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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File Number: 0-24416
ADFLEX SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3186513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 W. CHANDLER BLVD., CHANDLER, AZ 85224
(602) 963-4584
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
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 the filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's common stock, as of June 30,
1996:
COMMON STOCK, $.01 PAR VALUE: 8,584,054 SHARES
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ADFLEX SOLUTIONS, INC.
INDEX
<TABLE>
<CAPTION>
Page
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PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995........................................ 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1996 and 1995.......................... 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995.................................... 5
Notes to Condensed Consolidated Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................ 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................ 11
SIGNATURES................................................................................ 12
</TABLE>
EXHIBITS
(10.33) Second Amendment to Credit Agreement, dated June 18, 1996,
among the Registrant, The First National Bank of Boston and
First Interstate Bank of Arizona, N.A.
(11.1) Computation of Net Income per Share
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ADFlex Solutions, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 3,555 $ 15,699
Accounts receivable, net 20,943 15,592
Receivable for taxes 6,334 6,269
Duties/VAT receivable 1,598 --
Inventories 18,488 16,824
Other current assets 1,882 1,294
-------- --------
Total current assets 52,800 55,678
Property, plant & equipment, net 41,451 35,289
Purchased intangibles, net 14,318 15,937
Other assets 61 14
-------- --------
$108,630 $106,918
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 6,900 $ --
Acquisition payable -- 12,375
Accounts payable 11,736 7,257
Accrued liabilities 7,179 5,996
Liability for taxes 6,334 6,269
Accrued taxes 370 513
Current portion of long-term debt and
capitalized leases 2,641 2,632
-------- --------
Total current liabilities 35,160 35,042
Deferred tax liabilities 610 471
Long-term debt and capitalized leases 7,768 7,851
Stockholders' equity 65,092 63,554
-------- --------
$108,630 $106,918
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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ADFlex Solutions, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $ 35,031 $24,423 $ 73,113 $46,403
Cost of sales 29,787 17,347 60,671 33,135
-------- ------- -------- -------
Gross profit 5,244 7,076 12,442 13,268
Operating expenses:
Engineering, research & development 1,727 1,119 3,393 2,187
Selling, general & administrative 3,521 2,175 6,635 4,078
Amortization of intangible assets 795 -- 1,591 --
-------- ------- -------- -------
Total operating expenses 6,043 3,294 11,619 6,265
Operating income (loss) (799) 3,782 823 7,003
Other income (expense), net (233) 238 (505) 523
-------- ------- -------- -------
Income (loss) before income taxes (1,032) 4,020 318 7,526
Income taxes (372) 1,494 139 2,794
-------- ------- -------- -------
Net income (loss) $ (660) $ 2,526 $ 179 $ 4,732
======== ======= ======== =======
Net income (loss) per share $ (0.08) $ 0.35 $ 0.02 $ 0.66
======== ======= ======== =======
Number of shares used in computing net
income (loss) per share 8,579 7,212 8,619 7,140
======== ======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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ADFlex Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income $ 179 $ 4,732
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,353 948
Deferred taxes 212 295
Changes in operating assets and liabilities:
Accounts receivable (5,351) (3,174)
Duties/VAT receivable (1,598) --
Inventories (1,664) (1,698)
Other current assets (661) (83)
Accounts payable and accrued liabilities 5,520 4,962
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 990 5,982
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures (8,925) (5,099)
Decrease in other assets (19) (1)
Decrease in acquisition payable (12,375) --
Sales of available-for-sale securities -- 61,358
Purchases of available-for-sale securities -- (60,610)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (21,319) (4,352)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Net activity on line of credit 6,900 --
Payments on capitalized lease obligations (74) (59)
Issuance of common stock, net of expenses 1,359 5,909
-------- --------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 8,185 5,850
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,144) 7,480
Cash and cash equivalents at beginning of period 15,699 4,025
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,555 $ 11,505
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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ADFLEX SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes 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. Additionally, certain prior period amounts have
been reclassified to conform to the current presentation. Operating results for
the six month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1995.
Effective December 31, 1995, the Company purchased from Havant
International Holdings Limited (HIHL) all outstanding capital shares of Havant
International Limited, an HIHL subsidiary containing the flexible interconnect
division and certain net assets, including inventory, fixed assets, certain
receivables and liabilities and purchased intangibles. The division was involved
in the design, manufacture, assembly and sale of flexible interconnects. In
exchange for the capital shares, the Company paid consideration consisting of
$12.4 million in cash, a $10.0 million subordinated debenture and 1,242,347
shares of restricted Common Stock. Upon completion of the acquisition the
business was renamed and now operates as ADFlex Solutions Limited (ADFlex U.K.).
The acquisition was accounted for using the purchase method of accounting;
therefore, the accompanying unaudited condensed consolidated financial
statements include the accounts of ADFlex U.K. since the date of acquisition.
(2) SHORT-TERM INVESTMENTS
The Company held no short-term investments at June 30, 1996 or December
31, 1995. Included in cash and cash equivalents at June 30, 1996 and December
31, 1995 are available-for-sale securities totaling $380,000 and $15,699,000,
respectively, at cost and fair value. For the six month periods ending June 30,
1996 and 1995, there were no gross realized gains or losses on sales of
available-for-sale securities. There were no net adjustments to unrealized
holding gains (losses) on available-for-sale securities during the same periods.
(3) ACCOUNTS RECEIVABLE, NET
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Accounts receivable trade $ 21,525 $ 16,234
Allowance for doubtful accounts and returns (582) (642)
-------- --------
$ 20,943 $ 15,592
======== ========
</TABLE>
6
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(4) INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------- ------------
<S> <C> <C>
Raw materials $ 9,338 $ 7,309
Work-in-process 7,364 9,153
Finished goods 1,786 362
------- -------
$18,488 $16,824
======= =======
</TABLE>
Item 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net Sales
Net sales for the three and six month periods ended June 30, 1996
increased 43% and 58%, respectively, over the same periods in 1995 due to the
inclusion of sales from the Company's recently acquired ADFlex U.K. operation.
Excluding the effect of ADFlex U.K., sales for the three months ended June 30,
1996 were negatively impacted by program delays among customers in the hard disk
segment involving new magneto-resistive recording technology, a slow down for
mature products and order cancellations from certain major customers.
Gross Profit
Gross profit as a percentage of net sales (gross margin) for the three
and six months ended June 30, 1996 was 15.0% and 17.0% as compared to 29.0% and
28.6%, respectively, for the same periods in 1995. The Company's gross margin
for 1996 has been negatively impacted by the integration of the ADFlex U.K.
assembly operation, lower efficiencies and capacity utilization and increased
depreciation expense.
The acquisition of ADFlex U.K. was completed effective December 31,
1995. ADFlex U.K. manufactures high end circuit assemblies whereas ADFlex's U.S.
operations have historically focused on the manufacture and fabrication of
circuits. Due to the additional components and high dollar value of integrated
circuits added in the assembly process, full assemblies contain a material
content which, on average, is nearly twice that of the circuit. As the Company
is not able to obtain a comparable margin on this additional material content,
the overall gross margins on assemblies are lower than those of circuits. While
the Company anticipated that in the near term overall gross margins would be
adversely affected by the integration of the ADFlex U.K. operations, the Company
believes that over time the consolidation of the two operations should provide
improvements in production costs through higher product yields, faster
production ramps, reduced inventories, shorter production cycle times, improved
account control and increased leverage over expenses, resulting in improved
margins. However, the slowdown in the hard disk drive industry and the resulting
decline in net sales experienced throughout the first six months of the year has
delayed the materialization of these benefits.
As discussed above, during the three and six month periods ended June
30, 1996 the Company's net sales were negatively impacted by order delays and
program cancellations from major customers, some of which generated revenue
without generating gross margins. As it is difficult for the Company to readily
reduce spending in areas such as fixed costs, research and development, and
on-going customer service, this reduction in sales resulted in reduced
efficiencies and capacity utilization thus adversely impacting the gross margin
for the period.
