SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-22384
MICRO COMPONENT TECHNOLOGY, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0985960
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2340 West County Road C, St. Paul, MN 55113-2528
----------------------------------------------------
(Address of principal executive offices)
(651) 697-4000
-----------------------------
(Registrant's telephone number)
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 ___
The number of shares outstanding of the Registrant's Common Stock, as of April
23, 1999 was 7,394,300.
Page 1 of 24 pages
Exhibit index on page 14
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
EXHIBITS AND REPORTS 14
2
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 27, June 27,
ASSETS 1999 1998
- -------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,603 $ 2,532
Accounts receivable, less allowance for doubtful accounts
of $146 and $250, respectively 3,339 3,614
Inventories:
Raw materials 896 878
Work in process 1,328 1,562
Finished goods 1,181 1,390
Other 179 152
-------- --------
Total current assets 8,526 10,128
Property, plant and equipment 3,978 3,952
Less accumulated depreciation (3,253) (2,905)
-------- --------
Property, plant and equipment, net 725 1,047
Other assets 48 51
-------- --------
Total assets $ 9,299 $ 11,226
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------
Current liabilities:
Current portion of long term debt $ 50 $ 50
Accounts payable 1,137 1,227
Other accrued liabilities 1,186 1,466
-------- --------
Total current liabilities 2,373 2,743
Long-term debt and financing obligations 46 83
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 authorized,
7,394,300 and 7,394,300 issued, respectively 74 74
Additional paid-in capital 44,012 44,012
Cumulative translation adjustment (64) (64)
Accumulated deficit (37,142) (35,622)
-------- --------
Total stockholders' equity 6,880 8,400
-------- --------
Total liabilities and stockholders' equity $ 9,299 $ 11,226
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -----------------------
Mar. 27, Mar. 28, Mar. 27, Mar. 28,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 4,028 $ 3,567 $ 10,716 $ 12,539
Cost of sales 2,032 1,783 5,538 5,310
-------- -------- -------- --------
Gross profit 1,996 1,784 5,178 7,229
Operating expenses:
Selling, general and administrative 1,417 1,700 4,569 5,868
Research and development 708 888 2,140 2,868
-------- -------- -------- --------
Total operating expenses 2,125 2,588 6,709 8,736
-------- -------- -------- --------
Loss from operations (129) (804) (1,531) (1,507)
Interest income, net 18 23 61 95
Other (14) 8 (50) 135
-------- -------- -------- --------
Total Interest and other 4 31 11 230
-------- -------- -------- --------
Net Income (loss) $ (125) $ (773) $ (1,520) $ (1,277)
======== ======== ======== ========
Net income (loss) per share:
Basic $ (0.02) $ (0.10) $ (.21) $ (0.18)
======== ======== ======== ========
Diluted $ (0.02) $ (0.10) $ (.21) $ (0.18)
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding:
Basic 7,394 7,376 7,394 7,204
======== ======== ======== ========
Diluted 7,394 7,376 7,394 7,204
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statement
4
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
March 27, March 28,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,520) $(1,277)
Adjustments to reconcile net income (loss) to net cash
Used by operating activities:
Depreciation and amortization 367 366
Changes in assets and liabilities:
Accounts Receivable 275 959
Inventories 425 (2,449)
Other assets (24) 126
Accounts payable (90) (580)
Other accrued liabilities (280) (247)
------- -------
Net cash used in operating activities (847) (3,102)
Cash flows from investing activities:
Maturity of short-term investments -- 1,169
Additions to property, plant and equipment (45) (226)
------- -------
Net cash provided by (used in) investing activities (45) 943
Cash flows from financing activities:
Payments of long-term debt (37) (287)
Proceeds from issuance of stock -- 20
------- -------
Net cash used in financing activities (37) (267)
------- -------
Net decrease in cash and cash equivalents (929) (2,426)
Cash and cash equivalents at beginning of period 2,532 5,360
------- -------
Cash and cash equivalents at end of period $ 1,603 $ 2,934
======= =======
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, consolidated financial statements for the
three and nine month periods ended March 27, 1999 have been prepared in
accordance with the instructions for SEC Form 10-Q and, accordingly, do
not include all disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals
considered necessary for a fair presentation, have been included.
