<PAGE>
UNITED STATES
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 SEPTEMBER 26, 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 number 0-24746
TESSCO TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 52-0729657
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11126 McCormick Road, Hunt Valley, Maryland 21031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (410) 229-1000
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 filing requirements
for the past 90 days.
Yes /X/ No / /
The number of shares of the registrant's Common Stock, $ .01 par value,
outstanding as of October 29, 1999 was 4,466,232.
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TESSCO TECHNOLOGIES INCORPORATED
INDEX TO FORM 10-Q
PART I FINANCIAL INFORMATION
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Item 1 Financial Statements
Consolidated Balance Sheets as of September 26, 1999 and March 3
28, 1999
Consolidated Statements of Income for the periods ended 4
September 26, 1999 and September 27, 1998
Consolidated Statements of Cash Flows for the periods ended 5
September 26, 1999 and September 27, 1998
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk 11
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PART II OTHER INFORMATION
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Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
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Signature 14
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TESSCO TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
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September 26, March 28,
1999 1999
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(unaudited) (audited)
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ASSETS
CURRENT ASSETS:
Cash and marketable securities $ 409,200 $ 97,700
Trade accounts receivable, net 22,677,400 19,621,000
Product inventory 21,521,200 21,149,000
Deferred tax asset 626,600 626,600
Prepaid expenses and other current assets 1,703,600 1,968,900
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Total current assets 46,938,000 43,463,200
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PROPERTY AND EQUIPMENT, net 16,107,700 15,725,900
DEFERRED TAX ASSET 255,100 255,100
GOODWILL 3,453,700 3,618,200
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Total assets $ 66,754,500 $ 63,062,400
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 18,058,400 $ 12,938,500
Accrued expenses and other current liabilities 2,709,800 2,783,800
Revolving line of credit 531,000 4,403,000
Current portion of long-term debt 297,000 287,200
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Total current liabilities 21,596,200 20,412,500
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DEFERRED TAX LIABILITY 14,500 14,500
OTHER LIABILITY -- 50,000
LONG-TERM DEBT, net of current portion 6,964,500 7,128,700
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Total liabilities 28,575,200 27,605,700
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock -- --
Common stock 53,000 47,000
Additional paid-in capital 21,195,400 20,598,400
Treasury stock, at cost (3,710,600) (3,107,600)
Retained earnings 20,641,500 17,918,900
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Total shareholders' equity 38,179,300 35,456,700
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Total liabilities and shareholders' equity $ 66,754,500 $ 63,062,400
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</TABLE>
See accompanying notes.
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TESSCO TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
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Fiscal Quarters Ended Six Months Ended
September 26, September 27, September 26, September 27,
1999 1998 1999 1998
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(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $44,612,900 $ 43,317,800 $88,140,700 $ 79,617,600
Cost of goods sold 31,932,300 32,767,200 63,834,700 59,811,100
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Gross profit 12,680,600 10,550,600 24,306,000 19,806,500
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Selling, general and
administrative
expenses 9,988,200 9,364,000 19,329,400 17,886,700
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Income from operations 2,692,400 1,181,600 4,976,600 1,919,800
Interest expense, net (259,600) (322,400) (585,400) (553,100)
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Income before provision
for income taxes 2,432,800 864,200 4,391,200 1,366,700
Provision for income taxes 924,400 328,400 1,668,600 519,500
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Net income $ 1,508,400 $ 535,800 $ 2,722,600 $ 847,200
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Basic earnings per share $ 0.34 $ 0.12 $ 0.61 $ 0.19
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Diluted earnings per share $ 0.33 $ 0.12 $ 0.59 $ 0.18
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Basic weighted average shares
outstanding 4,460,900 4,417,600 4,455,300 4,414,500
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Diluted weighted average
shares outstanding 4,576,500 4,580,800 4,597,400 4,580,500
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</TABLE>
See accompanying notes.
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TESSCO TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six Months Ended
September 26, September 27,
1999 1998
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(unaudited) (unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,722,600 $ 847,200
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,299,300 940,400
Provision for bad debts 127,200 210,900
Increase in trade accounts receivable (3,183,600) (4,396,500)
Increase in product inventory (372,200) (2,088,200)
Decrease in prepaid expenses and other current assets 265,300 171,900
Increase (decrease) in trade accounts payable 5,119,900 (2,843,000)
(Decrease)increase in accrued expenses and other current liabilities (74,000) 23,800
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Net cash (used in) provided by operating activities 5,904,500 (7,133,500)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,516,600) (1,579,400)
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Net cash used in investing activities (1,516,600) (1,579,400)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit - 4,381,400
Repayments of revolving line of credit (3,872,000) -
Payments on long-term debt (154,400) (169,900)
Proceeds from exercise of stock options - 42,200
Decrease in other liabilities (50,000) -
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Net cash provided by (used in) financing activities (4,076,400) 4,253,700
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Net increase (decrease) in cash and marketable securities 311,500 (4,459,200)
CASH AND MARKETABLE SECURITIES, beginning of period 97,700 4,459,200
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CASH AND MARKETABLE SECURITIES, end of period $ 409,200 $ -
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</TABLE>
See accompanying notes.
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TESSCO TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1998
(Unaudited)
Note 1. Description of Business and Basis of Presentation
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TESSCO Technologies Incorporated (the "Company") is a leading provider of
products and value-added services to the wireless communications industry. The
Company serves customers in the cellular telephone, Personal Communications
Services (PCS), paging and mobile radio-dispatch markets, including a
diversified mix of cellular, PCS and paging carriers, dealers, self-maintained
users and consumers. The Company offers a wide selection of over 18,000 stock
keeping units, which are broadly classified as base site infrastructure,
subscriber accessory, and test and maintenance products. Although the Company
conducts business selling various products to different customer groups, these
products and customers all fall within the wireless telecommunications industry;
therefore, the Company reports operating results as one reportable segment.
In management's opinion, the accompanying interim financial statements of the
Company include all adjustments, consisting only of normal, recurring
adjustments, necessary for a fair presentation of the Company's financial
position for the interim periods presented. These statements are presented in
accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the Company's annual financial statements have been omitted from these
statements, as permitted under the applicable rules and regulations. The results
of operations presented in the accompanying interim financial statements are not
necessarily representative of operations for an entire year. The information
included in this Form 10-Q should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the fiscal
year ended March 28, 1999.
Note 2. Earnings Per Share
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In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share."
SFAS No. 128 simplifies the standards for computing earnings per share
previously found in Accounting Principles Board (APB) Opinion No. 15 "Earnings
per Share" by replacing the presentation of primary earnings per share (EPS)
with basic EPS and replacing fully diluted EPS with diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS is computed by dividing income available to common
shareholders by the weighted average number of common shares and the dilutive
common equivalent shares outstanding for the period.
