-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ah30y5LJZO05u6ZavowMYUx1YhsH4d88INF02B8Q6q5ASJUVMZ8LdRA/lTuRcJyf pkyGMsSGQjGZVU/ORsGaCg== 0001005477-97-002073.txt : 19970815 0001005477-97-002073.hdr.sgml : 19970815 ACCESSION NUMBER: 0001005477-97-002073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXSYS TECHNOLOGIES INC CENTRAL INDEX KEY: 0000206030 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 111962029 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16182 FILM NUMBER: 97661256 BUSINESS ADDRESS: STREET 1: 645 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125937900 MAIL ADDRESS: STREET 1: 645 MADISON AVENUE STREET 2: 645 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: VERNITRON CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1997 Commission file number 0-16182 ------------------- AXSYS TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 11-1962029 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 645 Madison Avenue New York, New York 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 593-7900 ------------------- Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes |X| No |_| 3,048,381 shares of Common Stock, $.01 par value, were outstanding as of August 11, 1997. ================================================================================ AXSYS TECHNOLOGIES, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited): Condensed Consolidated Statements of Operations - Three Months Ended June 30, 1997 and 1996.............................. 3 Condensed Consolidated Statements of Operations - Six Months Ended June 30, 1997 and 1996................................ 4 Condensed Consolidated Balance Sheets - June 30, 1997 and December 31, 1996.................................... 5 Condensed Consolidated Statements of Cash Flows- Six Months Ended June 30, 1997 and 1996................................ 6 Notes to Condensed Consolidated Financial Statements.................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 10 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K................................. 12 SIGNATURES................................................................ 12 - ---------- 2 PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements AXSYS TECHNOLOGIES, INC. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) Three Months Ended June 30, --------------------------- 1997 1996 ------------ ----------- Net Sales $ 31,247 $ 23,514 Cost of sales 22,709 17,287 Selling, general and administrative expenses 5,385 4,237 Amortization of intangible assets 73 50 ----------- ----------- Operating income 3,080 1,940 Interest expense 688 598 Other expense (income) 15 (6) ----------- ----------- Income before taxes and extraordinary item 2,377 1,348 Provision for income taxes 956 536 ----------- ----------- Income before extraordinary item 1,421 812 Extraordinary loss on early extinguishment of debt, net of tax benefit -- (173) ----------- ----------- Net income 1,421 639 Preferred stock dividends 42 221 ----------- ----------- Net income applicable to common shareholders $ 1,379 $ 418 =========== =========== Earnings per share: Earnings before extraordinary charge $ 0.41 $ 0.21 Extraordinary charge -- (0.06) ----------- ----------- $ 0.41 $ 0.15 =========== =========== Weighted average common shares outstanding 3,323,042 2,701,158 =========== =========== See notes to condensed consolidated financial statements. 3 AXSYS TECHNOLOGIES, INC. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) Six Months Ended June 30, ------------------------ 1997 1996 ---------- ----------- Net Sales $ 58,849 $ 40,545 Cost of sales 43,111 29,890 Selling, general and administrative expenses 10,284 7,502 Amortization of intangible assets 125 102 ---------- ----------- Operating income 5,329 3,051 Interest expense 1,343 1,042 Other expense (income) 26 (13) ---------- ----------- Income before taxes and extraordinary item 3,960 2,022 Provision for income taxes 1,594 820 ---------- ----------- Income before extraordinary item 2,366 1,202 Extraordinary loss on early extinguishment of debt, net of tax benefit -- (173) ---------- ----------- Net income 2,366 1,029 Preferred stock dividends 102 405 ---------- ----------- Net income applicable to common shareholders $ 2,264 $ 624 ========== =========== Earnings per share: Earnings before extraordinary charge $ 0.69 $ 0.31 Extraordinary charge -- (0.07) ---------- ----------- $ 0.69 $ 0.24 ========== =========== Weighted average common shares outstanding 3,276,586 2,615,102 ========== =========== See notes to condensed consolidated financial statements. 4 AXSYS TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets (Dollars in thousands)
