SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 28, 1996
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9348
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QMS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 63-0737870
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE MAGNUM PASS, MOBILE, AL 36618
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(Address of principal executive offices) (Zip Code)
(334) 633-4300
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of the issuer's common stock, as of the latest practicable date
10,680,215 AT JULY 26, 1996.
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QMS, INC. AND SUBSIDIARIES
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INDEX
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<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NUMBER
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(unaudited) as of June 28, 1996 and
September 29, 1995 3 - 4
Condensed Consolidated Statements of Operations
(unaudited) for the three and nine months ended
June 28, 1996 and June 30, 1995 5
Condensed Consolidated Statements of Cash Flows
(unaudited) for the nine months ended
June 28, 1996 and June 30, 1995 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
PART II - OTHER INFORMATION 13
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Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. (a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 14
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QMS, INC. AND SUBSIDIARIES
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 28, 1996 and September 29, 1995
(Unaudited)
<CAPTION>
June 28, September 29,
in thousands 1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 2,560 $ 7,431
Trade Receivables (less allowance for doubtful
accounts of $377 at June 1996 and $546
at September 1995) 25,746 37,721
Notes Receivable 3,667 0
Inventories, Net (Note 3) 32,031 47,482
Other Current Assets 4,280 7,066
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Total Current Assets 68,284 99,700
PROPERTY, PLANT AND EQUIPMENT 61,802 69,205
Less Accumulated Depreciation 41,093 42,484
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Property, Plant and Equipment, Net 20,709 26,721
OTHER ASSETS
Note Receivable 2,333 0
Other, Net 9,885 9,117
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Total Other Assets 12,218 9,117
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TOTAL ASSETS $ 101,211 $ 135,538
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See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
==========================
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 28, 1996 and September 29, 1995
(Unaudited)
June 28, September 29,
in thousands 1996 1995
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 10,725 $ 16,586
Short-Term Bank Loans 0 7,764
Revolving Credit Loan and Short-Term Debt (Note 4) 19,050 4,990
Deferred Service Revenue - Current 10,576 10,330
Other 10,090 24,519
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Total Current Liabilities 50,441 64,189
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 551 25,630
DEFERRED INCOME TAXES 1,182 1,162
OTHER LIABILITIES 2,571 1,344
STOCKHOLDERS' EQUITY 46,466 43,213
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 101,211 $ 135,538
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
<TABLE>
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QMS, INC. AND SUBSIDIARIES
==========================
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended June 28, 1996 and June 30, 1995
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
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June 28, June 30, June 28, June 30,
in thousands, except per share amounts 1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES
Printers and Supplies $ 29,663 $ 54,660 $ 88,320 $ 176,322
U.S. Service 8,555 8,038 24,645 23,548
----------- ----------- ----------- -----------
Total Net Sales 38,218 62,698 112,965 199,870
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COST OF SALES
Printers and Supplies 20,377 44,339 60,650 138,955
U.S. Service 5,225 4,771 14,843 14,299
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Total Cost of Sales 25,602 49,110 75,493 153,254
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GROSS PROFIT
Printers and Supplies 9,286 10,321 27,670 37,367
U.S. Service 3,330 3,267 9,802 9,249
----------- ----------- ----------- -----------
Total Gross Profit 12,616 13,588 37,472 46,616
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, General and Administrative
Expenses 11,041 21,597 32,895 64,886
Restructuring Expense 0 0 0 2,685
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Total Operating Expenses 11,041 21,597 32,895 67,571
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OPERATING INCOME (LOSS) 1,575 (8,009) 4,577 (20,955)
----------- ------------ ----------- ------------
OTHER INCOME (EXPENSE)
Interest Income 91 73 261 113
Interest Expense (410) (1,067) (1,435) (3,059)
Miscellaneous Expense (123) (503) (594) (16)
------------ ------------ ------------ ------------
Total Other Expense - Net (442) (1,497) (1,768) (2,962)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 1,133 (9,506) 2,809 (23,917)
INCOME TAX BENEFIT (488) (28) (488) 0
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NET INCOME (LOSS) $ 1,621 $ (9,478) $ 3,297 $ (23,917)
=========== ============ =========== ============
EARNINGS (LOSS) PER COMMON SHARE (Note 2)
Primary and Fully Diluted $ 0.15 $ (0.89) $ 0.31 $ (2.24)
SHARES USED IN PER SHARE COMPUTATION (Note 2)
Primary 10,759 10,677 10,719 10,676
Fully Diluted 10,759 10,677 10,758 10,676
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<TABLE>
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QMS, INC. AND SUBSIDIARIES
==========================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 28, 1996 and June 30, 1995
(Unaudited)
<CAPTION>
June 28, June 30,
in thousands 1996 1995
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 3,297 $ (23,917)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation of Property, Plant and Equipment 4,051 6,388
Amortization of Capitalized and Deferred Software 3,237 7,821
Provision for Losses on Inventory 6,872 10,380
Provision for Restructuring Expense 0 2,685
Other 105 210
Net Change in Assets and Liabilities that Provided
(Used) Cash (481) 740
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Net Cash Provided by Operating Activities 17,081 4,307
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment (1,562) (5,549)
Additions to Notes Receivable (7,500) 0
Proceeds from Notes Receivable 1,500 0
Additions to Capitalized and Deferred Software Costs (5,173) (6,597)
Proceeds from Divestiture of Businesses 9,300 0
Other 310 403
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Net Cash Used in Investing Activities (3,125) (11,743)
Cash Flows from Financing Activities:
Proceeds from Debt and Capital Lease Obligations 12,955 7,702
Payments of Debt and Capital Lease Obligations (23,974) (4,407)
Payments of Bank Loans (7,764) 0
Other 172 11
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Net Cash Provided by (Used in) Financing Activities (18,611) 3,306
Effect of Exchange Rate Changes on Cash (216) 2,252
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Net Change in Cash and Cash Equivalents (4,871) (1,878)
Cash and Cash Equivalents at Beginning of Period 7,431 4,956
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Cash and Cash Equivalents at End of Period $ 2,560 $ 3,078
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
QMS, INC. AND SUBSIDIARIES
==========================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. MANAGEMENT OPINION
In the opinion of management, the condensed consolidated financial statements
reflect all adjustments necessary to present fairly the financial position of
the Company as of June 28, 1996, the results of operations for the three and
nine months ended June 28, 1996 and June 30, 1995 and changes in cash flows
for the nine months ended June 28, 1996 and June 30, 1995. All adjustments
included in the condensed consolidated financial statements are of a normal
recurring nature except amounts related to the restructuring reserves (see
Note 6) and reclassification of the revolving credit loan and senior secured
notes payable from long-term to short-term debt (see Note 4). The results of
operations for the nine months ended June 28, 1996 are not necessarily
indicative of the results to be expected for the fiscal year ending September
27, 1996.
