UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-7234
NATIONAL PATENT DEVELOPMENT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1926739
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip code)
(212) 826-8500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange act of 1934 during the preceding 12 months
(or for such shorter period) that the registrant was required to
file such reports and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of issuer's classes of
common stock as of November 7, 1996:
Common Stock 7,503,372 shares
Class B Capital 62,500 shares
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets -
September 30, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Operations-
Three Months and Nine Months Ended September 30,
1996 and 1995 3
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Qualification Relating to Financial Information 14
Part II. Other Information 15
Signatures 16
PART I. FINANCIAL INFORMATION
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
September 30, December 31,
1996 1995
ASSETS (unaudited) (a)
Current assets
Cash and cash equivalents $ 23,371 $ 8,094
Marketable securities 3,280 3,563
Accounts and other receivables,
of which $15,354 and $13,013
is from government contracts 45,243 39,466
Inventories 20,871 20,444
Costs and estimated earnings in excess
of billings on uncompleted contracts,
of which $645 and $1,473 relates to
government contracts 10,125 9,118
Prepaid expenses and other current assets 3,540 3,640
Total current assets 106,430 84,325
Investments and advances 23,392 21,452
Property, plant and equipment, at cost 35,740 33,367
Less accumulated depreciation (26,521) (24,374)
9,219 8,993
Intangible assets, net of amortization 33,987 33,053
Other assets 3,682 3,897
$176,710 $151,720
(a) The Consolidated Condensed Balance Sheet as of December 31,
1995 has been summarized from the Company's audited Consolidated
Balance Sheet as of that date.
See accompanying notes to the consolidated condensed financial
statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(in thousands)
September 30, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) (a)
Current liabilities:
Current maturities of long-term debt $ 8,910 $ 4,167
Short-term borrowings 21,540 18,043
Accounts payable and accrued expenses 24,825 20,865
Billings in excess of costs and estimated
earnings on uncompleted contracts 8,395 8,301
Total current liabilities 63,670 51,376
Long-term debt less current maturities 11,853 19,765
Minority interests and other 9,903 9,581
Stockholders' equity
Common stock 73 68
Class B capital stock 1 1
Capital in excess of par value 130,080 125,419
Deficit (40,501) (52,139)
Net unrealized gain (loss) on
available-for-sale securities 2,542 (1,440)
Minimum pension liability adjustment (911) (911)
Total stockholders' equity 91,284 70,998
$176,710 $151,720
(a) The Consolidated Condensed Balance Sheet as of December 31,
1995 has been summarized from the Company's audited Consolidated
Balance sheet as of that date.
See accompanying notes to the consolidated condensed financial statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three months Nine months
ended September 30, ended September 30,
1996 1995 1996 1995
Revenues
Sales $ 53,332 $ 47,551 $152,536 $142,519
Investment and other
income, net 1,132 246 2,658 924
54,464 47,797 155,194 143,443
Costs and expenses
Costs of goods sold 45,255 39,444 129,623 119,310
Selling, general &
administrative 8,089 9,419 22,269 23,968
Interest 1,123 1,203 3,142 3,636
54,467 50,066 155,034 146,914
Minority interests (402) (314) (1,094) (818)
Loss on investments (4,000)
Unrealized gain on transfer
from long-term investment to
trading securities 1,842 1,842
Gain on issuance of stock by
affiliates 5,912 1,938 5,912
Gain on disposition of stock
of a subsidiary and affiliate 12,200 2,567
Income before income
taxes, discontinued operation
and extraordinary item 1,437 3,329 11,046 4,190
Income tax benefit (expense) (685) (248) 592 (1,073)
Income before
discontinued operation
and extraordinary item 752 3,081 11,638 3,117
Discontinued operation (1,015) (2,154)
Income before
extraordinary item 752 2,066 11,638 963
Extraordinary item
Extinguishment of debt,
net of income tax (87) (79)
Net income $ 752 $ 1,979 $11,638 $ 884
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
(in thousands, except per share data)
Three months Nine months
ended September 30, ended September 30,
1996 1995 1996 1995
Income per share
Income before
discontinued operation and
extraordinary item $ .10 $ .45 $ 1.58 $ .47
Discontinued operation (.15) (.33)
Extraordinary item (01) (.01)
Income per share $ .10 $ .29 $ 1.58 $ .13
Dividends per share none none none none
See accompanying notes to the consolidated condensed financial statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine months
ended September 30,
1996 1995
Cash flows from operations:
Net income $ 11,638 $ 884
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Provision for discontinued operation 2,075
Depreciation and amortization 3,919 3,640
Loss from extinguishment of debt 79
Gain on disposition of stock of
an affiliate (12,200) (2,567)
Gain on issuance of stock by affiliates (1,938) (5,912)
Loss on investments 4,000
Reduction in valuation allowance for
deferred tax asset (2,386)
Unrealized gain on transfer from
long-term investments to
trading securities (1,842)
Change in other operating items (3,685) 3,792
Net cash (used for) provided by operations (2,494) 1,991
Cash flows from investing activities:
Proceeds from sale of stock of a subsidiary 17,700 5,000
Additions to property, plant & equipment (2,373) (1,701)
Additions to intangible assets (2,706) (988)
Reduction of investments and other assets, net 1,238 139
Net cash provided by investing activities $ 13,859 $ 2,450
See accompanying notes to the consolidated condensed financial statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
Nine months
ended September 30,
1996 1995
Cash flows from financing activities:
Proceeds from short-term borrowings $ 5,247 $ 7,160
Repayments of short-term borrowings (1,750) (11,020)
Proceeds from issuance of long-term debt 1,400 4,910
Reduction of long-term debt (3,545) (8,728)
Exercise of common stock options and warrants 7
Proceeds from issuance of common stock 2,553
Net cash provided by (used for)
financing activities 3,912 (7,678)
Net increase (decrease) in cash and
cash equivalents 15,277 (3,237)
Cash and cash equivalents at the
beginning of the periods 8,094 10,075
Cash and cash equivalents at the
end of the periods $ 23,371 $ 6,838
Supplemental disclosures of cash
flow information:
Cash paid during the periods for:
Interest $ 3,449 $ 3,939
Income taxes $ 836 $ 421
See accompanying notes to the consolidated condensed financial statements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Inventories
Inventories are valued at the lower of cost or market,
principally using the first-in, first-out (FIFO) method.