June 30, December 31, 1997 1996 ------- ------------ (Unaudited) ASSETS CURRENT ASSETS Cash $ 415 $ 2,691 Accounts receivable - net 17,994 13,801 Inventories - net 26,270 24,454 Other current assets 1,161 850 ------- ------- TOTAL CURRENT ASSETS 45,840 41,796 PROPERTY, PLANT AND EQUIPMENT - net 14,272 13,456 EXCESS OF COST OVER NET ASSETS ACQUIRED - net 14,141 6,415 OTHER ASSETS 442 504 ------- ------- TOTAL ASSETS $74,695 $62,171 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 8,862 $ 6,881 Accrued expenses and other liabilities 10,741 7,290 Current portion of long-term debt and capital lease obligations 3,057 2,831 ------- ------- TOTAL CURRENT LIABILITIES 22,660 17,002 LONG-TERM DEBT & CAPITAL LEASES, less current portion 26,056 23,324 OTHER LONG-TERM LIABILITIES 2,064 2,293 DEFERRED INCOME 321 387 SHAREHOLDERS' EQUITY: Preferred Stock, issued and outstanding 738,881 shares in 1996 -- 7 Common Stock, issued and outstanding 3,048,381 shares in 1997 and 2,568,940 shares in 1996 30 26 Capital in Excess of Par 19,465 17,297 Retained Earnings 4,099 1,835 ------- ------- TOTAL SHAREHOLDERS' EQUITY 23,594 19,165 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $74,695 $62,171 ======= =======
See notes to condensed consolidated financial statements. 5 AXSYS TECHNOLOGIES, INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Six Months Ended June 30, ---------------------- 1997 1996 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,366 $ 1,029 Adjustments to reconcile net income to cash provided by (used in) operating activities: Extraordinary loss, net -- 173 Realization of net operating loss carryforward 1,355 653 Depreciation and amortization 1,563 1,099 Increase in current assets, other than cash (3,320) (1,932) Increase (decrease) in current liabilities 3,875 (1,355) Other - net (121) (333) -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,718 (666) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (851) (580) Acquisition of business, net of cash acquired (7,335) (4,728) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (8,186) (5,308) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 23,500 54,061 Repayment of borrowings (21,726) (47,529) Other (1,582) (420) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 192 6,112 -------- -------- NET (DECREASE) INCREASE IN CASH (2,276) 138 CASH AT BEGINNING OF PERIOD 2,691 91 -------- -------- CASH AT END OF PERIOD $ 415 $ 229 ======== ======== Supplemental Cash Flow Information: Cash paid for: Interest $ 1,162 $ 669 Income taxes 37 373 Non-cash investing and financing activities: Equipment acquired under capital leases $ 1,158 $ 464 Capital stock issued for acquisition 2,166 --
See notes to condensed consolidated financial statements. 6 AXSYS TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (Dollars in thousands) Note 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 considered necessary for a fair presentation (consisting of normal recurring accruals) have been included. Operating results for the three month and six month periods ended June 30, 1997 are not indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Certain reclassifications have been made to previously reported financial statements to conform to current classifications. Note 2 - Earnings per Share - --------------------------- Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" was issued in February 1997 and replaces Accounting Principles Board ("APB") Opinion No. 15. The new statement simplifies the computations of earnings per share ("EPS") by replacing the presentation of primary EPS with basic EPS, which is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS under the new statement is computed similarly to fully diluted EPS pursuant to APB Opinion 15. SFAS No. 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Early application is prohibited. For the three month and the six month periods ended June 30, 1997, the effect of adopting SFAS No. 128 on the Company's reported EPS would be immaterial. Note 3 - Acquisitions and Divestiture - ------------------------------------- On May 30, 1997, the Company acquired Teletrac, Inc. for $9,926, including the issuance of 153,000 shares of Axsys common stock. Teletrac designs and manufactures laser-based precision measurement systems and state-of-the-art precision linear and rotary positioning servo systems for use in the electronics capital equipment market. On April 25, 1996, the Company acquired all of the outstanding shares of Precision Aerotech, Inc., ("PAI") for $4,728, net of cash acquired. In addition, the Company repaid $12 million of borrowings under PAI term loans. Precision Aerotech designs, manufactures and markets laser scanners, precision metal optics, high performance air bearings and precision machined parts sold predominantly in commercial markets. The acquisitions of Teletrac and PAI were accounted for