2. PER COMMON SHARE COMPUTATIONS
Per share computations are based on the weighted average number of common
shares outstanding during the period and the dilutive effect of the assumed
exercise of stock options. This effect was not material for the three- and
nine-month periods ending June 28, 1996 and June 30, 1995 and did not change
the amounts of the primary and fully diluted earnings (loss) per common
share.
3. INVENTORIES
Inventories at June 28, 1996 and September 29, 1995 are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
June 28, September 29,
1996 1995
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<S> <C> <C>
Raw materials $ 7,300 $11,709
Work in process 1,824 3,152
Finished goods 28,489 43,453
Inventory reserve (5,582) (10,832)
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Total $ 32,031 $47,482
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4. CLASSIFICATION OF REVOLVING CREDIT LOAN AND SENIOR SECURED NOTES PAYABLE
The Company reclassified its revolving credit loan and the senior secured
notes payable from long-term to short-term debt as of December 29, 1995 only
to comply with FASB Emerging Issues Task Force Issue No. 95-22, "Balance
Sheet Classification of Borrowings Outstanding Under Revolving Credit
Arrangements That Include a Subjective Acceleration Clause and a Lock-Box
Arrangement" which became effective in November 1995. The revolving credit
agreement is for a four-year period and the Company was in full compliance
with all the covenants of this agreement as of June 28, 1996.
5. COMMITMENTS AND CONTINGENCIES
As of June 28, 1996, the Company had a commitment of approximately $5.5
million to purchase print engines under purchase contracts.
The Company was contingently liable for approximately $1.2 million as of June
28, 1996, the result of letters of credit issued in the normal course of
business for the purchase of inventory.
6. RESTRUCTURING RESERVES
At September 29, 1995, the Company had reserves for restructuring charges and
business divestitures totaling $10.1 million. During fiscal 1996, total net
charges of $8.1 million were taken against these reserves leaving a balance
of $2 million at June 28, 1996.
7. RECLASSIFICATIONS
Certain reclassifications have been made to fiscal 1995 amounts to conform to
the fiscal 1996 presentation.
QMS, INC. AND SUBSIDIARIES
==========================
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
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Net income for the third quarter of fiscal 1996 was $1.6 million on net sales of
$38.2 million and for the nine months ended June 28, 1996 was $3.3 million on
net sales of $113 million. The 1996 results compare to a net loss of $9.5
million on net sales of $62.7 million for the third quarter of fiscal 1995 and a
net loss of $23.9 million on net sales of $200 million for the nine months ended
June 30, 1995.
<TABLE>
<CAPTION>
Table of Net Sales Comparisons for Key Channels of Distribution
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Third Quarter Ended Nine Months Ended
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June 28, June 30, June 28, June 30,
(000's) 1996 1995 Difference 1996 1995 Difference
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<S> <C> <C> <C> <C> <C> <C>
U.S. Direct $ 14,968 $ 18,372 $ (3,404) $ 39,506 $ 56,359 $ (16,853)
U.S. Service 8,555 8,038 517 24,645 23,548 1,097
U.S. Reseller 3,503 2,596 907 12,567 10,241 2,326
Europe 4,478 21,487 (17,009) 15,704 68,938 (53,234)
Japan 2,496 8,046 (5,550) 7,796 24,160 (16,364)
Canada 1,909 2,446 (537) 7,333 10,820 (3,487)
QMS Circuits 800 988 (188) 2,646 2,973 (327)
All Other 1,509 725 784 2,768 2,831 (63)
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Total $ 38,218 $ 62,698 $ (24,480) $ 112,965 $ 199,870 $ (86,905)
======================================= =======================================
</TABLE>
Net sales for the third quarter of fiscal 1996 declined by 39% from net sales
for the third quarter of fiscal 1995 and by 43.5% in the nine-month comparison.
The sales by key distribution channels in the third quarter of fiscal 1996 (the
three months ended June 28, 1996) compared to the third quarter of fiscal 1995
(the three months ended June 30, 1995) and the nine-month periods ending on the
same dates are shown in the table above. The principal reasons for the sales
declines are the change in the methods of doing business in Europe and Japan and
the sale of the color thermal transfer consumables business. The combined sales
decline in the Europe and Japan sales channels represents $22.6 million, or
92.2%, of the total decline for the third quarter comparison, and $69.6 million,
or 80.1%, of the total decline for the nine-month comparison. Sales of color
thermal transfer consumables included in the third quarter of fiscal 1995 were
$3.2 million and for the nine months ended June 30, 1995 were $10.3 million. As
reported in the Company's 10-Q filing for the first quarter of fiscal 1996, the
Company has completed the divestiture of its Europe and Japan business
operations to management buy-out groups and established exclusive master
distributor agreements with the new owners of these businesses to market QMS
products in their respective geographic territories. The Company recognizes
revenue on sales of components and controller boards to these master
distributors and, additionally, commissions are earned by the Company on sales
of QMS products by these master distributors. As a result, the amount of
revenue recognized through these sales channels in fiscal 1996 is significantly
lower than that recognized in fiscal 1995.
