UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the fiscal year ended February 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number 0-1460
ANDERSEN GROUP, INC.
(Exact name of Registrant as specified in its charter)
Connecticut
06-0659863
(State or other jurisdiction of incorporation or organization) (I.R.S
Employer Identification No.)
1280 Blue Hills Avenue, Bloomfield, Connecticut 06002-1374
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (860) 242-0761
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock Without Par Value
(Title of Class)
10-1/2% Convertible Subordinated Debentures Due 2002
(Title of Class)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the average bid and asked prices of the Common Stock on
May 9, 1997, as reported on the NASDAQ National Market System, was approximately
$5,310,000. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
As of May 9, 1997, there were 1,934,478 shares of Common Stock,
without par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Parts I and III: Portions of the Registrant's
Proxy Statement for its 1997 Annual Meeting
of Shareholders The exhibit index is
located on page E-1
<PAGE>
PART I
ITEM 1. BUSINESS.
1 (a) Introduction. (i) General. Andersen Group, Inc., referred to herein as the
"Company" or the "Registrant", was incorporated under the laws of the State of
Connecticut in 1951.
The Company has historically made investments in companies that operated in
several highly diverse segments, and which required extensive management
participation in operation and restructure. These segments have included dental
distribution and manufacture, electronics manufacturing and supply businesses,
ultrasonic cleaning equipment, communications electronics, medical products and
services and video products.
Since 1991 the Registrant's primary investment has been The J. M. Ney Company
(Ney) which operated in two industry segments: Electronics, consisting of Ney's
electronics and ultrasonics divisions, and Dental. In November 1995, Ney sold
the assets and certain liabilities of the Dental segment. In 1997 the
ultrasonics division of Ney was classified as a separate industry segment
(Ultrasonic Cleaning Equipment). In addition to the investment in Ney, since
April 1993, the Registrant held an investment in Digital GraphiX, Incorporated
(DGI), a video graphics company. As discussed in more detail below, under the
heading "Other Investments", DGI sold substantially all of its assets in April
1997 and is currently in the process of winding up its affairs.
As part of a strategic reorganization of the Company, effective June 1, 1997
Oliver R. Grace, Jr., the Company's Chairman, will become President and Francis
E. Baker, the Company's President, will become Chairman. It is anticipated that
the Company's principal executive offices will be relocated to New York, New
York, and that the Company will increasingly make minority, non-controlling
investments in operating companies.
1 (b) Industry Segment Information. Financial information regarding the
Company's industry segments is contained in Note 16 to the Registrant's
Consolidated Financial Statements for the fiscal year ended February 28, 1997
contained in Item 8 herein.
1 (c) Narrative Description of Business. During the fiscal year ended February
28, 1997, the Registrant held investments in companies that operated in two
business segments, Electronics and Ultrasonics. In addition, the Registrant held
interests in a video graphics company and in a company with plans to develop
data transmission networks throughout the Commonwealth of Independent States.
The Company also holds a portfolio of marketable securities comprised primarily
of the common stock of certain financial institutions.
Electronic Segment
The Electronics segment, which consists of the operations of Ney, is a
full-service, precious metal and parts supplier to automotive, medical,
industrial electronics, military and semi-conductor manufacturers. The fully
integrated approach of Ney includes fabrication and manufacture of its precious
metal alloys, as well as design, engineering and metallurgical support. The
fabrication capabilities include stamping, wire drawing, rolling from ingot to
foil, precision turning, injection and insert molding, and refining.
<PAGE>
Ney specializes in the engineering and manufacturing of precious metal alloy
contacts and contact assemblies aimed at low amperage applications. Electrical
contacts made of precious metals, including gold, platinum, palladium and
silver, are considered extremely dependable as the materials are inert and
highly resistant to corrosion and wear. In developing a finished contact or
assembly, Ney's technical staff works closely with customers, typically on an
engineer-to-engineer level, in order to design a product that meets all of the
metallurgical, electronic, dynamic and other performance specifications required
for the customer's applications. Ney designs and builds the necessary molds and
tools as well as designs and manufactures the end product. By controlling the
total process Ney has a competitive advantage over other companies in
technology, cost and response time. Ney has attained ISO 9001 certification for
the manufacture of its products as well as approval by the Japanese Industrial
Standards (JIS) and the United States Food and Drug Administration. In addition,
QS9000 certification was received in May, 1997.
In connection with the sale of the assets and liabilities of the Company's
Dental segment in November, 1995, Ney entered into a three year manufacturing
agreement to alloy and fabricate precious metals for Ney Dental International,
Inc. (NDI), the purchaser of Ney's dental business. As part of this agreement,
the Company agreed, for a ten-year period, not to sell alloys, equipment or
merchandise into the dental market that NDI serves. The Company is, however,
permitted to continue producing, selling and marketing precious metal copings
and other machined and molded parts and material for use in the dental implant
industry.
Ney's business has limited direct competition with regard to the manufacture of
low amperage precious contacts and contact assemblies due to the inherent risks,
which accompany the engineering and manufacture of precious metals (i.e., high
start-up and inventory costs, theft, etc.). While some competitors offer similar
products, the Company believes that these operations lack the vertical
integration to compete across the entire spectrum of products. Ney faces
indirect competition from companies such as Engelhard Corporation and Johnson
Matthey, Inc., which have significantly greater resources and which are involved
in higher volume production of more standard precious metal alloys.
Ney sells to more than 800 customers, with approximately 85% of its sales being
made to customers in the United States. Ney's sales are made domestically
through both field sales and manufacturers' representatives located in key
geographic markets. Internationally, Ney sells through manufacturers'
representatives, independent distributors and original equipment manufacturers.
No customer in the Electronics segment accounted for more than 10% of the
Registrant's consolidated sales in fiscal 1997.
Ultrasonics Segment
The Ultrasonics segment, which consists of Ney's majority owned subsidiary, Ney
Ultrasonics Inc. (Ney Ultrasonics), has focused on working with high-end
electronic, semi-conductor, disk-drive, medical and aerospace customers to
provide the advanced capabilities of patented ultrasonic cleaning technology and
to increase its market penetration. Ney Ultrasonics' products have become the
preferred choice in ultrasonics for numerous OEM system integrators and
fabricators.
<PAGE>
Ney's EnviroSONIK(TM) and Torrent(TM) cleaning systems continue to replace
equipment and processes that use ozone-depleting chemicals which are being
phased out under mandates of provisions in the Clean Air Act of 1990. Ney
Ultrasonics is the exclusive licensee, pursuant to a license agreement, of the
patented ultrasonic technology used in its products. These products are capable
of cavitating some of the newer replacement chemistries and also incorporate
technologies that eliminate damage to microminiature components typically caused
by ultrasonic equipment produced by other manufacturers.
Ney Ultrasonics competes with a number of national and regional companies on the
basis of cleaning performance, price and delivery. Ney Ultrasonic's generators
carry a three-year general warranty which is not generally offered by its
competitors.
No customers in the Ultrasonics segment accounted for more than 10% of the
Registrant's consolidated sales in fiscal 1997.
Other Investments
During fiscal 1997 the Company increased its interest in DGI, a video graphics
company, by acquiring additional Common Stock, and by converting a note from DGI
into shares of DGI's Series A Preferred Stock. DGI was formerly wholly owned and
comprised the Company's Video Products segment from April 1993 to May 2, 1995.
In April 1997 DGI sold substantially all of its assets and received the approval
of its shareholders to liquidate. Also in April 1997, as part of the plan of
liquidation, DGI redeemed the shares of its Series A Preferred Stock held by the
Company. The liquidation will occur during fiscal 1998 and be completed by
February 1998. For further information on the Registrant's investment in DGI,
see Note 17 to the Company's Consolidated Financial Statements for the fiscal
year ended February 28, 1997 contained in Item 8 herein, and Certain
Relationships and Related Transactions in Item 13.
The Company also holds an investment in Treglos Investments, LTD, a joint
venture which is investing in a Russian telecommunications company that has
agreements to develop a data transmission network throughout the Commonwealth of
Independent States. The joint venture owns approximately 6% of the Institute for
Automated Systems. Among the joint venture partners are the Company's Chairman
and another Director. See Note 17 to the Company's Consolidated Financial
Statements for the fiscal year ended February 28, 1997 contained in Item 8
herein, and Certain Relationships and Related Transactions in Item 13.
Research and Development
During fiscal years 1997, 1996, and 1995, research and development expenditures
totaled approximately $1,472,000, $1,683,000 and $2,587,000, respectively.
Sources and Availability of Raw Materials and Components
The Company purchases its raw materials, including precious metals, and the
components used in the manufacture of its products from a number of domestic
suppliers, and generally is not dependent upon any single supplier. The Company
believes that its sources of supply are adequate for its continuing needs.
<PAGE>
Compliance with Environmental Protection Laws
Management of the Company believes that the Company and its operating
subsidiaries are in material compliance with applicable federal, state and local
environmental regulations. Compliance with these regulations has not in the past
had any material effect on the Company's capital expenditures, consolidated
statements of operations or competitive position, nor does the Company
anticipate that compliance with existing regulations will have any such effect
in the near future.
Employees
As of April 30, 1997, the Registrant, including all subsidiaries, had 193
full-time employees and 1 part-time employee. None of these employees are
represented by a labor union, and the Registrant is not aware of any organizing
activities. Neither the Registrant nor any of its subsidiaries has experienced
any significant work stoppage due to any labor problems. The Registrant
considers its employee relations to be satisfactory.
Executive Officers of the Registrant
The Executive Officers of the Company and certain significant employees of its
subsidiaries are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Position Since
- ------------------------------- -------- ----------------------------------------------------------- -----------------
<S> <C> <C> <C>
Oliver R. Grace, Jr. 43 Chairman 1990
Francis E. Baker 67 President and Secretary 1959
Robert P. Belcher 48 Treasurer and Chief Financial Officer 1996
Bernard F. Travers, III 39 Assistant Secretary 1993
Ronald N. Cerny 45 President, The J.M. Ney Company 1993
Andrew M. O'Shea 38 Treasurer and Chief Financial Officer,
The J.M. Ney Company 1995
Eugene Phaneuf 50 Vice President - Operations,
The J.M. Ney Company 1995
- ------------------------------- -------- ----------------------------------------------------------- -----------------
</TABLE>
Except as set forth below, all of the officers and significant employees of its
subsidiaries have been associated with the Company in their present positions
for more than the past five years. None of the executive officers of the Company
are related to any of the Directors.
Mr. Grace, Jr. has been a Director of the Company since 1986 and Chairman since
March 29, 1990. Mr. Grace, Jr. has also been President of AG Investors, Inc.,
one of the Company's subsidiaries, since 1992. Mr. Grace, Jr. is a General
Partner of The Anglo American Security Fund L.P. Mr. Grace, Jr., the Company's
Chairman, is the brother of John S. Grace, a member of the Company's Board of
Directors. Effective June 1, 1997, Oliver R. Grace, Jr. will become President of
the Company and Mr. Baker will become Chairman.
<PAGE>
Mr. Baker has been a Director of the Company and President of the Company since
1959. In May 1997, Mr. Baker became Secretary of the Company. Effective June 1,
1997, Mr. Baker will become Chairman and Secretary of the Company.
Mr. Belcher joined the Company in August 1996 as Treasurer and Chief Financial
Officer. From December 1996 to May 1997, Mr. Belcher was also the Company's
Secretary. From July 1994 to July 1996 Mr. Belcher was a Principal at the
management firm of Booz-Allen & Hamilton, Inc. From 1988 to 1994 Mr. Belcher was
the Executive Vice-President of Trinity Capital Corporation, a venture
capital/investment company.
Mr. Travers, III joined the Company in 1983. He was promoted to Assistant
Secretary in June 1993. From 1990 through the present he has also served as the
Company's Director of Law and Taxation. Mr. Travers is an attorney and a
Certified Public Accountant.
Mr. Cerny has served as president of Ney since November 16, 1995. From April
1993 to November 1995, Mr. Cerny was the General Manager of Ney's Electronics
Division. From 1988 until joining Ney, Mr. Cerny served as Director of
Operations (1990-1993) and Director of Sales & Marketing (1988 to 1990) for the
Materials Technology Division of Johnson Matthey, Inc., a precious metals
fabricator.
Mr. O'Shea joined the Company in December 1995 as Treasurer and Chief Financial
Officer of Ney. From 1994 until joining the Company, Mr. O'Shea was
Vice-President of Finance and Administration for the WorldCrisa Corporation.
From 1990 to 1994, Mr. O'Shea worked for Buxton Co. in various financial
management capacities, including Vice-President, Finance and Administration. Mr.
O'Shea is a Certified Public Accountant
Mr. Phaneuf joined Ney in 1990. He was promoted to Vice President-Operations of
Ney in March 1996. From April 1994 to February 1996, Mr. Phaneuf was Ney's
Director of Operations. He was also Acting General Manager of Ney Ultrasonics
from April 1995 through December 1996. From 1990 to 1994, Mr. Phaneuf was Ney's
Manager of Engineering and Manufacturing.
ITEM 2. PROPERTIES. The Company's principal executive offices are currently
located in a 108,000 square foot building in Bloomfield, Connecticut. The
Registrant leases portions of this facility to its subsidiary, Ney Ultrasonics
and its former subsidiaries, NDI and DGI, as well as to third parties. See Note
10 to the Company's Consolidated Financial Statements for the fiscal year ending
February 28, 1997, contained in Item 8, for a discussion of the indebtedness
related to this property. The Company anticipates that during the fiscal year
ended February 28, 1998 it will relocate its principal executive offices to
leased space in New York, New York. Ney owns a 100,000 square foot facility
within a 16.5 acre industrial park in Bloomfield, Connecticut. This site
contains the principal operations of the Electronics segment and Ney's general
administrative offices. The Registrant believes that its plants and properties,
and the production capacities thereof, are suitable and adequate for its
business needs of the present and immediately foreseeable future.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS. As previously reported in the Company's Form 10-Q for
the quarter ended August 31, 1996, in July 1996, two companion lawsuits were
filed in the United States District Court for the district of New Jersey, MORTON
INTERNATIONAL, INC. V. A.E. STALEY MFG. CO. ET AL, and VELSICOL CHEMICAL CORP.
V. A.E. STALEY MFG. CO. ET AL, in which Morton and Velsicol assert cost recovery
and contribution claims pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) against approximately 95 companies
relating to the Ventron/Velsicol Superfund Site located in Wood Ridge and
Carlstadt, New Jersey (Site). On December 31, 1996, Morton and Velsicol filed a
First Amended Complaint, alleging an alternative basis for liability under the
Resource Conservation and Recovery Act (RCRA). Specifically, the plaintiffs
allege that Ney is a generator of hazardous substances which were ultimately
processed at the Site and contributed to the alleged contamination at the Site.
The suits, which duplicate each other, in all material aspects, seek to recover
the plaintiff's unspecified past and future costs of remediation of the Site.
The investigation at the Site to determine the extent of contamination has not
been completed and no plan for remediation has been developed. The plaintiffs
have not been able to provide the defendants with any confirmed figures with
respect to past costs and no figures at all for its future costs. On January 3,
1997, the defendants, including Ney, filed a Motion to Dismiss both Morton's and
Velsicol's Complaints based upon the statue of limitations and the New Jersey
doctrine of entire controversy. On April 15,1997, the Court denied the motion of
the defendants to dismiss the case. Initial disclosure of information relating
to the claims asserted in the complaints were made by plaintiffs and defendants
in January, 1997. In addition, two depositions of former employees of the
operators of the Site were taken earlier this year. Based on this preliminary
information, Ney is one of the smaller parties to have had any transactions with
one of the plaintiff's predecessors in interest. However, at this time, there is
insufficient information to determine the appropriate allocation of costs as
between or among the defendants group, if liability to the generator defendants
is ultimately proven. The Company continues to investigate whether any liability
which may accrue at some future date may be subject to reimbursement in whole or
in part from insurance proceeds. As of this date, the Company has no basis to
conclude that the litigation may be material to the Company's financial
condition or business. During the fiscal year ended February 28, 1997, the
Company settled a lawsuit with one of its business partners in connection with
the unauthorized transfer of shares in a Russian telecommunications company
held, indirectly by the Company through intermediary companies. The Settlement
Agreement requires the return of shares in the Russian telecommunications
company held by one of the intermediary companies. ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS. On December 5, 1996, the Company paid off the
remaining outstanding principal balance of its 1979 Industrial Development Bonds
(IDBs) thereby allowing the waivers which had been received, as described in the
following paragraph, to become effective. In November 1996, the Company received
the consent of the holders of its 1983 IDBs and of the holders of its 10.5%
Convertible Subordinated Debentures due 2002 (Debentures) to waive compliance by
the Company with certain covenants contained in the indentures applicable to the
1983 IDBs and to the Debentures. The waivers received permit the Company to (1)
purchase from time to time, from or through brokers or dealers, through direct
negotiated transactions, in the open market, in block transactions, by tender
offer or otherwise, shares of (a) the Company's Series A Cumulative Convertible
Preferred Stock, without par value (Preferred Stock), and (b) (i) if no shares
of the Preferred Stock are outstanding, shares of the Company's Common Stock,
without par value (Common Stock), or (ii) if any shares of the Preferred Stock
are outstanding, shares of the Common Stock with the consent of the holders of
the Preferred Stock; in each case for such purchase prices as determined by the
Company, but not to exceed $6.0 million in the aggregate for all such purchases,
and (2) make payments for any shares of capital stock so purchased. A majority
of the non-affiliated holders of the Debentures (approximately $3,100,000) gave
their consent to the waiver. There was approximately $4,531,000 principal amount
of the non-affiliated holders of the Debentures outstanding at the time of the
consent solicitation.
<PAGE>
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's Common Stock is traded on The Nasdaq Stock Market under the
symbol (ANDR) with quotes supplied by the
National Market System of the National Association of Securities Dealers, Inc.
(NASDAQ). The approximate number of record and beneficial holders of the
Registrant's Common Stock on May 9, 1997 was 700 and 1100, respectively. During
fiscal year 1997 the Registrant did not pay any cash dividends. The Company's
high and low sales prices for the common equity, for each full quarterly period
within the two most recent fiscal years, are included below. The stock prices
shown, which were obtained from NASDAQ, represent prices between dealers and do
not include retail markups, markdowns or commissions and may not necessarily
represent actual transactions.
Year ended February 28, High Low
1997
First Quarter $ 6 1/2 $ 3 3/4
Second Quarter 7 5 1/4
Third Quarter 7 3 1/4
Fourth Quarter 6 1/2 5
Year ended High Low
February 29, 1996
First Quarter $ 6 1/4 $3
Second Quarter 6 1/4 4 3/4
Third Quarter 5 1/4 3
Fourth Quarter 6 1/2 3 3/4
The Indenture relating to the Company's 10 1/2% Convertible Subordinated
Debentures contains a covenant which restricts payment of dividends on, or
repurchases or redemptions of, the Company's capital stock. See discussion of
the Restrictive Covenants under the heading - Liquidity and Capital Resources
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 herein, and Notes 9 and 10 of the Registrant's
Consolidated Financial Statements for the fiscal year ended February 28, 1997
contained in Item 8.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain financial data with respect to the
Company and is qualified in its entirety by the Consolidated Financial
Statements of the Company for the fiscal year ended February 28, 1997 contained
in Item 8, (amounts in thousands, except per share data).
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ---------------- -------------- ---------------- ----------------
Years ended February 1997 1996 1995 1994 1993
- ------------------------------------ ---------------- ---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues1 $24,375 $24,048 $28,866 $21,015 $15,629
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) from continuing
Operations 299 (2,270) (1,159) (1,634) (1,474)
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Net Income (loss) 299 1,933 (388) (868) (2,685)
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) applicable to
Common shares 22 2,389 (975) (1,468) (3,355)
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) from continuing
Operations per common share .01 (.94) (.90) (1.22) (2.45)
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) per common
Share, primary .01 1.23 (.50) (0.80) (1.89)
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Depreciation, amortization
and accretion 1,419 1,887 2,329 3,368 3,287
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Total assets 37,677 38,798 43,679 48,590 52,337
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Total debt 10,119 8,485 12,328 16,371 17,723
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Redeemable preferred stock 4,891 5,280 10,593 10,494 10,684
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Common and other stockholders'
equity 13,647 13,625 9,913 10,837 11,482
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Book value per common share 7.05 7.04 5.13 5.62 6.46
- ------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
</TABLE>
1 The results of Digital GraphiX are included in 1994, 1995 and two months of
1996. Net sales and revenues, and income (loss) from continuing operations
for FY 1996 exclude the results of operations of the Company's Dental
segment as a result of its sale in November 1995.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997 VS YEAR ENDED FEBRUARY 29, 1996
Revenues
Total revenues of $24,375,000 during the fiscal year ended February 28, 1997
(FY97) represent an increase of 1.4% from the $24,048,000 recorded during the
year ended February 29, 1996 (FY96). This modest increase represents the
combination of increased sales from the Electronics segment, losses sustained
from investments in Phoenix Shannon, p.l.c. and the absence of sales from the
Company's formerly consolidated Video Products segment.
Sales from the Electronics segment totaled $20,643,000 during FY97, which
represents a 24.8% increase over the $16,544,000 recorded during FY96. Increased
sales in medical, automotive and other industrial markets, which resulted from
expansion of capabilities and effective marketing efforts, coupled with sales
from fabrication services to the Company's former Dental segment, produced the
sales growth. Sales from the Ultrasonics segment during FY97 of $3,874,000
represents a 16.0% decrease from the prior year. A slowdown in the semiconductor
industry resulted in fewer shipments in the third and fourth quarters, although
bookings strengthened for the segment in the fourth quarter. Sales from the
formerly consolidated Video Products segment totaled $2,080,000 during the first
two months of FY96. Due to an offering of the common stock of Digital GraphiX,
Incorporated (DGI), the Company's ownership was diluted, and its results beyond
that date were not consolidated with those of the Company. Accordingly, during
FY97, this segment did not generate any reportable sales for the Company.
Investment and other income produced a net loss of $142,000 during FY97, versus
income of $813,000 in the prior fiscal year. A significant decline in the market
value of Phoenix Shannon common stock resulted in a complete writeoff of
$2,175,000 of the Company's investment in Phoenix Shannon, including a $1
million note receivable. During FY96, the Company absorbed a $525,000 loss on
Phoenix Shannon's common stock due to a decline in its market value.
Gains from common stocks, which primarily comprise investments in certain
financial institutions, produced net investment gains of $1,032,000 during FY97,
while these investment activities yielded $585,000 of net gains during FY96. In
addition, rental income increased from $281,000 in FY96 to $342,000 in FY97.
Interest income of $342,000 in FY97 was 27.1% lower than the $469,000 recorded
in FY96 primarily due to reduced interest related to the Company's note
receivable from DGI, which was partially offset by increased interest on excess
cash balances. The DGI note was partially converted to preferred stock during
the year, and no accruals of dividend income were recorded. In addition,
management fees received constitutes $200,000 of other income in FY97.
Cost of Sales
Cost of sales totaled $15,469,000 in FY97, an increase of 0.5% from FY96. Cost
of sales represented 63.1% and 66.3% of net sales for FY97 and FY96,
respectively. The 3.2% improvement in gross margin rates is attributable to a
16.3% improvement in rates within the Ultrasonics segment and a 1.5% improvement
within the Electronics segment.
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $7,249,000 during FY97 were
20.9% lower than the $9,166,000 of such expenses reported for FY96. The
writedown in FY96 of $1 million of the Company's investment in DGI and
approximately $950,000 of legal and settlement costs relating to a suit filed
against the Company's former subsidiary, Seratronics, Inc., which has since been
liquidated, account for most of the higher costs in FY96. Selling, general and
administrative expenses totaled 29.7% of revenues in FY97 versus 38.1% in FY96.
Research and Development Expenses
Research and development expenses decreased from $1,683,000 in FY96 to
$1,472,000 in FY97. Without the expenses from the former Video Products segment
for two months in FY96, the current year amount would have represented an
increase of 10.2%. Such expenses represented 6.0% of net sales in FY97, versus
7.2% for FY96, due primarily to the relatively higher level of these expenses
within the Video Products segment.
Interest Expense
Interest expense of $790,000 during FY97, represents a 36.1% decrease from the
interest expense of $1,237,000 incurred during FY96. Principal payments in both
years on long-term obligations, including prepayments made during FY97 to obtain
consents to implement a Capital Stock Purchase Program, along with lower average
outstanding amounts under revolving credit agreements, resulted in lower
interest expense in FY97.
