SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-9125
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AMERICAN TECHNICAL CERAMICS CORP.
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(Exact name of Registrant as specified in its charter)
DELAWARE 11-2113382
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 STEPAR PLACE, HUNTINGTON STATION, NY 11746
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(Address of principal executive offices) (Zip Code)
516-547-5700
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(Telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of October 30, 1996, the Registrant had outstanding 3,885,461 shares of
Common Stock, par value $.01 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
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ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash (including cash equivalents of approximately
$1,110,000 and $1,082,000, respectively) $ 2,854,000 $ 2,661,000
Investments 887,000 887,000
Accounts receivable, net 4,216,000 4,913,000
Inventories 8,409,000 8,758,000
Deferred income taxes 738,000 738,000
Other current assets 527,000 641,000
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Total current assets 17,631,000 18,598,000
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Property, plant and equipment, net of
depreciation and amortization of $15,501,000
and $15,047,000, respectively 14,040,000 14,152,000
Other assets, net 298,000 308,000
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$31,969,000 $33,058,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 849,000 $ 841,000
Accounts payable 877,000 1,128,000
Accrued expenses 1,776,000 2,215,000
Income taxes payable 315,000 857,000
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Total current liabilities 3,817,000 5,041,000
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LONG-TERM DEBT 3,425,000 3,642,000
DEFERRED INCOME TAXES 1,283,000 1,283,000
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Total liabilities 8,525,000 9,966,000
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STOCKHOLDERS' EQUITY:
Common stock- par value $.01;authorized 20,000,000 shares;
issued 4,067,979 and 4,067,501 shares,respectively 41,000 41,000
Capital in excess of par value 6,441,000 6,439,000
Retained earnings 17,586,000 17,251,000
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24,068,000 23,731,000
Unrealized gain on investments available for sale 12,000 12,000
Less: Treasury stock, at cost; 183,518 shares for both periods 572,000 572,000
Foreign currency translation adjustment 64,000 79,000
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Total stockholders' equity 23,444,000 23,092,000
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$31,969,000 $33,058,000
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</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Quarter Ended September 30,
(unaudited)
1996 1995
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<S> <C> <C>
Net sales $8,289,000 $7,855,000
Cost of goods sold 5,852,000 5,218,000
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Gross profit 2,437,000 2,637,000
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Selling, general and administrative expenses 1,488,000 1,637,000
Research and development expenses 374,000 362,000
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Total expenses 1,862,000 1,999,000
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Income from operations 575,000 638,000
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Other expense (income):
Interest expense 104,000 117,000
Interest income (44,000) (78,000)
Other (6,000) (141,000)
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54,000 (102,000)
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Income before provision for income taxes 521,000 740,000
Provision for income taxes 186,000 234,000
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Net income $ 335,000 $ 506,000
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Net income per common and common equivalent share $0.09 $0.13
========== ==========
Weighted average common and common
equivalent shares outstanding 3,884,000 3,874,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
(unaudited)
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 335,000 $ 506,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 466,000 445,000
Stock award compensation expense - 9,000
Gain on sale of investments - (149,000)
Changes in operating assets and liabilities:
Accounts receivable, net 702,000 (434,000)
Inventories 362,000 (636,000)
Other assets 38,000 (75,000)
Accounts payable, and accrued expenses (691,000) (569,000)
Income taxes payable (468,000) 101,000
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Net cash provided by (used in) operating activities 744,000 (802,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (354,000) (1,073,000)
Proceeds from sale of investments - 2,358,000
Proceeds from sale of fixed assets 3,000 -
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Net cash (used in) provided by investing activities (351,000) 1,285,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (209,000) (206,000)
Issuance of stock 2,000 -
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Net cash used in financing activities (207,000) (206,000)
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Effect of exchange rate changes on cash 7,000 (5,000)
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Net increase in cash and cash equivalents 193,000 272,000
CASH AND CASH EQUIVALENTS, beginning of period 2,661,000 1,813,000
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CASH AND CASH EQUIVALENTS, end of period $2,854,000 $2,085,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) PRINCIPLES OF CONSOLIDATION:
The accompanying unaudited interim financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of its consolidated financial
position and results of operations as of and for the three months ended
September 30, 1996 and 1995. These financial statements should be read in
conjunction with the summary of significant accounting policies and notes to
consolidated financial statements included in the Registrant's annual report to
stockholders for the year ended June 30, 1996. Results for the three months
ended September 30, 1996 are not necessarily indicative of results which could
be expected for the entire year.
(2) INVENTORIES:
Inventories included in the accompanying consolidated financial
statements consist of the following:
Sept. 30, June 30,
1996 1996
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Raw materials $1,525,000 $1,642,000
Work-in-process 3,402,000 3,413,000
Finished goods 3,482,000 3,703,000
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$8,409,000 $8,758,000
========== ==========
Interim inventories were determined by the gross profit method (which
is intended to approximate a first-in, first-out method) pursuant to which
estimated gross profit percentages are applied to net sales.
(3) 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 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 except when their effect would be
antidilutive or immaterial.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements, related notes and other information included in
this Quarterly Report on Form 10-Q.
Statements in this Quarterly Report on Form 10-Q that are not
historical fact may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All such
forward-looking statements are subject to risks and uncertainties, including,
but not limited to, the impact of competitive products, product demand and
market acceptance risks and fluctuations in operating results. These risks
could cause the Registrant's actual results for fiscal year 1997 and beyond to
differ materially from those expressed in any forward-looking statement made by
the Registrant.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996
Compared with Three Months Ended September 30, 1995
Net sales for the three months ended September 30, 1996 increased 6%
to $8,289,000 as compared to net sales of $7,855,000 for the comparable period
in the prior fiscal year. This increase was primarily the result of higher
sales of hi rel and thin film products. Sales of commercial products were lower
in the current quarter as compared to the comparable quarter in the prior
fiscal year. The Registrant has experienced an increase in demand for its core
products in recent weeks which, if sustained, may translate into stronger sales
in the months ahead. The backlog of unfilled orders was $6,239,000 at September
30, 1996, compared to $7,890,000 at September 30, 1995 and $6,538,000 at June
30, 1996.