Inventories consisting of material, labor, and overhead are
classified as follows (in thousands):
September 30, December 31,
1996 1995
Raw materials $ 780 $ 580
Work in process 230 219
Finished goods 19,861 19,645
$ 20,871 $ 20,444
2. Long-term debt
Long-term debt consists of the following (in thousands):
September 30, December 31,
1996 1995
8% Swiss bonds due 1995 $ $ 247
8% Swiss bonds due 2000 2,301 2,365
Swiss convertible bonds 1,751
5% Convertible bonds due 1999 1,740 2,249
12% Subordinated debentures
due to 1997 6,732 6,749
Term loans with banks 7,470 8,713
Other 2,520 1,858
20,763 23,932
Less current maturities 8,910 4,167
$ 11,853 $ 19,765
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. General Physics Corporation
In September 1996, the Company and General Physics
Corporation (GP) reached an agreement pursuant to which the
Company would acquire the remaining 5,039,732 shares (48% of the
outstanding shares) of GP that it does not already own. The
agreement was recommended to the Board of Directors of GP by a
Special Committee of the Board composed of independent directors.
Based on an agreed upon price of the Company's Common Stock on
September 18, 1996 ($9.625), the Company would issue .5299 shares
of its common stock, par value $.01 per share, for each
outstanding share of GP Common Stock not owned by the Company.
The exchange ratio, which is subject to certain adjustments,
would provide approximately $5.10 in value for each outstanding
share of GP. The proposed transaction is subject, among other
things, to the execution of a definitive merger agreement, the
approval by stockholders of each of the Company and GP, receipt
of a fairness opinion from the investment banker for GP, and
registration under the Securities Act of 1933 of the shares of
the Company's Common Stock to be issued in the proposed
transaction.
On September 27, 1996, General Physics, all of the directors
of General Physics and the Company were named as defendants in a
complaint filed in the Court of Chancery of the State of Delaware
in and for New Castle County, styled Dunlop v. Pollak, et all.,
Civil Action No. 15237-NC. The complaint was brought by an
alleged stockholder of General Physics, individually and
purportedly as a class action on behalf of all other stockholders
of General Physics. The complaint alleges purported breaches of
fiduciary duty by the directors of General Physics, including
certain directors who are also directors of the Company, and
purported breaches of fiduciary duty by the Company, as an
alleged majority and controlling shareholder, arising primarily
from the Merger. The complaint alleges, among other things, that
the Merger has been timed to allow the Company to take advantage
of the current trading price of GP Common Stock, which plaintiff
alleges is depressed. The complaint seeks, among other things,
injunctive relief prohibiting the Merger or, if the Merger is
consummated, an order rescinding the Merger or granting plaintiff
and the other members of the purported class damages. Plaintiff
has granted the defendants extensions of the time in which to
answer the complaint and to respond to plaintiff's pending
request to review documents relating to the Merger. The
defendants believe that the claims set forth in the complaint are
without merit, and intend vigorously to defend the litigation.
4. Short-term borrowings
On September 30, l996, the Five Star Group, Inc. (Five Star)
and MXL Industries, Inc. (MXL) entered into an extension of, as
well as various amendments to the Five Star Loan Agreement and
MXL Loan Agreement. The amended agreements expire on September
30, 1997. Under the terms of the amendments, several Five Star
covenants, including provisions regarding working capital,
tangible net worth, capital expenditures and cash flow ratios
were revised.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company realized income before income taxes, discontinued
operation and extraordinary item of $1,437,000 and $11,046,000
for the quarter and nine months ended September 30, 1996, as
compared with income of $3,329,000 and $4,190,000 for the
corresponding periods of 1995. The improvement in the Company's
results before discontinued operation and extraordinary item for
the nine months is due to several factors. In April 1996, the
Company sold 1,000,000 shares of the Company's GTS Duratek, Inc.
(Duratek) common stock, realized proceeds of $17,700,000 and
recognized a gain of $12,200,000. In the third quarter of 1996,
the Company recorded an unrealized gain totaling $1,842,000 on
the transfer of 200,000 shares of Duratek common stock from long-
term investments to trading securities. These gains were
partially offset by a $4,000,000 loss recognized on the Company's
investments in American White Cross, Inc. (AWC), due to AWC
filing for protection under Chapter 11 of the United States
Bankruptcy Code in July 1996. In addition, in April 1996,
Interferon Sciences, Inc. (ISI), the Company's approximately 17%
owned affiliate, issued additional shares of common stock, which
resulted in the Company recognizing a gain of $1,938,000. For
the nine months ended September 30, 1996, the Company's share of
loss of an affiliate (ISI) due to the buy back of certain
marketing rights was $563,000. In January 1995, the Company
realized a $2,567,000 gain on the sale of 1,666,667 shares of the
Company's Duratek common stock. As a result of such transaction,
the Company's ownership fell below 50% and commencing in January
1995, the Company accounted for its investment in Duratek on the
equity basis. At September 30, 1996, the Company owns
approximately 15% of the outstanding common stock of Duratek and
currently accounts for its investment as a combination of
marketable securities, long-term investments and as long-term
available-for-sale equity securities. Included in investment and
other income, net for the nine months ended September 30, 1996,
is $80,000 of foreign currency transaction gain, compared to a
loss of $(1,061,000) for the nine months ended September 30,
1995.
The reduced income before income taxes, discontinued operation
and extraordinary item for the quarter ended September 30, 1996,
is primarily due to a $5,912,000 gain recognized during the third
quarter of 1995 as a result of the issuance of common stock by
ISI and the initial public offering by GSE Systems, Inc. (GSES).
At September 30, 1996, the Company controls approximately 21% of
GSES. The effect of the gain recorded in 1995 was partially
offset by improved operating results within the Physical Science
and Distribution Groups in 1996 partially offset by reduced
operating profits within the Optical Plastics Group and at the
Company's Hydro Med Sciences (HMS) division. In addition, for
the nine months ended September 30, 1996, the Company also
achieved reduced interest expense at the corporate level, as a
result of reduced long-term debt.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Sales
For the quarter ended September 30, 1996, consolidated sales
increased by $5,781,000 to $53,332,000 from the $47,551,000
recorded in the corresponding quarter of 1996. For the nine
months ended September 30, 1996, consolidated sales increased by
$10,017,000 to $152,536,000 from $142,519,000 recorded for the
nine months ended September 30, 1995. The increased sales for
the quarter and nine months ended September 30, 1996, were the
result of increased sales within the Distribution Group and
Physical Science Group, partially offset by reduced sales within
the Optical Plastics Group and by the Company's Hydro Med
Sciences division (HMS) for the nine months ended September 30,
1996. The increased sales within the Physical Science Group were
the result of General Physics Corporation's (GP) expansion of
managerial and technical training services in manufacturing and
process industries, partially offset by reduced activity at
commercial nuclear power utilities and U.S. Department of Energy
facilities. The increased sales within the Distribution Group,
which is comprised of the Five Star Group, Inc. (Five Star), were
the result of sales generated by a major retail chain, which was
not a customer of Five Star during the first nine months of 1995,
as well as an overall increase in sales of hardware products.