Income Tax Benefit
An income tax benefit of $904,000 was recorded during FY97 due to the operating
loss and to the favorable settlement of a state income tax audit relating to
prior years which was the primary factor that enabled the Company to reverse
approximately $546,000 of accrued income taxes. A tax benefit of $1,166,000
relating to the loss from continuing operations was recorded in FY96.
Preferred Dividends
The preferred dividend requirement, including the amortization of the issuance
discount, totaled $411,000 in FY97 versus $559,000 in FY96. The decrease relates
to fewer preferred shares outstanding due to purchases in the fourth quarters of
both FY96 and FY97. Dividends per preferred share, which are based on the
consolidated operating income (as defined) of The J. M. Ney Company, increased
from $.78 in FY96 to $1.24 in FY97 due to improvement in the operating
performance of the Electronics and Ultrasonics segments.
Net Income
For FY97, the Company reported net income of $299,000. After preferred dividends
and the reversal of preferred dividends due to the repurchase of shares, net
income was $22,000 or $.01 per share, versus a net loss from continuing
operations applicable to common shareholders of $1,814,000, or $0.94 per share,
in FY96. The FY 96 results also benefitted from a gain on the sale of the Dental
segment and the results of operations from that segment for approximately nine
months. These factors added $4,203,000 or $2.17 per share, of income to make net
income for FY96 total $2,389,000, or $1.23 per share.
<PAGE>
YEAR ENDED FEBRUARY 29, 1996 VS. YEAR ENDED FEBRUARY 28, 1995
Revenues
Total revenues of $24,048,000 during the fiscal year ended February 29, 1996
(FY96) declined by 16.7% from the $28,866,000 recorded during the year ended
February 28, 1995 (FY95). This decline represents the combination of sales
growth in the Electronics segment, the removal of the results of the Video
Products segment from consolidation during FY96, and lower levels of investment
income.
Sales from the Electronics segment totaled $16,544,000 during FY96, which
represented a 17.5% increase over the $14,079,000 of sales recorded during FY95.
Growth came from utilization of increased machining capabilities and successful
sales and marketing efforts. Sales from the Ultrasonics segment totaled
$4,611,000 during FY96, a 6.1% increase over the previous year's sales totals.
Sales from the Video Products segment totaled $2,080,000 for the first two
months of FY96; after which its operations ceased to be consolidated due to a
dilution of ownership from an offering of its common stock. During FY95, the
activities of the Video Products segment were consolidated with the Company for
the entire fiscal year and $6,998,000 of sales was recorded.
Investment and other income totaled $813,000 during FY96, primarily from
$281,000 of rental income, $585,000 of gains on marketable securities, and
$469,000 of interest income on excess cash, from a note receivable from DGI, and
from a note receivable which was received as part of the proceeds of the sale of
the Company's Dental segment. These sources of income were then reduced by a
$525,000 decline in the value of the Company's common stock investment in
Phoenix Shannon. During FY95, investment and other income totaled $3,443,000
primarily from gains totaling $3,223,000 from the sales of the Company's
investments in two cellular telephone partnerships and $212,000 of rental
income.
Cost of Sales
Cost of sales totaled $15,398,000 in FY96, a decline of 11.5% from the FY95
level. Cost of sales represented 66.3% and 68.4% of net sales for FY96 and FY95,
respectively. The 2.1% increase in gross margin rates resulted from improved
absorption of fixed manufacturing costs within the Electronics segment, and the
reduction of direct manufacturing costs from improved manufacturing efficiencies
in the Ultrasonics segment resulting from refocused marketing strategies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $9,166,000 during FY96 were 2.6%
lower than the $9,413,000 reported for FY95. The absence of ten months of
operating expenses from the Video Products segment resulted in a $2,453,000
decrease, but was nearly offset by $950,000 of legal and settlement costs
relating to a lawsuit filed by Althin Medical, Inc. against the Company's former
subsidiary, Seratronics, Inc. and a $1,000,000 writedown of the Company's
investment in DGI. Selling general and administrative expenses totaled 38.1% of
revenue in FY96, versus 32.6% in FY95.
Research and Development Expenses
Research and development expenses decreased from $2,587,000 in FY95 to
$1,683,000 in FY96 due primarily to a $978,000 decrease relative to the absence
of the Video Products segment for the last ten months of FY96.
<PAGE>
Interest Expense
Interest expense totaled $1,237,000 during FY96, which is a 14.5% decrease from
the $1,447,000 of interest expense incurred during FY95. The repayment of the
revolving line of credit at the end of the third quarter of FY96, concurrent
with the sale of the net assets of the Dental segment, and principal payments on
long-term indebtedness resulted in the lower interest cost.
Income Tax Benefit
For FY1996, the income tax benefit attributable to the loss from continuing
operations totaled $1,166,000, or an effective tax benefit rate of 33.9%, versus
a tax benefit of $812,000, or a rate of 41.2% in FY95.
Discontinued Operations
During FY96, the Company sold the net assets of the Dental segment and recorded
a net gain of $3,790,000, or $1.96 per share, including a curtailment gain of
$519,000 related to the overfunded defined benefit retirement plan. For the
nine-month period in FY96 prior to the sale, these operations earned $413,000
net of tax, or $0.21 per share, versus net income of $792,000, or $0.41 per
share, for FY95. Such results were based upon historical allocations of
administrative expenses, and net of apportioned income taxes.
Preferred Dividends
The preferred dividend requirement, including the amortization of the issuance
discount, totaled $559,000 in FY96, versus $587,000 for FY95. The decrease is
primarily related to the fourth quarter FY96 purchase of 299,561 shares of the
redeemable preferred stock.
As a result of this purchase, $1,015,000 of previously accrued but unpaid
dividends and accreted discounts were reversed and added to income application
to common shares. An additional $1,324,000 was recorded to additional paid-in
capital as a result of the price paid being below the original issue price.
Net Income (Loss)
For FY96, the Company reported net loss from continuing operations in the amount
of $2,270,000. After the impact of the preferred dividend requirement and the
reversal of previously accrued preferred dividends, the net loss from continuing
operations applicable to common shareholders was $1,814,000, or $0.94 per share.
In addition, the operations of the discontinued Dental segment and the gain from
its sale produced total income of $4,203,000, or $2.17 per share, to produce net
income applicable to common shares of $2,389,000,or $1.23 per share for FY96.
For FY95, the net loss from continuing operations totaled $1,159,000. After an
extraordinary loss of $21,000 from the early extinguishment of debt and
preferred dividends, the net loss from continuing operations applicable to
common shareholders was $1,767,000, or $0.91 per share. The operations of the
discontinued Dental segment produced net income of $792,000 or $0.41 per share,
bringing the loss attributable to common shares to $975,000, or $0.50 per share
for FY95.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company's cash, short-term investments and marketable
securities totaled $8,564,000, which is an increase of $639,000 from the
February 29, 1996 total of $7,925,000. The marketable securities are comprised
of the common stock of certain financial institutions and of Centennial Cellular
Corporation, non-investment grade high-yield bonds and short-term instruments
being held in escrow until November 1997 pursuant to the sale of the net assets
of the Dental segment.
During FY97, The J. M. Ney Company, the Company's primary operating subsidiary,
closed on a $6,000,000 Revolving Credit and Deferred Payment Sales Agreement
with two banks under which it can borrow funds or acquire precious metals on a
deferred payment basis. This revolving credit agreement contains restrictive
covenants including those that limit the transfer of cash or other resources
from Ney to the Company. The Company believes that these limitations will not
restrict it from meeting its obligations or from continuing with its business
plans.
During FY97, the Company secured the consent of a majority of the non-affiliated
holders of its outstanding 10.5% Convertible Subordinated Debentures and one of
its Senior Lenders, and reached agreement with another Senior Lender to permit
the Company to use up to $6.0 million to repurchase shares of the Company's
Capital Stock (the Capital Stock Purchase Program). The first phase of the
Capital Stock Purchase Program resulted in the repurchase of 24,283 shares of
the Company's Series A Cumulative Convertible Preferred Stock.
Subsequent to February 28, 1997, DGI entered into an agreement to sell
substantially all of its assets. Accordingly, the Company expects to realize the
value of this investment during the first half of FY98.
At February 28, 1997, the Company's net worth totaled $13,647,000
or $7.05 per share, which is essentially unchanged from the prior year's
equity position.
The Indenture relating to the Company's 10.5% Convertible Subordinated
Debentures contains a covenant restricting the payment of dividends, on or
repurchases or redemptions of, the Company's capital stock. As the result of
preferred stock repurchases and losses incurred in recent years, the Company is
currently prohibited by such covenant (except as provided by the Capital Stock
Purchase Program) from making such payments on the Preferred Stock or the Common
Stock until such time as the sum of (i) the aggregate cumulative consolidated
net income; (ii) the aggregate net cash proceeds received by the Company from
sales of shares of its capital stock for cash; and (iii) the aggregate net cash
proceeds received by the Company from the sales of indebtedness of the Company
convertible into stock of the Company, to the extent such stock has been
converted into stock of the Company (collectively, Consolidated Net Income)
exceeds the sum of the aggregate amount of all dividends declared and all such
other payments and distributions on account of the purchase, redemption or other
retirement of any shares of stock of the Company (collectively, Distributions).
As of February 28, 1997, Distributions exceeded Consolidated Net Income by
approximately $4,282,000.
The Company believes that funds generated from operations, sale of existing
investments or businesses, and potential future refinancings will be sufficient
to meet its anticipated working capital and debt service requirements for the
foreseeable future, but there can be no assurance as to the availability of
future financing or the terms thereof.
Forward Looking Statements
This report contains forward looking statements which are subject to a number of
risks and uncertainties that may cause actual results to differ materially from
expectations. These uncertainties include, but are not limited to, general
economic conditions, competitive conditions in markets served by the Company,
political developments in countries where the Company conducts business and
market conditions for precious metals and equity securities.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statement schedules are filed as part of Part IV, Item 14, of this
Annual Report on Form 10-K.
The Registrant's Consolidated Financial Statements for the fiscal year ended
February 28, 1997 are set forth below.
The following table summarizes certain financial data with respect to the
Company and is qualified in its entirety by the Company's Consolidated Financial
Statements for the fiscal year ended February 28, 1997 contained in this Item
(amounts in thousands, except per share data).
Selected Quarterly Financial Data
<TABLE>
<CAPTION>
1997 Quarterly Financial Data May 31 August 31 November 30 February 28
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Net sales and revenues $8,050 $5,542 $4,801 $5,982
Gross profit 2,733 2,008 2,060 2,247
Net income (loss) 619 (374) (941) 995
Income (loss) applicable to common shares 477 (474) (1,027) 1,046
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Earnings (Loss) Per Common Share:
Net income (loss) 0.25 (0.25) (0.53) 0.54
Share Price:
High 6 1/2 7 7 6 1/2
Low 3 3/4 5 1/4 3 1/4 5
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
1996 Quarterly Financial Data May 31 August 31 November 30 February 29
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Net sales and revenues1 $7,199 $5,835 $5,516 $5,498
Gross profit 2,269 1,798 1,968 1,802
Loss from continuing operations (319) (278) (333) (1,340)
Net income (loss) (220) (8) 3,451 (1,290)
Income (loss) applicable to common shares (367) (157) 3,304 (391)
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Earnings (Loss) Per Common Share:
Continuing operations (.24) (.22) (.25) (.23)
Net income (loss) (.19) (.08) 1.71 (.21)
Share price:
High 6 1/4 6 1/4 5 1/4 6 1/2
Low 3 4 3/4 3 3 3/4
- --------------------------------------------------- ------------------ ---------------- ------------------- --------------------
</TABLE>
1 The results of Digital GraphiX are included for the first two months of 1996
only. Net sales and revenues, and income (loss) from continuing operations
for FY 1996 exclude the results of operations of the Company's Dental
segment as a result of its sale in November 1995.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Balance Sheets February 28, 1997 and February 29, 1996 (in
thousands, except share data)
<TABLE>
<S> <C> <C>
Assets 1997 1996
Current assets:
Cash and cash equivalents $3,219 $4,116
Marketable securities 5,345 3,809
Accounts and other receivables, less allowance for doubtful
accounts of $190 in 1997 and $124 in 1996 2,773 4,337
Inventories 9,040 8,612
Prepaid expenses and other assets 516 92
- ------------------------------------------------------------------------- ------------------------ ----------------
Total current assets 20,893 20,966
- ------------------------------------------------------------------------- ------------------------ ----------------
Property, plant and equipment, net 9,336 9,116
Prepaid pension expense 4,274 4,027
Investment in Digital GraphiX 1,346 1,259
Other assets 1,828 3,430
- ------------------------------------------------------------------------- ------------------------ ----------------
$37,677 $38,798
- ------------------------------------------------------------------------- ------------------------ -----------------
Liabilities, Redeemable Convertible Preferred Stock and Common and
Other Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 773 $1,136
Short-term debt 2,305
-
Accounts payable 1,398 2,923
Accrued liabilities 3,670 4,578
Deferred income taxes 564 567
- ------------------------------------------------------------------------- ------------------------ -----------------
Total current liabilities 8,710 9,204
- ------------------------------------------------------------------------- ------------------------ -----------------
Long-term debt, less current maturities 7,041 7,349
Other long-term obligations 1,121 1,143
Deferred income taxes 2,267 2,197
Commitments and contingencies (Notes 7 and 15)
Redeemable cumulative convertible preferred
stock, no par value; authorized 800,000 shares;
issued 789,628 shares; outstanding shares 265,192 in 1997
and 289,475 in 1996; unamortized discount of $81 in 1997
and $148 in 1996; liquidation preference $18.75 per share 4,891 5,280
- ------------------------------------------------------------------------- ------------------------ -----------------
Common and other stockholders' equity: Preferred stock, no par value; authorized
200,000 shares Common stock, no par value; authorized 6,000,000 shares,
issued 1,958,478 shares in 1997 and 1,958,205 shares in 1996 2,103 2,103
Additional paid-in capital 3,248 3,248
Retained earnings 8,386 8,364
- ------------------------------------------------------------------------- ------------------------ -------------------------
13,737 13,715
Treasury stock, at cost, 24,000 shares (90) (90)
- ------------------------------------------------------------------------- ------------------------ -------------------------
Total common and other stockholders' equity 13,647 13,625
- ------------------------------------------------------------------------- ------------------------ -------------------------
$37,677 $38,798
- ------------------------------------------------------------------------- ------------------------ -------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
(in thousands, except per share data)
<TABLE>
1997 1996 1995
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
<S> <C> <C> <C>
Revenues:
Net sales $ 24,517 $23,235 $ 25,423
Investment and other income (loss) (142) 813 3,443
- ------------------------------------------------------- --------------------- --------------------- ------------------------
24,375 24,048 28,866
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Costs and expenses:
Cost of sales 15,469 15,398 17,390
Selling, general and administrative 7,249 9,166 9,413
Research and development 1,472 1,683 2,587
Interest expense 790 1,237 1,447
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
24,980 27,484 30,837
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Loss from continuing operations
Before income taxes and extraordinary item (605) (3,436) (1,971)
Income tax benefit 904 1,166 812
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) from continuing operations
Before extraordinary item 299 (2,270) (1,159)
Income from discontinued operations, net of
income tax of $170 and $528,in
1996 and 1995, respectively - 413
792
Gain on sale of discontinued segment, net of
income taxes of $2,041 - 3,790 -
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) before extraordinary item 299 1,933 (367)
Extraordinary loss from early
extinguishment of debt, net of income tax
benefit of $10 - -
(21)
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Net income (loss) 299 1,933 (388)
Preferred dividend requirement (411) (559) (587)
Reversal of preferred dividends 134 1,015
-
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) applicable to common shares $ 22 $ 2,389 $ (975)
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Earnings (loss) per common share:
Continuing operations $.01 $ (.94) $ (.90)
Discontinued operations - .21 . 41
Gain on sale of discontinued segment - 1.96
-
Extraordinary item - - (.01)
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) per common share $.01 $1.23 $ (.50)
- ------------------------------------------------------- --------------------- ---------------------- -----------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Common and Other Stockholders' Equity
Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
(in thousands, except share data)
<TABLE>
Common Common Additional
Stock Stock Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
- --------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1994 1,952,798 $2,103 $1,873 $6,950 $(90) $ 10,836
Preferred stock dividends
and accretion - - - (587) - (587)
Conversion of preferred 5,407 51 - - 51
stock -
Net loss - - - (388) - (388)
- --------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 28, 1995 1,958,205 2,103 1,924 5,975 (90) 9,912
Preferred stock dividends
and accretion - - - (559) - (559)
Gain on redemption
of - - 1,324 1,015 - 2,339
redeemable preferred stock
Net income - - - 1,933 - 1,933
- --------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 29, 1996 1,958,205 2,103 3,248 8,364 (90) 13,625
Shares from prior
conversion of 273 - - - - -
preferred stock
Preferred stock dividends
and accretion - - - (411) - (411)
Gain on redemption of -
Redeemable preferred - - 134 - 134
stock
Net income - - - 299 - 299
- --------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 28, 1997 1,958,478 $2,103 $3,248 $8,386 $(90) $13,647
- --------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
(in thousands)
<TABLE>
1997 1996 1995
- ----------------------------------------------------------- ------------- -------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $299 $1,933 $(388)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation, amortization and accretion 1,419 1,887 2,329
Deferred income taxes 67 (479) (414)
Gain on sale of Dental segment - (3,790) -
Gain on sale of cellular investments - - (3,223)
Losses (gains) from securities 1,149 (46) (186)
Purchases of securities (1,625) (3,576) (3,031)
Proceeds from sales of securities 526 1,893 2,213
Loss on redemptions of long-term debt - - 31
Pension (income) expense (247) 8 (148)
Loss (gain) on disposal of property, plant and equipment 58 1 (62)
Investment in Digital GraphiX (87) 543 2,014
Changes in operating assets and liabilities, net of
changes from sale of Dental segment in 1996:
Accounts and notes receivable 1,564 (1,205) (645)
Inventories (428) (2,941) (1,096)
Prepaid expenses and other assets (339) (806) 667
Accounts payable (1,799) 2,006 (144)
Accrued liabilities and other long-term obligations (930) (2,022) 398
- ----------------------------------------------------------- ------------- -------------- ---------------
Net cash used for operating activities (373) (6,594) (1,685)
- ----------------------------------------------------------- ------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 4 256 337
Purchase of property, plant and equipment (1,191) (1,503) (1,436)
Proceeds from sale of Dental segment, net of cash sold - 16,848 -
Proceeds from sale of cellular partnerships - - 7,511
- ----------------------------------------------------------- ------------- -------------- ---------------
Net cash (used for) provided by investing activities (1,187) 15,601 6,412
- ----------------------------------------------------------- ------------- -------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt (1,250) (642) (4,042)
Redemptions of preferred stock (392) (3,758) -
Proceeds (payment) of short-term debt, net 2,305 (3,200) (37)
- ----------------------------------------------------------- ------------- -------------- ---------------
Net cash provided by (used for) financing activities 663 (7,600) (4,079)
- ----------------------------------------------------------- ------------- -------------- ---------------
Net (decrease) increase in cash and cash equivalents (897) 1,407 648
Cash and cash equivalents, beginning of year 4,116 2,709 2,061
- ----------------------------------------------------------- ------------- -------------- ---------------
Cash and cash equivalents, end of year $3,219 $4,116 $2,709
- ----------------------------------------------------------- ------------- -------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 863 $1,203 $1,503
Income taxes, net $ 85 $1,410 $ 166
- ----------------------------------------------------------- ------------- -------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Years ended February 28, 1997, February 29,
1996 and February 28, 1995
(1) Nature of Business
Andersen Group, Inc. (the Company) is a diversified holding company. Its
subsidiaries manufacture electronic connectors, components and precious metal
materials and industrial ultrasonic cleaners for sale to the automotive,
defense, semiconductor and medical and dental markets. (2) Summary of
Significant Accounting Policies Use of Estimates The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. Principles of Consolidation The Company's financial statements
include the accounts of the Company and its wholly-owned subsidiaries. As a
result of the partial spin-off of Digital GraphiX, Incorporated (DGI) as
described in Note 17, the consolidated financial statements include the
operating results of DGI through May 2, 1995. As of both February 28, 1997 and
February 29, 1996, DGI's balance sheet has not been consolidated. All
significant intercompany transactions and balances have been eliminated in
consolidation. Cash and Cash Equivalents Cash and cash equivalents include funds
held in investments with an original maturity of three months or less.
Marketable Securities The Company's marketable securities are carried as trading
securities at market value in accordance with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115). Any changes in the valuation of the portfolio are
reflected in the accompanying Consolidated Statements of Operations. At February
28, 1997, marketable securities consisted of $3,771,000 of equity investments
and $1,574,000 of debt securities, while at February 29, 1996, marketable
securities comprised $3,063,000 of equity investments and $746,000 of debt
securities. Inventories Inventories are stated at the lower of cost or market.
Cost is determined using the last-in, first-out (LIFO) method for precious
metals and at standard costs which approximate the first-in, first-out (FIFO)
and average cost methods for the balance of the inventories. Property, Plant and
Equipment Property, plant and equipment, including capital leases, are stated at
cost and depreciated using the straight-line method over the estimated useful
life of the respective assets, as follows:
Buildings and improvements 10-50 years
Machinery and equipment 5-10 years
Furniture and fixtures 3-10 years
<PAGE>
Unamortized Discounts
Unamortized discounts on redeemable convertible cumulative preferred stock and
subordinated notes payable are accreted using the effective interest method.
Income Taxes
Income taxes are determined using the asset and liability approach in accordance
with the provisions set forth in SFAS No. 109, Accounting for Income Taxes. This
method gives consideration to the future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities at currently enacted tax rates.
Earnings Per Share
Earnings per share is computed based on the weighted average number of common
and common equivalent shares outstanding. Fully diluted net income (loss) per
share assumes full conversion of all convertible securities into common stock at
the later of the beginning of the year or date of issuance, unless antidilutive.
For the years ended February 28, 1997, February 29, 1996 and February 28,1995,
the effects have been antidilutive.
Off-Balance Sheet Hedging
The Company has entered into precious metal forward contracts as a hedge against
precious metal fluctuations for firm price deliveries. These contracts limit the
Company's exposure to both favorable and unfavorable precious metals price
fluctuations.
Financial Statement Presentation
Certain reclassifications have been made to the 1996 and 1995 financial
statements in order to conform with the 1997 presentation.
(3) Inventories
Inventories consist of the following (in thousands):
<TABLE>
February 28, 1997 February 29, 1996
----------------------------------------- -------------------------- --------------------------
<S> <C> <C>
Raw Material $3,111 $3,147
Work in Process 3,877 3,413
Finished Goods 2,955 3,398
----------------------------------------- -------------------------- --------------------------
9,943 9,958
LIFO Reserve 903 1,346
----------------------------------------- -------------------------- --------------------------
$9,040 $8,612
----------------------------------------- -------------------------- --------------------------
</TABLE>
At February 28, 1997 and February 29, 1996, inventories valued at LIFO
cost comprised 64% and 56% of total inventories, respectively.
(4) Sale of Dental Segment
On November 28, 1995, the Company sold the assets and certain liabilities of its
Dental segment to Phoenix Shannon p.l.c. of Shannon, County Clare, Ireland and
recorded a gain of $3,790,000, net of expenses, and income taxes of $2,041,000.
The Company received $18.5 million in cash, part of which, under the terms of
the sale, was used to purchase 200,000 Phoenix Shannon Ordinary Shares; a
two-year, interest-bearing note for $1 million and additional conditional
consideration subject to the determination of defined contingencies. Included in
the gain on sale is an increase of $519,000 in prepaid pension expense from a
curtailment gain which arose as a result of the transfer of the employees of the
Dental segment to the new employer.
During the year ended February 28, 1997, the $1 million note and the remaining
value of the Phoenix Shannon ordinary shares were written off, resulting in
charges to investment income totaling $2,175,000.
