<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended July 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _______________
Commission File Number 0-14365
ALPHA TECHNOLOGIES GROUP, INC.
-------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 76-0079338
-------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
333 Cypress Run, Suite 360, Houston, Texas 77094
-------------------------------------------------
(Address of principal executive offices)
(713)-647-9941
--------------
(Issuer's telephone number)
Fiscal 1994 - October 31, 1994
------------------------------
(Former fiscal year)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
<TABLE>
<S> <C>
Common Stock, $.03 par value 6,042,441
------------------------------ ---------
Class Outstanding at August 31, 1995
</TABLE>
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC.
FORM 10-QSB
JULY 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION......................................... 3
CONSOLIDATED BALANCE SHEET - JULY 30, 1995............................ 3
CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS AND
NINE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994.................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS
ENDED JULY 30, 1995 AND JULY 31, 1994................................ 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................. 10
PART II - OTHER INFORMATION........................................... 15
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - JULY 30, 1995
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<S> <C>
ASSETS
-------
CURRENT ASSETS:
Cash and cash equivalents $ 3,689
Marketable securities 874
Accounts receivable, net 11,366
Inventories, net 8,070
Prepaid expenses 1,097
---------
Total current assets 25,096
PROPERTY AND EQUIPMENT, at cost 9,092
Less - Accumulated depreciation
and amortization 989
---------
Property and equipment, net 8,103
GOODWILL, net 2,694
OTHER ASSETS, net 2,312
---------
$ 38,205
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable, trade $ 5,121
Accrued compensation and related
benefits 1,470
Other accrued liabilities 2,015
Current portion of long-term debt 470
Current portion of other long-term
liabilities 886
---------
Total current liabilities 9,962
LONG-TERM DEBT 7,969
OTHER LONG-TERM LIABILITIES 1,216
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 1,648
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value;
shares authorized 180,000 -
Common stock, $.03 par value;
shares authorized 17,000,000;
issued 6,921,345 at July 30, 1995 208
Additional paid-in capital 39,004
Retained earnings (deficit) (18,746)
Unrealized gain on marketable
securities, net of income taxes 44
Cumulative translation adjustment,
net of income taxes 1
Treasury stock, at cost (935,404
common shares at July 30, 1995) (3,101)
---------
17,410
---------
$ 38,205
=========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND NINE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
--------------------- ------------------------
July 30, July 31, July 30, July 31,
1995 1994 1995 1994
---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
SALES $ 17,429 $ 8,996 $ 44,590 $ 18,579
COST OF SALES 12,621 5,957 32,555 12,959
-------- -------- --------- --------
Gross profit 4,808 3,039 12,035 5,620
OPERATING EXPENSES
Research and development 293 143 838 438
Selling, general and administrative 3,294 1,785 8,658 4,065
-------- -------- --------- --------
Total operating expenses 3,587 1,928 9,496 4,503
-------- -------- --------- --------
INCOME FROM CONTINUING OPERATIONS 1,221 1,111 2,539 1,117
INTEREST, INVESTMENT AND OTHER INCOME, 308 133 534 232
net
INTEREST EXPENSE (205) (39) (523) (39)
-------- -------- --------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
PROVISION FOR INCOME TAXES AND
MINORITY INTEREST 1,324 1,205 2,550 1,310
PROVISION (BENEFIT) FOR INCOME TAXES-
CONTINUING OPERATIONS (453) 104 (175) 198
-------- -------- --------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
MINORITY INTEREST 1,777 1,101 2,725 1,112
MINORITY INTEREST IN CONSOLIDATED (168) (189) (264) (189)
SUBSIDIARY
INCOME FROM DISCONTINUED OPERATIONS, net
of income tax effect - 571 - 1,070
-------- -------- --------- --------
NET INCOME $ 1,609 $ 1,483 $ 2,461 $ 1,993
======== ======== ======== ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Continuing operations $ 0.19 $ 0.17 $ 0.39 $ 0.18
Interest, investment and other
income $ 0.04 $ 0.03 $ 0.08 $ 0.04
Interest expense ($0.03) ($0.01) ($0.08) (.01)
(Provision) benefit for income
taxes $ 0.07 ($0.02) $ 0.03 ($0.03)
Minority interest ($0.03) ($0.03) ($0.04) ($0.03)
Discontinued operations - $ 0.09 - $ 0.17
-------- -------- --------- --------
Net income $ 0.24 $ 0.23 $ 0.38 $ 0.32
======== ======== ======== ========
SHARES USED IN COMPUTING NET INCOME PER
SHARE 6,591 6,336 6,533 6,255
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,461 $ 1,993
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Net (income) from discontinued operations - (1,070)
Deferred income taxes (535) -
Gain on sale of marketable securities - available-for-sale (206) -
Depreciation and amortization 875 251
Minority interest in earnings of subsidiary 264 189
Cumulative translation adjustment 1 -
Changes in assets and liabilities:
(Increase) in marketable securities -- trading securities (36) (177)
Decrease in notes receivable 2,000 -
(Increase) in accounts receivable (2,469) (91)
(Increase) decrease in inventories (2,124) 551
(Increase) in prepaid expenses (355) (60)
(Increase) in goodwill (790) -
Increase in accounts payable 635 267
Increase in accrued compensation and related benefits 68 56
(Decrease) in other accrued liabilities (207) (230)
(Decrease) in other long-term liabilities (712) -
--------- --------
Total adjustments (3,591) (314)
--------- --------
Net cash provided (used) by continuing operations (1,130) 1,679
Net cash provided by discontinued operations - 1,155
--------- --------
Net cash provided (used) by operating activities (1,130) 2,834
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturity of short-term investments - 3,516
Payments and expenditures for business acquisitions (2,560) (4,325)
Purchase of marketable securities - available-for-sale (767) (1,251)
Proceeds from sale of marketable securities - available-for-sale 1,254 237
Purchase of property and equipment, net (3,168) (276)
Increase (decrease) in other assets, net (105) 8
--------- --------
Net cash (used) by investing activities (5,346) (2,091)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 340 140
Payments to repurchase common stock (2,118) -
Proceeds from debt 33,662 6,184
Payments on debt (29,125) (2,037)
--------- --------
Net cash provided by financing activities 2,759 4,287
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,717) 5,030
--------- --------
CASH AND CASH EQUIVALENTS, beginning of year 7,406 1,932
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,689 $ 6,962
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
The consolidated financial statements include the accounts of Alpha Technologies
Group, Inc. ("Alpha" or the "Company") and its wholly- and majority-owned
subsidiaries. The Company provides thermal management products and niche-market
connectors for the electronics industry. Wakefield Engineering, Inc.
("Wakefield"), a wholly-owned subsidiary of the Company, is a designer and
manufacturer of thermal management products. Uni-Star Industries, Inc. ("Uni-
Star"), an 80% owned subsidiary of the Company, is a manufacturer and assembler
of connectors, back-panels, cables and cable assemblies.
In fiscal 1994, the Company sold its Information Solutions Segment ("ISS").
Accordingly, the ISS financial results for fiscal 1994 are presented as
discontinued operations.
The Company was incorporated in Delaware in 1983 and is a successor to a Texas
corporation incorporated in 1969. The shareholders, at the Annual Meeting of
the Company on April 19, 1995, approved a name change of the corporation to
Alpha Technologies Group, Inc. Prior to this change, the name of the
corporation was Synercom Technology, Inc.
(2) CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of the Company, the accompanying interim unaudited consolidated
financial statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial condition, the
results of operations and the changes in cash flows of Alpha Technologies
Group, Inc. and Subsidiaries for interim periods. The results for such interim
periods are not necessarily indicative of results for a full year.
Users of financial information produced for interim periods are encouraged to
refer to the footnotes contained in the Annual Report to Stockholders when
reviewing interim financial results.
6
<PAGE>
(3) INVENTORIES
Inventories consisted of the following on (in thousands):
<TABLE>
<CAPTION>
July 30,
1995
-------
<S> <C>
Raw materials and components $5,014
Work in process 1,980
Finished goods 1,323
----------
8,317
Valuation reserve (247)
----------
$8,070
==========
</TABLE>
(4) LONG-TERM DEBT
Long-term debt consisted of the following on:
<TABLE>
<CAPTION>
July 30,
1995
--------------
(in thousands)
<S> <C>
Variable-rate revolving credit facility
(effective interest rate of 9.5% at
July 30, 1995), interest payable monthly,
principal is repaid and reborrowed
based on cash requirements $6,279
Variable-rate equipment term loan
(effective interest rate of 9.5% at
July 30, 1995), payable in monthly
installments of $20,833.33, plus accrued
interest, through June of 1999 979
Variable-rate equipment facility note
(effective interest rate of 9.5% at
July 30, 1995), payable interest only
until October 1995, thereafter payable in
monthly installments of $16,995 plus accrued
interest, through October of 1998 612
Variable-rate equipment term note
(effective interest rate of 9.5% at
July 30, 1995), payable in monthly
installments of $5,520.83 plus accrued
interest, through May of 1999 248
Variable-rate equipment facility note
(effective interest rate of 9.5% at
July 30, 1995), payable in monthly
installments of $8,000 plus accrued
interest, through October of 1997 216
Other 105
------
8,439
Less current portion 470
------
$7,969
======
</TABLE>
7
<PAGE>
4. LONG-TERM DEBT (CONTINUED)
In May of 1995, Wakefield amended its Loan and Security Agreement (the "Loan
Agreement") to increase the revolving credit facility from a maximum aggregate
commitment of $4,000,000 to $7,000,000 and to extend the term of such facility
to May 5, 1997. The equipment credit facility was increased from a maximum
aggregate amount of $600,000 to $1,050,000 of which $300,000 had to be borrowed
by October 31, 1994 and $750,000 must be borrowed by October 31, 1995. On July
30, 1995, Wakefield had borrowed $612,000 of the $750,000. The proceeds from
the equipment credit facility may be used only for the purchase of capital
equipment. In addition in May of 1995, Wakefield entered into an equipment term
note in the amount of $265,000. Interest on the revolving credit facility and
equipment term loans accrues at the bank's corporate base rate plus three-
quarters of one percent. The obligations under the Loan Agreement are secured
by a first lien and assignment of the assets of Wakefield, exclusive of the
assets of Specialty Extrusion Corp., a wholly-owned subsidiary of Wakefield,
including without limitation, all accounts receivable, inventory, equipment and
general intangibles which in aggregate totals $18,789,000. The terms of the
Loan Agreement include various covenants with which, as of July 30, 1995,
Wakefield was in compliance with. On July 30, 1995, $6,279,000 was drawn on the
revolving credit facility. On February 28, 1995, Uni-Star entered into a fixed-
rate term note in the amount of $116,124 which is secured by the equipment it
was used to purchase.
Interest paid on all outstanding debt amounted to approximately $479,000 for the
nine months ended July 30, 1995 and approximately $116,000 in fiscal year 1994.
Management intends to renew the revolving credit facility upon its maturity.
8
<PAGE>
(5) ACQUISITION
On June 30, 1995, Wakefield acquired substantially all of the assets and
business of Specialty Extrusion Ltd. ("Specialty"). The purchase price of
$2,000,000 was paid in cash. In addition, the Company paid Specialty debt in
the amount of $560,000. The acquisition has been accounted for as a purchase
transaction, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed. Goodwill of approximately $358,000
represents the excess of cost over fair value of the net assets acquired and is
being amortized over 15 years using the straight-line method. Adjustments to
the allocation of the purchase price may be made during the 12 months following
the date of acquisition as a result of resolutions of uncertainties existing at
the date of acquisition.
(6) SUBSEQUENT EVENT
On August 30, 1995, Uni-Star entered into an Accounts Receivable Loan Agreement
which included a revolving credit commitment in the aggregate principal amount
of $2,500,000. Uni-Star also entered into an equipment term loan in the amount
of $750,000 and an equipment acquisition facility of $300,000. The initial
proceeds from the revolving credit commitment and the equipment term loan which
in aggregate will amount to approximately $1,600,000 will be used to repay
advances from the Company to Uni-Star. The proceeds from the equipment
acquisition facility may be used only for the purchase of capital equipment.