The U.S. direct channel is the Company's primary method of distribution for the
higher end of the Company's product offerings to major corporate accounts and
governmental agencies. Net sales in the direct channel for the three- and nine-
month periods ending June 28, 1996 declined by 18.5% and 29.9%, respectively,
compared to the same periods in fiscal 1995. The principal reasons for the
sales declines are increased competition in this sales channel and the sale of
the color thermal transfer consumables business, as discussed above. Sales of
color thermal transfer consumables included in this channel were $2.1 million in
the third quarter of fiscal 1995, representing 11.5% of the total decline, and
for the nine months ended June 30, 1995 were $6.5 million, also representing
11.5% of the total decline. However, there was a 27% increase in the U.S.
direct sales channel in the third quarter of fiscal 1996 compared to the second
quarter of fiscal 1996. This increase reflects the impact of the introduction
of the QMS(R) 2425 Print System, a 24 page-per-minute monochrome printer, into
this channel at the end of the second quarter of fiscal 1996.
The Company introduced two new color laser print systems during the third
quarter of fiscal 1996. The first of these print systems is the QMS
magicolor(R) WX, which is a work group printer for Windows(R) 95 environments.
With a list price of $3,999, the magicolor WX was introduced as the least
expensive color laser printer available and is the only color laser printer to
offer direct Windows 95 support without the need to translate data into
PostScript(R), HP(R) PCL or HP-GL. The Company also introduced the QMS
magicolor CX/40, a print system which features 1200 dpi photographic quality
images, document control and network features. The introduction of these two
new print systems, combined with the recent introduction of the QMS 2425 Print
System as discussed above, should allow the Company to continue to compete
effectively in the mid- to high-end print system market.
Overall, the Company's gross profit as a percentage of sales increased from
21.7% to 33% in the three-month comparison and from 23.3% to 33.2% in the nine-
month comparison. The reasons for these improvements are a focus on higher
margin products in the sales mix, including service and consumables, and
reductions in manufacturing overhead costs that were achieved in fiscal 1996.
The Company purchases print engine mechanisms and memory components from several
Japanese suppliers. Fluctuations in foreign currency exchange rates will affect
the prices of these products. The Company attempts to mitigate possible
negative impacts through yen-sharing arrangements with suppliers, foreign
exchange contracts and price negotiations; however, material price increases
resulting from exchange rate fluctuations could develop which would adversely
affect operating results.
Selling, general and administrative expenses declined from $21.6 million in the
third quarter of fiscal 1995 to $11 million in the third quarter of fiscal 1996
and from $67.6 million to $32.9 million in the nine-month comparison. These
decreases of $10.6 million and $34.7 million in the three- and nine-month
comparisons, respectively, are due, in part, to the elimination of expenses
associated with the divested business operations in Europe and Japan, which were
$6.7 million in the third quarter of fiscal 1995 and $19.4 million for the nine
months ended June 30, 1995. The remainder of the decreases in selling, general
and administrative expenses from fiscal 1995 compared to fiscal 1996 result from
cost reductions and restructuring efforts implemented during the latter part of
fiscal 1995. Net operating expenses, excluding restructuring charges, as a
percentage of net sales decreased from 34.4% in the third quarter of fiscal 1995
to 28.9% in the third quarter of fiscal 1996 and also decreased from 32.5% to
29.1% in the nine-month comparison.
Total other expense for the third quarter of fiscal 1996 decreased 70.5%, from
$1.5 million in the third quarter of fiscal 1995 to $0.4 million in the third
quarter of fiscal 1996, and declined $1.2 million, or 40.3%, for the comparable
nine-month periods. Interest expense decreased by $0.6 million in the third
quarter of fiscal 1996 compared to the third quarter of fiscal 1995 and by $1.6
million in the nine-month comparison which was a direct result of the decrease
in total non-trade debt from $38.4 million at September 29, 1995 to $19.6
million at June 28, 1996.
During the third quarter of fiscal 1996, the Company recognized a tax benefit of
$488,000 from the carryback of its losses in Japan. This tax benefit resulted
from the loss on the sale of its Japanese operations which was finalized in
early fiscal 1996. Due to the availability of net operating loss carryforwards
and income tax credits, the Company does not anticipate providing for any income
tax expense during fiscal 1996.
FINANCIAL CONDITION
- -------------------
The decrease in cash and cash equivalents from $7.4 million at September 29,
1995 to $2.6 million at June 28, 1996 results from revised cash management
processes that were implemented as part of the new credit facility with Foothill
Capital Corporation ("Foothill"). This credit facility provides for a direct
flow of the Company's cash receipts to Foothill and a simplified method of re-
borrowing funds from Foothill to meet working capital requirements.
The decreases in trade accounts receivable of $12 million, in inventories of
$15.5 million, in property, plant and equipment of $6 million, in trade accounts
payable of $5.9 million, in short-term bank loans of $7.8 million, and in other
current liabilities of $14.2 million at June 28, 1996 compared to September 29,
1995 are principally the result of the divestitures of the Company's European
and Japanese operations.
The increases in notes receivable (current) of $3.7 million and note receivable
(non-current) of $2.3 million at June 28, 1996 compared to September 29, 1995
represent balances of the notes due from the purchasers of the Company's
business operations in Europe ($4 million) and Japan ($3.5 million). These
notes are scheduled for repayment over periods of one and five years,
respectively, and all payments are current as of June 28, 1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the third quarter and first nine months of fiscal 1996, the Company's
working capital and capital expenditure requirements came principally from
operations and borrowings under the new credit facility with Foothill. Proceeds
from the divestiture of the Company's business operations in Europe and Japan
were used to pay down the Company's short- and long-term debt obligations. The
Company's net working capital as of June 28, 1996 was $17.8 million compared to
$35.5 million at September 29, 1995. This reduction is principally due to the
disposition of the European and Japanese operations, the change in the Company's
cash management processes under the Foothill credit facility and the
reclassification of the revolving credit loan and senior secured notes payable
from long-term to short-term debt, as discussed below.