<PAGE>
The assets and liabilities sold are presented below (in thousands):
<TABLE>
<S> <C>
Cash $ 552
Accounts receivable 5,476
Inventories 7,019
Other current assets 415
Property, plant and equipment, net 1,752
Other assets 21
------------------------------------------------- ----------------------------------
Total assets 15,235
------------------------------------------------- ----------------------------------
Accounts payable 1,203
Other current liabilities 259
------------------------------------------------- ----------------------------------
Total liabilities 1,462
------------------------------------------------- ----------------------------------
Net assets sold $13,773
------------------------------------------------- ----------------------------------
</TABLE>
The results of operations of the Dental segment have been presented as
discontinued operations. Revenue from this segment totaled approximately $29.6
million, and $38.0 million during 1996 and 1995, respectively.
(5) Sale of Cellular Partnership Interests
In May 1994, the Company's subsidiary, Clear Cellular Holdings, Inc. (Clear),
sold its interest in a partnership which owned a cellular communications license
to Centennial Cellular Corporation (Centennial) for a combination of cash and
Centennial stock. The Centennial stock was immediately remarketed in an open
market block transaction. Overall, Clear received $3,472,000 in net proceeds
from the partnership interest sale.
In August 1994, the Company sold its general partnership interest in MidSouth
Cellular L.P., a nonwireline cellular telephone franchise, to Centennial in
exchange for 281,507 shares of Centennial stock, of which 241,395 shares were
sold at average proceeds of $16.67 per share. The Company continues to hold
23,086 shares of Centennial common stock.
During the years ended 1996 and 1995, the Company recorded gains from the sales
of these cellular partnership interests totaling $65,000 and $3,223,000,
respectively, which are included in investment and other income.
(6) Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
<TABLE>
February 28, 1997 February 29, 1996
- ------------------------------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Land and improvements $ 1,054 $1,054
Buildings and improvements 8,783 8,610
Machinery and equipment 10,188 9,287
Furniture and fixtures 921 907
- ------------------------------------------------------ ------------------------------ -------------------------------
20,946 19,858
Less accumulated depreciation and amortization 11,610 10,742
- ------------------------------------------------------ ------------------------------ -------------------------------
$ 9,336 $ 9,116
- ------------------------------------------------------ ------------------------------ -------------------------------
</TABLE>
Depreciation and amortization expense was $1,393,000, $1,797,000 and
$1,977,000 in 1997, 1996 and 1995, respectively.
At February 28, 1997 and February 29, 1996, property, plant and equipment
includes $1,146,000 and $567,000, respectively of machinery and equipment
acquired under capital leases, which expire through the fiscal year ending
February 28, 2002, with a related allowance for depreciation of $493,000 and
$439,000, respectively.
<PAGE>
(7) Short-term Debt
The Company's primary operating subsidiary, The J.M. Ney Company (Ney), has a
$6.0 million demand revolving credit and deferred payment sales agreement with
two commercial banks. At February 28, 1997, $2,305,000 was outstanding and
$500,000 was committed through a standby letter of credit. The facility is
secured by substantially all of Ney's assets. At Ney's discretion, interest is
charged at the bank's prime rate, which was 8.25% at February 28, 1997, or at
LIBOR plus 2.50% if borrowing is fixed for a period time, or at 2.50% over the
bank's precious metals leasing rate if the borrowing is represented by deferred
payment purchases of precious metals. A fee of 0.25% is charged on the unused
balance of the facility. This agreement includes restrictive covenants that
limit the amount of dividends and distributions from Ney to the Company and
which require Ney to maintain a specified amount of Stockholders' equity. At
February 28, 1997 the amount of assets which Ney was restricted from
distributing to the Company totaled approximately $11,655,000.
(8) Accrued Liabilities
<TABLE>
Accrued liabilities consist of the following (in thousands):
February 28, 1997 February 29, 1996
- --------------------------------------- ------------------------------------ ----------------------------------------
<S> <C> <C>
Employee compensation $ 628 $594
Accrued dividends 934 660
Income taxes 51 849
Other 2,057 2,475
- --------------------------------------- ------------------------------------ ----------------------------------------
$3,670 $4,578
- --------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
(9) Redeemable Cumulative Convertible Preferred Stock
During 1997 and 1996, the Company purchased 24,283 and 299,561 shares,
respectively, of its redeemable cumulative convertible preferred stock
(Preferred Stock) at $16.15 per share in 1997, and at $12.25 per share in 1996.
The 1997 purchases were part of a repurchase program, while in 1996 purchases
were made under terms of a voluntary tender offer. As a result of the purchases,
the Company reversed $134,000 and $1,015,000 in 1997 and 1996, respectively, of
accrued dividends and accreted discounts. In addition, in 1996, $1,324,000 of
additional paid-in capital was recorded to reflect the discount of the total
purchase cost, including expenses, from the original issue cost of the shares
purchased.
The Preferred Stock is subject to annual mandatory redemption from legally
available funds of 160,000 shares at $18.75 per share, or $3,000,000, commencing
in March 1996. Purchases of Preferred Stock to date have satisfied this
requirement through February 1999.
Quarterly dividend payments, ranging from $.1875 to $.4375 per share, are
accrued based upon the operating income of Ney, as defined. Approximately $1.24,
$.78 and $.75 per preferred share of dividends were accrued during 1997, 1996
and 1995, respectively. As discussed in Note 10, the Company has been restricted
from paying dividends since April 15, 1993 until cumulative consolidated net
income (as defined) earned after February 28, 1997 exceeds approximately
$4,282,000. At February 28, 1997 and February 29, 1996 the Company had accrued
$934,000 and $660,000, respectively, for payment of prior dividends.
The preferred shares increase in carrying value at a rate of approximately $.26
per share per year and, as such, approximately $58,000, $137,500, and $150,000
of accretion has been recorded as part of the preferred dividend requirement for
1997, 1996 and 1995, respectively.
The preferred shares are convertible into the Company's common stock at any time
at a rate of 1.935 shares of common stock for each preferred share. The original
conversion rate of 1.875 has been increased to 1.935 after giving effect to the
issuance of common stock in fiscal 1994. At February 28, 1997, 513,147 shares of
common stock have been reserved for conversion.
<PAGE>
(10) Long-term Debt
<TABLE>
Long-term debt consists of the following (in thousands):
February 28, 1997 February 29, 1996
---------------------- ----------------------
<S> <C> <C>
Mortgage note payable due June 2001; interest at varying
rates from 60-68% of the prime rate, as defined, 5.4%
at both February 28, 1997 and February 29, 1996,
respectively, payable semi-annually; semi-annual
principal payments in escalating amounts from $59
in 1997 to $78 at maturity; secured further by
certain personal property $575 $ 928
Mortgage note payable; interest at 7.75% - 599
Convertible subordinated debentures, due October 2002;
Interest at 10.5%, payable semi-annually; annual principal
payments in varying amounts through maturity; unsecured 6,287 6,505
Other 952 453
---------------------- ----------------------
7,814 8,485
Less current maturities 773 1,136
---------------------- ----------------------
$7,041 $7,349
---------------------- ----------------------
</TABLE>
The terms of the convertible subordinated debentures call for the annual
redemption of $834,000 face value of debentures, either through open market
purchases or mandatory sinking fund payments. The Company may also make an
additional optional sinking fund payment of $834,000. The debentures are
convertible into common stock of the Company at any time prior to maturity,
unless previously redeemed, at $16.17 per share, subject to adjustment under
certain conditions. At February 28, 1997, 388,806 shares of common stock were
reserved for conversion.
Certain of the debt agreements contain restrictive covenants which limit, among
other things, mergers or consolidations, sales of assets, additional long-term
debt, payments of dividends and stock repurchases. Under the terms of the 10.5%
Convertible Subordinated Debentures, the Company had been restricted from
repurchasing stock or paying dividends since April 15, 1993 until such time as
the Company's cumulative earnings, as defined, reach specified amounts. During
1997, the Company obtained the consent of a majority of the holders of these
debentures to repurchase up to $6,000,000 of its capital stock.
Maturities of long-term debt for each of the next five fiscal years and
thereafter are as follows (in thousands):
<TABLE>
<C> <S>
1998 $ 773
1999 1,130
2000 1,112
2001 1,097
2002 996
Thereafter 2,706
---------------------------------
$7,814
---------------------------------
</TABLE>
(11) Income Taxes
For 1997, 1996 and 1995, income tax benefit (expense) consists of the following
(in thousands):
<TABLE>
1997 1996 1995
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Current:
Federal $410 $(360) $ (20)
State 561 (296) (100)
Deferred (67) (389) 414
--------------------- --------------------- ---------------------
$904 $(1,045) $294
--------------------- --------------------- ---------------------
</TABLE>
<PAGE>
The difference between the actual income tax benefit (expense) and the income
tax benefit (expense) computed by applying the statutory Federal income tax rate
of 34% to income (loss) before taxes is attributable to the following (in
thousands):
<TABLE>
1997 1996 1995
---------------------- --------------------- ---------------------
<S> <C> <C> <C>
Income tax benefit (expense) $206 ($1,012) $199
State income taxes, net of Federal benefit (107) (196) (66)
Change in enacted tax rates 264 - -
Change in valuation allowance - 483 -
Adjustment of accrual for prior years' taxes 546 (319) 161
Other (5) (1) -
- -------------------------------------------------- ---------------------- --------------------- ---------------------
$904 $(1,045) $294
- -------------------------------------------------- ---------------------- --------------------- ---------------------
</TABLE>
During 1997, the Company settled a State income tax audit covering 1989 through
1996. This settlement is the primary reason for the $546,000 benefit adjustment
of accrual for prior years' taxes reported in the above reconciliation.
A deferred income tax (expense) benefit results from temporary differences in
the recognition of income and expense for income tax and financial reporting
purposes. The principal components of the net deferred tax asset (liability)
which give rise to this deferred income tax (expense) benefit as of February 28,
1997 and February 29, 1996 are as follows (in thousands):
<TABLE>
1997 1996
-------------------------- --------------------------
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences $(1,288) $ (1,580)
Inventory (1,443) (1,476)
Pension (1,581) (1,491)
Installment sale (207) -
- --------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax liabilities (4,519) (4,547)
- --------------------------------------------------------------- -------------------------- --------------------------
Deferred tax assets:
Post-retirement benefits other than pensions 415 337
Unrealized gains/losses on marketable securities, net 177 132
Allowance for uncollectable receivables 440 50
Federal credit carryforwards 302 753
Other 354 511
- --------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax assets 1,688 1,783
- --------------------------------------------------------------- -------------------------- --------------------------
Net deferred tax liabilities $(2,831) $(2,764)
- --------------------------------------------------------------- -------------------------- --------------------------
</TABLE>
At February 28, 1997 the Company had no valuation allowance. The Company
reasonably expects that the sale of certain assets, investment securities and
certain real property, will generate sufficient income to fully utilize its
deferred tax assets. At February 28, 1997 the Company had $302,000 of Federal
credit carryforwards, $55,000 of which were attributable to the alternative
minimum tax and have no expiration date. The remaining credits, totaling
$247,000, expire from 1999 through 2002.
(12) Stock Option Plans
The Company's incentive stock option plan provides for option grants to
directors and key employees at prices equal to at least 100% of the stock's fair
market value at date of grant. In addition, during 1997, a stock option plan was
put into effect under which options to acquire shares of The J. M. Ney Company
were granted. The per share weighted average fair value of stock options granted
in 1997 under the Company and Ney plans were $2.08 and $4.95, respectively on
the dates of grant using the Black Scholes option pricing model with the
following weighted average assumptions: expected dividend yield of 0%; risk-free
interest rate of 6.5%; expected life of seven years; and expected volatility of
33.3%.
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". Accordingly, no compensation expense
has been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans, including the Ney plan, been determined based on
the fair
<PAGE>
value on the grant date for awards during 1997 consistent with the
provisions of SFAS No. 123, the Company's net earnings applicable to common
shares, and earnings per share would have been reduced to the proforma amounts
indicated below (amounts in thousands, except per share data):
<TABLE>
1997
---------------------------------------------------------
<C> <S>
Net income (loss) applicable to common shares:
As reported: $ 22
Pro forma $(68)
Earnings (loss) per share:
As reported $ .01
Pro forma $(.03)
</TABLE>
The assumption regarding the stock options issued during 1997 was that such
options vest over periods ranging from one to three years. Proforma net income
reflects only options granted in 1997. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in the
proforma amounts because the compensation cost for options granted prior to 1997
is not considered.
The Company reserved 162,200 shares of common stock for the exercise of stock
options. At February 28, 1997, the Company had 60,500 options available for
issuance under the plan. The J. M. Ney Company has reserved 150,000 shares of
its common stock for the exercise of stock options. At February 28, 1997, Ney
had 20,000 options available for issuance under its plan.
Activity under the Company's plans, including an expired plan, was as follows:
<TABLE>
Number Weighted Average Range of
Outstanding Options of Shares Exercise Price Exercise Prices
- ---------------------------------------- ------------------------- ------------------------ -------------------------
<S> <C> <C> <C>
Balance at February 28, 1994 77,600 $8.39 $6.00 - $9.50
Canceled (300) $7.00 $7.00
- ---------------------------------------- ------------------------- ------------------------ -------------------------
Balance at February 28, 1995 77,300 $8.40 $6.50 - $9.50
Canceled (37,600) $9.06 $7.00 - $9.00
- ---------------------------------------- ------------------------- ------------------------ -------------------------
Balance at February 29, 1996 39,700 $7.77 $6.50 - $9.375
Granted 75,000 $4.29 $3.813- $6.125
Canceled (13,000) $7.50 $3.813- $9.375
- ---------------------------------------- ------------------------- ------------------------ -------------------------
Balance at February 28, 1997 101,700 $5.02 $3.813 - $8.375
- ---------------------------------------- ------------------------- ------------------------ -------------------------
</TABLE>
At February 28, 1997, the range of exercise prices and the weighted average
remaining contractual life of the options was as follows:
<TABLE>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Weighted
Weighted Average Average
Range of Exercise Number Weighted Average Remaining Number Exercise
- ----------------- ------------------ ------------------ ----------------- -------------- -----------
$8.375 - $7.75 8,000 $8.22 4.0 years 8,000 $8.22
$7.00 - $5.375 33,200 $6.46 5.3 years 19,200 $6.90
$3.813 60,500 $3.81 9.1 years - -
- ------------------ ------------------ ------------------ ----------------- -------------- -----------
101,700
- ------------------ ------------------ ------------------ ----------------- -------------- -----------
</TABLE>
Also, during 1997, options to purchase 130,000 shares of Ney, at an exercise
price of $10.00 per share, were issued to key management of Ney. None of these
options was exercisable at February 28, 1997, as they are subject to a three
year vesting provision. At February 28, 1997, the Company owned all 850,000
shares of Ney. There presently is no public market for Ney's common stock.
(13) Retirement Plans
The Company maintains both noncontributory defined benefit and defined
contribution plans, which collectively cover substantially all full-time
employees. The defined contribution plans are funded annually through
contributions in
<PAGE>
amounts that can be deducted for Federal income tax purposes.
Benefits payable under all plans are based upon years of service and
compensation levels.
The plan assets, which are managed by third-party trustees, include equity
securities, government and corporate debt securities and other fixed income
obligations.
The following table sets forth the actuarially determined funded status of the
Company's defined benefit plan and amounts recognized in the Company's
Consolidated Balance Sheets (in thousands):
<TABLE>
February 28, 1997 February 29, 1996
- --------------------------------------------------------------- -------------------------- --------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $8,970 $9,092
Non-vested 68 63
- --------------------------------------------------------------- -------------------------- --------------------------
Accumulated benefit obligation 9,038 9,155
Effect of projected compensation increases 983 907
- --------------------------------------------------------------- -------------------------- --------------------------
Projected benefit obligation 10,021 10,062
Plan assets at fair value 16,815 15,642
- --------------------------------------------------------------- -------------------------- --------------------------
Plan assets in excess of projected benefit obligation 6,794 5,580
Unrecognized prior service cost (141) (151)
Unrecognized net gain on plan assets (2,379) (1,402)
- --------------------------------------------------------------- -------------------------- --------------------------
Prepaid pension expense $4,274 $4,027
- --------------------------------------------------------------- -------------------------- --------------------------
</TABLE>
For 1997, 1996 and 1995, the projected benefit obligations and pension income
were determined using the following components:
<TABLE>
1997 1996 1995
-------------------- ------------------- --------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Future compensation growth rate 5.5% 5.5% 5.5%
Long-term rate of return on plan assets 8.0% 8.0% 8.5%
</TABLE>
Net pension expense (income) for the Company's funded defined benefit plan
for 1997, 1996 and 1995 includes the following components:
<TABLE>
1997 1996 1995
------------------- -------------------- --------------------
<S> <C> <C> <C>
Service cost of benefits accrued $ 253 $ 341 $286
Interest cost on projected benefit obligations 723 806 784
Return on plan assets (2,190) (2,130) (1,196)
Unrecognized net gain (loss) 967 991 (22)
- ------------------------------------------------------- ------------------- -------------------- --------------------
Pension (income) expense $(247) $ 8 $(148)
- ------------------------------------------------------- ------------------- -------------------- --------------------
</TABLE>
In addition, as discussed in Note 4, during 1996 prepaid pension expense
increased by $519,000 as a result of the curtailment gain recorded in connection
with the sale of the net assets of the Dental segment.
The Company also has a supplemental defined benefit plan which covers a former
senior executive of Ney. There are no assets held by the plan. At February 28,
1997 and February 29, 1996, the actuarially determined status of the plan and
the amount recognized in the balance sheet was a vested accumulated and
projected benefit obligation of approximately $314,400 and $319,550,
respectively. For each of the fiscal years 1997, 1996 and 1995, a discount rate
of 7.5% was used for determining the projected benefit obligation.
Pension expense for all defined contribution plans totaled $121,000,
$143,000 and $157,000 in 1997, 1996 and 1995, respectively.
<PAGE>
(14) Post-Retirement Benefit Obligations
During 1993, the Company amended its retiree health care plan to include only
those retirees currently in the plan and discontinued the benefit for current
employees. The Company's cost of its unfunded retiree health care plan for 1997,
1996 and 1995 was approximately $53,000, $55,000 and $56,000, respectively,
including interest. At February 28, 1997 and February 29, 1996, the accumulated
benefit obligation for post-retirement benefits was approximately $823,000 and
$843,000, respectively. At February 28, 1997, 32 retirees were receiving
benefits under this plan.
The accumulated estimated benefit obligation was determined using the unit
credit method and assumed discount rates of 7.25% at both February 28, 1997 and
February 29, 1996, respectively. At February 28, 1997 and February 29, 1996, the
accumulated benefit obligation was compiled using assumed health care cost trend
rates of 9.0% and 10%, gradually declining to 5% in the year 2001 and thereafter
over the projected payout period of the benefits.
The estimated effect on the present value of the accumulated benefit obligation
at March 1, 1997 of a 1% increase each year in the health care cost trend rate
used would result in an estimated increase of approximately $63,000 in the
obligation.
(15) Leases
During 1997, the Company incurred capital lease obligations totaling $579,000 in
connection with lease agreements to acquire equipment. This non-cash financing
activity has been excluded from the 1997 Consolidated Statement of Cash Flows.
The Company leases various manufacturing and office facilities and equipment
under operating lease agreements expiring through January 2004. In addition, the
Company earns rental income from office space leased to tenants under operating
leases expiring through February 28, 1999. Lease expense was $209,000, $240,000
and $349,000 for 1997, 1996 and 1995, respectively, while rental income totaled
$342,000, $281,000 and $212,000 for 1997, 1996 and 1995, respectively.
Future minimum lease payments and rental income under the terms of the leases
for each of the years ending February 28, are as follows (in thousands):
<TABLE>
Lease Expense Rental Income
<S> <C> <C>
1998 $ 162 $276
1999 152 132
2000 115 -
2001 38 -
2002 38 -
Thereafter 23 -
------------------ ------------------------------ ------------------------------
</TABLE>
<PAGE>
(16) Business Segments and Export Sales
During 1997, the Company operated in two business segments: Electronics and
Ultrasonics. Operating income consists of net sales, less cost of sales and
selling, general and administrative expenses directly allocated to the industry
segments. Corporate expenses consist of administrative costs and interest
expense. Corporate revenues consist of investment and other income not
attributable to a specific segment. Corporate identifiable assets include
marketable securities and short-term investments, and assets not directly
attributable to a specific segment.
Summarized financial information for business segment is as follows (in
thousands):
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Net Sales and revenues:
Electronics $20,643 $16,544 $14,079
Ultrasonics 3,874 4,611 4,346
Video Products - 2,080 6,998
Corporate (142) 813 3,443
--------------------- --------------------- -----------------
$24,375 $24,048 $28,866
--------------------- --------------------- -----------------
Operating income (loss):
Electronics $2,598 $1,612 $1,113
Ultrasonic (57) (563) (1,287)
Video Products - (177) (1,876)
Corporate (3,146) (4,308) 79
--------------------- --------------------- -----------------
$(605) $(3,436) $(1,971)
--------------------- --------------------- -----------------
Identifiable assets:
Dental - - $14,789
Electronics $22,467 $20,886 12,842
Ultrasonics 1,798 1,911 2,458
Corporate 13,412 16,001 13,590
--------------------- --------------------- -----------------
$37,677 $38,798 $43,679
--------------------- --------------------- -----------------
Depreciation, amortization & accretion:
Electronics $1,142 $1,363 $1,057
Ultrasonics 95 76 54
Video Products - - 350
Corporate 240 230 627
--------------------- --------------------- -----------------
$1,477 $1,669 $2,088
--------------------- --------------------- -----------------
Capital expenditures:
Electronics $1,512 $1,239 $649
Ultrasonics 234 66 78
Video Products - - 507
Corporate 24 123 168
--------------------- --------------------- -----------------
$1,770 $1,428 $1,402
- ------------------------------------------------- --------------------- --------------------- -----------------
</TABLE>
Export sales for 1997, 1996 and 1995 were $3,475,000, $2,658,000 and $2,262,000,
respectively. Such sales were made primarily to customers in Europe and the
Pacific Rim.
(17) Investments
Digital GraphiX, Incorporated
During May 1995, DGI issued additional shares of common stock for $324,000
before transaction costs, thus diluting the Company's ownership to approximately
19%. The Company did not recognize any gain related to this transaction. In
January 1995, the Company converted its receivable from DGI to a $2.9 million
note receivable at 7.5% interest, which, when discounted to reflect a market
rate of interest, and coupled with a reduction of approximately $500,000 of net
liabilities to DGI, resulted in a carrying value of $1.8 million at February 28,
1995.
<PAGE>
Prior to May 1995, the Company reduced intercompany liabilities and increased
its investment in DGI to nearly $2.3 million. As of February 29, 1996, the
Company reduced the carrying value of its investment to approximately $1.26
million, and in doing so, formally discharged DGI of its obligation to pay $2.2
million. With this forgiveness of debt, the Company has realized an income tax
benefit in 1996.
During 1997, the Company converted $1,047,000 of the debt portion of this
investment into an equal amount of DGI's convertible preferred stock.
Additionally, the Company invested $250,000 to purchase 83,334 shares of DGI's
common stock to bring its total common stock investment in DGI to 235,334
shares. Subsequent to February 28, 1997, DGI sold substantially all its assets,
which will enable it to repay its notes and redeem its preferred stock. Future
liquidations of remaining assets are expected to allow DGI to pay its common
shareholders approximately $1.00 per share. The Company expects to fully realize
its entire recorded investment as a result of these events.
The Company's Chairman and President are also directors and stockholders of DGI.
Institute for Automated Systems
Included in other assets at February 28, 1997 is an investment of approximately
$835,000 in a joint venture which is investing in the Institute for Automated
Systems, a Russian telecommunications company that has plans to develop a data
transmission network throughout Russia.
The Company's Chairman and another Director are also among a group of investors
in the joint venture.
(18) Estimated Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts
payable and other accrued liabilities are reasonable estimates of their fair
value based upon their current maturities. The carrying value of marketable
securities approximates fair value as determined by quoted market prices. The
fair value of the investment in DGI, which is comprised of notes receivable,
preferred stock and common stock, is estimated to approximate the carrying
amount based upon the announcement of the sale of certain of DGI's assets as
described in Note 17. The note receivable and Phoenix Shannon common stock
received in connection with the sale of the Dental segment have been written off
to no value which approximates fair value as estimated, based on factors
affecting Phoenix Shannon's ability to repay such note.
At February 28, 1997, the Company had futures contracts to purchase 12,500
ounces of palladium through June 1997 at aggregate prices approximating market.