Interim unaudited financial results should be read in conjunction with
the audited financial statements included in the SEC Annual Report,
Form 10-K, for the fiscal year ended June 27, 1998.
The results of operations for the three and nine months ended March 27,
1999 are not necessarily indicative of the operating results to be
expected for the full year.
2. EARNINGS PER SHARE
Earnings per share are computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share."
Basic earnings per share are computed using the weighted average number
of common shares outstanding during each period. Diluted earnings per
share include the dilutive effect of common shares potentially issuable
upon the exercise of stock options and warrants outstanding. Earnings
per share data for the three and nine month periods ended March 27,
1999 and March 28, 1998 have been stated and restated, respectively, to
conform to the provisions of SFAS No. 128. The following table
reconciles the denominators used in computing basic and diluted
earnings per share:
Three months ended Nine months ended
---------------------------------------------
March 27, March 28, March 27, March 28,
(in thousands) 1999 1998 1999 1998
---------------------------------------------
Weighted average common
shares outstanding 7,394 7,376 7,394 7,204
Effect of dilutive stock
options and warrants (1) -- -- -- --
---------------------------------------------
7,394 7,376 7,394 7,204
=============================================
(1) The Company reported a loss for all periods presented. No
adjustment made for the effect of stock options or warrants as
effect is anti-dilutive.
6
<PAGE>
3. REPORTING OF COMPREHENSIVE NET INCOME OR (LOSS)
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS), No. 130 "Reporting Comprehensive
Income" which establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of
general-purpose financial statements. Under this standard, certain
revenues, expenses, gains, and losses recognized during the period are
included in comprehensive income (loss), regardless of whether they are
considered to be results of operations of the period. During the three
and nine month periods ended March 27, 1999 and March 28, 1998, total
comprehensive loss equaled net loss as reported on the Consolidated
Statements of Operations.
4. PREFERRED STOCK
In November 1997, the Company converted 315,789 shares of Class A
preferred stock to common stock on a one-for-one basis. There were no
dividends accrued or paid on the preferred stock. The Company no longer
has shares of preferred stock outstanding. The issuance of the shares
of common stock was exempt from registration pursuant to section
3(a)(9) of the Securities Act of 1933. No commission or other
remuneration was paid to solicit the conversion.
7
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 27, 1999
Net sales for the third quarter fiscal 1999, ended March 27, 1999, increased
12.9% to $4.0 million compared to $3.6 million for the same period the previous
year. Record sales of 5100 handlers and the shipment of the first Tapestry unit
in the current year combined to generate the increase in sales. Although sales
activity of the newer products designed to handle the newest technology showed
strength during the quarter, the semiconductor capital equipment market remained
soft in the current year, most notably in older products. While the market
appears to be signaling the beginning of a recovery, net sales are expected to
continue to be adversely affected for the foreseeable future, most pronounced in
the older products.
Gross margins for the third quarter of fiscal 1999 were 49.6%, virtually flat
compared to 50.0% the prior year. Current year sales included a greater mix of
higher margin 5100 products, offset by the increased costs associated with
production ramp up of the Tapestry product. Gross margins are expected to remain
near the 50% level in the near term.
Selling, general and administrative expense in the third quarter of fiscal 1999
was $1.4 million compared to $1.7 million for the same quarter in 1998. The
decrease in current year expense is the result of the cost reduction activities
previously initiated by the Company.
Research and development expense for the third quarter fiscal 1999 was $0.7
million compared to $0.9 million the previous year. The decrease in spending in
the current year resulted from reduced spending requirements related to R&D
projects in process during this period. The Company expects to continue to make
significant investments in new product development, and expects fourth quarter
fiscal 1999 R&D expenses to approximate current quarter levels, based upon the
projected needs of current and anticipated development projects.
