FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _______________ TO __________________
COMMISSION FILE NUMBER 1-9125
AMERICAN TECHNICAL CERAMICS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2113382
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17 STEPAR PLACE, HUNTINGTON STATION, NY 11746
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 516/547-5700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.01 AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY
AMENDMENT TO THIS FORM 10-KSB. [ ].
THE REGISTRANT'S NET SALES FOR THE FISCAL YEAR ENDED JUNE 30, 1995
WERE APPROXIMATELY $28,630,000.
ON SEPTEMBER 20, 1995, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S
COMMON STOCK (BASED UPON THE CLOSING SALES PRICE OF SUCH SHARES ON THE
AMERICAN STOCK EXCHANGE ON SEPTEMBER 20, 1995) HELD BY NONAFFILIATES OF THE
REGISTRANT WAS APPROXIMATELY $18,325,000. (FOR PURPOSES OF THIS REPORT, ALL
OFFICERS AND DIRECTORS HAVE BEEN CLASSIFIED AS AFFILIATES, WHICH
CLASSIFICATION SHALL NOT BE CONSTRUED AS AN ADMISSION OF THE AFFILIATE STATUS
OF ANY PERSON.)
ON SEPTEMBER 20, 1995, THE REGISTRANT HAD OUTSTANDING 3,873,683
SHARES OF COMMON STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
----- -----
DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE REGISTRANT'S
PROXY STATEMENT RELATING TO ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
NOVEMBER 17, 1995 ARE INCORPORATED INTO PART III OF THIS REPORT BY REFERENCE.
EXHIBIT INDEX APPEARS ON PAGES 15-16.
<PAGE>
PART 1
ITEM 1. BUSINESS
GENERAL
The Registrant was incorporated in New York in 1966 as Phase Industries,
Inc., and changed its name to American Technical Ceramics Corp. in June 1984.
The Registrant was merged into a new Delaware corporation and recapitalized
its Common Stock in April 1985. Unless the context indicates otherwise,
references to the Registrant herein include American Technical Ceramics Corp.,
a Delaware corporation, its predecessor, American Technical Ceramics Corp., a
New York corporation, and the subsidiaries of the Registrant, all of which are
wholly-owned.
The Registrant designs, develops, manufactures and markets
RF/Microwave/Millimeter-Wave ceramic and porcelain capacitors and Thin Film
products. Capacitors function within electronic circuits by storing and
discharging precise amounts of electrical power. The Registrant believes that
it is a leading manufacturer of multilayer capacitors ("MLCs") for ultra-high
frequency ("UHF") and microwave applications. The Registrant's MLCs' selling
prices typically range from $.30 to $10 or higher, whereas commodity-type MLC
units typically have selling prices ranging from $.01 to $.25.
During the fiscal year ended June 30, 1995, the Registrant experienced a
significant increase in sales and profits for, among other reasons, the
general increase in demand for technology and electronic products in the
United States and abroad. The Registrant is responding to the increased demand
for its products by expanding production capacities. During fiscal year 1994,
the Registrant purchased a building for use as a manufacturing facility, which
facility was placed in production in June 1995. See "Item 2. PROPERTIES" and
"Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS".
Management believes the Registrant operates in only one industry
segment-the electronic components industry.
PRODUCTS
The Registrant's MLCs are currently available in predominantly two
physical sizes designated "A" (a .055 inch cube) and "B" (a .110 inch cube);
in three types of dielectrics: low-loss porcelain (the 100 Series), zero
temperature coefficient (the 700 Series) and high dielectric constant (the 200
Series); and in a variety of capacitance values. The 100 Series, the
Registrant's basic product line, is the only product line that accounts for
more than 15% of consolidated revenue, and is widely used in microwave
equipment. This product line accounted for 56%, 58% and 61% of the
Registrant's revenues in fiscal years 1995, 1994 and 1993, respectively. The
700 Series has a slightly higher dissipation factor than the 100 Series, but
because of its lower temperature coefficient, is used in certain UHF/Microwave
and lower frequency applications. The 200 Series has high packaging density,
and is used in microcircuits where high capacitance value is needed in a small
space.
The Registrant's products are designed for critical performance
applications, and are characterized by high reliability ("hi-rel"), low power
dissipation and ruggedness. These products are used in military and commercial
applications, including missiles, satellite broadcasting, high performance
aircraft radar and navigation systems, electronic countermeasure jamming
systems and a variety of other "smart weapons". For the fiscal years ended
June 30, 1995 and June 30, 1994, the Registrant estimates that approximately
14% and 13% of sales, respectively, were hi-rel products to United States
military and aerospace contractors; approximately 51% and 52% of sales,
respectively, were to other domestic customers; and approximately 35% of sales
for both fiscal years 1995 and 1994 were to foreign customers. See Note 10 of
Notes to Consolidated Financial Statements.
The Registrant's products can be broadly classified as either hi-rel or
commercial, based upon the amount of testing involved. The Registrant produces
its hi-rel MLCs to precise customer specifications, and subjects each hi-rel
MLC to a battery of performance and environmental tests. Such performance
tests measure capacitance, dissipation factor, insulation resistance and
dielectric withstanding voltage. The environmental tests are either designated
by customers or
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specified by the military and include temperature shock tests, humidity tests
and tests of life expectancy at elevated voltage levels. The Registrant
maintains a hi-rel testing facility in Huntington Station, New York.
Hi-rel MLCs are principally utilized in military electronics applications
such as missiles, satellites, high performance military aircraft radar and
navigation systems, electronic counter-measure jamming devices and other
"smart weapons". The Registrant's Microcap(R) , for example, a single layer
ceramic capacitor, is currently utilized in satellite broadcasting, telemetry
and missiles. This product was developed for very high frequency applications
with low capacitance requirements, where very small size is important. The
Microcap(R) may in the future be used in other applications such as direct
satellite broadcasting and cellular communications. See "Item 1. BUSINESS --
PATENTS AND PROPRIETARY INFORMATION".
The Registrant has also developed hi-rel MLC products which apply the
Registrant's UHF/Microwave manufacturing technology to lower frequency digital
applications. These products offer higher capacitance and reliability than
other MLCs for similar applications through the use of more ceramic layers and
smaller spacing between electrodes. These products have been used across a
range of voltage and environmental conditions.
Hi-rel MLCs for military electronics applications constitute a small part
of the circuit cost and, because performance requirements are stringent and
the cost of component failure high, customers are willing to specify higher
performance that results in higher priced products. Typically, the
Registrant's hi-rel MLCs are sold at higher prices than the Registrant's
commercial-type MLCs.
The Registrant also produces commercial MLCs to similar precise
performance specifications as for hi-rel MLCs, and individually tests them for
certain performance characteristics. However, the Registrant does not subject
them to environmental tests. Commercial MLCs are utilized in applications
which require high performance capacitors and where periodic maintenance is
possible. These applications include aircraft radar, navigation devices and
communication systems.
The Registrant has historically pursued the high performance and
high-priced MLC market. Mechanization of the Registrant's manufacturing
processes, an ongoing development more greatly emphasized in recent years,
permits the manufacture of lower cost MLCs for the medium-priced
communications market, supplementing rather than supplanting present products.
The Registrant recently diversified product offerings through its
acquisition of thin film technologies from Miltech Corp. The additional
product lines enable the Registrant to offer custom metalization and patterned
substrates for a broad range of hybrid circuit requirements. Typical
applications include, among others, microwave attenuators, filters, resistors,
amplifiers and capacitors.
MANUFACTURING
The Registrant currently manufactures capacitors primarily at three New
York facilities which aggregate approximately 54,000 square feet. The
manufacturing process involves four primary stages. The first stage, called
the "white room" stage, involves the casting, dicing, firing, and inspection
of raw ceramic powder. In the second stage, called the "termination" stage,
the chips are coated with silver. In the third stage, the parts are then
customized to specific order requirements for commercial applications. This
stage includes, but is not limited to, chip plating, soldering of leads, laser
marking and chip packing. If the customer requirements necessitate a higher
level of precision, the parts are put through a fourth stage, the "hi-rel"
stage, where additional testing is performed. Throughout the entire process,
the chips are tested electrically and inspected.
Product development in the MLC industry tends to be evolutionary with the
principal focus being on cost reduction. The historical pattern of industry
price declines has largely prevented MLC producers, including the Registrant,
from increasing prices, and has forced the Registrant and competitors to rely
on advances in productivity and efficiency in order to improve profit margins.
While the Registrant places great emphasis on cost reduction, the principal
focus of its research efforts is on developing new products and improving its
present product line. In this connection, it is continually
3
<PAGE>
seeking to improve its ceramic technology and reduce capacitor size and
precious metal content. Frequent contacts between the Registrant's engineering
personnel and its customers typically provide the Registrant with its new
product concepts.
RESEARCH AND DEVELOPMENT
Expenditures for research and development were approximately $1,445,000,
$1,238,000 and $1,047,000 in fiscal years 1995, 1994 and 1993, respectively,
representing 5% of net sales for each of such years.
The Registrant's facility in Jacksonville, Florida houses most of the
Registrant's research and development activities. See "Item 2. PROPERTIES".
The Registrant anticipates that research and development expenditures,
expressed as a percentage of net sales, will continue at levels approximately
comparable to that of the latest fiscal year.
CUSTOMERS AND MARKETING
The Registrant markets its products primarily to microwave systems
manufacturers, including prime government contractors, original equipment
manufacturers and subcontractors.
In each of fiscal years 1995, 1994 and 1993, the Registrant shipped
products to approximately 1,400 customers. The top ten customers combined
accounted for approximately 22% of net sales in fiscal year 1995, and
approximately 21% of net sales in fiscal years l994 and l993. No customer
accounted for more than 10% of net sales in any of these periods. The
Registrant does not typically sell its products under long-term contracts, but
rather sells pursuant to a large number of individual purchase orders.
Customers are invoiced simultaneously with merchandise shipments, and
invoices are payable on a 30-day basis. Customers are given the option to
remit payment beyond normal credit terms and incur a nominal financing charge.
Sales returns are authorized and accepted by the Registrant as a normal course
of doing business. An evaluation of the returned product is performed which
typically results in either a credit or a shipment of replacement product to
customers. The Registrant believes that it has provided an adequate reserve
for returns in the accompanying financial statements.
The Registrant sells its products through independent sales
representative or distributor organizations. In general, the Registrant
employs sales representatives in the United States, which are compensated on a
commission basis, and distributors in foreign countries, which actually
purchase products from the Registrant for resale. At June 30, 1995, the
Registrant had approximately 16 sales representative organizations in the
United States and approximately 18 distributors in foreign countries,
principally Western Europe. The Registrant's sales representatives and
distributors generally have substantial engineering expertise which enables
the Registrant to provide a high level of service to assist customers in
generating product specifications and to provide applications assistance. The
Registrant employs three regional sales managers to supervise both its sales
representative organizations in the United States and its distributors abroad.
See "Item 1. BUSINESS -- FOREIGN SALES" and Note 10 of Notes to Consolidated
Financial Statements.
The Registrant is presently a qualified producer of capacitors with the
Defense Logistics Agency of the United States Department of Defense. This
qualified status covers several varieties and types of capacitors. Maintenance
of its qualified producer status is critical in order for the Registrant to
continue to sell its hi-rel military product line. The failure to continue to
be listed as a qualified producer would have a materially adverse effect on
the Registrant's business. To date, the Registrant has not encountered any
difficulty in maintaining its status as a qualified producer.
SALES BACKLOG
The Registrant's sales backlog generally consists of a large quantity of
small orders which are manufactured for shipment within approximately six
months following the receipt of a firm purchase order. At June 30, 1995, the
sales backlog was approximately $8,189,000 compared to sales backlogs of
approximately $4,676,000 and $3,876,000 at the end of fiscal years 1994 and
1993, respectively.
4
<PAGE>
FOREIGN SALES
In fiscal years 1995, 1994 and 1993, sales to customers located outside
the United States constituted 36%, 35% and 37% of net sales, respectively. The
Registrant's overseas customers are located primarily in Western Europe. See
"Item 1. BUSINESS -- CUSTOMERS AND MARKETING". Export sales are made through
the Registrant's foreign sales corporation subsidiary ("FSC"). All foreign
sales are denominated in United States dollars. See Note 10 of Notes to
Consolidated Financial Statements.
RAW MATERIALS
The principal raw materials used by the Registrant include silver,
palladium, other precious metals and titanate powders which are used in
ceramics. Precious metals are available from many sources, although palladium
is generally available from a limited number of metal dealers who obtain their
product requirements from the Republic of South Africa or the former Soviet
Union. A cessation or a reduction of exports of palladium by the Republic of
South Africa or the territory formerly referred to as the Soviet Union could
materially adversely affect the Registrant's operations. The Registrant has
not experienced any difficulty in obtaining any of the raw materials necessary
for its manufacturing processes.
COMPETITION
Competition in the MLC industry is intense and is based primarily on
price. In the hi-rel and UHF/Microwave market segment, where price tends to be
less important, competition is based primarily on high performance product
specifications, achieving consistent product reliability, fast deliveries and
high levels of customer service. The Registrant believes it competes in the
UHF/Microwave market with several other manufacturers, some of which are
larger and have greater financial and technical resources than the Registrant.
There are a number of large commodity-type MLC manufacturers which have
attempted to develop products for the UHF/Microwave market segment. While the
Registrant believes these efforts have not produced significant results to
date, there can be no assurance that such efforts will not be successful in
the future. In addition, while some of the Registrant's new product
developments may break new ground in non-competitive industries, other
developments may lead it into markets where there are existing competitors
which may have significantly greater financial and technical resources and
greater expertise in mass production techniques.
EMPLOYEES
At June 30, 1995, the Registrant employed 333 persons at its facilities
in New York, of which 13 were employed on a part-time basis. The Registrant
also employed 90 persons at its facility in Florida, of which two were
employed on a part-time basis. There were six persons employed at its facility
in the United Kingdom. See "Item 2. PROPERTIES". Of the 429 persons employed
by the Registrant, 29 persons are involved in hi-rel testing activities, 31 in
research and development activities, 314 in manufacturing and as support
personnel and 55 in selling and general administration activities. None of the
Registrant's employees are covered by collective bargaining agreements. The
Registrant considers its relations with its employees to be satisfactory.
ENVIRONMENTAL COMPLIANCE
The Registrant believes that it is in material compliance with all
applicable federal, state and local environmental laws. In the production of
capacitors, the Registrant produces hazardous waste in limited quantities. The
Registrant disposes of its hazardous waste through licensed carriers which are
required to deposit such waste at licensed waste sites. The Registrant does
not currently anticipate having to make material capital expenditures to
remain in compliance with applicable federal, state and local environmental
laws.
5
<PAGE>
PATENTS AND PROPRIETARY INFORMATION
The Registrant's porcelain and ceramic formulations are considered trade
secrets which are protected by internal nondisclosure safeguards and
employee confidentiality agreements. Although the Registrant has manufacturing
and design patents and pending patent applications, and although the
Registrant will continue to seek the supplemental protection afforded by
patents, the Registrant generally considers protection of its products,
processes and materials to be more dependent upon proprietary knowledge and on
rapid assimilation of innovations than on patent protection.
ITEM 2. PROPERTIES
The Registrant conducts its administrative, production and research and
development activities in New York and Florida. The Registrant's primary
production facilities are located at 10 Stepar Place, 15 Stepar Place and One
Norden Lane, Huntington Station, New York; its principal executive office is
located at 17 Stepar Place, Huntington Station, New York; and its principal
research and development facility is located at 2201 Corporate Square
Boulevard, Jacksonville, Florida. The following table details the facilities,
sets forth its primary function, specifies the square footage occupied by the
Registrant and indicates whether the facility is leased or owned.
<TABLE>
<CAPTION>
PRIMARY SQUARE FOOTAGE TYPE OF
ADDRESS OF FACILITY FUNCTION OCCUPIED OCCUPANCY
- ------------------- -------- -------- ---------
<S> <C> <C> <C>
One Norden Lane Production 8,400 Owned
Huntington Station, N.Y.
10 Stepar Place Production 10,900 Owned
Huntington Station, N.Y.
15 Stepar Place Production 35,000 Leased from
Huntington Station, N.Y. Principal Stockholder (1)
17 Stepar Place Corporate, sales, 18,000 Owned
Huntington Station, N.Y. administration
2201 Corporate Square Blvd. Production, research 41,300 Leased from
Jacksonville, Florida and development Principal Stockholder (1)
Unit 5, Redkiln Way Sales and distribution 1,600 Owned
Sussex, England office
</TABLE>
In April l994, the Registrant purchased the facility at 10 Stepar Place
for the purpose of its white room production. The Registrant began production
in this facility in June 1995. The Registrant believes that with the addition
of this new facility, it now has adequate capabilities to meet its
manufacturing requirements.
(1) See "Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
6
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ITEM 3. LEGAL PROCEEDINGS
The Registrant is not currently a party to any significant legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
The executive officers of the Registrant are as follows:
Victor Insetta, age 55, co-founded the Registrant in 1966 and has served
as President and Chief Executive Officer and a Director since its
organization.
Kathleen M. Kelly, age 41, joined the Registrant as secretary to the
President in 1974. Later she assumed the duties of Purchasing Manager until
November 1989 when she was promoted to Corporate Secretary. On March 7, 1991,
she assumed additional responsibilities and was promoted to Vice President -
Administration.
Richard Monsorno, age 43, joined the Registrant in 1983 as a Project
Engineer. In early 1984, he assumed the duties of Manager of R&D Special
Projects. In April 1989, he was promoted to Vice President of Product
Development.
Chester E. Spence, age 56, joined the Registrant in 1993 as Vice
President of Marketing and Sales. Prior to his employment with the Registrant
he served, from January 1988 to December 1990, as the Manager - Account
Marketing - Latin America for International Business Machines Corp. ("IBM")
and from January 1991 to August 1993 was a Consultant for IBM.
The officers serve at the discretion of the Board of Directors and there
are no family relationships among the officers listed and any directors of the
Registrant.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Registrant's Common Stock has been traded on the American Stock
Exchange ("AMEX") under the symbol "AMK" since May 15, 1986. The table below
sets forth the quarterly high and low sales prices for the Common Stock on the
AMEX for the fiscal years ended June 30, 1995 and June 30, 1994.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1994
-------------- ------------
Quarter Ended: High Low High Low
- -------------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
September ......................... $ 4 3/8 $3 1/8 $4 $2 5/8
December .......................... 4 3 1/4 5 3 7/16
March ............................. 4 3/4 3 7/16 4 7/16 3 3/16
June .............................. 15 7/8 4 1/4 3 7/8 3 1/16
</TABLE>
NUMBER OF STOCKHOLDERS
As of September 20, 1995, there were approximately 387 holders of record
of the Registrant's Common Stock. The Registrant believes numerous shares are
held of record by brokerage and other institutional firms for their customers.
DIVIDENDS
The Registrant has not paid dividends on its Common Stock during the past
three fiscal years. It is the present policy of the Registrant's Board of
Directors to retain earnings to finance the expansion of the Registrant's
operations and not to pay cash dividends on its Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following Selected Consolidated Financial Data for each of the five
fiscal years ended June 30 has been derived from, and should be read in
conjunction with, the Registrant's Consolidated Financial Statements.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales ......................................... $ 28,630 $ 23,111 $ 20,599 $ 19,359 $ 18,787
======== ======== ======== ======== ========
Gross profit ...................................... $ 11,178 $ 8,736 $ 7,323 $ 6,275 $ 5,350
======== ======== ======== ======== ========
Income (loss) from operations ..................... $ 2,855 $ 1,634 $ 1,366 $ 532 $ (1,133)
======== ======== ======== ======== ========
Net income (loss) (1) ............................. $ 1,880 $ 997 $ 991 $ 394 $ (841)
======== ======== ======== ======== ========
Net income (loss) per common
and common equivalent share (1) .................. $ 0.48 $ 0.26 $ 0.25 $ 0.10 $ (0.21)
======== ======== ======== ======== ========
Cash dividends paid per common share .............. $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Property, plant and equipment, net ................ $ 13,379 $ 9,953 $ 8,821 $ 9,130 $ 9,703
======== ======== ======== ======== ========
Total assets ...................................... $ 31,624 $ 26,510 $ 24,795 $ 23,871 $ 23,564
======== ======== ======== ======== ========
Long-term debt, less current portion .............. $ 4,497 $ 3,048 $ 3,423 $ 3,621 $ 3,816
======== ======== ======== ======== ========
Working capital ................................... $ 12,979 $ 12,565 $ 13,446 $ 12,335 $ 11,608
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA:
(unaudited) (In thousands, except per share amounts)
NET INCOME
QUARTER ENDED NET SALES GROSS PROFIT NET INCOME PER SHARE
- ------------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Fiscal 1995
- -----------
September .......... $ 6,487 $ 2,157 $ 395 (1) $ 0.10 (1)
December ........... 6,515 2,320 126 0.03
March .............. 7,781 3,100 655 0.17
June ............... 7,847 3,601 704 0.18
------- ------- ------- ------
Total ........... $28,630 $11,178 $ 1,880 $ 0.48
======= ======= ======= ======
Fiscal 1994
- -----------
September .......... $ 5,337 $ 1,905 $ 190 $ 0.05
December ........... 5,394 1,915 272 0.07
March .............. 5,709 2,227 189 0.05
June ............... 6,671 2,689 346 0.09
------- ------- ------- ------
Total ........... $23,111 $ 8,736 $ 997 $ 0.26
======= ======= ======= ======
<FN>
(1) Fiscal year 1995 includes a cumulative effect of a change in
accounting for certain investments in debt and equity securities to
adopt the provisions of Statement of Financial Accounting Standards
No. 115, effective July 1, l994, amounting to $152,000, or $.03 per
share.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be reviewed in conjunction with the
Consolidated Financial Statements and Notes thereto and other information set
forth following Item 14 of this report. The Consolidated Financial Statements
for the fiscal years ended June 30, 1995 and 1994 include the operations of
the Registrant, American Technical Ceramics (Florida), Inc., ATC International
Technical Ceramics, Inc., and Phase Components Ltd., each of which is a
wholly-owned subsidiary of the Registrant.