under the purchase method of accounting and, accordingly, the results of operations of Teletrac and PAI have been included in the accompanying consolidated financial statements since the date of their respective acquisition. The cost of the acquisitions was allocated on the basis of the estimated fair market value of the assets acquired and liabilities assumed. The purchase price allocations for Teletrac have been completed on a preliminary basis, however, management does not believe that changes in the allocations will be material. During the PAI acquisition process, the Company determined that L&S Machine Company, Inc. (L&S), a wholly-owned subsidiary of PAI which manufactures structural components for the aerospace industry, did not fit its long-term strategy and would be subsequently sold. The portion of the PAI acquisition cost allocated to this asset represented the net proceeds realized upon sale. In December 1996, the Company completed the sale of L&S for an aggregate purchase price of approximately $13,000. The price included the assumption of approximately $1,800 in long-term capitalized. 7 AXSYS TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (Dollars in thousands) Summarized below are the unaudited pro forma results of operations of the Company as if Teletrac and PAI had been acquired on January 1, 1996: Pro Forma Six Months Ended June 30, ------------------------- 1997 1996 --------- --------- Net sales $63,160 $53,703 Income before extraordinary item 2,455 1,252 Net income 2,455 1,079 Earnings per share: Income before extraordinary item 0.69 0.31 Net income 0.69 0.24 The pro forma financial information presented above is not necessarily indicative of either the results of operations that would have occurred had the acquisitions of Teletrac and PAI taken place at the beginning of 1996 or the future operating results of the combined companies. Pro forma net income for the six months ended June 30, 1996 included certain special charges totaling approximately $400. On October 2, 1996, the Company acquired substantially all of the assets of Lockheed Martin Beryllium Corporation ("LMBC") for $2,883, subject to post-closing adjustments. LMBC's operations consist primarily of precision machining of beryllium and other exotic material components. This acquisition has also been accounted for under the purchase method of accounting and, accordingly, the results of operations of LMBC have been included in the accompanying consolidated financial statements since the date of acquisition. The cost of the acquisition has been allocated on the basis of the estimated fair market value of the assets acquired and liabilities assumed. The purchase price allocation has been completed on a preliminary basis. Management does not believe that changes in the purchase price allocation will be material. Note 4 - Inventories - -------------------- Inventories have been determined generally by lower of cost (first-in, first-out or average) or market. Inventories consist of: June 30, December 31, 1997 1996 -------- ------------ Raw materials $ 9,030 $ 8,033 Work-in-process 12,717 12,942 Finished goods 10,576 10,118 ------- ------- 32,323 31,093 Less reserves 6,053 6,639 ------- ------- $26,270 $24,454 ======= ======= 8 Note 5 - Shareholders' Equity - ----------------------------- On February 14, 1997, the Company commenced an offer to exchange 0.75 shares of its common stock for each outstanding share of its preferred stock. On March 17, 1997, the Exchange Offer terminated and the Company accepted for exchange all shares of preferred stock validly tendered as of that time. Approximately 538,000 shares of preferred stock were exchanged for 403,500 shares of common stock. Holders of shares of preferred stock accepted for exchange did not receive any separate payment in respect of dividends not paid subsequent to February 22, 1996, the last date on which dividends were paid on the preferred stock. On June 4, 1997, the Company redeemed all remaining outstanding shares of its preferred stock. The redemption price was $7.70 per share, including accrued and unpaid dividends of $1.54 per share through the redemption date. Approximately 200,900 shares of preferred stock have been called for redemption. Note 6 - Other Information - -------------------------- June 30, December 31, 1997 1996 ------- ------------ Allowance for doubtful accounts $ 432 $ 385 ====== ====== Accumulated depreciation and amortization of property, plant and equipment $8,952 $7,458 ====== ====== Accumulated amortization of excess of cost over net assets acquired $1,171 $1,046 ====== ====== 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales by product for the three month and six month periods ended June 30, 1997 are presented in the table below. The Company