The Company generated net interest income during the quarter of $18,000 as
compared to $23,000 for the same period one year ago. The decrease resulted from
lower levels of interest bearing cash equivalents and short-term investments in
the current year.
Net loss for the third quarter of fiscal 1999 was $125,000, or $0.02 per share
as compared to a net loss of $ 773,000 and $0.10 per share for the third quarter
of fiscal 1998.
8
<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 27, 1999
Net sales for the first nine months of fiscal 1999 decreased 14.5 % to $10.7
million compared to $12.5 million for the same period the previous year. The
weakness in the semiconductor capital equipment market during the current year
adversely impacted sales, most notably in older products.
Gross margin for the first nine months of fiscal 1999 decreased to 48.3% from
57.7% for the same period the prior year. The decrease is primarily attributed
to changes in product mix, shifting from older, higher margin products to
products with lower margins. In addition, unabsorbed overhead costs related to
lower production volumes further decreased gross margins in the current year.
Selling, general and administrative expense decreased by $1.3 million, or 22.1%,
to $4.6 million in the first nine months of the current fiscal year, compared to
$5.9 million for the same period in fiscal 1998. The decrease in expenses is the
result of the cost reduction activities initiated by the Company in late fiscal
1998 and early fiscal 1999.
Research and development expense decreased to $2.1 million in fiscal 1999, as
compared to $2.9 million in the previous year. The decrease in spending in the
current year resulted from reduced spending requirements related to R&D projects
in process during this period.
The Company generated net interest income during the current year of $61,000 as
compared to $95,000 for the same period one year ago. The decrease resulted from
lower levels of interest bearing cash equivalents and short-term investments in
the current year.
Net loss for the first nine months of fiscal 1999 was $1.5 million, or $0.21 per
share as compared to a net loss of $1.3 million, and $0.18 per share for the
same period of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 27, 1999, the Company had cash and cash equivalents of $1.6 million
compared to $2.5 million at June 27, 1998. Cash used in operations was $0.8
million during the current year, versus $3.1 million used in the previous year.
Cash provided by reduced receivables and inventory partially offset the net loss
in the current year. During fiscal 1998, increases in inventory and receivables
to support new product launches combined with the net loss as the primary uses
of cash.
Current assets at March 27, 1999 were $8.5 million, the current ratio was 3.6
and working capital was $6.2 million, versus $10.1 million, 3.7 and $7.4
million, respectively, at June 27, 1998.
The Company maintains a $5 million secured line of credit with a bank, which was
unused at March 27, 1999. Management believes that cash and cash equivalents at
March 27, 1999 and funds available through its bank line of credit will sustain
the Company's continuing operations at their current levels, for the foreseeable
future.
9
<PAGE>
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. When year 2000 begins,
these computers may interpret "00" as the year 1900 and could either stop
processing date related computations or could process them incorrectly.
Beginning in the year 2000, these date code fields will need to accept
four-digit entries to distinguish 21st century dates from 20th century dates to
be year compliant.
The Company completed an initial assessment of its internal information systems
and determined that most of the application software and internal information
systems, other than the Company's primary manufacturing and accounting system:
(1) are year 2000 compliant; (2) can be upgraded to be year 2000 compliant
without significant cost or effort; or (3) do not pose a significant issue to
the Company if left uncorrected. With regard to the Company's primary
manufacturing and accounting system, the Company contracted with the software
vendor and related hardware supplier to bring these systems year 2000 compliant.
The upgrade process was completed in the 2nd quarter of fiscal 1999. Total costs
to upgrade the Company's internal information systems, most of which have been
paid, are not material to the operations of the Company, and are expected to be
less than $100,000.