Gross margin for the three months ended September 30, 1996 was 29.4%
of net sales as compared to 33.6% of net sales for the comparable period in the
prior fiscal year. As noted above, the Registrant experienced an increase in
sales of its larger, lower volume hi rel products. While the Registrant has
corrected many of its previously reported process difficulties associated with
its smaller, higher volume products (which have accounted for a greater
percentage of sales in recent quarters), it is still experiencing some problems
with its processes relative to these larger, lower volume products. The
Registrant has determined to concentrate the production of these products in
its Jacksonville facility and to focus in its New York facility on production
of its smaller, higher volume products. The costs associated with this shift
also affected the profit margins during the quarter. Management believes that,
over time, this shift will accelerate the resolution of the process
difficulties associated with the larger, lower volume products and will result
in manufacturing efficiencies and improved margins. Additional costs for
employee benefits, including medical costs and the costs of severance pay
associated with a modest work force reduction, also contributed to the lower
margins.
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<PAGE>
RESULTS OF OPERATIONS, continued
Total operating expenses for the three months ended September 30, 1996
decreased 7% to $1,862,000 as compared to $1,999,000 in the comparable period
in the prior fiscal year. The decrease in operating costs was primarily the
result of a decrease in spending on advertising and promotional activities and
lower discounts and commissions to distributors and sales representatives.
Lower employee hiring expenses in the current year quarter and the effect of
certain uncollectible accounts receivable writeoffs in the prior year's quarter
also contributed to the decrease in operating costs.
The Registrant recorded net interest expense of $60,000 in the current
period as compared to net interest expense of $39,000 in the comparable period
in the prior fiscal year. The increase in net interest expense was the result
of lower interest income due to lower funds available for investment in the
current year quarter.
As a result of the foregoing, the Registrant recorded net income of
$335,000, or $.09 per common and common equivalent share, for the three months
ended September 30, 1996 compared to net income of $506,000, or $.13 per common
and common equivalent share, for the comparable period in the prior fiscal
year.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's financial position at September 30, 1996 remains
strong as evidenced by working capital of $13,814,000 and stockholders' equity
of $23,444,000. The Registrant's current ratio at September 30, 1996 was 4.6:1
as compared to a current ratio of 3.7:1 at June 30, 1996. The Registrant's
quick ratio at September 30, 1996 was 2.4:1 as compared to a quick ratio of
2.0:1 at June 30, 1996.
Cash and marketable securities increased by $193,000 to $3,741,000 at
September 30, 1996 from $3,548,000 at June 30, 1996. Accounts receivable
decreased by $697,000 to $4,216,000 at September 30, 1996 from $4,913,000 at
June 30, 1996. Inventories decreased by $349,000 to $8,409,000 at September 30,
1996 from $8,758,000 at June 30, 1996. The decrease in accounts receivable and
inventory are primarily related to a slowing of sales growth during recent
months and a conscious effort to reduce inventory to more realistic levels in
light of the slower sales growth. Accounts payable and accrued expenses
decreased by $690,000 to $2,653,000 at September 30, 1996 from $3,343,000 at
June 30, 1996. Accounts payable decreased primarily as a result of generally
lower operating expenditures and lower capital equipment expenditures while
accrued expenses decreased primarily as a result of the payment in September of
bonuses to officers and employees based upon the Registrant's pretax profits in
fiscal year 1996. Income taxes paid in the three month period ended September
30, 1996 were $728,000.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES, continued
Capital expenditures for the three months ended September 30, 1996
totaled $342,000 of which $299,000 was for machinery and equipment. During the
quarter ended September 30, 1996, the Registrant entered into a $2,000,000
revolving line-of-credit with Barnett Bank of Jacksonville, N.A. ("Barnett").
The line-of-credit is subject to certain fees on the unused portion while the
outstanding balance bears interest at a rate equal to Barnett's prime rate
minus one-half percent (1/2%). Borrowing under the line-of-credit is subject
to, among other things, continued compliance with certain financial covenants,
including maintenance of asset and liability percentage ratios. There is
currently no balance outstanding under this line-of-credit. The Registrant
intends to use cash on hand, funds generated from operations and, possibly,
funds available under the Barnett line of-credit to finance budgeted capital
expenditures of approximately $2.0 million in fiscal year 1997, primarily for
replacement of machinery and equipment and to meet other operating
requirements.
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. As of September 30, 1996, 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.
Statement of Financial Accounting Standards No. 123 Accounting for
Stock-Based Compensation ("SFAS No. 123") establishes financial accounting and
reporting standards for stock- based compensation plans. SFAS No. 123 defines
and encourages a fair value based method of accounting for an employee stock
option or similar instrument. However, it allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25 Accounting for Stock
Issued to Employees ("Opinion 25"). SFAS No. 123 requires that financial
statements include certain disclosures about stock-based employee compensation
arrangements regardless of which method is used to account for them. Management
currently intends to continue accounting for stock-based compensation awarded
to employees using Opinion 25.