At June 28, 1996, borrowings under the Foothill credit facility were $13.8
million and borrowing capacity under this credit facility totaled $15.5 million,
plus the availability of a $5 million term loan. During the third quarter of
fiscal 1996, the Company amended the Foothill credit agreement to extend the
terms of the agreement from three years to four years. In addition, the
availability of the optional $5 million term loan was extended from May 15, 1996
to December 15, 1996. (See Item 6 for a copy of this amendment.) The Company
was in compliance with all of the Foothill debt covenants at June 28, 1996.
At June 28, 1996, the Company was not in compliance with certain covenants
contained in the 6.15% senior secured notes payable and, accordingly, this
obligation is classified as short-term debt. Although the Company has not
received a waiver of the non-compliance, the holder of the senior secured notes
has not taken steps to accelerate repayment of this debt and, in management's
opinion, the status of this debt is unlikely to change. The Company has
adequate borrowing capacity available as a term loan under the Foothill credit
facility to repay the senior secured notes in the unlikely event that repayment
of these notes is accelerated.
In November 1995, the FASB Emerging Issues Task Force released Issue No. 95-22,
"Balance Sheet Classification of Borrowings Outstanding Under Revolving Credit
Arrangements That Include a Subjective Acceleration Clause and a Lock-Box
Arrangement" which required the Company to reclassify its revolving credit loan
from long-term to short-term debt.
Management believes that the Company's continuing working capital and capital
expenditure requirements will be met by cash flow from operations and borrowings
under the Foothill credit facility.
QMS, INC. AND SUBSIDIARIES
==========================
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
The Company is a defendant in several cases in the normal course of business.
Management is of the opinion that the ultimate resolution of these cases, either
individually or collectively, will not materially affect the Company's financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES - None.
- ------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
(a) At June 28, 1996, the Company was not in compliance with certain covenants
contained in the 6.15% senior secured notes payable. Covenant violations
include noncompliance with minimum net income requirements and interest
coverage. Although the Company has not received a waiver of the noncompliance,
the holder of the senior secured notes has not taken steps to accelerate
repayment of this debt and, in management's opinion, the status of this debt is
unlikely to change. The Company has adequate borrowing capacity available as a
term loan under the Foothill credit facility to repay the senior secured notes
in the unlikely event that repayment of these notes is accelerated. The
Foothill credit facility is a four-year agreement and the Company was in full
compliance with all of the covenants in this agreement as of June 28, 1996.
(b) None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
- ------------------------------------------------------------
ITEM 5. OTHER INFORMATION - None.
- --------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
Exhibit
Number Description
------ -----------
10(r)(xi) Amendment Number One dated December 4, 1995 to the Loan and
Security Agreement dated November 7, 1995(1)
10(r)(xii) Amendment Number Two dated February 7, 1996 to the Loan and
Security Agreement dated November 7, 1995(1)
10(r)(xiii) Amendment Number Three dated July 31, 1996 to the Loan and
Security Agreement dated November 7, 1995(1)
27 Financial Data Schedule
(b) Reports: None.
- ---------------------
(1) Incorporated herein by reference to exhibits in Registrant's
Form 8-K filed on November 21, 1995 (Commission File No. 1-9348).
<TABLE>
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QMS, INC. AND SUBSIDIARIES
==========================
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
<S> <C>
QMS, INC.
(Registrant)
Date: August 9, 1996 /s/ Gerald G. Roenker
----------------------------- ----------------------------------------------
GERALD G. ROENKER
Executive Vice President, Chief Operating
Officer and Acting Chief Financial Officer
(Mr. Roenker is the Principal Operating and
Financial Officer and has been duly authorized
to sign on behalf of the Registrant.)
</TABLE>
Exhibit 10(r)(xi)
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of December 4, 1995, by and between Foothill
Capital Corporation, a California corporation ("Foothill"), on the one hand,
and QMS, Inc., a Delaware corporation ("Borrower"), with reference to the
following facts:
A. Foothill and Borrower heretofore have entered into that
certain Loan and Security Agreement, dated as of November 7, 1995 (the
"Agreement");
B. Pursuant to the terms and conditions of that certain
letter agreement, dated as of November 7, 1995 (the "Equipment Side
Letter"), between Borrower and Foothill, Borrower has the right to
borrow under the revolving credit facility under Section 2.1 of the
-----------
Agreement and use the proceeds thereof to prepay Term Loan A, without
penalty or premium, in an amount equal to the "Appraised Value" of
those items of "Equipment" that are subject to "Liens" (as each
such term is defined in the Equipment Side Letter), such prepayment to
be applied to the scheduled installments of principal thereunder in
inverse order of their maturity (such prepayment is referred to herein
as the "Term Loan A Paydown");
C. Borrower has requested Foothill to amend the Agreement
and to amend and restate Term Note A in its entirety, in each case, to
reflect the Term Loan A Paydown;
D. Foothill is willing to so amend the Agreement and to
amend and restate Term Note A in its entirety, in each case, in
accordance with the terms and conditions hereof; and
E. All capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the
Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendment to the Agreement. Subsection (a) of Section 2.3 of the
--------------------------
Agreement hereby is deleted in its entirety and the following hereby is
substituted in lieu thereof:
(a) Foothill agreed to make a term loan to Borrower on the
Closing Date in the original principal amount of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000), which loan, after giving effect to the
December 1995 monthly installment set forth in the table below and to the
initial partial prepayment referenced in the following sentence, shall be
evidenced by and repayable in accordance with the terms and conditions of
that certain Amended and Restated Term Note A, dated as of December 4, 1995
("Term Note A"), executed by Borrower in favor of Foothill. Such term
loan ("Term Loan A") shall be reduced by a one-time, initial partial
prepayment in the amount of Five Hundred Fifteen Thousand Dollars
($515,000) on December 4, 1995 and otherwise repaid in monthly installments
of principal in the following amounts:
Month Installment Amount
----- ------------------
December 1995 Thirty Five Thousand Dollars
($35,000.00)
January 1996 and each month Twenty Four Thousand Dollars
thereafter ($24,000.00)
Each such installment shall be due and payable on the first day of each
month commencing on December 1, 1995 and continuing on the first day of
each month thereafter until and including the date on which the unpaid
balance of Term Loan A is paid in full. The outstanding principal balance
and all accrued and unpaid interest under Term Loan A shall be due and
payable upon the termination of this Agreement, whether by its terms, by
prepayment, by acceleration, or otherwise. Term Loan A may be prepaid, in
whole or in part, without any premium or penalty. Partial prepayments of
Term Loan A shall be applied to the installments under Term Note A in
inverse order of maturity. All amounts evidenced by Term Note A shall
constitute Obligations.