Interest on the funds advanced on the revolving credit commitment accrues at the
bank's prime rate plus one half of one percent and interest on the equipment
term loan accrues at the bank's prime rate plus three quarters of one percent.
The equipment term loan is repayable in 48 equal monthly installments, of
principal of $15,625 plus accrued interest, payable on the first day of each
month beginning October 1, 1995. All of the aforementioned credit facilities for
Uni-Star are secured by a first lien and assignment of substantially all of
assets, including without limitation, accounts receivable, inventory, equipment
and general intangibles.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
---------------------
For fiscal 1995, the Company adopted a 52/53 week fiscal calendar ending on the
last Sunday of October, therefore, the third quarter and first nine months for
fiscal 1995 ended on July 30, 1995. The comparable periods in fiscal 1994 ended
July 31, 1994. The quarterly periods included 13 weeks of operations and the
nine month periods included 39 weeks of operations.
Quarter to Quarter Comparison
The Company reported income from continuing operations before income taxes less
minority interest for the third quarter ended July 30, 1995 of $1,156,000 or
$.17 per share on sales of $17,429,000 compared to $1,016,000 or $.16 per share
on sales of $8,996,000 for the comparable period in fiscal 1994. For the
quarter ended July 30, 1995, the Company also reported a net tax benefit of
$453,000 or $.07 per share resulting from the estimated realization of $950,000
of the net tax asset which was primarily related to net operating loss
carryforwards.
Sales for the quarter ended July 30, 1995 were $17,429,000 an increase of
$8,433,000 or 93.7% compared to sales of $8,996,000 from continuing operations
for the quarter ended July 31, 1994. Sales for the quarters ended July 30, 1995
and July 31, 1994 from thermal management products were $11,305,000 and
$4,827,000, respectively. This increase in thermal management sales of 134% is
primarily due to internal growth of 76.7% and sales from the acquired thermal
management operation, Ahamtor. Internal growth was due to higher sales of
extruded heat sink products, particularly the Penguin/TM/ Cooler product line
related to the rapid growth of the high performance microprocessor market. The
Penguin/TM/ Cooler product line is extruded aluminum heat sinks specifically
designed for microprocessor and personal computer manufacturers. Connector
sales for the quarters ended July 30, 1995 and July 31, 1994 were $6,124,000 and
$4,169,000, respectively. Sales of connectors for the 1994 period represent the
two months following the acquisition of Uni-Star. Sales for connectors fluctuate
depending on the irregular purchasing pattern of customers for customized
products.
The Company's overall gross profit percentage as a percentage of sales ("gross
profit percentage") for the quarter ended July 30, 1995 was 27.6% versus 33.8%
from continuing operations for the quarter ended July 30, 1994. The Company's
gross profit percentage decreased for the quarter ended July 30, 1995 compared
to the same period of 1994 as a result of (i) the inclusion in the 1995 period
of Ahamtor, which has lower gross profit percentages than the Company's average,
(ii) an increase in the cost of aluminum, a portion of which could not be
reflected in the sales price of the Company's products, (iii) a significant
increase in sales of Penguin/TM/ Coolers, which have a lower gross profit
percentage than the Company's average, and (iv) the high gross profit
contribution during the 1994 third quarter from the backorders existing at the
time of the acquisition of Uni-Star. The gross profit percentage was offset in
part by more efficient use of capacity.
Generally, the gross profit percentage for connectors is higher than for thermal
management products. The gross profit percentage of connectors fluctuates based
upon the sales mix of custom products, which have a higher gross profit
percentage, and standard products.
10
<PAGE>
Research and development expenses for the third quarter of fiscal 1995 were
$293,000 compared to $143,000 for the third quarter of fiscal 1994. This
increase was primarily due to payroll and related benefit expenses related to an
increase in engineering staff as well as new licensing costs for engineering
software and the purchase of related workstations.
Selling, general and administrative expenses for the third quarter of fiscal
1995 were $3,294,000, or 18.9% of sales, compared to $1,785,000, or 19.8% of
sales, for the third quarter of fiscal 1994. The decrease of selling, general
and administrative expenses as a percentage of sales was primarily attributable
to increased sales without a proportional increase in selling, general and
administrative expenses. Included in selling, general and administrative
expenses for the third quarter of fiscal 1995 was a bonus payment charge of
$153,000 related to stock appreciation rights, which are no longer in effect
at quarter end.
Interest, investment and other income totaled $308,000 for the quarter ended
July 30, 1995 compared to $133,000 for the quarter ended July 31, 1994. This
increase is primarily a result of an increase in recognized gains on marketable
securities sold and higher interest rates with an increase in the average cash
balance invested. During the quarter ended July 30, 1995, the Company sold
marketable equity securities and recognized a gain of approximately $151,000
compared to $97,000 for the comparable period in fiscal 1994.
The Company incurred interest expense of $205,000 in the quarter ended July 30,
1995 compared to $39,000 in the comparable quarter of fiscal 1994 primarily due
to the revolving credit facility, equipment term loan and equipment credit
facility related to a Loan and Security Agreement ("Loan Agreement") entered
into by Wakefield in June of 1994. Interest accrues at the bank's corporate base
rate plus three quarters of one percent.
Upon implementation of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", ("Statement 109") on November of 1993, the
Company established a deferred tax asset. Due to historic operating losses and
uncertainty regarding the utilization of net operating loss carryforwards, the
deferred tax asset was fully reserved by establishing a valuation allowance of
$9,421,000.
During the quarter ended July 30, 1995, the Company recognized a net income tax
benefit of $453,000 which included a federal income tax benefit of $600,000 and
a state income tax expense of $147,000. Because the Company generated taxable
income and was able to utilize net operating loss carryforwards, in addition to
an increase in the likelihood of future realization of the net deferred tax
asset, the Company reversed $950,000 of the valuation allowance. The likelihood
of future realization of the net deferred tax asset is based on Management's
estimate of future taxable income. For the quarter ended July 31, 1994, the
Company's effective federal income tax rate was 2%. In addition to federal
income taxes, the income tax provision for the quarter ended July 31, 1994
included state income taxes of $80,000.
11
<PAGE>
Nine Months to Nine Months Comparison
For the nine months ended July 30, 1995, the Company reported income from
continuing operations before income taxes less minority interest of $2,286,000
or $.35 per share compared to $1,121,000 or $.18 per share for the comparable
period in the prior fiscal year. In addition, for the nine months ended July
30, 1995, the Company reported a tax benefit of $175,000 or $.03 per share
resulting from $1,256,000 related to the estimated realization of the net tax
asset which was primarily related to net operating loss carryforwards.
Sales for the nine months ended July 30, 1995 were $44,590,000, an increase of
$26,011,000 or 140%, compared to sales of $18,579,000 from continuing operations
for the nine months ended July 31, 1994. Sales from thermal management products
for the nine months ended July 30, 1995 were $29,353,000 compared to $14,410,000
for the comparable period of fiscal 1994. This increase in thermal management
sales of 104% is primarily attributable to internal growth of 54% and sales from
the acquired thermal management operation, Ahamtor. Internal growth was due to
higher sales of extruded heat sink products, particularly the aforementioned
Penguin/TM/ Cooler product line. As mentioned earlier, sales for connectors can
fluctuate due to the nature of the customers' purchasing pattern. Average
monthly connector sales for the two months following the acquisition of such
operation were higher than the average experienced for the nine months ended
July 30, 1995 due to this purchasing pattern. In addition, upon the purchase of
this operation, the Company shipped products under backorders existing at the
acquisition.
The Company's overall gross profit percentage for the nine months ended July 30,
1995 was 27.0% compared to 30.2% from continuing operations for the nine months
ended July 31, 1994. The Company's gross profit percentage decreased for the
nine months ended July 30, 1995 compared to the same period of 1994 as a result
of (i) the inclusion in the 1995 period of Ahamtor, which has lower gross profit
percentages than the Company's average, (ii) an increase in the cost of
aluminum, a portion of which could not be reflected in the sales price of the
Company's products, (iii) a significant increase in sales of Penguin/TM/
Coolers, which have a lower gross profit percentage than the Company's average,
and (iv) the high gross profit contribution from the backorders existing on the
acquisition of Uni-Star. The gross profit percentage was offset in part by more
efficient use of capacity.
Generally, the gross profit percentage for connectors is higher than for thermal
management products. The gross profit percentage of connectors fluctuates based
upon the sales mix of custom products, which have a higher gross profit
percentage, and standard products. In the first quarter of 1995, the gross
profit percentage was lower, and in the third quarter of 1995 was higher, than
average as a result of the relative amount of custom products sold in each
quarter.
Research and development expenses for the nine months ended July 30, 1995 were
$838,000 compared to $438,000 for the nine months ended July 31, 1994. This
increase was primarily due to payroll and related benefit expenses related to an
increase in engineering staff as well as new licensing costs for engineering
software and the purchase of related workstations.
Selling, general and administrative expenses for the nine months ended July 30,
1995 were $8,658,000, or 19.4% of sales, compared to $4,065,000, or 21.8% of
sales, for the nine months ended July 31, 1994. The decrease of selling,
general and administrative expenses as a percentage of sales was primarily
attributable to increased sales without a proportional increase in selling,
general and administrative expenses.
12
<PAGE>
Interest, investment and other income was $534,000 for the nine months ended
July 30, 1995 compared to $232,000 for the first nine months of fiscal 1994.
This increase is primarily attributable to higher interest income as a result of
higher interest rates and an increase in the average cash balance invested and
an increase in recognized gains on marketable equity securities sold. Interest
income on the cash invested for the nine months ended July 30, 1995 was $216,000
versus $107,000 for the comparable period of fiscal 1994. Gains on marketable
equity securities sold increased approximately $72,000 for the nine months ended
July 30, 1995 compared to the comparable period in fiscal 1994 due to sales in
the third quarter of fiscal 1995.
Interest expense was $523,000 for the nine months ended July 30, 1995 compared
to $39,000 for the nine months ended July 31, 1994. This interest expense is
primarily due to the revolving credit facility, equipment term loans and
equipment credit facility related to the Loan Agreement originally entered into
by the thermal management operations in June of 1994 and amended in May of 1995.
Interest accrues at the bank's corporate base rate plus three quarters of one
percent. On July 30, 1995, interest was accruing at 9 1/2%.
During the nine months ended July 30, 1995, the Company recognized a net income
tax benefit of $175,000 which included a federal income tax benefit of $489,000
and a state income tax expense of $314,000. Because the Company generated
taxable income and was able to utilize net operating loss carryforwards, in
addition to an increase in the likelihood of future realization of the net
deferred tax asset, the Company reversed $1,256,000 of the valuation allowance.
On July 30, 1995, the Company has a remaining valuation allowance for the
deferred tax asset of $5,319,000, which will be reversed as warranted by future
profitable operations and Management's future estimates of the realization of
the deferred tax asset based on expected taxable income.
For the nine months ended July 31, 1994, the Company's effective federal income
tax rate was 2%. In addition to federal income taxes, the provision for income
taxes for the nine months ended July 31, 1994 included state income taxes of
$172,000.
The minority interest not acquired by the Company related to the connectors and
related products operation was included in income before provision for income
taxes on the consolidated statement of income and as a separate item on the
consolidated balance sheet and statement of cash flows. The Company owns 80% of
the outstanding common stock of this operation.
Liquidity and Capital Resources
-------------------------------
During the nine months ended July 30, 1995, the Company used funds for operating
activities, to purchase Specialty, to invest in capital equipment, and to
repurchase Common Stock. These funds were provided primarily from existing cash
and advances under the Wakefield loan agreement discussed below.
13
<PAGE>
For the nine months ended July 30, 1995, $1,130,000 were used to fund operating
activities, primarily to increase accounts receivables and inventories by
$4,593,000. This use of funds was offset by $2,000,000 collected on notes
receivable which related to the sale of the software business. In addition to
operating activities, $2,560,000 were used to purchase Specialty, and to pay off
existing Specialty debt. The Company also spent $3,168,000 to purchase equipment
which included machines to add capacity and improve productivity in the
manufacturing of extruded heat sinks, primarily Penguin/TM/ Coolers, and to
upgrade internal computer systems. Pursuant to its Common Stock repurchase plan,
the Company purchased 391,155 shares at an aggregate price of approximately
$2,118,000. This repurchase program has been completed.