acquired the stock of Teletrac and PAI on May 30, 1997 and April 25, 1996, respectively. On October 2, 1996, the Company acquired substantially all of the assets of LMBC. These acquisitions have been accounted for under the purchase method of accounting and, accordingly, the results of the continuing operations of Teletrac, PAI and LMBC (see Note 3 to the Condensed Consolidated Financial Statements) have been included in the Company's Condensed Consolidated Statement of Operations since their respective dates of acquisition. Three Months Ended June 30 Six Months Ended June 30 -------------------------- ------------------------ 1997 1996 1997 1996 ------- ------- ------- ------- Precision Systems $19,800 $12,325 $36,418 $18,100 Industrial Components 11,447 11,189 22,431 22,445 ------- ------- ------- ------- Net Sales $31,247 $23,514 $58,849 $40,545 ======= ======= ======= ======= Three Months Ended June 30, 1997 Compared to the Three Months Ended June 30, - -------------------------------------------------------------------------------- 1996 - ---- Net sales in 1997 increased by $7.7 million or 33%, compared to the same period in 1996. The Precision Systems group's sales (precision optical and positioning components and subsystems) increased in 1997 by $7.5 million, or 61%, as compared to 1996. Bookings for the group were $19.8 million in 1997, an increase of $8.3 million, or 72%, compared to 1996. Both the increase in sales and bookings were primarily due to the acquisitions of Teletrac, PAI and LMBC, and increased business in the space market. Backlog at June 30, 1997 was $50.6 million, compared to $43.9 million at December 31, 1996. The increase in backlog of $6.7 million is primarily attributable to the acquisition of Teletrac and increased bookings from the digital imaging market. The Industrial Components group's sales (precision ball bearings and interconnect devices) increased in 1997 by $.3 million, or 2%, compared to 1996. Bookings for the group were $10.6 million, a decrease of $.2 million, or 2%, compared to 1996. Backlog at June 30, 1997 was $11.7 million, compared to $12.5 million at December 31, 1996. Operating income was $3.1 million in 1997, as compared to $1.9 million in 1996, representing a $1.2 million increase. This increase was primarily due to the higher sales volume partially offset by increased engineering and other fixed overhead spending and higher selling, general and administrative expenses. Gross margin on sales was 27.3% in 1997 as compared to 26.5% in 1996. Selling, general and administrative expenses, as a percentage of sales, declined to 17.2% in 1997 from 18.0% in 1996. Selling, general and administrative expenses increased by $1.1 million in 1997 primarily due to the acquisitions of Teletrac, PAI and LMBC, as well as increased employment and other selling expenses. Preferred stock dividends decreased by $.2 million, as compared to 1996, due to the Company's exchange of preferred stock for common stock and subsequent redemption of remaining preferred stock (see Note 5 to the Condensed Consolidated Financial Statements). 10 Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996 - ----------------------------------------------------------------------------- Net sales in 1997 increased by $18.3 million or 45%, compared to the same period in 1996. The Precision Systems group's sales (precision optical and positioning components and subsystems) increased in 1997 by $18.3 million, or 101%, as compared to 1996. Bookings for the group were $37.9 million in 1997, an increase of $20.4 million, or 117%, compared to 1996. Both the increase in sales and bookings were primarily due to the acquisitions of Teletrac, PAI and LMBC and increased business in the space market. The Industrial Components group's sales and bookings (precision ball bearings and interconnect devices) for both 1997 and 1996 were $22.4 and $21.6 million, respectively. Operating income was $5.3 million in 1997, as compared to $3.1 million in 1996, representing a $2.2 million increase. This increase was primarily due to the higher sales volume partially offset by an unfavorable sales mix in the Precision Systems group, increased engineering and other fixed overhead spending and higher selling, general and administrative expenses. Gross margin on sales was 26.7% in 1997 as compared to 26.3% in 1996. Selling, general and administrative expenses, as a percentage of sales declined to 17.5% in 1997 from 18.5% in 1996. Selling, general and administrative expenses increased by $2.8 million in 1997 primarily due to the acquisitions of Teletrac, PAI and LMBC, as well as increased employment and other selling expenses. Interest expense increased by $.3 million in the first six months of 1997 as a result of higher average borrowings due to the