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
Net sales for the fiscal year ended June 30, 1995 were $28,630,000, an
increase of 24% over the $23,111,000 recorded in fiscal year 1994. Domestic
sales increased by 22% to $18,448,000 in fiscal year 1995 from $15,070,000 in
fiscal year 1994. International sales increased by 27% to $10,182,000 in
fiscal year 1995 from $8,041,000 in fiscal year 1994. Significantly higher
unit shipment volumes more than offset a decrease in average unit selling
prices for the majority of the Registrant's product lines. The increase in
sales in the current fiscal year is the result of several positive sales
trends. These included unparalleled demand for capacitors in commercial
applications, including wireless technologies and satellite transmissions, as
well as renewed demand for high-reliability or non-commercial products. The
increased demand was apparent on a global scale as the Registrant's rate of
sales growth accelerated both in the United States and in foreign markets.
Demand for new products, particularly those developed by the Registrant's new
thin film products division, also contributed to the sales growth. Management
believes that these new products and continuing demand for its more
established products should result in continued sales growth in the near
future.
Gross margins were 39.0% of net sales in fiscal year 1995 compared with
37.8% in fiscal year 1994. The increase in gross margins was attributable to
lower per unit production costs as a result of higher factory utilization and
greater economies of scale in fiscal year 1995 as compared to fiscal year
1994. Operating expenses totaled $8.3 million, or 29% of net sales, compared
with $7.1 million, or 31% of net sales, in fiscal year 1994. Selling expenses
increased by $692,000 to $4,151,000 in fiscal year 1995 as compared to
$3,459,000 in fiscal year 1994. The increase in selling expenses in the
current fiscal year, as compared to fiscal year 1994, was the result of higher
variable selling expenses directly attributable to the higher level of net
sales. These expenses primarily consisted of higher commissions paid to
representative organizations and to the Registrant's sales executives and
personnel. General and administrative expenses increased by $322,000 to
$2,727,000 in fiscal year 1995, as compared to $2,405,000 in fiscal year 1994.
This increase was the result of several factors, including a sales tax
assessment by the state of Florida and higher bonuses earned by various
executives on the basis of higher profits in the current fiscal year compared
to fiscal year 1994.
Expenditures for product research and development increased by $207,000
to $1,445,000 in fiscal year 1995 as compared to $1,238,000 in fiscal year
1994. The increase in research and development expenses was the result of
higher salaries in the current fiscal year as compared to fiscal year 1994.
The Registrant anticipates that research and development expenditures,
expressed as a percentage of net sales, will continue at levels approximately
comparable to that of the latest fiscal year.
Net interest expense of $188,000 was recorded in fiscal year 1995
compared to net interest income of $91,000 in fiscal year 1994. Net interest
expense in the current year, as compared to net interest income in fiscal year
1994, was due primarily to lower funds available for investment as a result of
significantly higher expenditures for capital equipment and facilities
renovation. Other expense was $199,000 in the current fiscal year as compared
to $265,000 in fiscal year 1994. Other expense in the current fiscal year
includes $191,000 of net realized losses on sales of investments. Other
expense in fiscal year 1994 included unrealized losses on marketable
securities of $224,000.
The effective income tax rate for fiscal year 1995 was approximately 30%
as compared to approximately 32% for fiscal year 1994. The slightly lower rate
in fiscal year 1995 was primarily due to a higher tax benefit related to the
Registrant's FSC.
10
<PAGE>
Effective July 1, 1994, the Registrant adopted the provisions of Statement
of Financial Accounting Standards No.115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115"). The adoption of SFAS No. 115
resulted in a cumulative effect of a change in accounting principle amounting to
$152,000, net of income taxes.
As a result of the foregoing, the Registrant reported net income of
$1,880,000, or $.48 per share, for the fiscal year ended June 30, 1995 as
compared with net income of $997,000, or $.26 per share, in the prior fiscal
year.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
Net sales for the fiscal year ended June 30, 1994 totaled $23,111,000, an
increase of 12% over the $20,599,000 recorded in fiscal year 1993. Domestic
sales increased by 15% to $15,070,000 in fiscal year 1994 from $13,088,000 in
fiscal year 1993. International sales increased by 7% to $8,041,000 in fiscal
year 1994 from $7,511,000 in fiscal year 1993. The increases in sales growth
were primarily the result of stronger sales of commercial products,
particularly to customers in the telecommunications and wireless
communications industries. The Registrant's sales were also affected by
general industrial trends toward capital spending and the modernization of
capital equipment.
Gross margins were 37.8% of net sales in fiscal year 1994 compared with
35.6% in fiscal year 1993. The improvement in gross margins was attributable
to increased utilization of the Registrant's production facilities as a result
of higher production and sales volumes. Increased efficiencies resulting from
the increased production more than offset a marginal decline in average unit
selling prices for many of the Registrant's product lines. Operating expenses
totaled $7.1 million, or 31% of net sales, compared with $6.0 million, or 29%
of net sales, in fiscal year 1993. Selling expenses increased by $608,000 to
$3,459,000 in fiscal year 1994 as compared to $2,851,000 in fiscal year 1993,
as a result of increased advertising and marketing expenditures incurred to
promote the Registrant's existing products and several new products, including
the Registrant's thin film product line. The Registrant historically has not
relied extensively on advertising and promotion of its products. In fiscal
year 1994, the Registrant implemented a revised marketing program designed to
increase customer awareness of its existing products and to introduce its new
products. The Registrant also incurred higher marketing salaries as a result
of hiring a Vice President of Marketing and Sales. General and administrative
expenses increased by $346,000 to $2,405,000 in fiscal year 1994, as compared
to $2,059,000 in fiscal year 1993. This increase was a result of higher
administrative salaries, higher executive and supervisors' bonuses, increased
employee benefit costs and additional administrative costs associated with
acquisition of the operations of Miltech Corp. See "Item 1. BUSINESS --
PRODUCTS".
Expenditures for product research and development increased by $191,000
to $1,238,000 in fiscal year 1994 as compared to $1,047,000 in fiscal year
1993. This increase was primarily the result of higher salaries and additional
personnel added in fiscal year 1994.
Net interest income of $91,000 was recorded in fiscal year 1994 compared
to net interest income of $10,000 in fiscal year 1993. The increase of net
interest income in the fiscal year 1994 as compared to the fiscal year 1993
was due to the effect of higher income on investments, primarily as a result
of higher average balances invested in mutual funds, as well as lower interest
expense as a result of lower outstanding debt balances. Other expense was
$265,000 in the fiscal year 1994 as compared to other income of $57,000 in the
fiscal year 1993. Other expense in fiscal year 1994 included $224,000 of
unrealized losses on marketable securities. Other income in fiscal year 1993
included a net gain on the sale of marketable securities of $63,000.
The effective income tax rate for fiscal year 1994 was approximately 32%
as compared to approximately 31% for fiscal year 1993.
The Registrant reported net income of $997,000, or $.26 per share, for
the fiscal year ended June 30, 1994 as compared with net income of $991,000,
or $.25 per share, in the prior fiscal year. The marginal increase in net
income was the result of several factors as explained above. These included
the positive effect of higher production levels on gross profit margins offset
by higher selling, administrative and research and development expenses as
well as the unrealized losses on marketable securities.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's financial position at June 30, 1995 remains strong as
evidenced by working capital of $12,979,000 as compared to working capital of
$12,565,000 at June 30, 1994. The Registrant's current ratio at June 30, 1995
was 3.6:1 compared to 4.4:1 at June 30, 1994. The Registrant's quick ratio at
June 30, 1995 was 2.1:1 compared to 2.7:1 at June 30, 1994.
Cash and investments decreased to $5,221,000 at June 30, 1995 as compared
to $5,470,000 at June 30, 1994. The decrease in cash and investments was
primarily the result of significantly higher capital expenditures in the
current fiscal year. Such expenditures included the renovation of a new
production facility of approximately $1,010,000 and equipment purchases of
approximately $4,044,000, compared to total capital expenditures of $2,720,000
in fiscal year 1994, including $339,000 to purchase the assets of Miltech
Corp. Accounts receivable increased by $331,000 to $3,897,000 at June 30, l995
as compared to $3,566,000 at June 30, 1994, as a result of significantly
higher shipments in the fourth quarter of the fiscal year ended June 30, 1995,
as compared to the same period of the prior fiscal year. The Registrant's
number of days sales outstanding in accounts receivable as of June 30, 1995
was slightly lower as compared with that of the prior fiscal year. Inventories
increased by $1,388,000 to $7,705,000 at June 30, 1995 as compared to
$6,317,000 at June 30, 1994. The increase in inventory was primarily the
result of a higher sales backlog at June 30, 1995 as compared to June 30,
1994, resulting in higher work in process. The Registrant also increased raw
materials and finished stock levels in an attempt to support the higher levels
of sales and orders currently anticipated in fiscal year 1996. Management does
not expect inventory requirements to have a further material effect on cash
and investments. Accounts payable and accrued expenses increased by $978,000
to $3,719,000 as compared to $2,741,000 at June 30, 1994. This increase was
due primarily to higher expenditures for inventory purchases and other
manufacturing purposes. Accrued expenses also increased as a result of the
accrual of an employee profit bonus pursuant to a profit bonus plan adopted
during fiscal year 1995. At June 30, 1995, the Registrant had current income
taxes payable of $447,000 relating to the fiscal year's pretax profits and
taxes payable by the Registrant's United Kingdom subsidiary.
In September 1994, the Registrant entered into a term loan agreement with
Barnett Bank of Jacksonville, N.A. ("Barnett Bank") pursuant to which the
Registrant borrowed $1.9 million. The loan is unsecured, is subject to certain
financial covenants and is payable over five years in equal monthly
installments of principal plus accrued interest at Barnett Bank's prime rate.
The Registrant used the majority of the proceeds of this loan to prepay the
outstanding balance under a pre-existing mortgage note. The balance of the
proceeds of approximately $350,000 were used to finance capital equipment
expenditures. See Note 4 of Notes to Consolidated Financial Statements.
In February 1995, the Registrant entered into two separate loan
agreements with European American Bank ("EAB") pursuant to which the
Registrant borrowed $2.0 million. Each loan is for $1.0 million, is secured by
capital equipment, is subject to certain financial covenants and is payable
over a five year period. The agreement representing the first such loan with
EAB provides for payment of 60 monthly installments of a fixed principal
payment amount and interest accrued at a fixed rate of 6.85% per annum of the
outstanding balance for the first two years and 8.85% per annum thereafter.
The agreement representing the second such loan with EAB provides for payment
of 60 equal monthly installments of principal and interest accrued at a fixed
rate of 8.85% per annum of the outstanding balance for the term of the loan.
See Note 4 of Notes to Consolidated Financial Statements.
Under a lease agreement, dated October 1, 1980, the Registrant leases a
manufacturing facility from a partnership controlled by the Registrant's
President and principal stockholder. Under the lease, the Registrant is
obligated to pay approximately $249,000 per annum. The payments due over the
remaining sixteen years of this capital lease total approximately $3,460,000.
See Note 4 of Notes to Consolidated Financial Statements and "Item 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".
The Registrant intends to use cash on hand as well as funds generated
from operations to finance budgeted capital expenditures of approximately $2.0
million in fiscal year 1996.
12
<PAGE>
In June 1990, the Registrant announced a stock purchase program pursuant
to which it is authorized to purchase up to $1,000,000 of its Common Stock.
Through June 30, 1995, the Registrant has expended approximately $741,000 to
purchase an aggregate of 297,700 shares under this program.
IMPACT OF NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"), effective for fiscal years beginning after December 15,
1995, requires among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment losses should
be based upon the fair value of the asset, and reported in the period in which
the recognition criteria are first applied and met. Management of the
Registrant believes that the implementation of SFAS No. 121 will not have a
material impact on the Registrant's financial position or results of
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Registrant's Consolidated Financial Statements and the Notes thereto
begin on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The information set forth under the caption "Election of Directors" in
the Registrant's Proxy Statement to be furnished in connection with its Annual
Meeting of Stockholders to be held November 17, 1995 is hereby incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation of Officers and
Directors" in the Registrant's Proxy Statement to be furnished in connection
with its Annual Meeting of Stockholders to be held November 17, 1995 is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" and the information relating to
beneficial ownership of the Registrant's Common Stock in the table under the
caption "Election of Directors" in the Registrant's Proxy Statement to be
furnished in connection with its Annual Meeting of Stockholders to be held
November 17, 1995 is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and
Related Transactions" in the Registrant's Proxy Statement to be furnished in
connection with its Annual Meeting of Stockholders to be held November 17,
1995 is hereby incorporated by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
--------------------
PAGE NO.
--------
Independent Auditors' Report.................................. F-1
Consolidated Financial Statements
Balance Sheets as of June 30, 1995 and 1994............. F-2
Statements of Earnings for the
Years Ended June 30, 1995, 1994 and 1993........... F-3
Statements of Stockholders' Equity
for the Years Ended June 30, 1995, 1994 and 1993... F-4
Statements of Cash Flows for the
Years Ended June 30, 1995, 1994 and 1993........... F-5
Notes to Consolidated Financial Statements....................F6 - F-15
(B) REPORTS ON FORM 8-K
-------------------
The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
(C) EXHIBITS
--------
Unless otherwise indicated, the following exhibits were filed as part of
the Registrant's Registration Statement on Form S-18 (No. 2-96925-NY)
(the "Registration Statement") and are incorporated herein by reference
to the same exhibit thereto:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3(a)(i) - Certificate of Incorporation of the Registrant.
* 3(a)(ii) - Amendment to Certificate of Incorporation.
3(b)(i) - By-laws of the Registrant
9(a)(i) - Restated Shareholders' Agreement, dated April 15, 1985, among Victor Insetta, Joseph Mezey, Joseph Colandrea and
the Registrant. Incorporated by reference to Exhibit 9(a)(iii) to the Registration Statement.
10(b)(i) - Lease Agreement between Victor Insetta and the Registrant for premises at 15 Stepar Place,
Huntington Station, N.Y.
10(b)(ii) - Amendment to Lease Agreement, dated May 8, 1984, but effective as of July 14, 1981, between
Victor Insetta, d/b/a Stepar Leasing Company, and the Registrant.
10(b)(iii) - Amendment to Lease Agreement, dated June 15, 1987, but effective as of May 1, 1987, between
Victor Insetta, d/b/a Stepar Leasing Company, and the Registrant. Incorporated by reference to
Exhibit 10 (b) (iii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1987.
10(b)(iv) - Amendment to Lease Agreement, dated February 9, 1989, between Victor Insetta, d/b/a Stepar
Leasing Company, and the Registrant. Incorporated by reference to Exhibit 10 (b) (iv) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 (the "1989 10-K").
10(c)(i) - 1984 Employee Stock Sale Agreement between the Registrant and various employees. Incorporated by reference to
Exhibit 10 (e) (i) to the Registration Statement.
10(c)(ii) - 1985 Employee Stock Sale Agreement between the Registrant and various employees. Incorporated by reference to
Exhibit 10 (e) (ii) to the Registration Statement.
15
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(c)(iii) - Form of Employee Stock Bonus Agreement, dated as of July 1, 1993, between the Registrant and
various employees. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, l994 (the "1994 10-KSB").
10(c)(iv) - Form of Employee Stock Bonus Agreement, dated as of April 19, 1994, between the Registrant and various employees.
Incorporated by reference to Exhibit 10(c)(iv) to the l994 10-KSB.
*10(c)(v) - Form of Employee Stock Bonus Agreement, dated as of April 20, l995, between the Registrant and
various employees.
10(e)(ii) - Lease, effective as of October 1, 1980, between VPI Properties Associates, d/b/a VPI Properties
Associates, Ltd. and American Technical Ceramics (Florida), Inc. Incorporated by reference to
Exhibit 10 (g) (ii) to the Registration Statement.
10(e)(iii) - Amendment entered into on June 20, 1984 to Lease, effective as of October 1, 1980, between VPI Properties
Associates, d/b/a VPI Properties Associates, Ltd. and American Technical Ceramics (Florida), Inc. Incorporated by
reference to Exhibit 10 (g) (iii) to the Registration Statement.
10(g) - Purchase Agreement, dated May 31, 1989, by and among Diane LaFond Insetta and/or Victor D.
Insetta, as custodians for Danielle and Jonathan Insetta, and American Technical Ceramics Corp.,
and amendment thereto, dated July 31, 1989. Incorporated by reference to Exhibit 10 (g) to the 1989
10-K.
10(i)(i) - Incentive Stock Option Plan of the Registrant. Incorporated by reference to Exhibit 10 (j) (i) to the
Registration Statement.
10(i)(iii) - Stock Appreciation Rights Plan of the Registrant. Incorporated by reference to Exhibit 10 (j) (iii) to
the Registration Statement.
*10(i)(iv) - Profit Bonus Plan, dated April 19, l995, and effective for the fiscal years beginning July 1, l994.
10(i)(v) - Employment Agreement, dated April 3, 1985, between Victor Insetta and the Registrant, as amended.
Incorporated by reference to Exhibit 10 (i) (vi) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993 (the "1993 10-K").
10(l) - Mortgage Note, dated as of February 9, 1988, between the Registrant and European American Bank.
Incorporated by reference to Exhibit 10 (l) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1988 (the "1988 10-K").
10(n) - Consolidation, Modification and Spreader Agreement, dated as of February 9, 1988, between the
Registrant and European American Bank. Incorporated by reference to Exhibit 10 (n) to the 1988
10-K.
10(o) - Consolidation, Modification and Spreader Agreement, dated as of April 13, 1988, between the
Registrant and European American Bank. Incorporated by reference to Exhibit 10 (o) to the 1988
10-K.
10(p) - Loan Agreement, dated September 27, 1994, between the Registrant and Barnett Bank of Jacksonville, N.A.
Incorporated by reference to Exhibit 10(p) to the 1994 10-KSB.
*10(q) - Secured Commercial Note, dated as of February 17, l995, between the Registrant and European
American Bank.
*10(r) - Secured Commercial Note, dated as of February 17, l995, between the Registrant and European
American Bank.
21 - Subsidiaries of the Registrant. Incorporated by reference to Exhibit 21 to the 1993 10-K.
*23 - Consent of KPMG Peat Marwick LLP.
<FN>
- ----------------
*Filed herewith.
</FN>
</TABLE>
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
AMERICAN TECHNICAL CERAMICS CORP.
BY: /S/ VICTOR INSETTA
------------------
VICTOR INSETTA
President
Dated: September 26, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND ON THE DATES AND CAPACITIES INDICATED:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ VICTOR INSETTA September 26, 1995
- ------------------ President and Director
Victor Insetta (Principal Executive Officer)
/S/ CHESTER E. SPENCE September 26, 1995
- ----------------------
Chester E. Spence Director
/S/ JAMES CONDON September 26, 1995
- ----------------- Controller
James Condon (Principal Financial Officer)
/S/ O. JULIAN GARRARD III
- -------------------------
O. Julian Garrard III Director September 26, 1995
/S/ STUART P. LITT
- -------------------
Stuart P. Litt Director September 26, 1995
</TABLE>
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number Independent Auditors' Report........................... F-1
Consolidated Balance Sheets - June 30, 1995 and 1994............... F-2
Consolidated Statements of Earnings for the
Years Ended June 30, 1995, 1994 and 1993.......................... F-3
Consolidated Statements of Stockholders' Equity
for the Years Ended June 30, 1995, 1994 and 1993.................. F-4
Consolidated Statements of Cash Flows for the
Years Ended June 30, 1995, 1994 and 1993.......................... F-5
Notes to Consolidated Financial Statements......................... F-6 - F-15
F
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountants
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
American Technical Ceramics Corp.:
We have audited the accompanying consolidated balance sheets of American
Technical Ceramics Corp. and subsidiaries (the Company) as of June 30, l995
and l994 and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
June 30, l995. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Technical Ceramics Corp. and subsidiaries as of June 30, l995, and l994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended June 30, l995 in conformity with generally
accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Company
adopted a new method of accounting for certain investments in debt and equity
securities in fiscal l995 and a new method of accounting for income taxes in
fiscal l994.