In June 1994, Wakefield entered into a loan agreement which included a revolving
credit facility of up to $4,000,000, an equipment credit facility of $600,000
and an equipment term loan of $1,250,000. In May 1995, Wakefield amended this
loan agreement to increase the revolving credit facility to $7,000,000 and the
equipment credit facility to $1,050,000, and to extend the term of such facility
to May 5, 1997. In addition, Wakefield borrowed $265,000 as an equipment term
loan. Interest on the revolving credit facility and equipment loans accrues at
the bank's corporate base rate plus .75%. On July 30, 1995, the interest on the
bank debt was 9 1/2% per annum. The obligations under the loan agreement are
secured by a first lien on and assignment of the assets of Wakefield, excluding
Specialty. The loan agreement includes various financial covenants which the
Company was in compliance with on July 30, 1995. On July 30, 1995, $6,279,000
was outstanding under the revolving credit facility.
On August 31, 1995, Uni-Star entered into an Accounts Receivable Loan Agreement
which included a revolving credit commitment of up to $2,500,000. Uni-Star also
entered into an equipment term loan in the amount of $750,000 and an equipment
acquisition facility of $300,000. The initial proceeds of $1,600,000 from these
loans were used to repay advances from the Company to Uni-Star. The proceeds
from the equipment acquisition facility may be used only for the purchase of
capital equipment. Interest on the funds advanced on the revolving credit
commitment accrues at the bank's prime rate plus .50% and interest on the
equipment term loan accrues at the bank's prime rate plus .75%. The principal
amount of the equipment term loan is repayable in 48 equal monthly installments,
payable on the first day of each month beginning October 1, 1995. All Uni-Star
credit facilities are secured by a first lien and assignment of substantially
all Uni-Star assets, including without limitation, accounts receivable,
inventory, equipment and general intangibles.
The Company believes that its currently available cash, anticipated cash flow
from operations and availability under credit facilities, should be sufficient
to satisfy its current and planned operations for the forseeable future.
14
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
For fiscal 1995, Alpha adopted a 52/53 week fiscal calendar ending on the last
Sunday of October, therefore the quarters for fiscal 1995 will end on January
29, April 30, July 30 and October 29.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.23 Accounts Receivable Loan Agreement dated as of August 30, 1995 by and
between Uni-Star Industries, Inc. and City National Bank and related
Term Note in the amount of $750,000.
11.1 Statement re Computation of Per Share Earnings for the quarters ended
July 30, 1995 and July 31, 1994.
27 Article 5 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company filed a Form 8-K dated July 14, 1995, reporting that on June
30, 1995, Wakefield Engineering, Inc. ("Wakefield"), a wholly-owned
subsidiary of the Company, through its newly formed wholly-owned
subsidiary, Specialty Acquisition Corp. ("Specialty Acquisition"), acquired
substantially all of the assets and business and assumed certain
liabilities of Specialty Extrusion, LTD. ("Specialty Extrusion"). The
assets acquired include substantially all of the operating assets of
Specialty Extrusion including accounts receivable, inventory, manufacturing
equipment and the trade name "Specialty". In addition, Specialty
Acquisition acquired the aluminum extrusion press used in the business
which was owned personally by the shareholders of Specialty Extrusion,
Walter Hastie and William Esparza. Specialty Extrusion is a California
corporation which manufactures aluminum extrusions and related products.
The consideration paid for the assets and business was $2,000,000,
determined by arms length negotiation, which is subject to certain post-
closing adjustments related to the Net Working Capital of Specialty
Extrusion as of June 30, 1995. The funds for the acquisition were provided
by the Company's current assets.
The business in which the acquired assets were used was the manufacture of
aluminum extrusions and related products, and the Company intends to use
the acquired assets for such purpose. Specialty Acquisition will operate
as a wholly-owned subsidiary of Wakefield. The name of Specialty
Acquisition was subsequently changed to Specialty Extrusion Corp.
The required financial statements were filed as Amendment 1, dated
September 12, 1995, of the aforementioned 8-K.
15
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Alpha Technologies Group, Inc.
------------------------------
(Registrant)
Date: September 13, 1995 By: /s/ Lawrence Butler
--------------------- --------------------------------------
Lawrence Butler
President and Chief Executive Officer
(Principal Executive Officer)
Date: September 13, 1995 By: /s/ Johnny J. Blanchard
---------------------- --------------------------------------
Johnny J. Blanchard
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
------- --------
<C> <S> <C>
10.23 Accounts Receivable Loan Agreement dated as of
August 30, 1995 by and between Uni-Star Industries, Inc.
and City National Bank and related Term Note in the
amount of $750,000.
11.1 Statement re Computation of Per Share Earnings for
the quarter ended July 30, 1995 and July 31, 1994.
27 Article 5 Financial Data Schedule
</TABLE>
17
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EXHIBIT 10.23
ACCOUNTS RECEIVABLE LOAN AGREEMENT
----------------------------------
This Agreement ("Agreement") is entered into as of August 30, 1995, by and
between UNI-STAR INDUSTRIES, INC., a Delaware corporation ("Borrower"), and City
National Bank, a national banking association ("CNB"), with reference to the
Commitment set forth below.
1. DEFINITIONS. As used herein, the following terms shall have the following
meanings:
1.1 "Account" or "Accounts" shall mean and include any right to payment for
goods sold or leased or for services rendered which is not evidenced by an
instrument or chattel paper from any Person, firm, corporation or other legal
entity, whether now existing or hereafter arising or acquired, whether or not it
has been earned by performance.
1.2 "Account Debtor" shall mean the Person or entity obligated on an
Account.
1.3 "Affiliate," as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" (including with
correlative meaning, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise. The definition of "Affiliate" hereunder shall also
specifically include any employee stock ownership plan of Borrower or an
Affiliate.
1.4 "ATG" shall mean Alpha Technologies Group, Inc., a Delaware
corporation.
1.5 "Borrower's Loan Account" shall mean the statement of daily balances on
the books of CNB in which will be recorded Revolving Credit Loans made by CNB to
Borrower pursuant to this Agreement, payments made on such loans and other
appropriate debits and credits as provided by this Agreement. CNB shall render
to Borrower a statement of account for Borrower's Loan Account at least once
each month on a date established by CNB, which statement shall be considered
correct and accepted by Borrower and conclusively binding upon Borrower unless
it notifies CNB in writing to the contrary within ten (10) business days of
receipt by Borrower of such statement or ten (10) business days after sending of
such statement if Borrower does not notify CNB of its non-receipt of the
statement. Statements regarding other credit extended to Borrower shall be
rendered separately.
1.6 "Borrowing Base" shall be in an amount equal to eighty percent (80%) of
the Eligible Accounts. In no event shall the Borrowing Base exceed the Revolving
Credit Commitment.
1.7 "Borrowing Base Certificate" shall mean the certificate, in form and
satisfactory to CNB, executed by Borrower to evidence the Borrowing Base.
1.8 "Cash Flow from Operations" shall be determined on a consolidated basis
for Borrower and the Subsidiaries and shall mean the sum of (a) net income after
taxes; plus (b) amortization of intangible assets; plus (c) interest expenses;
plus (d) depreciation, each of such items computed on an annualized basis.
1.9 "Code" shall mean the Uniform Commercial Code of California except where
the Uniform Commercial Code of another state governs the perfection of a
security interest in Collateral located in that state.
1.10 "Collateral" shall mean all property securing the Obligations and as
described in Section 8 hereof.
1
<PAGE>
1.11 "Commitment" shall mean CNB's commitment, in accordance with the terms
and conditions of this Agreement, to make the Loans in the aggregate principal
amount outstanding at any one time of up to Three Million Five Hundred Fifty
Thousand and no/100 Dollars ($3,550,000.00).
1.12 "Current Assets" shall be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with GAAP, excluding, however from
the determination of Current Assets, loans to stockholders, management or
employees, amounts due from Subsidiaries and Affiliates, deferred costs and
other intangible assets.
1.13 "Current Liabilities" shall be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with GAAP and shall include, without
limitation: (a) all payments on Subordinated Debt required to be made within one
(1 ) year after the date on which the determination is made, and (b) all
indebtedness payable to stockholders, Affiliates, Subsidiaries or officers
regardless of maturity, unless such indebtedness shall have been subordinated,
on terms satisfactory to CNB, to the Obligations.
1.14 "Debt" shall mean, at any date, the aggregate amount of, without
duplication, (a) all obligations of Borrower or any Subsidiary for borrowed
money, or reimbursement for open letters of credit and banker's acceptances, (b)
all obligations of Borrower or any Subsidiary evidenced by bonds, debentures,
notes or other similar instruments, (c) all obligations of Borrower or any
Subsidiary to pay the deferred purchase price of property or services, (d) all
capitalized lease obligations of Borrower or any Subsidiary, (e) all obligations
or liabilities of others secured by a lien on any asset of Borrower or any
Subsidiary, whether or not such obligation or liability is assumed, (f) all
obligations guarantied by Borrower or any Subsidiary, (g) all obligations,
direct or indirect, for letters of credit, and (h) any other obligations or
liabilities which are required by GAAP to be shown as liabilities on the balance
sheet of Borrower or any Subsidiary.
1.15 "Debt Service" shall mean (a) the aggregate amount of Current Maturity
of Long-Term Debt plus, (b) all interest incurred on borrowed money, computed on
an annualized basis. "Current Maturity of Long-Term Debt" shall mean that
portion of Borrower's consolidated long-term liabilities, determined in
accordance with generally accepted accounting principles consistently applied,
which shall, by the terms thereof, become due and payable within one (1 ) year
following the date of the balance sheet upon which such calculations are based.
1.16 "Dilution" shall be determined at the end of each month by CNB for the
preceding three-month period by dividing total reductions, excluding cash
collections of Accounts, by gross sales which gave rise to the Accounts for such
three-month period.
1.17 "Eligible Account" shall mean an Account of Borrower:
1.17.1 Upon which Borrower's right to receive payment is absolute and not
contingent upon the fulfillment of any condition whatsoever;
1.17.2 Against which is asserted no defense, counterclaim, discount or set-
off, whether well-founded or otherwise;
1.17.3 That is a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account for goods sold or leased and delivered to,
or for services rendered to and accepted by, the Account Debtor:
1.17.4 That is owned by Borrower free and clear of all liens, encumbrances,
charges, interests and rights of others, except the security interests granted
to CNB;
1.17.5 That does not arise from a sale or lease to or for services rendered
to an employee, stockholder, director, Subsidiary or Affiliate of Borrower or
any entity in which any employee, stockholder, director, Subsidiary or Affiliate
of Borrower has any interest;
2
<PAGE>
1.17.6 That is not the obligation of an Account Debtor that is the federal
government unless perfected under the Federal Assignment of Claims Act of 1940,
as amended from time to time;
1.17.7 That is not the obligation of an Account Debtor located in a foreign
country, except Canada;
1.17.8 That is due and payable not more than forty-five (45) days from the
date of the billing therefor unless otherwise agreed to in writing by CNB;
1.17.9 As to which not more than ninety (90) days has elapsed since the
original invoice date;
1.17.10 As to which the Account Debtor has not:
(i) died, suspended business, made a general assignment for the benefit
of creditors, become the subject of a petition under the Bankruptcy Code or
consented to or applied for the appointment of a receiver, trustee,
custodian or liquidator for itself or any of its property;
(ii) become more than sixty (60) days past due, under the original terms
of sale, with respect to 20% or more of the amounts owed by such Account
Debtor to Borrower;
(iii) had its check in payment of an Account returned unpaid; or
(iv) become or appear to have become unable, in the opinion of CNB, to
pay the Account in accord with its terms.