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<PAGE>
PART II - OTHER INFORMATION
ITEMS 1. THROUGH 5. Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(a)(i) - Certificate of Incorporation of the Registrant. (1)
3(a)(ii) - Amendment to Certificate of Incorporation. (6)
3(b)(i) - By-laws of the Registrant (1)
9(a)(i) - Restated Shareholders' Agreement, dated April 15, 1985, among
Victor Insetta, Joseph Mezey, Joseph Colandrea and the
Registrant. (1)
10(b)(i) - Lease Agreement between Victor Insetta and the Registrant for
premises at 15 Stepar Place, Huntington Station, N.Y. (1)
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. (1)
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. (2)
10(b)(iv) - Amendment to Lease Agreement, dated February 9, 1989, between
Victor Insetta, d/b/a Stepar Leasing Company, and the
Registrant. (3)
10(c)(i) - 1985 Employee Stock Sale Agreement between the Registrant and
various employees. (1)
10(c)(ii) - Form of Employee Stock Bonus Agreement, dated as of July 1,
1993, between the Registrant and various employees. (5)
10(c)(iii) - Form of Employee Stock Bonus Agreement, dated as of April 19,
1994, between the Registrant and various employees. (5)
10(c)(iv) - Form of Employee Stock Bonus Agreement, dated as of April 20,
1995, between the Registrant and various employees. (6)
10(e)(i) - Lease, effective as of October 1, 1980, between VPI Properties
Associates, d/b/a VPI Properties Associates, Ltd. and American
Technical Ceramics (Florida), Inc. (1)
10(e)(ii) - 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. (1)
10(f) - 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. (3)
10(g)(i) - Incentive Stock Option Plan of the Registrant. (1)
10(g)(ii) - Stock Appreciation Rights Plan of the Registrant. (1)
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<PAGE>
10(g)(iii) - Profit Bonus Plan, dated April 19, 1995, and effective for the
fiscal years beginning July 1, 1994. (6)
10(g)(iv) - Employment Agreement, dated April 3, 1985, between Victor
Insetta and the Registrant, as amended. (4)
10(h) - Loan Agreement, dated September 27, 1994, between the Registrant
and Barnett Bank of Jacksonville, N.A. (5)
10(i) - Secured Commercial Note, dated as of February 17, 1995, between
the Registrant and European American Bank. (6)
10(j) - Secured Commercial Note, dated as of February 17, 1995, between
the Registrant and European American Bank. (6)
10(k) - Letters of Agreement, dated June 26, 1996 and August 22, 1996
between the Registrant and Stuart P. Litt. (7)
10(l) - Loan Agreement, dated September 25, 1996, between the Registrant
and Barnett Bank, N.A.
27 - Financial Data Schedule
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1. Incorporated by reference to the Registration Statement.
2. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1987.
3. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1989.
4. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993.
5. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1994.
6. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1995.
7. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1996.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the quarter
ended September 30, 1996.
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<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TECHNICAL CERAMICS CORP.
(Registrant)
DATE: October 30, 1996 BY: /s/ VICTOR INSETTA
------------------
Victor Insetta
President
(Chief Executive Officer)
DATE: October 30, 1996 BY: /s/ JAMES CONDON
----------------
James Condon
Controller
(Principal Financial Officer)
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EXHIBIT 10(l)
LOAN AGREEMENT
THIS AGREEMENT is made this 25th day of September, 1996, between AMERICAN
TECHNICAL CERAMICS CORP., a Delaware corporation (the "Borrower"), and BARNETT
BANK, N.A. (the "Bank").
RECITALS
The Borrower wishes to obtain credit from the Bank on the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
ARTICLE I.
BORROWING AND PAYMENT
1.01 Revolving Credit Advances.
(a) The Bank hereby establishes in favor of the Borrower a revolving
line of credit. The Borrower shall be entitled to borrow, repay and
reborrow funds from the Bank in accordance with the terms hereof so long as
the total principal amount owed to the Bank under the revolving line of
credit does not exceed $2,000,000 (or such lesser amount as is set forth
herein) from the date hereof through the end of the Revolving Period (as
defined below). The Bank's obligation to make advances hereunder shall
terminate on the last day of the Revolving Period or such earlier date as
is set forth herein. This indebtedness shall be evidenced by a Promissory
Note of even date herewith (as amended, extended or renewed from time to
time, the "Revolving Note") executed by the Borrower in favor of the Bank
in the original principal amount of $2,000,000. The Revolving Note shall
bear interest at the rate set forth therein and shall be payable as set
forth therein.
(b) The Bank shall make each advance hereunder upon notice from the
Borrower to the Bank specifying the date and amount of such advance. The
Bank will make each requested advance available to the Borrower not later
than the close of business on the business day following the day of the
request by crediting the Borrower's account maintained with the Bank in the
amount of the advance if as of such time: (i) the Bank's obligation to make
advances hereunder has not terminated or expired; (ii) a Default or Event
of Default (as hereinafter defined) has not occurred; and (iii) all
conditions to the advance set forth herein or in any other Loan Documents
(as hereinafter defined) have been satisfied.
(c) The "Revolving Period" shall commence on the date hereof and end
on the first anniversary of such date; provided, however, that unless the
Bank notifies the Borrower otherwise, in its sole discretion, not less than
45 days prior to the then-upcoming last day of the Revolving Period, the
Revolving Period shall be extended by one year. The Bank's determination
shall be final and binding, and the Bank may determine not to extend the
Revolving Period regardless of the existence or non-existence of a Default
or Event of Default (as herein defined). The Bank may condition any such
extension on such terms as it may choose.
<PAGE>
1.02 Facility Fee. The Borrower shall pay the Bank a facility fee on the
daily average unused amount of the revolving line of credit during the
Revolving Period at the rate of one-quarter percent (1/4%) per annum
(calculated on the basis of a 360 day year for the actual number of days
elapsed). The Borrower shall pay the fee quarterly in arrears within 15 days
after each September 1, December 1, March 1 and June 1, commencing September 1,
1996, and on the termination or expiration of the Revolving Period.
1.03 Other Documents. The Borrower shall execute a Waiver of Jury Trial (as
amended from time to time, the "Waiver of Jury Trial") in form satisfactory to
the Bank. This Agreement (as amended from time to time), the Revolving Note,
the Waiver of Jury Trial and all documents related to the foregoing documents
are referred to herein as the "Loan Documents."