The reduced sales within the Optical Plastic Group were due to a
slowdown by MXL Industries, Inc.'s (MXL) major customer as a
result of the customer's decision to reduce its inventory level.
The reduced sales within HMS were due to the timing of sales to
two customers.
Gross margin
Consolidated gross margin of $8,077,000, or 15%, for the quarter
ended September 30, 1996, decreased by $30,000 when compared to
the consolidated gross margin of $8,107,000, or 17%, for the
quarter ended September 30, 1995. For the nine months ended
September 30, 1996, consolidated gross margin of $22,913,000 or
15% of consolidated sales decreased by $296,000 when compared to
$23,209,000 or 16% of consolidated sales earned in the nine
months ended September 30, 1995. These decreases were
principally the result of decreased gross margin achieved by MXL
and HMS as a result of reduced sales levels partially offset by
increased gross margin generated by Five Star and GP, as a result
of increased sales. In addition, Five Star and MXL achieved
lower gross margin percentages due to a change in their customer
mix.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses
For the quarter and nine months ended September 30, 1996,
selling, general and administrative expenses (SG&A) of $8,089,000
and $22,269,000 were $1,330,000 and $1,699,000 lower than the
$9,419,000 and $23,968,000 of SG&A expenses incurred during the
quarter and nine months ended September 30, 1995. The decrease in
SG&A for the quarter and nine months ended September 30, 1996,
was principally the result of efforts by GP during 1995 to
consolidate and streamline its organization, which has been
realized in the current periods, partially offset by increased
selling expenses incurred by Five Star as a result of increased
sales.
Interest expense
For the quarter and nine months ended September 30, 1996,
interest expense was $1,123,000 and $3,142,000, compared to
$1,203,000 and $3,636,000 for the third quarter and nine months
ended September 30, 1995. The decreased interest expense for the
quarter and nine months ended September 30, 1996, was the result
of reduced long-term debt.
Investment and other income, net
Investment and other income, net of $1,132,000 and $2,658,000
for the quarter and nine months ended September 30, 1996
increased by $886,000 and $1,734,000, respectively, as compared
to $246,000 and $924,000 for the corresponding periods of 1995.
The change for the periods was principally due to an $80,000
foreign currency transaction gain recognized during the nine
months ended September 30, 1996, compared to a loss of
$(1,061,000) for the nine months ended September 30, 1995. In
addition, for the quarter and nine months ended September 30,
1996 the Company had increased investment income due to increased
cash and cash equivalents, reduced losses related to ISI, the
Company's 17% owned affiliate, which effective in the third
quarter of 1996 was accounted for on the cost basis and increased
consulting revenues earned by the Company's 54% owned American
Drug Company subsidiary.
Income tax expense
For the quarter and nine months ended September 30, 1996, the
Company had an income tax benefit (expense) of $(685,000) and
$592,000, respectively, compared to an expense of $248,000 and
$1,073,000 for the corresponding periods of 1995. The benefit
recognized in 1996 is the result of the reduction of $2,386,000
in the valuation allowance for deferred tax assets due to
management's assessment that it is more likely than not that the
Company will realize the benefits of this amount of deferred tax
assets, based upon unrealized gains on the Company's investments
and other factors, offset by state and local taxes, as well as
GP's Federal income tax expense. GP is not included in the
Company's Federal income tax return. The expense in 1995 relates
primarily to state and local taxes and GP's Federal income tax
expense.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Recent accounting developments
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." Statement 121 requires the Company to estimate the
future cash flows expected to result from the use and eventual
disposition of its property, plant and equipment and other long
lived assets, and if the sum of such cash flows is less than the
carrying amount of these assets, to recognize an impairment loss
to the extent, if any, that the carrying amount of the assets
exceeds their fair values. The Company believes that expected
future cash flows derived from these assets will be at least
equal to their carrying values, and that no impairment loss will
be indicated.
In December 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), effective for years beginning after
December 15, 1995. Under SFAS 123, the Company may elect either
a "fair value" based method or the current "intrinsic value"
based method of accounting prescribed by APB No. 25, "Accounting
for Stock Issued to Employees," for its stock-based compensation
arrangements. Under the "intrinsic value" based method, the
Company will be required to disclose in the footnotes to the
consolidated financial statements net income and earnings per
share computed under the "fair value" based method. The Company
has elected to continue accounting for stock-based compensation
arrangements using the "intrinsic value" based method; therefore,
the adoption of SFAS 123 will not impact the Company's results of
operations or financial condition.
Forward-Looking Statements. This report contains certain forward-
looking statements reflecting management's current views with
respect to future events and financial performance. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those in the forward-looking statements,
including, but not limited to, ability to reverse its history of
the Company's operating losses; the Company's dependence on its
subsidiaries and its investments as its primary source to service
outstanding debt and to fund its operations; and the Company's
ability to comply with financial covenants in connection with
various loan agreements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash and cash
equivalents totaling $23,371,000. GP, SGLG, Inc. and American
Drug Company had cash and cash equivalents of $1,028,000 at
September 30, 1996. The minority interests of these three
companies are owned by the general public, and therefore the
assets of these subsidiaries have been dedicated to the
operations of these companies and may not be readily available
for the general corporate purposes of the parent.
In April 1996, the Company sold 1,000,000 shares of Duratek
common stock, and realized net proceeds of $17,700,000. The
Company currently owns approximately 1,846,000 shares of Duratek
common stock. During the first quarter of 1996, the Company
completed a private placement of its common stock, totaling
approximately $2,300,000. The Company used the proceeds from
this transaction to retire long-term debt, which was currently
due. As a result of the above transactions, the Company has
sufficient cash, cash equivalents and marketable securities and
borrowing availability under existing and potential lines of
credit to satisfy its cash requirements for the repayment of
approximately $6,732,000 of 12% Subordinated Debentures scheduled
to mature in 1997. In addition to its ability to issue equity
securities, the Company believes that it has sufficient
marketable long-term investments, the ability to obtain
additional funds from its operating subsidiaries and the
potential to enter into new credit arrangements in order to fund
its working capital requirements.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
QUALIFICATION RELATING TO FINANCIAL INFORMATION
September 30, 1996
The financial information included herein is unaudited. In
addition, the financial information does not include all
disclosures required under generally accepted accounting
principles because certain note information included in the
Company's Annual Report has been omitted; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods. The results for the 1996 interim period are not
necessarily indicative of results to be expected for the entire
year.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
1. Amendment dated September 30, 1996 to
Loan Agreement dated April 29, 1993 by and among
MXL Industries, Inc., the Bank and Fleet Bank,
National Association (successor in interest to
NatWest Bank, N.A.).