1.17.11 That does not, when added to all other Accounts that are obligations
of the Account Debtor to Borrower, at any time result in a total sum that
exceeds twenty percent (20%) of the total balance then due on all Accounts: and
1.17.12 That is not an obligation owed by the Account Debtor which is
evidenced by chattel paper or an instrument as those terms are defined in the
Code.
1.18 "Equipment Acquisition Commitment" shall be $300,000.00.
1.19 "Equipment Acquisition Facility Fee" shall be $500.00.
1.20 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published interpretations
thereunder.
1.21 "Event of Default" shall mean an event described in Section 9 of this
Agreement.
1.22 "Facility Fee" shall be 0.20% of the Revolving Credit Commitment.
1.23 "GAAP" shall mean generally accepted accounting principles consistently
applied.
1.24 "Inventory" shall mean goods held for sale or lease in the ordinary
course of business, work in process and any and all raw materials used in
connection with the foregoing.
1.25 "Loan" or "Loans" shall mean the loans extended by CNB to Borrower
pursuant to Section 2 hereof.
1.26 "Obligations" shall mean all present and future liabilities and
obligations of Borrower to CNB hereunder and all other liabilities and
obligations of Borrower to CNB of every kind and description, now
3
<PAGE>
existing or hereafter owing, matured or unmatured, direct or indirect, absolute
or contingent, joint or several, including any extensions and renewals thereof
and substitutions therefor.
1.27 "Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, joint ventures, associations, joint stock
companies, companies, trusts, banks, trust companies, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
1.28 "Potential Event of Default" shall mean any condition that with the
giving of notice or passage of time or both would, unless cured or waived,
become an Event of Default.
1.29 "Prime Rate" shall mean the rate most recently announced by CNB at its
principal office in Beverly Hills, California as its "Prime Rate." Any change in
the interest rate resulting from a change in such Prime Rate shall become
effective on the banking day on which each change in the Prime Rate is announced
by CNB.
1.30 "Revolving Credit Commitment" shall mean CNB's commitment, in
accordance with the terms of this Agreement, to make the Revolving Credit Loans
in the aggregate principal amount at any one time of up to Two Million Five
Hundred Thousand and no/100 Dollars ($2,500,000.00).
1.31 "Subordinated Debt" shall mean Debt of Borrower or any Subsidiary the
repayment of principal and interest of which is subordinated, on terms
satisfactory to CNB, to the Obligations.
1.32 "Subsidiary" shall mean any corporation, the majority of whose voting
shares are at any time owned, directly or indirectly by Borrower and/or by one
or more Subsidiaries.
1.33 "Tangible Net Worth" shall mean the total of all assets appearing on a
balance sheet prepared in accordance with GAAP for Borrower and the Subsidiaries
on a consolidated basis, less the following:
1.33.1 All intangible assets, including, without limitation, unamortized
debt discount, Affiliate, employee, officer and stockholder receivables or
advances, goodwill, research and development costs, patents, trademarks, the
excess of purchase price over underlying values of acquired companies, any
covenants not to compete, deferred charges, copyrights, franchises and
appraisal surplus;
1.33.2 All obligations which are required by GAAP to be classified as a
liability on a consolidated balance sheet of Borrower and the Subsidiaries;
1.33.3 The amount, if any, at which shares of stock of a non-wholly owned
Subsidiary appear on the asset side of Borrower's consolidated balance
sheet, as determined in accordance with GAAP;
1.33.4 Minority interests; and
1.33.5 Deferred income and reserves not otherwise classified as a
liability on the consolidated balance sheet of Borrower and the
Subsidiaries.
1.34 "Term Loan Commitment" shall be $750,000.00.
1.35 "Term Loan Facility Fee" shall be $3,750.00.
1.36 "Termination Date" shall mean August 31,1996, unless the term of this
Agreement shall have been renewed for an additional period under Section 3
hereof, or such earlier termination date under Section 9.3 upon the occurrence
of an Event of Default. Upon any renewal as provided in Section 3, the
Termination Date shall be the renewed maturity date.
4
<PAGE>
1.37 "Total Senior Liabilities" shall mean, as of any date of
determination, the amount of all liabilities that should be reflected as a
liability on a consolidated balance sheet of Borrower and the Subsidiaries
prepared in accordance with GAAP, less Subordinated Debt.
2. THE CREDIT.
2.1 Revolving Credit Loan. Subject to the terms and conditions of this
Agreement, CNB agrees to make loans ("Revolving Credit Loans") to Borrower, from
the date of this Agreement up to, but not including the Termination Date, at
such times as Borrower may request, up to the amount of the Borrowing Base.
2.1.1 Interest. The Revolving Credit Loans shall bear interest on the
principal amount thereof from time to time outstanding until due and payable
(whether at the stated maturity, by acceleration or otherwise) at a
fluctuating annual rate equal to the Prime Rate of CNB, from time to time in
effect, plus one half of one percent (0.50%) computed on the basis of a 360-
day year and actual days elapsed. The Revolving Credit Loans shall bear
additional interest of three percent (3.0%) per annum on the portion of the
Revolving Credit Loans in excess of the Borrowing Base. Interest on the
Revolving Credit Loans and other charges incurred pursuant to this Agreement
shall be payable monthly in arrears on the first day of each month for the
previous month, commencing on the first such date after the date hereof and
on the date such Revolving Credit Loans are paid in full.
2.1.2 Payment for Amounts Exceeding Borrowing Base. If at any time the
aggregate unpaid principal amount of Borrower's Loan Account exceeds the
amount CNB has agreed to lend pursuant to Section 2.1 hereof, Borrower
shall, immediately upon demand by CNB, repay such amount.
2.1.3 Payments. All payments under this Agreement shall be in United
States Dollars and in immediately available funds. All payments of
principal, interest, fees and other charges incurred under this Agreement
shall be made by charging, and Borrower hereby authorizes CNB to charge,
Borrower's demand deposit account at CNB or Borrower's Loan Account for the
amount of each such payment. Borrower agrees that CNB may make a charge
equal to two (2) days' collection time at the interest rate referred to in
subsection 2.1.1 hereof, payable monthly in arrears on the first day of each
month for the previous month for all funds as to which immediate credit is
given by application to Borrower's Loan Account except for funds which have
been deposited by Borrower to its deposit account at CNB. Borrower hereby
authorizes CNB to charge to Borrower's deposit account with CNB or
Borrower's Loan Account any payment credited against the Obligations which
is dishonored by the drawee or maker thereof.
2.2 Term Loan Facility. Subject to the terms and conditions hereof, CNB
agrees to make a term loan ("Term Loan") to Borrower, on or before September 30,
1995, in the amount of the Term Loan Commitment. The Term Loan shall be
evidenced by a promissory note ("Term Note") consistent with the terms of this
Agreement.
2.2.1 Interest on Term Loan. The Term Loan shall bear interest on the
unpaid principal amount thereof at a fluctuating annual rate equal to the
Prime Rate of CNB plus three quarters of one percent (0.75%) computed on the
basis of a 360-day year and actual days elapsed. Interest on the Term Loan
shall be payable monthly in arrears on the first day of each month,
commencing on the first such date after the date hereof and on the date such
Term Loan is paid in full.
2.2.2 Payment of Term Loan. The principal amount of the Term Loan shall
be repaid by Borrower to CNB in forty-eight (48) equal consecutive monthly
installments, payable on the first day of each month commencing on October
1, 1995. All unpaid principal and interest shall be due and payable forty-
eight (48) months after the funding of the Term Loan, or on the Termination
Date, whichever first occurs.
2.3 Equipment Acquisition Facility. Prior to August 31, 1996, and provided
that no Event of Default or Potential Event of Default exists at the time of
Borrower's request, CNB agrees to make loans ("Equipment Acquisition Loans") to
Borrower totaling in the aggregate up to the amount of the Equipment Acquisition
5
<PAGE>
Commitment for the acquisition of new fixed assets consisting of equipment. Each
Equipment Acquisition Loan shall be made in an amount equal to eighty percent
(80%) of the invoice purchase price for such fixed assets, excluding sales
taxes, delivery and set-up charges. Each Equipment Acquisition Loan shall be
made when Borrower submits an appropriate purchase invoice and executes and
delivers to CNB its promissory note, in the form and substance satisfactory to
CNB, providing for interest payable monthly at a fluctuating annual rate equal
to the Prime Rate plus three quarters of one percent (0.75%) computed on the
basis of a 360-day year and actual days elapsed, and principal payable at the
same time as interest is payable in sixty (60) equal monthly payments. Borrower
shall also submit such further documents as are required to perfect a first lien
in the assets being purchased in favor of CNB. All unpaid principal and interest
shall be due and payable sixty (60) months after the funding of the Equipment
Acquisition Loan or on the Termination Date, whichever first occurs.
2.4 Optional Prepayments. Borrower shall have the right to prepay any Term
Loan or Equipment Acquisition Loan in whole or in part provided that (a) each
partial payment shall be in an amount equal to the amount of the normal monthly
payment or an integral multiple thereof, (b) on each prepayment, Borrower shall
pay the accrued interest on the principal so prepaid to the date of such
prepayment, and (c) all such prepayments shall be applied to principal
installments in the inverse order of their maturities; Borrower may prepay
Revolving Credit Loans at any time without paying accrued interest, except when
due under Section 2.1.1.
2.5 Default Interest Rate. From and after written notice by CNB to Borrower
of the occurrence of an Event of Default (and without constituting a waiver of
such Event of Default), until all Obligations have been paid in full or until
the Event of Default has been cured, whichever occurs first, all Obligations
owed by Borrower to CNB shall bear interest, at a fluctuating rate per annum
equal to: (a) with respect to Revolving Credit Loans, five percent (5.0%) per
annum higher than the interest rate as determined in Section 2.1.1, and (b) with
respect to all other Obligations of Borrower to CNB, five percent (5.0%) per
annum higher than the interest rates as set forth in the respective promissory
notes or other instruments or agreements evidencing such Obligations,
notwithstanding anything to the contrary contained in such promissory notes or
other instruments or agreements.
3. TERM AND TERMINATION.
3.1 Establishment of Termination Date. The term of this Agreement shall
begin as of the date hereof and shall continue until the initial Termination
Date, unless the term of this Agreement shall have been renewed for an
additional period by CNB giving Borrower prior written notice of such renewal,
and such renewal is accepted by Borrower, in which event the Termination Date
shall mean the renewed maturity date as set forth in such notice to Borrower.
Notwithstanding the foregoing, CNB may, at its option, terminate this Agreement
pursuant to Section 9.3 hereof; the date of any termination under Section 9.3
shall thereupon become the Termination Date as that term is used in this
Agreement. Upon renewal under this Section 3.1, Borrower authorizes CNB to
charge Borrower's Loan Account with the amount of the Facility Fee.
3.2 Obligations Upon the Termination Date. Borrower shall, upon the
Termination Date:
3.2.1 Repay the amount of the balance due as set forth in Borrower's Loan
Account plus any accrued interest, fees and charges; and
3.2.2 Pay the amounts due on all other Obligations owing to CNB. In this
connection and notwithstanding anything to the contrary contained in the
instruments evidencing such Obligations, the Termination Date hereunder
shall constitute the maturity date of such other Obligations.
3.3 Survival of Rights. Any termination of this Agreement, however, shall
not affect the rights, liabilities and obligations of the parties with respect
to any Obligations outstanding on the date of such termination. Until all
Obligations have been fully repaid, CNB shall retain its security interest in
all existing Collateral and Collateral arising thereafter, and Borrower shall
continue to assign all Accounts to CNB and shall continue to immediately turn
over to CNB, in kind, all collections received respecting the Accounts.