KPMG PEAT MARWICK LLP
Jericho, New York
August 31, l995
F-1
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash (including cash equivalents of approximately
$1,054,000 and $1,205,000, respectively) ......................... $ 1,813,000 $ 1,865,000
Investments ............................................................ 3,408,000 3,605,000
Accounts receivable, net ............................................... 3,897,000 3,566,000
Inventories ............................................................ 7,705,000 6,317,000
Deferred income taxes .................................................. 738,000 639,000
Other current assets ................................................... 399,000 250,000
----------- -----------
Total current assets ............................................... 17,960,000 16,242,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land ................................................................... 738,000 738,000
Buildings and building under capital lease ............................. 5,745,000 4,735,000
Leasehold improvements ................................................. 1,923,000 1,805,000
Machinery and equipment ................................................ 17,429,000 13,673,000
Furniture, fixtures and other .......................................... 1,186,000 1,016,000
----------- -----------
27,021,000 21,967,000
Less: Accumulated depreciation ......................................... 13,642,000 12,014,000
----------- -----------
13,379,000 9,953,000
----------- -----------
OTHER ASSETS ................................................................ 285,000 315,000
----------- -----------
$31,624,000 $26,510,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ...................................... $ 815,000 $ 385,000
Accounts payable ....................................................... 1,547,000 858,000
Accrued expenses ....................................................... 2,172,000 1,883,000
Income taxes payable ................................................... 447,000 551,000
----------- -----------
Total current liabilities .......................................... 4,981,000 3,677,000
----------- -----------
LONG-TERM DEBT .............................................................. 4,497,000 3,048,000
DEFERRED INCOME TAXES ....................................................... 1,080,000 811,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock- par value $.01;authorized 20,000,000 shares;
issued 4,067,201 and 4,065,211 shares, respectively .............. 41,000 41,000
Capital in excess of par value ......................................... 6,345,000 6,315,000
Retained earnings ...................................................... 15,188,000 13,308,000
----------- -----------
21,574,000 19,664,000
Unrealized gain on investments available-for-sale ....................... 134,000 --
Less: Treasury stock (193,518 and 164,118 shares, respectively) ......... 590,000 458,000
Deferred compensation ......................................... 26,000 158,000
Foreign currency translation adjustment ....................... 26,000 74,000
----------- -----------
Total stockholders' equity ....................................... 21,066,000 18,974,000
----------- -----------
$31,624,000 $26,510,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales .................................................. $ 28,630,000 $ 23,111,000 $ 20,599,000
Cost of goods sold ......................................... 17,452,000 14,375,000 13,276,000
------------ ------------ ------------
Gross profit ............................................ 11,178,000 8,736,000 7,323,000
------------ ------------ ------------
Selling expenses ........................................... 4,151,000 3,459,000 2,851,000
General and administrative expenses ........................ 2,727,000 2,405,000 2,059,000
Research and development expenses .......................... 1,445,000 1,238,000 1,047,000
------------ ------------ ------------
Total expenses .......................................... 8,323,000 7,102,000 5,957,000
------------ ------------ ------------
Income from operations .................................. 2,855,000 1,634,000 1,366,000
------------ ------------ ------------
Other (income)expense:
Interest expense ........................................ 397,000 315,000 334,000
Interest income ......................................... (209,000) (406,000) (344,000)
Other ................................................... 199,000 265,000 (57,000)
------------ ------------ ------------
387,000 174,000 (67,000)
------------ ------------ ------------
Income before provision for income taxes and
cumulative effect of change in accounting method ........ 2,468,000 1,460,000 1,433,000
Provision for income taxes ................................. 740,000 463,000 442,000
------------ ------------ ------------
Income before cumulative effect
of change in accounting method .......................... $ 1,728,000 $ 997,000 $ 991,000
Cumulative effect of change in method of
accounting for investments, net of income taxes ............ 152,000 -- --
------------ ------------ ------------
Net income .............................................. $ 1,880,000 $ 997,000 $ 991,000
============ ============ ============
Income per common and common equivalent share,
before cumulative effect of change in accounting method .... $ 0.45 $ 0.26 $ 0.25
Cumulative effect of change in accounting method
per common and common equivalent share ..................... $ 0.03 -- --
------------ ------------ ------------
Net income per common and common equivalent share .......... $ 0.48 $ 0.26 $ 0.25
============ ============ ============
Weighted average common and common
equivalent shares outstanding .............................. 3,877,000 3,900,000 3,911,000
============ ============ ============
</TABLE>
See accompany notes to consolidated financial statements.
F-3
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Unrealized
Gain on Foreign
Common Stock Capital in Investments Currency
--------------- Excess of Retained Available Treasury Deferred Translation
Shares Amount Par Value Earnings for Sale Stock Compensation Adjustment
------ ------ --------- -------- -------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992 ........ 4,065,211 $41,000 $6,216,000 $11,320,000 $ -- $(215,000) $ -- $ 184,000
Purchase of
treasury stock .................. -- -- -- -- -- (63,000) -- --
Foreign currency
translation adjustment .......... -- -- -- -- -- -- -- (308,000)
Net income ...................... -- -- -- 991,000 -- -- -- --
--------- ------- ---------- ----------- -------- --------- --------- --------
Balance at June 30, 1993 ........ 4,065,211 $41,000 $6,216,000 $12,311,000 $ -- $(278,000) $ -- $(124,000)
--------- ------- ---------- ----------- -------- --------- --------- --------
Purchase of
treasury stock .................. -- -- -- -- -- (329,000) -- --
Deferred compensation ........... -- -- 99,000 -- -- 149,000 (248,000) --
Stock award
compensation expense ............ -- -- -- -- -- -- 90,000 --
Foreign currency
translation adjustment .......... -- -- -- -- -- -- -- 50,000
Net income ...................... -- -- -- 997,000 -- -- -- --
--------- ------- ---------- ----------- -------- --------- --------- --------
Balance at June 30, 1994 ........ 4,065,211 $41,000 $6,315,000 $13,308,000 $ -- $(458,000) $(158,000) $(74,000)
--------- ------- ---------- ----------- -------- --------- --------- --------
Purchase of
treasury stock .................. -- -- -- -- -- (148,000) -- --
Deferred compensation ........... -- -- 19,000 -- -- 16,000 (35,000) --
Stock award
compensation expense ............ -- -- -- -- -- -- 167,000 --
Exercise of stock options ....... 1,990 -- 11,000 -- -- -- -- --
Unrealized gain on
investments available-for-sale .. -- -- -- -- 134,000 -- -- --
Foreign currency
translation adjustment .......... -- -- -- -- -- -- -- 48,000
Net income ...................... -- -- -- 1,880,000 -- -- -- --
--------- ------- ---------- ----------- -------- --------- --------- --------
Balance at June 30, 1995 ........ 4,067,201 $41,000 $6,345,000 $15,188,000 $134,000 $(590,000) $ (26,000) $(26,000)
--------- ------- ---------- ----------- -------- --------- --------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 1,880,000 $ 997,000 $ 991,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Unrealized loss on marketable securities ..................... -- 224,000 --
Provision for doubtful accounts receivable
and sales returns ......................................... 28,000 45,000 --
Depreciation and amortization ................................ 1,657,000 1,398,000 1,273,000
(Gain) loss on disposal of fixed assets ...................... (5,000) 13,000 --
Stock award compensation expense ............................. 167,000 90,000 --
Provision for deferred income taxes .......................... 110,000 (278,000) (20,000)
Cumulative effect of change in accounting method
for investments, net of income taxes ...................... (152,000) -- --
Realized loss (gain) on investments .......................... 191,000 (9,000) (63,000)
Changes in operating assets and liabilities:
Accounts receivable, net ..................................... (344,000) (776,000) 26,000
Inventories .................................................. (1,377,000) (206,000) 298,000
Other assets ................................................. (124,000) (57,000) 66,000
Accounts payable, accrued expenses and
income taxes payable ...................................... 795,000 1,165,000 187,000
Other ........................................................ -- -- (44,000)
----------- ----------- -----------
Net cash provided by operating activities ........................ 2,826,000 2,606,000 2,714,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................ (4,995,000) (2,381,000) (979,000)
Purchase of investments ..................................... (3,941,000) (6,890,000) (3,572,000)
Proceeds from sale of investments ........................... 4,366,000 7,120,000 2,432,000
Purchase of Miltech Corp. ................................... -- (339,000) --
Proceeds from sale of fixed assets .......................... 12,000 -- --
----------- ----------- -----------
Net cash used in investing activities ............................. (4,558,000) (2,490,000) (2,119,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt ................................. (2,114,000) (224,000) (240,000)
Proceeds from issuance of debt .............................. 3,910,000 8,000 --
Payments to acquire treasury stock .......................... (148,000) (329,000) (63,000)
Proceeds from exercise of stock options ..................... 11,000 -- --
----------- ----------- -----------
Net cash provided by (used in) financing activities ............... 1,659,000 (545,000) (303,000)
----------- ----------- -----------
Effect of exchange rate changes on cash ...................... 21,000 18,000 (184,000)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ....... (52,000) (411,000) 108,000
CASH AND CASH EQUIVALENTS, beginning of year ......................... 1,865,000 2,276,000 2,168,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year ............................... $ 1,813,000 $ 1,865,000 $ 2,276,000
=========== =========== ===========
</TABLE>
See accompany notes to consolidated financial statements .............
F-5
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
American Technical Ceramics Corp. and its wholly-owned subsidiaries ("the
Company") is engaged in the design, development, manufacture and sale of
ceramic multilayer capacitors for commercial and military purposes in the
United States and for export. During fiscal years 1995, 1994 and 1993, there
were no customers which accounted for 10 percent or more of consolidated
revenues. In fiscal years ended June 30, 1995, 1994 and 1993, sales of
approximately 14%, 13% and 17%, respectively, were to United States military
and aerospace contractors. The Company operates in one industry, the
manufacture of electronic components.
In September 1993, the Company acquired substantially all of the assets
and business of Miltech Corp., a manufacturer of metalized substrates and
circuits for approximately $339,000 in cash. The Company accounted for the
acquisition under the purchase method of accounting. The operations of Miltech
Corp. are insignificant to those of the Company.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of American
Technical Ceramics Corp. and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation.
REVENUE RECOGNITION
Revenue is recognized as products are shipped.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity
of three months or less when purchased to be cash equivalents, including money
market accounts and certificates of deposit.
INVESTMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115") effective July 1, 1994. Under SFAS No. 115, the
Company classifies its investments in debt and equity securities as
available-for-sale. Accordingly, these investments are reported at fair value
with unrealized holding gains and losses excluded from earnings and reported
as a separate component of stockholders' equity, net of tax. Classification of
investments is determined at acquisition and reassessed at each reporting
date. Realized gains and losses are included in the determination of net
earnings at the time of sale and are derived using the specific identification
method for determining cost of securities sold.
Prior to fiscal year 1995, marketable securities were stated at the lower
of aggregate cost or market.
INVENTORIES
Inventories are stated at the lower of aggregate cost (first-in,
first-out) or market.
F-6
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided primarily using the straight-line method over the
estimated useful lives of the related assets as follows:
<TABLE>
<S> <C>
Buildings and building under capital lease............. 30 years
Leasehold improvements................................. The lesser of the remaining lease term or 5 years
Machinery and equipment................................ 3 to 10 years
Furniture, fixtures and other.......................... 3 to 8 years
</TABLE>
OTHER ASSETS
Included in other assets as of June 30, 1995 and 1994 is approximately
$67,000 and $88,000, respectively, of goodwill and $17,000 and $23,000,
respectively, of other intangible assets related to the acquisition of Miltech
Corp. These amounts are net of accumulated amortization of $36,000 and $15,000
for goodwill and $12,000 and $6,000 for the other intangibles as of June 30,
1995 and 1994, respectively. The Company amortizes goodwill over five years
and other intangibles over approximately four years using the straight-line
method. The Company assesses the recoverability of intangible assets by
determining whether the amortization of the intangible balance over its
remaining life can be recovered through undiscounted future cash flows of the
acquired business.
INCOME TAXES
Effective July 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
No. 109") and the cumulative effect of that change in the method of accounting
for income taxes was immaterial. Under the asset and liability method of SFAS
No. 109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The Company previously used the asset and liability method under
Statement 96. Under the asset and liability method of Statement 96, deferred
tax assets and liabilities were recognized for all events that had been
recognized in the financial statements. Under Statement 96, the future tax
consequences of the recovering assets or settling liabilities at their
financial statement carrying amounts were considered in calculating deferred
taxes. Generally, Statement 96 prohibited consideration of any other future
events in calculating deferred taxes.
FOREIGN CURRENCY TRANSLATION
The Company translates the financial statements of its foreign subsidiary
(located in England) by applying the current exchange rate as of the balance
sheet date to the assets and liabilities of the subsidiary and a weighted
average rate to such subsidiary's results of operations. The resulting
translation adjustment of ($26,000) and ($74,000) as of June 30, 1995 and
1994, respectively, is recorded as a component of stockholders' equity.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share has been computed based
upon the weighted average number of common and common equivalent shares
outstanding. Recognition has been given to the assumed exercise (as of the
beginning of each period or date of issuance if later) of outstanding options
and warrants, except when their effect would be antidilutive or immaterial.
F-7
<PAGE>
NOTE 2. INVESTMENTS
As discussed in Note 1, the Company adopted the provisions of SFAS No.
115 effective July 1, 1994. The cumulative effect of this change in the method
of accounting for certain investments in debt and equity securities, net of
income taxes was $152,000, and has been reported in the Consolidated Statement
of Earnings for fiscal year 1995.
The following table presents the amortized cost, gross unrealized gains
and losses and fair value of the investments available-for-sale as of June 30,
1995:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Mutual funds ............... $ 566,000 $ 31,000 $ 8,000 $ 589,000
Equity securities .......... 955,000 135,000 2,000 1,088,000
U.S. Government
obligations ............. 1,332,000 37,000 - 1,369,000
Certificates of deposit .... 360,000 2,000 - 362,000
---------- ---------- ---------- ----------
$3,213,000 $ 205,000 $ 10,000 $3,408,000
========== ========== ========== ==========
</TABLE>
At June 30, 1994, marketable securities were comprised principally of
mutual funds and equity securities. Marketable securities were carried at
cost, net of an allowance of $224,000, included as a component of other
expense for fiscal year 1994, to reduce such amounts to aggregate market
value.
Gross realized gains of approximately $23,000, $135,000 and $95,000,
respectively, and gross realized losses of approximately $214,000, $126,000
and $32,000, respectively, are included in other income for fiscal years 1995,
1994 and 1993, respectively.
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
---------- ----------
<S> <C> <C>
Raw materials ........................ $1,296,000 $ 893,000
Work in process ...................... 3,316,000 2,583,000
Finished goods ....................... 3,093,000 2,841,000
--------- ---------
$7,705,000 $6,317,000
========== ==========
</TABLE>
F-8
<PAGE>
NOTE 4. LONG-TERM DEBT
Long-term debt as of June 30, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Notes payable to banks ................... $3,490,000 $ -
Mortgage note payable .................... - 1,571,000
Obligations under capital leases ......... 1,802,000 1,852,000
Other notes payable ...................... 20,000 10,000
---------- -----------
5,312,000 3,433,000
Less: Current Portion .................... 815,000 385,000
---------- -----------
Long-term debt ........................... $4,497,000 $3,048,000
========== ==========
</TABLE>
Interest payments during fiscal years 1995, 1994 and 1993 approximated
interest expense for those years.
NOTES PAYABLE TO BANKS
Notes payable to banks at June 30, l995 consists of:
(i) an unsecured $1.9 million term loan with a remaining balance of
$1,615,000 payable in equal monthly installments of principal of
approximately $32,000 through September l999, plus accrued interest
at the bank's prime rate (9% at June 30, l995). The loan is subject
to certain financial covenants which require, among other things, a
minimum level of tangible net worth; and
(ii) two term loans, aggregating $1,875,000, secured by capital
equipment with an approximate net book value of $1,900,000 at June
30, l995. The remaining balance of the first loan of $933,000, is
payable in equal monthly principal installments of approximately
$17,000 through February 2000, and bears interest at a fixed rate of
6.85% through February l997 and 8.85% thereafter. The remaining
balance of the second loan of $942,000 bears interest at a fixed rate
of 8.85% and is payable in equal monthly installments of
approximately $21,000, including interest, through February 2000.
Both loans are subject to certain financial covenants which require,
among other things, the maintenance of certain financial ratios.
The mortgage note payable at June 30, 1994 was repayable in equal monthly
installments of principal of approximately $10,000 through February 1995, with
the remaining outstanding principal balance due on March 1, l995. Interest was
payable monthly at the bank's prime rate (7 1/4% at June 30, 1994) plus 1/2% .
This note was satisfied in September l994 from the proceeds of the $1.9
million term loan discussed above.
MATURITY SCHEDULE (without leases)
The following table presents aggregate annual maturities of long-term
debt due after fiscal year 1995 excluding the obligations under capital
leases:
1996 $ 752,000
1997 785,000
1998 784,000
1999 803,000
2000 386,000
----------
$3,510,000
==========
F-9
<PAGE>
OBLIGATIONS UNDER CAPITAL LEASES
Under a lease agreement dated October 1, 1980, as amended, the Company
leases a manufacturing facility in Jacksonville, Florida from a partnership
controlled by the Company's President and Chief Executive Officer and
principal stockholder. This lease agreement gives the Company substantially
all of the benefits and obligations of ownership, and is therefore treated as
a capital lease.
The leased facility had an original cost of approximately $1,973,000 and
has a net book value of approximately $1,067,000 at June 30, 1995. The lease
is for a period of 30 years and was capitalized using an interest rate of
10.5%. Monthly payments (including interest) are approximately $19,000 before
rental adjustments. The lease agreement provides for a rental adjustment
upward (but not downward) based upon the ratio of the Consumer Price Index
between October 1988 and October 1995.
During 1990, the Company leased computer equipment with annual payments
of approximately $85,000 (including interest) for a term of five years. The
leased equipment had an original cost of approximately $301,000 and was fully
depreciated at June 30, 1995. The lease was capitalized using an interest rate
of 14%.
In October l994, the Company renewed the computer equipment lease
discussed above to upgrade existing equipment as well as obtain additional
equipment. The new equipment has an original cost of $83,000 and a net book
value of $71,000 at June 30, l995. The lease is for a period of five years and
was capitalized using an interest rate of 10%. Annual payments, including
interest, are approximately $21,000.
The following sets forth the future minimum lease payments (excluding
rental adjustments) under these capital leases by fiscal year and the present
value of the minimum lease payments as of June 30, 1995:
1996 $ 249,000
1997 249,000
1998 249,000
1999 249,000
2000 233,000
2001 and thereafter 2,321,000
----------
Total minimum lease payments 3,550,000
Less: Amount representing interest 1,748,000
----------
Present value at June 30, 1995 1,802,000
Less: Current portion 63,000
----------
$1,739,000
==========
F-10
<PAGE>
NOTE 5. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CURRENT:
Federal ............. $447,000 $ 578,000 $ 370,000
State ............... 50,000 75,000 50,000
Foreign ............. 133,000 88,000 42,000
-------- --------- ---------
630,000 741,000 462,000
======== ========= =========
DEFERRED:
Federal ............. 110,000 (278,000) (20,000)
-------- --------- ---------
Total ............... $740,000 $ 463,000 $ 442,000
======== ========= =========
</TABLE>
The following table reconciles the Federal statutory rate to the
Company's effective rate:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Tax provision computed at statutory rate ......... 34.0% 34.0% 34.0%
State tax, net of Federal tax effect ............. 3.4 3.0 2.3
FSC benefit ...................................... (2.7) (0.9) (1.8)
Tax credits and other ............................ (4.7) (4.4) (3.7)
---- ---- ----
30.0% 31.7% 30.8%
==== ==== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1995 and 1994 are presented below.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts receivable and
sales returns ............................ $ 108,000 $ 92,000
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the
Tax Reform Act of 1986 .................... 303,000 290,000
Compensated absences accrued for financial
reporting purposes ........................ 200,000 146,000
Other ....................................... 127,000 111,000
---------- ---------
Total deferred tax assets ................. 738,000 639,000
========== =========
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and capitalized
interest ................................. (1,020,000) (811,000)
Unrealized appreciation on investments
available-for-sale ........................ (60,000) -
----------- ---------
Total deferred tax liabilities .......... (1,080,000) (811,000)
=========== =========
Net deferred tax liability ................ $ (342,000) $(172,000)
=========== =========
</TABLE>
F-11
<PAGE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based
upon the level of historical taxable income, projections for future taxable
income over the periods which the deferred tax assets are deductible, and
reversals of deferred tax liabilities, management believes it is more likely
than not the Company will realize the benefits of these deductible
differences. Income taxes paid were approximately $696,000, $353,000 and
$352,000 for fiscal years 1995, 1994 and 1993, respectively.