The Company has completed an assessment of non-IT systems within the Company to
determine if they are year 2000 compliant. Non-year 2000 compliant systems have
been identified and are scheduled to be upgraded or replaced by the end of
fiscal 1999. Although the Company is not aware of any material operational
issues or costs associated with preparing its internal systems for the year
2000, there can be no assurance that the Company will not experience serious
unanticipated negative consequences and/or material costs caused by undetected
errors or defects in the technology used in its internal operating systems,
which are composed predominately of third party software and hardware
technology.
The Company is in the process of determining the impact that third-party
suppliers and vendors that are not year 2000 compliant may have on the
operations of the Company. Non-compliance by any of the Company's major
distributors, suppliers, customers, vendors, or financial organizations could
result in business disruptions that could have a material adverse affect on the
Company's results of operations, liquidity and financial condition. The Company
plans on developing a contingency plan once it has completed its assessment of
significant party compliance. The contingency plan will be developed to minimize
the Company's exposure to work slowdowns or business disruptions and any adverse
affects on the Company's results of operations. The contingency plan should be
completed by the end of fiscal 1999.
The Company is currently in the process of assessing and testing the software
components of its products for year 2000 compliance. The Company does not
believe that its products contain undetected errors or defects associated with
year 2000 date functions that may result in material costs to the Company,
including repair costs and costs incurred in litigation due to any such defects;
however, there can be no assurance that such errors or defects do not exist.
Many commentators have stated that a significant amount of litigation will arise
out of year 2000 compliance issues. Because of the unprecedented nature of such
litigation, there can be no assurance that the Company will not be materially
adversely affected by claims related to year 2000 compliance.
10
<PAGE>
IMPACT OF ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which is required to be adopted for the
fiscal year beginning June 28, 1998. At that time, the Company will be required
to disclose certain financial and descriptive information about its operating
segments as redefined by SFAS No. 131. The Company is in the process of
assessing the impact of SFAS No. 131.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing accounting standards. SFAS 133 requires that all derivatives be
recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. Adopting the provisions of SFAS 133
are not expected to have a material effect on the Company's financial
statements. The standard is effective for the Company in fiscal 2000.
RISK FACTORS
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. These "forward-looking
statements" involve certain risks and uncertainties, including, but not limited
to, the following: (1) fluctuations and periodic downturns in the semiconductor
market, as currently being experienced, which often have had a
disproportionately negative effect on manufacturers of semiconductor capital
equipment; (2) rapid changes in technology and in tester and handler products,
which the Company must respond to successfully in order for its products to
avoid becoming noncompetitive or obsolete; (3) customer acceptance of the
Company's new products, including the MCT 5100, MCT 5200, MCT 7632 and Tapestry
handling systems, in which the Company has invested significant amounts of
inventory; (4) possible loss of any of the Company's key customers, who account
for a substantial percentage of the Company's business; (5) the possible adverse
impact of competition in markets which are highly competitive, including
increased pressure on pricing and payment terms which may adversely affect net
sales and gross margins and increase the Company's exposure to credit risk; (6)
the possible adverse impact of economic or political changes in markets the
Company serves, including the uncertain economic situation currently facing
Southeast Asia; (7) the possible adverse impact on the Company's operations or
material costs which may be incurred by the Company due to undetected errors or
defects in preparing its internal operating systems for the year 2000; (8) the
possible adverse impact on the Company's operations or material costs which may
be incurred by the Company arising from year 2000 related repair costs or
litigation due to undetected errors or defects in its products which use
software; and, (9) other factors detailed from time to time in the Company's SEC
reports, including but not limited to the discussion in the Management's
Discussion & Analysis included in the Annual Report on Form 10-K for the year
ended June 27, 1998. All forecasts and projections in this report are
"forward-looking statements," and are based on management's current expectations
of the Company's near-term
11
<PAGE>
results, based on current information available pertaining to the Company,
including risk factors discussed above. Actual results could differ materially.
12
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 11, 1999, the Company entered into an agreement with the Securities
and Exchange Commission (the "Commission") resolving the investigation of the
Company by the Commission with respect to certain financial reporting
discrepancies announced by the Company in April 1994 dating back to fiscal 1993
and the first two quarters of fiscal 1994. Without admitting or denying any
wrongdoing, the Company has agreed to an order of the Commission that it will
not in the future violate federal securities law provisions governing, among
other things, the maintenance of books and records and periodic reporting.