2. Term Loan A Paydown. Pursuant to the terms and conditions of the
-------------------
Equipment Side Letter, Borrower hereby requests, and Foothill hereby agrees to
make, a revolving advance under Section 2.1 of the Agreement in the amount of
Five Hundred Fifteen Thousand Dollars ($515,000) for the purpose of effecting
the Term Loan A Paydown.
3. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Agreement, as amended by this Amendment, are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Agreement, as amended
by this Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
4. Conditions Precedent to Amendment. The satisfaction of each of
---------------------------------
the following on or before, unless otherwise specified below, the First
Amendment Closing Date shall constitute conditions precedent to the
effectiveness of this Amendment:
a. Foothill shall have received the reaffirmation and
consent of the Guarantors attached hereto as Exhibit A, duty executed and
---------
delivered by the respective authorized officials thereof;
b. Foothill shall have received a duly executed Term Note
A, in the form of Exhibit T-1 attached hereto, and such document shall be in
-----------
full force and effect;
c. The representations and warranties in this Amendment,
the Agreement as amended by this Amendment, and the other Loan Documents shall
be true and correct in all respects on and as of the date hereof, as though made
on such date (except to the extent that such representations and warranties
relate solely to an earlier date);
d. No Event of Default or event which with the giving of
notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
e. No injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower, Foothill, or any of their
Affiliates;
f. The Collateral shall not have declined materially in
value from the values set forth in the most recent appraisals or field
examinations previously-done by Foothill; and
g. All other documents and legal matters in connection
with the transactions contemplated by this Amendment shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
5. Effect on Agreement. The Agreement, as amended hereby, shall be
-------------------
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. The execution, delivery, and
performance of this Amendment shall not operate as a waiver of or, except as
expressly set forth herein, as an amendment, of any right, power, or remedy of
Foothill under the Agreement, as in effect prior to the date hereof.
6. Further Assurances. Borrower shall, shall cause Guarantor to,
------------------
execute and deliver all agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as Foothill may
reasonably request from time to time, to perfect and maintain the perfection and
priority of Foothill's security interests in the Collateral, the collateral in
which Guarantor has granted or is required to grant security interests in favor
of Foothill, and the Real Property, and to fully consummate the transactions
contemplated under this Amendment and the Agreement, as amended by this
Amendment.
7. Miscellaneous.
-------------
a. Upon the effectiveness of this Amendment, each reference in
the Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Agreement shall mean and refer to the
Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment, each reference in
the Loan Documents to the "Loan Agreement", "thereunder", "therein",
"thereof" or words of like import referring to the Agreement shall mean and
refer to the Agreement as amended by this Amendment.
c. Upon the effectiveness of this Amendment, each reference in
the Agreement and the other Loan Documents to Exhibit T-1 of the Agreement shall
-----------
mean and refer to Exhibit T-1 attached hereto.
-----------
d. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
e. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By Deborah Kautz
----------------------------
Title:ASSISTANT VICE PRESIDENT
QMS, INC., a Delaware
corporation
By /s/ James K. Doan
----------------------------
Title:EXEC. V.P. FINANCE & ADMIN
CHIEF FINANCIAL OFFICER
EXHIBIT A
---------
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Amendment Number
One to Loan and Security Agreement, dated as of December 4, 1995 (the
"Amendment"). Each of the undersigned hereby (a) represents and warrants to
Foothill that the execution, delivery, and performance of this Reaffirmation and
Consent are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms its obligations owing
to Foothill under its Guaranty and each of the other Loan Documents to which it
is party; and (d) agrees that each of the Guaranty and the other Loan Documents
to which it is a party is and shall remain in full force and effect. Although
each of the undersigned has been informed of the matters set forth herein and
has acknowledged and agreed to same, it understands that Foothill has no
obligation to inform it of such matters in the future or to seek its
acknowledgement or agreement to future amendments, and nothing herein shall
create such a duty.
QMS CIRCUITS, INC., a Delaware
corporation
By/s/ James K. Doan
----------------------------
Title:EXEC. V.P. FINANCE & ADMIN
CHIEF FINANCIAL OFFICER
QMS CANADA INC., a corporation
incorporated under the laws of
Canada
By/s/ James K. Doan
----------------------------
Title:EXEC. V.P. FINANCE & ADMIN
CHIEF FINANCIAL OFFICER
EXHIBIT T-1
-----------
AMENDED AND RESTATED TERM NOTE A
$1,200,000 Los Angeles, California
December 4, 1995
FOR VALUE RECEIVED, QMS, INC., a Delaware corporation ("Maker")
hereby promises to pay to FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), or order, at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, or at such other address as the holder may
specify in writing, the principal sum of One Million Two Hundred Thousand and
00/100 Dollars ($1,200,000.00), plus interest in the manner and upon the terms
and conditions set forth below. This Amended and Restated Term Note A ("Note")
is the Term Note A referred to in and made pursuant to the terms and conditions
of that certain Loan and Security Agreement, dated as of November 7, 1995 (the
"Original Loan Agreement"), and amended by that certain Amendment Number One
to Loan and Security Agreement, dated as of December 4, 1995 (the Original Loan
Agreement, as so amended, is referred to herein as the "Loan Agreement"),
between Maker and Foothill, the provisions of which are incorporated herein by
this reference. All capitalized terms used herein, unless otherwise defined
herein, shall have the meanings ascribed to them in the Loan Agreement.
1. Rate and Payment of Interest.
----------------------------
The principal balance of this Note shall bear interest at the
applicable rates set forth in, and shall be payable in accordance with the terms
of, Section 2.5 of the Loan Agreement.