acquisition of PAI in April 25, 1996 and Teletrac on May 30, 1997. Preferred stock dividends decreased by $.3 million, as compared to 1996, due to the Company's exchange of preferred stock for common stock and subsequent redemption of remaining preferred stock (see Note 5 to the Condensed Consolidated Financial Statements). Liquidity and Capital Resources - ------------------------------- Net cash provided by (used in) operations for 1997 and 1996 was $5.7 million and $(.7) million, respectively. This improvement was primarily due to higher cash earnings and lower working capital requirements. Cash used in investing activities was $8.2 million in 1997, as compared to $5.3 million in 1996, due to an increase in the use of cash for business acquisitions. During the second quarter of 1997, the Company acquired the stock of Teletrac. The cash portion of the total purchase price for Teletrac was $7.3 million. During the second quarter of 1996, the Company acquired the stock of PAI for $4.7 million (see Note 3 of the Condensed Consolidated Financial Statements). The Company had no material commitments for capital expenditures as of June 30, 1997. In connection with the acquisition of Teletrac, the Company amended its Credit Agreement to increase the revolving credit portion of its Credit Facility from $11.0 million to $18.0 million. The Company believes that funds available under this revolving credit facility and cash generated from operations will be sufficient to meet its future capital expenditure and working capital requirements and required debt amortization. 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits: Exhibit 10: Amendments No. 2 and 3 to Bank Credit Agreement Exhibit 27: Financial Data Schedule (For SEC use only). b) Reports on Form 8-K On June 13, 1997 the Company filed a report on Form 8-K relating to its acquisition of Teletrac. 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. Date: August 14, 1997 AXSYS TECHNOLOGIES, INC. By: /s/ Stephen W. Bershad -------------------------- Stephen W. Bershad Chief Executive Officer By: /s/ Raymond F. Kunzmann -------------------------- Raymond F. Kunzmann Chief Financial Officer 12 EX-10 2 AMENDMENTS NO. 2 AND 3 TO BANK CREDIT AGREEMENT SECOND AMENDMENT TO CREDIT AGREEMENT ------------------------------------ SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"), dated as of April , 1997, among AXSYS TECHNOLOGIES INC. (f/k/a VERNITRON CORPORATION), a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), the financial institutions party to the Credit Agreement referred to below (each a "Bank" and, collectively, the "Banks"), and BANQUE PARIBAS, as agent (the "Agent"). All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H ------------------- WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit Agreement, dated as of April 25, 1996 (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, the Borrower desires to purchase 100% of the capital stock of Teletrac, Inc. and enter into related transactions for an aggregate purchase price of approximately $9,200,000 in cash (including all related fees and expenses) plus 53,000 shares of the Borrower's common stock (collectively, the "Acquisition"), and the Banks are willing to consent to the Acquisition, subject to and on the terms and condition set forth herein; WHEREAS, pursuant to the Consent to the Credit Agreement, dated as of February 19, 1997, among the Borrower, the Banks and the Agent, the Banks consented to the Borrower exchanging (the "Exchange Offer") 0.75 shares of its common stock, par value $.01 per share (the "Common Stock") for each outstanding share of its $1.20 Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock"). After the consummation of the Exchange Offer, approximately 201,000 shares of Preferred Stock remain outstanding. The Borrower desires the right to redeem (the "Preferred Stock Redemption") such outstanding Preferred Stock in amounts acceptable to the Banks; WHEREAS, the Borrower has requested that the Banks agree to amend certain provisions of the Credit Agreement; and WHEREAS, the Banks are willing to amend certain provisions of the Credit Agreement and consent to the Acquisition and the Preferred Stock Redemption in each case, subject to and on the terms and conditions set forth herein; NOW, THEREFORE, it is agreed: 1. Notwithstanding anything to the contrary contained in the Credit Agreement, the undersigned Banks hereby consent to the Borrower effecting the Acquisition, so long as (i) any Liens or Indebtedness issued or assumed in connection with the Acquisition are otherwise permitted under the Credit Agreement, (ii) upon the acquisition of any Subsidiary acquired pursuant to the Acquisition, 100% of the capital stock of such Subsidiary is pledged and delivered to the Collateral Agent for the benefit of the Secured Creditors under the Pledge Agreement, (iii) within 10 days after the Acquisition, each such new Subsidiary (x) executes and delivers a counterpart of the Subsidiaries Guaranty and (y) secures the Borrower's obligations pursuant to the Credit Agreement and the other Credit Documents (or such Subsidiary's obligations pursuant to a Subsidiaries Guaranty) by executing a counterpart of the relevant Security Documents and (iv) no Default or Event of Default then exists or would result therefrom. 