There were no fines or other penalties imposed upon the Company.
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 10.R Second Amendment to Credit and Security Agreement
(Eximbank Guaranteed Loan), dated February 16, 1999 between
Norwest Bank Minnesota N.A and Micro Component Technology, Inc.
10.S Second Amendment to Credit and Security Agreement, dated
May 6, 1999 between Wells Fargo Business Credit, Inc. and
Micro Component Technology, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
13
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
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.
Micro Component Technology, Inc.
Registrant
Dated: May 7, 1999 By: /s/Roger E. Gower
--------------------------------------
Roger E. Gower
President and Chief Executive Officer
And
Dated: May 7, 1999 By: /s/ Jeffrey S. Mathiesen
--------------------------------------
Jeffrey S. Mathiesen
Chief Financial Officer
Chief Accounting Officer
14
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit
Number Page
10.R Second Amendment to Credit and Security Agreement (Eximbank
Guaranteed Loan), dated February 16, 1999 between Norwest Bank
Minnesota N.A and Micro Component Technology, Inc. 15
10.S Second Amendment to Credit and Security Agreement , dated
May 6, 1999 between Wells Fargo Business Credit, Inc. and Micro
Component Technology, Inc. 19
27 Financial Data Schedule 24
EXHIBIT 10.R
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
(EXIMBANK GUARANTEED LOAN NO. AP073233XA)
This Amendment, dated as of February 16, 1999, is made by and
between MICRO COMPONENT TECHNOLOGY, INC., a Minnesota corporation (the
"Borrower"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association (the "Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of February 17, 1998 as amended by a First Amendment to
Credit and Security Agreement dated as of October 22, 1998 (as so amended, the
"Credit Agreement"). Capitalized terms used in these recitals have the meanings
given to them in the Credit Agreement unless otherwise specified.
The Borrower has requested that the Lender extend the Maturity Date
by two years. The Lender is willing to grant the Borrower's request pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which
are defined in the Credit Agreement shall have the same meanings as defined
therein, unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"'Maturity Date' means February 15, 2001."
2. No Other Changes. Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance or letter of credit
thereunder.
3. Fees.
(a) APPLICATION FEE. The Borrower shall reimburse the Lender for
the $100 application fee payable to Eximbank in connection with the
renewal application.
(b) FACILITY FEE. The Borrower shall pay the Lender a fully earned
and non-refundable facility fee of $25,000 due and payable upon the date
of this Amendment.
<PAGE>
4. Conditions Precedent. This Amendment shall be effective when
the Lender shall have received an executed original hereof, together with each
of the following, each in substance and form acceptable to the Lender in its
sole discretion:
(a) A Certificate of the Secretary of the Borrower certifying as
to (i) the resolutions of the board of directors of the Borrower approving
the execution and delivery of this Amendment, (ii) the articles of
incorporation and bylaws of the Borrower, which were certified and
delivered to the Lender pursuant to its Certificate of Authority dated as
of February 16, 1998 continue in full force and effect and have not been
amended or otherwise modified except as set forth in the Certificate to be
delivered, and (iii) certifying that the officers and agents of the
Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority dated as of February 16, 1998, as being
authorized to sign and to act on behalf of the Borrower continue to be so
authorized or setting forth the sample signatures of each of the officers
and agents of the Borrower authorized to execute and deliver this
Amendment and all other documents, agreements and certificates on behalf
of the Borrower.
(b) The SBA/Eximbank Joint Application, properly completed and
executed by the Borrower.
(c) The Borrower Agreement, properly executed by the Borrower.
(d) An Exceptions Approval Letter, properly signed by Eximbank.
(e) Payment of the fee described in Paragraph 3.
(f) Receipt by the Lender of the executed Loan Authorization
Notice.