ARTICLE II.
CONDITIONS
2.01 Conditions to Advances. The obligation of the Bank to make advances
hereunder or under the Revolving Note on or after the date hereof is subject,
without limitation, to satisfaction of the following conditions precedent:
(a) The Borrower's representations and warranties set forth in this
Agreement and in the other Loan Documents shall be true and correct in all
material respects on and as of the date hereof and on and as of the date of
each such advance.
(b) On the date hereof and on the date of each such advance, the
Borrower shall be in compliance in all material respects with all the terms
and provisions set forth in this Agreement on its part to be observed or
performed, and no Default or Event of Default shall have occurred.
(c) The Bank shall have received on or before the date hereof and the
date of each such advance in form reasonably satisfactory to it: (i) the
duly executed Loan Documents; (ii) such evidence of corporate authorization
from the Borrower as the Bank may require; (iii) good standing certificates
indicating that the Borrower is in good standing in Florida, Delaware and
in any other state where the Borrower is required to qualify to do
business; and (iv) certified articles of incorporation and bylaws of the
Borrower.
2.02 Other Documents. The Bank shall have received on or before the date
hereof or the date of any advance hereunder such other documents or items as
the Bank may reasonably request.
ARTICLE III.
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof as long as
there is any amount outstanding under the Revolving Note:
3.01 Financial Statements of the Borrower. The Borrower will deliver to the
Bank the following:
(a) Within 45 days after the end of each fiscal quarter of the
Borrower's fiscal years, the Borrower's financial statements as of the end
of and for such period in reasonable detail, setting forth in comparative
form the corresponding figures for that date and period
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<PAGE>
and for the corresponding date and accounting period in the preceding
fiscal year, certified by the Borrower's chief financial officer.
(b) Within 120 days after the end of each fiscal year of the Borrower,
the Borrower's audited financial statements as of the end of and for such
year of the Borrower in reasonable detail, setting forth in comparative
form the corresponding figures for that date and period and for the
corresponding date and period in the preceding fiscal year, certified by
independent certified public accountants of recognized standing selected by
the Borrower.
(c) Promptly upon receipt thereof, copies of all other detailed
reports (if any) (including, without limitation, any management letters)
submitted to the Borrower by independent certified public accountants in
connection with each annual or interim audit or review of the books of the
Borrower by such accountants.
(d) With each delivery required under subparagraphs (a) and (b) above,
a compliance certificate in form approved by the Bank executed by an
executive officer of the Borrower demonstrating compliance with the Loan
Documents.
(e) Promptly upon the occurrence of any Default or Event of Default, a
notice thereof, specifying the nature thereof; and promptly upon the
occurrence of any event or discovery of any fact which might affect or
indicate a material adverse change in the Borrower's financial condition,
notice thereof specifying the nature thereof.
(f) Promptly upon becoming available, a copy of all: (i) reports,
registration statements and other materials filed by the Borrower with the
Securities and Exchange Commission; and (ii) notices, proxy statements and
other materials mailed or distributed to the Borrower's shareholders.
(g) Such other material information as the Bank may from time to time
reasonably request.
3.02 Financial Information. All financial information submitted by the
Borrower hereunder shall be prepared in accordance with generally accepted
accounting principles on a basis consistently applied. The Borrower will
maintain books of account in accordance with generally accepted accounting
principles. The books of account shall disclose the information necessary for
determining whether the Borrower has satisfied any provisions or requirements
of this Agreement.
3.03 Taxes and Other Charges. The Borrower will pay and discharge or cause
to be paid and discharged all taxes, charges, liabilities or claims of any type
at any time assessed against or incurred by the Borrower, or which could become
a lien against the Borrower or any of its properties. Nothing in this
subsection shall require the payment of any such sum if the Borrower promptly
notifies the Bank and by appropriate proceedings contests the same in good
faith and so long as the Borrower, if so requested by the Bank, creates a
funded reserve equal to the amount so claimed or assessed.
3.04 Insurance. The Borrower will maintain adequate insurance with
responsible insurers with coverage normally obtained by businesses similar to
that of the Borrower but covering at least: (i) damage to physical property
from fire and other hazards for the full insurable value of such property; (ii)
liability on account of injury to persons; and (iii) insurance against theft,
forgery or
- 3 -
<PAGE>
embezzlement or other illegal acts of officers or employees in reasonable
amounts. If requested by the Bank, the Borrower will provide the Bank, within
ninety (90) days after the end of each of its fiscal years, a certificate of
the Borrower specifying the types and amounts of insurance in force and the
insurers of each risk covered by such insurance.
3.05 Maintenance of Corporate Existence. The Borrower will do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence, franchises, rights and privileges as a corporation under the laws of
its state of incorporation and any other jurisdiction where the failure to so
qualify would have a material adverse affect on the Borrower's business. The
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its right to own property and to operate its business
as it may from time to time be conducted.
3.06 Use of Proceeds. The funds borrowed under the Revolving Note shall be
used for any bona fide corporate purpose not inconsistent with this Agreement.
No such funds shall be loaned or distributed to the Borrower's shareholders or
other affiliates without the Bank's prior written consent.
3.07 Executive Officers. The Borrower will use its reasonable efforts to
cause its current chief executive officer to remain engaged in the active
management of the Borrower and to perform duties substantially similar to those
presently performed by such officer.
3.08 Notice of Litigation. Promptly after the commencement thereof, the
Borrower shall furnish the Bank notice of all actions, suits and proceedings
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, affecting the Borrower which are
required to be disclosed by the Borrower in a report filed with the Securities
and Exchange Commission.