The significant components of deferred income tax expense for the year
ended June 30, 1993 were as follows:
<TABLE>
<S> <C>
Plant and equipment, principally due to differences in
depreciation and capitalized interest .............. $(93,000)
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax
Reform Act of 1986 ................................. 57,000
Other ................................................ 16,000
--------
$(20,000)
========
</TABLE>
NOTE 6. COMMON STOCK
In April 1985, the Board of Directors adopted an Incentive Stock Option
Plan, which provided for the granting of stock options to employees and
officers to purchase not more that 100,000 shares of Common Stock. This plan
terminated in April l995 and no further options may be granted thereunder.
Options under this plan were granted at a price per share equal to the fair
market value of the Common Stock on the date of grant. In addition, each
option granted terminates ten years from the date of grant. Further, upon
exercise of options under this plan, the recipient is required to enter into a
Voting and Transfer Agreement which requires the optionee to vote for certain
directors (as defined by the agreement) and in certain cases offer the Company
and the principal stockholder the right of first and second refusal,
respectively, to purchase any shares acquired under this plan.
Information with respect to options is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993
------------- ------------- -------------
AMOUNT PRICE AMOUNT PRICE AMOUNT PRICE
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding and exercisable,
beginning of year ............. 2,768 $5.50 2,768 $5.50 2,879 $5.50
Granted ............................ - - - - - -
Exercised .......................... (1,990) 5.50 - - - -
Canceled ........................... - - - - (111) 5.50
------- ------ ------
Outstanding and exercisable,
end of year..................... 778 $5.50 2,768 $5.50 2,768 $5.50
====== ===== =====
</TABLE>
F-12
<PAGE>
In June 1990, the Company announced that its Board of Directors had
approved a stock purchase program, authorizing the purchase of up to
$1,000,000 of the Company's Common Stock. Purchases can be made in the open
market or in privately negotiated transactions. The program may be suspended
from time to time or discontinued. As of June 30, 1995, the Company has
expended approximately $741,000 to purchase an aggregate of 297,700 shares
under this program.
NOTE 7. DEFERRED COMPENSATION
In fiscal years 1995 and 1994, the Board of Directors granted 10,000 and
100,000 restricted shares of the Company's Common Stock, respectively, to
certain employees.
The awards relate to services to be provided over the one year period
from the dates of grant and, as a result, the stock award agreements provide
that the Company has an option to repurchase the awarded shares for one cent
per share if the recipient is not an employee, for any reason, any time within
one year from the date of grant. The market value of the shares awarded in
fiscal years 1995 and l994 of $35,000 and $248,000, respectively, was recorded
as deferred compensation, and amortized to expense over the one year period
the employees provide the related services. Compensation expense related to
stock awards was $167,000 and $90,000 for fiscal years l995 and l994,
respectively. Deferred compensation of $26,000 and $158,000 is reflected as a
reduction of stockholders' equity in the accompanying consolidated balance
sheets as of June 30, 1995 and l994, respectively. As treasury shares have
been utilized for all stock awards, treasury stock has been reduced for the
cost of the shares on a specific identification basis.
NOTE 8. COMMITMENTS
OPERATING LEASES
At June 30, 1995, the Company was obligated for future minimum rent
payments of $327,000 under non-cancelable operating leases expiring in fiscal
year l996.
Substantially all future minimum rent payments are due to related parties
controlled by the principal stockholder of the Company. Rent expense under
related party operating leases was approximately $546,000, $485,000 and
$573,000 for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively.
Rent expense to non-related parties was approximately $20,000, $57,000
and $76,000 for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively.
EMPLOYMENT AGREEMENTS
In September 1992, the Company amended its President's employment
agreement, effective October 1992, to provide for an increase in the annual
base compensation to $234,000 as well as additional annual compensation equal
to 5% of net income before such bonus and income taxes. In February 1993, the
agreement was further amended to extend the President's term of employment as
indicated above until March 1, 1995. This amendment further provides for
automatic one year renewals of the employment agreement on March 1st of every
year subsequent to March 1, 1995, in the absence of written notice to the
contrary by either party at least 120 days prior to the March 1st renewal
date. In addition, if there is a change in control of the Company or the
President's employment is terminated by the Company before the expiration of
the agreement other than for cause (as defined in the agreement), the
President is entitled to the greater of (a) all compensation due under the
remaining term of the agreement, or (b) a payment equal to three times his
average annual compensation (including any incentives) over the last five
years.
In connection with the acquisition of Miltech Corp., the active principal
became an employee of the Company. The Company entered into an employment
agreement with the former principal of Miltech Corp., dated September 10,
1993, which expires on December 31, 1997. Pursuant to the agreement, the
former principal is entitled to annual compensation
F-13
<PAGE>
in the amount of $75,000 and an annual bonus equal to the aggregate of $12,500
plus 1 1/2% of gross revenues received by the Company from operations of the
metalized substrates business.
NOTE 9. OTHER DATA
ACCRUED EXPENSES
Accrued expenses included in the accompanying consolidated financial
statements consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Accrued commissions ..................... $ 993,000 $ 503,000
Accrued payroll and related expenses .... 1,011,000 1,184,000
Other ................................... 168,000 196,000
---------- ----------
$2,172,000 $1,883,000
========== ==========
</TABLE>
VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying accounts included in the accompanying
consolidated financial statements consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Allowance for doubtful accounts receivable
and sales returns ........................ $290,000 $270,000
Allowance for unrealized loss on marketable
securities ............................... - $224,000
</TABLE>
EMPLOYEE BENEFIT DEFINED CONTRIBUTION PLAN
Effective November 1, 1985, the Company established a voluntary savings
and defined contribution plan under Section 401(k) of the Internal Revenue
Code. This Plan covers all employees meeting certain eligibility requirements
and allows participants to contribute an amount not to exceed 15% of annual
compensation. For the fiscal years ended June 30, 1995, 1994 and 1993, the
Company provided a matching contribution of $265,000, $225,000 and $212,000,
respectively, which was equal to 50% of each participant's contribution up to
a maximum of 6% of annual compensation. Employees are 100% vested in their own
contributions and become full vested in the employer contributions after five
years.
PROFIT BONUS PLAN
Effective commencing in fiscal year l995, the Company adopted a profit
bonus plan for the benefit of eligible employees, as defined. The plan
provides that for each fiscal year the Board of Directors, in its discretion,
shall establish a bonus pool not to exceed 10% of pre-tax income of the
Company for the subject fiscal year. The bonus pool is then allocated among
eligible employees in accordance with the terms of the plan. For fiscal year
l995, the bonus pool equaled 10% of pre-tax income, and the Company recognized
related compensation expense of $269,000.
F-14
<PAGE>
NOTE 10. FOREIGN OPERATIONS
The Company markets and distributes a portion of its foreign sales
through Phase Components Ltd., a wholly-owned subsidiary in the United
Kingdom.
The following table summarizes certain financial information covering the
Company's operations in the U.S. and U.K. for fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales
U.S ............ $26,264,000 $21,079,000 $18,846,000
U.K ............ 2,366,000 2,032,000 1,753,000
----------- ----------- -----------
Total ............. $28,630,000 $23,111,000 $20,599,000
=========== =========== ===========
Pretax income
U.S ............ $ 2,142,000 $ 1,302,000 $ 1,321,000
U.K ............ 326,000 158,000 112,000
----------- ----------- -----------
Total ............. $ 2,468,000 $ 1,460,000 $ 1,433,000
=========== =========== ===========
Identifiable assets
U.S ............ $29,394,000 $24,760,000 $23,289,000
U.K ............ 2,230,000 1,750,000 1,506,000
----------- ----------- -----------
Total ............. $31,624,000 $26,510,000 $24,795,000
=========== =========== ===========
</TABLE>
U.S. sales include $7,816,000, $6,009,000 and $5,758,000 for export in
fiscal years 1995, 1994 and 1993, respectively. Export sales were primarily to
customers in Europe, Canada and the Far East.
F-15
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
ANNUAL REPORT ON 10-KSB
AMERICAN TECHNICAL CERAMICS CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
EXHIBIT NO.: DESCRIPTION
- ------------ -----------
<S> <C> <C>
3(a)(ii) - Amendment to Certificate of Incorporation.
10(c)(v) - Form of Employee Stock Bonus Agreement, dated as of April 20, l995, between the
Registrant and various employees.
10(i)(iv) - Profit Bonus Plan, dated April 19, l995 and effective for the fiscal years beginning
July 1, l994.
10(q) - Secured Commercial Note, dated as of February 17, l995, between the Registrant
and European American Bank.
10 (r) - Secured Commercial Note, dated as of February 17, l995, between the Registrant
and European American Bank.
23 - Consent of KPMG Peat Marwick LLP.
</TABLE>
EXHIBIT 3(a)(ii)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
AMERICAN TECHNICAL CERAMICS CORP., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY.
FIRST: That the Board of Directors of said corporation, by
unanimous written consent of its members, filed with the minutes of the board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:
"TENTH: No director shall be personally liable to the
Corporation or any stockholder for monetary damages for
beach of fiduciary duty as a director, except for any matter
in respect to which such director shall be liable under
Section 174 of Title 8 of the Delaware Code or any amendment
thereto or successor provision thereto or shall be liable by
reason that, in addition to any and all other requirements
for such liability, he (i) shall have breached his duty of
loyalty to the Corporation or its stockholders, (ii) shall
have acted, or failed to act, in a manner that is not in
good faith, (iii) shall have acted, or failed to act, in a
manner involving intentional misconduct or a knowing
violation of law or (iv) shall have derived an improper
personal benefit."
SECOND: That at a duly called and constituted meeting of the
stockholders of American Technical Ceramics Corp., a majority of the
stockholders entitled to vote approved the adoption of said amendment in
accordance with the provisions of Section 242 of The General Corporation Law
of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said American Technical Ceramics Corp. has
caused this certificate to be signed by Victor Insetta its President and
attested by Joseph N. Morra, its Secretary, this 30th day of January, 1987.
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Victor Insetta
----------------------
Victor Insetta
President
ATTEST:
By: /s/ Joseph N. Morra
-----------------------
Joseph N. Morra
Secretary
EXHIBIT 10(C)(V)
AGREEMENT, dated as of April 20, 1995, between _____________,
residing at _________________________________________________ ("Employee"), and
AMERICAN TECHNICAL CERAMICS CORP., a Delaware corporation with offices at One
Norden Lane, Huntington Station, New York 11746 (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has granted to Employee a bonus of
5,000 shares (the "Shares") of its Common Stock, par value $.01 per shares
("Common Stock"), subject, however, among other things, to the Company's right
to repurchase such Shares under certain circumstances;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Employee hereby represents, warrants and agrees that:
(a) He shall hold the Shares for his own account (and not
for the account of others) for investment and not with a view to the
distribution or resale thereof;
(b) By virtue of his position, he has access to the same
kind of information which would be available in a registration statement filed
under the Securities Act of 1933;
(c) He is a sophisticated investor;
(d) He understands that he may not sell or otherwise
dispose of such shares in the absence of either a registration statement under
the Securities Act of 1933 or an exemption from the registration provisions of
the Securities Act of 1933; and
(e) The certificates representing the Shares may contain
a legend to the effect of (d) above.
2. (a) Employee shall not transfer or otherwise dispose of
any of his Shares, unless such transfer is made in accordance with the terms
of this Agreement. Any attempt by Employee to effect a transfer in violation
of this Agreement shall be void and ineffective for all purposes. The words
"transfer" and "dispose" shall include the making of any sale, exchange,
assignment, gift, security interest, pledge or other encumbrance, or any
contract therefore, any voting trust or other agreement with respect to the
transfer of voting rights or any other beneficial interest in the Shares, the
creation of any other claim thereto or any other transfer or disposition
whatsoever, affecting the right, title, interest or possession with respect to
the Shares.
(b) Each stock certificate representing Shares shall bear
the following legend:
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN AGREEMENT DATED AS OF APRIL 20, 1995, WHICH CONTAINS
RESTRICTIONS ON THE TRANSFER OF SUCH SHARES AND OTHER
MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY.
3. If during the one year period commencing on the date
hereof, Employee ceases to be employed by the Company for any reason (or for
no reason), including, without limitation, voluntary resignation, termination
without cause, death or disability, the Company shall have the right (but not
the obligation) to purchase any or all of the Shares for $.01 per share,
provided it gives notice of its election to do so to Employee within 45 days
of the cessation of Employee's employment.
4. If Employee desires to transfer any of her Shares,
Employee shall give written notice (the "Notice") thereof to the Company. The
Company shall thereupon have the right (but not the obligation) to purchase
any or all of the Shares specified in the Notice, in the case of a transfer by
sale, at the lower of the Applicable Price thereof (as hereinafter defined) or
the price set forth in the Notice, and in any other case, at the Applicable
Price thereof, provided it gives notice of its election to do so to Employee
within 45 days of the date upon which the Notice is given.
5. If Employee shall die, the Company shall have the right
(but not the obligation) to purchase any or all of the Shares at the
Applicable Price thereof, provided it gives notice of its election to do so to
the executor or administrator of Employee's estate within 45 days after the
Company receives actual notice of Employee's death, or, if no executor or
administrator has been appointed within such 45-day period, within 45 days
after the appointment of an executor or an administrator.
6. For purposes of this Agreement, the term "Applicable
Price" shall mean:
(a) During the period commencing on the date hereof and
ending on the first anniversary of such date, $.01 per share; and
(b) Thereafter, the market price per Share, which shall
mean the average of the last reported sales price, regular way, of the Common
Stock for the 30 trading days immediately preceding the date upon which the
event giving rise to the right to repurchase takes place (or, if no sale takes
place on any such day, the closing bid price of the Common Stock on such day),
on the principal securities exchange (including the National Association of
Securities Dealers, Inc. (the "NASD'S") National Market System) on which the
Common Stock is admitted or listed for trading, or, if the Common Stock is not
listed on any such exchange, on any such day, the highest reported bid price
for the Common Stock as furnished by the NASD through NASDAQ, or a similar
organization if NASDAQ is no longer reporting such information, or, if the
Common Stock is not listed for trading on an exchange and is not quoted on
NASDAQ or any similar organization on any such day, the fair value of a share
of Common Stock on such day as determined by the Board of Directors of the
Company in good faith.
7. (a) Unless the parties to any purchase and sale pursuant
to this Agreement otherwise agree in writing, the closing of any purchase and
sale of Shares in
- 2 -
<PAGE>
accordance with this Agreement shall take place on the 30th day after the date
notice is given by the Company of its election to purchase such Shares. Any
such closing shall be held at the offices of the Company at 10:00a.m., local
time, or at such other time and place as the parties to such purchase and sale
otherwise agree in writing.
(b) At the closing, the Company shall deliver by check an
amount, in cash, equal to, the purchase price for the Shares to be purchased
and Employee shall deliver the certificates for said Shares in proper form for
transfer. By delivering the certificates at the closing, Employee shall be
deemed to represent that the Company will receive good title to such Shares,
free and clear of all liens, security interests, pledges, charges,
encumbrances, voting trusts and other similar rights of any kind or nature
whatsoever, other than those created by this Agreement.
8. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including, without limitation, recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that any remedy at
law, including monetary damages, for breach of any such provision will be
inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
9. The provisions of this Agreement shall be deemed to apply
equally to any Shares or other securities distributed in respect of such
Shares (including, without limitation, any securities issued in connection
with any stock split, stock dividend or similar distribution).
10. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns and Employee and her
heirs, executors and administrators.
11. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
12. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
13. If any provision of this Agreement is invalid, illegal,
or unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person, party or circumstance, it shall
nevertheless remain applicable to all other persons, parties and
circumstances.
- 3 -
<PAGE>
14. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telex, telegram or facsimile
transmission or sent by registered or certified mail (return receipt
requested) postage prepaid to the address of the party set forth in the
preamble to this Agreement (or at such other address for any party as shall be
specified by like notice). Any notices or other communications given by
personal delivery, telex, telegram or facsimile transmission shall be deemed
given when so delivered, telexed, telegrammed or transmitted, and any notices
or other communications given by registered or certified mail shall be deemed
effective upon registration or certification thereof, provided that notices of
a change of address shall be deemed given only upon receipt thereof.
15. At any time and from time to time each party agrees to
take such actions and to execute and deliver such instruments, documents and
agreements as may be reasonably necessary to carry out the intent and
effectuate the purpose of this Agreement.
16. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law.
17. A copy of this Agreement shall be filed with the
Secretary of the Company.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands as of the day and year first above written.
AMERICAN TECHNICAL CERAMICS CORP.
By: ____________________________
Victor Insetta, President
EMPLOYEE:
________________________________
97209
- 4 -
Q:\SSDATA1\PNGENERL\95221.1
EXHIBIT 10(I)(IV)
AMERICAN TECHNICAL CERAMICS CORP.
PROFIT BONUS PLAN
This profit bonus plan is adopted by American Technical Ceramics
Corp. (the "Corporation"), effective for its fiscal year beginning July 1,
1994 and ending June 30, 1995.
WHEREAS, the Corporation has benefited from the efforts of its loyal
and productive employees; and
WHEREAS, the Corporation is desirous of continuing to retain and
attract a loyal and productive workforce and to reward its current employees
for their efforts on behalf of the Corporation; and
WHEREAS, the Corporation is desirous of establishing a program which
will enable eligible employees to participate in the profits of the
Corporation;
NOW, THEREFORE, the Company does hereby establish the American
Technical Ceramics Profit Bonus Plan (the "Plan") as set forth herein.
ARTICLE I
NATURE OF THE PLAN
1.1 IN GENERAL. This Plan is intended to allow Eligible Employees (as
hereinafter defined) to share in the profits of the Corporation on a current
basis to the extent provided in the Plan.
1.2 EXEMPTION FROM ERISA COVERAGE. This Plan is intended to be exempt
from the requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
- 1 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
1.3 EFFECTIVE DATE. This Plan shall be effective with respect to
profits earned by the Corporation in the fiscal year ending June 30, 1995.
ARTICLE II
DEFINITIONS
2.1 "BOARD" or "BOARD OF DIRECTORS" shall mean the Board of Directors
of the Corporation.
2.2 "BONUS POOL" shall mean, for each Fiscal Year, the dollar amount
of funds to be contributed by the Corporation to this Plan in respect of such
fiscal year determined in accordance with Article IV hereof.
2.3 "COMMITTEE" shall mean a committee of not less than two persons
which may be appointed by the Board to administer this Plan in accordance with
the provisions of Article VI of this Plan.
2.4 "COMPENSATION" shall mean the compensation actually paid to an
Employee in a Fiscal Year including holiday pay, vacation pay and sick pay,
but excluding overtime pay, night differential, commissions and any bonus,
incentive or contingent compensation of any kind.
2.5 "CORPORATION" shall mean American Technical Ceramics Corp., a
Delaware corporation.
2.6 "DISTRIBUTION DATE" shall mean the 107th day following the end of
a Fiscal Year (currently October 15) or, if such day is a Saturday, Sunday or
legal holiday, the first normal business day thereafter.
2.7 "EMPLOYEE" shall mean any individual who is a common law employee
of the Corporation.
- 2 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
2.8 "ELIGIBLE EMPLOYEE" shall mean any Employee who is not an
Excluded Category Employee who is eligible to participate in the Plan in
accordance with the provisions of Article III of this Plan.
2.9 "EXCLUDED CATEGORY EMPLOYEE" shall mean any Employee holding any
one or more of the following titles or falling into one or more of the
following categories:
a. President.
b. Vice President.
c. Operating Director.
d. Any person who, in the opinion of the Board or the
Committee, performs functions customarily
performed by persons holding any of the titles
listed above.
e. Temporary Employees.
f. Any employee currently participating in a
commission plan maintained by the Corporation.
g. Any employee currently participating in an
incentive plan maintained or sponsored by the
Corporation or who otherwise receives any bonus,
incentive or contingent compensation of any kind.
h. Any other employee or category of employees who
the Board or the Committee may designate from time
to time as an Excluded Category Employee.