Late in the first quarter of 1995, in response to increasing sales
levels, the Company began a capacity expansion plan. This expansion plan
resulted in increased capital expenditures and increased depreciation expense
during 1995 and continuing in 1996. For the three and six months ended June 30,
1996, depreciation expense as a percentage of net sales was 4.1% and 3.8%
compared with 2.2% and 2.0, respectively, for the same periods in 1995.
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Operating Expenses
Engineering, research & development expenses and selling, general &
administrative expenses as a percentage of net sales for the three month period
ended June 30, 1996 were 4.9% and 10.1% compared with 4.6% and 8.9% for the same
period in 1995, respectively. The percentage increases are due to the decline in
revenues for the three month period without a corresponding decline in operating
expenses. In addition, amortization of intangibles purchased in the acquisition
of ADFlex U.K. was $0.8 million, or 2.3% of net sales, for the three month
period ended June 30, 1996.
For the six month period ended June 30, 1996, engineering, research &
development expenses and selling, general & administrative expenses as a
percentage of net sales for the six month period ended June 30, 1996 were 4.6%
and 9.1% compared with 4.7% and 8.8% for the same period in 1995, respectively.
Other Income (Expense)
For the three month period ended June 30, 1996, other income (expense)
includes $0.2 million of interest expense on the $10 million subordinated
debenture, $0.2 million of interest expense related to borrowings under the line
of credit, the impact of bank fees and translation gains or (losses) offset by
interest income and gains of the sales of assets approximating $0.2 million.
Other income (expense) for the same period in 1995 represents net interest
income of $0.3 million, the impact of bank fees, and translation gains or
(losses).
For the six month period ended June 30, 1996, other income (expense)
includes $0.4 million of interest expense on the $10 million subordinated
debenture, $0.3 million of interest expense related to borrowing on the line of
credit, the impact of bank fees and translation gains or (losses) offset by
interest income and gains on the sale of assets approximating $0.2 million
compared with net interest income generated on the investment of the proceeds of
the Company's initial public offering of $0.5 million, the impact of bank fees,
and translation gains or (losses) for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended June 30, 1996, the Company has funded its
needs from cash generated by operations and $6.9 million in proceeds from an
available line of credit. For the comparable period in 1995, the Company funded
its cash needs from cash generated by operations and maintaining higher levels
of accounts payable.
Net cash provided by operating activities for the six month period ended
June 30, 1996 was $1.0 million compared with $6.0 million for the same period in
1995. The Company experienced a $4.6 million reduction in net income for the
1996 period as compared with 1995 due in part to a $1.8 million increase in
depreciation expense and $1.6 million in amortization of intangible assets The
Company experienced increased working capital requirements of $3.8 million for
the six month period ended June 30, 1996 primarily in the form of increased
receivables and inventories. Also during the period, the Company required an
additional $12.0 million in working capital for funding of accounts receivable
associated with its U.K. operations as receivables were not purchased in the
acquisition. These working capital requirements were funded through the
generation of accounts payable and accrued liability balances and from
borrowings on the Company's existing line of credit.
Net cash used in investing activities was $21.3 million for the six
months ended June 30, 1996 compared with $4.4 million for the same period in
1995. Late in the first quarter of 1995, the Company began a capacity expansion
plan in response in increasing sales levels. This expansion continued into the
six month period ending June 30, 1996, during which the Company spent $8.9
million on capital expenditures versus $5.1 million for the same period in 1995.
In January, 1996 the Company paid $12.4 million in connection with its
acquisition of the ADFlex U.K. operations. This payment and the majority of the
capital expenditures were financed from existing cash and cash equivalent
balances.
Net cash provided by financing activities for the six months ended June
30, 1996 was $8.2 million compared with $5.9 million for the same period in
1995. The Company generated $.7 million and $5.9 million in the six months ended
June 30, 1996 and 1995, respectively, through sales of its common stock and $0.7
million from the
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tax benefit received on disqualifying dispositions of employee stock in 1996.
Additionally, the Company borrowed $6.9 million on its bank line of credit
during the six months ended June 30, 1996.
On June 18, 1996, the Company amended its $20.0 million revolving line
of credit with the First National Bank of Boston and First Interstate Bank of
Arizona (the FNBB line) to provide additional flexibility with respect to
certain covenants which allows the Company to more adequately meet its working
capital requirements. Under the amended FNBB line, accounts receivable and
inventory are pledged as collateral and borrowing is limited to 80% of the
aggregate value of all eligible domestic accounts plus 70% of the aggregate
value of all eligible foreign accounts. At June 30, 1996, the Company had $15.6
million available for borrowing with an outstanding balance of $6.9 million. Any
outstanding balance bears interest at the bank's prime interest rate, or at the
Company's option, LIBOR plus 1.5%. The Company is required to maintain certain
covenants on a quarterly basis based on leverage and profitability. The FNBB
line prohibits the payment of dividends and certain types of merger transactions
without the prior approval of the banks. At June 30, 1996, the Company was in
compliance with all coventants under the FNBB line.
OTHER MATTERS
Foreign Operations
The Company's primary finishing and assembly facilities are located in
Agua Prieta, Mexico and Havant, United Kingdom. While the Company believes that
it has established good relationships with its labor force and the local
governments, the spread of the manufacturing process over multiple countries
subjects the Company to risks inherent in international operations. In light of
the Company's increased international presence, the Company is in the process of
developing and implementing a foreign exchange policy to mitigate against the
risk of foreign currency fluctuations in its operations. All of the Company's
sales for the three and six months ended June 30, 1996 were in United States
dollars.
Future Operations
The Company has been conducting environmental studies of its facility in
Chandler, Arizona. In connection with these studies, the Company has discovered
a limited amount of soil contamination that may require remediation. While the
investigation of the extent of this contamination is not yet complete, based on
the preliminary information currently available to it, the Company believes that
the costs associated with the investigation and remediation of this situation
will not have a material adverse effect on its operations or financial
condition; however, given the uncertainties associated with environmental
contamination, until a full investigation has been completed there can be no
assurance that such costs will not have a material adverse impact on the
Company. Pursuant to the agreements with Rogers Corporation (Rogers) through
which the Company acquired its U.S. and Mexico flex business, Rogers has
retained all environmental liabilities existing prior to the date of the
transaction. While Rogers currently has sufficient assets to fulfill its
obligations under the acquisition agreements, if pre-closing environmental
liabilities requiring remediation are discovered and the Company was unable to
enforce the acquisition agreement against Rogers, the Company could become
subject to costs and damages relating to such environmental liabilities. Any
such costs and damages imposed on the Company could materially adversely affect
the Company's business, financial condition and results of operations.
In mid 1995, the Company acquired a manufacturing facility located in
Agua Prieta, Mexico. In connection with this acquisition, the Company conducted
an environmental study of the facility which indicated the contamination by
hazardous materials in the soil and groundwater. Pursuant to the purchase
agreement, the sellers have agreed to diligently pursue in good faith an
approved remediation plan with the appropriate Mexican authorities; provided
that the sellers' obligation for cost of remediation is limited to $2,500,000. A
total of $975,000 is being held in escrow pending sellers' performance of their
environmental obligations under the agreement.
The Company is subject to a variety of environmental laws relating to
the storage, discharge, handling, emission, generation, manufacture, use and
disposal of hazardous material used to manufacture the Company's flex products.
The Company believes that it has been operating its facilities in substantial
compliance in all material respected with existing environmental laws. However,
the Company cannot predict the nature, scope or effect of legislation or
regulatory requirements that could be imposed or how existing or future laws or
regulations will be
9
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administered or interpreted with respect to products or activities to which they
have not previously been applied. Compliance with more stringent environmental
laws, as well as more vigorous enforcement policies of regulatory agencies,
could require substantial expenditures by the Company and could adversely affect
the results of operations of the Company.