6
<PAGE>
4. CONDITIONS PRECEDENT.
4.1 Extension of Credit. The obligation of CNB to make the first Loan or
other extension of credit hereunder is subject to the fulfillment to CNB's
satisfaction of each of the following conditions:
4.1.1 CNB shall have received this Agreement duly executed by Borrower;
4.1.2 CNB shall have received (a) a copy of Borrower's Articles of
Incorporation; (b) a Resolution of Borrower's Board of Directors approving
and authorizing the execution, delivery and performance of this Agreement
and any other documents required pursuant to this Agreement, certified by
Borrower's corporate secretary; and, (c) a copy of the last certificate
filed on behalf of Borrower containing the information required by
California Corporations Code Section 2117(a);
4.1.3 CNB shall have received (a) executed copies (and acknowledgement
copies to the extent reasonably available) of proper financing statements
(Form UCC-1), in form and substance satisfactory to CNB, duly filed under
the Code in all such jurisdictions as may be necessary, or in CNB's opinion
desirable, to perfect CNB's security interests created under this Agreement;
and (b) evidence, in form and substance acceptable to CNB, that all filings,
recordings and other actions that are necessary or advisable, in the opinion
of CNB, in order to establish, protect, preserve and perfect CNB's security
interests and liens as legal, valid and enforceable first securitY interests
and liens in the Collateral have been effected;
4.1.4 CNB shall have received evidence that the insurance required by
Section 6.6 hereof is in effect;
4.1.5 CNB shall have received a complete list of claims made against
Borrower together with an opinion of counsel for Borrower with respect to
such claims, that the representations contained in Section 5.6 are true and
correct as of the date of this Agreement;
4.1.6 CNB shall have received Borrower's detailed and comprehensive
statement of projected cash flows ("Cash Flow Statement"), a projected
balance sheet ("Balance Sheet") and a projected income statement ("Income
Statement") for the period from November 1, 1994, through October 31, 1995.
The Cash Flow Statement, Balance Sheet and Income Statement (collectively
"Budget") shall be prepared in accordance with FASB 95. The Budget shall be
realistic and conservative and shall be based upon considered analysis and
diligent investigation of Borrower of the matters stated therein. All
material liabilities or expenses which Borrower expects to incur during said
period shall be disclosed in the Budget;
4.1.7 CNB shall have received the first Facility Fee through the initial
Termination Date equal to $5,000.00; and
4.1.8 CNB shall have received the Equipment Acquisition Facility Fee
equal to $500.00 and the Term Loan Facility Commitment Fee equal to
$3,750.00.
4.2 Conditions to Each Extension of Credit. The obligation of CNB to make
any Loan or other extension of credit hereunder shall be subject to the
fulfillment of each of the following conditions to CNB's satisfaction:
4.2.1 The representations and warranties of Borrower set forth in Section
5 hereof shall be true and correct on the date of the making of each Loan or
other extension of credit with the same effect as though such
representations and warranties had been made on and as of such date;
4.2.2 There shall be in full force and effect in favor of CNB a legal,
valid and enforceable first security interest in, and a valid and binding
first lien on the Collateral; and CNB shall have received evidence, in form
and substance acceptable to CNB, that all filings, recordings and other
actions that are necessary or advisable, in the opinion of CNB, in order to
establish, protect, preserve and perfect CNB's
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security interests and liens as legal, valid and enforceable first security
interests and liens in the Collateral have been effected;
4.2.3 There shall have occurred no Event of Default or Potential Event
of Default; and
4.2.4 All other documents and legal matters in connection with the
transactions contemplated by this Agreement, shall be satisfactory in form
and substance to CNB.
5. REPRESENTATIONS AND WARRANTIES. To induce CNB to enter into this Agreement,
Borrower makes the following representations and warranties which shall survive
the making and repayment of the Loans and other extensions of credit.
5.1 Corporate Existence. Borrower and each Subsidiary is duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and is duly qualified to conduct business in all other states in
which the law thereof requires it to be so qualified.
5.2 Requisite Power. Borrower has all requisite corporate power to borrow
the sums provided for in this Agreement, and to execute and deliver this
Agreement and each other document, contract and instrument delivered to CNB in
connection with this Agreement to which Borrower is required hereunder to be a
party. The execution, delivery and performance of this Agreement have been duly
authorized by the Board of Directors of Borrower and do not require any consent
or approval of the stockholders of Borrower.
5.3 Binding Agreement. This Agreement when delivered pursuant hereto will
constitute the valid and legally binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as the enforceability
thereof may be affected by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
5.4 Ancillary Documents. To the extent that any security agreement or
guaranty is required hereunder to be executed by a Subsidiary or Affiliate of
Borrower, the representations and warranties set forth in Sections 5.2 and 5.3
are also true and correct with respect to each such Subsidiary and Affiliate of
Borrower and such document.
5.5 Other Agreements. The execution, delivery and performance of this
Agreement will not violate any provision of law or regulation (including,
without limitation, Regulations X and U of the Federal Reserve Board), or any
order of any governmental authority, court, arbitration board or tribunal or the
Articles of Incorporation or Bylaws of Borrower, or result in the breach of or a
default under any provisions of any agreement to which Borrower is a party.
5.6 Litigation. There is no litigation, investigation or proceeding in any
court or before any arbitrator or regulatory commission, agency or other
governmental authority existing or threatened against or affecting Borrower, any
Subsidiary, any Guarantor, or any of their respective properties, which, if
adversely determined would have a material adverse effect on the business,
operation or condition, financial or otherwise, of Borrower, any Subsidiary or
any Guarantor.
5.7 Financial Condition. Borrower's and each Guarantor's most recent
financial statements, copies of which have heretofore been delivered to CNB, are
true, complete and correct and fairly present the financial condition of
Borrower and its Subsidiaries and each Guarantor, including operating results,
as of the accounting period referenced therein. The financial statements have
been prepared in accordance with GAAP. There has been no material adverse change
in the business, operations or conditions, financial or otherwise, of Borrower,
any Subsidiary or any Guarantor since the date of such financial statement.
Neither Borrower, any Subsidiary nor any Guarantor have any material
liabilities, direct or contingent, for taxes, long-term leases or long-term
commitments, except as disclosed in the aforementioned financial statements.
5.8 No Violations. Borrower is not in violation of any law, ordinance, rule
or regulation to which
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it or any of its properties is subject which would have a material impact on
Borrower's operations or financial condition.
5.9 Collateral.
5.9.1 Borrower owns and has possession of and has the right and power to
grant a security interest in the Collateral;
5.9.2 The Collateral is genuine and free from liens, adverse claims, set-
offs, defaults, prepayments, defenses and encumbrances except those in favor
of CNB;
5.9.3 No bills of lading, warehouse receipts or other documents or
instruments of title are outstanding with respect to the Collateral or any
portion of the Collateral, in favor of a Person other than Borrower;
5.9.4 The office where Borrower keeps its records concerning all Accounts
and where it keeps the bulk of its Inventory is 306 Pasadena Avenue, South
Pasadena, California 91030 and all of its other places of business are as
follows: 94 County Line Road, Colmar, Pennsylvania 18915; and 10340 Julian
Drive, Cincinnati, Ohio 45215.
5.10 ERISA. Borrower and ATG are in compliance in all material respects with
all applicable provisions of ERISA. No "Reportable Event" (as defined in ERISA
and the regulations issued thereunder [other than a "Reportable Event" not
subject to the thirty (30) day notice to the Pension Benefit Guaranty
Corporation ("PBGC") under such regulations]) has occurred with respect to any
benefit plan of Borrower or ATG nor are there any unfunded vested liabilities
under any benefit plan of Borrower or ATG. Borrower and ATG have met its minimum
funding requirements under ERISA with respect to each benefit plan of Borrower
and ATG and have not incurred any material liability to PBGC in connection with
any such benefit plans.
5.11 Consents. No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with,
any governmental authority or agency is required in connection with the
execution, delivery and performance by Borrower of this Agreement or the
transactions contemplated hereby.
5.12 Use of Proceeds. The proceeds of the Revolving Credit Loans shall be
used by Borrower solely for working capital purposes in the normal course of
business, which may include reimbursement to ATG for expenses of Borrower paid
by ATG and for reasonable management fees to ATG for services rendered to
Borrower, except the initial advance shall be used to pay Borrower's long term
note payable to ATG as described in its April 30, 1995 interim financial
statement. The proceeds of the Term Loan shall be used by Borrower to pay the
outstanding principal balance on promissory note #23543, executed by Borrower in
favor of CNB, dated February 28, 1995, in the original principal amount of
$116,124.40 (which promissory note will be terminated and of no further force or
effect) and the balance thereof used to pay Borrower's long term note payable to
ATG as described in its April 30, 1995 interim financial statement.
5.13 Regulation U. Borrower is not engaged principally, or as one of its
principal activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations U or X of
the Federal Reserve Board). No part of the proceeds of the Loans will be used by
Borrower to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying such margin stock.
5.14 Environmental Matters.
5.14.1 The operations of Borrower and each Subsidiary comply in all
material respects with all applicable federal, state and local
environmental, health and safety statutes, regulations and ordinances and
comply in all material respects with all terms and conditions of all
required permits and licenses;
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5.14.2 Borrower and each Subsidiary have received no notices of
threatened or pending governmental or private civil, criminal or
administrative proceeding regarding any environmental or health and safety
statute, regulation or ordinance in excess of $50,000.00 and have not been
subject to any federal, state or local investigations, inspections or orders
regarding any environmental or health and safety statute, regulation or
ordinance in excess of $50,000.00; and
5.14.3 Neither Borrower nor any Subsidiary knows of any facts or
conditions which may exist which may subject Borrower or any Subsidiary to
liability or contingent liability in excess of $50,000.00 and neither
Borrower nor any Subsidiary are presently liable or contingently liable for
any removal, remedial, response or other costs or damages in connection with
any release into the environment of toxic or hazardous substances or waste
included on any federal, state or local hazardous chemical or substance
lists under any federal, state or local statute, regulation or ordinance in
excess of $50,000.00.
6. AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of all
Obligations, Borrower shall comply with the following covenants:
6.1 Collateral.
6.1.1 Borrower shall, on demand of CNB, make available to CNB, shipping
and delivery receipts evidencing the shipment of the goods which gave rise
to an Account; completion certificates or other proof of the satisfactory
performance of services which gave rise to an Account; a copy of the invoice
for each Account; and Borrower's copy of any written contract or order from
which an Account arose. Unless previously requested by Borrower in writing
to return such documents, CNB shall be authorized to destroy any such
documentation six (6) months after its receipt by CNB;
6.1.2 Borrower shall advise CNB within ten (10) days whenever an Account
Debtor refuses to retain, or returns, any goods in excess of $50,000.00 from
the sale of which an Account arose, and shall comply with any instructions
which CNB may give regarding the sale or other disposition of such returns;
6.1.3 Borrower shall, when requested by CNB from time to time, give CNB
specific assignments of Accounts after they come into existence, and
schedules of Accounts, the form and content of such assignments and
schedules to be satisfactory to CNB; but, despite this provision for express
assignments to CNB, CNB shall have a continuing security interest in all
Accounts irrespective of whether some Accounts are omitted from such
assignments or whether any assignments are ever given; and Borrower shall
execute and deliver to CNB any instrument, document, financing statement,
assignment or other writing which CNB may deem necessary or desirable to
carry out on the terms of this Agreement, to perfect CNB's security interest
in the Accounts, and any other Collateral for the Obligations, or to enable
CNB to enforce its security interest in any of the foregoing;
6.1.4 Borrower shall maintain, in accord with sound accounting
practices, accurate records and books of account showing, among other
things, all Inventory and Accounts, the proceeds of the sale or other
disposition thereof and the collections therefrom. Borrower shall not
change the accounting method used to determine Borrower's Inventory cost
without CNB's prior written approval. Borrower shall permit any
representative(s) of CNB, at any reasonable time, to inspect, audit, examine
and make extracts or copies from all books, records and other data relating
to the Collateral, to inspect any of Borrower's properties, to confirm
balances due on Accounts by direct inquiry to Account Debtors, and shall
furnish CNB with all information regarding the business or finances of
Borrower promptly upon CNB's request;
6.1.5 Borrower shall, if requested by CNB, mark its records concerning
its Inventory and Accounts in a manner satisfactory to CNB to show CNB's
security interest therein;
6.1.6 Borrower shall, if requested by CNB, provide CNB with a current
physical count of its Inventory in the manner specified by CNB;
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6.1.7 Borrower shall endorse to the order of and deliver to CNB any
negotiable instrument accepted by Borrower in lieu of payment in accord with
the original terms of sale;
6.1.8 Borrower shall pay CNB, upon demand, the cost, including, but not
limited to reasonable attorneys' fees and expenses (which counsel may be CNB
employees) expended or incurred by CNB (or allocable to CNB's in-house
counsel) in the collection or enforcement of any Accounts or other
Collateral if CNB itself undertakes such collection or enforcement, together
with all taxes, charges and expenses of every kind or description paid or
incurred by CNB under or with respect to loans hereunder or any Collateral
therefor and Borrower authorizes CNB to charge the same to any deposit
account of Borrower or Borrower's Loan Account maintained with CNB;
6.1.9 Borrower shall promptly notify CNB of any occurrence or discovery
of any event which would cause or has caused a previously Eligible Account
to become ineligible; and
6.1.10 Borrower shall maintain the tangible Collateral in good
condition and promptly notify CNB of any event causing loss or reduction of
value of Collateral and the amount of such loss or reduction.