2.10 "FISCAL YEAR" shall mean the fiscal year of the Corporation
which currently begins on July 1 and ends on the following June 30.
- 3 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
2.11 "HOUR OF SERVICE" shall mean each hour for which an employee is
paid (not including overtime) or is entitled to be paid for periods for which
he or she is performing no duties.
2.12 "PER CAPITA BONUS POOL" shall mean that portion of the Bonus
Pool which is allocated among Eligible Employees in proportion to the number
of Eligible Employees in accordance with Article V.
2.13 "PLAN" shall mean the American Technical Ceramics Corp. Profit
Bonus Plan as set forth herein, as it may be amended from time to time.
2.14 "PROFITS" shall mean the net income of the Corporation for a
Fiscal Year before provision for federal, state and local income taxes as
reflected in its audited financial statements for such Fiscal Year prepared in
accordance with generally accepted accounting principles.
2.15 "SALARY BONUS POOL" shall mean that portion of the Bonus Pool
that is allocated among Eligible Employees in proportion to their Compensation
in accordance with Article V.
2.16 "TEMPORARY EMPLOYEE" shall mean any Employee whose employment
records indicate was hired by the Corporation on a temporary basis.
ARTICLE III
ELIGIBILITY
3.1 ELIGIBILITY REQUIREMENTS. Subject to Section 3.2 of this Plan,
all Employees of the Corporation, other than Excluded Category Employees, who
(i) were actively employed on or before the January 1 within the Fiscal Year;
(ii) have completed 1,000 Hours of Service within such Fiscal Year; (iii) are
employed by the Corporation (other than as an Excluded
- 4 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
Category Employee) on June 30 of such Fiscal Year; and (iv) are still be
employed by the Corporation on the 77th day after the end of such Fiscal Year
(currently September 15), shall be eligible to participate in the Plan. Any
questions concerning an Employee's status for purposes of participating in the
Plan shall be determined by the Committee (or, if no Committee has been
appointed, the Board) in its sole discretion.
3.2 CHANGE IN STATUS. For purposes of the Plan, an Excluded Category
Employee who, as a result of a change in employment status, is no longer an
Excluded Category Employee shall be deemed to have commenced his or her
employment on the day he or she ceased to be an Excluded Category Employee. An
Eligible Employee who, as a result of a change in employment status, becomes
an Excluded Category Employee, shall cease his or her participation in this
Plan on the date his or her status changes. If an Eligible Employee becomes an
Excluded Category Employee on or prior to June 30 of a Fiscal Year, he or she
shall not be eligible to participate in the Plan in respect of such Fiscal
Year. If, however, an Eligible Employee becomes an Excluded Category Employee
after June 30 of a Fiscal Year he or she shall still be eligible to
participate in the Plan with respect to the Fiscal Year just concluded,
provided he or she (i) is still employed by the Corporation on the 92nd day
after the end of such Fiscal Year (currently September 30), and (ii) satisfies
the other eligibility requirements set forth in Section 3.1 of this Plan in
respect of such concluded Fiscal Year.
ARTICLE IV
DETERMINATION OF THE BONUS POOL
4.1 DETERMINATION OF CONTRIBUTION PERCENTAGE. During the fourth
quarter of each Fiscal Year (currently the period from April 1 to June 30),
the Board, in its sole discretion,
- 5 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
shall determine the percentage of the Profits in respect of such Fiscal Year,
which will be contributed to the Plan. In no event shall the percentage of the
Corporation's Profits to be contributed to the Plan in respect of any Fiscal
Year exceed 10% of such Profits. The Board, for any reason or for no reason,
in its sole discretion, may elect not to contribute any of the Profits in
respect of a Fiscal Year to the Plan regardless of the level of Profits.
4.2 CALCULATION OF BONUS POOL. The amount which will be contributed
to the Plan on account of a Fiscal Year and which shall constitute the Bonus
Pool for such Fiscal Year shall be determined by multiplying the percentage
determined in Section 4.1 by the amount of the Corporation's Profits in
respect of such Fiscal Year. Any ambiguities regarding the Corporation's
Profits in respect of any Fiscal Year shall be resolved by the Board, in its
sole discretion.
ARTICLE V
ALLOCATION OF BONUS POOL; PAYMENT OF BONUSES
5.1 DIVISION OF BONUS POOL. The Bonus Pool shall be divided into two
parts which shall be as nearly equal as possible. One part shall constitute
the Per Capita Bonus Pool and the other part shall constitute the Salary Bonus
Pool.
5.2 DETERMINATION OF BONUS RECIPIENTS. Each Fiscal Year, the
Committee (or if no Committee has been appointed, the Board) shall determine
which Employees are Eligible Employees in respect of such Fiscal Year and
shall allocate the Bonus Pool among such Eligible Employees in the manner set
forth in Sections 5.3 and 5.4.
5.3 ALLOCATION OF THE PER CAPITA BONUS POOL. Each Eligible Employee
shall receive an equal share of the Per Capita Bonus Pool.
- 6 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
5.4 ALLOCATION OF THE SALARY BONUS POOL. Each Eligible Employee shall
receive a share of the Salary Bonus Pool determined by multiplying the amount
of the Salary Bonus Pool by the percentage that his or her Compensation bears
to the total Compensation of all Eligible Employees determined pursuant to
Section 5.2 of this Plan.
5.5 PAYMENT OF BONUSES. The bonuses determined in accordance with the
provisions of this Article V shall be paid to Eligible Employees on or before
the Distribution Date.
5.6 TITLE TO FUNDS. Title to all funds under this Plan shall remain
in the Corporation until said funds are actually distributed. The existence of
this Plan or any allocation of funds shall not create any title or vested
interest in any separate fund by any Employee.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1 APPOINTMENT OF COMMITTEE. The Plan shall be administered by the
Board. Alternatively, the Board may appoint a committee of not less than two
persons (who need not be directors but who shall not be eligible to
participate in this Plan) who shall be responsible for the administration and
operation of this Plan and who shall have the duties, responsibilities and
powers set forth in this Article VI.
6.2 DUTIES AND RESPONSIBILITIES OF THE COMMITTEE. If appointed, the
Committee shall have, without limitation, the following responsibilities:
a. Determination of Eligible Employees.
b. Calculation of each such Eligible Employee's share
of the Bonus Pool.
- 7 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
c. Distribution of funds to Eligible Employees in
accordance with the terms of the Plan.
d. Establishing administrative rules and regulations
of the Plan as necessary or appropriate.
e. Resolving disputed issues and determining claims
for benefits.
f. Resolving any ambiguities arising under the Plan
concerning its operation and administration.
6.3 RESERVATION OF RIGHTS BY BOARD. The Committee shall have no
authority to determine the percentage of the Corporation's contribution to the
Plan or to resolve ambiguities concerning the amount of the Corporation's
Profits, which determinations shall be made solely by the Board.
6.4 NO DUTY OF ENFORCEMENT. The Committee shall have no obligation to
enforce the payment of any funds to any Eligible Employee and such payment
shall be the sole responsibility of the Corporation.
6.5 INDEMNIFICATION. The Corporation shall indemnify the Committee
and its individual members for their actions performed in connection with the
administration and operation of this Plan to the full extent provided by the
Certificate of Incorporation and ByLaws of the Corporation and by applicable
law.
ARTICLE VII
MISCELLANEOUS
7.1 AMENDMENT OR TERMINATION. The Plan may be amended or terminated
by the Board at any time in its sole discretion.
- 8 -
<PAGE>
Q:\SSDATA1\PNGENERL\95221.1
7.2 GENDER OR NUMBER. Except as otherwise clearly indicated by
context, words in the masculine gender shall be deemed to include the feminine
gender and vice versa. Words in the singular form shall be deemed to include
the plural form and vice versa.
7.3 CONTROLLING STATE LAW. This Plan shall be construed and enforced
according to the laws of the state of New York.
7.4 NO CONTRACT OF EMPLOYMENT. Neither participation in the Plan,
establishment of the Plan or any modification thereof, nor payment of any
benefit, shall give any Employee the right to be retained in the employ of the
Corporation.
7.5 NOTICES. All notices to the Corporation, the Board and the
Committee shall be delivered to such party at the following address:
American Technical Ceramics Corp.
One Norden Lane
Huntington Station, New York 11746
Attention: Kathleen M. Kelly, Vice President - Administration
IN WITNESS WHEREOF, American Technical Ceramics Corp. has caused
these presents to be executed by its officers duly authorized this ______day
of _________, 1995.
AMERICAN TECHNICAL CERAMICS CORP.
BY:______________________________
- 9 -
EXHIBIT 10(q)
EAB SECURED COMMERCIAL NOTE
- -----------------------------------------------------------------------------
$1,000,000 February 17, 1995
- ---------- ----------------------
FOR VALUE RECEIVED, the undersigned promises to pay to the order of EUROPEAN
AMERICAN BANK ("EAB"), at any of its banking offices, the sum of
One Million
___________________ Dollars, to be paid as follows:
[ ] On_________________, the principal sum of $____________ with interest to be
(Maturity Date; No. of Days After Date)
payable___________________at maturity at the rate indicated below, unless
(Monthly, and, or, Quarterly and)
discounted.
60 monthly $16,666.47
[X] In equal, consecutive ______________ principal installments of ___________
1st March 1, 1995
on the ______ day of the month commencing _______________ and the balance
$16,666.47 February 1, 2000 monthly and
of $___________ on ________________ with interest to be payable ___________
(Monthly, and, or, Quarterly and)
at maturity at the rate indicated below.
[ ] In____________equal, consecutive monthly installments of principal plus
(No. of)
interest in the amount of $________ each, on the ____day of each month
commencing________, 19__ and the balance of $_______on_______, 19__ with
interest to be calculated at the rate indicated below.
INTEREST SHALL BE:
6.85
[X] equal to the rate of______% per annum.*
[ ] discounted at the rate of______% per annum.
[ ] equal to the rate of______% above EAB's Prime Rate (the rate of
interest stated by EAB to be its Prime Rate) as in effect from time to
time.
[ ] equal to the following rate: _____________________________________________
__________________________________________________________________________
* For the period commencing on the date hereof through February 16, 1997 and
shall be adjusted to a fixed rate at 8.85% per annum commencing on February
17, 1997 and at all times thereafter.
Any amount of principal hereof which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear interest until paid in
full at a rate 3% per annum in excess of the discount rate or the interest
rate in effect at maturity. Interest shall be calculated on a basis of a 360
day year for the actual number of days elapsed.
The undersigned hereby grants EAB a lien on and security interest in the
following property (including any and all renewals, replacements and/or
substitutions thereof and any and all procceds and yields thereof) as
collateral security for the payment of any and all obligations of the
undersigned to EAB, under this note, whether now existing or hereafter
incurred (all of such obligations, including this Note, being hereinafter
called the "Obligations"):
Specific equipment, including accessions thereto, and replacements or
substitutions thereof and spare parts now owned or hereafter acquired, more
fully described on attached Schedule "A". See rider attached hereto and made
a part thereof.
The undersigned also hereby grants EAB a security interest in, the right of
setoff against and pledge and assignment of any and all monies, securities
(to the extent permitted by Regulation U of the Federal Reserve Board),
general intangibles and other property of the undersigned and the proceeds
thereof, now or hereafter held or received by EAB from or for the undersigned
in safekeeping, in transit or otherwise, and also upon any and all deposits
(general or special) (all of the
<PAGE>
foregoing being hereinafter called the "Collateral"). The undersigned hereby
authorized EAB to execute and file, at any time(s), on behalf of the
undersigned, one or more financing statements with respect to any part or all
of the Collateral, although the same may have been executed only by EAB as
secured party.
Upon the occurrence with respect to the undersigned of any of the following
(each, an "Event of Default"): filing by or against the undersigned of a
petition commencing any proceeding under any bankruptcy, reorganization or
rearrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or hereafter in effect; making an assignment
for the benefit of creditors; petitioning or applying to any tribunal for the
appointment of a custodian, receiver or trustee for the undersigned or for a
substantial part of its assets; entry of judgment or order of attachment,
injunction or governmental tax lien or levy issued against the undersigned or
against property of the undersigned; in an amount in excess of $300,000.00
consent by the undersigned to assume, suffer or allow to exist, without the
prior written consent of EAB, any lien, mortgage, assignment or other
encumbrance on any of its assets or personal property, listed on Schedule "A"
herein; default in the punctual payment or performance of this or any other
obligation to EAB or to any other lender at any time; the existence or
occurrence at any time of one or more conditions or events, which, in the
sole opinion of EAB, has resulted or may result in a material adverse change
in the business, properties or financial condition of the undersigned, which
shall increase the credit risk or impair the collateral of EAB, then this
Note shall at the sole option of EAB become due and payable without notice or
demand.
Upon the failure to pay any of the Obligations when the same shall become
due, or upon the happening of any of the Events of Default hereinabove set
forth, and at any time thereafter, EAB, without notice (except where any
statute specifically requires reasonable notification of any public or
private sale or other intended disposition, in which event the undersigned
hereby agrees that five days notice by ordinary mail, postage prepaid, to any
address of the undersigned setting forth the place and time of any public
sale or of the place and time after which any private sale or other
disposition may be made shall be deemed reasonable notice of such sale or
other disposition), may (in addition to all other rights and remedies
afforded EAB under the Uniform Commercial Code or under any security
agreement at any time executed and delivered by the undersigned to EAB)
forthwith realize upon the Collateral, with the right of EAB upon any such
sale or sales, public or private, to purchase the whole or any part of the
Collateral, free of any right of redemption, which right or equity is hereby
expressly waived and released by the undersigned. EAB may apply the net
proceeds of any such sale, after deducting all costs and expenses of every
kind incurred in connection therewith, to the payment in whole or in part, in
such order as EAB may elect, to any one or more or all of the Obligations,
whether then due or not due, making proper rebate for interest or discount
not earned, and to account for the surplus, if any, to the undersigned who
shall remain liable to EAB for the payment of any deficiency with interest.
Any securities held by EAB hereunder may, whether or not an Event of Default
has occurred, be registered and held in the name of EAB or its nominee,
without disclosing that EAB is a pledgee thereof, and EAB or said nominee
shall be entitled to receive and retain all distributions therefrom, and to
exercise all rights with respect thereto as if it was the absolute owner
thereof, but shall not be obligated to do so. Should any securities,
distributions or proceeds be received by the undersigned as the registered
owner of any Collateral, then same shall be deemed part of the Collateral and
shall be held in trust and delivered to EAB in kind, duly endorsed in blank
where appropriate.
EAB shall not, by any act, delay, omission or otherwise, be deemed to have
waived any of its rights and/or remedies hereunder. No change, amendment,
modification, termination, waiver, or discharge, in whole or in part, of any
provision of this Note shall be effective unless in writing and signed by the
party against whom such change, amendment, modification, termination, waiver,
or discharge is sought to be enforced. The undersigned, in any litigation
with respect to, in connection with or arising out of this Note, waives the
right to allege that part performance by EAB of an oral agreement satisfies
the requirements of a writing contained in the preceding sentence.
In the event that EAB for any reason whatsoever shall deem it necessary to
refer this Note to an attorney for the enforcement thereof, there shall be
due from the undersigned, in addition to the unpaid principal, interest and
late charges hereunder, reasonable attorney's fees (whether in-house or
outside counsel) together with all costs and expenses of any such action.
This Note shall be governed by and construed in accordance with the laws of
the State of New York. The undersigned in any litigation in which EAB and any
of them shall be adverse parties, waives trial by jury and the right to
interpose any defense, setoff or counterclaim of any nature or description
including without limitation, waiver and estoppel. The undersigned consents
to the jurisdiction of any state or federal court located in the State of New
York in any action brought to enforce any rights of EAB under this Note and
consents to the placing of venue in the County of Nassau or any other
<PAGE>
county permitted by law and further expressly waives any claim that any such
action or proceeding has been brought in an inconvenient forum. The
undersigned agrees that service of process may be effected by the mailing of
a summons by first class mail, postage prepaid, and certified mail, return
receipt requested to the address of the undersigned provided to EAB.
The undersigned, if more than one, shall be jointly and severally liable
hereunder. This Note shall bind the respective successors, assigns, heirs and
representatives of the undersigned. This Note is not assignable by the
undersigned without EAB's prior written consent.
Name of Borrower AMERICAN TECHNICAL CERAMICS CORP.
---------------------------------------------------
By: /s/ Kathleen M. Kelly V.P. 2/17/95
-----------------------------------------------
Signature and Title
Kathleen M. Kelly Vice President
By: ------------------------------------------------
Signature and Title
Street Address ONE NORDEN LANE
------------------------------------
City and State HUNTINGTON STATION, NEW YORK 11746
------------------------------------
No. 00067
<PAGE>
RIDER TO SECURED COMMERCIAL NOTE
DATED FEBRUARY 17, 1995 IN THE
AMOUNT OF $1,000,000
1. The undersigned covenants and agrees:
(a) To deliver to EAB:
(i) Annually, as soon as available, but in any event within 120 days after
the last day of each of its fiscal years, a copy of the completed Form 10-K
filed or to be filed with the Securities and Exchange Commission (the "SEC")
pursuant to the rules and regulations of the SEC, which shall include
consolidated balance sheets of the undersigned and its subsidiaries as at
such last day of the fiscal year, and consolidated statements of income and
retained earnings and cash flows, for such fiscal year, each prepared in
accordance with generally accepted accounting principles consistently
applied, in reasonable detail, such consolidated statements to be certified
without qualification by the accounting firm of KPMG Peat Marwick LLP (the
"Company") or by such other firm of independent certified public accountants
as may be reasonably satisfactory to EAB.
(ii) As soon as available, but in any event within 60 days after the end
of each of the first three fiscal quarterly periods of each fiscal year, the
completed Form 10-Q filed or to be filed with the SEC pursuant to the rules
and regulations of the SEC, which shall include the consolidated balance
sheets of the undersigned and its subsidiaries, as of the last day of such
quarter, and consolidated statements of income, for such quarterly period and
the portion of the fiscal year through such date, all in reasonable detail,
each such statement to be prepared by the undersigned in accordance with
generally accepted accounting principles consistently applied.
(b) To maintain:
(i) At all times a Maximum Leverage Ratio, the ratio of total
unsubordinated liabilities to tangible net worth of not greater than 0.80 to
1.0.
(ii) As at each fiscal year-end, a Debt Service Coverage Ratio, the ratio
of net profits plus depreciation and amortization to the current portion of
long-term debt, (the principal and interest due in respect of long-term debt
for the ensuing twelve-month period), of not less than 1.2 to 1.0.
2. Prepayment: Upon not less than three (3) days prior written notice to EAB,
the undersigned may prepay this Note in whole or in part of multiples of
$10,000 on the date set for the regular monthly payments of interest and
principal. All prepayments shall be accompanied by the interest accrued on
the amount prepaid through the date of prepayment. Any prepayment made prior
to ninety (90) days before the maturity of this Note shall be subject to an
additional payment as liquidated damages for such prepayment and not as a
penalty equal to the net present value of (A) (i) the difference between the
interest set forth herein and the current yield on U.S. Treasury Notes with
maturities approximately equal to the remaining time between the date of
prepayment and the maturity date (expressed as a percentage), multipled by
(ii) the total amount of principal prepaid, divided by (iii) 360 multiplied
by (B) the actual number of days remaining. In addition, the undersigned
shall reimburse EAB for any and all additional administrative or processing
costs incurred by EAB as a result of such prepayment.
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly 2/17/95
-----------------------------------
Kathleen M. Kelly
Vice President
<PAGE>
SCHEDULE A
Attached to that certain Secured Commercial Note in the amount of
$1,000,000 dated February 17, 1995.
DESCRIPTION OF EQUIPMENT
Draiswerke, Inc.
Mill
John Iacono
2 Oil Free Compressors
RJ Lee Group
SEM Analyzer
Ismeca
Custom Laser Marking System
Lumonics
Laser Beam
Palomar Systems and Machines
Rotary Tester
BTU International
Furnace
Palomar Systems and Machines
(2) Lasers
Hewlett Packard
3 Capacitance Meters
Veeco Instruments
Fluorescent Measuring System
Norman Levy Associates
Mask Aligner & Desiccator Boxes
V.J. Enterprises
Laser Resistor Trimming System
Keith Co.
Box Furnace
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly 2/17/95
-------------------------------
Kathleen M. Kelly
Vice President
Page 1 of 2
<PAGE>
SCHEDULE A
Attached to that certain Secured Commercial Note in the amount of
$1,000,000 dated February 17, 1995.