(g) Such other matters as the Lender may require.
5. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate action
and do not (i) require any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
-2-
<PAGE>
presently in effect, having applicability to the Borrower, or the articles
of incorporation or by-laws of the Borrower, or (iii) result in a breach
of or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article
V of the Credit Agreement are correct on and as of the date hereof as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
6. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
7. No Waiver. The execution of this Amendment and acceptance of
any documents related hereto shall not be deemed to be a waiver of any Default
or Event of Default under the Credit Agreement or breach, default or event of
default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of
this Amendment.
8. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
9. Costs and Expenses. The Borrower hereby reaffirms its
agreement under the Credit Agreement to pay or reimburse the Lender on demand
for all costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby
-3-
<PAGE>
agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make an Advance
under the Credit Agreement, or apply the proceeds of any Advance, for the
purpose of paying any such fees, disbursements, costs and expenses and the fee
required under paragraph 3 hereof.
10. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
NORWEST BANK MINNESOTA, MICRO COMPONENT TECHNOLOGIES,
NATIONAL ASSOCIATION INC.
By By
---------------------------------- ----------------------------------
Brett Beugen Jeffrey S. Mathiesen
Its Officer Its Chief Financial Officer
-4-
EXHIBIT 10.S
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of May 6, 1999 is made by and between MICRO
COMPONENT TECHNOLOGY, INC., a Minnesota corporation (the "Borrower"), and WELLS
FARGO BUSINESS CREDIT, INC. f/k/a NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of February 17, 1998, as amended by a First Amendment to
Credit and Security Agreement dated as of October 22, 1998 (the "Credit
Agreement"). Capitalized terms used in these recitals have the meanings given to
them in the Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which
are defined in the Credit Agreement shall have the same meanings as defined
therein, unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"'Floating Rate' means an annual rate equal to the sum of the Base
Rate plus one and one-half percent (1.5%), which annual rate shall change
when and as the Base Rate changes."
2. Minimum Tangible Net Worth. Section 6.12 of the Credit
Agreement is hereby amended to read as follows:
"Section 6.12 Minimum Tangible Net Worth. The Borrower will maintain
its Tangible Net Worth determined as at the end of each fiscal quarter, at
an amount not less than the amount set forth opposite such fiscal quarter:
<PAGE>
---------------------------------------------------------
Fiscal Quarter Ending Minimum Tangible
Net Worth
---------------------------------------------------------
June 30, 1999 $6,300,000
---------------------------------------------------------
September 30, 1999 $6,500,000
---------------------------------------------------------
December 31, 1999 $6,700,000
---------------------------------------------------------
March 31, 2000 $6,900,000
---------------------------------------------------------
June 30, 2000 and thereafter $7,100,000
---------------------------------------------------------
3. Minimum Net Income. Section 6.13 of the Credit Agreement is
hereby amended to read as follows:
"Section 6.13 Minimum Net Income. Borrower will achieve Net Income,
determined as at the end of each month, of not less than the amount set
forth opposite the applicable period below:
---------------------------------------------------------
Period Minimum Net
Income
---------------------------------------------------------
April 1, 1999 to June 30, 1999 ($3,000,000)
---------------------------------------------------------
July 1, 1999 and thereafter ($1,500,000)
---------------------------------------------------------
In addition, the Borrower shall achieve, as of the end of each
fiscal quarter, Net Income of not less than the amount set forth opposite
the applicable period below:
---------------------------------------------------------
Period Minimum Net
Income
---------------------------------------------------------
April 1, 1999 to June 30, 1999 ($2,300,000)
---------------------------------------------------------
July 1, 1999 to September 30, 1999 ($250,000)
---------------------------------------------------------
October 1, 1999 to December 31, 1999 $0
---------------------------------------------------------
January 1, 2000 to March 31, 2000 $250,000
---------------------------------------------------------
April 1, 2000 and thereafter $500,000
---------------------------------------------------------
4. New Covenants. Section 6.14 of the Credit Agreement is hereby
amended to read as follows:
"Section 6.14 New Covenants. On or before May 31, 2000, the Borrower
and the Lender shall agree on new covenant levels for Sections 6.12, 6.13,
6.15 and 7.11 for periods after such date. The new covenant levels will be
based on the Borrower's projections for such periods and shall be no less
stringent than the present levels."