Due to continued weakness in the hard disk drive industry and continued
delays in bringing magnetoresistive technology on-line, the Company believes
that near term operating results will be about comparable to that reported for
the second quarter of 1996.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains forward-looking statements that involve risks and
uncertainties, including but not limited to the Company's ability to achieve
improved production costs through integration of its U.K. operations, risks of
foreign operations, risks of future order cancellations and delays,
magneto-resistive technology issues, environmental matters and other risks
detailed herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, Quarterly Report on Form 10-Q for the period ended
March 31, 1996 and other Securities and Exchange Commission filings.
10
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of the shareholders of ADFlex Solutions
Inc. held on April 16, 1996, the following matters were submitted to a vote:
PROPOSAL I - ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
Rolando C. Esterverena For - 8,110,486 Withheld - 14,039
Michael L. Pierce For - 8,110,012 Withheld - 14,513
Richard P. Clark For - 8,110,355 Withheld - 14,170
Steve Sanghi For - 8,111,975 Withheld - 12,550
William Kennedy Wilkie For - 8,111,975 Withheld - 12,550
</TABLE>
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
AUDITORS
For - 8,105,692 Against - 8,856 Abstain - 9,977
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(10.33) Second Amendment to Credit Agreement, dated June 18, 1996,
among the Registrant, The First National Bank of Boston and First
Interstate Bank of Arizona, N.A.
(11.1) Computation of Net Income Per Share
(b) Reports on Form 8-K.
The registrant did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
11
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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.
ADFlex Solutions, Inc.
Date: August 18, 1996 By /s/ Dale J. Bartos
--------------- -------------------------------------------
Dale J. Bartos
Chief Financial Officer, Treasurer
(Duly Authorized Officer, and
Principal Financial and Accounting Officer)
12
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SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT") is executed as
of June 18, 1996, by and among ADFLEX SOLUTIONS, INC., a Delaware corporation
("BORROWER"), THE FIRST NATIONAL BANK OF BOSTON and FIRST INTERSTATE BANK OF
ARIZONA, N.A., and each other lender which may hereafter execute and deliver an
instrument of assignment pursuant to the Credit Agreement (any one individually,
a "BANK" and collectively, the "BANKS") and THE FIRST NATIONAL BANK OF BOSTON,
as Agent ("AGENT").
RECITALS
A. Borrower, the Banks and Agent have entered into that certain Credit
Agreement dated as of October 31, 1995, as amended by that certain First
Amendment to Credit Agreement dated as of December 29, 1995 (as such may be
amended, modified, supplemented or restated further, the "CREDIT AGREEMENT"),
pursuant to which the Banks made certain credit facilities available to
Borrower. Capitalized terms used but not defined in this Amendment have the
meanings given them in the Credit Agreement.
B. Borrower has requested that the Requisite Banks consent to the
amendment of certain financial covenants set forth in the Credit Agreement as
set forth herein.
D. The Banks party hereto, constituting the Requisite Banks, and Agent are
willing to accommodate Borrower's request, but only on the terms and subject to
the conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereto agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
1.1 DEFINITIONS. SECTION 1.1 of the Credit Agreement shall be amended to
include the following definitions:
ACCOUNTS. As of any measurement date, all "accounts," as such term
is defined in Section 9106 of the UCC, then owned by Borrower, including,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by chattel paper,
documents or instruments) now owned by or belonging or owing to Borrower
(including, without limitation, under any trade name, style or division
thereof) arising out of goods sold or services rendered by Borrower, and
all monies due or to become due to Borrower under all purchase orders and
contracts for the sale of goods or the performance of services or both by
Borrower.
BORROWING BASE. As at and for any date of determination, an amount
not to exceed the sum of:
1.
<PAGE> 2
(a) eighty percent (80%) of the aggregate value of all
Eligible Domestic Accounts computed (i) with respect to any requested
Loan, as of the requested Funding Date, and (ii) with respect to the
delivery of any monthly Borrowing Base certificate to be furnished
pursuant to Section 5.1(l), as of the last day of the calendar month for
which such Borrowing Base certificate is furnished; plus
(b) seventy percent (70%) of the aggregate value of all
Eligible Foreign Accounts computed (i) with respect to any requested Loan,
as of the requested Funding Date, and (ii) with respect to the delivery of
any monthly Borrowing Base certificate to be furnished pursuant to Section
5.1(l), as of the last day of the calendar month for which such Borrowing
Base certificate is furnished.
COLLATERAL. The property of any Borrower covered by the Security
Agreement, and any other property, now existing or hereafter acquired,
that may at any time be or become subject to an Encumbrance granted or
created in favor of Agent, on behalf of Banks, to secure the full and
complete payment and performance of Borrower's Obligations.
ELIGIBLE DOMESTIC ACCOUNTS. At any time, the aggregate of the
Borrower's Accounts due from account debtors whose principal place of
business is in the United States of America, excluding, however (a) all
Accounts in respect of which full payment has not been received within
sixty (60) days of the due date; (b) all Accounts as to which the goods,
merchandise or other personal property or the rendition of services has
not been fully and completely delivered or performed; (c) all Accounts
against which the account debtor or any other person obligated to make
payment thereon asserts any defense, offset, counterclaim or other right
to avoid or reduce the liability represented by such Accounts, but only to
the extent there exists a colorable claim for such in the reasonable
determination of Requisite Banks and then only to the extent of such
defense, offset, counterclaim or other right; (d) all Accounts as to which
the account debtor or other person obligated to make payment thereon is
insolvent, subject to bankruptcy or receivership proceedings or has made
an assignment for the benefit of creditors or whose credit standing is
unacceptable to Agent and Agent has so notified Borrower; (e) all Accounts
in which any Borrower or an affiliate of any Borrower is the account
debtor; (f) in the event thirty percent (30%) or more of the Accounts of
any account debtor shall be deemed ineligible under clause (a) above, all
accounts of such account debtor; (g) any Account not previously included
as an Eligible Domestic Account which Agent in its reasonable discretion
shall deem not to qualify as an Eligible Domestic Account and for which
Agent has provided an explanation, in reasonable detail, for such failure
to qualify; and (h) any Account in which Banks do not have a perfected
security interest. For purposes of calculating the Borrowing Base,
otherwise Eligible Foreign Accounts that are backed by a letter of credit
shall be deemed to be Eligible Domestic Accounts.
2.
<PAGE> 3
ELIGIBLE FOREIGN ACCOUNTS. At any time, the aggregate of the
Borrower's Accounts due from account debtors whose principal place of
business is located in any country other than the United States of America
and in which the Banks are not prohibited from doing business, excluding,
however (a) all Accounts in respect of which full payment has not been
received within sixty (60) days of the due date; (b) all Accounts as to
which the goods, merchandise or other personal property or the rendition
of services has not been fully and completely delivered or performed; (c)
all Accounts against which the account debtor or any other person
obligated to make payment thereon asserts any defense, offset,
counterclaim or other right to avoid or reduce the liability represented
by such Accounts, but only to the extent there exists a colorable claim in
the reasonable determination of Requisite Banks and then only to the
extent of such defense, offset, counterclaim or other right; (d) all
Accounts as to which the account debtor or other person obligated to make
payment thereon is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or
whose credit standing is unacceptable to Agent and Agent has so notified
Borrower; (e) all Accounts in which any Borrower or an affiliate of
Borrower is the account debtor; (f) in the event thirty percent (30%) or
more of the Accounts of any account debtor shall be deemed ineligible
under clause (a) above, all accounts of such account debtor; and (g) any
Account not previously included as an Eligible Foreign Account which Agent
in its reasonable discretion shall deem not to qualify as an Eligible
Foreign Account and for which Agent has provided an explanation, in
reasonable detail, for such failure to qualify.