2. Amendment dated September 30, 1996 to
Loan Agreement dated April 29, 1993 by and among
Five Star Group, Inc., the Bank and Fleet Bank,
National Association (successor in interest to
NatWest Bank, N.A.).
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the
period ended September 30, 1996.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
September 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
NATIONAL PATENT DEVELOPMENT
CORPORATION
DATE: November 14, 1996 BY: Jerome I. Feldman
President & Chief
Executive Officer
DATE: November 14, 1996 BY: Scott N. Greenberg
Vice President &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000070415
<NAME> NATIONAL PATENT DEVELOPMENT CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 23,371
<SECURITIES> 3,280
<RECEIVABLES> 45,243
<ALLOWANCES> 2,622
<INVENTORY> 20,871
<CURRENT-ASSETS> 106,430
<PP&E> 35,740
<DEPRECIATION> 26,521
<TOTAL-ASSETS> 176,710
<CURRENT-LIABILITIES> 63,670
<BONDS> 20,763
0
0
<COMMON> 73
<OTHER-SE> 91,211
<TOTAL-LIABILITY-AND-EQUITY> 176,710
<SALES> 152,536
<TOTAL-REVENUES> 155,194
<CGS> 129,623
<TOTAL-COSTS> 122,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,142
<INCOME-PRETAX> 11,046
<INCOME-TAX> 592
<INCOME-CONTINUING> 11,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,638
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 0
</TABLE>
AMENDMENT TO
LOAN AGREEMENT
AGREEMENT, made this 30th day of September, 1996,
by and among:
MXL INDUSTRIES, INC., a Delaware corporation (the
"Borrower");
The Banks that have executed the signature pages
hereto (individually a "Bank" and collectively, the "Banks"); and
FLEET BANK, NATIONAL ASSOCIATION, a national
banking association (the successor in interest to NatWest Bank
N.A.), as Agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS:
A. The Borrower, the Banks and National
Westminster Bank N.J., as Agent (a predecessor in interest to the Agent)
have heretofore entered into a Loan Agreement dated April 29,
1993 (as such Loan Agreement has heretofore been amended, the "Original Loan
Agreement", and as the Original Loan Agreement is amended hereby
and as it may from time to time hereafter be amended and supplemented, the
"Loan Agreement");
B. The parties hereto wish to amend the Original Loan
Agreement as hereinafter set forth; and
C. Capitalized terms used herein which are defined in
the Original Loan Agreement and not otherwise defined herein shall
have the respective meanings ascribed thereto in the Original Loan
Agreement;
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto
agree as follows:
Article 1. Amendments to the Loan Agreement
The Original Loan Agreement is hereby amended as follows:
Section 1.1 Article 1 of the Original Loan Agreement
is amended as follows:
(a) The definition of "Agent's Main Office" is deleted
in its entirety and the following new definition is substituted
therefor:
"'Agent's Main Office' - the office of the Agent
presently located at 51 Cragwood Road, South
Plainfield, New Jersey 07080."
(b) The definition of "Principal Office" is deleted in
its entirety, and the following new definition is substituted therefor:
"'Principal Office' - The office of Fleet Bank,
National Association presently located at 1133
Avenue of the Americas, New York, New York 10036."
(c) The following new definitions are added, each in the
appropriate alphabetical order:
"'Fleet' - Fleet Bank, National Association, a
national banking association."
"'Summit' - Summit Bank, a national banking
association."
Section 1.2 Section 2.8 of the Original Loan Agreement
is amended as follows:
(a) The heading of Section 2.8 is deleted in its
entirety, and the following new heading is substituted therefor:
"Section 2.8 Voluntary and Mandatory Changes in
Commitments; Mandatory and Optional
Prepayments of Loans."
(b) A new subsection (f) is added to Section 2.8 as follows:
"(f) In the event that Five Star shall prepay the
full outstanding balance of all Loans under the
Five Star Loan Agreement, or Five Star shall
terminate the Commitments under the Five Star Loan
Agreement, then, in such event, not later than such
prepayment or such termination, as the case may be,
(i) the Borrower shall prepay the full outstanding
balance of all Loans hereunder together with all
accrued interest and Fees, and (ii) the Commitments
hereunder shall thereupon terminate."
Section 1.3 Section 10.9 of the Original Loan Agreement is
amended by deleting subsection 10.9(c) and by substituting therefor the
following:
"(c) If to the Agent:
Fleet Bank, National Association, as Agent
51 Cragwood Road
South Plainfield, NJ 07080
Attention: Murray Markowitz
Telecopier No.: (908)226-6205
with a copy (other than in the case of Borrowing
Notices and reports and other documents delivered
in compliance with Article 5 hereof) to:
Sullivan & Worcester LLP
767 Third Avenue
New York, New York 10017
Attention: Simon B. Posner, Esq.
Telecopier No.: (212)758-2151"
Section 1.4 The parties hereto acknowledge that:
(a) Fleet is the successor to NatWest Bank N.A., which
in turn was a successor to National Westminster Bank USA, and that
all references in the Loan Agreement to "NatWest USA" shall be
deemed to refer to Fleet, in its capacity as a Bank under the Loan
Agreement; and
(b) Summit is the successor to UJB, and that all
references in the Loan Agreement to "UJB" shall be deemed to refer
to Summit in its capacity as a Bank under the Loan Agreement.
Section 1.5 The Original Loan Agreement, the Loan
Documents, and all agreements, instruments and documents executed
and delivered in connection with any of the foregoing, shall each
be deemed to be amended hereby to the extent necessary to give
effect to the provisions of this Amendment and Supplement. Except
as amended hereby, the Loan Agreement and the other Loan Documents
shall remain in full force and effect in accordance with their
respective terms.
Article 2. Acknowledgments and Confirmations
Section 2.1 Each of Five Star and NPDC, as Guarantors,
consents in all respects to the execution and delivery by the
Borrower of this Amendment, and acknowledges and confirms that its
Guaranty continues to be valid and in full force and effect.
Section 2.2 Each of the Borrower, the Banks and the
Agent hereby acknowledges and confirms that all references in the
Loan Agreement, the other Loan Documents and any other agreement,
instrument or document executed and delivered in connection herewith
or therewith to the "Loan Agreement" or "this Agreement"
(insofar as such term refers to the Loan Agreement) shall be deemed
to refer to the Original Loan Agreement as amended hereby.