The Company has not been subject to material gains or losses from theses
contracts as they have generally been offset by the transactions being hedged.
Realized market gains and losses on such contracts are also included in cost of
sales.
The carrying value of short-term debt equals fair value as it reflects the
market value of the corresponding precious metals in which the liability is
denominated.
The carrying values of long-term debt issued by banks and capital lease
obligations approximate fair value based on interest rate and repayment terms,
and the extent to which the individual debts are secured. The fair value of the
Company's 10.5% convertible debentures approximates carrying value based upon
market interest rates, its subordinated status, and the market value of the
Company's common stock in relation to the conversion feature of the debt.
It is not practicable to estimate a fair value for the redeemable preferred
stock due to the terms of this security, including the cumulative nature of
dividends, the right to convert the preferred shares to common shares, the
possibility for increased dividends based upon the earnings of Ney, and the
right for preferred stockholders as a group to elect a representative to the
Company's Board of Directors. Current limitations relating to the payment of
dividends and the redemption of shares also factor into the inability to
reasonably estimate a fair value for this security.
<PAGE>
Independent Auditors' Report
KPMG Peat Marwick LLP Letterhead
The Stockholders and Board of Directors
Andersen Group, Inc.:
We have audited the accompanying consolidated balance sheets of Andersen Group,
Inc. and subsidiaries as of February 28, 1997 and February 29, 1996 and the
related consolidated statements of operations, common and other stockholders'
equity and cash flows for each of the years in the three-year period ended
February 28, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Andersen Group, Inc.
and subsidiaries at February 28, 1997 and February 29, 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended February 28, 1997 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 8, 1997
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Certain information required by Part III is omitted from this Report in that the
Registrant has filed a definitive proxy statement pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this Report and
certain information included therein is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by reference to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders, and is
incorporated by reference to the Section in Part I hereof entitled, Executive
Officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information required by this Item is incorporated by reference to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a)1. Consolidated Financial Statements applicable to the Registrant
contained in Item 8:
<C> <S>
Consolidated Balance Sheets Pages
as of February 28, 1997 and February 29, 1996 18
Consolidated Statements of Operations
for the years ended February 28, 1997, February 29, 1996 and
February 28, 1995 19
Consolidated Statements of Common and Other Stockholders' Equity
for the years ended February 28, 1997, February 29, 1996
and February 28, 1995 20
Consolidated Statements of Cash Flows
for the years ended February 28, 1997, February 29, 1996
and February 28, 1995 21
Notes to Consolidated Financial Statements 22-32
Independent Auditor's Report 33
(a)2. Consolidated Financial Statement Schedules:
Schedule
I Condensed Financial Information F-1 to F-5
II Valuation and Qualifying Accounts F-6
Note: Schedules other than those listed above, are omitted as not
applicable, not required, or the information is included in the
Consolidated Financial Statements or notes thereto.
(a)3. Exhibits required by Item 601 of Regulation S-K:
</TABLE>
Exhibit
No. Description
3.1 Amendedand Restated Certificate of Incorporation of the Registrant,
incorporated herein by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the year ended February 29, 1992
(Commission File No. 0-1460).
3.2 Amended and Restated By-Laws of the Registrant as of April 18, 1997.*
4.1 Indenture, dated as of October 15, 1982, between the Registrant and
Hartford National Bank and Trust Company (predecessor to Fleet National
Bank, N.A., The Connecticut National Bank and Shawmut Bank, N.A.),
as Trustee, in respect of $10,000,000, aggregate principal amount,
10-1/2% Convertible Subordinated Debentures Due 2002,
<PAGE>
incorporated
herein by reference to Exhibit 4.8 to the Registrant's Registration
Statement on Form S-4
(Commission File No. 33-38646) effective January 31, 1991.
10.1 Guaranty and Indemnification Agreement, dated as of November 1, 1979,
between the Registrant and American Re-Insurance Company incorporated
herein by reference to the Exhibit filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 25, 1979 (Commission
File No. 0-1460).
10.2 Loan Agreement, dated December 20, 1983, between the Connecticut
Development Authority and the Registrant, incorporated herein by
reference to Exhibit 10.10 to the Registrant's Registration Statement on
Form S-4 (File No. 33-38646) effective January 31, 1991.
10.3 Security Agreement, dated December 20, 1983, between the Registrant and
the Connecticut Development Authority, incorporated herein by reference
to Exhibit 10.11 to the Registrant's Registration Statement on Form S-4
(File No. 33-38646) effective January 31, 1991.
10.4 Construction and Open-End Mortgage Deed from the Registrant to the
Connecticut Development Authority and assigned to the Connecticut
National Bank, dated December 20, 1983, incorporated herein by reference
to Exhibit 10.12 to the Registrant's Registration Statement on Form S-4
(File No. 33-38646) effective January 31, 1991.
10.5 Andersen Group, Inc. Incentive Stock Option Plan incorporated
herein by reference to Appendix A to the Registrant's Post-Effective
Amendment No.1 to Form S-8 (File No. 333-17659) filed February 27, 1997.
10.6 Andersen Group, Inc. Incentive and Non-Qualified Stock Option Plan
incorporated herein by reference to Appendix B to the Registrant's
Post-Effective Amendment No. 1 to Form S-8 (File No.333-17659) filed
February 27, 1997.
10.7 Deferred Compensation Agreement, entered into as of September 30, 1992,
by and between the Registrant and Francis E. Baker, incorporated herein
by reference to Exhibit 10.26 of the Registrant's Annual Report on Form
10-K for the year ended February 28, 1995 (Commission File No. 0-1460).
10.8 Letter Agreement, dated March 7, 1993, between the Registrant and Ronald
N. Cerny, incorporated herein by reference to Exhibit 10.30 to the
Registrant's Annual Report on Form 10-K for the year ended February 28,
1995 (Commission File No. 0-1460).
10.9 Letter Agreements, dated February 23, 1995 and March 20, 1995, between
the Registrant and Ronald N. Cerny.
10.10 Asset Purchase Agreement among Phoenix Shannon p.l.c., Andersen Group,
Inc., The J.M. Ney Company and Ney Dental International, Inc. dated as
of August 10, 1995, incorporated herein by reference to Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the quarter ending
August 31, 1995 (Commission file No. 0-1460).
<PAGE>
10.11 Amendment No. 1 to Asset Purchase Agreement by and among Phoenix
Shannon p.l.c., The J.M. Ney Company, Andersen Group, Inc. and Ney
Dental International, Inc. made as of October 30, 1995, incorporated
herein by reference to Exhibit 10.1 to the Registrant's current
report on Form 8-K dated December 13, 1995 (Commission file No. 0-1460).
10.12 Amendment No. 2 to Asset Purchase Agreement by and among Phoenix
Shannon p.l.c., The J. M. Ney Company, Andersen Group, Inc., and Ney
Metals, Inc.(f/k/a Ney Dental International, Inc.) made as of
October 30, 1995, incorporated herein by reference to Exhibit 10.2
to the Registrant's current report on Form 8-K dated December 13, 1995
(Commission file No. 0-1460).
10.13 Revolving Credit and Deferred Payment Sales Agreement by and among
The J. M. Ney Company, Bank of Boston, Connecticut and Rhode Island
Hospital Trust National Bank made as of the 8th day of October 1996*
21. Subsidiaries of the Registrant. *
23. Accountant's Consent.*
27.1 Financial Data Schedule. *
27.2 Restated Financial Data Schedule. *
(b) Reports on Form 8-K.
None.
*Filed herein
<PAGE>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ANDERSEN GROUP, INC. ANDERSEN GROUP, INC.
Registrant Registrant
/s/ Francis E. Baker /s/ Robert P. Belcher
Francis E. Baker Robert P. Belcher, Treasurer
President and Chief Financial Officer
May 28, 1997 May 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chairman
/s/ Oliver R. Grace, Jr. and May 28, 1997
- ---------------------
Oliver R. Grace, Jr. Director
President, Chief
/s/ Francis E. Baker Executive Officer May 28, 1997
Francis E. Baker and Director
/s/ Peter N. Bennett May 27, 1997
Peter N. Bennett Director
/s/ John S. Grace May 28, 1997
John S. Grace Director
/s/ Louis A. Lubrano May 28, 1997
Louis A. Lubrano Director
/s/James J. Pinto May 27, 1997
- --------------------
James J. Pinto Director
<PAGE>
KPMG Peat Marwick, LLP Letterhead
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Andersen Group, Inc.:
Under date of April 8, 1997, we reported on the consolidated balance sheets of
Andersen Group, Inc. and subsidiaries as of February 28, 1997 and February 29,
1996 and the related consolidated statements of operations, common and other
stockholders' equity and cash flows for each of the years in the three-year
period ended February 28, 1997, which are included in the Annual Report on Form
10-K for the year 1997. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules as listed in the accompanying index under Part IV,
Item 14. The financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 8, 1997
<PAGE>
ANDERSEN GROUP, INC.
Schedule I - Condensed Financial Information
of the Registrant
Consolidated Balance Sheet
February 28, 1997
(amounts in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------- ------------------------------
<C> <S>
Assets
Current assets:
Cash and cash equivalents $2,304
Marketable securities 5,345
Accounts and other receivables,
less allowance for doubtful accounts 53
Prepaid expenses and other assets 390
- ------------------------------------------------------------------------- ------------------------------
Total current assets 8,092
- ------------------------------------------------------------------------- ------------------------------
Investment in The J. M. Ney Company 15,107
Investment in Digital GraphiX, Incorporated 1,346
Property, plant and equipment, net 2,748
Other assets 1,225
- ------------------------------------------------------------------------- ------------------------------
$28,518
- ------------------------------------------------------------------------- ------------------------------
Liabilities, Redeemable Convertible Preferred
Stock and Common and Other Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 586
Accounts payable 101
Due to The J. M. Ney Company 316
Accrued liabilities 1,765
Deferred income taxes 564
- ------------------------------------------------------------------------- ------------------------------
Total current liabilities 3,332
- ------------------------------------------------------------------------- ------------------------------
Long-term debt, less current maturities 6,540
Deferred income taxes 108
Commitments and contingencies
Redeemable cumulative convertible preferred
Stock, no par value; authorized 800,000 shares;
issued 789,628 shares; outstanding 265,192
shares;liquidation preference $18.75 per share 4,891
- ------------------------------------------------------------------------- ------------------------------
Common and other stockholders' equity: Preferred stock,
no par value; authorized 200,000 shares Common stock,
no par value; authorized 6,000,000 shares, issued 1,958,478 shares 2,103
Additional paid-in capital 3,248
Retained earnings 8,386
- ------------------------------------------------------------------------- ------------------------------
13,737
Treasury stock, at cost, 24,000 shares (90)
- ------------------------------------------------------------------------- ------------------------------
Total common and other stockholders' equity 13,647
- ------------------------------------------------------------------------- ------------------------------
$28,518
- ------------------------------------------------------------------------- ------------------------------
</TABLE>
See accompanying notes to condensed financial information.
F-1
<PAGE>
ANDERSEN GROUP, INC.
Schedule I Condensed Financial Information
Of the Registrant
Condensed Statement of Operations
Year ended February 28, 1997
(amounts in thousands, except per share data)
<TABLE>
- ------------------------------------------------------- -----------------------------------
<C> <S>
Revenues:
Investment and other income $ 267
Equity in earnings of The J. M. Ney Company 1,311
- ------------------------------------------------------- -----------------------------------
1,578
- ------------------------------------------------------- -----------------------------------
Costs and expenses:
General and administrative 2,280
Interest expense 777
- ------------------------------------------------------- -----------------------------------
3,057
- ------------------------------------------------------- -----------------------------------
Loss from continuing operations
Before income taxes (1,479)
Income tax benefit 1,778
- ------------------------------------------------------- -----------------------------------
Net income 299
Preferred dividend requirement (411)
Reversal of preferred dividend 134
- ------------------------------------------------------- -----------------------------------
Income applicable to common shares $ 22
- ------------------------------------------------------- ----------------------------------
Earnings per share $0.01
- ------------------------------------------------------- ----------------------------------
</TABLE>
See accompanying notes to condensed financial information.
F-2
<PAGE>
ANDERSEN GROUP, INC.
Schedule I - Condensed Financial Information of the Registrant
Condensed Statement of Cash Flows
Year ended February 28, 1996
(amounts in thousands)
<TABLE>
- ----------------------------------------------------------- -----------------------------------
<C> <S>
Cash flows from operating activities:
Net income $299
Adjustments to reconcile net income to net cash used for operating activities:
Equity in earnings of The J. M. Ney Company (1,311)
Depreciation, amortization and accretion 167
Deferred income taxes 105
Net (gains) losses from securities 1,149
Purchases of securities (1,625)
Proceeds from sales of securities 526
Investment in Digital GraphiX (87)
Changes in operating assets and liabilities
Accounts and notes receivable 652
Prepaid expenses and other assets (184)
Accounts payable, accrued liabilities and other
long-term obligations (654)
- ----------------------------------------------------------- ------------------------------------
Net cash used for operating activities (963)
- ----------------------------------------------------------- ------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (7)
- ----------------------------------------------------------- ------------------------------------
Net cash used for investing activities (7)
- ----------------------------------------------------------- ------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (1,178)
Redemptions of preferred stock (392)
Dividends received from The J. M. Ney Company 1,150
- ----------------------------------------------------------- ------------------------------------
Net cash used for financing activities (420)
- ----------------------------------------------------------- ------------------------------------
Net decrease in cash and cash equivalents (1,390)
Cash and cash equivalents, beginning of year 3,964
- ----------------------------------------------------------- -----------------------------------
Cash and cash equivalents, end of year $2,304
- ----------------------------------------------------------- -----------------------------------
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 803
Income taxes, net $ 85
- ----------------------------------------------------------- -----------------------------------
</TABLE>
See accompanying notes to condensed financial information.
F-3
<PAGE>
ANDERSEN GROUP, INC
Schedule I - Condensed Financial Information
of the Registrant
Notes to Condensed Financial Information
February 28, 1997
NOTE 1 - GENERAL
The Condensed Financial Information presented herein is required for 1997 only
because the Registrant's majority owned subsidiary, The J. M. Ney Company (Ney),
entered into a Revolving Credit and Deferred Payment Sales Agreement with two
banks in October 1996, which contained covenants that limit the transfer of cash
and other resources from Ney to the Registrant.
The Condensed Financial Information of the registrant should be read in
conjunction with the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements which are included in Item 8 herein. The
Condensed Financial Information of the Registrant include the accounts of two
wholly owned subsidiaries which are immaterial to the Registrant's Condensed
Financial Information.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
The Registrant and its majority owned subsidiaries share certain administrative
services. The costs of these services are allocated to the entity which receives
the service. The following are among the types of services provided to the
Registrant by Ney: maintenance, accounting, human resources, management
information systems and the rental of office space in Ney's facility. Services
provided by the Registrant to Ney include the following: legal, tax, and the
rental of manufacturing and office space in the Registrant's principal executive
offices. In addition, during 1997 Ney paid the Registrant interest for the cost
of capital used by Ney.
In connection with Ney entering into the Revolving Credit and Deferred Payment
Sales Agreement referred to above, the Registrant and Ney entered into a Tax
Sharing Agreement, effective as of March 1, 1996, which requires Ney to pay the
Registrant an amount which may be equal to the maximum allowable amount of any
Federal and State income taxes for which Ney or any of its subsidiaries would
have been liable for in the particular year. The Tax Sharing Agreement does not
require any adjustments to be made for deferred taxes and no such adjustments
were made for the fiscal year ending February 28, 1997. The Registrant files a
consolidated Federal income tax return with its subsidiaries.
NOTE 3 - LONG TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following (in thousands):
<C> <C>
February 28, 1997
Mortgage note payable due June 2001; Interest at Varying rates from 60-68% of
the prime rate, as defined, 5.4% at February 28, 1997, payable semi
-annually; semi-annual principal payments in escalating amounts from $59 in
1997 to $78 at maturity; further secured by personal property $ 575
Convertible subordinated debentures, due October 2002;
Interest at 10.5%, payable semi-annually; annual principal payments in
varying amounts through majority, unsecured 6,287
Other 264
-------
7,126
Less current maturities 586
--------
$6,540
--------
</TABLE>
F-4
<PAGE>
The terms of the convertible subordinated debentures call for the annual
redemption of $834,000 face value of debentures, either through open market
purchases or mandatory sinking fund payments. The Company may also make an
additional optional sinking fund payment of $834,000. The debentures are
convertible into common stock of the Company at any time prior to maturity,
unless previously redeemed, at $16.17 per share, subject to adjustment under
certain conditions. At February 28, 1997, 388,806 shares of common stock were
reserved for conversion.
Certain of the debt agreements contain restrictive covenants which limit, among
other things, mergers or consolidations, sales of assets, additional long term
debt, payments of dividends and stock repurchases. Under the terms of the10.5%
Convertible Subordinated Debentures, the Company had been restricted from
repurchasing stock or paying dividends since April 15, 1993 until such time as
the
Company's cumulative earnings, as defined, reach specified amounts. During 1997,
the Company obtained the consent of a majority of the holders of these
debentures to repurchase up to $6,000,000 of its capital stock.
Maturities of long-term debt for each of the next five fiscal years are as
follows (in thousands):
<TABLE>
<CAPTION>
<C> <C>
1998 $586
1999 974
2000 986
2001 999
2002 876
Thereafter 2,705
----------
$7,126
----------
</TABLE>
NOTE 4 - REDEEMABLE CUMULATIVE CONVERTIBLE PREFERRED STOCK
See Note 9 to the Registrant's Consolidated Financial Statements for the fiscal
year ended February 28, 1997 contained in Item 8 herein.
NOTE 5 - CASH DIVIDENDS
The amount of cash dividends paid to the Registrant by Consolidated Subsidiaries
during fiscal 1997 was approximately $1,150,000.
F-5
<PAGE>
<TABLE>
Andersen Group, Inc.
Schedule II - Valuation and Qualifying Accounts
(Amounts in thousands)
<CAPTION>
-----Additions-----------
Balance Charged to Charged Balance
beginning costs and to other end
Description of year expenses account Deductions of year
<S> <C> <C> <C> <C> <C>
February 28, 1997
Allowance for doubtful
accounts $124 76 (10))a) $190
Reserve for returns $0 95 $ 95
Warranty reserve $100 (30) $ 70
- ------------------------------------------------------------------------------------------------------------------------------
February 29, 1996
Allowance for doubtful
accounts $360 97 (287)(c) (46)(a) $124
Warranty reserve $ 65 35 $100
Discontinued operation $63 (63)(d) $0
Deferred income tax
valuation allowance $483 (483) $0
- ------------------------------------------------------------------------------------------------------------------------------
February 28, 1995
Allowance for doubtful
accounts $427 47 (31) (83)(a) $360
Warranty reserve $0 65 $65
Discontinued operation $0 41 31 (9)(a) $63
Deferred income tax
valuation allowance $458 25 $483
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Write offs net of recoveries.
(b) Offset of discontinued operation losses.
(c) Transferred in connection with sale of certain assets of Dental Segment.
(d) Eliminated in connection with reduction in stock ownership of DGI in May
1995.
F-6
<PAGE>
EXHIBIT INDEX
No. Description Page No.
3.2 Amended and Restated By-Laws. E-2
10.13 Revolving Credit and Deferred Payment Sales Agreement by and
Among The J. M. Ney Company, Bank of Boston Connecticut
And Rhode Island Hospital Trust National Bank made as of the 8th
Day of October 1996. E-3
21. Subsidiaries of the Registrant. E-4
23. Accountant's Consent. E-5
27.1 Financial Data Schedule. E-6
27.2 Restated Financial Data Schedule. E-7
E-1
Exhibit 3.2
Amended and Restated
By-Laws of Andersen Group, Inc.
As of April 18, 1997
I. The name of the Corporation is Andersen Group, Inc.
II. All Stockholders' meetings shall be held within the State of
Connecticut.
III. Meetings of the Stockholders shall be held at the office of the
Corporation in Bloomfield or at such other place as the Directors may
determine. The Annual Meeting of the Stockholders shall be held on such
day in the month of June or July in each year as the Directors may
determine, or in default of such determination shall be held on the
15th day of June, if not a legal holiday, and if a legal holiday, then
on the next succeeding business day.
IV. Special meetings of the Stockholders may be called by the President and
shall upon the written request of Stockholders holding one-tenth of the
capital stock issued and outstanding be called by the President. In
case of the neglect or refusal of the President to call a meeting on
such request, the Stockholder or Stockholders so requesting may call
the same.
V. The property and affairs of the Corporation shall be managed by a Board
of not less than three nor more than thirteen Directors, who may but
need not be Stockholders of the Corporation. The Directors shall be
elected by ballot at the Annual Meeting and shall hold office until the
next Annual Meeting and until others are chosen and qualified in their
stead. The Board of Directors may exercise all such power and do all
such things as may be exercised or done by the Corporation but subject,
nevertheless, to the provisions of the statutes of the State, of the
Certificate of Incorporation and of these By-Laws.
VI. At their First meeting after the election of Directors, the Directors
shall elect from their number by ballot a President and shall appoint a
Secretary and a Treasurer and may from time to time elect or appoint
such other officers as the Board shall deem expedient to hold their
respective offices during the pleasure of the Board. The offices of
President and Treasurer and the offices of Secretary and Treasurer may
be filled by the same person.
VII. The duties of the officers of the Corporation shall be such as are
imposed by law and from time to time prescribed by the Directors.
VIII. Meetings of the Directors may be called by the President or by any two
Directors at any time on reasonable notice to each Director.
E-2
<PAGE>
IX. If the office of any Director or of any officer of the Corporation
becomes vacant by reason of death, resignation or otherwise, the
remaining Directors or Director present at any meeting, although less
than a quorum, may by a majority vote, fill such vacancy, the person or
persons so chosen or appointed to hold office for the unexpired portion
of the term of his predecessor or predecessors.
X. The seal of this Corporation shall bear the words "Andersen Group,Inc.
Seal Connecticut", the imprint of said seal being shown in the margin
hereof.
XI. A majority of the Directors present at any regular or at any special
meeting may alter, amend or add to these By-Laws, but no By-Law shall
be adopted and no existing By-Law shall be amended or replaced unless
written notice of such proposed action shall have been given in the
Call for the meeting at which such adoption, amendment or repeal is to
be acted upon.
XII. Regular transfer books shall be kept by the Secretary or his/her
delegate, and no transfer shall be permitted except upon said books by
the Stockholder in person, or by power of attorney executed by him for
that purpose. In order to determine the Shareholders entitled to
notice of a Shareholders' meeting, to demand a special meeting, to vote
or to take other action, the Board may fix a future date as the record
date;provided that the date selected may not be more than seventy (70)
days before the meeting or action requiring a determination of
Shareholders.If the Board fails to select a record date, the record
date shall be (i) the day before notice is sent or otherwise given to
Shareholders of an annual meeting or a special meeting called other
than by demand of the requisite number of Shareholders, (ii) the day
the first Shareholder signs a demand for any special meeting to be
held as a result of such demand; or (iii) the day the first
Shareholder signs a writing to take action without a meeting for any
Shareholder action to be so taken.
XIII. Each Director and each officer shall be indemnified by the Corporation
against legal and other expenses reasonably incurred by him in
connection with the defense or reasonable settlement of any action,
suit or proceeding to which he may be a party by reason of his being or
having been a Director or officer of the Corporation or of any other
corporation at least one-half of the voting stock of which is owned or
controlled by this Corporation and which he serves as Director or
officer at the request of this Corporation, except in relation to
matters as to which he shall be finally adjudged to be liable for
negligence or misconduct in the performance of his duty as such
Director of officer. Such right of indemnification shall also extend
to persons who have previously served as Directors or officers and
shall not be exclusive of any other rights under any statute, by-laws,
agreement, vote, resolution or rule of law.
<PAGE>
XIV. Whenever any notice is required to be given under the provisions of
these By-laws, or of the Certificate of Incorporation, or of any of the
laws of the State of Connecticut, a waiver thereof, in writing, signed
by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
XV. The Board of Directors, by resolution adopted by the affirmative vote
of Directors holding a majority of the Directorships, at a meeting of
which a quorum is present, may designate two or more Directors to
constitute an Executive Committee or other committees, which committees
shall have and may exercise all such authority of the Board of
Directors as shall be provided in such resolution, subject to the
provisions of the statutes of the State of Connecticut, of the
Certificate of Incorporation, and of these By-laws.