6.2 Financial Statements. Borrower shall furnish to CNB on a continuing
basis:
6.2.1 Within forty-five (45) days after the end of each quarterly
accounting period of each fiscal year, a financial statement consisting of
not less than a balance sheet and income statement, and prepared in
accordance with GAAP, and accompanied by the following: (a) supporting
schedules of costs of goods sold, operating expenses and other income and
expense items, (b) quarterly 10Q's on ATG and (c) Borrower's certification
as to whether any event has occurred which constitutes an Event of Default
or Potential Event of Default, and if so, stating the facts with respect
thereto, which financial statement may be internally prepared;
6.2.2 Within ninety (90) days after the close of ATG's fiscal year, a
copy of the annual audit report for ATG and its subsidiaries, including
therein, a balance sheet, income statement, reconciliation of net worth and
statement of cash flows, with notes thereto, the balance sheet, income
statement and statement of cash flows to be audited by a certified public
accountant acceptable to CNB, and certified by such accountant to have been
prepared in accordance with GAAP and accompanied by the following: (a)
supporting schedules consisting of the consolidating to consolidated balance
sheets, income statements and statements of cash flow of ATG's subsidiaries,
(b) ATG's annual financial statement on Form 10K and annual report to
shareholders, and (c) Borrower's certification as to whether any event has
occurred which constitutes an Event of Default or Potential Event of
Default, and if so, stating the facts with respect thereto;
6.2.3 As soon as available, any written report pertaining to material
items with respect to matters involving Borrower's internal controls
submitted to Borrower by Borrower's independent public accountants in
connection with each annual or interim special audit of the financial
condition of Borrower and the Subsidiaries made by such accountants;
6.2.4 As soon as available, a copy of the letter to Borrower from its
independent public accountants, in form and substance satisfactory to CNB,
setting forth the scope of such accountants' engagement; and
6.2.5 A Proforma Budget as described in Section 4.1.6 prior to the end
of each of Borrower's fiscal years for the next fiscal year.
6.3 Collateral Reports. Borrower shall supply the following collateral
reports, together with such additional information, reports and/or statements as
CNB may, from time to time reasonably request, within fifteen (15) days after
the end of each month:
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6.3.1 A listing and aging by invoice date of all accounts receivable and
accounts payable (together with a current list of the names, addresses and
detail of outstanding balances due by invoice date from all Account Debtors;
6.3.2 A reconciliation of such aging with the previous aging delivered
to CNB and CNB account records;
6.3.3 A Borrowing Base Certificate.
6.4 FEDERAL TAX Returns. Within ten (10) days of filing, Borrower or ATG if
consolidated, shall supply CNB with a copy of the Federal Income Tax Return of
ATG.
6.5 Taxes and Premiums. Borrower shall, and shall cause each Subsidiary to,
pay and discharge all taxes, assessments, governmental charges, and real and
personal taxes including, but not limited to federal and state income taxes,
employee withholding taxes and payroll taxes, and all premiums for insurance
required hereunder prior to the date upon which penalties are attached hereto.
CNB may pay, upon five (5) business days notice to Borrower any of the foregoing
which Borrower fails to pay for the account of Borrower and any such amounts
shall be debited to Borrower's Loan Account and shall be paid by Borrower to
CNB, with interest thereon, upon demand, unless Borrower is contesting the tax
in good faith by appropriate proceedings for which appropriate reserves are
maintained.
6.6 Insurance.
6.6.1 Borrower shall, and shall cause each Subsidiary to, (a) keep its
Inventory, Equipment and any other tangible personal property which is
Collateral insured for the benefit of Borrower and CNB (with CNB named as
Loss Payee) in such amounts, by such companies and against such risks as may
be satisfactory to CNB; (b) pay the cost of all such insurance; and (c)
deliver certificates evidencing such insurance to CNB (and copies of
policies if requested); and Borrower hereby assigns to CNB all right to
receive proceeds of such insurance, and agrees to direct any insurer to pay
all proceeds directly to CNB, and authorizes CNB to endorse Borrower's name
to any draft or check for such proceeds;
6.6.2 In addition to insuring the assets as required in Section 6.6.1,
above, Borrower shall, and shall cause each Subsidiary to, maintain and keep
in force insurance of the types and in amounts customarily carried in its
lines of business, including, but not limited to, fire, public liability,
property damage, business interruption and worker's compensation, such
insurance to be carried with companies and in amounts satisfactory to CNB,
and shall deliver to CNB from time to time, as CNB may request, schedules
setting forth all insurance then in effect; and
6.6.3 In the event that Borrower fails to provide, maintain, keep in
force and deliver or furnish to CNB the policies of Insurance required by
this Section 6.6, CNB may, but is not obligated to, procure such insurance,
and Borrower shall pay all premiums thereon promptly upon demand by CNB,
together with interest thereon at the rate set forth in Section 2.1.1 hereof
from the date of expenditure until reimbursement by Borrower.
6.7 Notice. Borrower shall promptly advise CNB in writing of (a) the opening
of any new places of business, the closing of any of its existing places of
business, each location at which Inventory is or will be kept, and of the change
of Borrower's name, trade name or other name under which it does business or of
any such new or additional name; (b) the occurrence of any Event of Default or
Potential Event of Default; (c) any litigation pending or threatened where the
amount or amounts in controversy exceed $50,000.00; (d) any unpaid taxes which
are more than fifteen (15) days delinquent; and (e) any other material matter
which has resulted or might result in a material adverse change in Borrower's,
any Subsidiary's or any Guarantor's financial condition, operations, property or
business.
6.8 Fair Labor Standards Act. Borrower shall, and shall cause each
Subsidiary to, comply with the requirements of, and all regulations promulgated
under, the Fair Labor Standards Act .
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6.9 Corporate Existence. Borrower shall, and shall cause each Subsidiary to,
preserve and maintain its corporate existence and all of its rights, privileges
and franchises necessary or desirable in the normal course of its business.
6.10 Compliance with Law. Borrower shall, and shall cause each Subsidiary
to, comply with all requirements of all applicable laws, rules, regulations
(including, but not limited to, ERISA with respect to each of their benefit
plans, and all environmental and hazardous materials laws), orders of any
governmental agency and all material agreements to which they are a party.
6.11 Financial Tests. Borrower shall maintain:
6.11.1 Tangible Net Worth plus Subordinated Debt of not less than
$3,700,000.00;
6.11.2 A ratio of Total Senior Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than 1.25 to 1;
6.11.3 A ratio of Cash Flow from Operations to Debt Service of not less
than 1.50 to 1;
6.11.4 Current Assets less Current Liabilities of not less than
$3.000,000.00; and
6.11.5 A ratio of Current Assets to Current Liabilities of not less
than 1.65 to 1.
6.12 Confidentiality. CNB shall not disclose the non-public financial
information of Borrower and ATG received hereunder, except as required by law or
regulation, to its regulators, counsel, accountants or auditors as necessary for
the enforcement of its rights under this Agreement, or otherwise in the course
of its business.
7. NEGATIVE COVENANTS. Borrower agrees that until payment in full of all the
Obligations, Borrower shall not do any of the following, nor shall it permit any
Subsidiary to do any of the following, without CNB's prior written consent:
7.1 Borrowing. Create, incur, assume or suffer to exist any Debt except (a)
Debt to CNB, (b) Subordinated Debt, (c) trade Debt in the ordinary course of
Borrower's business, and (d) short term indebtedness to ATG for working capital
purposes.
7.2 Sale of Assets. Sell, lease or otherwise dispose of any of Borrower's or
any Subsidiary's assets, other than merchandise Inventory or Equipment in the
ordinary course of business.
7.3 Loans. Make loans or advances to any Person, except (i) Subsidiaries up
to an aggregate amount not to exceed $650,000.00, and to (ii) credit extended to
employees or to customers in the ordinary course of business, or to ATG.
7.4 Contingent Liabilities. Assume, guarantee, endorse, contingently agree
to purchase or otherwise become liable upon the obligation of any Person,
including Borrower, a Subsidiary or Affiliate, except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, and (b) contingent liabilities in favor of CNB.
7.5 Investments. Purchase or acquire the obligations or stock of, or any
other interest in, any partnership, joint venture or corporation, except (a)
direct obligations of the United States of America; or (b) investments in
certificates of deposit issued by, and other deposits with, commercial banks or
other financial institutions organized under the United States or a State
thereof having capital of at least One Hundred Million Dollars
($100,000,000.00).
7.6 Mortgages, Liens, etc. Mortgage, pledge, hypothecate, grant or contract
to grant any security interest of any kind in any property or assets, to anyone
except CNB.
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7.7 Involuntary Liens. Permit any involuntary liens to arise with respect
to any property or assets including but not limited to those arising from the
levy of a writ of attachment or execution, or the levy of any state or federal
tax lien which lien shall not be removed within a period of thirty (30) days.
7.8 Sale and Leaseback. Enter into any sale-leaseback transaction.
7.9 Mergers and Acquisitions. Enter into any merger or consolidation, nor,
acquire all or substantially all the assets of any Person, except; (a) mergers
and acquisitions of a total value, defined as the sum of cash or other assets
paid plus assumed liabilities, of equal to or less than $500,000.00 for any
individual occurrence and up to $1,000,000.00 in the aggregate in any fiscal
year, provided that Borrower shall notify CNB within ten (10) days after any
such merger or acquisition and (b) a Subsidiary may be merged into or
consolidated with another Subsidiary or with Borrower.
7.10 Dividends and Purchase of Stock. Redeem or repurchase any class of
stock or partnership interest, declare or pay any dividends or make any
distribution, whether of capital, income or otherwise, and whether in cash or
other property, except that (i) any Subsidiary may declare and pay dividends or
make distributions to Borrower and (ii) Borrower may declare and pay dividends
or make distributions to ATG; and provided, however, if Borrower for any tax
year elects to file as a Sub-Chapter S corporation under the federal or state
income tax laws, distributions may be made to Borrower's shareholders during any
current or subsequent tax year in proportion to their holdings, in an aggregate
amount equal to that payable by an individual in the highest tax bracket upon
Borrower's taxable income computed as if Borrower were a taxpaying entitY.
7.11 Event of Default. Permit a default to occur under any document or
instrument evidencing Debt incurred under any indenture, agreement or other
instrument under which such Debt may be issued, or any event to occur under any
of the foregoing which would permit any holder of the Debt outstanding
thereunder to declare the same due and payable before its stated maturity,
whether or not such acceleration occurs or such default be waived; except for
trade Debt contested by Borrower in good faith by appropriate proceedings.