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The dilutive effect of all options outstanding has been determined by using the
treasury stock method. The weighted average shares outstanding is calculated as
follows:
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Fiscal Quarters Ended Six Months Ended
September 26, September 27, September 26, September 27,
1999 1998 1999 1998
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Basic weighted average common
shares
outstanding 4,460,900 4,417,600 4,455,300 4,414,500
Effect of dilutive common
equivalent shares 115,600 163,200 142,100 166,000
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Diluted weighted average
shares outstanding 4,576,500 4,580,800 4,597,400 4,580,500
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</TABLE>
Options to purchase 456,000 shares of common stock at a weighted average
exercise price of $23.96 per share were outstanding as of September 26, 1999,
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
Note 3. New Accounting Pronouncements
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During March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
that computer software costs that are incurred in the preliminary project stage
should be expensed as incurred. Once the capitalization criteria of SOP 98-1
have been met, external direct costs of materials and services consumed in
developing or obtaining internal-use computer software; payroll and
payroll-related costs for employees who are directly associated with and who
devoted time to the internal-use computer software project (to the extent of the
time spent directly on the project); and the interest costs incurred when
developing computer software for internal use should be capitalized.
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Under SOP 98-1, training costs, data conversion costs and internal costs
incurred for upgrades, enhancements and maintenance should be expensed as
incurred. Impairment of capitalized software should be recognized in accordance
with the provision of FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The SOP is
effective for fiscal years beginning after December 15, 1998 and is to be
adopted prospectively. Management does not believe that the adoption of SOP 98-1
will have a material effect on the Company's financial condition or results of
operations.
Note 4. New Revolving Credit Agreement
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On September 30, 1999, the Company and its affiliates amended the terms of the
Company's bank financing agreement. Pursuant to the amended terms, the two
facilities previously existing under the agreement - a $5,000,000 line of credit
facility and a $10,000,000 revolving credit loan - were consolidated into one
$15,000,000 revolving credit facility, and the expiration date of the
consolidated facility was extended until September 2002. In addition, the bank
agreed to reduce the percentage amount which determines the monthly maintenance
fee required to be paid by the Company on the undisbursed balance of the
revolving credit facility. Otherwise, the terms of the bank financing agreement
remain substantially identical to those set forth in the financing agreement as
existing prior to the amendment.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This commentary should be read in conjunction with the Management's Discussion
and Analysis of Financial Condition and Results of Operations from the Company's
Form 10-K for the fiscal year ended March 28, 1999.
Second Quarter of Fiscal 2000 Compared to Second Quarter of Fiscal 1999
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Revenues increased by $1.3 million, or 3.0%, to $44.6 million for the second
quarter of fiscal 2000 compared to $43.3 million for the second quarter of
fiscal 1999. Revenues from sales of the Company's base site infrastructure
products decreased while sales of subscriber accessory products and services
and test and maintenance products increased. The largest percentage increase
was experienced in the sale of subscriber accessory products and services,
primarily attributable to growth in affinity marketing programs. Base site
infrastructure, subscriber accessory and test and maintenance products and
services accounted for approximately 50%, 38% and 12%, respectively, of
revenues during the second quarter of fiscal 2000. The Company experienced
revenue growth from its reseller, system operator and consumer services
categories, partially offset by a decrease in its international category.
Resellers, system operators, consumer services and international users
accounted for approximately 30%, 55%,
<PAGE>
8% and 7%, respectively, of revenues during the second quarter of fiscal 2000.
Gross profit increased by $2.1 million, or 20.2%, to $12.7 million for the
second quarter of fiscal 2000 compared to $10.6 million for the second quarter
of fiscal 1999 due to improved gross profit margins. The gross profit margin
increased to 28.4% for the second quarter of fiscal 2000 compared to 24.4% for
the second quarter of fiscal 1999. The increase in gross profit margin was
principally attributable to the effect of product mix changes, more competitive
pricing on base site infrastructure inventory purchases and a move to more
value-added, solution based pricing strategies.
Total operating expenses increased by $624,200, or 6.7%, to $10.0 million for
the second quarter of fiscal 2000 compared to $9.4 million for the second
quarter of fiscal 1999. Total operating expenses increased as a percentage of
revenues to 22.4% for the second quarter of fiscal 2000 from 21.6% for the
second quarter of fiscal 1999. The increase in these expenses is primarily
attributable to a continued investment in personnel and marketing expenses to
support revenue and gross profit growth as well as increased depreciation and
amortization related to information system enhancements.
Income from operations increased by $1.5 million, or 127%, to $2.7 million for
the second quarter of fiscal 2000 compared to $1.2 million for the second
quarter of fiscal 1999. The operating income margin increased to 6.0% for the
second quarter of fiscal 2000 compared to 2.7% for the second quarter of fiscal
1999.
Net interest expense decreased by $62,800, or 19.5%, to $259,600 for the second
quarter of fiscal 2000 compared to $322,400 for the second quarter of fiscal
1999. This decrease is due to decreased levels of borrowing under the Company's
revolving line of credit, partially offset by higher interest rates.
Income before provision for income taxes increased $1.6 million or 182% to $2.4
million for the second quarter of fiscal 2000 compared to $864,200 for the
second quarter of fiscal 1999. The effective tax rate for both quarters was 38%.
Net income and earnings per share (diluted) for the second quarter of fiscal
2000 increased 182% and 175%, respectively, compared to the second quarter of
fiscal 1999.
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First Six Months of Fiscal 2000 Compared to First Six Months of Fiscal 1999
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Revenues increased by $8.5 million, or 10.7%, to $88.1 million for the first six
months of fiscal 2000 compared to $79.6 million for the first six months of
fiscal 1999. Revenues increased in each of the Company's major product
categories, with the largest percentage increase experienced in the sale of
subscriber accessory products and services, primarily attributable to growth in
affinity marketing programs. Base site infrastructure, subscriber accessory and
test and maintenance products and services accounted for approximately 50%, 38%
and 12%, respectively, of revenues during the first six months of fiscal 2000.
The Company experienced revenue growth from its reseller, system operator and
consumer services categories, partially offset by a decrease in its
international category. Resellers, system operators, consumer services and
international users accounted for approximately 29%, 55%, 9% and 7%,
respectively, of revenues during the first six months of fiscal 2000.
Gross profit increased by $4.5 million, or 22.7%, to $24.3 million for the first
six months of fiscal 2000 compared to $19.8 million for the first six months of
fiscal 1999. The gross profit margin increased to
<PAGE>
27.6% for the first six months of fiscal 2000 compared to 24.9% for the first
six months of fiscal 1999. The increase in gross profit margin was principally
attributable to the effect of product mix changes, more competitive pricing on
base site infrastructure inventory purchases and a move to more value-added,
solution based pricing strategy.
Total operating expenses increased by $1.4 million, or 8.1%, to $19.3 million
for the first six months of fiscal 2000 compared to $17.9 million for the first
six months of fiscal 1999. Total operating expenses decreased as a percentage of
revenues to 21.9% for the first six months of fiscal 2000 from 22.5% for the
first six months of fiscal 1999. The increase in these expenses is primarily
attributable to continued investment in personnel and marketing expenses to
support future revenue and gross profit growth as well as increased depreciation
and amortization related to information system enhancements. The decrease as a
percentage of revenue is attributable to a disproportionately greater increase
in revenue.