Section 2.3 The Borrower, the Banks, the Agent and the
Guarantors acknowledge (i) that, concurrently herewith, the parties
to the Five Star Loan Agreement are amending and supplementing the
Five Star Loan Agreement pursuant to an Amendment and Supplement to
Loan Agreement of even date herewith, and (ii) all references in
the Loan Agreement and any of the other Loan Documents to the "Five
Star Loan Agreement" shall be deemed to refer to the Five Star Loan
Agreement as so amended and supplemented.
Article 3. Representations and Warranties
The Borrower hereby represents and warrants to the Agent
and the Banks that after giving effect to the amendment of the
Original Loan Agreement pursuant hereto and the consummation of the
transactions contemplated hereby, (a) each of the representations
and warranties set forth in Article 3 of the Loan Agreement is true
and correct in all respects as if made on the date hereof, and (b)
there exists no Default or Event of Default under the Loan Agreement.
Article 4. The Agent
(a) The Banks and the Agent agree and confirm that
Article 9 of the Loan Agreement applies in all respects to this
Amendment, the Loan Agreement as amended hereby and the transactions
contemplated herein. Without limiting the generality
of the foregoing, each Bank agrees that Section 9.6 of the
Loan Agreement applies to this Amendment and the transactions
contemplated hereby, and that each Bank has, independently
and without reliance on the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter this Amendment.
(b) Each Bank acknowledges that Fleet Bank, National
Association is the successor in interest to NatWest Bank N.A. in
its capacity as Agent, and that Fleet Bank, National Association,
in such capacity, is vested with all the rights, powers, privileges
and duties with which NatWest Bank N.A. had been vested in its
capacity as Agent, and each Bank consents to the foregoing in all
respects.
Article 5. Miscellaneous
Section 5.1 THIS AMENDMENT, THE LOAN AGREEMENT AS
AMENDED HEREBY AND ALL OTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED IN CONNECTION HEREWITH AND THEREWITH SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Section 5.2 The provisions of this Amendment are
severable, and if any clause or provision 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 in this Amendment
and Supplement in any jurisdiction.
Section 5.3 This Amendment may be signed in any number
of counterparts with the same effect as if the signatures thereto
and hereto were upon the same instrument.
Section 5.4 This Amendment shall be binding upon and
inure to the benefit of the Borrower and the Guarantors and their
respective successors and to the benefit of each of the Agent and
the Banks and its respective successors and assigns. The rights
and obligations of the Borrower and the Guarantors under this
Amendment shall not be assigned or delegated without the prior
written consent of the Banks, and any purported assignment or
delegation without such consent shall be void.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above written.
MXL INDUSTRIES, INC.
By:
Title:
FLEET BANK, NATIONAL
ASSOCIATION
By:
Title:
[Signatures Continued on Next Page]
SUMMIT BANK
By:
Title:
FLEET BANK, NATIONAL
ASSOCIATION, as Agent
By:
Title:
Consented to and
Agreed in All Respects:
NATIONAL PATENT DEVELOPMENT
CORPORATION
By:
Title:
FIVE STAR GROUP, INC.
By:
Title:
AMENDMENT AND SUPPLEMENT
TO
LOAN AGREEMENT
AGREEMENT, made this 30th day of September, 1996,
by and among:
FIVE STAR GROUP, INC., a Delaware corporation (the
"Borrower");
The Banks that have executed the signature pages hereto
(individually a "Bank" and collectively, the "Banks"); and
FLEET BANK, NATIONAL ASSOCIATION, a national banking
association (the successor in interest to NatWest Bank N.A.), as
Agent for the Banks (in such capacity, together with its successors
in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS:
A. The Borrower, the Banks and National Westminster
Bank N.J., as Agent (a predecessor in interest to the Agent) have
heretofore entered into a Loan Agreement dated April 29, 1993 (as
heretofore amended, the "Original Loan Agreement", and as the
Original Loan Agreement is amended and supplemented hereby and as
it may from time to time hereafter be amended and supplemented, the
"Loan Agreement");
B. The parties hereto wish to amend and supplement the
Original Loan Agreement to provide for an extension of the Commitment
Termination Date, as defined therein, and for certain other matters as
hereinafter set forth; and
C. Capitalized terms used herein which are defined in
the Original Loan Agreement and not otherwise defined herein shall
have the respective meanings ascribed thereto in the Original Loan
Agreement;
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
Article 1. Amendments to Loan Agreement
The Original Loan Agreement is hereby amended as follows:
Section 1.1 Article 1 of the Original Loan Agreement
is amended as follows:
(a) The definition of "Agent's Main Office" is deleted
in its entirety and the following new definition is substituted
therefor:
"'Agent's Main Office' - the office of the Agent
presently located at 51 Cragwood Road, South
Plainfield, New Jersey 07080."
(b) The definition of "Applicable Margin" is deleted in
its entirety and the following new definition is substituted therefor:
"'Applicable Margin' - as at any date of
determination thereof, the applicable percentage
set forth below opposite the ratio of Indebtedness
of the Borrower as at such date of determination,
to the Tangible Net Worth of the Borrower, as in
effect on such date:
Ratio of Indebtedness Applicable
to Tangible Net Worth Margin
Equal to or greater 2%
than 2.50:1.00
Equal to or greater 1%
than 2.00:1.00 and
less than 2.50:1.00
Equal to or greater 3/4%
than 1.75:1.00 and
less than 2.00:1.00
Equal to or greater 1/2%
than 1.50:1.00 and
less than 1.75:1.00
Equal to or greater 1/4%
than 1.00:1.00 and
less than 1.50:1.00
Less than 1.00:1.00 -0-
The determination of the applicable percentage
pursuant to the table set forth above shall be made
on a quarterly basis based on an examination of the
certified financial statements of the Borrower
delivered pursuant to and in compliance with
Section 5.1 or Section 5.2 hereof, which financial
statements, whether annual or quarterly, shall be
certified by the chief financial officer of the
Borrower and shall indicate that there exists no
Default or Event of Default hereunder. Each
determination of the Applicable Margin shall be
effective as of the first day of the calendar month
following the date on which the financial
statements on which such determination was based
were received by the Agent. In the eventthat
financial statements for the most recently
completed fiscal period prior to such date of
determination either: (i) have not been delivered
to the Agent in compliance with Section 5.1 or 5.2
hereof, or (ii) if delivered, do not comply in form
or substance with Section 5.1 or 5.2 hereof (in the
sole judgment of the Agent), then the Agent may
determine, in its reasonable judgment, the ratio
referred to above which would have been in effect
as at such date, and, consequently, the Applicable
Margin in effect for the period commencing on such
date."