2. Notwithstanding anything to the contrary contained in Section 9.03 of the Credit Agreement, the Banks hereby consent to the Borrower consummating the Preferred Stock Redemption at a maximum price of $9.00 per share of Preferred Stock (or $1,809,000 in the aggregate for all such remaining shares of Preferred Stock), it being understood that the aggregate redemption price paid by the Borrower in connection with the Preferred Stock Redemption will be included in the definition of "Fixed Charges" as set forth in Section 11.01 of the Credit Agreement. 3. Section 9.08 of the Credit Agreement is hereby amended by deleting in its entirety the table appearing therein and inserting in lieu thereof the following new table:
Fiscal Year Amount ----------- ------ 1997 $4,300,000 1998 $3,875,000 1999 $3,875,000 2000 $3,875,000 2001 $3,875,000 2002 $3,875,000
- 2 - 4. On and after the Second Amendment Effective Date (as defined below), Schedule I to the Credit Agreement is hereby amended by deleting the column for Revolving Loan Commitment in its entirety and inserting in lieu thereof the new column for Revolving Loan Commitment set forth on Annex I attached hereto which increases the Total Revolving Loan Commitment from $11,000,000 to $18,000,000. Each Bank listed on Annex I attached hereto whose Revolving Loan Commitment is increased by this Second Amendment, (each, an "Increasing Bank") hereby acknowledges and agrees that from and after the Second Amendment Effective Date its Revolving Loan Commitment shall be the amount set forth opposite such Increasing Bank's name on Annex I attached hereto, as such amount may be reduced from time to time in accordance with the terms of the Credit Agreement. 5. The Company hereby agrees that on or after the Second Amendment Effective Date and upon the request of the Collateral Agent, it will execute such amendments to the Mortgages as the Collateral Agent shall require in connection with the transactions contemplated by this Second Amendment. 6. In order to induce the Banks to enter into this Second Amendment, the Borrower hereby represents and warrants that on the Second Amendment Effective Date, both before and after giving effect to this Second Amendment and the transactions contemplated hereby, (1) no Default or Event of Default shall exist and (2) all of the representations and warranties contained in the Credit Documents shall be true and correct in all material respects, with the same effect as though such representations and warranties had been made on and as of the Second Amendment Effective Date (it being understood that any representation or warranty made as of a specific date shall be true and correct in all material respects as of such specific date). 7. This Second Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 8. This Second Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. 9. THIS SECOND AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. - 3 - 10. The headings of the several sections of this Second Amendment are inserted for convenience only and shall not in any way affect the meaning or construction of any provision hereof. 11. This Second Amendment shall become effective as of the date hereof (the "Second Amendment Effective Date") when (1) each Credit Party, the Required Banks, the Increasing Banks and the Collateral Agent shall have signed a copy hereof (whether the same or different copies) and shall have delivered (including by way of telecopier) the same to the Agent and (2) the Borrower shall have executed and delivered to the Agent for the benefit of each Increasing Bank a new Revolving Note reflecting the increase in the Revolving Loan Commitment of each such Increasing Bank. * * * - 4 - ANNEX I -------
Revolving Loan Bank Commitment - ---- ---------------- Banque Paribas $4,000,000.00 Paribas Capital Funding LLC 3,036,000.00 Prime Income Trust 0 First Source Financial LLP 4,090,000.00 IBJ Schroder Bank & Trust Company 3,437,000.00 The First National Bank of Chicago 3,437,000.00 ---------------- Total: 18,000,000.00