3.09 Notice of ERISA Requirements. As soon as possible and in any event
within thirty (30) days after the Borrower knows or has reason to know that any
reportable event, accumulated funding deficiency, prohibited transaction,
disqualification or termination (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended) with respect to any Plan
has occurred, the Borrower shall furnish the Bank with the statement of the
chief financial officer of the Borrower setting forth details as to such event
and the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such event to the Pension Benefit
Guaranty Corporation. For purposes of this Agreement, "Plan" shall mean any
employee benefit plan maintained in whole or in part for employees of the
Borrower which is subject to the provisions of Title IV of the Employee
Retirement Income Security Act of 1974, as amended from time to time, or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code of 1986, as amended from time to time.
3.10 Other Events. The Borrower shall promptly notify the Bank of any
material default under or material violation of any material agreement, law or
regulation to which the Borrower is a party or by which it is bound. The
Borrower shall promptly perform all of its material obligations under any
agreements to which it is a party.
3.11 Compliance with Laws. The Borrower shall comply in all material
respects at all times with all statutes, regulations, orders and judgments to
which it is subject.
- 4 -
<PAGE>
3.12 Access. The Bank (by any of its officers, employees or agents) shall
have the right, at reasonable times and on reasonable advance notice, to
inspect, audit and make extracts from all of the records, files and books of
account of the Borrower. The Borrower shall instruct its banking and other
financial institutions to make available to the Bank such information and
records as the Bank may reasonably request.
ARTICLE IV.
NEGATIVE COVENANTS
The Borrower covenants and agrees, while any portion of the principal
amount of the revolving line of credit established hereunder is outstanding, it
will not take any of the following actions from the date hereof:
4.01 Sale of Substantial Assets; Change in Control. The Borrower will not
merge into or with (other than a merger in which the Borrower is the surviving
entity), or sell all or a substantial part of its assets to, any other person
or entity. In addition, Victor Insetta shall at all times maintain legal and
beneficial ownership of at least 51% of the outstanding voting stock of the
Borrower.
4.02 Nature of Business. The Borrower will not engage in any business if,
as a result, the general nature of the business in which it would then be
engaged would be substantially changed from the general nature of the business
engaged in by it on the date of this Agreement.
4.03 Pension Plan Funding Deficiency. The Borrower shall not incur or
suffer to exist any material accumulated funding deficiency within the meaning
of the Employee Retirement Income Security Act of 1974 or incur any material
liability to the Pension Benefit Guaranty Corporation (or any successor)
established thereunder in connection with any Plan.
4.04 Transactions with Affiliates. The Borrower shall not directly or
indirectly enter into any transaction with any affiliate of the Borrower unless
such transaction is upon fair and reasonable terms and provisions no less
favorable to the Borrower than it could have obtained in a comparable
arm's-length transaction with a person who is not an affiliate of the Borrower.
4.05 Financial Covenants. The Borrower shall comply at all times with the
following financial covenants. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles on a basis consistently applied.
(a) The Borrower's Debt Service Coverage Ratio shall be the ratio of:
(i) the Borrower's consolidated earnings before interest, capital lease
obligations, taxes and depreciation for the four preceding fiscal quarters
to (ii) the sum of all principal, interest and capital lease obligations
payable by the Borrower and its consolidated subsidiaries during such
fiscal quarters. The Debt Service Coverage Ratio shall be computed
quarterly, so long as the indebtedness to the Bank under this Agreement is
outstanding, commencing September 30, 1996, and on each December 31, March
31, June 30 and September 30 thereafter, and shall not be less than 1.25 to
1.00.
(b) The Borrower shall not allow its ratio of consolidated Total
Liabilities to consolidated Tangible Net Worth to exceed 0.50 to 1.00. The
consolidated Tangible Net Worth of the Borrower shall not be less than
$15,000,000. For purposes hereof, "Tangible Net Worth" and "Total
Liabilities" shall have the following meanings:
- 5 -
<PAGE>
(i) "Tangible Net Worth" shall mean the aggregate of the
following:
(aa) The gross book value as shown by the books of the
Borrower and its consolidated subsidiaries of all real and
personal property excluding: (1) any property located outside the
United States or its territorial possessions or Great Britain;
(2) all intangible personal property including, without
limitation, licenses, patents, patent applications, copyrights,
trademarks, trade names, goodwill, going concern value,
experimental or organizational expense, treasury stock and
unamortized discount; and (3) all investments in, loans to or
amounts due from any shareholder, officer, director, employee or
other affiliate;
less the sum of the following items (bb), (cc) and (dd);
(bb) all reserves for depletion, depreciation and
amortization of properties as shown by the books of the Borrower
and its consolidated subsidiaries and all other proper reserves
which in accordance with generally accepted accounting principles
should be set aside in connection with the business of the
Borrower and its consolidated subsidiaries;
(cc) all obligations which under generally accepted
accounting principles are shown or should be shown on the balance
sheet of the Borrower and its consolidated subsidiaries as
liabilities; and
(dd) all increases in book value of any real estate or
tangible personal property of the Borrower and its consolidated
subsidiaries attributable to a reappraisal or other write-up of
assets.
(ii) "Total Liabilities" shall mean: (aa) any indebtedness or
liability for borrowed money and any other indebtedness or liability
evidenced by notes, debentures, bonds or similar obligations of the
Borrower and its consolidated subsidiaries; and (bb) all other
obligations which under generally accepted accounting principles are
shown or should be shown on the balance sheet of the Borrower and its
consolidated subsidiaries as liabilities.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and so long as this Agreement is in
effect or any part of the indebtedness to the Bank under this Agreement remains
unpaid, shall continue to represent and warrant at all times, that:
5.01 Corporate Status. The Borrower: is a corporation duly incorporated and
validly existing under and by virtue of its state of incorporation; is duly
licensed and qualified in all other states and jurisdictions wherein the
failure to so qualify would have a material adverse effect on the Borrower's
business; and holds in full force and effect all permits, licenses and
franchises necessary for it to carry out its operations in conformity with all
applicable laws and regulations (other than permits, licenses and franchises
the failure of which to hold or maintain would not have a material adverse
effect on the Borrower's business).