8. SECURITY AGREEMENT.
8.1 Grant of Security Interest. To secure all Obligations hereunder as well
as all other Obligations to CNB, Borrower hereby grants and transfers to CNB a
continuing security interest in the following property whether now owned or
hereafter acquired:
8.1.1 All of Borrower's Inventory;
8.1.2 All of Borrower's Accounts;
8.1.3 All of Borrower's general intangibles as that term is defined in
the Code;
8.1.4 All of Borrower's equipment as that term is defined in the Code;
8.1.5 All of Borrower's interest in any patents (now existing or
pending), copyrights, trade names, trademarks and service marks useful to
the operation of Borrower's business;
8.1.6 All notes, drafts, acceptances, instruments, documents of title,
policies and certificates of insurance, chattel paper, guaranties and
securities now or hereafter received by Borrower or in which Borrower has or
acquires an interest;
8.1.7 All cash and noncash proceeds of the foregoing property, including,
without limitation, proceeds of policies of fire, credit or other insurance;
8.1.8 All of Borrower's books and records pertaining to any of the
Collateral described in this Section 8.1;
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8.1.9 Any other Collateral which CNB and Borrower may designate as
additional security from time to time by separate instruments; and
8.1.10 Collateral shall not include Borrower's stock in foreign (non
United States) Subsidiaries and the assets of such Subsidiaries.
8.2 Notification of Account Debtors. CNB shall have the right to notify any
Account Debtor to make payments thereon directly to CNB, take control of the
cash and noncash proceeds of any Account, and to settle any Account, which right
CNB may exercise at any time whether or not an Event of Default has occurred
hereunder or whether Borrower was theretofore making collections thereon,
provided that CNB in good faith believes the collateral or prospects of
repayment of the obligations is materially impaired. Until such time as CNB
elects to exercise such right, Borrower is authorized on behalf of CNB to
collect and enforce the Accounts. Immediately upon CNB's request, Borrower shall
deliver to CNB for application in accord with this Agreement, all checks,
drafts, cash and other remittances in payment or on account of payment of its
Accounts on the banking day following the receipt thereof, and in precisely the
form received, except for the endorsement of Borrower where necessary to permit
collection of the items, which endorsement Borrower hereby agrees to make.
Pending such delivery, Borrower shall not commingle any such checks, cash,
drafts and other remittances with any of its other funds or property, but shall
hold them separate and apart therefrom expressly in trust for CNB. All such
remittances shall be accompanied by such statements and reports of collections
and adjustments as CNB may from time to time specify.
8.3 Attorney-ln-Fact. CNB or any of its officers is hereby irrevocably made
the true and lawful attorney for Borrower with full power of substitution to do
the following: (a) to endorse the name of Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of moneys which are
payable to Borrower and constitute collections on Accounts; (b) to execute in
the name of Borrower any schedules, assignments, instruments, documents and
statements which Borrower is obligated to give CNB hereunder; (c) upon the
occurrence of an Event of Default to receive, open and dispose of all mail
addressed to Borrower; (d) upon the occurrence of an Event of Default to notify
the Post Office authorities to change the address for delivery of mail addressed
to Borrower to such address as CNB shall designate; and (e) upon the occurrence
of an Event of Default to do such other and further acts and deeds in the name
of Borrower which CNB may deem necessary or desirable to enforce any Account or
other Collateral. The powers granted CNB hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon CNB to exercise
any such powers.
9. EVENTS OF DEFAULT AND PROCEEDINGS UPON DEFAULT.
9.1 Events of Default. After expiration of any applicable cure period set
forth in Section 9.2, the following shall constitute Events of Default for
purposes of this Agreement:
9.1.1 Borrower shall fail to pay when due any installment of principal or
interest or any other payment payable under this Agreement including but not
limited to amounts payable under Section 2.1.2;
9.1.2 Borrower shall fail to perform or observe any of the terms,
conditions, or covenants contained in this Agreement;
9.1.3 Any financial statement, representation or warranty made or
furnished by Borrower, any Subsidiary or any Guarantor in connection with
this Agreement should prove to be in any material respect incorrect;
9.1.4 There shall occur the entry of an order for relief or the filing of
an involuntary petition with respect to Borrower, or any Guarantor under the
United States Bankruptcy Code which involuntary petition Borrower does not
file within ten (10) days a motion for dismissal and the petition is not
dismissed within sixty (60) days from the filing of the motion; there shall
occur the appointment of a receiver, trustee, custodian or liquidator of
or for any part of the assets or property of Borrower, or any Guarantor;
Borrower, or any Guarantor shall make a general assignment for the benefit
of creditors;
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9.1.5 CNB's security interest in or lien on any portion of the Collateral
shall become impaired or otherwise unenforceable;
9.1.6 Any person shall obtain an order or decree in any court of
competent jurisdiction enjoining or prohibiting Borrower or CNB or either of
them from performing this Agreement, and such proceedings are not dismissed
or such decree is not vacated within ten (10) days after the granting
thereof;
9.1.7 Borrower or any Subsidiary shall neglect, fail or refuse to keep in
full force and effect any governmental permit, license or approval which is
necessary to the operation of its business;
9.1.8 Borrower shall fail to meet any of the conditions precedent for
each extension of credit set forth in Section 4.2;
9.1.9 All or substantially all of the property of Borrower, any
Guarantor or any Subsidiary shall be condemned, seized or otherwise
appropriated;
9.1.10 The occurrence of (a) a Reportable Event (as defined in ERISA)
which CNB determines in good faith constitutes grounds for the institution
of proceedings to terminate any pension plan by the PBGC, (b) an appointment
of a trustee to administer any pension plan of Borrower or ATG, or (c) any
other event or condition which might constitute grounds under ERISA for the
involuntary termination of any pension plan of Borrower or ATG, where such
event set forth in (a), (b) or (c) results in a significant monetary
liability to Borrower or ATG;
9.1.1 Dilution shall exceed eight percent (8.0%); or
9.1.12 ATG and Neal Castleman collectively, no longer control at least
eighty percent (80%) of the stock of Borrower.
9.2 Notice of Default and Cure of Potential Events of Default. Except with
respect to the Events of Default specified in Sections 9.1.1 (with respect to
principal payments), 9.1.4 or 9.1.5 above and subject to the provisions of
Section 9.4, CNB shall give Borrower at least ten (10) days' written notice of
any event which constitutes or, with the lapse of time would become an Event of
Default, during which time Borrower shall be entitled to cure same.
9.3 CNB's Remedies. Upon the occurrence of an Event of Default, at the sole
and exclusive option of CNB, and upon written notice to Borrower, CNB may (a)
declare the principal of and accrued interest on, the Loans immediately due and
payable in full, whereupon the same shall immediately become due and payable;
(b) terminate this Agreement as to any future liability or obligation of CNB,
but without affecting CNB's rights and security interest in the Collateral and
without affecting the Obligations owing by Borrower to CNB; and/or (c) exercise
its rights and remedies hereunder or under any security agreement, deed of trust
or guaranty securing or guaranteeing Obligations hereunder; and, in addition to
the rights and remedies given it by this Agreement, all of the rights and
remedies of a secured party under the Code and other applicable laws with
respect to all of the Collateral.
9.4 Additional Remedies. Notwithstanding any other provision of this
Agreement, upon the occurrence of any event, action or inaction by Borrower, or
in the event any action or inaction is threatened, which CNB reasonably believes
will materially affect the value of the Collateral, CNB may take such actions as
permitted by law as it deems reasonably necessary under the circumstances to
protect the Collateral, including, but not limited to, seeking injunctive relief
and the appointment of a receiver, irrespective of whether an Event of Default
or Potential Event of Default has occurred under this Agreement.
10. MISCELLANEOUS.
10.1 Costs, Expenses and Attorneys' Fees. Borrower shall reimburse CNB for
all reasonable costs and expenses relating to the administration and
documentation connected with this Agreement, including, but
16
<PAGE>
not limited to, reasonable attorneys' fees and expenses (which counsel may be
CNB employees), expended or incurred by CNB (or allocable to CNB's in-house
counsel) in collecting any sum which becomes due CNB under this Agreement or
under any security agreement, deed of trust, guaranty or other agreements
delivered hereunder or in connection herewith, irrespective of whether suit is
filed, or in the protection, perfection, preservation or enforcement of any and
all rights of CNB in connection with this Agreement or any security agreement,
deed of trust, guaranty or other agreements delivered hereunder or in connection
herewith, including, without limitation, the fees and costs incurred in any out-
of-court workout or a bankruptcy or reorganization proceeding. Borrower shall
also reimburse CNB for all expenses and costs incurred by CNB during the course
of periodic field examinations of the Borrower's operations, books and records
and the collateral, plus a charge equal to $2,000.00 for each such periodic
field examination.
10.2 Cumulative Rights and No Waiver. Each and every right and remedy
granted to CNB hereunder or under any other document delivered hereunder or in
connection herewith, shall be cumulative and no one such right or remedy shall
be exclusive of any other. No failure on the part of CNB to exercise, and no
delay in exercising, any right or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise or waiver by CNB of any right or remedy
preclude any other or future exercise thereof or the exercise of any other right
or remedy.
10.3 Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and interpreted and construed in
accordance with the laws of the State of California and venue and jurisdiction
with respect to hereto shall be with any court of competent jurisdiction located
in Los Angeles County, State of California.
10.4 Lien and Right of Set-off. Borrower hereby grants to CNB a continuing
lien for all Obligations of Borrower to CNB upon any and all moneys, securities
and other property of Borrower and the proceeds thereof, now or hereafter held
or received by or in transit to CNB from or for Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special) and credits of Borrower with, and
any and all claims of Borrower against, CNB, at any time existing. Upon the
occurrence of any Event of Default, CNB is hereby authorized at any time and
from time to time, without notice to Borrower or any other person to set-off,
appropriate and apply any or all items hereinabove referred to against all
Obligations of Borrower whether under this Agreement or otherwise, and whether
now existing or hereafter arising.
10.5 Notices. Any notice required or permitted to be given shall be given in
writing and shall be deemed to have been given when deposited in the United
States mail certified, return receipt requested, with first-class postage
prepaid and properly addressed. For the purposes hereof, the addresses of the
parties hereto shall, until further notice given as herein provided, be as
follows:
CNB: City National Bank
400 North Roxbury Drive
Beverly Hills, California 90210
Attention: Department Manager
with copy to: City National Bank
Legal Department
400 North Roxbury Drive, 5th Floor
Beverly Hills, California 90210
Attention: General Counsel
Borrower: Uni-Star Industries, Inc.
306 Pasadena Avenue
South Pasadena, California 91030
Attention: Neal Castleman, President
17
<PAGE>
with copy to: Alpha Technologies Group, Inc.
333 Cypress Run, Suite 360
Houston, Texas 77094
Attention: Johnny Blanchard, Chief Financial Officer
10.6 Assignments. The provisions of this Agreement are hereby made
applicable to and shall inure to the benefit of CNB's successors and assigns and
Borrower's successors and assigns; provided, however, that Borrower may not
assign or transfer its rights or obligations under this Agreement without the
prior written consent of CNB, which consent shall not be unreasonably withheld.
10.7 Indemnification. Borrower shall, at all times, defend and indemnify and
hold CNB (which for the purposes of this Section shall include the shareholders,
officers, directors, employees, representatives and agents of CNB) harmless from
and against any and all liabilities, claims, demands, causes of action, losses,
damages, expenses (including, without limitation, reasonable attorneys' fees,
[which attorneys may be employees of CNB, or may be outside counsel]), costs,
settlements, judgments or recoveries arising out of or resulting from (a) any
breach of the representations, warranties, agreements or covenants made by
Borrower herein; (b) any suit or proceeding of any kind or nature whatsoever
against CNB arising from or connected with the transactions contemplated by this
Agreement or any of the documents, instruments or agreements to be executed
pursuant hereto or any of the rights and properties assigned to CNB hereunder,
except those arising from the gross negligence, recklessness, or willful
misconduct by CNB; and/or (c) any suit or proceeding that CNB may deem necessary
or advisable to institute, in the name of CNB, Borrower or both, against any
other person, company or entity, for any reason whatsoever to protect the rights
of CNB hereunder or under any of the documents, instruments or agreements
executed or to be executed pursuant hereto, including attorneys' fees and court
costs and all other costs and expenses incurred by CNB (or allocable to CNB's
in-house counsel), all of which shall be charged to and paid by Borrower and
shall be secured by the Collateral. Any obligation or liability of Borrower to
CNB under this Section shall survive the Termination Date and the repayment of
all Loans and other extensions of credit and the payment or performance of all
other Obligations of Borrower to CNB.