- 5 - IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second Amendment to be duly executed and delivered as of the date first above written. AXSYS TECHNOLOGIES, INC. as Borrower By /s/ Elliott W. Konopko -------------------------- Name: Elliott N. Konopko Title: Vice President PRECISION AEROTECH, INC. as Subsidiary Guarantor By /s/ Elliott W. Konopko -------------------------- Name: Elliott N. Konopko Title: Vice President SPEEDRING, INC. as Borrower By /s/ Elliott W. Konopko -------------------------- Name: Elliott N. Konopko Title: Vice President SPEEDRING SYSTEMS, INC. as Subsidiary Guarantor By /s/ Elliot W. Konopko -------------------------- Name: Elliott N. Konopko Title: Vice President - 6 - BANQUE PARIBAS, Individually, as Agent and as Collateral Agent By /s/ D. Ercole -------------------------- Name: D. Ercole Title: Vice President By /s/ Edward Irwin -------------------------- Name: Edward Irwin Title: Vice President PARIBAS CAPITAL FUNDING LLC By /s/ Jeffrey Youle -------------------------- Name: Jeffrey Youle Title: Director PRIME INCOME TRUST By /s/ Rafael Scolari -------------------------- Name: Rafael Scolari Title: Vice President Portfolio Manager FIRST SOURCE FINANCIAL LLP, By First Source Financial, Inc. its Agent/Manager By /s/ James W. Wilson -------------------------- Name: James W. Wilson Title: Senior Vice President - 7 - IBJ SCHRODER BANK & TRUST COMPANY By /s/ Mark H. Minter -------------------------- Name: Mark H. Minter Title: Director THE FIRST NATIONAL BANK OF CHICAGO By /s/ Amy L. Golz -------------------------- Name: Amy L. Golz Title: Vice President - 8 - THIRD AMENDMENT TO CREDIT AGREEMENT ----------------------------------- THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment"), dated as of May 30, 1997, among AXSYS TECHNOLOGIES INC. (f/k/a VERNITRON CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), the financial institutions party to the Credit Agreement referred to below (each a "Bank" and, collectively, the "Banks"), and BANQUE PARIBAS, as agent (the "Agent"). All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H : --------------------- WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit Agreement, dated as of April 25, 1996 (as amended, modified or supplemented to the date hereof, the "Credit Agreement"); WHEREAS, pursuant to the Second Amendment to the Credit Agreement, the Banks consented to the acquisition (the "Acquisition") by the Borrower of the capital stock of Teletrac, Inc. ("Teletrac") on the terms and conditions set forth therein, including the purchase of 100% of the capital stock of Teletrac for an aggregate purchase price of approximately $9,200,000 in cash (including all related fees and expenses) plus 53,000 shares of the Borrower's common stock; WHEREAS, the terms of the Acquisition have been modified, to wit, (i) the total consideration paid by the Borrower for the Acquisition shall consist of (x) 53,000 shares of the Borrower's common stock, plus (y) approximately $9,100,000 in cash as such amount is reduced by the fair market value (determined upon the execution and delivery of the definitive documentation evidencing the Acquisition) of up to 100,000 additional shares of the Borrower's common stock, and (ii) the Borrower shall acquire no less than 85% of the capital stock of Teletrac, with the existing shareholders retaining the remaining capital stock t hereof (the "Retained Shares"); WHEREAS, the Borrower shall have the right (and, under certain circumstances, the obligation) to purchase the Retained Shares in exchange for up to 100,000 shares of the Borrower's common stock at a fixed exchange rate to be determined upon the execution and delivery of the definitive documentation evidencing the Acquisition; WHEREAS, after giving effect the Acquisition, Mr. Stephen W. Bershad would fail to control shares of capital stock of the Borrower entitling him to exercise at least 40% of the combined voting power of the Voting Securities; and WHEREAS, the Banks are willing to amend certain provisions of the Credit Agreement and consent to the Acquisition, in each case, subject to and on the terms and conditions set forth herein; NOW, THEREFORE, it is agreed: 1. Notwithstanding anything to the contrary contained in the Credit Agreement and the Second Amendment, the undersigned Banks hereby consent to the Borrower effecting the Acquisition on the terms and conditions set forth in this Third Amendment, provided that (i) any Liens or Indebtedness issued or assumed in connection with the Acquisition are otherwise permitted under the Credit Agreement, (ii) upon the acquisition of any Subsidiary acquired pursuant to the Acquisition, all capital stock, owned by the borrower, of such Subsidiary is pledged and delivered to the Collateral Agent for the benefit of the Secured Creditors under the Pledge Agreement, (iii) within 10 days after the Acquisition, each such new Subsidiary (x) executes and delivers a counterpart of the Subsidiaries Guaranty and (y) secures