- 6 -
<PAGE>
5.02 Authorization, Conflicts and Validity. The execution and delivery of
this Agreement and each of the other Loan Documents to which the Borrower is or
will be a party and the performance by the Borrower of all of its obligations
thereunder: (a) have been duly authorized by all requisite corporate action;
(b) will not violate or be in conflict with (i) any provision of applicable law
(including, without limitation, any applicable usury or similar law); (ii) any
order, rule or regulation of any court or other governmental authority binding
upon the Borrower; (iii) any provision of its certificate of incorporation or
bylaws, including any amendments thereto, or any resolution with continuing
effect adopted by its Board of Directors or shareholders; or (iv) any provision
of any shareholders' agreement or trust respecting securities of its issue or
related rights; (c) will not violate, be in conflict with, result in a breach
of or constitute a default (with or without the giving of notice or the passage
of time or both) of a material provision under any material instrument,
indenture, agreement or other obligation to which it is a party or by which it
or any of its assets and properties is or may be bound or subject; and (d)
except as specifically contemplated by this Agreement or any other Loan
Documents, will not result in the creation or imposition of any lien, charge or
encumbrance of any nature upon any of its assets and properties. The Loan
Documents to which the Borrower is or will be a party when executed and
delivered will be legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and provisions, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by equitable principles.
5.03 Consents. No consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority or other person
(including, without limitation, the shareholders of the Borrower) is required
as a condition precedent, concurrent or subsequent to or in connection with the
due and valid execution, delivery and performance by the Borrower of this
Agreement or any other Loan Document to which it is or will be a party, or the
legality, validity, binding effect or enforceability of any of the respective
representations, warranties, covenants and other terms and provisions thereof.
Each franchise, license, certificate, authorization, approval or consent from
any governmental authority material to the present conduct of the business and
operations of the Borrower or required for the acquisition, ownership,
improvement, operation or maintenance by it of any material portion of the
assets and properties it now owns, operates or maintains, has been obtained and
validly granted, is in full force and effect and constitutes valid and
sufficient authorization therefor.
5.04 Financial Statements. The Borrower has heretofore made available to
the Bank financial statements as of and for its fiscal year ending June 30,
1995, and the nine-month period ending March 31, 1996. Those financial
statements fairly present the financial condition of the Borrower and the
results of its operations as of the dates thereof. Those financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except for the omission
of certain footnote disclosures relating to the financial statements for the
nine-month period ended March 31, 1996, and except for changes, if any, stated
in the related accountants' reports.
5.05 Financial Condition. Since March 31, 1996, there has been no material
adverse change in the assets or the financial condition of the Borrower from
that set forth or reflected in the financial statements as of that date. The
Borrower has complied in all material respects with all of its material
obligations. There are no actions, suits, investigations or proceedings by any
person or entity pending or threatened against the Borrower or to which it is a
party involving the possibility of any material judgment or liability not fully
covered by insurance or by adequate reserves set up on the books of the
Borrower. The Borrower has good, marketable title to all of
- 7 -
<PAGE>
its assets reflected in the financial statements dated March 31, 1996, as being
owned by it, and such assets are free and clear of all liens, charges and
encumbrances except as shown on those financial statements. Since the date of
the financial statements already delivered to the Bank, no loss, damage,
destruction or taking of any of the physical properties of the Borrower which
are material to its business has occurred which has not been fully restored or
replaced, or which is not fully covered by insurance, and neither such property
nor business has been adversely affected in any substantial way as the result
of any accident, strike, lockout, combination of workmen, embargo, riot, war,
act of God or public enemy.
5.06 Corporate Restrictions. The Borrower is not a party to any contract or
subject to any charter or other corporate restriction which would materially
and adversely affect its property or business, or its ability to perform its
obligations under the Loan Documents.
5.07 Taxes. The Borrower has filed all federal and state tax returns which
are required to be filed, and has paid all taxes as shown on the returns and on
all assessments received by it to the extent that the taxes have become due.
Proper and accurate amounts have been withheld by the Borrower from its
employees for all periods in material compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies.
5.08 Default. There exists as of the date hereof no Default or Event of
Default.
5.09 Other Representations. All warranties and representations of the
Borrower contained in any of the other Loan Documents are true and accurate in
all material respects.
5.10 ERISA. No Plan has incurred any material accumulated funding
deficiency within the meaning of the Employee Retirement Income Security Act of
1974, and the Borrower has not incurred any material liability to the Pension
Benefit Guaranty Corporation (or any successor) in connection with any Plan.
5.11 Purpose of the Borrower. None of the proceeds of the loan by the Bank
to the Borrower made hereunder will be used for the purpose of purchasing or
carrying any "margin security" within the meaning of Regulation U (12 CFR Part
221) of the Board of Governors of the Federal Reserve System or for the purpose
of reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin security or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
U, as now in effect or as it may hereafter be amended. Neither the Borrower nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement or any Loan Document to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in each case as in effect now or
as the same may hereafter be amended.
5.12 Payment of Loan Proceeds. The Bank is authorized to disburse all
proceeds of any loan to the Borrower hereunder directly to or upon the order of
the President of the Borrower without looking into the use of those proceeds.
The President of the Borrower as of the date hereof is Victor Insetta. The Bank
may rely on the fact that he continues to serve in that capacity until the Bank
receives written notice to the contrary.