FINANCING STATEMENTS. The UCC-1 financing statements executed by
Borrower, as debtor, in favor of Agent, on behalf of Banks, as secured
party, in form sufficient for due filing with the offices of the Secretary
of State of the State of Arizona and with such other jurisdictions as
Agent shall reasonably deem appropriate in order to perfect Agent's
security interest in the Collateral to the extent such security interest
can be perfected by a filing or recordation of a UCC-1 financing statement
under the UCC.
FUNDING DATE. With respect to any proposed borrowing hereunder, the
date funds are advanced to Borrower for any Loan.
OVER ADVANCE. Has the meaning set forth in Section 2.1.
SECURITY AGREEMENT. The Security Agreement executed by Borrower,
substantially in the form of EXHIBIT E hereto, granting to the Agent, on
behalf of Banks, a security interest in the Collateral.
SECURITY DOCUMENTS. The Security Agreement, each UCC-1 financing
statement delivered pursuant hereto and any and all other related
documents.
UCC. The Uniform Commercial Code as the same may, from time to time,
be in effect in the Commonwealth of Massachusetts; provided, however, in
3.
<PAGE> 4
the event that, by reason of mandatory provisions of law, any and all of
the attachment, perfection or priority of the lien of Agent, on behalf of
Banks, in and to the Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the Commonwealth of
Massachusetts, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
1.2 DEFINITIONS. The definition of "Loan Documents" set forth in SECTION
1.1 of the Credit Agreement shall be amended in its entirety to read as follows:
LOAN DOCUMENTS. Any and all of this Agreement, the Note, the
Security Agreement, the Financing Statements and any and all other
agreements, documents and instruments executed and delivered by or on
behalf or in support of Borrower to Agent or any Bank or their authorized
designee evidencing or otherwise relating to the Loans and the Letters of
Credit, on behalf of the Banks, as the same from time to time may be
amended, modified, supplemented or renewed.
1.3 THE LOANS. SECTION 2.1 (a) of the Credit Agreement shall be amended in
its entirety to read as follows:
(a) Subject to the terms and conditions hereof, each Bank
severally agrees to make Loans to Borrower up to the amount of its
Commitment, from time to time until the close of business on the Final
Payment Date, in such sums as Borrower may request, provided that the
aggregate principal amount of all Loans and undrawn and unreimbursed
Letters of Credit at any one time outstanding hereunder shall not exceed
the lesser of (i) the Borrowing Base or (ii) the Maximum Availability.
Borrower may borrow, prepay pursuant to Section 2.11 and reborrow, from
the date of this Agreement until the Final Payment Date, the full amount
of the Commitment Amount or any lesser sum that is at least $100,000 and
an integral multiple of $100,000.
1.4 THE LOANS. SECTION 2.1 of the Credit Agreement shall be amended to
include a subsection (e) to read as follows:
(e) If at any time and for any reason the sum of the aggregate
principal outstanding under Loans and undrawn and unreimbursed Letters of
Credit shall exceed the Borrowing Base (the amount of such excess, if any,
being an "OVER ADVANCE"), Borrower shall immediately repay the full amount
of such Over Advance, together with all interest accrued thereon. All Over
Advances shall bear interest on the principal amount at a rate of two
percent (2%) per annum in excess of the interest rate applicable to the
most recently borrowed Loans comprising the Over Advance.
4.
<PAGE> 5
1.5 INTEREST RATES. SECTION 2.8(b) of the Credit Agreement shall be
amended in its entirety to read as follows:
(b) Each LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at
a rate per annum equal to the Adjusted LIBOR Rate plus
(i) one and one-half percent (1.50%) if the ratio of
Consolidated Total Liabilities (including the undrawn amount of all
outstanding Letters of Credit) to Consolidated Tangible Net Worth
(calculated as of the last day of the preceding fiscal quarter of
Borrower) is less than or equal to .90:1.00, or
(ii) one and three-quarters percent (1.75%) if the ratio of
Consolidated Total Liabilities (including the undrawn amount of all
outstanding Letters of Credit) to Consolidated Tangible Net Worth
(calculated as of the last day of the preceding fiscal quarter of
Borrower) is greater than .90:1.00.
Such interest shall be payable for such Interest Period on the last day
thereof and when such LIBOR Loan is due (whether at maturity, by reason of
acceleration or otherwise) and, if such Interest Period is longer than
three (3) months, at intervals of three (3) months after the first day
thereof.
1.6 COLLATERAL SECURITY. SECTION II of the Credit Agreement shall be
amended to include a subsection 2.19 to read as follows:
2.19 COLLATERAL SECURITY AND SINGLE LOAN. All of the Obligations of
Borrower to Banks and Agent arising under or in connection with this
Agreement, the Note or any of the other Loan Documents, including without
limitation, all Obligations of Borrower arising in respect of the Loans
and the Letters of Credit, shall constitute one general obligation of
Borrower and shall be secured by all of the Collateral.
1.7 FINANCIAL COVENANTS. SECTION 5.7 (a) of the Credit Agreement shall be
deleted in its entirety.
1.8 FINANCIAL COVENANTS. SECTION 5.7 (c) of the Credit Agreement shall be
amended in its entirety to read as follows:
(c) LEVERAGE RATIO. Borrower shall maintain a ratio of
Consolidated Total Liabilities (including the undrawn amount of all
outstanding Letters of Credit) to Consolidated Tangible Net Worth as
follows:
(i) not to exceed 1.25:1.00 as of the end of each of
the fiscal quarters ended June 30, 1996, September 30, 1996 and December
31, 1996; and
5.
<PAGE> 6
(ii) not to exceed 1.00:1.00 as of the end of the fiscal
quarter ended March 31, 1997 and thereafter.
1.9 FINANCIAL STATEMENTS AND OTHER REPORTING REQUIREMENTS. SECTION 5.1 of
the Credit Agreement shall be amended to include subsection (l) as follows:
(l) As soon as available, but in no event later than ten (10)
days after the end of each month, a written calculation of the Borrowing
Base, substantially in the form of the Borrowing Base schedule to EXHIBIT
B hereto certified by the chief financial officer of Borrower;
1.10 AFFIRMATIVE COVENANTS. SECTION V of the Credit Agreement shall be
amended to include Section 5.10 as follows:
5.10 CREDIT FINANCE EXAMINATION. Upon reasonable notice to Borrower
and during normal business hours, Borrower shall permit Agent or any
agents or representatives of Agent to complete a credit finance
examination with respect to Borrower's business and assets, at Borrower's
expense with results satisfactory to the Banks.
1.11 EVENTS OF DEFAULT. SECTION 7.1(a) of the Credit Agreement shall be
amended in its entirety to read as follows:
(a) Borrower shall fail to pay (i) any amount of principal of any
Loans when due, (ii) any amount of interest thereon or any fees or
expenses payable hereunder or under the Note, or (iii) any Over Advance
together with all interest accrued thereon, in each case within four (4)
days of the due date thereof; or
1.12 EVENTS OF DEFAULT. SECTION 7.1 of the Credit Agreement shall be
amended to include Section 7.1(l) as follows:
(l) Borrower shall fail to maintain for the benefit and on behalf of
Banks, a first priority legal and valid security interest in and to all of
the Collateral in which Grantor now has rights or later acquires rights.
1.13 NOTICES. SECTION 9.1 of the Credit Agreement shall be amended to
replace the designated addressee for notice to Borrower to read as follows:
ADFLEX SOLUTIONS, INC.
2001 West Chandler Boulevard
Chandler, Arizona 85224
Attention: Dale J. Bartos
Chief Financial Officer
Telephone: (602) 786-8274
(602) 786-8280
6.
<PAGE> 7
1.14 SUBSIDIARIES. SCHEDULE 4.12 of the Credit Agreement shall be amended
in its entirety to read as set forth in SCHEDULE 4.12 attached hereto and
incorporated herein by this reference.