the Borrower's obligations pursuant to the Credit Agreement and the other Credit Documents (or such Subsidiary's obligations pursuant to a Subsidiaries Guaranty) by executing a counterpart of the relevant Security Documents, (iv) the shareholders owning the Retained Shares consent to the actions to be taken pursuant to clause (ii) and (iii) above, (v) no Default or Event of Default then exists or would result from any of the foregoing and (vi) any consideration paid by the Borrower or any of its Subsidiaries for the Retained Shares pursuant to any put or call rights shall be paid solely through the shares of the Borrower's capital stock, it being understood that the Banks hereby consent to the Borrower issuing up to 100,000 shares of its' common stock to purchase the Retained Shares as described in the fourth whereas clause above. 2. The definition of "Change of Control" contained in Section 11 of the Credit Agreement is hereby amended by deleting the percentage "40%" appearing in clause (ii) thereof and inserting in lieu thereof the percentage "35%". 3. Notwithstanding anything to the contrary contained in the Second Amendment, the Second Amendment Effective Date shall be the date upon which the Third Amendment Effective Date occurs so long as all conditions set forth in Section 11 of the Second Amendment have been satisfied by the Third Amendment Effective Date. 4. In order to induce the Banks to enter into this Third Amendment, the Borrower hereby represents and warranties that on the Third Amendment Effective Date, - 2 - both before and after giving effect to this Third Amendment and the transactions contemplated hereby, (1) no Default or Event of Default shall exist and (2) all of the representations and warranties contained in the Credit Documents shall be true and correct in all material respects, with the same effect as though such representations and warranties had been made on and as of the Third Amendment Effective Date (it being understood that any representation or warranty made as of a specific date shall be true and correct in all materials respects as of such specified date). 5. This Third Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 6. This Third Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. 7. THIS THIRD AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 8. The headings of the several sections of this Third Amendment are inserted for convenience only and shall not in any way affect the meaning or construction of any provision hereof. 9. This Third Amendment shall become effective as of the date hereof (the "Third Amendment Effective Date") when each Credit Party, the Required Banks and the Collateral Agent shall have signed a copy hereof (whether the same or different copies) and shall have delivered (including by way of telecopier) the same to the Agent. - 3 - IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Third Amendment to be duly executed and delivered as of the date first above written. AXSYS TECHNOLOGIES, INC., as Borrower By /s/ Raymond F. Kunzman ----------------------- Name: Raymond F. Kunzmann Title: Vice President PRECISION AEROTECH, INC., as Subsidiary Guarantor By /s/ Raymond F. Kunzmann ----------------------- Name: Raymond F. Kunzmann Title: Vice President SPEEDRING, INC., as Subsidiary Guarantor By /s/ Raymond F. Kunzman ----------------------- Name: Raymond F. Kunzmann Title: Vice President SPEEDRING, INC., as Subsidiary Guarantor By /s/ Raymond F. Kunzmann ----------------------- Name: Raymond F. Kunzmann Title: Vice President - 4 - BANQUE PARIBAS individually, as Agent and as Collateral Agent. By /s/ D. Ercole ----------------------- Name: D. Ercole Title: Vice President By /s/ Jeffrey Youle ----------------------- Name: Jeffrey Youle Title: Senior Vice President PARIBAS CAPITAL FUNDING LLC By /s/ Eric Careen ----------------------- Name: Eric Careen Title: Director PRIME INCOME TRUST By /s/ Rafael Scolari ----------------------- Name: Rafael Scolari Title: Vice President Portfolio Manager FIRST SOURCE FINANCIAL LLP By First Source Financial, Inc., its Agent/Manager By /s/ John Walding ----------------------- Name: John Walding Title: Vice President - 5 - IBJ SCHRODER BANK & TRUST COMPANY By /s/ Mark H. Minter ----------------------- Name: Mark H. Minter Title: Director THE FIRST NATIONAL OF CHICAGO By /s/ Amy S. Golz ----------------------- Name: Amy S. Golz Title: Vice President - 6 - EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF AXSYS TECHNOLOGIES, INC. AS OF JUNE 30, 1997 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 415 0 18,426 432 26,270 45,840 23,224 8,952 74,695 22,660 26,056 0 0 30 23,564 74,695 58,849 58,849 43,111 43,111 10,409 66 1,343 3,960 1,594 2,366 0 0 0 2,366 0.70 0.69
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