5.13 Solvency. After giving effect to the full funding of the loan
contemplated herein, the Borrower is solvent. "Solvent" shall mean, when used
with respect to any person or entity, that:
- 8 -
<PAGE>
(a) such person or entity does not intend to incur, and does not believe and
has no reason to believe that it will incur, debts beyond its ability to pay as
they become due; (b) the sum of such person's or entity's assets is greater
than all of such person's or entity's liabilities at a fair valuation; (c) such
person or entity has sufficient means to enable it to pay its debts as they
become due; and (d) such person or entity does not have unreasonably small
capital to carry on such person's or entity's business as theretofore operated
and all businesses in which such person or entity is about to engage. "Fair
valuation" is intended to mean that value which can be obtained if the assets
are sold within a reasonable time in arm's-length transactions in an existing
and not theoretical market.
ARTICLE VI.
EVENTS OF DEFAULT
6.01 Events of Default. Each of the following events shall constitute an
"Event of Default" hereunder:
(a) if the Borrower defaults in the payment of any principal, interest
or other amount under the Revolving Note when the same shall become due,
either by the terms thereof or otherwise as provided herein, and such
default continues for ten calendar days; or
(b) if there occurred an Event of Default under and as defined in that
certain Loan Agreement, dated as of September 27, 1994, between the
Borrower and the Bank, as amended from time to time (the "Term Loan
Agreement"); or
(c) if the Borrower defaults: (i) in any payment of principal of or
interest on any other material obligation beyond any period of grace
provided with respect thereto, or (ii) in the performance or observance of
any other agreement, term, or condition contained in any agreement under
which any such obligation is created if the effect of such default is to
cause, or permit the holder or holders of such obligation (or trustee on
behalf of such holder or holders) to cause, such obligation to become due
prior to its stated maturity, except for obligations disputed in good faith
if the Bank is promptly notified thereof and, if requested by the Bank,
funded reserves are established in amounts which in the Bank's opinion are
sufficient to pay the total amount in dispute; or
(d) if any statement, representation or warranty made by the Borrower
herein or in any writing now or hereafter furnished in connection with or
pursuant to the Loan Documents or in connection with any audit shall be
false in any material respect; or if the Borrower omits or fails to
disclose immediately any substantial contingent or liquidated liabilities,
or any material adverse change in facts previously disclosed by any
statement, representation, certificate or warranty to the Bank; or
(e) if there occurs a breach of Section 4.01 hereof; or
(f) if the Borrower makes an assignment for the benefit of creditors
or is generally not paying its debts as they become due; or
(g) if any order, judgment or decree is entered under the bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution or
- 9 -
<PAGE>
liquidation or similar law of any jurisdiction adjudicating the Borrower
bankrupt or insolvent; or
(h) if the Borrower petitions or applies to any tribunal for, or
consents to, the appointment of a trustee, receiver, custodian, liquidator,
or similar official, of the Borrower, or of any substantial part of the
assets of the Borrower, or commences a voluntary case under the Bankruptcy
Code of the United States or any proceedings relating to the Borrower under
the bankruptcy, insolvency, or moratorium law of any other jurisdiction,
whether now or hereafter in effect; or
(i) if any such petition or application is filed, or any such
proceedings are commenced against the Borrower and if the Borrower by any
act indicates its approval thereof, consent thereto, or acquiescence
therein, or an order is entered in an involuntary case under the Bankruptcy
Code of the United States, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator, or similar
official, or approving the petition in any proceedings, and such order
remains unstayed and in effect for more than 60 days; or
(j) if any order is entered in any proceedings against the Borrower
decreeing the dissolution or split-up of the Borrower; or
(k) if the Borrower defaults in the performance or observance of any
other material agreement, covenant, term or condition contained herein or
in any other Loan Document and such default shall not have been remedied
within 30 days after written notice thereof is sent by the Bank to the
Borrower except, however, that an Event of Default shall not be deemed to
have occurred if the Borrower commences to cure such default within such
30-day period and the Borrower completes such cure within 60 days after
such notice.
6.02 Default. A "Default" shall be deemed to have occurred hereunder if:
(i) any event or condition occurs which would constitute an Event of Default
hereunder upon the satisfaction of any requirement for notice or passage of
time in connection with such event or condition; or (ii) a "Default" occurs
under and as defined in the Term Loan Agreement.
6.03 Remedies. If any Default shall occur, any obligation of the Bank to
make advances hereunder or under any Loan Document shall be terminated without
notice to the Borrower. In addition, if any Event of Default shall occur, the
Bank may by notice to the Borrower, effective upon dispatch, declare the entire
unpaid principal amount then outstanding under the Loan Documents, all interest
accrued and unpaid under the Loan Documents and all other indebtedness of the
Borrower to the Bank under this Agreement or any of the other Loan Documents to
be forthwith due and payable. Thereupon, the then outstanding principal amount
under the Loan Documents, all such accrued interest and all such other
indebtedness shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower, and the Bank may immediately enforce
payment of all such amounts and exercise any or all of the rights and remedies
of the Bank under this Agreement and other Loan Documents.
6.04 Termination of Rights to Advances; Automatic Acceleration.
Notwithstanding anything herein to the contrary, (a) the Borrower's right, if
any, to obtain any additional advances under the Loan Documents shall
automatically terminate upon the initiation against the Borrower of any
proceeding under the Federal Bankruptcy Code, or upon the occurrence of any
Event of
- 10 -
<PAGE>
Default described in subparagraphs (f), (g), (h) or (i) of Section 6.01, and
(b) all indebtedness of the Borrower to the Bank under this Agreement or any of
the Loan Documents shall automatically be and become immediately due and
payable upon the occurrence of any Event of Default described in subparagraphs
(f), (g) or (h) of Section 6.01.
ARTICLE VII.