DESCRIPTION OF EQUIPMENT
Vision Engineering
Microscope
Henry Radio
RF Current Test System
Palomar Systems & Machines
Palomar 2001 ATM Table/Granite Block
MH International
Vacuum System
Microfluidics Corp.
Microfluidizer with Accessories
Electrosort Automation
Die Sorter
Inter-Continental Microwave
RF Microwave Measuring Fixtures and Assemblies
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly 2/17/95
---------------------------------
Kathleen M. Kelly
Vice President
Page 2 of 2
<PAGE>
EAB GENERAL SECURITY AGREEMENT
- -----------------------------------------------------------------------------
Date February 17, 1995
The undersigned (herein, whether one or more in number, referred to as Debtor
and which, if two or more in number, shall be jointly and severally bound)
with an address as it appears with the signature below, hereby agree(s) in
favor of European American Bank, a New York Banking Corporation (herein
referred to as Secured Party), as follows:
1. In consideration of one or more loans, advances, or other financial
accommodations at any time before, at or after date made or extended by
Secured Party to Debtor, directly or indirectly, as principal, guarantor or
otherwise, at the sole discretion of Secured Party relating to the collateral
as herein after defined in each instance, Debtor hereby grants to Secured
Party a security interest in, a continuing lien upon and a right of set-off
against, and Debtor hereby assigns to Secured Party, the Collateral described
in Paragraph 2, to secure the payment, performance and observance of all
indebtedness, obligations, liabilities and agreements of any kind of Debtor
to Secured Party, now existing or hereafter arising, direct or indirect
(including participations or any interest of Secured Party in obligations of
Debtor to others), acquired outright, conditionally, or as collateral
security from another, absolute or contingent, joint or several, secured or
unsecured, due or not, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, in each instance relating to
collateral and of all loan agreements, documents and instruments evidencing
any of the foregoing obligations that may have been issued, created, assumed
or guaranteed (all of the foregoing being herein referred to as the
"Obligations").
2. The Collateral is described as follows and/or on Schedule A, if any,
annexed hereto as part hereof and on any separate schedule at any time
furnished by Debtor to Secured Party (all of which are hereby deemed part of
this Security Agreement), which Collateral includes all attachments,
accessions and equipment now or hereafter affixed to the Collateral or used
in connection therewith, substitutions and replacements thereof, and (unless
the description of the Collateral expressly excludes after-acquired
Collateral) all items of the Collateral both now owned or existing and
hereafter acquired, created or arising, and any and all products and proceeds
thereof (including, without limitation, any claims of Debtor against third
parties, for loss or damage to or destruction of any or all of the
Collateral):
Specific equipment, including accessions thereto, and replacements or
substitutions thereof and spare parts now owned or hereafter acquired,
more fully described on attached Schedule "A".
together with any and all monies, securities, drafts, notes, items and other
property of the Debtor and the proceeds thereof, now or hereafter held or
received by or in transit to, Secured Party from or for the Debtor, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and
any and all deposits (general or special), balances, sums, proceeds, and
credits of the Debtor with, and any and all claims of the Debtor against,
Secured Party, at any time existing. In the event that the Collateral
includes inventory, Debtor also grants to Secured Party a security interest
in, and the Collateral shall include, all labels and other devices, names, or
marks affixed or to be affixed to inventory for purposes of selling or of
identifying the same or the seller or manufacturer thereof and all right,
title and interest of Debtor therein and thereto.
3. Debtor warrants, represents and covenants that: (a) the chief and other
places of business of Debtor, the books and records relating to the
Collateral and the Collateral are located at the addresses set forth below
and Debtor will not change any of the same without prior written notice to
and consent of Secured Party; (b) the Collateral is and will be used in
Debtor's business and not for personal, family, household or farming use; (c)
the Collateral is now, and at all times will be, owned by Debtor free and
clear of all liens, security interests, claims and encumbrances, except as
set forth on Schedule B, if any, annexed hereto as part hereof; (d) Debtor
will not assign, sell, mortgage, lease, transfer, pledge, grant a security
interest in or lien upon, encumber, or otherwise dispose of or abandon, nor
will Debtor suffer or permit any of the same to occur with respect to, any
part or all of the Collateral, without prior written consent of Secured
Party, except for the sale from time to time in the ordinary course of
business of Debtor of such items of Collateral as may constitute part of the
business inventory of Debtor, and the inclusion of "proceeds" of the
Collateral under the security interest granted herein, shall not be deemed a
consent by Secured Party to any sale or other disposition of any part or all
of the Collateral except as expressly permitted herein; (e) Debtor has made,
and will continue to make payment or deposit or otherwise provide for the
payment, when due, of all taxes, assessments or contributions required by law
which have been or may be levied or assessed against the Debtor, whether with
respect to any of the Collateral, to any wages or salaries paid by
<PAGE>
Debtor, or otherwise, and will deliver to Secured Party, on demand,
certificates or other evidence satisfactory to Secured Party attesting
thereto; (f) Debtor will use the Collateral for lawful purposes only, with
the reasonable care and caution and in conformity with all applicable laws,
ordinances and regulations; (g) Debtor will keep the Collateral in good
order, repair, running and marketable condition, at Debtor's own cost and
expense; (h) Secured Party shall at all times have free access to and right
of inspection of the Collateral and any records pertaining thereto (and the
right to make extracts from and to receive from Debtor originals or true
copies of such records and any papers and instruments relating to any or all
of the Collateral upon request therefor) and Debtor hereby grants to Secured
Party a security interest in all such records, papers and instruments to
secure the payment, performance and observance of the Obligations; (i) the
Collateral is now and shall remain personal property, and Debtor will not
permit any of the Collateral to become a part of or affixed to real property
without prior written notice to Secured Party and without first making all
arrangements, and delivering, or causing to be delivered, to Secured Party
all instruments and documents, including, without limitation, waivers and
subordination agreements by any landlords or mortgages, requested by and
satisfactory to Secured Party to preserve and protect the primary security
interest granted herein against all persons; (j) Debtor, at its own expense,
will insure the Collateral in the name of and with loss or damage payable to
Secured Party, as its interest may appear, against loss or damage by fire and
other hazards, and extended coverage, theft, burglary, bodily injury and such
other risks, with such companies and in such amounts, as is reasonably
required by Secured Party at any time (all such policies providing 10 days
minimum written notice of cancellation to Secured Party) and Debtor shall
deliver to Secured Party the original or certified duplicate policies, or
certificates or other evidence satisfactory to Secured Party of compliance
with the foregoing insurance provisions and Debtor will promptly notify
Secured Party of any loss or damage to any of the Collateral or arising from
its use; (k) at its option, Secured Party may apply any insurance monies
received at any time to the cost of repairs to or replacements for the
Collateral and/or to payment of any of the Obligations, whether or not due,
in any order Secured Party may determine, any surplus (after payment of all
costs, reasonable attorney's fees and disbursements) to be remitted to Debtor
who shall remain liable for any deficiency; (l) Debtor will, at its expense,
perform all acts and execute all documents requested by Secured Party at any
time to evidence, perfect, maintain and enforce Secured Party's primary
security interest in the Collateral or otherwise in furtherance of the
provisions of this Security Agreement; (m) Debtor assumes all responsibility
and liability arising from the use of the Collateral; (n) upon request of
Secured Party, at any time and from time to time, Debtor shall, at its sole
cost and expense, execute and deliver to Secured Party one or more financing
statements pursuant to the Uniform Commercial Code ("UCC") and one or more
applications for certificate of title and any other papers, documents or
instruments requested by Secured Party in connection with this Security
Agreement, and Debtor hereby authorizes Secured Party to execute and file at
any time or times, one or more financing statements with respect to all or
any part of the Collateral, signed only by the Secured Party; (o) in its
discretion, Secured Party may, whether or not a Default (as hereinafter
defined) has occurred or any of the Obligations be due, in its name or
Debtor's or otherwise, notify any account debtor or obligor of any account,
contract, instrument, chattel paper or general intangible included in the
Collateral to make payment to Secured Party; (p) Secured Party may, in its
sole discretion and at any time, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable by
Secured Party with respect to, any of the Collateral, and/or extend the time
of payment, arrange for payment in installments, or otherwise modify the
terms of, or release, any of the Collateral or the Obligations, all without
notice to or consent by Debtor and without otherwise discharging or affecting
the Obligations, the Collateral or the security interest granted herein; (q)
Secured Party may, in its discretion, for the account and expense of Debtor,
pay any amount or do any act required of Debtor hereunder or requested by
Secured Party to preserve, protect, maintain or enforce the Obligations, the
Collateral or the primary security interest granted herein, and which Debtor
fails to do or pay, and any such payment shall be deemed an advance by
Secured Party to Debtor and shall be payable on demand together with interest
at the highest rate then payable on any of the Obligations; (r) Debtor will
promptly pay Secured Party for any and all sums, costs, and expenses which
Secured Party may pay or incur pursuant to the provisions of this Security
Agreement or in defending, protecting or enforcing the security interest
granted herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including but not limited to all court
costs, collection charges, travel, and reasonable attorney's fees, all of
which, together with interest at a rate equal to the highest rate then
payable on any of the Obligations, shall be part of the Obligations and be
payable on demand; (s) whether or not a Default has occurred, Secured Party,
in its discretion, may transfer to or register in the name of Secured Party
or its nominee all or any of the Collateral consisting of securities, and
whether or not so transferred or registered, Secured Party shall be entitled
to receive and retain all income, dividends (including stock dividends and
rights to subscribe) and other distributions thereon as part of the
Collateral and to exchange any or all such Collateral upon the
reorganization, recapitalization, or readjustment of any entity issuing such
<PAGE>
securities, and to exercise all rights with respect thereto as if it was the
absolute owner thereof, provided that until the occurrence
of a Default and whether or not the Collateral is transferred to or
registered in the name of Secured Party or its nominee, Debtor alone shall be
entitled to exercise the right to vote such Collateral, and if the Collateral
has been so transferred or registered, Secured Party shall take such action
as Debtor may reasonably request to enable Debtor to exercise the right to
vote such Collateral or any part thereof for any purpose which is not
inconsistent with the terms of this Security Agreement or the Obligations or
which would not have an adverse effect on the value of the Collateral or any
part thereof; (t) any of the proceeds of the Collateral received by Debtor
shall not be commingled with other property of Debtor, but shall be
segregated, held by the Debtor in trust as the exclusive property of Secured
Party, and Debtor will immediately deliver to Secured Party the identical
checks, monies, or other proceeds of Collateral received, duly endorsed in
blank where appropriate to effectuate the provisions hereof, the same to be
held by Secured Party as additional Collateral hereunder or, at Secured
Party's option to be applied to payment of any of the Obligations, whether or
not due and in any order; and (u) at any time Secured Party may assign,
transfer and deliver to any transferee of any of the Obligations, any or all
of the Collateral, whereupon Secured Party shall be fully discharged from all
responsibility and the transferee shall be vested with all powers and rights
of Secured Party hereunder with respect thereto, but Secured Party shall
retain all rights and powers with respect to any Collateral not assigned,
transferred or delivered.
4. The occurrence of any one or more of the following events shall constitute
an event of default ("Default") by Debtor under this Security Agreement: (a)
if at any time Secured Party shall, in its sole discretion, consider the
Obligations insecure; (b) if Debtor or any obligor, maker, endorser,
acceptor, surety or guarantor of, or any party to, any of the Obligations or
the Collateral (the same, including Debtor, being collectively referred to
herein as "Obligors") shall default in the punctual payment of any sum
payable with respect to, or in the observance or performance of any of the
terms and conditions of, any Obligations or of this Security Agreement or the
Collateral or any other agreement between any Obligor and Secured Party; (c)
if any warranty, representation or statement of fact made to Secured Party at
any time by or on behalf of Debtor is false or misleading in any material
respect when made; (d) in the event of loss, theft, substantial damage to or
destruction of any of the Collateral, or the making or filing of any lien,
levy, or execution on, or seizure, attachment or garnishment of, any of the
Collateral; (e) if any of the Obligors being a natural person or any general
partner of an Obligor which is a partnership, shall die or (being a
partnership or corporation) shall be dissolved, or if any of the Obligors (if
a corporation) shall fail to maintain its corporate existence in good
standing; (f) or if any of the Obligors shall become insolvent (however
defined or evidenced) or make an assignment for the benefit of creditors, or
make or send notice of an intended bulk transfer, or if there shall be
convened a meeting of the creditors or principal creditors of any of the
Obligors or if a committee of creditors is appointed for any of them; (g) or
if there shall be filed by or against any of the Obligors any petition for
any relief under the bankruptcy laws of the United States now or hereafter in
effect or under any insolvency, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity); (h) if the usual business of any of the
Obligors shall be terminated or suspended; (i) if any proceeding, procedure
or remedy supplementary to or in enforcement of judgment shall be commenced
against, or with respect to any property of, any of the Obligors, or (j) if
any petition or application to any court or tribunal, at law or in equity, be
filed by or against any of the Obligors for the appointment of any receiver
or trustee for any of the Obligors or any material part of the property of
any of them.
5. Upon the occurrence of any Default and at any time thereafter, Secured
Party may, without notice to or demand upon Debtor, declare any or all
Obligations of Debtor immediately due and payable and Secured Party shall
have the following rights and remedies (to the extent permitted by applicable
law) in addition to all rights and remedies of a secured party under the UCC,
or of Secured Party under the Obligations, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively or
concurrently: (a) Secured Party may at any time and from time to time, with
or without judicial process or the aid and assistance of others, enter upon
any premises in which any of the Collateral may be located and, without
resistance or interference by Debtor, take possession of the Collateral;
and/or dispose of any part or all of the Collateral on any premises of
Debtor; and/or require Debtor to assemble and make available to Secured Party
at the expense of Debtor any part or all of the Collateral at any place and
time designated by Secured Party which is reasonably convenient to both
parties; and/or remove any part or all of the Collateral from any premises on
which any part may be located for the purpose of effecting sale or other
disposition thereof (and if any of the Collateral consists of motor vehicles,
Secured Party may use Debtor's license plates); and/or sell, resell, lease,
assign and deliver, grant options for or otherwise dispose of any or all of
the Collateral in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings or
otherwise, by one or more contracts, in one or more parcels, at the same or
different times, with or without having the Collateral at the place of sale
or other disposition, for cash and/or credit, and upon any terms, at such
<PAGE>
place(s) and time(s) and to such persons, firms or corporations as Secured
Party deems best, all without demand for performance or any notice or
advertisement whatsoever except that where an applicable
statute requires reasonable notice of sale or other disposition Debtor hereby
agrees that the sending of five days notice by ordinary mail, postage
prepaid, to any address of Debtor set forth in this Security Agreement of the
place and time of any public sale or of the time after which any private sale
or other intended disposition is to be made, shall be deemed reasonable
notice thereof. If any of the Collateral is sold by Secured Party upon credit
for future delivery, Secured Party shall not be liable for the failure of the
purchaser to pay for same and in such event Secured Party may resell such
Collateral. Secured Party may buy any part or all of the Collateral at any
public sale and if any part or all of the Collateral is of a type customarily
sold in a recognized market or is of the type which is the subject of widely
distributed standard price quotations Secured Party may buy at private sale
and may make payment therefor by any means. Secured Party may apply the cash
proceeds actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling,
leasing and the like, to reasonable attorney's fees (not exceeding 15% of the
outstanding Obligations) and to all travel and other expenses which may be
incurred by Secured Party in attempting to collect the Obligations or enforce
this Security Agreement or in the prosecution or defense of any action or
proceeding related to the subject matter of this Security Agreement; and then
to the Obligations in such order and as to principal or interest as Secured
Party may desire; and Debtor shall remain liable and will pay Secured Party
on demand any deficiency remaining, together with interest thereon at a rate
equal to the highest rate then payable on the Obligations and the balance of
any expenses unpaid, with any surplus to be paid to Debtor, subject to any
duty of Secured Party imposed by law to the holder of any subordinate
security interest in the Collateral known to Secured Party. Debtor recognizes
that the Secured Party may be unable to effect a public sale of all or a part
of the Collateral consisting of securities by reason of certain prohibitions
contained in the Securities Act of 1933, but may be compelled to resort to
one or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their
own account, for investment and not with a view to the distribution or resale
thereof. Debtor agrees that any such private sales may be at prices and other
terms less favorable to the seller than if sold at public sales and that such
private sales shall be deemed to have been made in a commercially reasonable
manner. Secured Party has no obligation to delay sale of any such securities
for the period of time necessary to permit the issuer of such securities,
even if such issuer would agree, to register such securities for public sale
under the Securities Act of 1993; (b) Secured Party may appropriate, set off
and apply to the payment of any or all of the Obligations, any and all
Collateral in or coming into the possession of Secured Party or its agents
and belonging or owing to Debtor, without notice to Debtor, and in such
manner as Secured Party may in its discretion determine; (c) Secured Party
may exercise all voting rights with respect to all or any of the Collateral
consisting of securities and may exercise all powers with respect thereto as
if an absolute owner thereof, none of which shall adversely affect the
security interests granted herein or the Obligations.
6. To effectuate the terms and provisions hereof, Debtor hereby designates
and appoints Secured Party and its designees or agents as attorney-in-fact of
Debtor, irrevocably and with power of substitution, with authority; to
endorse the name of Debtor on any notes, acceptances, checks, drafts, money
orders, instruments or other evidences of payment or proceeds of the
Collateral that may come into Secured Party's possession; to sign the name of
Debtor on any invoices, documents, drafts against and notices to account
debtors or obligors of Debtor, assignments and requests for verification of
accounts to execute proofs of claim and loss; to execute any endorsements,
assignments, or other instruments of conveyance or transfer to adjust and
compromise any claims under insurance policies; to execute releases; and to
do all other acts and things necessary and advisable in the sole discretion
of Secured Party to carry out and enforce this Security Agreement. All acts
of said attorney or designee are hereby ratified and approved and said
attorney or designee shall not be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law. This power
of attorney being coupled with an interest is irrevocable while any of the
Obligations shall remain unpaid.
7. Secured Party shall have the duty to exercise reasonable care in the
custody and preservation of any securities in its possession included in the
Collateral, which duty shall be fully satisfied if Secured Party maintains
safe custody of any such securities, and, with respect to any maturities,
calls, conversions, exchanges, redemption, offers, tenders or similar matters
relating to any of such securities (herein called "events"), if in the
exercise of its sole discretion (a) Secured Party endeavors to take such
action with respect to any of the events as Debtor may reasonably and
specifically request in writing in sufficient time for such action to be
evaluated and taken or (b) Secured Party determines that the action requested
might adversely affect the value of the securities as collateral, the
collection of the Obligations secured, or otherwise prejudice the interests
of Secured Party, Secured Party gives reasonable notice to Debtor that any
such requested action will not be taken and if Secured Party makes such
determination or if Debtor fails to make such timely request, Secured Party
takes such other action as it deems advisable in the circumstances. Secured
Party shall have no further obligation to ascertain the occurrence of, or to
notify Debtor with respect to, any events and shall not be deemed to assume
<PAGE>
any such obligation as a result of the establishment by Secured Party of any
internal procedures with respect to any securities in its possession,
nor shall Secured Party be deemed to assume any responsibility for, or
obligation or duty with respect to, any part or all of the Collateral, of any
nature or kind, or any matter or proceedings arising out of or relating
thereto, including, without limitation, any obligation or duty to take any
action to collect, preserve or protect its or Debtor's rights in the
Collateral or against any prior parties thereto, but the same shall be at
Debtor's sole risk at all times. If the Collateral hereunder includes "stock"
as defined in Regulation U of the Federal Reserve Board, it is hereby agreed
such "stock" shall not secure Obligations which are "purpose credits", as
that term is used in Regulation U, and (i) are secured solely by collateral
other than "stock" or (ii) are unsecured. Secured Party's prior recourse to
any part or all of the Collateral shall not constitute a condition of any
demand, suit or proceeding for payment or collection of the Obligations. Not
act, failure or delay by Secured Party shall constitute a waiver of its
rights and remedies hereunder or otherwise. No single or partial waiver by
the Secured Party of any Default or right or remedy which it may have shall
operate as a waiver of any other Default, right or remedy or of the same
Default, right or remedy on a future occasion. Debtor hereby waives
presentment, notice of dishonor and protest of all instruments included in or
evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever (except as expressly provided herein). Debtor
agrees to pay, on demand, all out-of-pocket expenses incurred by Secured
Party in connection with the negotiation, execution, perfection, consummation
and enforcement of this Security Agreement, the Obligations, and the
transactions contemplated hereunder and thereunder, including but not limited
to the fees and expenses of counsel to Secured Party. In the event of any
litigation, with respect to any matter connected with this Security
Agreement, the Obligations or the Collateral, Debtor and Secured Party waive
all rights to a trial by jury. Debtor also waives all defenses, including any
defense based on any Statute of Limitations or any claims of laches, rights
of setoff and the right to interpose counterclaims of any nature. Debtor
hereby irrevocably consents to the jurisdiction of the courts of the State of
New York and of any Federal Court located in such State in connection with
any action or proceeding arising out of or relating to the Obligations, this
Security Agreement or the Collateral, or any document or instrument delivered
with respect to any of the Obligations. Debtor hereby waives personal service
of any summons, complaint or other process in connection with any such action
or proceeding and agrees that the service thereof may be made by certified or
registered mail directed to Debtor at any place of business set forth below,
or at such other address as Debtor may designate by written notification by
certified or registered mail directed to and received by Secured Party at its
office set forth in the financing statements filed hereunder (or if no such
financing statements have been filed, at the office of Secured Party at which
is located the officer in direct supervision of the within security
interest). The Debtor so served shall appear or answer to such summons,
complaint or other process within thirty days after the mailing thereof.