-2-
<PAGE>
5. No Other Changes. Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance or letter of credit
thereunder.
6. Waiver of Defaults. The Borrower is in default of the
following provision of the Credit Agreement (the "Default"):
- --------------------------------------------------------------------------------
SECTION/COVENANT PERIOD REQUIRED ACTUAL
- --------------------------------------------------------------------------------
6.12 Minimum Tangible Net 3/27/99 not less than $7,000,000 $6,880,000
Worth
- --------------------------------------------------------------------------------
Upon the terms and subject to the conditions set forth in this Amendment, the
Lender hereby waives the Default. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this
waiver shall not entitle the Borrower to any other or further waiver in any
similar or other circumstances.
7. Covenant Default Fee. Section 2.8(f) of the Credit Agreement
states that "[i]f at any time the Borrower is in default of Section 6.12 or
Section 6.13, the Borrower agrees to pay to the Lender, upon written demand, a
fully earned and non-refundable covenant default fee of $20,000." The Lender
hereby demands payment as of the date hereof of one-half of such covenant
default fee, and payment of the remaining one-half of the covenant default fee
within one day after the tenth consecutive day that the amount of the
outstanding Advances is greater than $0.
8. Conditions Precedent. This Amendment, and the waiver set forth
in Paragraph 6 hereof, shall be effective when the Lender shall have received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:
(a) Payment of the fee described in Paragraph 7.
(b) Such other matters as the Lender may require.
9. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate action
and do not
-3-
<PAGE>
(i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, (ii) violate any provision of any law, rule or regulation or
of any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the articles of incorporation or by-laws
of the Borrower, or (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in Article
V of the Credit Agreement are correct on and as of the date hereof as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
10. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
11. No Other Waiver. Except as set forth in Paragraph 6 hereof,
the execution of this Amendment and acceptance of any documents related hereto
shall not be deemed to be a waiver of any Default or Event of Default under the
Credit Agreement or breach, default or event of default under any Security
Document or other document held by the Lender, whether or not known to the
Lender and whether or not existing on the date of this Amendment.
12. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
13. Costs and Expenses. The Borrower hereby reaffirms its
agreement under the Credit Agreement to pay or reimburse the Lender on demand
for all costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to
-4-
<PAGE>
the Lender for the services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments incidental
hereto. The Borrower hereby agrees that the Lender may, at any time or from time
to time in its sole discretion and without further authorization by the
Borrower, make a loan to the Borrower under the Credit Agreement, or apply the
proceeds of any loan, for the purpose of paying any such fees, disbursements,
costs and expenses and the fee required under paragraph 7 hereof.
14. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
WELLS FARGO BUSINESS CREDIT, INC. MICRO COMPONENT TECHNOLOGY, INC.
By By
---------------------------------- ----------------------------------
Kate F. Wahlberg Its
Its Assistant Vice President -------------------------------
-5-
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<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-END> MAR-27-1999
<CASH> 1,603
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<RECEIVABLES> 0
<ALLOWANCES> (146)
<INVENTORY> 3,405
<CURRENT-ASSETS> 8,526
<PP&E> 3,978
<DEPRECIATION> (3,253)
<TOTAL-ASSETS> 9,299
<CURRENT-LIABILITIES> 2,373
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0
0
<COMMON> 74
<OTHER-SE> 6,880
<TOTAL-LIABILITY-AND-EQUITY> 9,299
<SALES> 10,716
<TOTAL-REVENUES> 10,716
<CGS> 5,538
<TOTAL-COSTS> 5,538
<OTHER-EXPENSES> 6,709
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,520)
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<INCOME-CONTINUING> (1,520)
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