MISCELLANEOUS
7.01 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated shall be consummated, to pay, and save the Bank harmless against
liability for the payment of expenses arising in connection with any renewals
or modifications relating hereto and any state documentary stamp taxes or other
taxes (including interest and penalties, if any) which may be determined to be
payable in respect to the execution and delivery of any Loan Documents executed
in connection with this Agreement or any such renewal or modification. The
Borrower acknowledges that it has participated with the Bank in establishing
the structure of this transaction and that it has independently determined the
amount of documentary stamp and other taxes due in connection herewith. The
Borrower has not relied upon representations of the Bank or its counsel in
calculating the amount of such taxes, and the Borrower shall be liable for any
additional taxes (including interest and penalties) which may be due in
connection with this transaction or any renewals hereof. If an Event of Default
shall occur, the Borrower shall also pay all of the Bank's costs of collection
including Bank employee travel expenses, court costs and the reasonable fees of
attorneys and legal assistants (whether incurred in connection with trial or
appellate proceedings). The Borrower authorizes the Bank to make advances under
the Loan Documents and to debit its deposit accounts to pay all expenses.
7.02 Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Borrower in connection
herewith shall survive the execution and delivery of the Loan Documents but
shall expire upon full and indefeasible repayment of all principal and interest
under the Revolving Note.
7.03 Successors and Assigns. All covenants and agreements in this Agreement
contained by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. The Borrower shall not be entitled to assign its
rights hereunder. The Bank may not, without the Borrower's consent, grant
participations in the Loan Documents other than to affiliates of the Bank (or
successors in merger) regularly engaged in the business of making loans similar
to the loan made to the Borrower pursuant to the Loan Documents. The Bank may
disclose to any such participant such information concerning the Borrower as
the Bank deems appropriate.
7.04 Notices. All communications, notices or demands provided for hereunder
or under any other Loan Document to which the Borrower is a party shall be sent
by first class mail, by courier, by hand, or by certified mail as follows or to
such other address with respect to any party as such party shall notify the
others in writing:
To the Bank: Barnett Bank, N.A.
50 N. Laura Street
Jacksonville, Florida 32202
Attn: Corporate Banking Group
- 11 -
<PAGE>
To the Borrower: American Technical Ceramics Corp.
17 Stepar Place
Huntington Station, New York 11746
Attn: Kathleen M. Kelly, Vice President,
Administration
Except as otherwise specifically set forth herein, each such communication,
notice or demand shall be deemed given: (i) on the third business day after
deposited in the mail with proper postage affixed if sent by mail; and (ii)
when actually delivered to the appropriate address if sent by courier or by
hand.
7.05 Applicable Law, Etc. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. The descriptive section
headings herein have been inserted for convenience only and shall not be deemed
to limit or otherwise affect the construction of any provisions hereof. This
Agreement may be executed simultaneously in several counterparts. Each
counterpart shall be deemed an original. All rights and remedies of the Bank
hereunder are cumulative and in addition to any rights and remedies which the
Bank may have under the laws of Florida. The Bank's exercise of any one right
or remedy against one party hereto will not deprive the Bank of any right or
remedy against that party or any other parties hereto. No right, power or
remedy conferred upon or reserved to the Bank under this Agreement or any other
of the Loan Documents is exclusive of any other right, power or remedy in any
of the Loan Documents, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power
and remedy given hereunder or under any other Loan Documents, or now or
hereafter existing at law, in equity or by statute. No delay or omission of the
Bank to exercise any right, power or remedy under any of the Loan Documents or
accruing upon any Event of Default shall exhaust or impair any such right,
power or remedy or shall be construed to waive any such Event of Default or to
constitute acquiescence therein. Every right, power and remedy given to the
Bank under any of the Loan Documents may be exercised from time to time and as
often as may be deemed expedient by the Bank. No waiver of any Default or Event
of Default hereunder shall extend to or affect any subsequent Default or Event
of Default or any other Default or Event of Default then existing, or impair
any rights, powers or remedies consequent thereon. No term of any Loan Document
may be changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. If
any portion of any Loan Document is declared void by any court as illegal or
against public policy, the remainder of the Loan Documents in question shall
continue in full effect. Upon receipt by the Borrower of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note
(the "Lost Note") and of an indemnity agreement reasonably satisfactory to the
Borrower, the Borrower will make and deliver to the Bank a new Note of like
tenor, date and principal amount in lieu of the Lost Note.
7.06 Survival of Obligations Upon Termination of Financing Arrangement.
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of the financing
under this Agreement shall in any way affect or impair the obligations, duties,
and liabilities of the Borrower or the rights of the Bank relating to any
transaction or event occurring prior to such termination. This Agreement
supersedes and replaces any commitment letter relating to the loan extended to
the Borrower pursuant to the Loan Documents.
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
AMERICAN TECHNICAL CERAMICS CORP.
By: Victor Insetta
--------------------------------
Its: President
----------------------------
BARNETT BANK, N.A.
By: Robert Bartnofsky
--------------------------------
Its: Vice President
----------------------------
- 13 -
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<PERIOD-TYPE> 3-MOS
<S> <C>
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,854
<SECURITIES> 887
<RECEIVABLES> 4,216 <F1>
<ALLOWANCES> 0
<INVENTORY> 8,409
<CURRENT-ASSETS> 17,631
<PP&E> 29,541
<DEPRECIATION> 15,501
<TOTAL-ASSETS> 31,969
<CURRENT-LIABILITIES> 3,817
<BONDS> 3,425
0
0
<COMMON> 41
<OTHER-SE> 23,403
<TOTAL-LIABILITY-AND-EQUITY> 31,969
<SALES> 8,289
<TOTAL-REVENUES> 8,289
<CGS> 5,852
<TOTAL-COSTS> 7,714
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 521
<INCOME-TAX> 186
<INCOME-CONTINUING> 335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1> note: receivables shown net of allowance of 320
</TABLE>