1.15 NOTICE OF BORROWING OR CONVERSION. EXHIBIT B of the Credit Agreement
shall be amended in its entirety to read as set forth in EXHIBIT B attached
hereto and incorporated herein by this reference.
1.16 REPORT OF CHIEF FINANCIAL OFFICER. EXHIBIT C of the Credit Agreement
shall be amended in its entirety to read as set forth in EXHIBIT C attached
hereto and incorporated herein by this reference.
1.17 SECURITY AGREEMENT. The Credit Agreement shall be amended to
include EXHIBIT E as attached hereto and incorporated herein by this reference.
2. LIMITATION OF AMENDMENT; FULL FORCE AND EFFECT.
2.1 The amendments set forth in SECTION 1 hereof are effective for the
purposes set forth herein and shall be limited precisely as written and shall
not be deemed to (i) be a consent to any amendment, waiver or modification of
any other term or condition of any Loan Document; or (ii) otherwise prejudice
any right or remedy which Agent or the Banks may now have or may have in the
future under or in connection with any Loan Document.
2.2 This Amendment shall be construed in connection with and as part of
the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as amended
herein, are hereby ratified and confirmed and shall remain in full force and
effect.
3. REPRESENTATIONS AND WARRANTIES. In order to induce Agent and the Banks to
enter into this Amendment and to amend the Credit Agreement (a) Borrower
represents and warrants to each of Agent and the Banks that after giving effect
to this Amendment (i) the representations and warranties contained in the Loan
Documents (other than representations and warranties which expressly relate to
another date or as specifically described therein and expressly approved by
Requisite Banks) are true and correct in all material respects as of the date
hereof and (ii) no Event of Default has occurred and is continuing.
4. NO EXISTING CLAIMS.
4.1 Borrower hereby acknowledges and agrees that: (i) it has no claim or
cause of action against Agent or any Bank or any parent, subsidiary or affiliate
of Agent or any Bank, or any of their officers, directors, employees, attorneys
or other representatives or agents (all of which parties being, collectively,
the "BANKS' AGENTS") in connection with the Loan Documents, the loans thereunder
or the transactions contemplated therein and herein; (ii) it has no offset or
defense against any of its respective obligations, indebtedness or contracts in
favor of Agent and the Banks; and (iii) it recognizes that each of Agent and the
Banks has heretofore
7.
<PAGE> 8
properly performed and satisfied in a timely manner all of its obligations to
and contracts with Borrower.
5. EFFECTIVENESS. The effectiveness of this Amendment is subject to the
condition precedent that the Banks shall have received, in form and substance
satisfactory to the Banks and their respective counsel, the following:
5.1 This Amendment, the Security Agreement and the Financing Statements,
duly executed by Borrower;
5.2 A certificate of the Secretary or an Assistant Secretary of Borrower
with respect to resolutions of its Board of Directors authorizing the execution
and delivery of this Amendment, the Security Agreement and the Financing
Statements and identifying the officer(s) authorized to execute, deliver and
take all other actions required under this Amendment, the Security Agreement,
the Financing Statements and the other Loan Documents, and providing specimen
signatures of such officers;
5.3 Certified copies, dated close to the date hereof, of requests for
copies or information (Form UCC-3 or equivalent), or certificates, dated close
to the date hereof, satisfactory to the Banks, of a UCC Reporter Service,
listing all effective financing statements which name Borrower and/or each of
Borrower's domestic Subsidiaries as debtor and which are filed in the
appropriate offices in the State of Arizona, together with copies of such
financing statements, and accompanied by written evidence (including UCC
termination statements) satisfactory to the Banks that the Encumbrances
indicated in any such financing statements are either permitted hereunder or
have been terminated or released;
5.4 Payment from Borrower of an amendment fee of $20,000 payable to the
Banks based upon their pro rata Commitment;
5.5 Payment from Borrower of an amount equal to the aggregate of the fees
(including reasonable attorneys' fees), costs, expenses and other disbursements
incurred by Agent in connection with this Amendment and the transactions
contemplated hereunder, including, without limitation, the negotiation and
preparation of this Amendment and the other Loan Documents; and
5.6 Such other documents, and completion of such other matters, as counsel
for the Banks may reasonably deem necessary or appropriate.
6. ENTIRE AGREEMENT. Except to the extent expressly provided in this
Amendment, the terms and conditions of the Credit Agreement shall remain in full
force and effect. This Amendment and the other Loan Documents constitute and
contain the entire agreement of the parties hereto and supersede any and all
prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
extension of credit by the Banks to Borrower.
8.
<PAGE> 9
7. MISCELLANEOUS.
7.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS. On and after the date of this Amendment, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import referring to the Credit Agreement and each reference in the Loan
Documents to the "Credit Agreement," "thereunder," "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference to the
Agreement, as amended by this Amendment.
7.2 FEES AND EXPENSES. Borrower acknowledges that all costs, fees and
expenses as described in Section 9.2 of the Credit Agreement incurred by the
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Borrower.
7.3 HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
7.4 APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
7.5 COUNTERPARTS. This Amendment may be executed in counterparts, each of
which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
WITNESS the due execution hereof by the respective duly authorized officer
of the undersigned as of the date first written above.
BORROWER: ADFLEX SOLUTIONS, INC.
By: /s/ Dale J. Bartos
-----------------------------------------
Name: Dale J. Bartos
---------------------------------------
Title: CFO
--------------------------------------
AGENT: THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Maia D. Heymann
-----------------------------------------
Name: Maia D. Heymann
---------------------------------------
Title: Vice President
--------------------------------------
9.
<PAGE> 10
BANKS: THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Maia D. Heymann
-----------------------------------------
Name: Maia D. Heymann
---------------------------------------
Title: Vice President
--------------------------------------
FIRST INTERSTATE BANK OF ARIZONA, N.A.
By: /s/ Kevin C. Halloran
Name: Kevin C. Halloran
Title: Vice President
10.
<PAGE> 11
SCHEDULE 4.12
SUBSIDIARIES
As of the date of this Amendment, Borrower has the following Subsidiaries:
1. ADFlex Mexico, S.A. de C.V.
2. ADFlex Solutions FSC Inc.
3. ADFlex Solutions Limited
<PAGE> 12
EXHIBIT B
NOTICE OF BORROWING OR CONVERSION
____________________,199_
The First National Bank of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention:_________________________
RE: CREDIT AGREEMENT DATED AS OF OCTOBER 31, 1995, AS AMENDED BY THAT
CERTAIN FIRST AMENDMENT TO CREDIT AGREEMENT DATED AS OF DECEMBER 29,
1995, AND THAT CERTAIN SECOND AMENDMENT TO CREDIT AGREEMENT DATED AS OF
JUNE 18, 1996 (AS THE SAME FROM TIME TO TIME MAY BE AMENDED, MODIFIED,
SUPPLEMENTED OR RESTATED FURTHER, THE "CREDIT AGREEMENT"), BY AND AMONG
(i) ADFLEX SOLUTIONS, INC. ("BORROWER"); (ii) THE FIRST NATIONAL BANK
OF BOSTON ("FNBB") AND EACH OTHER LENDER WHOSE NAME IS SET FORTH ON THE
SIGNATURE PAGES OF THE CREDIT AGREEMENT OR WHICH MAY HEREAFTER EXECUTE
AND DELIVER AN INSTRUMENT OF ASSIGNMENT WITH RESPECT TO THE CREDIT
AGREEMENT (COLLECTIVELY, THE "BANKS"); AND (iii) FNBB AS AGENT
("AGENT")
Ladies and Gentlemen:
Reference is made to the Credit Agreement. The capitalized terms used in this
Notice of Borrowing or Conversion which are defined in the Credit Agreement have
the same meaning herein as given to them therein.
Borrower and the undersigned authorized officer of Borrower hereby certify that:
1. All representations and warranties of Borrower stated in
Section IV of the Credit Agreement are true, accurate and complete in all
material respects as of the date hereof; provided, however, that those
representations and warranties expressly referring to another date shall be
deemed to be made as of such date;
2. As of the date hereof, no Default or Event of Default has
occurred and is continuing; and
3. The information set forth on SCHEDULE 1 hereto, which Schedule
is incorporated herein by this reference, is true and correct.
1.
<PAGE> 13
The First National Bank of Boston, as Agent
Page 2
IN WITNESS WHEREOF, this Notice of Borrowing or Conversion is executed
by the undersigned this _ day of_____________, 199_.
ADFLEX SOLUTIONS, INC.
a Delaware corporation
By:__________________________________
Printed Name:________________________
Title:_______________________________
2.
<PAGE> 14
SCHEDULE I
TO
NOTICE OF BORROWING OR CONVERSION
DATED______________, 199_
<TABLE>
<CAPTION>
LOANS
<S> <C>
1. Current principal amount of Loans outstanding $_________
under the Credit Agreement
2. Current principal amount undrawn under $_________
outstanding Letters of Credit under the
Credit Agreement
3. Current principal amount of Loans and Letters of $_________
Credit outstanding: Line 1 plus Line 2
4. Borrowing Base* $_________
5. Amount available for borrowing: the amount equal $_________
to (a) the lesser of (i) Line 4 or (ii)
$20,000,000 minus (b) Line 3
a. Principal amount of Loan requested for this $_________
advance (must not be greater than Line 5).
b. Requested Funding Date $_________
c. Requested Rate (LIBOR Loan / / or Base $_________
Rate Loan / /)
d. If LIBOR Loan, Interest Period requested $_________
e. Principal amount of Loans outstanding plus $_________
principal amount undrawn under Letters of
Credit outstanding after giving effect to
this advance
</TABLE>
- ------------------
* Borrowing Base is calculated pursuant to Schedule B to Exhibit C of the Credit
Agreement.
3.
<PAGE> 15
EXHIBIT C
ADFLEX SOLUTIONS, INC.
REPORT OF CHIEF FINANCIAL OFFICER
ADFLEX SOLUTIONS, INC. (the "COMPANY") hereby certifies that:
This Report of Chief Financial Officer (the "REPORT") is furnished
pursuant to Section 5.1(d) of the Credit Agreement dated as of October 31, 1995,
as amended by that certain First Amendment to Credit Agreement dated as of
December 29, 1995, and that certain Second Amendment to Credit Agreement dated
as of June 18, 1996, by and among the Company and The First National Bank of
Boston ("FNBB"), and the other Banks party thereto (collectively, "BANKS") and
FNBB as agent for Banks (as amended, the "CREDIT AGREEMENT"). Unless otherwise
defined herein, the terms used in this Report have the meanings given to them in
the Credit Agreement.
As required by Section 5.1(a) and (b) of the Credit Agreement,
consolidated financial statements of the Company and its Subsidiaries for the
[year/quarter] ended ____________ 19__ (the "FINANCIAL STATEMENTS") prepared in
accordance with generally accepted accounting principles consistently applied
accompany this Report. The Financial Statements present fairly the consolidated
financial position of the Company and its Subsidiaries as at the date thereof
and the consolidated results of operations of the Company and its Subsidiaries
for the period covered thereby (subject only to normal recurring year-end
adjustments in the case of quarterly statements).
The figures set forth in SCHEDULE A hereto for determining compliance
by the Company with the financial covenants contained in the Credit Agreement
and the Borrowing Base computations (with respect to Eligible Domestic Accounts
and Eligible Foreign Accounts) set forth in SCHEDULE B hereto are true and
complete as of the date hereof and, after due inquiry of the Company's
environmental consultants and the appropriate Company personnel, the Company and
its Subsidiaries remain in full compliance with the provisions of Section 5.7(e)
of the Credit Agreement.
The activities of the Company and its Subsidiaries during the period
covered by the Financial Statements have been reviewed by the Chief Financial
Officer or by employees or agents under his immediate supervision. Based on such
review, to the best knowledge and belief of the Chief Financial Officer, and as
of the date of this Report, no Default has occurred.*
- ---------------------------
* If a Default has occurred. this paragraph is to be modified with an
appropriate statement as to the nature thereof. the period of existence thereof
and what action the Company has taken, is taking, or proposes to take with
respect thereto.
<PAGE> 16
WITNESS my hand this____________________day of__________________,19__.
ADFLEX SOLUTIONS, INC.
By:______________________________________
Printed Name:____________________________
Title:___________________________________
2.
<PAGE> 17
SCHEDULE A
TO
REPORT OF CHIEF FINANCIAL OFFICER
FINANCIAL COVENANTS
PROFITABILITY (SECTION 5.7(b))
REQUIRED:
(i) No operating or net loss greater than 5% of Consolidated
Tangible Net Worth
(ii) No operating or net loss in any two consecutive quarters.
ACTUAL:
<TABLE>
<S> <C>
(i) Consolidated Tangible Net Worth x 5% $
------
Consolidated net income at __ [prior quarter end] $
------
Consolidated net income at __ [most recent quarter end] $
------
(ii) Consolidated operating income at __ [prior quarter end] $
------
Consolidated operating income at __ [most recent quarter end] $
------
<CAPTION>
LEVERAGE RATIO (SECTION 5.7(c))
REQUIRED: Not to exceed 1.25:1.00*
ACTUAL:
<S> <C>
(i) CONSOLIDATED TOTAL LIABILITIES $
(including the undrawn amount of all outstanding ------
Letters of Credit)
(ii) CONSOLIDATED TANGIBLE NET WORTH $
------
(iii) LEVERAGE RATIO: Line (i) divided by Line (ii) :1.00
------
</TABLE>
* For quarters ended March 31, 1997 and thereafter, not to exceed 1.00:
1.00.
3.
<PAGE> 18
CONSOLIDATED TANGIBLE NET WORTH (SECTION 5.7(d))
REQUIRED:
(i) BEGINNING BALANCE $45,000,000.00
(ii) PLUS: 75% of the aggregate
Consolidated Net Income for
each fiscal quarter from
January 1, 1996 through the
fiscal quarter ended
_________________ ___,199__ $
------------
(iii) PLUS: 100% of the aggregate
increase in Consolidated
Tangible Net Worth
attributable to the issuance
and sale of capital stock
after June 30, 1995 $
------------
(iv) REQUIRED AMOUNT: $
-----------
ACTUAL:
(i) CONSOLIDATED TOTAL ASSETS OF COMPANY $
-----------
(ii) LESS: Consolidated Intangible Assets $( )
----------
(iii) LESS: Consolidated Total Liabilities $( )
----------
(iv) CONSOLIDATED TANGIBLE NET WORTH: $
-----------
4.
<PAGE> 19
SCHEDULE B
TO
REPORT OF CHIEF FINANCIAL OFFICER
BORROWING BASE
ELIGIBLE DOMESTIC ACCOUNTS
A. Aggregate amount of Domestic Accounts.
1. Previous Accounts Receivable Balance as of $
_________(date). -------------
2. Plus: Gross Sales for Current Month $
-------------
3. Plus: Other Debits to Accounts Receivable $
-------------
4. Less: Collections for Current Month $
-------------
5. Less: Credit Memos $
-------------
6. Less: Returns and Other Credits $
-------------
7. Current Accounts Receivable Balance as of $
___________(date). (Total of lines A.1-A.6) =============
B. Ineligible Domestic Accounts - list each such Account $
only once, in the first category in which it appears. -------------
1. Accounts as to which full payment has not $
been received within sixty (60) days of the -------------
due date.
2. Accounts as to which goods, merchandise or $
other personal property or services have not -------------
been fully delivered or performed.
3. Accounts subject to defense, offset, $
counterclaim or other right to avoid or -------------
reduce the liability by the Account debtor,
to the extent there exists a colorable claim
for such defense, offset, counterclaim or
other right.
4. Accounts as to which the account debtor is $
insolvent, subject to bankruptcy or --------------
receivership proceedings, or has made an
assignment for benefit of creditors.
5. Accounts as to which an affiliate of a $
Borrower or a Borrower is the account --------------
debtor.
1.
<PAGE> 20
6. Accounts of any account debtor as to which $
thirty percent (30%) are more than sixty --------------
(60) days past due.
7. Other Accounts deemed ineligible by Agent. $
--------------
8. Total ineligible Accounts (An amount equal $
to the sum of Lines B.1-B.7). ==============
C. The aggregate amount of Eligible Domestic Accounts $
(An amount equal to Line A.7 minus Line B.8). --------------
D. Eligible Domestic Accounts Borrowing Base (An $
amount equal to 80% of Eligible Domestic --------------
Accounts).
ELIGIBLE FOREIGN ACCOUNTS
E. Aggregate amount of Foreign Accounts.
1. Previous Accounts Receivable Balance as of $
_________________(date). --------------
2. Plus: Gross Sales for Current Month $
--------------
3. Plus: Other Debits to Accounts Receivable $
--------------
4. Less: Collections for Current Month $
--------------
5. Less: Credit Memos $
--------------
6. Less: Returns and Other Credits $
--------------
7. Current Accounts Receivable Balance as of $
_____________(date). (Total of lines E.1-E.6) ==============
F. Ineligible Foreign Accounts - list each such Account $
only once, in the first category in which it appears. --------------
1. Accounts as to which full payment has not $
been received within sixty (60) days of the --------------
due date.
2. Accounts as to which goods, merchandise or $
other personal property or services have not --------------
been fully delivered or performed.
2.
<PAGE> 21
3. Accounts subject to defense, offset, $
counterclaim or other right to avoid or --------------
reduce the liability by the Account debtor,
to the extent there exists a colorable claim
for such defense, offset, counterclaim or
other right.
4. Accounts as to which the account debtor is $
insolvent, subject to bankruptcy or --------------
receivership proceedings, or has made an
assignment for benefit of creditors.
5. Accounts as to which an affiliate of a $
Borrower or a Borrower is the account debtor. --------------
6. Accounts of any account debtor as to which $
thirty percent (30%) are more than sixty (60) --------------
days past the invoice date.
7. Other Accounts deemed ineligible by Agent. $
--------------
8. Total ineligible Accounts (An amount equal to $
the sum of Lines F.1-F.7). ==============
G. The aggregate amount of Borrower's Eligible Foreign $
Accounts (An amount equal to Line E.7 minus Line F.9). --------------
H. Eligible Foreign Accounts Borrowing Base (An amount $
equal to 70% of Eligible Foreign Accounts). --------------
I. Total Eligible Borrowing Base (An amount equal to the $
sum of Line D plus Line H). ==============
3.
<PAGE> 22
EXHIBIT E
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is entered into as of June 18, 1996, by and
among ADFLEX SOLUTIONS, INC., a Delaware corporation, having its chief executive
office and principal place of business at 2001 West Chandler Boulevard,
Chandler, Arizona 85224 ("GRANTOR"), THE FIRST NATIONAL BANK OF BOSTON, a
national banking association ("FNBB"), having its head office at 100 Federal
Street, Boston, Massachusetts 02110, and each other lender whose name is set
forth on the signature pages of that certain Credit Agreement, as more
specifically described below, or which may hereafter execute and deliver an
instrument of assignment with respect to the Credit Agreement (each, a "BANK"
and collectively, "BANKS"), and FNBB as agent for Banks under the Credit
Agreement ("SECURED PARTY").
RECITALS
A. Pursuant to that certain Credit Agreement dated as of October 31,
1995, as amended by that certain First Amendment to Credit Agreement dated as of
December 29, 1995, and that certain Second Amendment to Credit Agreement (the
"SECOND AMENDMENT"), dated as of even date herewith (as the same from time to
time may be amended, modified or supplemented further, the "CREDIT AGREEMENT"),
by and among Grantor, Secured Party and Banks, Banks have agreed to make certain
advances of money and to extend certain financial accommodations to Grantor in
the amounts and manner set forth in the Credit Agreement (collectively, the
"LOANS").
B. Grantor has requested that Secured Party and the Banks agree to
amend certain provisions of the Credit Agreement as set forth in the Second
Amendment.
C. Banks are willing to amend certain provisions of the Credit
Agreement as set forth in the Second Amendment, but only upon the condition,
among others, that Grantor shall have executed and delivered to Secured Party
and Banks this Security Agreement ("SECURITY AGREEMENT") whereby Grantor shall
have granted to Secured Party, on behalf and for the benefit of Banks, a
security interest in the Collateral (as hereinafter defined) securing Grantor's
obligations under the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Banks to enter into the Second
Amendment and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
Grantor hereby represents, warrants, covenants and agrees as follows:
1.
<PAGE> 23
1. DEFINED TERMS. Unless otherwise defined herein. (i) the terms
defined in the Credit Agreement are used herein as therein defined and (ii) the
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and plural forms of the terms defined):
"COLLATERAL" shall have the meaning assigned to such term in Section 2
of this Agreement.
"SECURED OBLIGATIONS" means all loans, advances, debts, liabilities and
Obligations, for monetary amounts owed by Grantor to Secured Party or Banks, or
to Secured Party on behalf of Banks, whether due or to become due, matured or
unmatured, liquidated or unliquidated, contingent or non-contingent, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, whether or not evidenced by any note, agreement or other instrument.
This term includes, without limitation, all principal, interest (including
interest that accrues after the commencement of a case against Grantor or any
affiliate of Grantor under the Bankruptcy Code), fees, including, without
limitation, any and all closing fees, prepayment fees, commitment fees, loan
fees, agent's fees and attorneys' fees and any and all other fees, expenses,
costs or other sums chargeable to Grantor under any of the Loan Documents.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the Commonwealth of Massachusetts; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Secured Party's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the Commonwealth of Massachusetts, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection of
priority and for purposes of definitions related to such provisions.
In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC (definition sections of the UCC are
noted parenthetically): "ACCOUNT DEBTOR" (9105(l)(a)); "ACCOUNTS" (9106);
"INVENTORY" (9109(4)); "PROCEEDS" (9306(l)). Each of the foregoing defined terms
shall include all of such items now owned, or hereafter acquired, by Grantor.
2. GRANT OF SECURITY INTEREST. As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
Secured Party and Banks to enter into the Second Amendment and to cause the
Loans to be made in accordance with the terms and conditions of the Credit
Agreement, Grantor hereby assigns, conveys, mortgages, pledges, hypothecates and
transfers to Secured Party, and hereby grants to Secured Party, a security
interest in all of Grantor's right, title and interest in, to and under the
following (all of which being herein collectively called the "COLLATERAL"):
(a) All Accounts of Grantor;
2.
<PAGE> 24
(b) All Inventory of Grantor;
(c) All property of Grantor held by Secured Party, or any
other party for whom Secured Party is acting as agent hereunder, including,
without limitation, all property of every description now or hereafter in the
possession or custody of or in transit to Secured Party or such other party for
any purpose, including, without limitation, safekeeping, collection or pledge,
for the account of Grantor, or as to which Grantor may have any right or power;
and
(d) To the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
3. RIGHTS OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Secured Party authorizes Grantor to collect its Accounts,
provided that such collection is performed in a prudent and businesslike manner,
and Secured Party may, upon the occurrence and during the continuation of any
Event of Default and without notice, limit or terminate said authority at any
time. If an Event of Default has occurred and is continuing, at the request of
Secured Party, Grantor shall deliver to Secured Party all original and other
documents evidencing, and relating to, the sale and delivery of such Inventory
and Grantor shall deliver all original and other documents evidencing and
relating to, the performance of labor or service which created such Accounts,
including, without limitation, all original orders, invoices and shipping
receipts.
(b) Secured Party may at any time, upon the occurrence and
during the continuation of any Event of Default, after first notifying Grantor
of its intention to do so, notify Account Debtors of Grantor that the Accounts
have been assigned to Secured Party and that payments shall be made directly to
Secured Party. Upon the request of Secured Party, Grantor shall so notify such
Account Debtors. Upon the occurrence and during the continuation of an Event of
Default, Secured Party may, in its name, or in the name of others communicate
with such Account Debtors to verify with such parties, to Secured Party's
satisfaction, the existence, amount and terms of any such Accounts.
4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and
warrants to Secured Party that:
(a) Except for the security interest granted to Secured Party
under this Security Agreement, Grantor is the sole legal and equitable owner of
each item of the Collateral in which it purports to grant a security interest
hereunder, having good and marketable title thereto free and clear of any and
all liens.
(b) No effective security agreement, financing statement.
equivalent security or lien instrument or continuation statement covering all or
any part of the Collateral exists,
3.
<PAGE> 25
except such as may have been filed by Grantor in favor of Secured Party pursuant
to this Security Agreement or such as relate to other Permitted Encumbrances.
(c) This Security Agreement creates and grants to Secured
Party for the benefit and on behalf of Banks a legal and valid security interest
in and to all of the Collateral in which Grantor now has rights and will create
a legal and valid security interest in the Collateral in which Grantor later
acquires rights, when Grantor acquires those rights.
(d) Grantor's chief executive office, principal place of
business, and the place where Grantor maintains its records concerning the
Collateral are presently located at the addresses set forth in the Credit
Agreement. The Collateral is presently located at such chief executive office
and principal place of business and Grantor's primary manufacturing facilities
in the United Kingdom and Mexico. Grantor shall not, during the continuance of
this Security Agreement, change such chief executive office or principal place
of business or remove or cause to be removed, except in the ordinary course of
Grantor's business, the Collateral or the records concerning the Collateral from
those premises without prior written notice to Secured Parry.
(e) The amount represented by Grantor to Secured Party from
time to time as owing by each Account Debtor or by all Account Debtors in
respect of the Accounts of Grantor shall at such time be the correct amount, in
all material respects, actually and unconditionally owing by such Account
Debtors thereunder.
5. COVENANTS. Grantor covenants and agrees with Secured Party that from
and after the date of this Agreement and until the Secured Obligations have been
performed and paid in full:
5.1 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any time and
from time to time, upon the written request of Secured Party, and at the sole
expense of Grantor, Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Secured Party may reasonably deem desirable to obtain the full benefits of this
Agreement.
5.2 MAINTENANCE OF RECORDS. Grantor shall keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.
6. RIGHTS AND REMEDIES UPON DEFAULT.
(a) If an Event of Default shall occur and be continuing,
Secured Parry may exercise in addition to all other rights and remedies granted
to it under this Security Agreement and the other Loan Documents, all rights and
remedies of a secured party under the UCC.
(b) Grantor also agrees to pay all fees, costs and expenses of
Secured Parry, including, without limitation. reasonable attorneys' fees,
incurred in connection with the enforcement of any of its rights and remedies
hereunder.
4.
<PAGE> 26
(c) Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by Secured Party in
the following order of priorities:
First, to Secured Party and Banks in an amount sufficient to
pay in full the reasonable costs of Secured Party in connection with
such sale. disposition or other realization, including all fees, costs,
expenses, liabilities and advances incurred or made by Secured Party
and Banks in connection therewith, including, without limitation,
reasonable attorneys' fees;
Second, to Secured Party for the account of Banks in an amount
equal to the then unpaid principal of and accrued interest and
prepayment premiums, if any, on the Secured Obligations;
Third, to Secured Party and Banks in an amount equal to any
other Secured Obligations which are then unpaid; and
Finally, upon payment in full of all of the Secured
Obligations, to Grantor or its representatives or as a court of
competent jurisdiction may direct.
7. LIMITATION ON SECURED PARTY'S DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
third party under section 9207 of the UCC.
8. REINSTATEMENT. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's property and assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance, " or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
5.
<PAGE> 27
9. MISCELLANEOUS.
9.1 NOTICES. Any notice or other communication hereunder to any party
shall be addressed and delivered (and shall be deemed given) in accordance with
the Credit Agreement.
9.2 SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.3 NO WAIVER; CUMULATIVE REMEDIES.
(a) Secured Party shall not by any act, delay, omission or
otherwise be deemed to have waived any of its respective rights or remedies
hereunder, nor shall any single or partial exercise of any right or remedy
hereunder on any one occasion preclude the further exercise thereof or the
exercise of any other right or remedy.
(b) The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
(c) None of the terms or provisions of this Security Agreement may
be waived, altered, modified or amended except by an instrument in writing, duly
executed by Grantor and Secured Party.
9.4 TIME IS OF THE ESSENCE. Time is of the essence for the performance
of each of the terms and provisions of this Security Agreement.
9.5 TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 8
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations.
9.6 SUCCESSOR AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor, and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, any future holder of any of
the indebtedness and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the lien granted
to Secured Party hereunder.
9.7 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder
6.
<PAGE> 28
shall be governed by, and construed and enforced in accordance with, the laws of
the Commonwealth of Massachusetts applicable to contracts made and performed in
such state, without regard to the principles thereof regarding conflict of laws.
9.8 COUNTERPARTS. This Security Agreement may be executed in any
number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. Each such agreement shall become effective upon the execution of a
counterpart hereof or thereof by each of the parties hereto and telephonic
notification thereof has been received by Grantor, Secured Party and Banks.
7.
<PAGE> 29
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
GRANTOR ADFLEX SOLUTIONS, INC.
By:_____________________________
Printed Name:___________________
Title:__________________________
Accepted and acknowledged by:
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Printed Name:____________________
Title :__________________________
FIRST INTERSTATE BANK OF ARIZONA, N.A.
By:______________________________
Printed Name:____________________
Title:___________________________
THE FIRST NATIONAL BANK OF BOSTON, AS AGENT
By:______________________________
Printed Name:____________________
Title:___________________________
8.
<PAGE> 1
EXHIBIT 11.1
ADFLEX SOLUTIONS, INC.
EXHIBIT (11.1) - COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) $ (660) $2,526 $ 179 $4,732
====== ====== ====== ======
WEIGHTED AVERAGE SHARES:
Common shares outstanding 8,579 6,946 8,555 6,781
Common equivalent shares representing
shares issuable upon exercise of stock
options (1) -- 266 64 359
------ ------ ------ ------
Total weighted average shares -
primary 8,579 7,212 8,619 7,140
====== ====== ====== ======
Total weighted average shares -
fully diluted 8,579 7,212 8,619 7,140
====== ====== ====== ======
Primary net income (loss) per common and
common equivalent share $ (.08) $ .35 $ .02 $ .66
====== ====== ====== ======
Fully diluted net income(loss) per common
and common equivalent share $ (.08) $ .35 $ .02 $ .66
====== ====== ====== ======
</TABLE>
- ---------------
(1) Amount calculated using the treasury stock method and fair market values
for stock.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,555
<SECURITIES> 0
<RECEIVABLES> 22,561
<ALLOWANCES> 1,618
<INVENTORY> 18,488
<CURRENT-ASSETS> 52,800
<PP&E> 47,525
<DEPRECIATION> 6,074
<TOTAL-ASSETS> 108,630
<CURRENT-LIABILITIES> 35,160
<BONDS> 7,768
0
0
<COMMON> 86
<OTHER-SE> 65,006
<TOTAL-LIABILITY-AND-EQUITY> 108,630
<SALES> 73,113
<TOTAL-REVENUES> 73,113
<CGS> 60,671
<TOTAL-COSTS> 60,671
<OTHER-EXPENSES> 11,619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 505
<INCOME-PRETAX> 318
<INCOME-TAX> 139
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