2. Schedule of Principal Payments
------------------------------
The principal balance of this shall be due and payable in the
amounts, at the times, and in the manner set forth in Section 2.3(a) of the Loan
Agreement.
3. Holder's Right of Acceleration
------------------------------
Anything herein to the contrary notwithstanding, upon the
termination of the Loan Agreement or upon the occurrence of an Event of Default
thereunder, then the entire unpaid principal balance of this Note, together with
all accrued but unpaid interest and all Foothill Expenses, shall become due and
payable on the effective date of such termination without presentment, notice,
or demand of any kind unless expressly required under the Loan Agreement.
4. Additional Rights of Holder
---------------------------
If any installment of principal or interest hereunder is not paid
when due, the holder shall have, in addition to the rights set forth herein, in
the Loan Agreement, and under law, the right to compound interest by adding the
unpaid interest to principal, with such amount thereafter bearing interest at
the rate then applicable under this Note.
5. General Provisions
------------------
(i) If this Note is not paid when due, Maker further promises to
pay all reasonable costs of collection incurred by the holder hereof, including
foreclosure fees, reasonable attorneys fees (irrespective of whether suit is
filed hereon), and any other fees, costs, and expenses provided for in the Loan
Agreement;
(ii) Maker hereby consents to any and all renewals, replacements,
and/or extensions of time for payment of this Note before, at, or after
maturity;
(iii)Maker hereby consents to the acceptance, release, or
substitution of security for this Note;
(iv) Presentment for payment, demand, notice of dishonor,
protest, and notice of protest are hereby expressly waived;
(v) No delay or omission on the part of the holder of this Note
in exercising any right shall operate as a waiver thereof or of any other right;
(vi) A waiver by the holder of this Note upon any one occasion
shall not be construed as a bar or waiver of any right or remedy on any future
occasion;
(vii)Should any one or more of the provisions of this Note
be determined illegal or unenforceable, such provision shall be severed and all
other provisions shall nevertheless remain effective;
(viii)Each person or entity composing Maker hereby waives any
defenses they might have based upon suretyship of impairment of collateral, such
waiver being intended to be a waiver contemplated by Section 3605(i) of the
Commercial Code;
(ix) This Note cannot be changed, modified, amended, or
terminated orally. A waiver of any rights by the holder of this Note is neither
valid nor effective unless made in writing and signed by the holder of this
Note; and
(x) The validity of this Note, its construction, interpretation,
and enforcement, and the rights of the parties hereto shall be determined under,
governed by, and construed in accordance with the laws of the State of
California; provided, however, that California Code of Civil Procedure Sections
-------- -------
580a, 580b, 580c, 580d, and 726, and Chapter 2 of Title 14 of the
California Civil Code shall apply only to real property located in the State of
California, and the applicable laws of a state other than California shall apply
to real property located in such other state. The parties agree that all actions
or proceedings arising in connection with this Note shall be tried and litigated
only in the state and federal courts located in the County of Los Angeles, State
of California or, at the sole option of Foothill, in any other court in which
Foothill shall initiate legal or equitable proceedings and which has subject
matter jurisdiction over the matter in controversy.
6. Security For The Note
---------------------
This Note is secured by, among other things, the security
interest granted by Maker to Foothill under the Loan Agreement in the
"Collateral" described in the Loan Agreement and is subject to all of the
terms and conditions thereof and of the other applicable Loan Documents,
including, but not limited to, the remedies specified therein.
7. Amendment and Restatement
-------------------------
This Note is an amendment and restatement of the Term Note A
delivered pursuant to the Original Loan Agreement and is not a novation.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
QMS, INC.,
a Delaware corporation
By/s/ James K. Doan
----------------------------
Title:EXEC. V.P. FINANCE & ADMIN
CHIEF FINANCIAL OFFICER
Exhibit 10(r)(xii)
AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of February 7, 1996, by and between Foothill
Capital Corporation, a California corporation ("Foothill"), on the one hand,
and QMS, Inc., a Delaware corporation ("Borrower"), with reference to the
following facts:
A. Foothill and Borrower heretofore have entered into that certain Loan
and Security Agreement, dated as of November 7, 1995 (as amended and
supplemented, the "Agreement");
B. Pursuant to the Term Loan B Funding Window, Borrower has requested
from Foothill an extension of the funding option of Term Loan B for an
additional ninety eight (98) days to expire on May 15, 1996;
C. Foothill is willing to so amend the Agreement and to amend and restate
in its entirety, the definition of the Term Loan B Funding Window, in accordance
with the terms and conditions hereof; and
D. All capitalized terms used herein and not defined herein shall have
the meanings ascribed to them in the Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower agree as follows:
1. Amendment to the Agreement. The definition "Term Loan B Funding
--------------------------
Window" under Section 1.1 Definitions is hereby amended in its entirety as
follows:
""Term Loan B Funding Window" means the period commencing February 7,
1996 through May 15, 1996 (which end date Foothill in its sole discretion may
(but shall not be obligated to) extend upon Borrower's written request for such
extension."
2. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Agreement, as amended by this Amendment, are within its
corporate powers, have been duly authorized by all necessary corporation action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Agreement, as amended
by this Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
3. Conditions Precedent to Amendment. The satisfaction of each of the
---------------------------------
following on or before, unless otherwise specified below, the Second Amendment
shall constitute conditions precedent to the effectiveness of this Amendment:
a. Foothill shall have received the reaffirmation and consent of the
Guarantors attached hereto as Exhibit A, duly executed and delivered by the
respective authorized officials thereof;
b. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
c. No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein;
d. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, or any of their Affiliates.
4. Effect on Agreement. The Agreement, as amended hereby, shall be and
-------------------
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. The execution, delivery, and
performance of this Amendment shall not operate as a waiver of or, except as
expressly set forth herein, as an amendment, of any right, power, or remedy of
Foothill under the Agreement, as in effect prior to the date hereof.