Should the Debtor so served fail to appear or answer within said thirty-day
period, such Debtor shall be deemed in default and judgment may be entered by
Secured Party against such Debtor for the amount or such other relief as may
be demanded in any summons, complaint or other process so served. In the
alternative, in its discretion Secured Party may effect service upon Debtor
in any other form or manner permitted by law. All terms used herein shall
have the meanings as defined in the UCC, unless the context otherwise
requires. No provision hereof shall be modified, altered or limited except by
a written instrument expressly referring to this Security Agreement and to
such provision, and executed by the party to be charged. The execution and
delivery of this Security Agreement has been authorized by the Board(s) of
Directors of Debtor and by any necessary vote or consent of stockholders of
Debtor (if a corporation). This Security Agreement and all Obligations shall
be binding upon the heirs, executors, administrators, successors, or assigns
of Debtor, and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, its successors, endorsees
and assigns. This Security Agreement and the Obligations shall be governed in
all respects by the laws of the State of New York. If any term of this
Security Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby.
Secured Party is authorized to annex hereto any schedules referred to herein.
Debtor acknowledges receipt of a copy of this Security Agreement. See
Modification attached hereto and made a part thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed or caused this Security
Agreement to be executed in the State of New York, the date first above set
forth.
Witness: Robert I. Erch
(CORPORATE SEAL)
AMERICAN TECHNICAL CERAMICS CORP.
----------------------------------------------
(Debtor)
By /s/ Kathleen M. Kelly 2/17/95
Kathleen M. Kelly Vice President
--------------------------------------
Trade Name (if any).
N/A
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Chief Place of Business:
ALL LOCATION(S) OF COLLATERAL: (ALSO SET FORTH THE
One Norden Lane SECTION, BLOCK AND LOT IN THE CITY OF NEW YORK, COUNTY
Huntington Station, NY 11746 OF NASSAU OR COUNTY OF ONONDAGA WHERE THERE IS LOCATED
OTHER PLACES OF BUSINESS: ANY OF THE COLLATERAL WHICH IS OR MAY BE AFFIXED TO
REALTY.)
One Norden Lane, Huntington Station, NY 11746
NONE 15 Stepar Place, Huntington Station, NY 11746
10 Stepar Place, Huntington Station, NY 11746
LOCATION OF BOOKS AND RECORDS 17 Stepar Place, Huntington Station, NY 11746
RELATING TO THE COLLATERAL:
NAME OF RECORD OWNER OF REAL ESTATE WHERE ANY OF
One Norden Lane THE COLLATERAL IS OR MAY BE AFFIXED TO REALTY:
Huntington Station, NY 11746 N/A
</TABLE>
<PAGE>
MODIFICATIONS TO GENERAL SECURITY AGREEMENT
DATED FEBRUARY 17, 1995
1. with reasonable wear and tear expected
2. during normal business hours upon reasonable advance notice
3. involving in excess of $300,000.00
4. relating to collateral
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly
-----------------------------
Kathleen M. Kelly
Vice President
EXHIBIT 10(r)
EAB SECURED COMMERCIAL NOTE
- -----------------------------------------------------------------------------
$1,000,000 February 17, 1995
- ---------- ----------------------
FOR VALUE RECEIVED, the undersigned promises to pay to the order of EUROPEAN
AMERICAN BANK ("EAB"), at any of its banking offices, the sum of
One Million
___________________ Dollars, to be paid as follows:
[ ] On_________________, the principal sum of $____________ with interest to be
(Maturity Date; No. of Days After Date)
payable___________________at maturity at the rate indicated below, unless
(Monthly, and, or, Quarterly and)
discounted.
[ ] In equal, consecutive ______________ principal installments of $___________
on the ______ day of the month commencing ___________, 19__ and the balance
of ___________ on __________, 19__ with interest to be payable ___________
(Monthly, and, or, Quarterly and)
at maturity at the rate indicated below.
60
[X] In____________equal, consecutive monthly installments of principal plus
(No. of)
$20,685.63 1st
interest in the amount of $__________ each, on the ____day of each month
March 1, 1995 $20,685.63 February 1, 2000
commencing______________ and the balance of $__________on_______________
with interest to be calculated at the rate indicated below.
INTEREST SHALL BE:
8.85
[X] equal to the rate of______% per annum.*
[ ] discounted at the rate of______% per annum.
[ ] equal to the rate of______% above EAB's Prime Rate (the rate of
interest stated by EAB to be its Prime Rate) as in effect from time to
time.
[ ] equal to the following rate: _____________________________________________
__________________________________________________________________________
Any amount of principal hereof which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear interest until paid in
full at a rate 3% per annum in excess of the discount rate or the interest
rate in effect at maturity. Interest shall be calculated on a basis of a 360
day year for the actual number of days elapsed.
The undersigned hereby grants EAB a lien on and security interest in the
following property (including any and all renewals, replacements and/or
substitutions thereof and any and all, procceds and yields thereof) as
collateral security for the payment of any and all obligations of the
undersigned to EAB under this note, whether now existing or hereafter
incurred (all of such obligations, including this Note, being hereinafter
called the "Obligations"):
Specific equipment, including accessions thereto, and replacements or
substitutions thereof and spare parts now owned or hereafter acquired, more
fully described on attached Schedule "A". See rider attached hereto and made
a part thereof.
The undersigned also hereby grants EAB a security interest in, the right of
setoff against and pledge and assignment of any and all monies, securities
(to the extent permitted by Regulation U of the Federal Reserve Board),
general intangibles and other property of the undersigned and the proceeds
thereof, now or hereafter held or received by EAB from or for the undersigned
in safekeeping, in transit or otherwise, and also upon any and all deposits
(general or special) (all of the foregoing being hereinafter called the
"Collateral"). The undersigned hereby authorized EAB to execute and file, at
any time(s), on behalf of the undersigned, one or more financing statements
with respect to any part or all of the Collateral, although the same may have
been executed only by EAB as secured party.
<PAGE>
Upon the occurrence with respect to the undersigned of any of the following
(each, an "Event of Default"): filing by or against the undersigned of a
petition commencing any proceeding under any bankruptcy, reorganization or
rearrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or hereafter in effect; making an assignment
for the benefit of creditors; petitioning or applying to any tribunal for the
appointment of a custodian, receiver or trustee for the undersigned or for a
substantial part of its assets; entry of judgment or order of attachment,
injunction or governmental tax lien or levy issued against the undersigned or
against property of the undersigned; in an amount in excess of $300,000.00
consent by the undersigned to assume, suffer or allow to exist, without the
prior written consent of EAB, any lien, mortgage, assignment or other
encumbrance on any of its assets or personal property listed on Schedule "A"
herein; default in the punctual payment or performance of this or any other
obligation to EAB or to any other lender at any time; the existence or
occurrence at any time of one or more conditions or events, which, in the
sole opinion of EAB, has resulted or may result in a material adverse change
in the business, properties or financial condition of the undersigned, which
shall increase the credit risk or impair the collateral of EAB, then this
Note shall at the sole option of EAB become due and payable without notice or
demand.
Upon the failure to pay any of the Obligations when the same shall become
due, or upon the happening of any of the Events of Default hereinabove set
forth, and at any time thereafter, EAB, without notice (except where any
statute specifically requires reasonable notification of any public or
private sale or other intended disposition, in which event the undersigned
hereby agrees that five days notice by ordinary mail, postage prepaid, to any
address of the undersigned setting forth the place and time of any public
sale or of the place and time after which any private sale or other
disposition may be made shall be deemed reasonable notice of such sale or
other disposition), may (in addition to all other rights and remedies
afforded EAB under the Uniform Commercial Code or under any security
agreement at any time executed and delivered by the undersigned to EAB)
forthwith realize upon the Collateral, with the right of EAB upon any such
sale or sales, public or private, to purchase the whole or any part of the
Collateral, free of any right of redemption, which right or equity is hereby
expressly waived and released by the undersigned. EAB may apply the net
proceeds of any such sale, after deducting all costs and expenses of every
kind incurred in connection therewith, to the payment in whole or in part, in
such order as EAB may elect, to any one or more or all of the Obligations,
whether then due or not due, making proper rebate for interest or discount
not earned, and to account for the surplus, if any, to the undersigned who
shall remain liable to EAB for the payment of any deficiency with interest.
Any securities held by EAB hereunder may, whether or not an Event of Default
has occurred, be registered and held in the name of EAB or its nominee,
without disclosing that EAB is a pledgee thereof, and EAB or said nominee
shall be entitled to receive and retain all distributions therefrom, and to
exercise all rights with respect thereto as if it was the absolute owner
thereof, but shall not be obligated to do so. Should any securities,
distributions or proceeds be received by the undersigned as the registered
owner of any Collateral, then same shall be deemed part of the Collateral and
shall be held in trust and delivered to EAB in kind, duly endorsed in blank
where appropriate.
EAB shall not, by any act, delay, omission or otherwise, be deemed to have
waived any of its rights and/or remedies hereunder. No change, amendment,
modification, termination, waiver, or discharge, in whole or in part, of any
provision of this Note shall be effective unless in writing and signed by the
party against whom such change, amendment, modification, termination, waiver,
or discharge is sought to be enforced. The undersigned, in any litigation
with respect to, in connection with or arising out of this Note, waives the
right to allege that part performance by EAB of an oral agreement satisfies
the requirements of a writing contained in the preceding sentence.
In the event that EAB for any reason whatsoever shall deem it necessary to
refer this Note to an attorney for the enforcement thereof, there shall be
due from the undersigned, in addition to the unpaid principal, interest and
late charges hereunder, reasonable attorney's fees (whether in-house or
outside counsel) together with all costs and expenses of any such action.
This Note shall be governed by and construed in accordance with the laws of
the State of New York. The undersigned in any litigation in which EAB and any
of them shall be adverse parties, waives trial by jury and the right to
interpose any defense, setoff or counterclaim of any nature or description
including without limitation, waiver and estoppel. The undersigned consents
to the jurisdiction of any state or federal court located in the State of New
York in any action brought to enforce any rights of EAB under this Note and
consents to the placing of venue in the County of Nassau or any other county
permitted by law and further expressly waives any claim that any such action
or proceeding has been brought in an inconvenient forum. The undersigned
agrees that service of process may be effected by the mailing of a summons by
first class mail, postage prepaid, and certified mail, return receipt
requested to the address of the undersigned provided to EAB.
<PAGE>
The undersigned, if more than one, shall be jointly and severally liable
hereunder. This Note shall bind the respective successors, assigns, heirs and
representatives of the undersigned. This Note is not assignable by the
undersigned without EAB's prior written consent.
Name of Borrower AMERICAN TECHNICAL CERAMICS CORP.
leslie
---------------------------------------------------
By: /s/ Kathleen M. Kelly V.P. 2/17/95
-----------------------------------------------
Kathleen M. Kelly Signature and Title Vice President
By:
----------------------------------------------
Signature and Title
Street Address ONE NORDEN LANE
------------------------------------
City and State HUNTINGTON STATION, NEW YORK 11746
------------------------------------
No. 00059
<PAGE>
RIDER TO SECURED COMMERCIAL NOTE
DATED FEBRUARY 17, 1995 IN THE
AMOUNT OF $1,000,000
1. The undersigned covenants and agrees:
(a) To deliver to EAB:
(i) Annually, as soon as available, but in any event within 120 days after
the last day of each of its fiscal years, a copy of the completed Form 10-K
filed or to be filed with the Securities and Exchange Commission (the "SEC")
pursuant to the rules and regulations of the SEC, which shall include
consolidated balance sheets of the undersigned and its subsidiaries as at
such last day of the fiscal year, and consolidated statements of income and
retained earnings and cash flows, for such fiscal year, each prepared in
accordance with generally accepted accounting principles consistently
applied, in reasonable detail, such consolidated statements to be certified
without qualification by the accounting firm of KPMG Peat Marwick LLP (the
"Company") or by such other firm of independent certified public accountants
as may be reasonably satisfactory to EAB.
(ii) As soon as available, but in any event within 60 days after the end
of each of the first three fiscal quarterly periods of each fiscal year, the
completed Form 10-Q filed or to be filed with the SEC pursuant to the rules
and regulations of the SEC, which shall include the consolidated balance
sheets of the undersigned and its subsidiaries, as of the last day of such
quarter, and consolidated statements of income, for such quarterly period and
the portion of the fiscal year through such date, all in reasonable detail,
each such statement to be prepared by the undersigned in accordance with
generally accepted accounting principles consistently applied.
(b) To maintain:
(i) At all times a Maximum Leverage Ratio, the ratio of total
unsubordinated liabilities to tangible net worth of not greater than 0.80 to
1.0.
(ii) As at each fiscal year-end, a Debt Service Coverage Ratio, the ratio
of net profits plus depreciation and amortization to the current portion of
long-term debt, (the principal and interest due in respect of long-term debt
for the ensuing twelve-month period), of not less than 1.2 to 1.0.
2. Prepayment: Upon not less than three (3) days prior written notice to EAB,
the undersigned may prepay this Note in whole or in part of multiples of
$10,000 on the date set for the regular monthly payments of interest and
principal. All prepayments shall be accompanied by the interest accrued on
the amount prepaid through the date of prepayment. Any prepayment made prior
to ninety (90) days before the maturity of this Note shall be subject to an
additional payment as liquidated damages for such prepayment and not as a
penalty equal to the net present value of (A) (i) the difference between the
interest set forth herein and the current yield on U.S. Treasury Notes with
maturities approximately equal to the remaining time between the date of
prepayment and the maturity date (expressed as a percentage), multiplied by
(ii) the total amount of principal prepaid, divided by (iii) 360 multiplied
by (B) the actual number of days remaining. In addition, the undersigned
shall reimburse EAB for any and all additional administrative or processing
costs incurred by EAB as a result of such prepayment.
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly 2/17/95
-----------------------------
Kathleen M. Kelly
Vice President
<PAGE>
SCHEDULE A
Attached to that certain Secured Commercial Note in the amount of
$1,000,000 dated
February 17, 1995.
EQUIPMENT
Chip Star
Termination Dipping System
Harper Surface Ref.
Mini Harperizer w/Timing Belt Drive
Palomar Systems and Machines
(2) Automated Electrical Test Equipment Fixtures
V-Tek Inc.
Tape and Reel System
American Isostatic
Press
Coherent General
Laser Cutter
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly 2/17/95
-----------------------------
Kathleen M. Kelly
Vice President
Page 1 of 1
<PAGE>
EAB GENERAL SECURITY AGREEMENT
- -----------------------------------------------------------------------------
Date February 17, 1995
The undersigned (herein, whether one or more in number, referred to as Debtor
and which, if two or more in number, shall be jointly and severally bound)
with an address as it appears with the signature below, hereby agree(s) in
favor of European American Bank, a New York Banking Corporation (herein
referred to as Secured Party), as follows:
1. In consideration of one or more loans, advances, or other financial
accommodations at any time before, at or after date made or extended by
Secured Party to Debtor, directly or indirectly, as principal, guarantor or
otherwise, at the sole discretion of Secured Party relating to the collateral
as herein after defined in each instance, Debtor hereby grants to Secured
Party a security interest in, a continuing lien upon and a right of set-off
against, and Debtor hereby assigns to Secured Party, the Collateral described
in Paragraph 2, to secure the payment, performance and observance of all
indebtedness, obligations, liabilities and agreements of any kind of Debtor
to Secured Party, now existing or hereafter arising, direct or indirect
(including participations or any interest of Secured Party in obligations of
Debtor to others), acquired outright, conditionally, or as collateral
security from another, absolute or contingent, joint or several, secured or
unsecured, due or not, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, in each instance relating to
collateral and of all loan agreements, documents and instruments evidencing
any of the foregoing obligations that may have been issued, created, assumed
or guaranteed (all of the foregoing being herein referred to as the
"Obligations").
2. The Collateral is described as follows and/or on Schedule A, if any,
annexed hereto as part hereof and on any separate schedule at any time
furnished by Debtor to Secured Party (all of which are hereby deemed part of
this Security Agreement), which Collateral includes all attachments,
accessions and equipment now or hereafter affixed to the Collateral or used
in connection therewith, substitutions and replacements thereof, and (unless
the description of the Collateral expressly excludes after-acquired
Collateral) all items of the Collateral both now owned or existing and
hereafter acquired, created or arising, and any and all products and proceeds
thereof (including, without limitation, any claims of Debtor against third
parties, for loss or damage to or destruction of any or all of the
Collateral):
Specific equipment, including accessions thereto, and replacements or
substitutions thereof and spare parts now owned or hereafter acquired,
more fully described on attached Schedule "A".
together with any and all monies, securities, drafts, notes, items and other
property of the Debtor and the proceeds thereof, now or hereafter held or
received by or in transit to, Secured Party from or for the Debtor, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and
any and all deposits (general or special), balances, sums, proceeds, and
credits of the Debtor with, and any and all claims of the Debtor against,
Secured Party, at any time existing. In the event that the Collateral
includes inventory, Debtor also grants to Secured Party a security interest
in, and the Collateral shall include, all labels and other devices, names, or
marks affixed or to be affixed to inventory for purposes of selling or of
identifying the same or the seller or manufacturer thereof and all right,
title and interest of Debtor therein and thereto.