XVI. The holder of 33 1/3% of the outstanding shares of the common voting
stock shall constitute a quorum at a meeting of the Stockholders for
the transaction of any business. The Stockholders present may adjourn
the meeting despite the absence of a quorum.
Exhibit 10.13
REVOLVING CREDIT AND DEFERRED PAYMENT SALES AGREEMENT
This REVOLVING CREDIT AND DEFERRED PAYMENT SALES AGREEMENT is made as
of the 8th day of October, 1996, by and among (i) The J.M. Ney Company (the
"Borrower"), a Delaware corporation having its principal place of business at
Ney Industrial Park, Bloomfield, CT 06002, (ii) BANK OF BOSTON CONNECTICUT, a
Connecticut state chartered savings bank, and (iii) RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, ("RIHT"), a national banking association.
ss1. DEFINITIONS AND RULES OF INTERPRETATION.
The following terms shall have the meanings set forth in this ss.1 or
elsewhere in the provisions of this Credit Agreement referred to below:
Affiliate. Any Person that would be considered to be an
affiliate of the Borrower or any Bank under Rule 144(a) of the Rules and
Regulations of the Securities and Exchange Commission, as in effect on the date
hereof, if the Borrower or such Bank were issuing securities.
Andersen Group, Inc.. Andersen Group, Inc., a Connecticut
corporation.
Applicable Percentage. Eight-five percent (85%) with respect
to raw materials Precious Metals and seventy-five percent (75%) with respect to
work-in-progress and finished goods Precious Metals; provided that each of such
percentages shall be subject to modification by BKB in its sole discretion from
time to time based upon the results of its periodic examinations of the Borrower
and its business.
Availability Amount. The lesser of (a) the amount by which the
Commitment exceeds the sum of (i) the aggregate outstanding balance of all
Revolving Loans, plus (ii) the Deferred Payment Sale Amount, plus (iii) the
Maximum Drawing Amount, plus (iv) the aggregate amount of all Unpaid
Reimbursement Obligations, and (b) after giving effect to any proposed Deferred
Payment Sale with respect to a type of Precious Metal, 90% of the aggregate
number of ounces of such type of Precious Metal that are (i) owned by the
Borrower and (ii) not subject to any liens other than liens in favor of the
Banks (e.g. if the Borrower owns 1000 ounces of silver Precious Metal prior to a
Deferred Payment Sale of silver, the Borrower will be limited to a Deferred
Payment Sale of 9000 ounces of silver under this clause (b)).
Balance Sheet Date. June 30, 1996.
Banks. Collectively, BKB and RIHT.
E-3
<PAGE>
Banks' Special Counsel. Bingham, Dana & Gould or such
other counsel as may be approved by the Banks.
Base Rate. The higher of (a) the annual rate of interest
announced from time to time by The First National Bank of Boston at its head
office in Boston, Massachusetts as its "base rate" and (b) one-half of one
percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this
definition, "Federal Funds Effective Rate" shall mean for any day, the rate per
annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by BKB from
three funds brokers of recognized standing selected by BKB.
Base Rate Loans. Revolving Loans bearing interest calculated
by reference to the Base Rate.
BKB. Bank of Boston Connecticut.
BKB's Head Office. BKB's office located at 31 Pratt Street,
Hartford, Connecticut 06103, or such other location as BKB may designate from
time to time.
Borrower. As defined in the preamble hereto.
Borrowing Base. The sum of (a) 85% of Eligible Receivables,
plus (b) the Applicable Percentage of each type of Eligible Precious Metal
Inventory after subtracting from the number of ounces of each type of Precious
Metals owned by the Borrower to be included in Eligible Precious Metal Inventory
hereunder, 110% of the number of ounces of that type of Precious Metal that is
the subject of a Deferred Payment Sale.
Borrower Security Agreement. The Security Agreement of
even date herewith among the Borrower and the Banks.
Breakage Fee. With respect to any Deferred Payment Sale, the
amount of any reduced return to RIHT due to redeployment loss as a result of the
prepayment or late payment by the Borrower of any Deferred Payment Amount, as
reasonably determined by RIHT in accordance with its customary practices.
Broker. A broker who trades for the Borrower's account in
commodities futures, forwards or other contracts or instruments related to
commodities and who is reasonably acceptable to the Banks.
Broker Accounts. The accounts maintained by the Borrower or
any of the Subsidiaries with any Broker for trading in commodities futures,
forwards or other contracts or instruments related to commodities.
Business Day. Any day on which banking institutions in
Hartford, Connecticut and Providence, Rhode Island are open for the transaction
of banking business and, in the case of LIBOR Rate Loans, which is also a LIBOR
Business Day.
Capital Assets. Fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will).
Capital Expenditures. Amounts paid or indebtedness incurred by
the Borrower or any of its Subsidiaries in connection with the purchase or lease
by such Person of Capital Assets that would be required to be capitalized and
shown on the balance sheet of such Person in conformity with generally accepted
accounting principles
Capitalized Leases. Leases under which the Borrower or any of
its Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in conformity with generally accepted accounting
principles.
Closing Date. The first date on which the conditions set
forth in ss.10 have been satisfied.
Code. The Internal Revenue Code of 1986, as amended or
modified or any successor thereto.
Collateral. See ss.5.10.
Commitment. An amount equal to $6,000,000, as such amount may
be reduced from time to time in accordance with ss.2.3; or if such commitment is
terminated pursuant to the provisions hereof, zero.
Commitment Fee. See ss.2.2.
Confirmation Order. See ss.4.2.
Consolidated or consolidated. With reference to any term
defined herein, shall mean that term as applied to the general ledger accounts
of the Borrower and its Subsidiaries, consolidated in conformity with generally
accepted accounting principles.
Consolidated Current Assets. All assets of the Borrower and
its Subsidiaries on a consolidated basis that, in conformity with generally
accepted accounting principles, are properly classified as current assets;
provided, that any amounts due and payable to the Borrower by Andersen Group,
Inc. shall be excluded from the definition of Consolidated Current Assets.
Consolidated Current Liabilities. All liabilities of the
Borrower and its Subsidiaries on a consolidated basis maturing on demand or
within one (1) year from the date as of which Consolidated Current Liabilities
are to be determined, and such other liabilities as may properly be classified
as current liabilities in conformity with generally accepted accounting
principles.
Consolidated Financial Obligations. With respect to any
period, an amount equal to the sum of all payments on Indebtedness that become
due and payable or that are to become due and payable during such period
pursuant to any agreement or instrument to which the Borrower or any of its
Subsidiaries is a party relating to the borrowing of money or the obtaining of
credit or in respect of Capitalized Leases (including, without limitation,
Deferred Payment Sale Interest). Demand obligations shall be deemed to be due
and payable during any fiscal year during which such obligations are
outstanding.
Consolidated Net Income (or Net Loss). The consolidated net
income (or net loss) of the Borrower and its Subsidiaries, after deduction of
all expenses, taxes, and other proper charges, determined in conformity with
generally accepted accounting principles.
Consolidated Shareholders Equity. An amount determined in
conformity with generally accepted accounting principles that is equal to the
sum of (a) the Consolidated capital accounts (including common stock and
preferred stock, but excluding treasury stock) of the Borrower and its
Subsidiaries, plus (b) the Consolidated retained earnings and additional paid in
capital of the Borrower and its Subsidiaries, minus (c) the Consolidated book
value of all assets acquired by the Borrower and its Subsidiaries after the
Closing Date not in the ordinary course of business which, under generally
accepted accounting principles, would be treated as intangible assets and minus
(d) any amounts due and payable to the Borrower by Andersen Group, Inc., the
parent of the Borrower.
Consolidated Tangible Net Worth. The excess of Consolidated
Total Assets over Consolidated Total Liabilities, and less the sum of:
(a) The total book value of all assets of the Borrower and its Subsidiaries
properly classified as intangible assets under generally accepted
accounting principles, including such items as goodwill, the purchase
price of acquired assets in excess of the fair market value thereof,
trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing; plus
(b) All amounts representing any write-up in the book value of any assets
of the Borrower or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date; plus
(c) to the extent otherwise included in Consolidated Tangible Net
Worth, the aggregate amount of any subscriptions receivable.
Consolidated Total Assets. All assets of the Borrower and
its Subsidiaries determined on a consolidated basis in conformity with
generally accepted accounting principles.
Consolidated Total Debt. With respect to any fiscal period, an
amount equal to the aggregate amount of all Indebtedness of the Borrower or any
of its Subsidiaries outstanding during such fiscal period pursuant to any final
judgment or any agreement, document, payment or performance guaranty or
instrument to which the Borrower or any of its Subsidiaries is a party relating
to the borrowing of money or the obtaining of credit or in respect of
Capitalized Leases.
Consolidated Total Liabilities. All liabilities of the
Borrower and its Subsidiaries determined on a consolidated basis in conformity
with generally accepted accounting principles (including, without limitation,
Deferred Payment Sale Interest) and all Indebtedness of the Borrower and its
Subsidiaries, to the extent not so classified.
Conversion Request. A notice given by the Borrower to
BKB of the Borrower's election to convert or continue a Revolving Loan in
accordance with ss.2.7.
Credit Agreement. This Revolving Credit and Deferred
Payment Sales Agreement, including the Schedules and Exhibits hereto.
Default. Any event, which with the giving of notice
or the lapse of time or both, would constitute an Event of Default hereunder.
Default Rate. The Base Rate plus three percent (3%).
Deferred Payment Date. The earliest of (a) a date mutually
agreed to by RIHT and the Borrower with respect to a particular Deferred Payment
Sale (which shall not exceed 180 days after the date of such Deferred Payment
Sale), (b) the Revolving Loans Maturity Date, or (c) the occurrence of an Event
of Default.
Deferred Payment Sale. See ss.4.1.
Deferred Payment Sale Amount. The aggregate amount owed to
RIHT on any day on account of all Deferred Payment Sales, as reasonably
calculated by RIHT on such day, including without limitation all Purchase
Prices, Precious Metal Fees, Breakage Fees, and Deferred Payment Sale Interest.
Deferred Payment Sale Interest. Interest on the principal
balance of the Deferred Payment Sale Amount calculated in accordance with the
method and/or amount set forth on the Confirmation Order for the applicable sale
(which will be RIHT's cost of leasing the metals, as reasonably determined by
RIHT, plus two and one-half of one percent (2.5%), or a variable rate determined
by RIHT to be set forth in the Confirmation Order).
Dollars or $. Dollars in lawful currency of the United States
of America.
Domestic Lending Office. Initially, the head office of BKB;
thereafter, such other office of BKB, if any, located within the United States
that will be making or maintaining Base Rate Loans.
Drawdown Date. The date on which any Revolving Loan is made or
is to be made, and the date on which any Revolving Loan is converted or
continued in accordance with ss.2.7.
EBITDA. The sum of (a) Consolidated Net Income (or Net Loss)
for any period, plus (b) any income taxes (as calculated in accordance with the
Tax Sharing Agreement) or interest expense of the Borrower and its Subsidiaries
for such period, plus (c) depreciation and amortization of the Borrower and its
Subsidiaries for such period, all as determined in conformity with generally
accepted accounting principles.
Eligible Precious Metal Inventory. The Fair Market Value of
the fine metal component (not including alloys or any labor component) of the
Borrower's raw materials, work-in-progress and finished goods Precious Metals
which are located at Permitted Inventory Locations, are subject to the Banks'
perfected, first lien security interest and no other lien or security interest,
are not in transit to third parties, are usable in the ordinary course of the
Borrower's business, and conform to the representations and warranties set forth
herein.
Eligible Receivables. Those accounts of the Borrower which
arise from the sale of inventory or rendition of services in the ordinary course
of the Borrower's business; are subject to the Banks' perfected, first lien
security interest and no other lien or security interest; are evidenced by an
invoice or other documentary evidence reasonably satisfactory to the Banks; and
which are not accounts: (i) that arise out of a sale made by the Borrower to any
affiliate, division, subsidiary or parent of the Borrower or to any person or
entity controlled by or under common control with an affiliate, division,
subsidiary or parent of the Borrower; (ii) which are due or unpaid more than (A)
sixty (60) days after their original due date or (B) one hundred and five (105)
days after the original invoice date or which are payable by an account debtor
as to which more than twenty percent (20%) of such account debtor's accounts
owed to the Borrower are due or unpaid more than (Y) sixty days after their
original due date or (Z) one hundred and five (105) days after the original
invoice date; (iii) as to which the account debtor is also a creditor or
supplier of the Borrower, has disputed liability or made any claim with respect
to any other account due from such account debtor to the Borrower, or as to
which the account is otherwise subject to any defense, counterclaim or offset of
or by the account debtor; (iv) as to which the account debtor is located outside
the United States (except as otherwise agreed in writing in its discretion by
BKB with respect to specific foreign account debtors); (v) as to which the
account debtor is located in New Jersey or Minnesota, unless the Borrower has
(x) filed a Notice of Business Activities Report in the appropriate office or
agency for such state in the then current year, or (y) received a Certificate of
Authority to do business and is in good standing in such state; (vi) as to which
the sale giving rise to the account is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or other repurchase or return
basis, or is evidenced by a note or chattel paper; (vii) which arise out of a
sale made by the Borrower to an account debtor that is the United States
Government or any agency or subdivision thereof, unless the Borrower has
complied in all respects with the Federal Assignment of Claims Act of 1940, or
has otherwise satisfied the Banks in their reasonable discretion as to the
assignability and collectibility of said accounts; (viii) as to which the
account debtor is the debtor with respect to more than 10% of the accounts
receivable of the Borrower or as to which the account debtor has had any
bankruptcy or insolvency proceeding commenced by or against it; or (ix) the
account debtors in respect of which are reasonably deemed by the Banks to be
uncreditworthy or insolvent.
Environmental Laws. Any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act,
the Toxic Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single
employer with the Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of ss.4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has not
been waived.
Event of Default. See ss.12.1.
Fair Market Value. On any day, (a) as to gold, the London
Bullion Brokers second fixing price for that day, or, in the event that the
London Bullion Brokers shall discontinue or alter its usual practice of quoting
a price in Dollars for gold on such day, RIHT's spot quotation for that day; (b)
as to silver, the Noon Handy & Harman published silver base price, or, in the
event that there is no Handy & Harman fix or silver is not quoted in Dollars on
such day, RIHT's spot quotation for that day; and (c) as to platinum or
palladium, the London Bullion Brokers second fixing price for the applicable
metal for that day, or, in the event that the London Bullion Brokers shall
discontinue or alter its usual practice of quoting a price in Dollars for the
applicable metal on such day, RIHT's spot quotation for that day
Generally Accepted Accounting Principles or generally accepted
accounting principles. (a) When used in ss.9, whether directly or indirectly
through reference to a capitalized term used therein, means (i) principles that
are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal year
ended on February 29, 1996, and (ii) to the extent consistent with such
principles, the accounting practice of the Borrower reflected in its financial
statements for the year ended on the Balance Sheet Date, and (b) when used in
general, other than as provided above, means principles that are (i) consistent
with the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, as in effect from time to time, and (ii)
consistently applied with past financial statements of the Borrower adopting the
same principles, provided that in each case referred to in this definition of
"generally accepted accounting principles" a certified public accountant would,
insofar as the use of such accounting principles is pertinent, be in a position
to deliver an unqualified opinion (other than a qualification regarding changes
in generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan
within the meaning of ss.3(2) of ERISA maintained or contributed to by the
Borrower or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
Guaranty. The Unlimited Guaranty of even date herewith
executed and delivered to the Banks by Ney Ultrasonics Inc., a Delaware
corporation and Subsidiary of the Borrower.
Guarantor Security Agreement. The Security Agreement
of even date herewith among NeY Ultrasonics Inc. and the Banks.
Hedging Policy. See ss.8.1(g) hereof.
Indebtedness. All obligations, contingent and otherwise, that
in conformity with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event to the extent not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto by the obligor, whether or not the liability secured
thereby shall have been assumed; (c) indebtedness arising under or in connection
with any judgment; and (d) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
Interest Payment Date. (a) As to any Base Rate Loan, the last
day of the calendar month which includes the Drawdown Date thereof; and (b) as
to any LIBOR Rate Loan in respect of which the Interest Period is (i) 3 months
or less, the last day of such Interest Period and (ii) more than 3 months, the
date that is 3 months from the first day of such Interest Period and, in
addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Loan (a)
initially, the period commencing on the Drawdown Date of such Revolving Loan and
ending on the last day of one of the periods set forth below, as selected by the
Borrower in a Loan Request (i) for any Base Rate Loan, the last day of the
calendar month; and (ii) for any LIBOR Rate Loan, 1, 2, 3 or 4 months; and (b)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Revolving Loan and ending on the last day of
one of the periods set forth above, as selected by the Borrower in a Conversion
Request; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end
on a day that is not a LIBOR Business Day, that Interest Period shall be
extended to the next succeeding LIBOR Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding LIBOR
Business Day;
(ii) if any Interest Period with respect to a Base Rate Loan would end on a day
that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;
(iii) if the Borrower shall fail to give notice as provided in ss.2.7, the
Borrower shall be deemed to have requested a conversion of the affected LIBOR
Rate Loan to a Base Rate Loan, or the continuation of the applicable Base Rate
Loan as a Base Rate Loan, as applicable, on the last day of the then current
Interest Period with respect thereto;
(iv) any Interest Period relating to any LIBOR Rate Loan that begins on the last
LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBOR Business Day of the corresponding calendar
month; and
(v) any Interest Period relating to any Revolving Loan that would otherwise
extend beyond the Revolving Loan Maturity Date shall end on the Revolving Loan
Maturity Date.
Investments. All expenditures made and all liabilities
incurred (contingently or otherwise) for the acquisition of stock or
Indebtedness of, or for loans, advances, capital contributions or transfers of
property to, or in respect of any guaranties (or other commitments as described
under Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit. See ss.3.1.
Letter of Credit Application. See ss.3.1.
Letter of Credit Fee. See ss.3.5.
LIBOR Business Day. Any day on which commercial banks are open
for international business (including dealings in Dollar deposits) in London,
England or such other interbank market as may be selected by BKB in its sole
discretion acting in good faith.
LIBOR Lending Office. Initially, the head office of BKB;
thereafter, such other office of BKB, if any, that shall be making or
maintaining LIBOR Rate Loans.
LIBOR Rate. For any Interest Period with respect to a LIBOR
Rate Loan, the rate of interest equal to the rate determined by BKB at which
Dollar deposits for such Interest Period are offered based either on information
presented on Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR
Business Day prior to the first day of such Interest Period or, if such Telerate
Page is unavailable for any reason whatsoever, on any other information
reasonably available to BKB, divided by a number equal to 1.00 minus the LIBOR
Reserve Rate.
LIBOR Rate Loans. Revolving Loans bearing interest cal-
culated by reference to the LIBOR Rate.
LIBOR Reserve Rate. For any day with respect to a LIBOR Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "LIBOR Liabilities"
(as that term is used in Regulation D), if such liabilities were outstanding.
The LIBOR Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the LIBOR Reserve Rate.
Loan Documents. This Credit Agreement, the Note, the
Guaranty, the Tax Sharing Agreement, and the Security Documents.
Loan Request. See ss.2.6.
Maximum Drawing Amount. As of any date, the maximum
amount that may be drawn upon letters of credit issued by BKB.
Mortgage. The Mortgage Deed, Security Agreement and
Fixture Filing of even date herewith executed and delivered by the Borrower
to the Banks.
Multiemployer Plan. Any multiemployer plan within the
meaning of ss.3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
Note. See ss.2.4.
Note Record. A Record with respect to the Note.
Obligations. All indebtedness, obligations and liabilities of
every kind and nature of the Borrower or any of its Subsidiaries to any of the
Banks, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, including,
without limitation, those obligations arising or incurred under this Credit
Agreement or any of the other Loan Documents or in respect of any of the
Revolving Loans or Deferred Payment Sales made or the Note or other instruments
at any time evidencing any thereof.
Outstanding. With respect to the Revolving Loans or the
Deferred Payment Sale Amount, the aggregate unpaid principal thereof as of
any date of determination.
Patent Assignment. The Patent Collateral Assignment and
Security Agreement of even date herewith among the Borrower and the Banks.
PBGC. The Pension Benefit Guaranty Corporation created
by ss.4002 of ERISA and any successor entity or entities having similar
responsibilities.
Permitted Inventory Locations. Locations owned by the Borrower
or as to which the applicable lessor or owner of such location has entered into
an agreement, in form and substance reasonably acceptable to the Banks,
acknowledging the first lien of the Banks in the Collateral and agreeing to give
the Banks access to such collateral for the purpose of removing it from the
premises.
Permitted Liens. Liens, security interests and other
encumbrances permitted by ss.8.2.
Person. Any individual, corporation, limited liability
company, partnership, trust, unincorporated association, business, or other
legal entity, and any government or any governmental agency or political
subdivision thereof.
Precious Metals. Gold measured in troy ounces having a
fineness of not less than .995; silver measured in troy ounces having a fineness
of not less than .999; and platinum and palladium measured in troy ounces having
a fineness of not less than .9995, in each case without regard to whether such
metal is in bullion form or is contained in or processed into other materials
which contain elements other than such Precious Metal; provided that, for the
purposes hereof, the term "Precious Metals" refers only to the number of ounces
of the applicable metal, and not to any other contents of such materials.
Precious Metal Fees. The amount of any applicable premiums
(which shall be established for each order of Precious Metals by RIHT in its
sole discretion), delivery charges, shipping insurance charges or other related
items applicable to each order of Precious Metals.
Purchase Price The amount payable to RIHT as the purchase
price portion of the Deferred Payment Sale Amount on any Deferred Payment Date,
which Purchase Price shall be, (a) if the Deferred Payment Date is earlier than
the Revolving Loan Maturity Date and prior to the occurrence of an Event of
Default, equal to either (i) a price to which the Borrower and RIHT agree or
(ii) if the Borrower and RIHT cannot agree, the Fair Market Value of the
applicable Precious Metal on the date of the sale, plus any Breakage Fees
incurred by the Banks (as determined by RIHT), Precious Metal Fees, and Deferred
Payment Sale Interest accrued thereon at the Default Rate until paid in full;
and (b) if the Deferred Payment Date is the Maturity Date, the Fair Market Value
of the applicable Precious Metals on the applicable date, plus any Breakage Fees
incurred by RIHT (as determined by RIHT), Precious Metal Fees, and Deferred
Payment Sale Interest thereon; and (c) if the Deferred Payment Date is after the
occurrence of an Event of Default, RIHT's spot prices for the applicable
Precious Metals, which may be determined by RIHT as of the date that the Event
of Default is declared by the Banks to have occurred or as of any date
thereafter that RIHT determines to be appropriate under the circumstances, plus
any Breakage Fees incurred by the RIHT (as determined by RIHT), Precious Metal
Fees, and Deferred Payment Sale Interest thereon at the Default Rate until paid.
Real Estate. All real property at any time owned or leased
(as lessee or sublessee) by the
Borrower or any of its Subsidiaries.
Record. The grid attached to the Note, or the continuation of
such grid, or any other similar record, including computer records, maintained
by BKB with respect to any Revolving Loans referred to in the Note.
Reimbursement Obligation. The Borrower's obligation to
reimburse BKB on account of any drawing under any Letter of Credit as provided
herein.
Revolving Loan Maturity Date. October 8, 1999.
Revolving Loans. Revolving Loans made or to be made by BKB to
the Borrower pursuant to ss.2.
RIHT. Rhode Island Hospital Trust National Bank.
Security Documents. See ss.5.10.
Stock Pledge Agreement. The Stock Pledge Agreement of even
date herewith between the Borrower and the Banks.
Subsidiary. Any corporation, association, trust, or other
business entity of which the designated parent shall at any time own, directly
or indirectly through a Subsidiary or Subsidiaries, at least a majority (by
number of votes) of the outstanding Voting Stock or equity interests.
Tax Sharing Agreement. See ss.8.12.
Type. As to any Revolving Loan, its nature as a Base Rate
Loan or a LIBOR Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, or any successor version
thereto adopted by BKB in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligations. The sum of all unpaid
Reimbursement Obligations of the Borrower.
Voting Stock. Stock or similar interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association, trust or
other business entity involved, whether or not the right so to vote exists by
reason of the happening of a contingency.
ss.1.2. Rules of Interpretation.
