
shall state the election to exercise the Option and the number of Option Shares
in respect of which it is being exercised, and shall be signed by the person so
exercising the Option. Such notice shall be accompanied by the payment of the
full purchase price of such Option Shares and the delivery of such payment to
the Treasurer of the Company. The certificate for the Option Shares as to which
the Option shall have been so exercised shall be registered in the name of the
person exercising the Option. If the Optionee shall so request in the notice
exercising the Option, the certificate shall be registered in the name of the
Optionee and another person jointly with right of survivorship, and shall be
delivered as provided above to or upon the written order of the person
exercising the Option. In the event the Option shall be exercised by any person
other than Optionee, such notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.
6. Reservation of Shares. The Company shall, at all times during the
term of the Option, reserve and keep available such number of shares of its
capital stock as will be sufficient to satisfy the requirements of this
Agreement, and shall pay all original issue and transfer taxes with respect to
the issue and transfer of Option Shares pursuant hereto, and all other fees and
expenses necessarily incurred by the Company in connection therewith.
7. No Rights as Stockholder. The holder of the Option shall not have
any of the rights of a stockholder with respect to the Option Shares covered by
the Option except to the extent that one or more certificates for shares shall
be delivered to him upon the due exercise of the Option.
8. Registration and Investment Purpose. The Company shall use
reasonable efforts to have the shares issuable upon the exercise of this Option
registered on a Form S-8 Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Unless the Option
Shares have been so registered, the Option is granted on the condition that the
acquisition of shares hereunder shall be for investment purposes only and the
person acquiring Option Shares upon exercise of the Option must bear the
economic risk of the investment for an indefinite period of time since the
shares so acquired cannot be sold unless they are subsequently registered or an
exemption from such registration is available. Optionee agrees that a legend may
be placed on the stock certificates acknowledging the restrictions on subsequent
distribution of the shares issued upon exercise of this Option.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, assigns and
representatives and shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
K-TEL INTERNATIONAL, INC.
By /S/ Philip Kives
-------------------------------------
Philip Kives, Chairman and
Chief Executive Officer
/S/ David Weiner
----------------------------------------
David Weiner
Exhibit 11
<TABLE>
<CAPTION>
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
For the Quarters ended September 30, 1996 and 1995
1996 1995
------ ------
<S> <C> <C>
Primary earnings per share --
Weighted average number of issued shares outstanding 3,743 3,707
Effect of:
Stock Incentive Plan 61 96
------ ------
Shares outstanding used to compute
primary earnings per share 3,804 3,803
====== ======
Net Income $ 852 $ 305
====== ======
Primary earnings per share $ .22 $ .08
====== ======
Fully diluted earnings per share --
Weighted average number of shares used for primary earnings per share 3,803 3,804
Effect of:
Stock Incentive Plan -- --
------ ------
Shares outstanding used to compute fully diluted earnings per share 3,804 3,803
====== ======
Net Income $ 852 $ 305
====== ======
Fully diluted earnings per share $ .22 $ .08
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 2,036
<SECURITIES> 0
<RECEIVABLES> 16,258
<ALLOWANCES> 0
<INVENTORY> 6,387
<CURRENT-ASSETS> 27,248
<PP&E> 2,697
<DEPRECIATION> (1,927)
<TOTAL-ASSETS> 29,058
<CURRENT-LIABILITIES> 26,642
<BONDS> 0
0
0
<COMMON> 3,804
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,058
<SALES> 15,622
<TOTAL-REVENUES> 0
<CGS> 7,478
<TOTAL-COSTS> 14,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18)
<INCOME-PRETAX> 949
<INCOME-TAX> (97)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 852
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