3. Debtor warrants, represents and covenants that: (a) the chief and other
places of business of Debtor, the books and records relating to the
Collateral and the Collateral are located at the addresses set forth below
and Debtor will not change any of the same without prior written notice to
and consent of Secured Party; (b) the Collateral is and will be used in
Debtor's business and not for personal, family, household or farming use; (c)
the Collateral is now, and at all times will be, owned by Debtor free and
clear of all liens, security interests, claims and encumbrances, except as
set forth on Schedule B, if any, annexed hereto as part hereof; (d) Debtor
will not assign, sell, mortgage, lease, transfer, pledge, grant a security
interest in or lien upon, encumber, or otherwise dispose of or abandon, nor
will Debtor suffer or permit any of the same to occur with respect to, any
part or all of the Collateral, without prior written consent of Secured
Party, except for the sale from time to time in the ordinary course of
business of Debtor of such items of Collateral as may constitute part of the
business inventory of Debtor, and the inclusion of "proceeds" of the
Collateral under the security interest granted herein, shall not be deemed a
consent by Secured Party to any sale or other disposition of any part or all
of the Collateral except as expressly permitted herein; (e) Debtor has made,
and will continue to make payment or deposit or otherwise provide for the
payment, when due, of all taxes, assessments or contributions required by law
which have been or may be levied or assessed against the Debtor, whether with
respect to any of the Collateral, to any wages or salaries paid by
<PAGE>
Debtor, or otherwise, and will deliver to Secured Party, on demand,
certificates or other evidence satisfactory to Secured Party attesting
thereto; (f) Debtor will use the Collateral for lawful purposes only, with
the reasonable care and caution and in conformity with all applicable laws,
ordinances and regulations; (g) Debtor will keep the Collateral in good
order, repair, running and marketable condition, at Debtor's own cost and
expense; (h) Secured Party shall at all times have free access to and right
of inspection of the Collateral and any records pertaining thereto (and the
right to make extracts from and to receive from Debtor originals or true
copies of such records and any papers and instruments relating to any or all
of the Collateral upon request therefor) and Debtor hereby grants to Secured
Party a security interest in all such records, papers and instruments to
secure the payment, performance and observance of the Obligations; (i) the
Collateral is now and shall remain personal property, and Debtor will not
permit any of the Collateral to become a part of or affixed to real property
without prior written notice to Secured Party and without first making all
arrangements, and delivering, or causing to be delivered, to Secured Party
all instruments and documents, including, without limitation, waivers and
subordination agreements by any landlords or mortgages, requested by and
satisfactory to Secured Party to preserve and protect the primary security
interest granted herein against all persons; (j) Debtor, at its own expense,
will insure the Collateral in the name of and with loss or damage payable to
Secured Party, as its interest may appear, against loss or damage by fire and
other hazards, and extended coverage, theft, burglary, bodily injury and such
other risks, with such companies and in such amounts, as is reasonably
required by Secured Party at any time (all such policies providing 10 days
minimum written notice of cancellation to Secured Party) and Debtor shall
deliver to Secured Party the original or certified duplicate policies, or
certificates or other evidence satisfactory to Secured Party of compliance
with the foregoing insurance provisions and Debtor will promptly notify
Secured Party of any loss or damage to any of the Collateral or arising from
its use; (k) at its option, Secured Party may apply any insurance monies
received at any time to the cost of repairs to or replacements for the
Collateral and/or to payment of any of the Obligations, whether or not due,
in any order Secured Party may determine, any surplus (after payment of all
costs, reasonable attorney's fees and disbursements) to be remitted to Debtor
who shall remain liable for any deficiency; (l) Debtor will, at its expense,
perform all acts and execute all documents requested by Secured Party at any
time to evidence, perfect, maintain and enforce Secured Party's primary
security interest in the Collateral or otherwise in furtherance of the
provisions of this Security Agreement; (m) Debtor assumes all responsibility
and liability arising from the use of the Collateral; (n) upon request of
Secured Party, at any time and from time to time, Debtor shall, at its sole
cost and expense, execute and deliver to Secured Party one or more financing
statements pursuant to the Uniform Commercial Code ("UCC") and one or more
applications for certificate of title and any other papers, documents or
instruments requested by Secured Party in connection with this Security
Agreement, and Debtor hereby authorizes Secured Party to execute and file at
any time or times, one or more financing statements with respect to all or
any part of the Collateral, signed only by the Secured Party; (o) in its
discretion, Secured Party may, whether or not a Default (as hereinafter
defined) has occurred or any of the Obligations be due, in its name or
Debtor's or otherwise, notify any account debtor or obligor of any account,
contract, instrument, chattel paper or general intangible included in the
Collateral to make payment to Secured Party; (p) Secured Party may, in its
sole discretion and at any time, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable by
Secured Party with respect to, any of the Collateral, and/or extend the time
of payment, arrange for payment in installments, or otherwise modify the
terms of, or release, any of the Collateral or the Obligations, all without
notice to or consent by Debtor and without otherwise discharging or affecting
the Obligations, the Collateral or the security interest granted herein; (q)
Secured Party may, in its discretion, for the account and expense of Debtor,
pay any amount or do any act required of Debtor hereunder or requested by
Secured Party to preserve, protect, maintain or enforce the Obligations, the
Collateral or the primary security interest granted herein, and which Debtor
fails to do or pay, and any such payment shall be deemed an advance by
Secured Party to Debtor and shall be payable on demand together with interest
at the highest rate then payable on any of the Obligations; (r) Debtor will
promptly pay Secured Party for any and all sums, costs, and expenses which
Secured Party may pay or incur pursuant to the provisions of this Security
Agreement or in defending, protecting or enforcing the security interest
granted herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including but not limited to all court
costs, collection charges, travel, and reasonable attorney's fees, all of
which, together with interest at a rate equal to the highest rate then
payable on any of the Obligations, shall be part of the Obligations and be
payable on demand; (s) whether or not a Default has occurred, Secured Party,
in its discretion, may transfer to or register in the name of Secured Party
or its nominee all or any of the Collateral consisting of securities, and
whether or not so transferred or registered, Secured Party shall be entitled
to receive and retain all income, dividends (including stock dividends and
rights to subscribe) and other distributions thereon as part of the
Collateral and to exchange any or all such Collateral upon the
reorganization, recapitalization, or readjustment of any entity issuing such
<PAGE>
securities, and to exercise all rights with respect thereto as if it was the
absolute owner thereof, provided that until the occurrence
of a Default and whether or not the Collateral is transferred to or
registered in the name of Secured Party or its nominee, Debtor alone shall be
entitled to exercise the right to vote such Collateral, and if the Collateral
has been so transferred or registered, Secured Party shall take such action
as Debtor may reasonably request to enable Debtor to exercise the right to
vote such Collateral or any part thereof for any purpose which is not
inconsistent with the terms of this Security Agreement or the Obligations or
which would not have an adverse effect on the value of the Collateral or any
part thereof; (t) any of the proceeds of the Collateral received by Debtor
shall not be commingled with other property of Debtor, but shall be
segregated, held by the Debtor in trust as the exclusive property of Secured
Party, and Debtor will immediately deliver to Secured Party the identical
checks, monies, or other proceeds of Collateral received, duly endorsed in
blank where appropriate to effectuate the provisions hereof, the same to be
held by Secured Party as additional Collateral hereunder or, at Secured
Party's option to be applied to payment of any of the Obligations, whether or
not due and in any order; and (u) at any time Secured Party may assign,
transfer and deliver to any transferee of any of the Obligations, any or all
of the Collateral, whereupon Secured Party shall be fully discharged from all
responsibility and the transferee shall be vested with all powers and rights
of Secured Party hereunder with respect thereto, but Secured Party shall
retain all rights and powers with respect to any Collateral not assigned,
transferred or delivered.
4. The occurrence of any one or more of the following events shall constitute
an event of default ("Default") by Debtor under this Security Agreement: (a)
if at any time Secured Party shall, in its sole discretion, consider the
Obligations insecure; (b) if Debtor or any obligor, maker, endorser,
acceptor, surety or guarantor of, or any party to, any of the Obligations or
the Collateral (the same, including Debtor, being collectively referred to
herein as "Obligors") shall default in the punctual payment of any sum
payable with respect to, or in the observance or performance of any of the
terms and conditions of, any Obligations or of this Security Agreement or the
Collateral or any other agreement between any Obligor and Secured Party; (c)
if any warranty, representation or statement of fact made to Secured Party at
any time by or on behalf of Debtor is false or misleading in any material
respect when made; (d) in the event of loss, theft, substantial damage to or
destruction of any of the Collateral, or the making or filing of any lien,
levy, or execution on, or seizure, attachment or garnishment of, any of the
Collateral; (e) if any of the Obligors being a natural person or any general
partner of an Obligor which is a partnership, shall die or (being a
partnership or corporation) shall be dissolved, or if any of the Obligors (if
a corporation) shall fail to maintain its corporate existence in good
standing; (f) or if any of the Obligors shall become insolvent (however
defined or evidenced) or make an assignment for the benefit of creditors, or
make or send notice of an intended bulk transfer, or if there shall be
convened a meeting of the creditors or principal creditors of any of the
Obligors or if a committee of creditors is appointed for any of them; (g) or
if there shall be filed by or against any of the Obligors any petition for
any relief under the bankruptcy laws of the United States now or hereafter in
effect or under any insolvency, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity); (h) if the usual business of any of the
Obligors shall be terminated or suspended; (i) if any proceeding, procedure
or remedy supplementary to or in enforcement of judgment shall be commenced
against, or with respect to any property of, any of the Obligors, or (j) if
any petition or application to any court or tribunal, at law or in equity, be
filed by or against any of the Obligors for the appointment of any receiver
or trustee for any of the Obligors or any material part of the property of
any of them.
5. Upon the occurrence of any Default and at any time thereafter, Secured
Party may, without notice to or demand upon Debtor, declare any or all
Obligations of Debtor immediately due and payable and Secured Party shall
have the following rights and remedies (to the extent permitted by applicable
law) in addition to all rights and remedies of a secured party under the UCC,
or of Secured Party under the Obligations, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively or
concurrently: (a) Secured Party may at any time and from time to time, with
or without judicial process or the aid and assistance of others, enter upon
any premises in which any of the Collateral may be located and, without
resistance or interference by Debtor, take possession of the Collateral;
and/or dispose of any part or all of the Collateral on any premises of
Debtor; and/or require Debtor to assemble and make available to Secured Party
at the expense of Debtor any part or all of the Collateral at any place and
time designated by Secured Party which is reasonably convenient to both
parties; and/or remove any part or all of the Collateral from any premises on
which any part may be located for the purpose of effecting sale or other
disposition thereof (and if any of the Collateral consists of motor vehicles,
Secured Party may use Debtor's license plates); and/or sell, resell, lease,
assign and deliver, grant options for or otherwise dispose of any or all of
the Collateral in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings or
otherwise, by one or more contracts, in one or more parcels, at the same or
different times, with or without having the Collateral at the place of sale
or other disposition, for cash and/or credit, and upon any terms, at such
<PAGE>
place(s) and time(s) and to such persons, firms or corporations as Secured
Party deems best, all without demand for performance or any notice or
advertisement whatsoever except that where an applicable
statute requires reasonable notice of sale or other disposition Debtor hereby
agrees that the sending of five days notice by ordinary mail, postage
prepaid, to any address of Debtor set forth in this Security Agreement of the
place and time of any public sale or of the time after which any private sale
or other intended disposition is to be made, shall be deemed reasonable
notice thereof. If any of the Collateral is sold by Secured Party upon credit
for future delivery, Secured Party shall not be liable for the failure of the
purchaser to pay for same and in such event Secured Party may resell such
Collateral. Secured Party may buy any part or all of the Collateral at any
public sale and if any part or all of the Collateral is of a type customarily
sold in a recognized market or is of the type which is the subject of widely
distributed standard price quotations Secured Party may buy at private sale
and may make payment therefor by any means. Secured Party may apply the cash
proceeds actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling,
leasing and the like, to reasonable attorney's fees (not exceeding 15% of the
outstanding Obligations) and to all travel and other expenses which may be
incurred by Secured Party in attempting to collect the Obligations or enforce
this Security Agreement or in the prosecution or defense of any action or
proceeding related to the subject matter of this Security Agreement; and then
to the Obligations in such order and as to principal or interest as Secured
Party may desire; and Debtor shall remain liable and will pay Secured Party
on demand any deficiency remaining, together with interest thereon at a rate
equal to the highest rate then payable on the Obligations and the balance of
any expenses unpaid, with any surplus to be paid to Debtor, subject to any
duty of Secured Party imposed by law to the holder of any subordinate
security interest in the Collateral known to Secured Party. Debtor recognizes
that the Secured Party may be unable to effect a public sale of all or a part
of the Collateral consisting of securities by reason of certain prohibitions
contained in the Securities Act of 1933, but may be compelled to resort to
one or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such securities for their
own account, for investment and not with a view to the distribution or resale
thereof. Debtor agrees that any such private sales may be at prices and other
terms less favorable to the seller than if sold at public sales and that such
private sales shall be deemed to have been made in a commercially reasonable
manner. Secured Party has no obligation to delay sale of any such securities
for the period of time necessary to permit the issuer of such securities,
even if such issuer would agree, to register such securities for public sale
under the Securities Act of 1993; (b) Secured Party may appropriate, set off
and apply to the payment of any or all of the Obligations, any and all
Collateral in or coming into the possession of Secured Party or its agents
and belonging or owing to Debtor, without notice to Debtor, and in such
manner as Secured Party may in its discretion determine; (c) Secured Party
may exercise all voting rights with respect to all or any of the Collateral
consisting of securities and may exercise all powers with respect thereto as
if an absolute owner thereof, none of which shall adversely affect the
security interests granted herein or the Obligations.
6. To effectuate the terms and provisions hereof, Debtor hereby designates
and appoints Secured Party and its designees or agents as attorney-in-fact of
Debtor, irrevocably and with power of substitution, with authority; to
endorse the name of Debtor on any notes, acceptances, checks, drafts, money
orders, instruments or other evidences of payment or proceeds of the
Collateral that may come into Secured Party's possession; to sign the name of
Debtor on any invoices, documents, drafts against and notices to account
debtors or obligors of Debtor, assignments and requests for verification of
accounts to execute proofs of claim and loss; to execute any endorsements,
assignments, or other instruments of conveyance or transfer to adjust and
compromise any claims under insurance policies; to execute releases; and to
do all other acts and things necessary and advisable in the sole discretion
of Secured Party to carry out and enforce this Security Agreement. All acts
of said attorney or designee are hereby ratified and approved and said
attorney or designee shall not be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law. This power
of attorney being coupled with an interest is irrevocable while any of the
Obligations shall remain unpaid.
7. Secured Party shall have the duty to exercise reasonable care in the
custody and preservation of any securities in its possession included in the
Collateral, which duty shall be fully satisfied if Secured Party maintains
safe custody of any such securities, and, with respect to any maturities,
calls, conversions, exchanges, redemption, offers, tenders or similar matters
relating to any of such securities (herein called "events"), if in the
exercise of its sole discretion (a) Secured Party endeavors to take such
action with respect to any of the events as Debtor may reasonably and
specifically request in writing in sufficient time for such action to be
evaluated and taken or (b) Secured Party determines that the action requested
might adversely affect the value of the securities as collateral, the
collection of the Obligations secured, or otherwise prejudice the interests
of Secured Party, Secured Party gives reasonable notice to Debtor that any
such requested action will not be taken and if Secured Party makes such
determination or if Debtor fails to make such timely request, Secured Party
takes such other action as it deems advisable in the circumstances. Secured
Party shall have no further obligation to ascertain the occurrence of, or to
notify Debtor with respect to, any events and shall not be deemed to assume
<PAGE>
any such obligation as a result of the establishment by Secured Party of any
internal procedures with respect to any securities in its possession,
nor shall Secured Party be deemed to assume any responsibility for, or
obligation or duty with respect to, any part or all of the Collateral, of any
nature or kind, or any matter or proceedings arising out of or relating
thereto, including, without limitation, any obligation or duty to take any
action to collect, preserve or protect its or Debtor's rights in the
Collateral or against any prior parties thereto, but the same shall be at
Debtor's sole risk at all times. If the Collateral hereunder includes "stock"
as defined in Regulation U of the Federal Reserve Board, it is hereby agreed
such "stock" shall not secure Obligations which are "purpose credits", as
that term is used in Regulation U, and (i) are secured solely by collateral
other than "stock" or (ii) are unsecured. Secured Party's prior recourse to
any part or all of the Collateral shall not constitute a condition of any
demand, suit or proceeding for payment or collection of the Obligations. Not
act, failure or delay by Secured Party shall constitute a waiver of its
rights and remedies hereunder or otherwise. No single or partial waiver by
the Secured Party of any Default or right or remedy which it may have shall
operate as a waiver of any other Default, right or remedy or of the same
Default, right or remedy on a future occasion. Debtor hereby waives
presentment, notice of dishonor and protest of all instruments included in or
evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever (except as expressly provided herein). Debtor
agrees to pay, on demand, all out-of-pocket expenses incurred by Secured
Party in connection with the negotiation, execution, perfection, consummation
and enforcement of this Security Agreement, the Obligations, and the
transactions contemplated hereunder and thereunder, including but not limited
to the fees and expenses of counsel to Secured Party. In the event of any
litigation, with respect to any matter connected with this Security
Agreement, the Obligations or the Collateral, Debtor and Secured Party waive
all rights to a trial by jury. Debtor also waives all defenses, including any
defense based on any Statute of Limitations or any claims of laches, rights
of setoff and the right to interpose counterclaims of any nature. Debtor
hereby irrevocably consents to the jurisdiction of the courts of the State of
New York and of any Federal Court located in such State in connection with
any action or proceeding arising out of or relating to the Obligations, this
Security Agreement or the Collateral, or any document or instrument delivered
with respect to any of the Obligations. Debtor hereby waives personal service
of any summons, complaint or other process in connection with any such action
or proceeding and agrees that the service thereof may be made by certified or
registered mail directed to Debtor at any place of business set forth below,
or at such other address as Debtor may designate by written notification by
certified or registered mail directed to and received by Secured Party at its
office set forth in the financing statements filed hereunder (or if no such
financing statements have been filed, at the office of Secured Party at which
is located the officer in direct supervision of the within security
interest). The Debtor so served shall appear or answer to such summons,
complaint or other process within thirty days after the mailing thereof.
Should the Debtor so served fail to appear or answer within said thirty-day
period, such Debtor shall be deemed in default and judgment may be entered by
Secured Party against such Debtor for the amount or such other relief as may
be demanded in any summons, complaint or other process so served. In the
alternative, in its discretion Secured Party may effect service upon Debtor
in any other form or manner permitted by law. All terms used herein shall
have the meanings as defined in the UCC, unless the context otherwise
requires. No provision hereof shall be modified, altered or limited except by
a written instrument expressly referring to this Security Agreement and to
such provision, and executed by the party to be charged. The execution and
delivery of this Security Agreement has been authorized by the Board(s) of
Directors of Debtor and by any necessary vote or consent of stockholders of
Debtor (if a corporation). This Security Agreement and all Obligations shall
be binding upon the heirs, executors, administrators, successors, or assigns
of Debtor, and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, its successors, endorsees
and assigns. This Security Agreement and the Obligations shall be governed in
all respects by the laws of the State of New York. If any term of this
Security Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby.
Secured Party is authorized to annex hereto any schedules referred to herein.
Debtor acknowledges receipt of a copy of this Security Agreement. See
Modification attached hereto and made a part thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed or caused this Security
Agreement to be executed in the State of New York, the date first above set
forth.
Witness: Robert I. Erch
(CORPORATE SEAL)
AMERICAN TECHNICAL CERAMICS CORP.
----------------------------------------------
(Debtor)
By /s/ Kathleen M. Kelly 2/17/95
Kathleen M. Kelly Vice President
--------------------------------------
Trade Name (if any).
N/A
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Chief Place of Business:
ALL LOCATION(S) OF COLLATERAL: (ALSO SET FORTH THE
One Norden Lane SECTION, BLOCK AND LOT IN THE CITY OF NEW YORK, COUNTY
Huntington Station, NY 11746 OF NASSAU OR COUNTY OF ONONDAGA WHERE THERE IS LOCATED
OTHER PLACES OF BUSINESS: ANY OF THE COLLATERAL WHICH IS OR MAY BE AFFIXED TO
REALTY.)
One Norden Lane, Huntington Station, NY 11746
NONE 15 Stepar Place, Huntington Station, NY 11746
10 Stepar Place, Huntington Station, NY 11746
LOCATION OF BOOKS AND RECORDS 17 Stepar Place, Huntington Station, NY 11746
RELATING TO THE COLLATERAL:
NAME OF RECORD OWNER OF REAL ESTATE WHERE ANY OF
One Norden Lane THE COLLATERAL IS OR MAY BE AFFIXED TO REALTY:
Huntington Station, NY 11746 N/A
</TABLE>
<PAGE>
MODIFICATIONS TO GENERAL SECURITY AGREEMENT
DATED FEBRUARY 17, 1995
1. with reasonable wear and tear expected
2. during normal business hours upon reasonable advance notice
3. involving in excess of $300,000.00
4. relating to collateral
AMERICAN TECHNICAL CERAMICS CORP.
By: /s/ Kathleen M. Kelly
-----------------------------
Kathleen M. Kelly
Vice President
KPMG Peat Marwick LLP
Certified Public Accountants
EXHIBIT 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
American Technical Ceramics Corp.:
We consent to incorporation by reference in the Registration Statement (No.
33-2300) on Form S-8 of American Technical Ceramics Corp. of our report dated
August 31, l995, relating to the consolidated balance sheets of American
Technical Ceramics Corp. and subsidiaries as of June 30, 1995 and l994, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, l995,
which report appears in the June 30, l995 annual report on Form 10-KSB of
American Technical Ceramics Corp. Our report refers to a change in method of
accounting for certain investments in debt and equity securities in fiscal
1995 and a change in method of accounting for income taxes in fiscal 1994.
KPMG PEAT MARWICK LLP
Jericho, New York
September 26, l995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 12-MOS
<CASH> 1,813
<SECURITIES> 3,408
<RECEIVABLES> 3,897 <F1>
<ALLOWANCES> 0
<INVENTORY> 7,705
<CURRENT-ASSETS> 17,960
<PP&E> 27,021
<DEPRECIATION> 13,642
<TOTAL-ASSETS> 31,624
<CURRENT-LIABILITIES> 4,981
<BONDS> 4,497
0
0
<COMMON> 41
<OTHER-SE> 21,025
<TOTAL-LIABILITY-AND-EQUITY> 31,624
<SALES> 28,630
<TOTAL-REVENUES> 28,630
<CGS> 17,452
<TOTAL-COSTS> 25,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 397
<INCOME-PRETAX> 2,468
<INCOME-TAX> 740
<INCOME-CONTINUING> 1,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 152
<NET-INCOME> 1,880
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<FN>
<F1> note: receivables shown net of allowance of 290
</TABLE>