A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
The singular includes the plural and the plural includes the
singular.
A reference to any law includes any amendment or modification to such
law.
A reference to any Person includes its permitted successors and
permitted assigns.
Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
The words "include", "includes" and "including" are not limiting.
All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the State of Connecticut, have the meanings assigned to them
therein.
Reference to a particular "ss." refers to that section of this Credit
Agreement unless otherwise indicated.
The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
ss.2. THE REVOLVING LOAN FACILITY
ss.2.1. Co Subject to the terms and conditions set forth in this Credit
Agreement, BKB agrees to lend to the Borrower and the Borrower may borrow,
repay, and reborrow from time to time between the Closing Date and the Revolving
Loan Maturity Date upon notice by the Borrower to BKB given in accordance with
ss.2.6, such sums as are requested by the Borrower up to a maximum aggregate
amount outstanding at any one time equal to the lesser of (a) the Borrowing Base
and (b) the sum of the Commitment minus the Maximum Drawing Amount, all Unpaid
Reimbursement Obligations and the Deferred Payment Sale Amount (after giving
effect to all amounts requested). Each request for a Revolving Loan hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in ss.10 and ss.11, in the case of the initial Revolving
Loans to be made on the Closing Date, and ss.10, in the case of all other
Revolving Loans, have been satisfied on the date of such request.
ss.2.2. Co The Borrower agrees to pay to BKB a Commitment Fee calculated on the
basis of a 360 day year and at a rate per annum equal to one-quarter of one
percent (0.25%) per annum on the average daily unused amount of the Commitment
(calculated by deducting the sum of outstanding Revolving Loans, the Maximum
Drawing Amount, all Unpaid Reimbursement Obligations, and the Deferred Payment
Sale Amount from the Commitment). The Commitment Fee will accrue commencing on
the date hereof and will be payable monthly in arrears on the first business day
of each month (or portion thereof), commencing on the first such date after the
date hereof, and upon the Revolving Loan Maturity Date (or upon any earlier
reduction or termination of the Commitment).
ss.2.3. Vo The Borrower shall have the right at any time and from time to time
upon three (3) Business Days' prior written notice to BKB to reduce by $100,000
or an integral multiple of $50,000 in excess thereof, or to terminate entirely,
the Commitment. Upon the effective date of any such voluntary reduction or other
(voluntary or involuntary) termination, the Borrower shall pay to BKB the full
amount of the Commitment Fee then accrued on the amount of the reduction in
accordance with ss.2.2 hereof. In addition, upon the termination of the
Commitment, the Borrower will pay to BKB the aggregate amount of all interest
accrued on the outstanding principal amount of the Revolving Loans through and
including such date of termination. No reduction or termination of the
Commitment may be reinstated.
ss.2.4. Th The Revolving Loans shall be evidenced by the promissory note of the
Borrower in substantially the form of Exhibit A hereto (the "Note"). The
Borrower irrevocably authorizes BKB to make or cause to be made, at or about the
time of the Drawdown Date of any Revolving Loan or at the time of receipt of any
payment of principal on the Note, an appropriate notation on BKB's Note Record
reflecting the making of such Revolving Loan or (as the case may be) the receipt
of such payment. The outstanding amount of the Revolving Loans set forth on
BKB's Note Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to BKB, but the failure to record, or any error in so
recording, any such amount on BKB's Note Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under the Note to make
payments of principal of or interest on the Note when due.
ss.2.5. In Except as otherwise provided in ss.5.9,
(a) Each Base Rate Loan shall bear interest for the period commencing with
the Drawdown Date thereof and ending on the last day of each Interest
Period with respect thereto at the Base Rate.
(b) Each LIBOR Rate Loan shall bear interest for the period commencing with
the Drawdown Date thereof and ending on the last day of each Interest
Period with respect thereto at the LIBOR Rate determined for such
Interest Period plus two and one-half of one percent (2.5%).
(c) The Borrower promises to pay interest on each Revolving Loan in arrears
on each Interest Payment Date with respect thereto.
ss.2.6. Re Except as expressly provided for in certain cash management
agreements between the Borrower and BKB, the Borrower shall give to BKB written
notice in the form of Exhibit B hereto (or telephonic notice confirmed in a
writing in the form of Exhibit B hereto) of each Revolving Loan requested
hereunder (a "Loan Request") no less than (a) one (1) Business Day prior to the
proposed Drawdown Date of any Base Rate Loan and (b) three (3) LIBOR Business
Days prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such
notice shall specify (i) the principal amount of the Revolving Loan requested,
(ii) the proposed Drawdown Date of such Revolving Loan, (iii) the Interest
Period for such Revolving Loan in the case of a LIBOR Rate Loan and (iv) the
Type of such Revolving Loan. Each Loan Request shall be irrevocable and binding
on the Borrower and shall obligate the Borrower to accept the Revolving Loan
requested from BKB on the proposed Drawdown Date. Except as expressly provided
for in certain cash management agreements between the Borrower and BKB, each
Loan Request loan shall be in a minimum aggregate amount of $100,000 or an
integral multiple of $50,000 in excess thereof.
ss.2.7. Conversion Options.
(a) The Borrower may elect from time to time to convert any
outstanding Revolving Loan to a Revolving Loan of another Type,
provided that (i) with respect to any such conversion of a LIBOR Rate Loan
to a Base Rate Loan, the Borrower shall give BKB at least one (1) Business
Day's prior written notice of such election; (ii) with respect to any such
conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall
give BKB at least three (3) LIBOR Business Days' prior written notice of
such election; (iii) with respect to any such conversion of a LIBOR Rate
Loan into a Base Rate Loan, such conversion shall only be made on the last
day of the Interest Period with respect thereto and (iv) no Base Rate Loan
may be converted into a LIBOR Rate Loan when any Default or Event of
Default has occurred. On the date on which such conversion is being made
BKB shall take such action as is necessary to transfer such Revolving Loans
to its Domestic Lending Office or its LIBOR Lending Office, as the case may
be. All or any part of outstanding Revolving Loans of any Type may be
converted into a Revolving Loan of another Type as provided herein,
provided that any partial conversion of a Base Rate Loan to a
LIBOR Rate Loan shall be in an aggregate principal amount of $100,000 or a
whole multiple of $50,000 in excess thereof. Each Conversion Request
relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan shall
be irrevocable by the Borrower.
(b) Any Revolving Loan of any Type may be continued as a Revolving
Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice provisions
contained in ss.2.7(a); provided that no LIBOR Rate Loan may be continued
as such when any Default or Event of Default has occurred, but shall be
automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto ending after the occurrence of any Default
or Event of Default. (c) Any conversion to or from LIBOR Rate Loans shall
be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of all LIBOR Rate
Loans having the same Interest Period shall not be less than $100,000 or an
integral multiple of $50,000 in excess thereof. Notwithstanding anything to
the contrary contained herein, at no time shall there be, in the aggregate,
more than six (6) different Interest Periods with respect to outstanding
LIBOR Rate Loans.
ss.2.8. Maturity. The Borrower promises to pay on the Revolving Loan Maturity
Date, and there shall become absolutely due and payable on the Revolving
Loan Maturity Date, all of the Revolving Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon.
ss.2.9. Mandatory Repayments of Revolving Loans. If at any time the aggregate
outstanding amount of the Revolving Loans exceeds the lesser of (a) the
Borrowing Base and (b) the sum of the Commitment minus the Maximum Drawing
Amount, all Unpaid Reimbursement Obligations and the Deferred Payment Sale
Amount, then the Borrower shall immediately pay the amount of such excess to BK
first for application to the Revolving Loans and Unpaid
Reimbursement Obligations and then to the Deferred Payment Sale Amount. Each
such partial prepayment upon the Revolving Loans shall be applied, in the
absence of instruction by the Borrower, first to the principal of Base Rate
Loans and then to the principal of LIBOR Rate Loans.
ss.2.10. Optional Repayments of Revolving Loans. The Borrower shall have the
right, at its election, to repay the outstanding amount of the Revolving Loans,
as a whole or in part, at any time without penalty or premium, provided that if
any full or partial prepayment of the outstanding amount of any LIBOR Rate Loans
pursuant to this ss.2.10 is made on a day other than the last day of the
Interest Period relating thereto, then the Borrower shall be obligated to pay to
BKB the amount of any loss, cost or expense associated with the prepayment of
LIBOR Rate Loans in accordance with ss.5.8(d) hereof. Except as expressly
provided for in certain cash management agreements between the Borrower and the
Bank, the Borrower shall give BKB, no later than 10:00 a.m., Hartford time, at
least one (1) Business Day's prior written notice of any proposed prepayment
pursuant to this ss.2.10 of Base Rate Loans, and three (3) LIBOR Business Days'
notice of any proposed prepayment pursuant to this ss.2.10 of LIBOR Rate Loans,
in each case specifying the proposed date of prepayment of Revolving Loans, the
type of Revolving Loan to be prepaid and the principal amount to be prepaid.
Except as expressly provided for in certain cash management agreements between
the Borrower and the Bank, each such partial prepayment of the Revolving Loans
shall be in a principal amount of $100,000 or whole multiples of $50,000 in
excess thereof, and each such prepayment shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and then
to the principal of LIBOR Rate Loans.
ss.3. LETTERS OF CREDIT.
ss.3.1. Letter of Credit Commitment.
(a) Subject to the terms and conditions hereof and the execution and
delivery by the Borrower of a letter of credit application on BKB's
customary form (a "Letter of Credit Application"), BKB (BKB being the
sole issuer of the Letters of Credit) upon the representations and
warranties of the Borrower contained herein, agrees, in its individual
capacity, to issue, extend and renew for the account of the Borrower
one or more standby letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the
Borrower and agreed to by BKB; provided, however, that after giving effect
to such request,(i) the sum of the aggregate Maximum Drawing Amount and
all Unpaid Reimbursement Obligations shall not exceed $500,000 at
any one time and (ii) the sum of (A) the Maximum Drawing Amount,
(B) all Unpaid Reimbursement Obligations, (C) the aggregate amount of
all Revolving Loans outstanding, and (D) the Deferred Payment Sale
Amount, shall not exceed the Commitment.
(b) Each Letter of Credit Application shall be completed to the
reasonable satisfaction of BKB. In the event that any provision of any
Letter of Credit Application shall be inconsistent with any provision of
this Credit Agreement, then the provisions of this Credit Agreement shall,
to the extent of any such inconsistency, govern.
(c) Each Letter of Credit issued, extended or renewed hereunder shall,
among other things, (i) provide for the payment of sight or time drafts for
honor thereunder when presented in conformity with the terms thereof and
when accompanied by the documents described therein, and (ii) have an
expiry date no later than the date which is ten (10) days prior to the
Revolving Loan Maturity Date. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
ss.3.2. Reimbursement Obligation of the Borrower.
(a) In order to induce BKB to issue, extend and renew each Letter of
Credit, the Borrower hereby agrees to reimburse or pay to BKB, for the
account of BKB, with respect to each Letter of Credit issued, extended or
renewed by BKB hereunder,
(i) except as otherwise expressly provided in ss.3.2(a)(ii) and (iii),
on each date that any draft presented pursuant to such Letter of Credit is
honored by BKB, or BKB otherwise makes a payment pursuant thereto, (i) the
amount paid by BKB pursuant to such Letter of Credit, and (ii) the amount
of any taxes, fees or charges whatsoever incurred by BKB in connection with
any payment made by BKB pursuant to such Letter of Credit,
(ii) upon the reduction (but not termination) of the Commitment to an
amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by BKB as cash collateral for all
Unpaid Reimbursement Obligations, and
(iii) upon the termination of the Commitment, or the acceleration
of the Unpaid Reimbursement Obligations with respect to all Letters of
Credit in accordance with ss.12, an amount equal to the then current
Maximum Drawing Amount on all Letters of Credit, which amount shall be
held by BKB as cash collateral for all Unpaid Reimbursement Obligations.
Each such payment shall be made to BKB at BKB's Head Office in immediately
available funds. Interest on any and all amounts remaining unpaid by the
Borrower under this ss.3.2 at any time from the date such amounts become due and
payable (whether as stated in this ss.3.2, by acceleration or otherwise) until
payment in full (whether before or after judgment) shall be payable to BKB on
demand at the rate specified in ss.5.9(a) for overdue principal on the Revolving
Loans.
(b) On the thirtieth (30th) day prior to the Revolving Loan Maturity
Date, the aggregate amount of all Letters of Credit then outstanding shall
be (a) cash collateralized by delivery by the Borrower to BKB of an amount
equal to 105% of the Maximum Drawing Amount or (b) secured by delivery by
the Borrower to BKB of a "back-to-back" letter of credit, issued by a bank
satisfactory to BKB (in its reasonable discretion), in an amount equal to
105% of the Maximum Amount (it being understood that from time to time such
cash collateral will be released, and such back-to-back letters of credit
may be reduced, to the extent that the Maximum Drawing Amount is reduced).
ss.3.3. Obligations Absolute. The Borrower's obligations under this ss.3 shall
be absolute and unconditional under any and all circumstances and irrespective
of the occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the Borrower
may have or have had against any Bank or any beneficiary of a Letter of Credit.
The Borrower further agrees with the Banks that the Banks shall not be
responsible for, and the Borrower's Unpaid Reimbursement Obligations under
ss.3.2 shall not be affected by, among other things, the validity or genuineness
of documents or of any endorsements thereon, even if such documents should in
fact prove to be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Borrower, the beneficiary of any Letter of Credit
or any financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee. The Banks shall not
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit. The Borrower agrees that any action taken
or omitted by any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, without gross negligence
and without willful misconduct by such Bank, shall be binding upon the Borrower
and shall not result in any liability on the part of any Bank to the Borrower.
ss.3.4. Reliance by Issuer. The Banks shall be entitled to rely, and shall
be fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Banks. The
Borrower shall, on the date of issuance or any extension or renewal of any
Letter of Credit and at such (ii) cusan amount (in each case, a "Letter of
Credit Fee") equal to one and one-half percent (1-1/2%) per annum on the face
amount of such Letter of Credit.
ss.4. DEFERRED PAYMENT SALE FACILITY.
ss.4.1. Deferred Payment Sales. Provided no Default or Event of Default
has occurred and is continuing, RIHT, at the request of the Borrower, will sell
or deliver Precious Metals to the Borrower on a deferred payment basis
(collectively, the "Deferred Payment Sales"), provided that RIHT will not sell
or deliver Precious Metals to the Borrower on a deferred payment basis if doing
so would cause the Deferred Payment Sale Amount owing to RIHT to exceed the
Availability Amount.
ss.4.2. Mechanics of Sales.
(a) The Borrower shall give notice to RIHT of its desire to purchase
or receive deliveries of Precious Metal on a deferred payment basis. Upon
receiving such request, RIHT shall quote payment terms to the Borrower for
the requested amount and type of Precious Metal. If the Borrower agrees to
pay on RIHT's payment terms, RIHT will then send via telecopier a written
confirmation of the sale to the Borrower which written confirmation (the
"Confirmation Order") will include the following items: (i) the quantity
and fineness of the Precious Metal sold; (ii) the payment terms for the
Precious Metal sold; (iii) the amount of any applicable premiums (which
shall be established for each order by RIHT in its sole discretion),
delivery charges, shipping insurance charges or other related items
applicable to such order of Precious Metals; and (iv) the manner of
payment. In each case, Deferred Payment Sale Interest will accrue on a
daily basis and will be payable within 10 days after RIHT sends to the
Borrower its monthly invoice.
(b) Following a request by the Borrower for the delivery of a
specified quantity of Precious Metals, the agreement of RIHT to deliver
such Precious Metals, and the agreement of the Borrower and RIHT on pricing
and other terms for such delivery, the Borrower shall be obligated to pay
the Purchase Price on each Deferred Payment Date with respect to such
Precious Metals.
ss.4.3. Deliveries of Precious Metals. All deliveries of Precious Metals by RIHT
to the Borrower will be made by delivery to the Permitted Inventory Location
designated by the Borrower, such delivery to be on terms and conditions
satisfactory to RIHT. All shipping expenses (including insurance) shall be borne
by the Borrower and any such expenses paid or incurred by RIHT shall be
reimbursed by the Borrower upon demand by RIHT. Upon RIHT's sale or delivery of
Precious Metals to the Borrower, title to the Precious Metals will become vested
in the Borrower. Upon each delivery, the Borrower shall bear the entire risk of
loss, theft, damage or destruction of the Precious Metals from any cause
whatsoever, whether or not such Precious Metals are insured. Notwithstanding
anything to the contrary contained herein, RIHT shall not be liable to the
Borrower if RIHT fails to deliver the Precious Metals by reason of any act of
occurrence beyond RIHT's control including any Act of God or other catastrophe,
force majeure, lack of supply, delay in transportation, war or other
hostilities, strike, lock out, epidemic, acts of government or other public
authority, unavoidable casualties or any other causes beyond RIHT's control.
RIHT MAKES NO WARRANTY OF MERCHANTABILITY IN RESPECT TO PRECIOUS METAL SOLD OR
DELIVERED UNDER THIS AGREEMENT NOR OF FITNESS FOR ANY PARTICULAR PURPOSE NOR ANY
OTHER WARRANTIES, EXPRESS OR IMPLIED, except RIHT does warrant to the Borrower
that the Precious Metal sold or delivered to the Borrower hereunder will be of
the fineness stated in the applicable Confirmation Order.
ss.4.4. Maturity. Deferred Payment Sales will be available until the Revolving
Loan Maturity Date and all or any portion of the Deferred Payment Sale Amount
that is not due or payable before the Revolving Loan Maturity Date will in any
event be payable not later than the Revolving Loan Maturity Date. All agreements
to sell or deliver Precious Metals shall, if not sooner expired, expire on the
Revolving Loan Maturity Date.
ss.4.5. Availability. During the term hereof, purchases of Precious Metals will
be available in minimum amounts to be determined by RIHT. All purchases will be
priced by reference to the Fair Market Value of the applicable Precious Metal on
the particular day, plus applicable Precious Metal Fees.
ss.4.6. Inventory Restrictions. All Precious Metal shall be located at all times
solely at Permitted Inventory Locations, and may be sold or otherwise disposed
of solely in the ordinary course of the Borrower's business consistent with past
practices.
ss.5. CERTAIN GENERAL PROVISIONS.
ss.5.1. Funds for Payments.
(a) All payments of principal, interest, commitment fees and any other
amounts due hereunder or under any of the other Loan Documents with respect
to Revolving Loans shall be made to BKB at BKB's Head Office or at such
other location that BKB may from time to time designate, in each case in
immediately available funds. The Deferred Payment Sale Amount owed to RIHT,
including, without limitation, all Deferred Payment Sale Interest, all
Purchase Prices, Precious Metal Fees and Breakage Fees applicable thereto,
shall be repaid by the Borrower to RIHT in the applicable Precious Metal or
in immediately available Dollars and in accordance with the requirements of
the applicable Confirmation Order.
(b) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Borrower will pay to the Banks, on the date
on which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
the Banks to receive the same net amount which the Banks would have
received on such due date had no such obligation been imposed upon the
Borrower. The Borrower will deliver promptly to the Banks certificates or
other valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such other
Loan Document.
ss.5.2. Computations. All computations of interest on the Revolving Loans and
the deferred Payment Sale Interest and all computaions of fees due and payable
hereunder shall be based on a 360 day year and paid for the actual number of
days elapsed. Except as otherwise provided in the definition of the term
"Interest Period" with respect to LIBOR Rate Loans, whenever a payment hereunder
or under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extensions. The
outstanding amount of (a) the Revolving Loans as reflected onthe Note Record
and (b) the Deferred Payment Sale Amount as reflected on the books and records
of RIHT from time to time shall be considered correct anda binding on the
Borrower unless within fifteen (15) Business Days after receipt of any notice
by the Borrower of such outstanding amounts, the Borrower shall notify BKB
or RIHT, as applicable, of its disagreement with such calculation.
ss.5.3. Inability to Determine LIBOR Rate. In the event prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, BKB shall
determine that adequate and reasonable methods do not exist for ascertaining the
LIBOR Rate that would otherwise determine the rate of interest to be applicable
during any Interest Period, BKB shall forthwith give notice of such
determination to the Borrower (which shall be conclusive and binding on the
Borrower). In such event (a) any Loan Request or Conversion Request with respect
to LIBOR Rate Loans shall be automatically withdrawn, (b) each LIBOR Rate Loan
will automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of BKB to make LIBOR
Rate Loans shall be suspended until BKB determines that the circumstances giving
rise to such suspension no longer exist, whereupon BKB shall so notify the
Borrower.
ss.5.4. Illegality. Notwithstanding any other provisions herein, if any present
or future law, regulation, treaty or directive, or the interpretation or
application thereof shall make it unlawful for BKB to make or maintain LIBOR
Rate Loans, BKB shall forthwith give notice of such circumstances to the
Borrower and thereupon (a) the commitment of BKB to make LIBOR Rate Loans or
convert Base Rate Loans to LIBOR Rate Loans shall forthwith be suspended and (b)
the Revolving Loans then outstanding as LIBOR Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such LIBOR Rate Loans or within such earlier period as may
be required by applicable law. The Borrower hereby agrees promptly to pay BKB,
upon demand by BKB, any additional amounts that are reasonably necessary to
compensate BKB for any costs (but excluding loss of anticipated profits)
incurred by BKB in making any conversion in accordance with this ss.5.4,
including any interest or fees payable by BKB to lenders of funds obtained by it
in order to make or maintain LIBOR Rate Loans hereunder.
ss.5.5. Additional Costs, Etc. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank by
any central bank or other fiscal, monetary or other governmental authority
(whether or not having the force of law), shall:
(a) subject any Bank to any tax, levy, impost, duty charge, fee,
deduction or withholding of any nature with respect to this Agreement, the
other Loan Documents, the Commitment or the Revolving Loans, Letters of
Credit, or Deferred Payment Sales (other than taxes based upon or measured
by the income or profits of such Bank), or
(b) materially change the basis of taxation (except for change in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Revolving Loan, Letters of Credit, Deferred Payment
Sale Amount, or any other amounts payable to any Bank under this Agreement
or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an office of any Bank, or
(d) impose on any Bank any other conditions or requirements with respect to
this Agreement, the other Loan Documents, the Commitment, the Revolving
Loans, the Letters of Credit, the Deferred Payment Sales, or any class of
loans or commitments of which any of the Revolving Loans, the Letters of
Credit, or Deferred Payment Sales forms a part, and the result of any of
the foregoing is:
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Revolving Loans,
Letters of Credit, or Deferred Payment Sales or the Commitment, or
(ii) to reduce the amount of principal, interest or other amount
payable to such Bank hereunder on account of the Commitment or any of the
Revolving Loans, Letters of Credit, or Deferred Payment Sales, or
(iii) to require such Bank to make any payment or to forego any
interest or other sum payable hereunder the amount of which payment or
foregone interest or other sum is calculated by reference to the gross
amount of any sum receivable or deemed received by such Bank from the
Borrower hereunder, then, and in each such case, the Borrower will, upon
demand made by such Bank at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank such additional amounts
as will be sufficient to compensate such Bank for such additional cost,
reduction, payment or foregone interest or other sum.
ss.5.6. Capital Adequacy. If any present or future law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force or
law) or the interpretation thereof by a court or governmental authority with
appropriate jurisdiction affects the amount of capital required or expected to
be maintained by any Bank or any corporation controlling such Bank and such Bank
determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of the Commitment or the Revolving
Loans, the Letters of Credit or the Deferred Payment Sales, then such Bank may
notify the Borrower of such fact. To the extent that the costs of such increased
capital requirements are not reflected in the Base Rate or the Deferred Payment
Sale Interest, as applicable, the Borrower and such Bank shall thereafter
attempt to negotiate in good faith, within thirty (30) days of the day on which
the Borrower receives such notice, an adjustment payable hereunder that will
adequately compensate such Bank in light of these circumstances. If the Borrower
and such Bank are unable to agree to such adjustment within thirty (30) days of
the date on which the Borrower receives such notice, then commencing on the date
of such notice (but not earlier than the effective date of any such increased
capital requirement), the amounts payable hereunder shall increase by an amount
that will, in the reasonable determination of such Bank (as the case may be),
provide adequate compensation. Each Bank shall allocate such cost increases
among its customers in good faith and on a basis determined by such Bank in its
discretion to be equitable, and the Borrower shall not have the right to review
or challenge the basis for such allocation.
ss.5.7. Certificate. A certificate setting forth any additional
amounts payable pursuant to ss.ss.5.5 or 5.6 and a reasonable
explanation of such amounts which are due, submitted by any Bank to
the Borrower, shall be conclusive, absent demonstrable error, that
such amounts are due and owing.
ss.5.8. Indemnity. The Borrower agrees to indemnify each Bank and to
hold each Bank harmless from and against any loss, cost or expense
that such Bank may sustain or incur as a consequence of (a) default by
the Borrower in payment of the principal amount of or any interest on
all or any portion of any LIBOR Rate Loan as and when due and payable,
including any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to
maintain a LIBOR Rate Loan, (b) default by the Borrower in making a
borrowing after the Borrower has given (or is deemed to have given) a
Loan Request, (c) default by the Borrower in the conversion of any
LIBOR Rate Loan after the Borrower has given (or is deemed to have
given) a request for conversion in accordance with ss.2.7 or (d) the
making of any payment of all or any portion of any LIBOR Rate Loan or
the making of any conversion of all or any portion of such LIBOR Rate
Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or
fees payable by such Bank to lenders of funds obtained by it in order
to maintain any such LIBOR Rate Loan.
ss.5.9. Interest After Default
(a) Overdue (beyond any grace period) principal of, and (to the extent
permitted by applicable law) interest on any Revolving Loan and the
Deferred Payment Sale Amount and all other overdue amounts payable
hereunder or under any of the other Loan Documents shall bear interest
compounded monthly and payable on demand at a rate per annum equal to the
Default Rate until such amount shall be paid in full (after as well as
before judgment).
(b) After the occurrence and during the continuance of an Event of Default, the
outstanding principal amount of the Revolving Loans, all Unpaid
Reimbursement Obligations, and the Deferred Payment Sale Amount not overdue
shall bear interest at a rate per annum equal to the Default Rate.
ss.6. Representations and Warranties. The Borrower represents and warrants
to the Banks as follows:
ss.6.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Borrower and its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, (ii) has all
requisite corporate power to own its property and conduct its business as
now conducted and as presently contemplated, and (iii) is in good standing
as a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure
to be so qualified would not have a material adverse effect on the
business, assets or financial condition of the Borrower or such Subsidiary.
(b) Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which the Borrower or any
of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (i) are within the corporate authority of
such Person, (ii) have been duly authorized by all necessary corporate
proceedings, (iii) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Borrower or any of its Subsidiaries is subject or any judgment, order,
writ, injunction, license or permit applicable to the Borrower or any of
its Subsidiaries and (iv) do not conflict with or require approval under
any provision of the corporate charter or bylaws of, or any agreement or
other instrument binding upon, the Borrower or any of its Subsidiaries
(other than those already obtained by the Borrower on or prior to the date
hereof).
(c) Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally
binding obligations of such Person enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief or any other equitable
remedy is subject to the discretion of the court before which any
proceeding therefor may be brought.
ss.6.2. Government Approvals. The execution, delivery and performance by the
Borrower and any of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency
or authority other than those already obtained.
ss.6.3. Title to Properties; Leases. Except as indicated on Schedule
6.3 hereto, the Borrower and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired since that date
(except property and assets sold or otherwise disposed of in the
ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales agreements,
title retention agreements, liens or other encumbrances except
Permitted Liens. ss.6.4. Financial Statements. There has been
furnished to each of the Banks consolidated and consolidating balance
sheets and consolidated and consolidating statements of income of
Andersen Group, Inc. and its Subsidiaries (including the Borrower) for
the fiscal year ending February 29, 1996, and as at the Balance Sheet
Date. Such balance sheets and statements of income have been prepared
in conformity with generally accepted accounting principles and fairly
present the financial condition of Andersen Group, Inc. and the
Borrower as at the close of business on the dates thereof and the
results of operations for the periods reported therein. There are no
material contingent liabilities of the Borrower or any of its
Subsidiaries as of either of such dates which were not disclosed in such
balance sheets and the notes related thereto.
ss.6.5. No Material Changes, Etc. Since the Balance Sheet Date there
has occurred no materially adverse change in the financial condition
or business of the Borrower and its Subsidiaries as shown on or
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, or the consolidated
statement of income for the four (4) fiscal month period then ended,
other than changes in the ordinary course of business that have not
had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Borrower or
any of its Subsidiaries.
ss.6.6. Franchises, Patents, Copyrights, Etc. Each of the Borrower and
its Subsidiaries possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in respect
of the foregoing, adequate for the conduct of its business
substantially as now conducted without conflict with any rights of
others.
ss.6.7. Litigation. Except as set forth in Schedule 6.7 hereto,
there are no actions, suits, proceedings or investigations of any kind
pending or threatened against the Borrower or any of its Subsidiaries
before any court, tribunal or administrative agency or board that, if
adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial
condition or business of the Borrower and its Subsidiaries considered
as a whole or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the consolidated balance sheet of the
Borrower and its Subsidiaries, or which question the validity of this
Credit Agreement or any of the other Loan Documents, or any action
taken or to be taken pursuant hereto or thereto.
ss.6.8. No Materially Adverse Contracts, Etc. Neither the
Borrower nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a
materially adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries considered as a whole.
Neither the Borrower nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected to have any materially
adverse effect on the business of the Borrower and its Subsidiaries
considered as a whole.
ss.6.9. Compliance with Other Instruments, Laws, Etc. Neither the
Borrower nor any of its Subsidiaries is in violation of/any provision
of its charter documents, bylaws, or any agreement or instrument to
which it may be subject or by which it or any of its properties may be
bound or any decree, order, judgment, statute, license, rule,
regulation or law (including, without limitation, Environmental laws
and ERISA), in any of the foregoing cases in a manner that could
result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of
the Borrower and its Subsidiaries taken as a whole.
ss.6.10. Tax Status. The Borrower and its Subsidiaries (a) have
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which any of
them is subject, (b) have paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and by appropriate proceedings and (c) have set aside on their books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Borrower know of no basis for any such claim.
ss.6.11 No Default of Default. or Event of Default has occurred and is
continuing.
ss 6.12 Holding Company and Investment Company Acts. Neither the Borrower nor
any of its Subsidiaries is
(a) "holding company", or a "subsidiary company" of a "holding
company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935;
(b) an "investment company"or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defomed in
the Investment Company Act of 1940;
(c) a "commodity trading adviser," a "commodity pool operator" or a "futures
commission merchant" within the meaning of the Commodity Futures Trading
Commission Act of 1974, as amended.
ss.6.13. Regulations U and X. The proceeds of the Revolving Loans, the
Letters of Credit and the Deferred Payment Sales shall be used for working
capital and general corporate purposes of the Borrower. No portion of any
Revolving Loan is to be used for the purpose of purchasing or carrying any
"margin security" or "margin stock" as such terms are used in Regulations U and
X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221
and 224.
ss.6.14. Subsidiaries, etc. The only Subsidiaries of the Borrower are
set forth on Schedule 6.14 attached hereto; provided, that if the Borrower shall
acquire any additional Subsidiaries after the date hereof in accordance with the
terms hereof, the Borrower shall promptly provide the Banks with an updated
Schedule 6.14.
ss.6.15. Insurance. The Borrower and each of its Subsidiaries maintain with
financially sound and reputable insurers insurance with respect to their
properties and business against such casualties and contingencies as are in
accordance with the general practices of businesses engaged in similar
activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as are reasonable and prudent.
ss.6.16. Broker Accounts. Attached hereto as Schedule 6.16 is a true,
correct and complete listing of all of the Broker Accounts of the Borrower.
ss.6.17. D The representations and warranties herein do not contain any untrue
statement of a material fact and do not omit any facts necessary to make the
statements contained in such representations and warranties not misleading.
ss.6.17. Disclosures. The Borrower covenants and agrees that, so long as
any Revolving Loan or Letter of Credit, the Deferred Payment Sale Amount or
other obligation is outstanding hereunder or under any Loan Document or any Bank
has any obligation to make any Revolving Loan or Deferred Payment Sale or issue
any Letter of Credit:
ss.7. Affirmative Covenants of the Borrower. The Borrower covenants and
agrees that, so long as any Revolving Loan or Letter of Credit, the Deferred
Payment Sale Amount or other obligation is outstanding hereunder or under any
Loan Document or any Bank has any obligation to make any Revolving Loan or
Deferred Payment Sale or issue any Letter of Credit:
ss.7.1. Punctual Payment. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Revolving Loans and the
Deferred Payment Sale Amount, the Commitment Fees, the Precious Metal Fees, the
Breakage Fees and all other amounts provided for in this Credit Agreement and
the other Loan Documents to which the Borrower or any of its Subsidiaries is a
party, all in accordance with the terms of this Credit Agreement and such other
Loan Documents.
ss.7.2. Maintenance of Office. The Borrower will maintain its chief
executive office in Bloomfield, Connecticut, or at such other place in the
United States of America as the Borrower shall designate upon written notice to
BKB, where notices, presentations and demands to or upon the Borrower in respect
of the Loan Documents to which the Borrower is a party may be given or made.
ss.7.3. Records and Accounts. The Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in conformity with generally
accepted accounting principles and (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence
and amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.
ss.7.4. Financial Statements, Certificates and Information. The Borrower will
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety (90)
days after the end of each fiscal year of the Borrower, the
consolidated and reviewed consolidating balance sheets of Andersen
Group, Inc. and its Subsidiaries (including, without limitation, the
Borrower and its Subsidiaries) as at the end of such year, and the
related consolidated and reviewed consolidating statements of income
and consolidated statement of cash flow for such year, each setting
forth in comparative form the figures for the previous fiscal year and
all such consolidated statements to be in reasonable detail, prepared
in conformity with generally accepted accounting principles, and
accompanied by a review thereof (or, if requested at any time by the
Banks, an unqualified (except for non-material qualifications
acceptable to the Banks) audit thereof) by independent certified
public accountants satisfactory to the Banks, which statements shall
be accompanied by annual projections submitted by the management of
the Borrower in form and detail acceptable to the Banks;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each calendar quarter, copies of the
unaudited consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such quarter, and the
related consolidated and consolidating statements of income and
consolidated statements of cash flow for the portion of the Borrower's
fiscal year then elapsed, and aging reports with respect to accounts
receivable and accounts payable, all in reasonable detail and prepared
in conformity with generally accepted accounting principles, together
with a certification by the principal financial or accounting officer
of the Borrower that the information contained in such financial
statements fairly presents the financial position of the Borrower and
its Subsidiaries on the date thereof (subject to customary year-end
adjustments);
(c) as soon as practicable, but in any event not later than
thirty (30) days after the end of each month, copies of the unaudited
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such month, and the related consolidated
and consolidating statements of income for the portion of the
Borrower's fiscal year then elapsed, and aging reports with respect to
accounts receivable and accounts payable, all in reasonable detail and
prepared in conformity with generally accepted accounting principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such
financial statements fairly presents the financial position of the
Borrower and its Subsidiaries on the date thereof (subject to
customary year-end adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by
the principal financial or accounting officer of the Borrower in form
and substance reasonably satisfactory to BKB and setting forth in
reasonable detail computations evidencing compliance with the
covenants contained in ss.9 and (if applicable) reconciliations to
reflect changes in generally accepted accounting principles since the
Balance Sheet Date;
(e) on the fourth day of each calendar week, a Borrowing Base
report certified by the chief financial officer or president of the
Borrower, in form reasonably acceptable to BKB;
(f) as and when requested by either of the Banks, collateral
reports by an independent collateral auditor or appraiser satisfactory
to the Banks with respect to the amount and value of Precious Metal
and other inventory held by the Borrower and set forth in the
borrowing base of the Borrower;
(g) promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
public shareholders of the Borrower or any stockholder of the
Borrower, and copies of all registration statements and Forms 10-K,
10-Q and 8-K filed with the Securities and Exchange Commission (or any
successor thereto) or any national securities exchange by the Borrower
or any stockholder of the Borrower;
(h) as soon as available and in any event not later than 6 p.m.
on the fourth Business Day of each calendar week, (i) a summary
(certified by the chief financial officer of the Borrower and
substantially in form reasonably acceptable to BKB) of the long and
short positions of the Borrower (including, without limitation, their
respective open, forward, and options and futures contracts) for
Precious Metal and the Precious Metal Inventory of the Borrower as at
the close of business on the previous Friday (or if such Friday was
not a Business Day, then as at the close of business on the next prior
Business Day), and promptly thereafter, a written advice with respect
to the foregoing, together with such reasonable detail as to permit
the Banks to ascertain the basis of such calculations and summaries
and (ii) a schedule (certified by the chief financial officer of the
Borrower) setting forth the calculations necessary to show the
Borrower's compliance with the terms of Section 8.10 hereof; and
(i) from time to time such other financial data and information
(including accountants' management letters) as any Bank may reasonably
request.
ss.7.5. Notices.
(a) Defaults. The Borrower will promptly notify each of the Banks in
writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed default
(constituting an Event of Default) under this Credit Agreement or any other
note, evidence of indebtedness, indenture or other obligation to which or with
respect to which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal, guarantor, surety or otherwise, the Borrower shall
forthwith give written notice thereof to each of the Banks, describing the
notice or action and the nature of the claimed default.
(b) Notice of Litigation and Judgments. The Borrower will, and will cause
each of its Subsidiaries to, give notice to each of the Banks in writing within
fifteen (15) days of becoming aware of any litigation or proceedings threatened
in writing or any pending litigation and proceedings affecting the Borrower or
any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is
or becomes a party involving an uninsured claim against the Borrower or any of
its Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Borrower and its Subsidiaries considered as a whole and stating
the nature and status of such litigation or proceedings. The Borrower will, and
will cause each of its Subsidiaries to, give notice to each of the Banks, in
writing, in form and detail satisfactory to the Banks, within ten (10) days of
any judgment not fully covered by insurance, final or otherwise, against the
Borrower or any of its Subsidiaries in an amount in excess of $500,000.
ss.7.6. Corporate Existence: Maintenance of Properties. The Borrower will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries. It (a) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business of
its Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment, (b) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Borrower may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times, and (c) will, and will cause each of its Subsidiaries to, continue
to engage primarily in the businesses now conducted by them and in related
businesses; provided that nothing in this ss.7.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrower, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis.
ss.7.7. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent.
ss.7.8. Taxes. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
ss.7.9. Inspection of Properties and Books, Etc. The Borrower shall permit
the Banks and their representatives and consultants to (a) visit and inspect any
of the properties of the Borrower or any of its Subsidiaries, (b) examine the
books of account of the Borrower and its Subsidiaries (and to make copies
thereof and extracts therefrom), (c) conduct examinations and verifications of
the components of the Borrowing Base, the other assets of the Borrower and all
systems and procedures of the Borrower, including those systems and procedures
relating to tracking and valuation of Precious Metals and to cash management,
(d) if an Event of Default shall have occurred and be continuing or if the Banks
have notice or knowledge of any violation of Environmental Laws, to conduct
environmental inspections of the properties and assets of the Borrower and its
Subsidiaries and (e) discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as any of the Banks may
reasonably request.
ss.7.10. Compliance with Laws, Contracts, Licenses, and Permits. The
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, ERISA, and occupational
and safety laws; (b) the provisions of its charter documents and by-laws, (c)
all agreements and instruments by which it or any of its properties may be bound
and (d) all applicable decrees, orders, and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Borrower
or any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Subsidiary is a party,
the Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Banks with evidence thereof.
ss.7.11. Use of Proceeds. The Borrower will use the proceeds of the
Revolving Loans solely for working capital and general corporate purposes.
ss.7.12. Margin Calls in Respect of Futures Contracts. The Borrower shall,
and shall cause each of the Subsidiaries to, meet all initial and variation
margin calls and make all other payments required in respect of futures
contracts acquired by the Borrower and the Subsidiaries, respectively, on any
commodities exchange as promptly as may be necessary in order that such futures
contracts shall remain in full force and effect. Futhermore, the Borrower shall
not, nor shall it permit or suffer any of the Subsidiaries to, close out any of
its futures contracts, except in the normal course of its business operations.
ss.7.13. Precious Metal Price Fluctuations. The Borrower shall, and shall
cause each of the Subsidiaries to, maintain in effect at all times arrangements
of the type set forth in the Hedging Policy for the purpose of limiting the
financial exposure of the Borrower and the Subsidiaries to adverse price
fluctuations of Precious Metal purchased or to be purchased in the ordinary
course of their respective businesses. The Borrower shall, and shall cause each
of the Subsidiaries to, comply in all material respects with all of the terms
and conditions of the Hedging Policy.
ss.7.14. Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and execute such further instruments
and documents as the Banks shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Credit Agreement and the
other Loan Documents, including without limitation maintaining the first
priority security interest of the Banks in the Collateral.
ss.8. Certain Negative covenants of the Borrower. The Borrower covenants
and agrees that, so long as any Revolving Loan or Letter of Credit, or the
Deferred Payment Sale Amount or other amount due and payable under any of the
Loan Documents, is outstanding or any Bank has any obligation to make any
Revolving Loan or Deferred Payment Sale or issue any Letter of Credit:
ss.8.1. Restrictions on Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and their respective Affiliates arising
under any of the Loan Documents;
(b) current liabilities incurred in the ordinary course of business not
incurred through (i) the borrowing of money, or (ii) the obtaining of
credit except for credit on an open account basis customarily extended
and in fact extended in connection with normal purchases of goods and
services;
(c) Indebtedness in respect of taxes, assessments, governmental charges or
levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in
accordance with the provisions of ss.7.8;
(d) Indebtedness in respect of judgments or awards that have been in force
for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower
or such Subsidiary shall at the time in good faith be prosecuting an
appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties of
products or services, in each case incurred in the ordinary course of
business;
(f) Indebtedness owed to the Borrower by a Subsidiary of the Borrower;
(g) under non-speculative hedge arrangements satisfactory to the Banks
designed to hedge against fluctuations in the price of Precious
Metals, and interest rates covering the notional amount set forth in
the trading and hedging policies of the Borrower with respect to
Precious Metals, financial futures, foreign currencies, futures or
options (the "Hedging Policy"), all of which shall be reasonably
satisfactory to the Banks;
(h) Other Indebtedness to the Banks and their respective Affiliates; and
(i) Indebtedness owed by the Borrower to a Subsidiary of the Borrower.
(j) Indebtedness incurred in connection with Capitalized Leases with third
party financial institutions other than the Banks; provided, that the
aggregate principal amount of all such Indebtedness shall not exceed
$800,000 at any time.
ss.8.2. Restrictions on Liens. The Borrower will not, and will not permit
any of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired; (b) transfer
any of such property or assets or the income or profits therefrom for the
purpose of subjecting the same to the payment of Indebtedness or performance of
any other obligation in priority to payment of its general creditors; (c)
acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (d) suffer to exist for a period of more than thirty (30)
days after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; (e)
sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse; or
(f) enter into or permit to exist any arrangement or agreement which directly or
indirectly prohibits the Borrower or such Subsidiary from creating or incurring
any lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind provided that the Borrower and any Subsidiary of the
Borrower may create or incur or suffer to be created or incurred or to exist:
(i) liens in favor of the Borrower on all or part of the assets
of Subsidiaries of the Borrower securing Indebtedness owing by
Subsidiaries of the Borrower to the Borrower;
(ii) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties
to secure claims for labor, material or supplies in respect of
obligations not overdue;
(iii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(iv) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by ss.7.1(d);
(v) liens of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties, in existence less than 60 days
from the date of creation thereof in respect of obligations not
overdue;
(vi) encumbrances on Real Estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property
and defects and irregularities in the title thereto, landlord's or
lessor's liens under leases to which the Borrower or a Subsidiary of
the Borrower is a party, and other minor liens or encumbrances, none
of which encumbrances, restrictions, defects, irregularities and liens
interferes materially with the use of the property affected in the
ordinary conduct of the business of the Borrower and its Subsidiaries,
and all of which do not individually or in the aggregate materially
affect the value or marketability of any Real Estate or have a
materially adverse effect on the business of the Borrower individually
or of the Borrower and its Subsidiaries on a consolidated basis;
(vii) liens in favor of the Banks and their respective Affiliates
securing the payment of the Obligations and other Indebtedness due and
owing to the Banks and such Affiliates; and
(viii) security interests in personal property acquired by the
Borrower or its Subsidiaries after the date hereof to secure
Capitalized Lease Indebtedness of the type and amount permitted by
ss.8.1(j) in connection with the acquisition of such property, which
security interests cover only the personal property so acquired.
ss.8.3. Restrictions on Investments. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment, including without limitation any Investment in a
partnership or joint venture, except Investments in:
(a) marketable direct or guaranteed obligations of the United States of
America and its agencies that mature within five (5) years from the
date of purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks
having total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws
of the United States of America or any state thereof
that at the time of purchase have been rated and the
ratings for which are not less than "P 1" if rated by
Moody's Investors Services, Inc., and not less than "A
1" if rated by Standard and Poor's;
(d) Investments existing on September 30, 1996 and listed on Schedule
8.3 hereto;
(e) Investments by the Borrower in Subsidiaries existing on the date
hereof;
(f) Investments consisting of loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course
of business not to exceed $50,000 in the aggregate at any time
outstanding;
(g) Investments expressly permitted by ss.8.4; and
(h) Other Investments in an aggregate amount not in excess of $500,000 at
any time consisting of the issued and outstanding capital stock of
savings and loan associations having total assets of not less than
$1,000,000,000.
ss.8.4. Merger, Consolidation and Acquisition and Disposition of
Assets. (a) The Borrower will not, and will not permit any of its
Subsidiaries to become a party to any merger or consolidation, or
agree to or effect any asset acquisition or stock acquisition
other than (i) the sale of inventory and leasing of equipment in
the ordinary course of business; (ii) the merger or consolidation
of one or more of the Subsidiaries of the Borrower with and into
the Borrower, and (iii) the merger or consolidation of two or
more Subsidiaries of the Borrower, provided, that, if a merger or
consolidation occurs between a Subsidiary which is partially
owned by the Borrower and a Subsidiary which is wholly owned by
the Borrower, the wholly owned subsidiary shall be the surviving
entity.
(a) The Borrower will not, and will not permit any of its Subsidiaries to,
become a party to or agree to or effect any disposition of assets, other than
the disposition of obsolete or worn-out assets in the ordinary course of
business, consistent with past practices.
ss.8.5. Sale and Leaseback. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property that the Borrower or any Subsidiary of the Borrower intends
to use for substantially the same purpose as the property being sold or
transferred.
ss.8.6. No Restrictions on Pledge or Upstreaming. The Borrower will not,
and will not permit any of its Subsidiaries to, agree with any third party to
limit, prohibit or restrict in any way (a) the ability or right of the Borrower
or any of its Subsidiaries to grant to the Banks liens on or security interests
in any of their respective properties and assets, or (b) the ability or right of
any of the Subsidiaries of the Borrower to transfer money or other assets to the
Borrower at any time.
ss.8.7. ERISA Compliance. Neither the Borrower nor any of its subsidiaries
will at any time permit any pension plan or other employee benefit plan
maintained by it that is subject to ERISA to:
(a) engage in any "prohibited transaction" as defined in
the Code; (b) incur any "accumulated funding
deficiency" as defined in Section 302 of ERISA; or
(c) terminate under circumstances which result in the
imposition of a lien on the property of the
Borrower or any of its Subsidiaries.
ss.8.8. Transactions with Affiliates. Neither the Borrower nor any of its
subsidiaries will enter into any transaction, including without limitation the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than the Borrower or such Subsidiary would obtain in a comparable arm's length
transaction with a person or entity which is not an Affiliate, provided that in
no event shall any such transaction involve loans or extensions of credit to or
other investments in any such Affiliate except such Indebtedness and other
Investments that are expressly permitted by this Agreement.
ss.8.9. Dividends and Distributions. The Borrower shall not make any
dividend or distribution to or for the benefit of its shareholders; provided,
that as long as (a) no Default or Event of Default has occurred, and (b) after
giving effect to such dividend or distribution, the Borrower will be in
compliance with all of its covenants in ss.9 herein, the Borrower may make
dividends to Andersen Group, Inc., its sole shareholder, in any fiscal year of
the Borrower ending on or after February 28, 1997 in an aggregate amount equal
to the sum of (1) required payments under the Tax Sharing Agreement plus (2)
fifty percent (50%) of the Borrower's net income for the immediately preceding
fiscal year of the Borrower; and provided further that, unless a Default or
Event of Default has occurred or would occur as a result thereof, the Borrower
may make additional cash dividends to Andersen Group, Inc., in $500,000
increments and in an aggregate amount not in excess of $3,500,000, if, and only
if, such amount of up to $3,500,000 is paid solely with the proceeds of (i) a
Revolving Loan hereunder or (ii) the sale of Precious Metals to RIHT.
ss.8.10. No Changes in Hedging Policy. The Borrower will not cause or
permit any modification or amendment change in any material respect of the
Hedging Policy.
ss.8.11. Precious Metal Consignments and Retail Consignments. The Borrower
will not, and will not permit any of its Subsidiaries to, engage in any
consignments or other arrangements that provide for the consignment or lease of
Precious Metal (a) to any other Person or (b) from any Person other than (i)
consignment transactions from any Person entered into with the prior written
consent of the Banks involving Precious Metals having a fair market value not in
excess of $1,200,000 and (ii) consignments from customers of the Borrower of
Precious Metals to be commingled in Precious Metals inventory of the Borrower.
ss.8.12. Tax Sharing Agreement. The Borrower will not amend, modify or
waive in any material respect any term or condition of the Tax Sharing Agreement
effective as of March 1, 1996 between Andersen Group, Inc. and the Borrower (the
"Tax Sharing Agreement") without the prior written consent of the Banks.
ss.9. Financial Covenants of the Borrower. The Borrower covenants and agrees
that, so long as any Revolving Loan or Letter of Credit, or the Deferred Payment
Sale Amount or any other amount due and payable under any of the Loan Documents,
is outstanding or any Bank has any obligation to make any Revolving Loan or
Deferred Payment Sale or issue any Letter of Credit:
ss.9. Ratio of EBITDA to Debt Payments. As of the last day of the four
fiscal quarters of the Borrower most recently ended, the Borrower shall not
permit the ratio of (a) EBITDA of the Borrower for such period of four fiscal
quarters less (i) Capital Expenditures that were not financed for their express
purpose by BKB, and (ii) taxes of or allocable to the Borrower for such period
of four fiscal quarters to (b) Consolidated Financial Obligations during the
such period of four fiscal quarters to be less than 1.35 to 1.
ss.9.2. Ratio of Liabilities to Tangible Net Worth. At all times, the
Borrower shall not permit the ratio of (a) Consolidated Total Liabilities of the
Borrower, to (b) the Borrower's Consolidated Tangible Net Worth, to exceed 1.25
to 1.
ss.9.3. Net Shareholder Equity. The Borrower shall maintain at all times
(a) Consolidated Shareholder Equity of not less than the sum of (i) $14,500,000,
plus (ii) on a cumulative basis, 50% of the Borrower's positive Consolidated Net
Income for each fiscal year ending on or after February 28, 1997, plus (iii)
100% of the net proceeds from any issuance of capital stock, options, rights or
warrants to buy capital stock, or other equity; minus (iv) the effect on such
Consolidated Shareholder Equity of (A) the payment of up to $3,500,000 dividends
to Andersen Group, Inc. permitted by the terms hereof in the aggregate after
June 30, 1996, and (B) the distribution of the Borrower's Ultrasonic business if
and only if the Banks consent in writing to such distribution.
ss.9.4. Ratio of Current Assests to Current Liabilities. The Borrower shall
maintain at all times a ratio of Consolidated Current Assets to Consolidated
Current Liabilities of not less than 1.25 to 1.
ss.9.5. Consecutive Net Losses. The Borrower shall not permit Consolidated
Net Income to be less than $0.00 in any two consecutive fiscal quarters of the
Borrower.
ss.9.6. Capital Expenditures. The Borrower shall not make or commit to
Capital Expenditures in excess of $2,000,000 during any fiscal year of the
Borrower ending on or after February 28, 1997.
ss.10. Closing Conditions. The obligations of the Banks to make the initial
Revolving Loans and Deferred Payment Sales shall be subject to the satisfaction
of the following conditions precedent on or prior to October 15, 1996:
ss.10.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
ss.10.2. Certified Copies of Charter Documents. Each of the Banks shall
have received from the Borrower a copy, certified by a duly authorized officer
of the Borrower to be true and complete on the Closing Date, of each of (a) its
charter or other incorporation documents as in effect on such date of
certification, and (b) its by-laws as in effect on such date.
ss.10.3. Corporate Actionl All corporate action necessary for the valid
execution, delivery and performance by the Borrower of this Credit Agreement and
the other Loan Documents to which it is or is to become a party shall have been
duly and effectively taken, and evidence thereof satisfactory to the Banks shall
have been provided to each of the Banks.
ss.10.4. Incumbency Certificate. Each of the Banks shall have received from
the Borrower an incumbency certificate, dated as of the Closing Date, signed by
a duly authorized officer of the Borrower, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (a) to sign, in
the name and on behalf of the Borrower, each of the Loan Documents to which the
Borrower is or is to become a party; (b) to make Loan Requests, and Conversion
Requests; (c) to execute Confirmation Orders; and (d) to give notices and to
take other action on its behalf under the Loan Documents.
ss.10.5. Financial Condition. The Banks shall be satisfied that the
financial information previously delivered to them fairly presents the business
and financial condition of the Borrower and its Subsidiaries as at the close of
business on the Balance Sheet Date and the results of operations for the periods
covered by such information, and that there has been no material adverse change
in the business, assets or financial condition of the Borrower and/or its
Subsidiaries since such date.
ss.10.6. Regulatory Approvals. The Banks shall have received all necessary
regulatory approvals and evidence of compliance with all state and Federal laws,
including but not limited to Regulation U and state and Federal securities laws,
applicable to any of the parties to the transactions.
ss.10.7. Opinion of Counsel. Each of the Banks shall have received a
favorable legal opinion addressed to the Banks, dated as of the Closing Date, in
form and substance satisfactory to the Banks, including opinions with respect to
the Borrower, the Loan Documents, and the transactions contemplated by this
Credit Agreement.
ss.10.8. Security Documents. The Borrower shall have (a) executed and
delivered to the Banks the Security Documents and (b) taken all steps reasonably
required to effect and perfect the Banks' security interests in the Collateral.
ss.11. COND The obligations of the Banks to make any Revolving Loan or Deferred
Payment Sales or issue any Letter of Credit, whether on or after the Closing
Date, shall also be subject to the satisfaction of the following conditions
precedent:
ss.11. Conditions to all Borrowings. The obligation of the Banks to make
any Revolving Loan or Deferred Payment Sales or issue any Letter of Credit,
whether on or after the Closing Date, shall also be subject to the satisfaction
of the following condtions precedent:
ss.11.1. Representations True; No event of Default. Each of the
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Revolving Loan or Deferred Payment
Sale or issuance of such Letter of Credit with the same effect as if made at and
as of that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred. The Banks shall have received a
certificate of the Borrower signed by an authorized officer of the Borrower to
such effect.
ss.11.2. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and the Banks' Special Counsel, and the Banks and such counsel
shall have received all information and such counterpart originals or certified
or other copies of such documents as the Banks may reasonably request.
ss.12. Events of Default; Acceleration; Etc.
ss.12.1. Events of Default and Acceleration. If any of the following events
("Events of Default") shall occur:
(a) the Borrower shall fail to pay when due any principal of any Revolving
Loan, any Reimbursement Obligation, or any Deferred Payment Sale
Amount;
(b) the Borrower shall fail to pay when due any interest on any Revolving
Loan, the Commitment Fee, any Deferred Payment Sale Interest, any
Precious Metal Fee, any Breakage Fee, or any other sum due hereunder or
under any of the other Loan Documents;
)
the Borrower shall fail to comply with any of its covenants contained
in ss.7.5(a) or (b), ss.8, ss.9.1 or ss.9.5;
(d) the Borrower or any of its Subsidiaries shall fail to perform any term,
covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this ss.12.1) for
fifteen (15) days after written notice of such failure has been given
to the Borrower by one of the Banks;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to
or in connection with this Credit Agreement shall be determined by the
Banks to have been false in any material respect upon the date when
made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay
when due, or within any applicable period of grace, any obligation for
borrowed money or credit received and/or in respect of any Capitalized
Leases in an aggregate amount in excess of $100,000 or fail to observe
or perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing borrowed money
or credit received and/or in respect of any Capitalized Leases in an
aggregate amount in excess of $100,000 for such period of time as
would permit (assuming the giving of appropriate notice if required)
the holder or holders thereof or of any obligations issued thereunder
to accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay
or generally fail to pay its debts as they mature or become due, or
shall petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of the Borrower or any of its
Subsidiaries or of any substantial part of the assets of the Borrower
or any of its Subsidiaries or shall commence any case or other
proceeding relating to the Borrower or any of its Subsidiaries under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against the Borrower or any of its
Subsidiaries and the Borrower or any of its Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein
or such petition or application shall not be dismissed within sixty
(60) days of the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any Subsidiary of the Borrower
in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied,
unstayed and unbonded (to the reasonable satisfaction
of the Banks), for more than sixty (60) days, whether
or not consecutive, any final judgment against the
Borrower and/or any of its Subsidiaries that, with
other outstanding final judgments, undischarged and
unbonded (to the reasonable satisfaction of the Banks),
against the Borrower or any of its Subsidiaries exceeds
in the aggregate $500,000;
(j) with respect to any pension plan, an ERISA Reportable Event shall have
occurred and the Banks shall have determined in their reasonable discretion
that such event reasonably could be expected to result in liability of the
Borrower and/or any of its Subsidiaries to the PBGC or such pension plan in
an aggregate amount exceeding $500,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of such
pension plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such pension plan; or a
trustee shall have been appointed by the United States District Court to
administer such pension plan; or the PBGC shall have instituted proceedings
to terminate such pension plan;
(k) any uninsured loss, theft or destruction of or damage to any
Precious Metal that is the subject of a Deferred Payment Sale or
to any products or property which includes Precious Metal that is
the subject of a Deferred Payment Sale or to any other
Collateral;
(l) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent
or approval of the Banks, or any action at law, suit in
equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or
on behalf of the Borrower or any of its Subsidiaries party
thereto or any of their respective stockholders, or any
court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination
that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the
terms thereof;
(m) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or
any administrative or regulatory agency from conducting any
material part of its business and such order shall continue in
effect for more than thirty (30) days;
(n) there shall occur formore than thirty (30) days the loss, suspension
or revocation of, or failure to renew, any license or permit now held
or hereafter acquired by the Borrower or any of its Subsidiaries if such
loss, suspension, revocation or failure to renew would have a material
aderse effect on the business or financial condition of the
Borrower or such Subsidiary; or
(o) Andersen Group, Inc., shall, at any time, legally or beneficially
own less than one hundred percent (100%) of the issued and outstanding
stock of the Borrower;
then, and in any such event, the Banks may, by notice in writing to the Borrower
declare all amounts owing with respect to this Credit Agreement, the Notes and
the other Loan Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; provided
that in the event of any Event of Default specified in ss.ss.12.1(g) or 12.1(h),
all such amounts shall become immediately due and payable automatically and
without any requirement of notice from any Bank. For the purposes of this ss.12,
RIHT shall have the right in its discretion to calculate the Deferred Payment
Sale Amounts based upon RIHT's spot prices for the applicable Precious Metals,
as of the date that the Event of Default is declared to have occurred or as of
such date that RIHT determines to be appropriate under the circumstances.
ss.12.2. Termination of Commitment. If any one or more of the Events of
Default specified in ss.12.1(g) or ss.12.1(h) shall occur, any unused portion of
the credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all further obligations to make Revolving Loans and Deferred Payment
Sales and issue Letters of Credit to the Borrower. If any other Event of Default
shall have occurred and be continuing, the Banks may, by notice to the Borrower,
terminate the unused portion of the credit hereunder, and upon such notice being
given such unused portion of the credit hereunder shall terminate immediately
and each of the Banks shall be relieved of all further obligations to make
Revolving Loans and Deferred Payment Sales and issue Letters of Credit to the
Borrower. No termination of the credit hereunder shall relieve the Borrower or
any of its Subsidiaries of any of the Obligations.
ss.12.3. Remedies. In case any one or more of the Events of Default shall
have occurred, and whether or not the Banks shall have accelerated the maturity
of the Revolving Loans, Letters of Credit and Deferred Payment Sales pursuant to
ss.12.1, each Bank, if owed any amount with respect to the Revolving Loans
and/or Deferred Payment Sales, may proceed to protect and enforce its rights by
suit in equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Credit
Agreement and the other Loan Documents or any instrument pursuant to which the
Obligations to such Bank are evidenced or otherwise, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such Bank.
No remedy herein conferred upon any Bank is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
ss.13. Setoff. Regardless of the adequacy of any Collateral, after the
occurrence of any Event of Default, any deposits or other sums credited by or
due from any of the Banks to the Borrower (other than employee tax withholding
and fiduciary accounts) and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agree with
each other Bank that (a) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness arising
hereunder or under the other Loan Documents owed to such Bank, such amount shall
be applied ratably to such other Indebtedness and to the Indebtedness evidenced
by the Loan Documents owed to such Bank, and (b) if such Bank shall receive from
the Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Loan
Documents by proceedings against the Borrower at law or in equity or by proof
thereof in bankruptcy, reorganization, liquidation, receivership or similar
proceedings, or otherwise, and shall retain and apply to the payment of the
Indebtedness evidenced by the Loan Documents held by such Bank any amount in
excess of its ratable portion of the payments received by all of the Banks with
respect to the Indebtedness evidenced by the Loan Documents held by all of the
Banks, such Bank will make such disposition and arrangements with the other
Banks with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each Bank
receiving in respect of the Loan Documents held by it, its proportionate payment
as contemplated by this Credit Agreement; provided that if all or any part of
such excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
ss.14. Expenses. The Borrower agrees to pay (a) EXP the reasonable fees,
expenses, disbursements and out-of-pocket expenses of the Banks (including,
without limitation, reasonable legal expenses) incurred by the Banks in
connection with the preparation, administration, amendment, modification or
interpretation of the Loan Documents and other instruments mentioned (b)in, a
all reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank, with
such costs based on actual hours worked by such staff counsel and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred by any Bank in connection with the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Subsidiaries or the administration thereof after the occurrence of a
Default or Event of Default. The covenants of this ss.14 shall survive for a
period of one hundred and eighty (180) days following the payment or
satisfaction of all other Obligations.
ss.15. Idemnification. The Borrower agrees to indemnify and hold harmless
the Banks from and against any and all claims, actions and suits, whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of or in
connection with this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Borrower or any of its Subsidiaries of, the Letters of
Credit or the proceeds of any of the Revolving Loans or the Deferred Payment
Sales, or (b) the Borrower entering into or performing this Credit Agreement or
any of the other Loan Documents, or (c) with respect to the Borrower and its
Subsidiaries and their respective properties and assets, the violation of any
Environmental Law (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of outside counsel
incurred in connection with any such investigation, litigation or other
proceeding. In litigation, or the preparation therefor, the Banks shall be
entitled to select their own outside counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such outside counsel. If, and to the extent that the obligations of the
Borrower under this ss.15 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this ss.15 shall survive payment or satisfaction in full of all other
Obligations.
ss.16. Survival of Covenants, Etc. All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have
been relied upon by the Banks, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of any
of the Revolving Loans or Deferred Payments Sales, as herein contemplated, and
shall continue in full force and effect so long as any amount due under this
Credit Agreement or the Note or any of the other Loan Documents remains
outstanding or any Bank has any obligation to make any Revolving Loans or
Deferred Payment Sale or issue any Letters of Credit, and for such further time
as may be otherwise expressly specified in this Credit Agreement. All statements
contained in any certificate or other paper delivered to any Bank at any time by
or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary hereunder.
ss.17. Assignment and Participation.
ss.17.1. Assignment by Banks. Following the occurrence of an Event of
Default, each Bank may, following written notice to the Borrower, assign to one
or more Persons all or a portion of its interests, rights and obligations under
this Credit Agreement (including all or a portion of the Commitment and the same
portion of the Revolving Loans at the time owing to it and the Note held by it).
ss.17.2. Participation. Each Bank may, following written notice to the
Borrower, sell participations to one or more banks or other entities in all or a
portion of such Bank's rights and obligations under this Credit Agreement and
the other Loan Documents; provided that (a) each such participation shall be in
an amount of not less than $500,000, (b) any such sale or participation shall
not affect the rights and duties of the selling Bank hereunder to the Borrower,
and (c) the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or modifications
of the Loan Documents shall be the rights to approve waivers, amendments or
modifications that would reduce the principal of or the interest rate on any
Revolving Loans or Deferred Payment Sale Interest, extend the term or increase
the amount of the Commitment as it relates to such participant or reduce the
amount of any commitment fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest.
ss.17.3. Disclosure. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process, and
(c) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
ss.17.4. Assignment by Borrower. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
ss.18. Notices, Etc. Except as otherwise expressly provided in this Credit
Agreement, all notices and other communications made or required to be given
pursuant to this Credit Agreement or the Note or any other Loan Document shall
be in writing and shall be delivered in hand, mailed by United States registered
or certified first class mail, postage prepaid, sent by overnight courier, or
sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via
courier or postal service, addressed as follows:
(a) if to the Borrower, at The J.M. Ney Company, Ney Industrial Park,
Bloomfield, Connecticut 06002, Attention: Andrew O'Shea, Chief
Financial Officer, or at such other address for notice as the
Borrower shall last have furnished in writing to the Person giving the
notice;
(b) if to BKB, at 100 Pearl Street, Hartford, Connecticut 06103, Attention:
Lynn Ryan, Assistant Vice President, or such other address for notice
as BKB shall last have furnished in writing to the Person giving the
notice; and
(c) if to RIHT, at One Hospital Trust Plaza, Providence Rhode Island 02903,
Attention: Albert Brown, Senior Vice President, or such other address
for notice as RIHT shall last have furnished in writing to the Person
giving the notice.
Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand, overnight courier or confirmed
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
ss.19. Governing Law. THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN
DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF CONNECTICUT AND SHALL FOR
ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CONNECTICUT OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN ss.18. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
ss.20. Headings. The captions in this Credit Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
ss.21. Counterparts. This Credit Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate counterpart,
each of which when executed and delivered shall be an original, and all of
which together shall constitute one instrument. In proving this Credit
Agreement it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom enforcement is sought.
ss.22. Entire Agreement. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Credit Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in ss.24.
ss.23. Waiver of Jury Trial. Each party hereto hereby waives its right to a
jury trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Note or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the performance
of such rights and obligations. Each party hereto hereby also waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. Each party hereto (a)
certifies that no representative, agent or attorney of any other party hereto
has represented, expressly or otherwise, that such party would not, in the event
of litigation, seek to enforce the foregoing waivers and (b) acknowledges that
the other parties hereto have been induced to enter into this Credit Agreement
and the other Loan Documents to which it is a party by, among other things, the
waivers and certifications contained herein.
ss.24. Consents, Amendments, Waivers, Etc. Any consent or approval required
or permitted by this Credit Agreement to be given by all of the Banks may be
given, and any term of this Credit Agreement, the other Loan Documents or any
other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower or any of its Subsidiaries of any
terms of this Credit Agreement, the other Loan Documents or such other
instrument or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Banks (and, in
the case of any amendment, with the written consent of the Borrower). No waiver
shall extend to or affect any obligation not expressly waived or impair any
right consequent thereon. No course of dealing or delay or omission on the part
of any Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
ss.25. Commercial Transaction; Prejudgement Remedy Waiver. THE BORROWER
REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE A PART IS A "COMMERCIAL TRANSACTION"
WITHIN THE MEANING OF CHAPTER 903A OF CONNECTICUT GENERAL STATUTES, AS AMENDED.
THE BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT
ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR
UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES THE BANKS MAY EMPLOY TO ENFORCE THEIR RIGHTS AND REMEDIES HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS. MORE SPECIFICALLY, BORROWER ACKNOWLEDGES THAT
THE BANKS' AND/OR THE BANKS' ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT.
ss.52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT
ORDER. THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING
SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE
BANKS ACKNOWLEDGE BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF
SAID WRIT.
ss.26. Severability. The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
THE J.M. NEY COMPANY
By:/s/ Andrew M. O'Shea
Its Chief Financial Officer
BANK OF BOSTON CONNECTICUT
By:/s/ Lynn Ryan
Its Assistant Vice President
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By:/s/ Albert Brown
Its Sr. Vice President
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
State or
Country of
Name or Organization Incorporation
AG Investors, Inc. Florida
AGI Technology, Inc. Connecticut
Ney International, Inc. U.S. Virgin Islands
Ney Ultrasonics Inc. Delaware
The J.M. Ney Company Delaware
E-4
Exhibit 23
The Board of Directors
Andersen Group, Inc.:
We consent to incorporation by reference in the registration statement (No.
333-17659) on Form S-8 of Andersen Group, Inc. of our report dated April 8,
1997, relating to the consolidated balance sheets of Andersen Group, Inc. and
subsidiaries as of February 28, 1997 and February 29, 1996 and the related
consolidated statements of operations, common and other stockholders' equity and
cash flows for each of the years in the three-year period ended February 28,
1997, and all related schedules, which report appears in the February 28, 1997,
Annual Report on Form 10-K of Andersen Group, Inc.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
May 28, 1997
E-5
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
Andersen Group, Inc.
Financial Data Schedule
Commercial and Industrial Companies
Article 5 of Regulation S-X
This schedule contains summary financial information extracted from
the Consolidated Financial Statements of Andersen Group, Inc. for the
fiscal year ended February 28, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Feb-28-1997
<PERIOD-START> Mar-01-1996
<PERIOD-END> Feb-28-1997
<EXCHANGE-RATE> 1,000
<CASH> 3,219
<SECURITIES> 5,345
<RECEIVABLES> 2,963
<ALLOWANCES> 190
<INVENTORY> 9,040
<CURRENT-ASSETS> 20,893
<PP&E> 20,946
<DEPRECIATION> 11,610
<TOTAL-ASSETS> 37,677
<CURRENT-LIABILITIES> 8,710
<BONDS> 7,041
4,891
0
<COMMON> 2,103
<OTHER-SE> 11,544
<TOTAL-LIABILITY-AND-EQUITY> 37,677
<SALES> 24,517
<TOTAL-REVENUES> 24,375
<CGS> 15,469
<TOTAL-COSTS> 24,980
<OTHER-EXPENSES> 8,721
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 811
<INCOME-PRETAX> (605)
<INCOME-TAX> (904)<F1>
<INCOME-CONTINUING> 299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22
<EPS-PRIMARY> .01
<EPS-DILUTED> 0<F2>
<FN>
<F1> Represents income tax benefit
<F2> Antidilutive
</FN>
<LEGEND>
E-6
[/LEGEND]
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.2
Andersen Group, Inc.
Restated Financial Data Schedule
Commercial and Industrial Companies
Article 5 of Regulation S-X
This schedule contains summary financial information extracted from
the Consolidated Financial Statements of Andersen Group, Inc. for the
fiscal year ended February 29, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-START> Mar-01-1995
<PERIOD-END> Feb-29-1996
<EXCHANGE-RATE> 1,000
<CASH> 4,116
<SECURITIES> 3,809
<RECEIVABLES> 4,461
<ALLOWANCES> 124
<INVENTORY> 8,612
<CURRENT-ASSETS> 20,966
<PP&E> 19,858
<DEPRECIATION> 10,742
<TOTAL-ASSETS> 38,798
<CURRENT-LIABILITIES> 9,204
<BONDS> 7,349
5,280
0
<COMMON> 2,103
<OTHER-SE> 11,522
<TOTAL-LIABILITY-AND-EQUITY> 38,798
<SALES> 23,235
<TOTAL-REVENUES> 24,048
<CGS> 15,398
<TOTAL-COSTS> 27,484
<OTHER-EXPENSES> 10,849
<LOSS-PROVISION> 97
<INTEREST-EXPENSE> 1,259
<INCOME-PRETAX> (3,436)
<INCOME-TAX> (1,166)<F1>
<INCOME-CONTINUING> (2,270)
<DISCONTINUED> 4,203
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,933)
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 0<F2>
<FN>
<F1> Represents income tax benefit
<F2> Antidilutive
</FN>
<LEGEND>
E-7
[/LEGEND]
</TABLE>