(c) The definition of "Commitment Termination Date" is
amended by deleting the date "September 30, 1996" and by
substituting therefor the date "September 30, 1997".
(d) The definition of "Current Liabilities" is amended
by adding at the conclusion thereof, before the period, the following:
",provided, however, that, notwithstanding the
foregoing, all Indebtedness of the Borrower to NPDC
and any of NPDC's Affiliates shall be deemed to be
Long Term Debt and not Current Liabilities"
(e) The definition of "Principal Office" is deleted in
its entirety, and the following new definition is substituted
therefor:
"'Principal Office' - The office of Fleet Bank,
National Association presently located at 1133
Avenue of the Americas, New York, New York 10036."
(f) The definition of "Tangible Net Worth" is amended by
deleting the proviso at the conclusion thereof and by substituting
therefor the following:
"provided, however, that amounts receivable by the
Borrower from NPDC or any Affiliate of NPDC,
whether pursuant to bonds, notes, open account
indebtedness or otherwise, shall be deemed to be
intangibles for the purposes hereof to the extent
that the aggregate amount of such amounts
receivable exceed, at the time of determination of
Tangible Net Worth, the aggregate amount payable at
such time by the Borrower to NPDC or any Affiliate
of NPDC whether pursuant to bonds, notes, open
account indebtedness or otherwise."
(g) The following new definitions are added, each in the
appropriate alphabetical order:
"'Fleet' - Fleet Bank, National Association, a
national banking association."
"'Summit' - Summit Bank, a national banking
association."
Section 1.2 Section 2.8 of the Original Loan Agreement
is amended as follows:
(a) The heading of Section 2.8 is deleted in its
entirety, and the following new heading is substituted therefor:
"Section 2.8 Voluntary and Mandatory Changes in
Commitments; Mandatory and Optional
Prepayments of Loans."
(b) A new subsection (f) is added to Section 2.8 as
follows:
"(f) In the event that MXL shall prepay the full
outstanding balance of all Loans under the MXL Loan
Agreement, or MXL shall terminate the Commitments
under the MXL Loan Agreement, then, in such event,
not later than such prepayment or such termination,
as the case may be, (i) the Borrower shall prepay
the full outstanding balance of all Loans hereunder
together with all accrued interest and Fees, and
(ii) the Commitments hereunder shall thereupon
terminate."
Section 1.3 Section 5.10 of the Original Loan Agreement
is amended by deleting subsection 5.10(v)(B) and by substituting therefor
the following:
"(B) monthly, as soon as available but in any event
within twenty (20) days after the end of each
calendar month, a schedule of physicals of finished
goods (including any resale items) and"
Section 1.4 Section 6.9 of the Original Loan Agreement
is deleted in its entirety and the following new Section 6.9 is
substituted therefor:
"Section 6.9 Financial Covenants.
(a) Have or maintain, as to the Borrower:
(i) Tangible Net Worth as at the last day of
each fiscal quarter of the Borrower which day
occurs in the years set forth below at not less
than the respective amounts set forth opposite each
such year:
Minimum Tangible Net
Fiscal Quarter-End Worth on Such Fiscal
Date Occurring in: Quarter-End Date
1993 $10,000,000
1994 11,500,000
1995 13,000,000
1996 and thereafter 14,500,000
(ii) The ratio of Indebtedness to Tangible Net
Worth of the Borrower as at (1) the last day of
each fiscal quarter of the Borrower through June
30, 1996 at not more than 3.00 to 1.00; and (2) the
last day of each fiscal quarter of the Borrower
from and after September 30, 1996 at not more than
2.50 to 1.00.
(iii) The excess of Current Assets over
Current Liabilities of the Borrower as at (1) the
last day of each fiscal quarter of the Borrower
through June 30, 1996 at not less than $2,500,000;
and (2) the last day of each fiscal quarter of the
Borrower from and after September 30, 1996 at not
less than $4,300,000.
(iv) Debt Service Coverage of the Borrower for
the four full fiscal quarters ending on (1) the
last day of each fiscal quarter of the Borrower
through June 30, 1996 at not less than 120%; and
(2) the last day of each fiscal quarter of the
Borrower from and after September 30, 1996 at not
less than 150%.
(b) Have or maintain, as to NPDC only, on an
unconsolidated basis, as at the last day of each
fiscal quarter, available, unencumbered and
unrestricted cash, cash equivalents and marketable
securities (as such terms are defined in accordance
with generally accepted accounting principles) of
not less than $5,000,000 in the aggregate, of which
amount, not more than $2,500,000 shall consist of
marketable securities."
Section 1.5 Section 7.13 of the Original Loan
Agreement is deleted in its entirety, and the following new Section
7.13 is substituted therefor:
"Section 7.13 Capital Expenditures
Make or become obligated to make Capital
Expenditures in the aggregate for the Borrower
during each fiscal year of the Borrower in excess
of the respective amounts set forth below
(provided, however, that the Capital Expenditures
set forth on Exhibit M-2 annexed hereto shall not
be included for purposes of determining compliance
with this Section 7.13):
Fiscal Year Ending Maximum Capital
December 31 Expenditures
1993 $750,000
1994 250,000
1995 500,000
1996 450,000
1997 and each 350,000"
year thereafter
Section 1.6 Section 7.14 of the Loan Agreement is
amended by deleting the amount "$2,500,000" and by substituting
therefor the amount "$2,800,000".
Section 1.7 Section 10.9 of the Original Loan
Agreement is amended by deleting subsection 10.9(c) and by
substituting therefor the following:
"(c) If to the Agent:
Fleet Bank, National Association, as Agent
51 Cragwood Road
South Plainfield, NJ 07080
Attention: Murray Markowitz
Telecopier No.: (908)226-6205
with a copy (other than in the case of Borrowing
Notices and reports and other documents delivered
in compliance with Article 5 hereof) to:
Sullivan & Worcester LLP
767 Third Avenue
New York, New York 10017
Attention: Simon B. Posner, Esq.
Telecopier No.: (212)758-2151"
Section 1.8 The parties hereto acknowledge that:
(a) Fleet is the successor to NatWest Bank N.A., which
in turn was a successor to National Westminster Bank USA, and that
all references in the Loan Agreement to "NatWest USA" shall be
deemed to refer to Fleet, in its capacity as a Bank under the Loan
Agreement; and
(b) Summit is the successor to UJB, and that all
references in the Loan Agreement to "UJB" shall be deemed to refer
to Summit in its capacity as a Bank under the Loan Agreement.