5. Further Assurances. Borrower shall cause Guarantor to, execute and
------------------
deliver its reaffirmation, in form and substance satisfactory to Foothill, and
take all actions as Foothill may reasonably request from time to time, to
perfect and maintain the perfection and priority of Foothill's security
interests in the Collateral, the collateral in which Guarantor has granted or is
required to grant security interest in favor of Foothill, and the Real Property,
and to fully consummate the transactions contemplated under this Amendment and
the Agreement, as amended by this Amendment.
6. Miscellaneous.
-------------
A. This Amendment shall be governed by and construed in accordance
with the laws of the State of California.
B. This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By/s/ Lisa M. Gonzales
----------------------------
Print Name: Lisa M. Gonzales
Title:ASSISTANT VICE PRESIDENT
QMS, INC.,
a Delaware corporation
By/s/ Philip R. Cahoon
----------------------------
Print Name: Philip R. Cahoon
Title:VICE PRESIDENT & CONTROLLER
EXHIBIT A
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed to them in that certain Amendment Number Two to Loan
and Security Agreement, dated as of February 7, 1996 (the "Amendment"). Each
of the undersigned hereby (a) represents and warrants to Foothill that the
execution, delivery, and performance of this Reaffirmation and Consent are
within its corporate powers, have been duly authorized by all necessary
corporate action, and are not in contravention of any law, rule, or regulation,
or any order, judgment, decree, writ, injunction, or award of any arbitrator,
court, or governmental authority, or of the terms of its charter or bylaws, or
of any contract or undertaking to which it is a party or by which any of its
properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms its obligations owing
to Foothill under its Guaranty and each of the other Loan Documents to which it
is party; and (d) agrees that each of the Guaranty and the other Loan Documents
to which it is a party is and shall remain in full force and effect. Although
each of the undersigned has been informed of the matters set forth herein and
has acknowledged and agreed to same, it understands that Foothill has no
obligation to inform it of such matters in the future or to seek its
acknowledgment or agreement to future amendments, and nothing herein shall
create such a duty.
QMS CIRCUITS, INC.,
a Delaware corporation
By/s/ Philip R. Cahoon
----------------------------
Print Name: Philip R. Cahoon
Title:SECRETARY
QMS CANADA INC., a corporation
incorporated under the laws of
Canada
By/s/ Philip R. Cahoon
----------------------------
Print Name: Philip R. Cahoon
Title:TREASURER
Exhibit 10(r)(xii)
AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of July 31, 1996, by and between Foothill
Capital Corporation, a California corporation ("Foothill"), on the one hand,
and QMS, Inc., a Delaware corporation ("Borrower"), with reference to the
following facts:
A. Foothill and Borrower heretofore have entered into
that certain Loan and Security Agreement, dated as of November 7,
1995, as amended by that certain Amendment Number One to Loan and
Security Agreement, dated as of December 4, 1995, and as further
amended by that certain Amendment Number Two to Loan and Security
Agreement, dated as of February 7, 1996 (as so amended, the
"Agreement");
B. Borrower has requested Foothill to amend the Agreement
to, among other things, extend the Term Loan B Funding Window to
December 31, 1996, extend by one year the Renewal Date, and adjust the
amount of the Early Termination Premium, in each case as set forth in
this Amendment;
C. Foothill is willing to so amend the Agreement in
accordance with the terms and conditions hereof; and
D. All capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the
Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Agreement.
---------------------------
a. Retroactively effective as of May 15, 1996, the definition
of "Term Loam B Funding Window" contained in Section 1.1 of the Agreement
hereby is deleted in its entirety and the following hereby is substituted in
lieu thereof:
"Term Loan B Funding Window" means the period commencing on the
--------------------------
Closing Date and ending on December 31, 1996 (which end date Foothill in
its sole discretion may (but shall not be obligated to) extend upon
Borrower's written request for such extension).
b. Section 3.3 of the Agreement hereby is deleted in its
entirety and the following hereby is substituted in lieu thereof:
3.3 Term; Automatic Renewal. This Agreement shall become eftective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on November 7, 1999
(the "Renewal Date") and automatically shall be renewed for successive
one (1) year periods thereafter, unless sooner terminated pursuant to the
terms hereof. Either party may terminate this Agreement effective on the
Renewal Date or on any one (1) year anniversary of the Renewal Date by
giving the other party at least ninety (90) days prior written notice by
registered or certified mail, return receipt requested. The foregoing
notwithstanding, upon the occurrence and during the continuation of an
Event of Default, Foothill shall have the right to terminate its
obligations under this Agreement immediately with notice to Borrower of
such termination.
c. Section 3.5 of the Agreement hereby is deleted in its
entirety and the following hereby is substituted in lieu thereof:
3.6 Early Termination by Borrower. The provisions of Section 3.3 that
-----------
allow termination of this Agreement by Borrower only on the Renewal Date
and certain anniversaries thereof notwithstanding, Borrower has the option,
at any time upon ninety (90) days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in cash, the Obligations
(including an amount equal to the full amount of the L/Cs or L/C
Guarantees), together with a premium (the "Early Termination Premium")
equal to: (a) if such prepayment is made prior to the second anniversary of
the Closing Date, the greater of (i) the total interest and L/C and L/C
Guaranty fees for the immediately preceding six (6) months, and (ii) Five
Hundred Thousand Dollars ($500,000); (b) if the prepayment is made on or
after the second anniversary of the Closing Date and prior to the third
anniversary of the Closing Date, (i) if the Target Share Price Condition
has not been satisfied prior to such prepayment, the greater of (y) the
total interest and L/C and L/C Guaranty fees for the immediately preceding
six (6) months, and (z) Five Hundred Thousand Dollars ($500,000), and (ii)
if the Target Share Price Condition has been satisfied prior to such
prepayment, the greater of (y) the total interest and L/C and L/C Guaranty
fees for the immediately preceding three (3) months, and (z) Two Hundred
Fifty Thousand Dollars ($250,000); and (c) if the prepayment is made on or
after the third anniversary of the Closing Date, (i) if the Target Share
Price Condition has not been satisfied prior to such prepayment, the
greater of (y) the total interest and L/C and L/C Guaranty fees for the
immediately preceding three (3) months, and (z) Two Hundred Fifty Thousand
Dollars ($250,000), and (ii) if the Target Share Price Condition has been
satisfied prior to such prepayment, zero. The foregoing notwithstanding, in
the event the Target Share Price Condition is not satisfied solely because
Foothill receives the price per share specified in item (b)(iii) of the
definition of "Target Share Price Condition" for less than all of the
share that are issuable upon exercise of the Warrant in full, then Borrower
shall be obligated to pay only a pro rata portion of the Early Termination
Premium otherwise payable under this Section 3.5, such pro rata portion to
-----------
be determined by the same percentage of shares that are issuable upon
exercise of the Warrant in full for which the price per share specified in
item (b)(iii) of the definition of "Target Share Price Condition" is not
received by Foothill.
2. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment and of the Agreement, as amended by this Amendment, are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Agreement, as amended
by this Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
3. Conditions Precedent to Amendment. The satisfaction of each of
---------------------------------
the following on or before, unless otherwise specified below, the First
Amendment Closing Date shall Constitute conditions precedent to the
effectiveness of this Amendment:
a. Foothill shall have received the reaffirmation and consent
of the Guarantors attached hereto as Exhibit A, duly executed and delivered by
---------
the respective authorized officials thereof;
b. Foothill shall have received a certificate from the
Secretary of Borrower attesting to the incumbency and signatures of authorized
officers of Borrower and to the resolutions of Borrower's Board of Directors
authorizing its execution and delivery of this Amendment and the performance of
this Amendment and the Agreement as amended by this Amendment, and authorizing
specific officers of Borrower to execute and deliver the same;
c. Foothill shall have received a certificate from the
Secretary of each Guarantor attesting to the incumbency and signatures of
authorized offficers of that Guarantor and to the resolutions of that
Guarantor's Board of Directors authorizing its execution and delivery of the
reaffirmation and consent of that Guarantor attached hereto as Exhibit A, and
---------
authorizing specific officers of that Guarantor to execute and deliver the same;
d. Foothill shall have received all required consents of
Foothill's participants in the Obligations to Foothill's execution, delivery,
and performance of this Amendment;
e. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
f. No Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default shall have occurred and
be continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein;
g. No injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower, Foothill, or any of their
Affiliates;
h. The Collateral shall not have declined materially in value
from the values set forth in the most recent appraisals or field examinations
previously done by Foothill; and
i. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
4. Effect on Agreement. The Agreement, as amended hereby, shall be
-------------------
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. The execution, delivery, and
performance of this Amendment shall not operate as a waiver of or, except as
expressly set forth herein, as an amendment, of any right, power, or remedy of
Foothill under the Agreement, as in effect prior to the date hereof.
5. Further Assurances. Borrower shall, and shall cause Guarantor to,
------------------
execute and deliver all agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as Foothill may
reasonably request from time to time, to perfect and maintain the perfection and
priority of Foothill's security interests in the Collateral, the collateral in
winch Guarantor has granted or is required to grant security interests in favor
of Foothill, and the Real Property, and to fully consummate the transactions
contemplated under this Amendment and the Agreement, as amended by this
Amendment.
6. Miscellaneous.
-------------
a. Upon the effectiveness of this Amendment, each reference in
the Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Agreement shall mean and refer to the
Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment, each reference in
the Loan Documents to the "Loan Agreement", "thereunder", "therein",
"thereof" or words of like import referring to the Agreement shall mean and
refer to the Agreement as amended by this Amendment.
c. Upon the effectiveness of this Amendment, each reference in
the Agreement and the other Loan Documents to Exhibit T-1 of the Agreement
-----------
shall mean and refer to Exhibit T-1 attached hereto.
-----------
d. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Nancy Perry
----------------------------
Title: Vice President
------------------------
QMS, INC., a Delaware corporation
By /s/ Gerald G. Roenker
----------------------------
Title:EXECUTIVE VICE PRESIDENT
& CHIEF OPERATING OFFICER
EXHIBIT A
---------
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Three to Loan and Security Agreement, dated as of July 31, 1996 (the
"Amendment"). Each of the undersigned hereby (a) represents and warrants to
Foothill that the execution, delivery, and performance of this Reaffirmation and
Consent are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms its obligations owing
to Foothill under its Guaranty and each of the other Loan Documents to which it
is party; and (d) agrees that each of the Guaranty and the other Loan Documents
to which it is a party is and shall remain in full force and effect. Although
each of the undersigned has been informed of the matters set forth herein and
has acknowledged and agreed to same, it understands that Foothill has no
obligation to inform it of such matters in the future or to seek its
acknowledgement or agreement to future amendments, and nothing herein shall
create such a duty.
QMS CIRCUITS, INC., a Delaware
corporation
By/s/ Gregory R. Jones
----------------------------
Title:SECRETARY
QMS CANADA INC., a corporation
incorporated under the laws of
Canada
By/s/ Gregory R. Jones
----------------------------
Title:SECRETARY
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000710983
<NAME> QMS, INC.
<MULTIPLIER> 1000
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-END> JUN-28-1996
<EXCHANGE-RATE> 1
<CASH> 2560
<SECURITIES> 0
<RECEIVABLES> 26123
<ALLOWANCES> 377
<INVENTORY> 32031
<CURRENT-ASSETS> 68284
<PP&E> 61802
<DEPRECIATION> 41093
<TOTAL-ASSETS> 101211
<CURRENT-LIABILITIES> 50441
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 46348
<TOTAL-LIABILITY-AND-EQUITY> 101211
<SALES> 112965
<TOTAL-REVENUES> 112965
<CGS> 75493
<TOTAL-COSTS> 75493
<OTHER-EXPENSES> 32895
<LOSS-PROVISION> 6872
<INTEREST-EXPENSE> 1435
<INCOME-PRETAX> 2809
<INCOME-TAX> (488)
<INCOME-CONTINUING> 3297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3297
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