10.8 Dispute Resolution.
10.8.1 Mandatory Arbitration. At the request of CNB or Borrower, any
dispute, claim or controversy of any kind (whether in contract or tort,
statutory or common law, legal or equitable) now existing or hereafter
arising between CNB and Borrower and in any way arising out of, pertaining
to or in connection with: (1) this Agreement, and/or any renewals,
extensions, or amendments thereto; (2) any agreements, documents or
instruments related to or delivered in connection with this Agreement
("Ancillary Documents); (3) any violation of this Agreement or the Ancillary
Documents; (4) all past, present and future loans; (5) any incidents,
omissions, acts, practices or occurrences arising out of or related to this
Agreement or the Ancillary Documents causing injury to either party whereby
the other party or its agents, employees or representatives may be liable,
in whole or in part, or (6) any aspect of the past, present or future
relationships of the parties, shall be resolved through final and binding
arbitration conducted at a location determined by the arbitrator in Los
Angeles, California, and administered by the American Arbitration
Association ("AAA") in accordance with the California Arbitration Act (Title
9, California Code of Civil Procedure Section 1280 et. seq.) and the then
existing Commercial Rules of the AAA. Judgment upon any award rendered by
the arbitrator(s) may be entered in any state or federal courts having
jurisdiction thereof.
10.8.2 Real Property Collateral. Notwithstanding the provisions of
subparagraph 10.8.1, no controversy or claim shall be submitted to
arbitration without the consent of all the parties if, at the time of the
proposed submission, such controversy or claim arises from or relates to an
obligation owed to CNB which is secured in whole or in part by real property
collateral. If all parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in subparagraph 10.8.3.
10.8.3 Judicial Reference. At the request of any party, a controversy or
claim which is not submitted to arbitration as provided and limited in
subparagraphs 10.8.1 and 10.8.2 shall be determined
18
<PAGE>
by a reference in accordance with California Code of Civil Procedure
Sections 638 et. seq. If such an election is made, the parties shall
designate to the court a referee or referees selected under the auspices of
the AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is
a single referee, shall be an active attorney or retired judge. Judgment
upon the award rendered by such referee or referees shall be entered in the
court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
10.8.4 Provisional Remedies, Self Help and Foreclosure. No provision of
this Agreement shall limit the right of any party to: (1 ) foreclose against
any real property collateral by the exercise of a power of sale under a deed
of trust, mortgage or other security agreement or instrument, or applicable
law, (2) exercise any rights or remedies as a secured party against any
personal property collateral pursuant to the terms of a security agreement
or pledge agreement, or applicable law, (3) exercise self help remedies such
as setoff, or (4) obtain provisional or ancillary remedies such as
injunctive relief or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration or
referral. The institution and maintenance of an action for judicial relief
or pursuit of provisional or ancillary remedies, or exercise of self help
remedies shall not constitute a waiver of the right of any party, including
the plaintiff, to submit any dispute to arbitration or judicial reference.
10.8.5 Powers and Qualifications of Arbitrators. The arbitrator(s) shall
give effect to statutes of limitation, waiver and estoppel and other
affirmative defenses in determining any claim. Any controversy concerning
whether an issue is arbitratable shall be determined by the arbitrator(s).
The laws of the State of California shall govern. The arbitration award may
include equitable and declaratory relief. All arbitrator(s) selected shall
be required to be a practicing attorney or retired judge licensed to
practice law in the State of California and shall be required to be
experienced and knowledgeable in the substantive laws applicable to the
subject matter of the controversy or claim at issue.
10.8.6 Discovery. The provisions of California Code of Civil Procedure
Section 1283.05 or its successor section(s) are incorporated herein and made
a part of this Agreement. Depositions may be taken and discovery may be
obtained in any arbitration under this Agreement in accordance with said
section(s).
10.8.7 Miscellaneous. The arbitrator(s) shall determine which is the
prevailing party and shall include in the award that party's reasonable
attorneys' fees and costs (including allocated costs of in-house legal
counsel). Each party agrees to keep all controversies and claims and the
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the parties or by
applicable law or regulation.
10.9 Environmental Indemnification. Borrower shall, at all times,
indemnify and hold harmless CNB, its parent company, subsidiaries and all of
their respective directors, officers, employees, agents, successors, attorneys,
and assigns from and against any claims that may arise as a result of Borrower's
business activities that are environmental in nature and for which CNB may be
named as a liable party, and against any loss, damage, cost, expense or
liability directly or indirectly arising out of or attributable to the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance on, under, or about
Borrower's property or operations or property leased to Borrower, including but
not limited to attorney's fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). For these purposes, the term
"hazardous substances" means any substance which is or becomes designated as
"hazardous" or "toxic" under any Federal, state, or local law. This indemnity
shall survive the Termination Date and the repayment of all Obligations of
Borrower to CNB.
10.10 Complete Agreement. This written Agreement, together with the exhibits
to this Agreement, is intended by CNB and Borrower as a final expression of
their agreement and is intended as a complete statement of the terms and
conditions of their agreement.
10.11 Headings. Section and subsection headings in this Agreement are
included herein for
19
<PAGE>
convenience of reference only and shall not constitute a part of the Agreement
for any purpose or be given any substantive effect.
10.12 Definitional Provisions. Any of the terms defined in this Agreement
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference.
10.13 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
GAAP, as in effect on the date hereof, except as otherwise specifically
prescribed herein.
10.14 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction, shall be, only as to such jurisdiction,
ineffective to the extent of such prohibition or unenforceability, but all
remaining provisions of this Agreement shall remain valid.
10.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, CNB and Borrower have caused this Agreement to be
executed as of the day and year first written at the head of this Agreement.
"Borrower" UNI-STAR INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Neal Castleman
Neal Castleman, President
"CNB" CITY NATIONAL BANK, A national
banking association
BY: /s/ Phillip Goessler
Phillip Goessler, Vice President
20
<PAGE>
TERM NOTE
082-517895/96802
$750,000.00 Beverly Hills, California
August 30, 1995
FOR VALUE RECEIVED, the undersigned, UNI-STAR INDUSTRIES, INC., a Delaware
corporation ("Borrower"), promises to pay in lawful money of the United States
of America to the order of CITY NATIONAL BANK, a national banking association
("CNB"), at its Office located at 400 North Roxbury Drive, California 90210 the
principal sum OF SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00),
plus interest on the unpaid principal balance at a rate equal to CNB's Prime
Rate, as it exists from time to time, plus three quarters of one percent (0.75%)
per annum, computed on the basis of a 360-day year and actual days elapsed.
Principal is payable in forty-eight (48) equal, consecutive monthly
installments, each in the amount of $15,625.00, commencing on October 1, 1995,
and continuing on the first day of each month up to and including September 1,
1999, on which day the balance of principal and interest then unpaid shall
become due and payable. Interest is payable monthly on the first day of each
month, commencing on October 1, 1995. Capitalized terms not defined herein shall
have the meanings given them in that certain Accounts Receivable Loan Agreement
dated as of August 30, 1995, between CNB and Borrower, as it may be amended from
time to time (the "Loan Agreement").
If payment on this Term Note becomes due and payable on a non-Business Day, the
maturity thereof shall be extended to the next Business Day and, with respect to
payments of principal or interest thereon, shall be payable during such
extension at the then applicable rate. Upon the occurrence of one or more of the
Events of Default specified in the Loan Agreement, all amounts remaining unpaid
on this Term Note may become or be declared to be immediately payable as
provided in the Loan Agreement, without presentment, demand or notice of
dishonor, all of which are expressly waived. Borrower agrees to pay all costs of
collection of this Term Note and reasonable attorneys' fees (including
attorneys' fees allocable to CNB's in-house counsel) in connection therewith,
irrespective of whether suit is brought thereon.
This is the Term Note referred to in the Loan Agreement and is entitled to the
benefits thereof and may be prepaid in whole or in part only as provided
therein.
Any change in the Prime Rate shall become effective on the same Business Day on
which the Prime Rate shall change, without prior notice to Borrower. Any
principal or interest not paid when due hereunder shall thereafter bear
additional interest from its due date at the rate of Five Percent (5%) per annum
higher than the interest rate as determined and computed above, and continuing
thereafter until paid.
This Term Note shall be governed by the laws of the State of California.
"Borrower" UNI-STAR INDUSTRIES, INC., A Delaware corporation
By: /s/ Neal Castleman
Neal Castleman, President
<PAGE>
EXHIBIT 11.1
ALPHA TECHNOLOGIES GROUP, INC., AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE QUARTERS ENDED JULY 30, 1995 AND JULY 31, 1994
(Unaudited)
(In Thousands, Except per Share Date)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
--------------------- --------------------
July 30, July 31, July 30, July 31,
1995 1994 1995 1994
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares:
Weighted average common shares
outstanding 5,897 5,903 5,967 5,871
Net common shares issuable on
exercise of stock options 694 433 566 384
---------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding 6,591 6,336 6,533 6,255
========== ========= ========= =========
Continuing operations $1,221 $1,111 $2,539 $1,117
Interest, investment and other income 308 133 534 232
Interest expense (205) (39) (523) (39)
(Provision) benefit for income
taxes-continuing operations 453 (104) 175 (198)
Minority interest (168) (189) (264) (189)
Discontinued operations - 571 - 1,070
---------- --------- --------- ---------
Net income $1,609 $1,483 $2,461 $1,993
========== ========= ========= =========
Net income per common and common
equivalent share:
Continuing operations $ 0.19 $ 0.17 $ 0.39 $ 0.18
Interest, investment and other income 0.04 0.03 0.08 0.04
Interest expense (0.03) (.01) (0.08) (0.01)
(Provision) benefit for income taxes-
continuing operations 0.07 (0.02) 0.03 (0.03)
Minority interest (0.03) (0.03) (0.04) (0.03)
Discontinued operations - 0.09 - 0.17
---------- --------- --------- ---------
Net income $ 0.24 $ 0.23 $ 0.38 $ .032
========== ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET-JULY 30, 1995, CONSOLIDATED STATEMENTS OF INCOME FOR
THE QUARTERS AND NINE MONTHS ENDED JULY 30, 1995 AND JULY 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> OCT-29-1995 OCT-31-1994 OCT-29-1995 OCT-31-1994
<PERIOD-START> MAY-01-1995 MAY-01-1994 NOV-01-1994 NOV-01-1993
<PERIOD-END> JUL-30-1995 JUL-31-1994 JUL-30-1995 JUL-31-1994
<CASH> 3,689 0 3,689 0
<SECURITIES> 874 0 874 0
<RECEIVABLES> 11,366 0 11,366 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 8,070 0 8,070 0
<CURRENT-ASSETS> 25,096 0 25,096 0
<PP&E> 9,092 0 9,092 0
<DEPRECIATION> 989 0 989 0
<TOTAL-ASSETS> 38,205 0 38,205 0
<CURRENT-LIABILITIES> 9,962 0 9,962 0
<BONDS> 7,969 0 7,969 0
<COMMON> 208 0 208 0
0 0 0 0
0 0 0 0
<OTHER-SE> 17,202 0 17,202 0
<TOTAL-LIABILITY-AND-EQUITY> 38,205 0 38,205 0
<SALES> 17,429 8,996 44,590 18,579
<TOTAL-REVENUES> 17,429 8,996 44,590 18,579
<CGS> 12,621 5,957 32,555 12,959
<TOTAL-COSTS> 12,621 5,957 32,555 12,959
<OTHER-EXPENSES> 3,587 1,928 9,496 4,503
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 205 39 523 39
<INCOME-PRETAX> 1,324 1,205 2,550 1,310
<INCOME-TAX> (453) 104 (175) 198
<INCOME-CONTINUING> 1,777 1,101 2,725 1,112
<DISCONTINUED> 0 571 0 1,070
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1,609 1,483 2,461 1,993
<EPS-PRIMARY> .24 .23 .38 .32
<EPS-DILUTED> 0 0 0 0
</TABLE>