Section 1.9 The Original Loan Agreement, the Loan
Documents, and all agreements, instruments and documents executed
and delivered in connection with any of the foregoing, shall each
be deemed to be amended hereby to the extent necessary to give
effect to the provisions of this Amendment and Supplement. Except
as amended hereby, the Loan Agreement and the other Loan Documents
shall remain in full force and effect in accordance with their
respective terms.
Article 2. Extension of Commitment Termination Date;
Amended and Restated Revolving Credit
Note; Mortgage Modification Agreements;
Amendment Facility Fee
Section 2.1 The parties hereto acknowledge that,
pursuant to this Amendment and Supplement, the Commitment
Termination Date in respect of the Revolving Credit Loans is being
extended. The Revolving Credit Loans, as so extended, shall be
evidenced by a single promissory note of the Borrower in form and
substance satisfactory to the Agent and the Banks (the "Amended and
Restated Revolving Credit Note"). The Amended and Restated
Revolving Credit Note shall be dated the date of this Amendment and
Supplement, shall be payable to the Agent for the ratable benefit
of the Banks in a principal amount equal to the sum of the Banks'
Revolving Credit Commitments as originally in effect and shall
otherwise be duly completed. The Amended and Restated Revolving
Credit Note shall be deemed to amend and restate the Revolving
Credit Note executed and delivered in connection with the Original
Loan Agreement, as heretofore amended (as so amended, the "Original
Revolving Credit Note"), and upon the execution and delivery to the
Agent of the Amended and Restated Revolving Credit Note, the Agent
shall mark the Original Revolving Credit Note "Paid by Substitution
of New Note" and return it to the Borrower.
Section 2.2 Concurrently with the execution and
delivery of this Amendment and Supplement, MXL shall execute and
deliver to the Agent Mortgage Modification and Extension Agreements
in form and substance satisfactory to the Agent and the Banks (the
"Mortgage Modification Agreements") pursuant to which MXL agrees
that the Guarantor Mortgages secure, without limitation, MXL's
obligations in respect of its Guaranty of the indebtedness
evidenced by the Amended and Restated Revolving Credit Note (the
Mortgage Modification Agreements, the Amended and Restated
Revolving Credit Note and this Amendment and Supplement, and all
other documents executed and delivered in connection herewith or
therewith, are sometimes hereinafter referred to collectively as
the "Supplemental Loan Documents").
Section 2.3 Concurrently with the execution and
delivery of this Amendment and Supplement, the Borrower shall pay
a non-refundable amendment facility fee to Fleet in the amount of
$10,937.00 and to Summit in the amount of $14,063.00.
Article 3. Acknowledgments and Confirmations
Section 3.1 (a) The Borrower acknowledges and
confirms that any term used in the Security Documents to which the
Borrower is a party to refer to the Borrower's Indebtedness,
liabilities and obligations to the Banks and the Agent, includes,
without limitation, the Indebtedness, liabilities and obligations
of the Borrower to the Banks, whether now existing or hereafter
arising under the Amended and Restated Revolving Credit Note and
the Original Loan Agreement as amended hereby, and that all of the
collateral security provided for in such Security Documents secures
the Borrower's full payment and performance of such Indebtedness,
liabilities and obligations of the Borrower.
(b) The Indebtedness, liabilities and obligations of the
Borrower to the Banks and the Agent, whether now existing or
hereafter arising, under the Amended and Restated Revolving Credit
Note and the Original Loan Agreement as amended and supplemented
hereby, are hereinafter referred to collectively as the
"Supplemental Obligations".
Section 3.2 Each of MXL and NPDC, as Guarantors,
consents in all respects to the execution and delivery by the
Borrower of this Amendment and Supplement and the Amended and
Restated Revolving Credit Note and the transactions contemplated
herein, and acknowledges and confirms that:
(a) its Guaranty continues to be valid and in full force
and effect, and guarantees, without limitation, the full payment
and performance of the Supplemental Obligations as well as the
Obligations; and
(b) any term used in the Security Documents to which
such Guarantor is a party to refer to the Borrower's Indebtedness,
liabilities and obligations to the Banks and the Agent, includes,
without limitation, the Supplemental Obligations, and that all of
the collateral security provided for in such Security Documents
secures, without limitation, the full payment and performance by
each Guarantor of the Indebtedness, liabilities and obligations of
such Guarantor under its Guaranty, as acknowledged and confirmed
hereby.
Section 3.3 Each of the Borrower, the Banks and the
Agent hereby acknowledges and confirms that all references in the
Loan Agreement, the other Loan Documents and any other agreement,
instrument or document executed and delivered in connection
herewith or therewith:
(a) to the "Revolving Credit Loans" shall be deemed to
include the Revolving Credit Loans as amended hereby;
(b) to the "Revolving Credit Note" shall be deemed to
refer to the Amended and Restated Revolving Credit Note;
(c) to the "Loan Agreement" or "this Agreement" (insofar
as such term refers to the Loan Agreement) shall be deemed to refer
to the Original Loan Agreement as amended and supplemented hereby;
(d) to the "Loan Documents" shall be deemed to include,
without limitation, the Supplemental Loan Documents, and all other
documents executed and delivered in connection herewith or
therewith; and
(e) to the "Obligations" (or any other term used to
describe or refer to the Borrower's Indebtedness, liabilities and
Obligations to the Banks and the Agent) shall be deemed to include,
without limitation, the Supplemental Obligations.
Article 4. Representations and Warranties
The Borrower hereby represents and warrants to the Agent
and the Banks that:
Section 4.1 After giving effect to the amendment and
supplement of the Original Loan Agreement pursuant hereto and the
consummation of the transactions contemplated hereby, (a) each of
the representations and warranties set forth in Article 3 of the
Loan Agreement is true and correct in all respects as if made on
the date hereof, and (b) there exists no Default or Event of
Default under the Loan Agreement.
Section 4.2 The Borrower and each Guarantor has
the power to execute, deliver and perform the Supplemental Loan
Documents to be executed by it. The Borrower and each
Guarantor has taken all necessary action, corporate or otherwise, to
authorize the execution, delivery and performance of the
Supplemental Loan Documents to be executed by it. No consent or
approval of any Person (including, without limitation, any
stockholder of the Borrower or any Guarantor), no consent or
approval of any landlord or mortgagee, no waiver of any Lien or
right of distraint or other similar right and no consent, license,
certificate of need, approval, authorization or declaration of any
governmental authority, bureau or agency, is or will be required in
connection with the execution, delivery or performance by the
Borrower or any Guarantor, or the validity, enforcement or
priority, of the Supplemental Loan Documents.