Income from operations increased by $3.1 million, or 159%, to $5.0 million for
the first six months of fiscal 2000 compared to $1.9 million for the first six
months of fiscal 1999. The operating income margin increased to 5.6% for the
first six months of fiscal 2000 compared to 2.4% for the first six months of
fiscal 1999.
Net interest expense increased by $32,300, or 5.8%, to $585,400 for the first
six months of fiscal 2000 compared to $553,100 for the first six months of
fiscal 1999. This increase is due to higher interest rates partially offset by
decreased levels of borrowing under the Company's revolving credit facility.
Income before provision for income taxes increased $3.0 million or 221% to $4.4
million for the first six months of fiscal 2000 compared to $1.4 for the first
six months of fiscal 1999. The effective tax rate for both periods was 38%. Net
income and earnings per share (diluted) for the first six months of fiscal 2000
increased 221% and 228%, respectively, compared to the first six months of
fiscal 1999.
Liquidity and Capital Resources
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Net cash provided by operating activities was $5.9 million for the first six
months of fiscal 2000, compared to net cash used by operating activities of $7.1
million for the first six months of fiscal 1999. This increase was primarily the
result of significant increases in net income and trade accounts payable,
partially offset by increases in accounts receivable and product inventory. Net
cash used in investing activities decreased to $1.5 million for the first six
months of fiscal 2000 compared to $1.6 million for the first six months of
fiscal 1999. Net cash used by financing activities was $4.1 million for the
first six months of fiscal 2000 compared to net cash provided by financing
activities of $4.3 million for the
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first six months of fiscal 1999. This change is primarily the result of
repayments of the Company's revolving line of credit during the first six months
of fiscal 2000.
Year 2000 Issue
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The Year 2000 issue is the result of computer programs using only two digits to
identify a year within date fields. Date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. Such an error could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on its assessment, the Company determined that it would be required to
modify or replace significant portions of its software so that its computer
systems would properly utilize dates beyond December 31, 1999. The Company has
utilized both internal and external resources to reprogram, or replace, and test
the software for Year 2000 modifications. The cost of new software purchased is
being capitalized; all other costs are being expensed as incurred. The cost of
the project is not expected to have a material effect on the results of
operations. The remediation and testing of all of the Company's "mission
critical" systems has been completed and such systems are currently Year 2000
compliant.
In addition, the Company is assessing the readiness of its significant suppliers
and large customers to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own Year 2000 issues. The
Company's total Year 2000 costs include the estimated costs associated with the
impact on the Company of the Year 2000 issue and on the Company's suppliers and
customers, and are based on currently available information. However, there can
be no guarantee that the systems of other companies will be timely converted, or
that a failure to convert by another company would not have a material adverse
effect on the Company. The Company has determined that it has no exposure to
contingencies related to the Year 2000 issue for the products it has sold.
Forward-Looking Statements
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This report contains a number of forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, all of which are based
on current expectations. The Company's future results of operations and other
forward-looking statements contained in this report involve a number of risks
and uncertainties. For a variety of reasons, actual results may differ
materially from those described in any such forward-looking statement. Such
factors include, but are not limited to, the following: the Company's dependence
on a relatively small number of suppliers and vendors, which could hamper the
Company's ability to maintain appropriate inventory levels and meet customer
demand; the effect that the loss of certain customers or vendors could have on
the Company's net profits; the possibility that unforeseen events could impair
the Company's ability to provide prompt and efficient service to its customers;
the possibility of unforeseen delays in entering into or performing under
anticipated contracts or in otherwise realizing anticipated revenues or
anticipated savings; existing competition from national and regional
distributors and the absence of significant barriers to entry which could result
in pricing and other pressures on profitability and market share; and continuing
changes in the wireless communications industry, including risks associated with
conflicting technologies, changes in technology and inventory obsolescence.
Consequently, the reader is cautioned to consider all forward-looking statements
in light of the risks to
<PAGE>
which they are subject.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not used derivative financial instruments. Management of the
Company believes its exposure to market risks, including exchange rate risk,
interest rate risk and commodity price risk, is not material at the present
time.
<PAGE>
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
The Company held its Annual Meeting of Shareholders at the Company's corporate
headquarters on August 13, 1999. At the meeting, the shareholders were asked to
vote on the election of directors, the approval of an amendment to the 1994
Stock and Incentive Plan increasing the number of shares available for issuance,
the approval of an amendment to the 1994 Stock and Incentive Plan permitting the
issuance of shares to non-employee directors, the approval of the Team Member
Stock purchase plan and the ratification of the appointment of the Company's
independent public accountants. Each of these proposals was described in the
Company's Definitive Proxy Statement filed with the Commission on July 15,
1999.
Election of Directors. At the meeting, the shareholders reelected Robert B.
Barnhill and Benn R. Konsynski, for three year terms expiring at the Company's
2002 Annual Meeting of Shareholders. The votes cast for Mr. Barnhill and Mr.
Konsynski were as follows:
<TABLE>
<S> <C> <C>
Robert B. Barnhill 3,093,861 For
147,346 Against or Withheld
0 Abstentions
1,195,004 Broker Non-Votes
Benn R. Konsynski 3,093,861 For
147,346 Against or Withheld
0 Abstentions
1,195,004 Broker Non-Votes
</TABLE>
1994 Stock and Incentive Plan. At the meeting, the shareholders approved as
proposed Amendment No. 2 to the 1994 Stock and Incentive Plan increasing the
number of shares available for issuance under the plan by 300,000. The number
of votes for was 1,426,129, the number of votes against was 322,660, the
number of abstentions was 9,368 and the number of broker non-votes was
2,678,054.
1994 Stock and Incentive Plan. At the meeting, the shareholders approved as
proposed Amendment No. 3 to the 1994 Stock and Incentive Plan permitting the
issuance of up to 50,000 shares to non-employee directors. The number of
votes for was 3,042,534, the number of votes against was 189,955, the number
of abstentions was 8,718 and the number of broker non-votes was 1,195,004.
Team Member Stock Purchase Plan. At the meeting, the shareholders approved as
proposed the Team Member Stock Purchase Plan which enables eligible
employees of the Company to purchase shares of the Company's common stock
through payroll deduction. The maximum number of shares authorized for
purchase under the plan is 200,000.
<PAGE>
The number of votes for was 1,735,328, the number of votes against was
27,726, the number of abstentions was 13,718 and the number of broker
non-votes was 2,659,439.
Independent Auditors. At the meeting, the shareholders ratified the appointment
of Arthur Andersen LLP to serve as the independent public accountants of the
Company for the fiscal year ending March 26, 2000. The number of votes for was
3,239,675, the number of votes against or withheld was 300, the number of
abstentions was 1,232, and the number of broker non-votes was 1,195,004.
ITEM 5 - OTHER INFORMATION
In September 1999, John D. Beletic, 47, joined the Company's Board of Directors.
Mr. Beletic is Chairman and Chief Executive Officer of PageMart Wireless, Inc.,
a leader in the wireless messaging industry. Prior to joining PageMart in 1992,
Mr. Beletic served as venture partner with Morgan Stanley Venture Capital. Mr.
Beletic has replaced Martin L. Grass, who resigned from the Board of Directors
in May, 1999, and will serve in the class of directors whose term expires at the
annual meeting of stockholders to be held in the calendar year 2000.
Effective July 16, 1999, Douglas Rein joined the Company as Senior Vice
President of Fulfillment and Operations. Mr. Rein, age 39, is responsible for
distribution, logistics and fulfillment activities. Prior to joining the
Company, Mr. Rein served as the Director of Operations for Compaq Computer
Corporation since 1997, and Vice President, Distribution and Logistics
Operations for Intelligent Electronics, from 1994 to 1997.
Effective October 4, 1999, Robert C. Singer joined the Company as Senior
Vice President and Chief Financial Officer. Mr. Singer, age 44, is a
certified public accountant, who will be responsible for all financial
aspects of the Company's business. He has over 20 years of financial
experience, having most recently served as Vice President and Chief Financial
Officer of the Global Industrial Group of McCormick & Company, Inc. Gerald T.
Garland, who served as the Company's Chief Financial Officer since September,
1993 is pursuing personal entrepreneurial interests, but remains as a
consultant to the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Fourth Amendment to Financing Agreement dated September 30, 1999
10.2 Amended and Restated Revolving Credit Note dated September 30, 1999
10.3 1994 Stock and Incentive Plan of TESSCO Technologies Incorporated
(incorporated by reference to Appendix No. 1 the Company's
Definitive Proxy Statement filed with the Commission on July 15,
1999)
10.4 Amendment No. 1 to 1994 Stock and Incentive Plan (incorporated by
reference to Appendix No. 1 to the Company's Definitive Proxy
Statement filed with the Commission on July 15, 1999)
10.5 Amendment No. 2 to 1994 Stock and Incentive Plan (incorporated by
reference to Appendix No. 1 to the Company's Definitive Proxy
Statement filed with the Commission on July 15, 1999)
10.6 Amendment No. 3 to 1994 Stock and Incentive Plan (incorporated by
reference to Proposal No. 3 as included in the Company's Definitive
Proxy Statement filed with the Commission on July 15, 1999)
10.7 Team Member Stock Purchase Plan (incorporated by reference to
Appendix No. 2 to the Company's Definitive Proxy Statement filed
with the Commission on July 15, 1999)
10.8 Employment Letter Agreement between TESSCO Technologies Incorporated
and Robert C. Singer
10.9 Termination of Employment Agreement between TESSCO
Technologies Incorporated and Robert C. Singer
10.10 Employment Letter Agreement between TESSCO Technologies Incorporated
and Douglas A. Rein
10.11 Termination of Employment Agreement between TESSCO Technologies
Incorporated and Douglas A. Rein
11. Statement re: computation of per share earnings
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter covered by this
report.
<PAGE>
SIGNATURE
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.
TESSCO TECHNOLOGIES INCORPORATED
Date: November 10, 1999 By: /s/Robert C. Singer
-------------------------------
Robert C. Singer
Senior Vice President and Chief Financial
Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT 10.1
FOURTH AMENDMENT TO FINANCING AGREEMENT
THIS FOURTH AMENDMENT TO FINANCING AGREEMENT (this "Agreement") is made as of
the 30th day of September, 1999, by TESSCO TECHNOLOGIES INCORPORATED (sometimes
referred to herein as the "Parent"), a corporation organized under the laws of
the State of Delaware, TESSCO COMMUNICATIONS INCORPORATED, a corporation
organized under the laws of the State of Delaware, TESSCO INCORPORATED, a
corporation organized under the laws of the State of Delaware, TESSCO FINANCIAL
CORPORATION, a corporation organized under the laws of the State of Delaware,
NATIONAL AIRTIME CORPORATION, a corporation organized under the laws of the
State of Delaware, WIRELESS SOLUTIONS INCORPORATED, a corporation organized
under the laws of the State of Maryland, (each of the foregoing corporations,
jointly and severally, collectively, the "Original Borrower") and CARTWRIGHT
COMMUNICATIONS COMPANY, a corporation organized under the laws of the State of
Delaware ("Cartwright"), jointly and severally (the Original Borrower and
Cartwright collectively, the "Borrower"), and BANK OF AMERICA, N.A., a national
banking association, formerly "NationsBank, N.A.," its successors and assigns
(the "Lender").
RECITALS
A. The Borrower and the Lender are parties to a Financing Agreement dated
March 31, 1995 (the same as amended by First Amendment to Financing Agreement
dated September 26, 1996 (the "First Amendment"), by Second Amendment to
Financing Agreement dated February 28, 1997 (the "Second Amendment"), by Third
Amendment to Financing Agreement dated June 13, 1997 (the "Third Amendment"),
and as amended, modified, substituted, extended, and renewed from time to time,
the "Financing Agreement"). The Financing Agreement provides for some of the
agreements between the Borrower and the Lender with respect to the "Loans" (as
defined in the Financing Agreement), including the Revolving Credit Facility (as
that term is defined in the Financing Agreement) in an amount not to exceed
$15,000,000.
B. The Borrower has requested that the Lender extend the Borrower's
Revolving Credit Facility and amend certain provisions of the Financing
Agreement, which the Lender is willing to do on the condition, among others,
that this Agreement be executed and delivered.
C. The Borrower and the Lender wish to amend the Financing Agreement as
set forth below.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, the Borrower and the
Lender agree as follows:
1. The Borrower and the Lender agree that the Recitals above are a part of
this Agreement. Unless otherwise expressly defined in this Agreement, terms
defined in the Financing Agreement shall have the same meaning under this
Agreement.
2. The Borrower represents and warrants to the Lender as follows:
(a) The Borrower is a corporation duly organized, and validly
existing and in good standing under the laws of the state in which it was
organized and has the power and authority to own its property and to carry on
its business in each jurisdiction in which the Borrower does business;
(b) The Borrower has the power and authority to execute and deliver
this Agreement
<PAGE>
and perform its obligations hereunder and has taken all necessary and
appropriate corporate action to authorize the execution, delivery and
performance of this Agreement; and
(c) The Financing Agreement, as amended by this Agreement, and each
of the other Financing Documents to which the Borrower is a party remain in full
force and effect, and each constitutes the valid and legally binding obligation
of Borrower, enforceable in accordance with its terms.
(d) All of Borrower's representations and warranties contained in the
Financing Agreement and the other Financing Documents to which the Borrower is a
party are true and correct on and as of the date of Borrower's execution of this
Agreement; and
(e) No Event of Default and no event which, with notice, lapse of
time or both would constitute and Event of Default, has occurred and is
continuing under the Financing Agreement or the other Financing Document which
has not been waived in writing by the Lender.
3. The Financing Agreement is hereby amended as follows:
(a) The definition of "Revolving Credit Expiration Date" contained in
Section 1.1 of the Financing Agreement is hereby amended in its entirety as
follows:
"Revolving Credit Expiration Date" means September 30, 2002.
(b) Section 2.1.3 of the Financing Agreement is hereby amended in its
entirety as follows:
2.1.3 REVOLVING CREDIT NOTE. The obligation of the Borrower to
pay the Revolving Loan with interest shall be evidenced by a
promissory note (as from time to time extended, amended, restated,
supplemented or otherwise modified, the "Revolving Credit Note")
substantially in the form of EXHIBIT "A" attached hereto and made a
part hereof, with appropriate insertions. The Revolving Credit Note
shall be dated as of September 30, 1999, shall be payable to the
order of the Lender at the times provided in the Revolving Credit
Note, and shall be in the principal amount of $15,000,000. The
Borrower acknowledges and agrees that, if the outstanding principal
balance of the Revolving Loan outstanding from time to time exceeds
the face amount of the Revolving Credit Note, the excess shall bear
interest at the rates provided from time to time for advances under
the Revolving Loan evidenced by the Revolving Credit Note and shall
be payable, with accrued interest, ON DEMAND. The Revolving Credit
Note shall not operate as a novation of any of the Obligations or
nullify, discharge, or release any such Obligations or the continuing
contractual relationship of the parties hereto in accordance with the
provisions of this Agreement. The Revolving Credit Note shall
evidence the Borrower's obligation to repay, with interest, the
AutoBorrow Advances as well as Other Advances.
(c) Section 2.1.5 is hereby amended in its entirety as follows:
<PAGE>
2.1.5 REVOLVING CREDIT UNUSED LINE FEE. The Borrower shall pay
to the Lender a quarterly revolving credit facility fee
(collectively, the "Revolving Credit Unused Line Fees" and
individually, a "Revolving Credit Unused Line Fee") based on the
average daily unused and undisbursed portion of the of the Revolving
Credit Committed Amount in effect from time to time accruing during
each calendar quarter, (a) at a rate equal to one-eighth of one
percent (0.125%) per annum on such unused and undisbursed portion up
to and including $7,500,000, and (b) at a rate equal to two-eighth of
one percent (0.25%) per annum on such unused and undisbursed portion
in excess of $7,500,000.
(d) Section 5.15 of the Financing Agreement is hereby amended in its
entirety as follows:
5.1.15 NET WORTH. Commencing October 1, 1999, the Borrower
will at all times maintain a Net Worth of not less than $32,000,000.
The Net Worth requirement of this Section shall be increased at the
end of each fiscal quarter, commencing September 30, 2000, by 50% of
the Borrower's net income (without regard to any loss) from the
immediately preceding fiscal quarter.
(e) Section 5.1.16 of the Financing Agreement is hereby deleted in
its entirety, without renumbering the Sections following.
(f) The parties acknowledge and agree that (i) the section "Senior
Funded Indebtedness to EBITDA Ratio" added to the Financing Agreement by
paragraph 4(e) of the First Amendment was intended to be designated "Section
5.1.19" and not "Section 5.1.18" as indicated in the First Amendment, and that
(ii) the Financing Agreement is hereby amended by designating the "Senior Funded
Indebtedness to EBITDA Ratio" section to be Section 5.1.19.
4. The Borrower and the Lender confirm that the current ratio covenant set
forth in Section 5.1.14 of the Financing Agreement is and shall be not less than
1.75 to 1.0 and that the Fixed Charges Coverage Ratio covenant set forth in
Section 5.1.17 of the Financing Agreement is and shall be not less than 1.60 to
1.0.
5. The Borrower hereby ratifies and confirms the representations,
warranties and covenants contained in the Financing Agreement, as amended
hereby. The Borrower agrees that this Agreement is not intended to and shall not
cause a novation with respect to any or all of the Obligations.
6. The Borrower shall pay at the time this Agreement is executed and
delivered all fees, commissions, searches, costs, charges, taxes and other
expenses incurred by the Lender and its counsel in connection with this
Agreement, including, but not limited to, reasonable fees and expenses of the
Lender's counsel.
7. This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument. The parties agree that their respective
<PAGE>
signatures may be delivered by facsimile. Any party who chooses to deliver its
signature by facsimile agrees to provide a counterpart of this Agreement with
its inked signature promptly to each other party.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this Agreement
under seal as of the date and year first written above.
WITNESS: TESSCO TECHNOLOGIES INCORPORATED
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: TESSCO COMMUNICATIONS
INCORPORATED
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: TESSCO INCORPORATED
/s/ David M. Young By: /s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: TESSCO FINANCIAL CORPORATION
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: NATIONAL AIRTIME CORPORATION
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
<PAGE>
WITNESS: WIRELESS SOLUTIONS INCORPORATED
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: CARTWRIGHT COMMUNICATIONS COMPANY
/s/ David M. Young By: /s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: BANK OF AMERICA, N. A.
/s/ David M. Young By:/s/ Monica R. Brandes (Seal)
- ----------------------- -------------------------------------
Monica R. Brandes
Senior Vice President
<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$15,000,000.00 Baltimore, Maryland
September 30, 1999
FOR VALUE RECEIVED, TESSCO TECHNOLOGIES INCORPORATED, a corporation organized
and existing under the laws of the State of Delaware, TESSCO COMMUNICATIONS
INCORPORATED, a corporation organized under the laws of the State of Delaware,
TESSCO INCORPORATED, a corporation organized under the laws of the State of
Delaware, TESSCO FINANCIAL CORPORATION, a corporation organized under the laws
of the State of Delaware, NATIONAL AIRTIME CORPORATION, a corporation organized
under the laws of the State of Delaware, WIRELESS SOLUTIONS INCORPORATED, a
corporation organized under the laws of the State of Maryland, and CARTWRIGHT
COMMUNICATIONS COMPANY, a corporation organized under the laws of the State of
Delaware, jointly and severally (collectively, the "Borrower"), promises to pay
to the order of BANK OF AMERICA, N.A., a national banking association, formerly
"NationsBank, N.A.," its successors and assigns (the "Lender"), the principal
sum of FIFTEEN MILLION DOLLARS ($15,000,000.00) (the "Principal Sum"), or so
much thereof as have been or may be advanced to, or for, the account of the
Borrower pursuant to the terms and conditions of the Financing Agreement (as
hereinafter defined) as "AutoBorrow Advances" (as that term is defined in the
Financing Agreement) and "Other Advances" (as that term is defined in the
Financing Agreement), together with interest thereon at the rate or rates
hereinafter provided, in accordance with the following;
1. INTEREST. Until repayment in full of all sums due hereunder, the unpaid
Principal sum shall bear interest from the date hereof until paid at the
Revolving Loan Rate as defined and set forth in the Financing Agreement for
AutoBorrow Advances (as defined in the Financing Agreement) and Other Advances
(as defined in the Financing Agreement), as the case may be. All interest
payable under the terms of this Note shall be calculated on the basis of a
360-day year and the actual number of days elapsed.
2. PAYMENTS. Accrued interest on the unpaid Principal Sum hereunder shall
be due and payable at the times set forth in the Financing Agreement and
additionally, for the AutoBorrow Advances (as defined in the Financing
Agreement), also at the times set forth in the AutoBorrow Service Agreement (as
defined in the Financing Agreement), up to and including maturity (whether by
acceleration, declaration, extension or otherwise).
The fact that the balance hereunder may be reduced to zero from time to time
pursuant to the Financing Agreement and also, for the AutoBorrow Advances (as
defined in the Financing Agreement) only, under the AutoBorrow Service Agreement
(as defined in the Financing Agreement), will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
Unless sooner paid, the entire unpaid Principal Sum, together with all
interest accrued and unpaid thereon, shall be due and payable in full on
September 30, 2002.
DEFAULT INTEREST. Upon the occurrence of an Event of Default (as
hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at
a rate of interest equal to the Post-Default Rate (as defined in the Financing
Agreement).
LATE CHARGES. If the Borrower shall fail to make any payment under the
terms of this Note within fifteen (15) days after the date such payment is due,
the Borrower shall pay to the
<PAGE>
Lender on demand a late charge equal to five percent (5%) of such payment.
APPLICATION AN PLACE OF PAYMENTS. All payments including permitted
prepayments made on account of this Note shall be applied first to the payment
of any late charge, second to the payment of any Early Termination Fees (as
defined in the Financing Agreement), if any, due hereunder or under the
Financing Agreement, third to the payment of any unpaid and accrued Enforcement
Costs (as defined in the Financing Agreement), if any, fourth to the payment of
accrued and past due interest, fifth, to the payment of all current due and
unpaid amounts hereunder and the remainder, if any, shall be applied to the
unpaid Principal Sum. All payments on account of this Note shall be paid in
lawful money of the United States of America in immediately available funds
during regular business hours of the Lender at its office at 10 Light Street,
Baltimore, Maryland, or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrower.
6. PREPAYMENT. The Borrower may prepay the Principal Sum in accordance
with, and subject to, the terms and conditions of the Financing Agreement.
7. FINANCING AGREEMENT AND OTHER FINANCING DOCUMENTS. This Note is the
"Revolving Credit Note" described in a Financing Agreement by and between the
Borrower and the Lender, dated March 31, 1995 (as amended by First Amendment to
Financing Agreement dated September 26, 1996, by Second Amendment to Financing
Agreement dated February 28, 1997, by Third Amendment to Financing Agreement
dated June 13, 1997 (the "Third Amendment"), by Fourth Amendment to Financing
Agreement dated the same date as this Note, and as amended, modified,
substituted, extended and renewed from time to time, the "Financing Agreement"),
and evidences the Borrower's obligations to repay the AutoBorrow Advances (as
defined in the Financing Agreement) and Other Advances (as defined in the
Financing Agreement) with interest. The indebtedness evidenced by this Note is
included within the meaning of the term "Obligations," and this Note is one of
the "Financing Documents," as defined in the Financing Agreement. This Note
combines, amends and restates the two promissory notes that, in accordance with
the terms of the Third Amendment, immediately prior hereto together constituted
the "Revolving Credit Note" (as defined in the Third Amendment) and is not
intended to and shall not cause a novation with respect to any or all of the
Obligations.
8. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an event of default (individually, an "Event of Default"
and collectively, the "Events of Default") under the terms of this Note:
The failure of the Borrower to pay to the Lender when due any and all
amounts payable by the Borrower to the Lender under the terms of this Note and,
only in the case of periodic payments of interest, such failure continues
incurred for a period of ten (10) Business Days (as that term is defined in the
Financing Agreement); or The occurrence of event of default (as defined therein)
under the terms and conditions of any of the other Financing Documents and such
default is not cured within any grace or cure period provided therefor, if any.
9. REMEDIES. Upon the occurrence of an Event of Default, at the option of
the Lender, all amounts payable by the Borrower to the Lender under the terms of
this Note shall immediately become due and payable by the Borrower to the Lender
without notice to the Borrower or any other person, and the Lender shall have
all of the rights, powers, and remedies available under the terms of this Note,
any of the other Financing Documents and all applicable laws. The Borrower and
all endorsers, guarantors, and other parties who may now or in the future
<PAGE>
be primarily or secondarily liable for the payment of the indebtedness evidenced
by this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrower,
guarantors and endorsers.
10. MANDATORY ARBITRATION. Any controversy or claim between or among the
Borrower and the Lender including but not limited to those arising out of or
relating to this Note or any related agreements or instruments, including any
claim based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), as promulgated from to time, by the Rules
of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial
Arbitration and Mediation Services, Inc. predecessor in interest to Endispute,
Inc, doing business an "J.A.M.S./Endispute", and the "Special Rules" set forth
below. In the event of any inconsistency, the Special Rules shall control.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Note may bring an action, including a summary or
expedited proceeding, to compel arbitration of any controversy or claim to which
this Note applies in any court having jurisdiction over such action.
(a) SPECIAL RULES. The arbitration shall be conducted in the City of
Baltimore, Maryland and administered by J.A.M.S./Endispute who will appoint an
arbitrator; if J.A.M.S./Endispute is unable or legally precluded from
administering the arbitration, then the American Arbitration Association will
serve. All arbitration hearings will be commenced within 90 days of the demand
for arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional 60
days.
(b) RESERVATIONS OF RIGHTS. Nothing in this Note shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
or repose and any waivers contained in this Note or (ii) be a waiver by the
Lender of the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the right of the Lender (A)
to exercise self help remedies such as (but not limited to) setoff, or (B) to
foreclose against any real or personal property collateral, or (C) to obtain
from a court provisional or ancillary remedies such as (but not limited to)
injunctive relief or the appointment of a receiver. The Lender may exercise such
self help rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this Note. At the Lender's option, foreclosure
under a deed of trust or mortgage may be accomplished by any of the following:
the exercise of a power of sale under the deed of trust or mortgage, or by
judicial sale under the deed of trust or mortgage, or by judicial foreclosure.
Neither the exercise of self help remedies nor the institution or maintenance of
an action for foreclosure or provisional or ancillary remedies shall constitute
a waiver of the right of any party, including the claimant in any such action,
to arbitrate the merits of the controversy or claim occasioning resort to such
remedies.
11. EXPENSES. The Borrower promises to pay to the Lender an demand by the
Lender all actual reasonable costs and expenses incurred by the Lender in
connection with the collection and enforcement of this Note, including, without
limitation, all reasonable attorneys, fees and expenses and all court costs.
<PAGE>
12. NOTICES. All notices, requests and demands hereunder shall be deemed
to have been given or made if made or given in the manner provided in Section
7.1 of the Financing Agreement.
13. MISCELLANEOUS. Each right, power, and remedy of the Lender as provided
for in this Note or any of the other Financing Documents, or now or hereafter
existing under any applicable law or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Financing Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Financing Documents or to exercise
any right, power, or remedy consequent upon a breach thereof, shall constitute a
waiver of any such term, condition, covenant, or agreement or of any such
breach, or preclude the Lender from exercising any such right, power, or remedy
at a later time or times. By accepting payment after the due date of any amount
payable under the terms of this Note, the Lender shall not be deemed to waive
the right either to require prompt payment when due of all other amounts payable
under the terms of this Note or to declare an Event of Default for the failure
to effect such prompt payment of any such other amount. No course of dealing or
conduct shall be effective to amend, modify, waive, release, or change any
provisions of this Note.
14. PARTIAL INVALIDITY. In the event any provision of this Note (or any
part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note; but this Note shall be construed as if
such invalid, illegal, or unenforceable provision (or part thereof) had not been
contained in this Note, but only to the extent it is invalid, illegal, or
unenforceable.
15. CAPTIONS. The captions herein set forth are for convenience only and
shall not be deemed to define, limit, or describe the scope or intent of this
Note.
16. GOVERNING LAW. WITHOUT IN ANY WAY LIMITING ANY ADDITIONAL RIGHTS
AND REMEDIES WHICH THE LENDER MAY HAVE UNDER THE LAWS OF ANY OTHER
JURISDICTION, THIS NOTE IS TO BE GOVERNZD BY, CONSTRUED UNDER AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF MARYLAND WITH THE SAME FORCE AND EFFECT
AS IF THIS NOTE HAD BEEN EXECUTED, DELIVERED, ADMINISTERED AND REPAID SOLELY
WITHIN MARYLAND.
17. CONSENT TO JURISDICTION. The Borrower irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Maryland
over any suit, action, or proceeding arising out of or relating to this Note.
The Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that the Borrower may now or hereafter have to the laying of venue
of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum. Final judgment in any such suit,
action, or proceeding brought in any such court shall be conclusive and
binding upon the Borrower and may be enforced in any court in which the
Borrower is subject to jurisdiction by a suit upon such judgment provided
that service of process is effected upon the Borrower as provided in this
Note or as otherwise permitted by applicable law.
18. SERVICE OF PROCESS. The Borrower hereby consents to process being
served in any suit, action, or
<PAGE>
proceeding instituted in connection with this Note by the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to the
Borrower. The Borrower irrevocably agrees that such service shall be deemed to
be service of process upon the Borrower in any such suit, action, or proceeding
upon the date which is four (4) days after the sending thereof. Nothing in this
Section shall affect the right of the Lender to serve process in any manner
otherwise permitted by law and nothing in this Section will limit the right of
the Lender otherwise to bring proceedings against the Borrower in the courts of
any jurisdiction or jurisdictions.
19. WAIVER OF TRIAL BY JURY. THE BORROWER AND THE LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER
MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B)
THE FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS NOTE.
This waiver is knowingly, willingly and voluntarily made by the Borrower and the
Lender, and the Borrower hereby represents that no representations of fact or
opinion have been made by any individual to induce this waiver of trial by jury
or to in any way modify or nullify its effect. The Borrower further represents
that it has been represented in the signing of this Note and in the making of
this waiver by independent legal counsel, selected of its own free will, and
that it has had the opportunity to discuss this waiver with counsel.
20. INTEREST RATE NOT TO EXCEED APPLICABLE LAWS. The interest rate or
rates required by this Note, the Financing Agreement or any of the other
Financing Documents shall not exceed the maximum rate permissible under
applicable laws, and any amounts paid in excess of such rate or rates shall be
applied to reduce the unpaid balance of the Principal Sum or shall be refunded
to the Borrower at the option of the Lender.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note under seal
as of the day and year first written above.
WITNESS: TESSCO TECHNOLOGIES INCORPORATED
/S/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: TESSCO COMMUNICATIONS INCORPORATED
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: TESSCO INCORPORATED
/s/ David M. Young By: /s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
<PAGE>
WITNESS: TESSCO FINANCIAL CORPORATION
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: NATIONAL AIRTIME CORPORATION
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: WIRELESS SOLUTIONS INCORPORATED
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
WITNESS: CARTWRIGHT COMMUNICATIONS COMPANY
/s/ David M. Young By:/s/ Robert B. Barnhill (Seal)
- ----------------------- -------------------------------
Robert B. Barnhill, Jr.
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.8
September 29, 1999
Mr. Robert C. Singer
114013 Foxland Road
Phoenix, MD 21131
Dear Bob:
We are excited with the opportunity of your joining the TESSCO team. I believe
the opportunity for personal and professional growth in the position of "Sr.
Vice President and Chief Financial Officer" to be outstanding, and I am
confident we will continue to grow TESSCO in the coming years.
I have summarized the employment arrangements that we have agreed upon:
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
Annual Base Salary $200,000.00
- -------------------------------------------------------------------------------
Bonus Potential 60 percent of annual base for meeting
goal (20 percent unit and personal achievement;
40 percent company)
- -------------------------------------------------------------------------------
Equity Options 50,000
- -------------------------------------------------------------------------------
Time Off Start with a balance of 1 week annual paid
time off and accrue from there starting at a
4-year tenure rate. Add 1 additional week at
beginning of your 4th month of employment and 1
additional week at beginning of your 7th month
of employment
- -------------------------------------------------------------------------------
Code of Conduct Letter Offer is contingent on the
return of the signed Code of Conduct Letter and
successful completion of a pre-employment
physical and drug screen
- -------------------------------------------------------------------------------
Severance Agreement As defined in attachment
- -------------------------------------------------------------------------------
TESSCO start date October 4, 1999
- -------------------------------------------------------------------------------
</TABLE>
Bob, I am excited about the opportunities that lie ahead with you at TESSCO. I
look forward to hearing from you.
Best regards,
/s/ Robert B. Barnhill
Robert B. Barnhill, Jr.
Chairman and CEO
<PAGE>
EXHIBIT 10.9
TERMINATION OF EMPLOYMENT ARRANGEMENT
TESSCO Technologies Incorporated and Mr. Robert C. Singer have entered into an
employment agreement as of October 4, 1999. Pursuant to the agreement, TESSCO
remains obligated to continue base salary compensation and benefits to Mr.
Singer for the scheduled terms of the agreement if the employment of Mr. Singer
is terminated by TESSCO without "good cause" or by Mr. Singer with "good
reason". If Mr. Singer's employment is terminated by TESSCO for "good cause", or
by Mr. Singer without "good reason", TESSCO is generally obligated to pay
compensation and benefits only to the date of termination. "Good cause"
generally means: (I) the willful continued failure by Mr. Singer to
substantially perform his management duties, (ii) intentional misconduct by Mr.
Singer causing substantial injury to the Company, or (iii) the conviction of a
felony crime involving moral turpitude. "Good reason" is defined to include: (I)
a substantial diminution in Mr. Singer's title, duties or authority, (ii) a
relocation of the Company's principal offices to another State, (iii) a
reduction in annual base salary, or (iv) a "change in control" of the Company. A
"change in control" is generally deemed to occur when: (i) a person or group
acquires beneficial ownership of thirty percent or more of the Common Stock of
the Company; or (ii) the shareholders approve a liquidation or sales of
substantially all of the assets of the Company or certain mergers or
consolidation of the Company.
This agreement is enforceable upon and beyond a "change in control" of the
Company.
The terms of this agreement provide for base salary and benefits to continue to
be paid to Mr. Singer should employment be terminated by TESSCO without "good
cause" or by Mr. Singer with "good reason" on the following schedule:
<TABLE>
<CAPTION>
TERM PAYMENT PERIOD OF SEVERANCE BASE SALARY & BENEFITS
<S> <C>
FIRST 12 MONTHS OF EMPLOYMENT 12 months following termination date
Months 13 - 24 of employment 9 months following termination date
Beyond month 24 of employment 6 months following termination date
</TABLE>
By:/s/ Robert C. Singer Date: 9/29/99
-------------------------------
Robert C. Singer
By:/s/ Robert B. Barnhill Date: 9/29/99
-------------------------------
Robert B. Barnhill, Jr.
Chairman and CEO
TESSCO Technologies Incorporated
<PAGE>
EXHIBIT 10.10
June 9, 1999
Doug Rein
11 Pale Dawn Place
The Woodlands, Texas 77381
Doug:
We are excited with the opportunity of your joining the TESSCO team. I believe
the opportunity for personal and professional growth in the position of "Senior
Vice President, Operations and Fulfillment" to be outstanding, and I am
confident we will continue to grow TESSCO in the coming years.
I have summarized the employment arrangements that we have agreed upon:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
ANNUAL BASE SALARY $ 200,000.00
- -------------------------------------------------------------------------------
Bonus potential 60 percent of annual base for meeting goal
(20 percent unit and personal achievement; 40
percent Company.)
- -------------------------------------------------------------------------------
Equity Options 50,000
- -------------------------------------------------------------------------------
Relocation Compensation $ 70,000.00 lump sum to be paid within 30 days
of offer acceptance. This amount will then be
covered via a 2-year promissory note as
previously discussed. Travel expenses for moving
your family and any travel associated with
closing on your Texas home will be handled
separately via expense reimbursement from
TESSCO. Temporary living expenses in Maryland
until permanent living arrangements can be made
will be covered separately via expense
reimbursement from TESSCO. .
- -------------------------------------------------------------------------------
Time Off Start with a balance of 1 week annual paid time
off and accrue from there starting at a 4-year
tenure rate. Add 1 additional week at beginning
of your 4th month of employment and 1 additional
week at beginning of your 7th month of
employment.
- -------------------------------------------------------------------------------
Severance Agreement As defined in attachment.
- -------------------------------------------------------------------------------
TESSCO start date August 1, 1999
- -------------------------------------------------------------------------------
</TABLE>
Doug, I am excited about the opportunities that lie ahead with you at TESSCO.
Once we have "formalized" and signed the above offer, I understand you will then
notify your current Company and start the relocation process from your end. I
look forward to your response.
Best regards,
/s/ Robert B. Barnhill
Robert B. Barnhill, Jr.
Chairman and CEO
<PAGE>
EXHIBIT 10.11
TERMINATION OF EMPLOYMENT ARRANGEMENT
TESSCO Technologies Incorporated and Mr. Douglas Rein have entered into an
employment agreement as of June 9, 1999. Pursuant to the agreement, TESSCO
remains obligated to continue base salary compensation and benefits to Mr. Rein
for the scheduled terms of the agreement if the employment of Mr. Rein is
terminated by TESSCO without "good cause" or by Mr. Rein with "good reason". If
Mr. Rein's employment is terminated by TESSCO for "good cause", or by Mr. Rein
without "good reason", TESSCO is generally obligated to pay compensation and
benefits only to the date of termination. "Good cause" generally means: (I) the
willful continued failure by Mr. Rein to substantially perform his management
duties, (ii) intentional misconduct by Mr. Rein causing substantial injury to
the Company, or (iii) the conviction of a felony crime involving moral
turpitude. "Good reason" is defined to include: (I) a substantial diminution in
Mr. Rein's title, duties or authority, (ii) a relocation of the Company's
principal offices to another State, (iii) a reduction in annual base salary, or
(iv) a "change in control" of the Company. A "change in control" is generally
deemed to occur when: (i) a person or group acquires beneficial ownership of
thirty percent or more of the Common Stock of the Company; or (ii) the
shareholders approve a liquidation or sales of substantially all of the assets
of the Company or certain mergers or consolidation of the Company.
This agreement is enforceable upon and beyond a "change in control" of the
Company.
The terms of this agreement provide for base salary and benefits to continue to
be paid to Mr. Rein should employment be terminated by TESSCO without "good
cause" or by Mr. Rein with "good reason" on the following schedule:
<TABLE>
<CAPTION>
TERM PAYMENT PERIOD OF SEVERANCE BASE SALARY & BENEFITS
<S> <C>
FIRST 12 MONTHS OF EMPLOYMENT 12 months following termination date
Months 13 - 24 of employment 9 months following termination date
Beyond month 24 of employment 6 months following termination date
</TABLE>
By:/s/ Douglas A. Rein Date: 6/9/99
-------------------------------------
Douglas A. Rein
By:/s/ Robert B. Barnhill Date: 6/9/99
-------------------------------------
Robert B. Barnhill, Jr.
Chairman and CEO
TESSCO Technologies Incorporated
<PAGE>
EXHIBIT 11
TESSCO TECHNOLOGIES INCORPORATED
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
The information required by this Exhibit is set forth in Note 2 to the
Consolidated Financial Statements of the Company contained in Part I of this
Report.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
unaudited quarterly financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000927355
<NAME> TESSCO TECHNOLOGIES INCORPORATED
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-26-2000
<PERIOD-START> SEP-26-1998
<PERIOD-END> MAR-29-1999
<EXCHANGE-RATE> 1
<CASH> 409,200
<SECURITIES> 0
<RECEIVABLES> 23,194,500
<ALLOWANCES> 517,100
<INVENTORY> 21,521,200
<CURRENT-ASSETS> 46,938,000
<PP&E> 23,551,900
<DEPRECIATION> 7,444,200
<TOTAL-ASSETS> 66,754,500
<CURRENT-LIABILITIES> 21,596,200
<BONDS> 7,792,500
0
0
<COMMON> 53,000
<OTHER-SE> 38,126,300
<TOTAL-LIABILITY-AND-EQUITY> 66,754,500
<SALES> 88,140,700
<TOTAL-REVENUES> 88,140,700
<CGS> 63,834,700
<TOTAL-COSTS> 63,834,700
<OTHER-EXPENSES> 19,329,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 585,400
<INCOME-PRETAX> 4,391,200
<INCOME-TAX> 1,668,600
<INCOME-CONTINUING> 2,722,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,722,600
<EPS-BASIC> 0.61
<EPS-DILUTED> 0.59
</TABLE>