Section 4.3 The execution and delivery by the Borrower
and each Guarantor of each Supplemental Loan Document to which it
is a party and performance by it hereunder and thereunder, will not
conflict with or result in a breach of any order, writ, injunction,
ordinance, resolution, decree, or other similar document or
instrument of any court or governmental authority, bureau or
agency, domestic or foreign, or any certificate of incorporation or
by-laws of the Borrower or any Guarantor, or create (with or
without the giving of notice or lapse of time, or both) a default
under or breach of any agreement, bond, note or indenture to which
the Borrower or any Guarantor, is a party, or by which it is bound
or any of its properties or assets is affected, or result in the
imposition of any Lien of any nature whatsoever upon any of the
properties or assets owned by or used in connection with the business of
the Borrower or any Guarantor, except for the Liens created and granted
pursuant to the Security Documents and acknowledged and confirmed hereby.
Section 4.4 This Amendment and Supplement and each
other Supplemental Loan Document has been duly executed and
delivered by each Loan Party that is a party thereto, and each
constitutes the valid and legally binding obligations of each such
Loan Party that is a party thereto, enforceable in accordance with
its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws, now or hereafter in effect, relating to or affecting
the enforcement of creditors' rights generally and except that the
remedy of specific performance and other equitable remedies are
subject to judicial discretion.
Section 4.5 The Liens that have been created and
granted pursuant to the Security Documents and confirmed hereby
constitute valid perfected first Liens on the properties and
assets covered by the Security Documents, subject to no prior or
equal Lien except as permitted by Section 7.2 of the Loan
Agreement. Without limiting the generality of the foregoing, (a) there has
been no change in the location of the chief place of business of
the Borrower or MXL, or offices where their respective records are
kept, or of other locations of Collateral owned by each of them,
from the locations set forth in the respective Security Agreement
executed by each of them, (b) there has been no change in the
respective business and trade names set forth in the respective
Security Agreement executed by each of them, and (c) all of the
representations and warranties of the Borrower and MXL contained in
their respective Security Agreements as to such locations and trade
names are true, correct and complete as of the date hereof.
Article 5. Conditions to Amendment
The effectiveness of this Amendment and Supplement shall
be subject to the fulfillment (to the satisfaction of the Agent and
the Banks) of the following conditions precedent:
Section 5.1 The Borrower, the Banks and the Agent
shall have executed and delivered this Amendment and Supplement.
Section 5.2 The Borrower shall have executed and
delivered to the Agent its Amended and Restated Revolving Credit Note.
Section 5.3 MXL shall have executed and delivered to
the Agent the Mortgage Modification Agreements.
Section 5.4 The Agent shall have received copies of
(i) a certificate of an officer of the Borrower and the Guarantors
to the effect that the Borrower's and Guarantors' respective
certificates of incorporation and by-laws have not been amended,
modified or changed in any respect since the date of delivery to
the Agent of the certificates of incorporation and by-laws of the
Borrower and the Guarantors in connection with the execution and
delivery of the Original Loan Agreement; (ii) all corporate action
taken by the Borrower and the Guarantors to authorize the execution,
delivery and performance of each of this Amendment and Supplement,
the Loan Agreement as amended hereby, the Amended and
Restated Revolving Credit Note, the other agreements, instruments
and documents executed in connection herewith and therewith and the
consummation of the transactions contemplated hereby and thereby,
certified by its secretary; and (iii) an incumbency certificate
(with specimen signatures) with respect to the Borrower and the
Guarantors.
Section 5.5 Counsel to the Borrower shall have
delivered to the Agent an opinion in form and substance
satisfactory to the Agent and its counsel.
Section 5.6 (a) The Borrower shall have complied and
shall then be in compliance with all of the terms, covenants and
conditions of this Amendment and Supplement and the Loan Agreement
as amended hereby;
(b) After giving effect to the transactions contemplated
hereby, there shall exist no Default or Event of Default under the
Loan Agreement; and
(c) The representations and warranties contained in
Article 3 of the Loan Agreement shall be true and correct on the
date hereof and after giving effect to this Amendment and
Supplement, the Loan Agreement as amended hereby and the
transactions contemplated hereunder and thereunder;
and the Agent shall have received a Compliance Certificate dated
the date hereof to the foregoing effect.
Section 5.7 All legal matters incident hereto shall be
satisfactory to counsel to the Agent.
Article 6. The Agent
(a) The Banks and the Agent agree and confirm that
Article 9 of the Loan Agreement applies in all respects to this
Amendment and Supplement, the Loan Agreement as amended hereby and
the transactions contemplated herein. Without limiting the generality
of the foregoing, each Bank agrees that Section 9.6 of the Loan
Agreement applies to this Amendment and Supplement and the
transactions contemplated hereby, and that each Bank has,
independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter
this Amendment and Supplement.
(b) Each Bank acknowledges that Fleet Bank, National
Association is the successor in interest to NatWest Bank N.A. in
its capacity as Agent, and that Fleet Bank, National Association,
in such capacity, is vested with all the rights, powers, privileges
and duties with which NatWest Bank N.A. had been vested in its
capacity as Agent, and each Bank consents to the foregoing in all
respects.
Article 7. Miscellaneous
Section 7.1 THIS AMENDMENT AND SUPPLEMENT, THE AMENDED
AND RESTATED REVOLVING CREDIT NOTE, THE LOAN AGREEMENT AS AMENDED
HEREBY AND ALL OTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS EXECUTED
AND DELIVERED IN CONNECTION HEREWITH AND THEREWITH SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
Section 7.2 The provisions of this Amendment and
Supplement are severable, and if any clause or provision 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 in this Amendment and Supplement in any jurisdiction.
Section 7.3 This Amendment and Supplement may be
signed in any number of counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 7.4 This Amendment and Supplement shall be
binding upon and inure to the benefit of the Borrower and the
Guarantors and their respective successors and to the benefit of
each of the Agent and the Banks and its respective successors and
assigns. The rights and obligations of the Borrower and the
Guarantors under this Amendment and Supplement shall not be
assigned or delegated without the prior written consent of the
Banks, and any purported assignment or delegation without such
consent shall be void.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
FIVE STAR GROUP, INC.
By:________________________
Title:
FLEET BANK, NATIONAL
ASSOCIATION
By:________________________
Title:
SUMMIT BANK
By:________________________
Title:
FLEET BANK, NATIONAL
ASSOCIATION, as Agent
By:________________________
Title:
Consented to and
Agreed in All Respects:
NATIONAL PATENT DEVELOPMENT
CORPORATION
By:________________________
Title:
MXL INDUSTRIES, INC.
By:________________________
Title:
