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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-2892
THE DEWEY ELECTRONICS CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK 13-1803974
(State of Incorporation) (I.R.S. Employer Identification No.)
27 Muller Road, Oakland, New Jersey 07436
(Address of principal executive offices)Zip Code
201-337-4700
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
(Title of class)
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 ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form l0-K. [X]
The aggregate market value of the voting stock held by nonaffiliates
of registrant, computed by reference to the price at which the stock
was sold as of the close of business on August 29, 1997: $788,363.
The number of shares outstanding of the registrant's common stock,
$.01 par value was 1,339,531 at August 29, 1997.
THE DEWEY ELECTRONICS CORPORATION
TABLE OF CONTENTS
PART I
Item Page
1. Business 1
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 3
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 4
6. Selected Financial Data 5
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
8. Financial Statements and Supplementary Data 12
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 28
PART III
10. Directors and Executive Officers of the Registrant 28
11. Executive Compensation 28
12. Security Ownership of Certain Beneficial Owners and
Management 28
13. Certain Relationships and Related Transactions 28
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 29
PART I
Item 1. BUSINESS
The Dewey Electronics Corporation (herein referred to as the
"Company") was incorporated in the State of New York in 1955. It is
a systems oriented military electronics development, design and
manufacturing organization based in Oakland, New Jersey. The Company
has two industry segments: electronics, and leisure and recreation.
In the electronics segment, the Company produces sophisticated
electronics and electromechanical systems for the U.S. military.
In the leisure and recreation segment, the Company, through its HEDCO
division, designs, manufactures and markets advanced, sophisticated
snowmaking equipment.
The sales and operating profit of each industry segment and the
identifiable assets attributed to each segment for the last three
fiscal years ended June 30, 1997 are set forth in Note J
("Information About the Company's Operations in Different
Industries") of the Notes to Financial Statements.
During the last three fiscal years, there have been no material
expenditures for Company-sponsored or customer-sponsored research and
development activities.
Compliance with Federal, State and local environmental provisions has
had no material effect upon capital expenditures, earnings or the
competitive position of the Company. In addition, there are no
material capital expenditures anticipated for environmental control
facilities.
As of August 29, 1997, the Company had a work force of 22 employees,
of whom 8 were technical or professional personnel. Last year at the
same date, the work force included 33 employees, of whom 9 were
technical or professional personnel. The change is principally
attributable to a reduction in the volume of electronics segment
business. Fluctuations in the work force may also result from the
seasonal nature of the leisure and recreation segment of business.
ELECTRONICS SEGMENT
This segment of business accounted for 74% of total revenues in
fiscal year 1997, 85% of total revenues in fiscal 1996 and 88% of
total revenues in fiscal 1995.
In recent years, most of the Company's electronics segment products
have been manufactured, either as prime contractor or subcontractor,
for the U.S. Navy. With the completion of performance of the
Company's contracts under the Navy's ADCAP torpedo program, most
electronics segment revenues now arise from performance of work for
the U.S. Army under a tactical generator set contract awarded in
August 1996.
1
The Company has continued to pursue both long-term and short-term
awards from various Government agencies and related business sectors
in its areas of electronic and mechanical expertise. The Company,
however, is bidding for such contracts in competition with other
companies, including other small firms as well as Fortune 500
companies, in a time of diminished and less predictable military
spending.
Since substantially all of the Company's electronics business comes
from contracts with various agencies of the United States Government
or subcontracts with prime Government contractors, the loss of
Government business would have a material adverse effect on this
segment of business.
For the most part, working capital requirements for the electronics
segment of business are funded by progress payments provided by the
Government.
All of the Company's contracts with the Government are subject to the
standard provision for termination at the convenience of the
Government.
Although raw materials are generally available from a number of
suppliers, the Company is at times dependent upon a specific supplier
or a limited number of suppliers of material for a particular
contract and has occasionally experienced some delays in deliveries.
Such delays have not had a material effect on operations.
Reference is made to Item 7 ("Management's Discussion and Analysis of
Financial Condition and Results of Operations") for additional
information regarding this segment.
LEISURE AND RECREATION SEGMENT
The leisure and recreation segment of business accounted for 26% of
the Company's revenues in fiscal 1997, 15% of the Company's revenues
in fiscal 1996 and 12% of the Company's revenues in fiscal 1995.
Snowmaking equipment is sold to ski areas as original equipment or as
replacement for existing equipment. Such equipment is sold under a
sales contract that provides for a substantial down payment and
retention of a security interest in the equipment until full payment
is received. Most snowmaking equipment is paid for in full at
delivery to the customer. Typically, in other cases, full payment is
made within one year. The Company has not experienced any losses due
to resale of the equipment following default by customers. The
Company services the equipment at the purchaser's expense after a
warranty period that expires at the end of the snowmaking season in
which the sale occurs.
The Company has sold snowmaking equipment to over three hundred
different locations in the United States and abroad. Marketing is
done by the Company's employees and by distributors in domestic and
foreign markets. Most revenues are from domestic sales.
2
Orders for snowmaking equipment are normally received during the
first and fourth quarters of the fiscal year, though (as discussed
under Item 7) this pattern has been changing. For the most part
shipments are made and revenues recorded during the second quarter.
Production usually takes place in the first and second quarters and
it is during this period that inventory is generated and working
capital demands are the greatest.
While there may be some temporary delays, problems regarding source
and availability of raw materials have had no material adverse effect
on operations of this segment.
Reference is made to Item 7 ("Management's Discussion and Analysis of
Financial Condition and Results of Operations") for additional
information regarding this segment.
Item 2. PROPERTIES
The Company's 49,200 square foot facility at 27 Muller Road, Oakland,
New Jersey, located on 90 acres of land owned by the Company, was
constructed in 1981. This facility houses executive offices and
manufacturing operations and is used primarily for the electronics
segment of business. Approximately 90% of this facility is being
utilized for production (one shift), staging and storage.
Under the terms of a new mortgage note to Sovereign Bank described in
Item 7 ("Management's Discussion and Analysis of Financial Condition
and Results of Operations") both the land and building are subject to
the lien of a mortgage securing indebtedness in the original
principal amount of $2,300,000. The Company also has a line of
credit with the Bank, under which the Company may borrow up to an
additional $500,000 that would be secured by a lien on substantially
all of the Company's' machinery, equipment and other personal
property.
Prior to the new financing arrangements, the Company's land, building
and equipment were subject to liens securing indebtedness for
borrowed money that was prepaid in connection with the delivery of
the new mortgage note.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
3
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter under the
symbol "DEWY".
The table below sets forth the high and low market prices of the
Company's common stock for each quarter during the last two fiscal
years.
Quarterly Common Stock Price Range
Fiscal Year 1997 Fiscal Year 1996
Quarter High Low High Low
lst .875 .75 .75 .25
2nd .9375 .75 .625 .1875
3rd .75 .625 1.0625 .375
4th .9375 .625 1.0625 .4375
Price information is based on over-the-counter market quotations,
which reflect inter-dealer prices, without retail mark-up, mark-down
or commissions, and may not necessarily represent actual
transactions.
There were no dividends declared or paid during the fiscal years 1997
and 1996. The Corporation has no plans to pay dividends in the
foreseeable future.
The number of holders of record of the Company's common stock as of
August 29, 1997 was 873.
4
Item 6. Selected Financial Data
(In thousands of dollars except per share amounts)
Year ended June 30,
1997 1996 1995 1994 1993
Net Sales.. $3,828 $4,595 $6,692 $8,473 $8,181
Earnings (loss) before income
taxes, cumulative effect of
accounting change and
extraordinary gain. (154) 409 179 198(2) 318
Net earnings 7(1) 244 107 821(3) 318
Net earnings per share before
income taxes, cumulative
effect of accounting change
and extraordinary gain $(.12) $ .31 $.13 $.15 $ .24
Net earnings per share .01 .18 .08 .61 .24
Cash dividends per common share -- -- -- -- --
Total assets... $4,645 $5,372 $5,555 $6,417 $6,015
Long-term obligations 1,780 2,289 2,614 3,365 3,714
Working capital 1,508 1,879 1,770 2,310 2,471
Stockholders' equity 1,235 1,227 983 876 55
(1) In fiscal 1997, net earnings were increased by an extraordinary
gain of $99,682 net of income taxes.
(2) Fiscal year 1994 includes temporary expropriation expense of
$100,000.
(3) In fiscal 1994, income was increased by $702,934 as a result of
adopting Statement of
Financial Accounting Standards (SFAS) No. 109.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis contains certain forward-
looking statements that should be read in conjunction with the
cautionary statements appearing under "Current Business Environment"
and elsewhere in this discussion.
The sales and operating profit of each industry segment and the
identifiable assets attributed to each segment for the last three
fiscal years ended June 30, 1997 are set forth in Note J
("Information About the Company's Operations in Different
Industries") of the Notes to Financial Statements.
Revenues
For fiscal year 1997, revenues were 17% lower than those for fiscal
year 1996 and 43% lower than revenues for 1995. The decline in
revenues is due to a lower level of activity in the electronics
segment of business. In that segment, revenues for fiscal year 1997
were 28% lower than those for fiscal year 1996 (declining from
$3,925,000 to $2,841,000) and 52% lower than revenues for 1995
($5,866,000). Fiscal year 1996 revenues were favorably affected by
$343,000 (approximately $.15 per share) following Government contract
review of prior year operations.
The Company's contracts under the U.S. Navy's MK48 ADCAP torpedo
program, which have in recent years provided most electronics segment
revenues, are now substantially completed. They accounted for 19% of
fiscal year 1997 revenues. Though in August 1996 the Company was
awarded a contract with the U.S. Army for production of tactical
generator sets over a five-year period, the Army contract initially
funded only $1,000,000 and the first production order - for
approximately $5,000,000 - was received in May 1997. The tactical
generator set project accounted for 49% of electronics segment
revenues in fiscal year 1997.
The other 32% of electronic product revenues was from various orders,
more limited in scope and duration, that were generally for
replacement parts for previously supplied Department of Defense
equipment and other projects performed as a subcontractor. A large
part of such other revenues continued to be attributable to the
Company's Pitometer Log Division, which manufactures speed and
distance measuring instrumentation for the Navy.
In the two preceding fiscal years, production efforts under the
Navy's ADCAP Torpedo Program accounted for the following percentages
of electronics segment revenues: 1996 - 74%; 1995 - 68%. Remaining
electronics segment revenues were derived from various orders,
limited in scope and duration, for Department of Defense and
replacement equipment.
6
The aggregate value of the Company's backlog of electronic products
not previously recorded as revenues was $4 million on June 30, 1997,
$1 million on June 30, 1996 and $1 million on June 30, 1995. It is
estimated that the present backlog will be shipped during the next 12
months and that the $4 million of this backlog not previously
recorded as revenues will be recognized as revenues during the 1998
fiscal year.
Most of the backlog is attributable to the first production order for
tactical generator sets, received in May 1997, under the contract
with the U.S. Army. Delivery of the first production order is
scheduled to begin in March 1998 and receipt of the second of the
four remaining production orders is expected around June 1998. While
the contract with the Army includes four additional annual orders and
has the potential for total sales over the remaining life of the
contract of up to approximately $32 million, there can be no
assurance that the Army will order any additional amounts.
In the leisure and recreation segment, revenues for fiscal years
1997, 1996 and 1995 amounted to approximately $987,000, $670,000, and
$826,000, respectively. The amount of export sales included in these
revenues were approximately $92,000, $92,000 and $121,000
respectively. Competition in foreign markets continues to be much
stronger than in the domestic market. The Company is continuing its
efforts to be more competitive in this area. The Company has also
expanded the type of services that it provides to the snowmaking
industry. It is anticipated that this expansion of services will
allow the Company to be more competitive in the domestic market.
There was no backlog of orders of snowmaking equipment as of June 30,
1997. Orders have been received subsequently for delivery prior to
the current ski season. The backlog of orders of snowmaking
equipment was approximately $156,000 on June 30, 1996 and $166,000 on
June 30, 1995.
Gross Profit
Gross profit was 26% in fiscal year 1997, 37% in fiscal year 1996 and
24% in fiscal year 1995.
In the electronics segment, gross profit returned to a more normal
level of 29% of revenues. In fiscal year 1996, gross profit had
increased to 43% due to favorable results of the completion of the
ADCAP torpedo program. Also, last year's fourth quarter revenues
were favorably affected by approximately $343,000 following
Government contract review of operations in prior years. The gross
profit in this segment was 24% in fiscal year 1995.
Gross profit on leisure products for the same periods was 16% in
fiscal year 1997, 5% in 1996, and 21% in 1995. Although marketing
pressures in the machine sale market have caused more competitive
pricing, the Company believes that it has improved its marketing
position.
7
Selling, General and Administrative Expenses
Selling, general and administrative expenses amounted to $938,366
(24% of revenues) in fiscal year 1997, $1,070,659 (23% of revenues)
in fiscal year 1996, and $1,082,576 (16% of revenues) in fiscal year
1995.
Interest Expense
Interest expense for the last three fiscal years was: $218,682 in
1997, $262,905 in 1996, and $279,087 in 1995.
Interest on a 9% note payable to the New Jersey Economic Development
Authority, and interest on borrowings under a term loan agreement
with Fleet Bank, referred to below and in Note F ("Long Term Debt")
of the Notes to Financial Statements, constituted essentially all of
the Company's interest expense.
Reduced interest expense can be attributed to principal reduction
payments made during the fiscal year.
Other Income/(Expense)-Net
Other income for fiscal 1997 is the net effect of interest income of
$11,159 which was offset by scrap sales and miscellaneous expenses of
$3,414.
For fiscal year 1996, other income is the result principally of
interest income of $8,679 and income from miscellaneous sales of
$20,376, net of a prorated portion ($8,072) of a bank financing fee.
For fiscal year 1995, other expense includes a prorated portion
($59,535) of the bank financing fee, interest income of $15,348 and
income from miscellaneous sales of $4,399.
Income Taxes
Federal income tax net operating loss carryforwards mainly arise from
prior years' losses and temporary differences between financial and
taxable income.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss carryforwards.
The tax provisions for the fiscal years ended June 30, 1997, 1996,
and 1995 were at an effective rate of 40%.
8
Extraordinary Gain
During the fourth quarter of the fiscal year ended June 30, 1997, the
Company and its then principal lender Fleet Bank agreed in principle
that the Company would prepay its indebtedness to Fleet upon
negotiating financing arrangements with a new long-term lender (see
below). It was determined that financing fees in the amount of
$166,832 previously recorded as Other Expense would not be due and
such amount, less applicable income taxes of $67,150, was treated as
an extraordinary gain of $99,682.
Changing Prices
Price changes and inflation did not have a material effect on
operations over the last three years.
Liquidity and Capital Resources
The Company's working capital was $1,508,075 at June 30, 1997 and
$1,879,138 at June 30, 1996. This decrease in working capital
resulted from a reduction in accounts receivable and inventories
offset in part by a decrease in payables. Part of the payments
received from receivables were used for payments towards long term
debt and accounts payable vendor debt.
The ratio of current assets to current liabilities was 1.96:1 at June
30, 1997 and 2:06:1 at June 30, 1996
In fiscal year 1997, operating activities provided net cash flow of
$752,620. Expenditures for plant and equipment used $15,903 and long
term debt was reduced by $507,061. These activities resulted in a
net increase in cash and cash equivalents of $229,656.
In fiscal year 1996, operating activities used net cash of $42,406,
expenditures for plant and equipment used $124,897 and $322,609 was
used in payment of long term debt. These activities resulted in a
net reduction in cash and cash equivalents of $489,912.
In fiscal year 1995, operating activities provided net cash of
$1,187,372, expenditures for plant and equipment used $79,383 and
$896,877 was used in payment of long term debt including a voluntary
principal reduction payment under the term loan agrement. These
activities resulted in a net increase in cash and cash equivalents of
$211,112.
The Company continues to meet its short term liquidity needs arising
out of electronic product operations through a combination of
progress payments on government contracts (based on costs incurred)
and billings at the time of delivery of products.
On a long-term basis, the Company's liquidity will depend upon its
ability to maintain adequate borrowing arrangements with lenders. On
September 18, 1997, the Company entered into borrowing arrangements
with Sovereign Bank (the "Bank") under which:
9
- - The Company borrowed $2,300,000 at an interest rate of 8.25% per
annum, repayable in monthly installments of approximately
$20,000 with a final maturity in year 2002, evidenced by
delivery of a mortgage note payable to the Bank (the "Mortgage
Note").
- - The Bank agreed to provide up to an additional $500,000 under a
line-of-credit agreement, to be evidenced by promissory notes
bearing interest at a rate 3/4 of 1% over prime that will become
due and payable on October 31, 1998. In the Bank's discretion,
this line of credit may be renewed for a further period or
periods.
The Mortgage Note will be secured by a first mortgage on all of the
Company's land and its building. Borrowings under the line-of-credit
arrangement will be secured by a first lien on all of the Company's
machinery, equipment and other personal property.
Approximately $1,900,000 of the proceeds from the issuance of the
Mortgage Note was applied to the prepayment in full of the
outstanding balances due from the Company to Fleet Bank under its
secured term loan agreement with the Company and to New Jersey
Economic Development Authority under a mortgage note. The interest
rate on the prepaid indebtedness was 9% per annum. The prepaid
indebtedness was secured by liens on virtually all of the Company's
real and personal property. Under the former term loan agreement,
the Company was subject to numerous affirmative and negative
covenants containing working capital, net worth and other financial
tests. The new borrowing arrangements with the Bank contain no such
financial test covenants.
The Company had no material commitments for capital expenditures as
of the end of the 1997 fiscal year.
The Company owns approximately 90 acres of land and the building it
occupies in Bergen County, New Jersey, which are carried on its books
at approximately $900,000 but which are believed to have a fair
market value substantially in excess of this amount. This property
is adjacent to a full interchange of Interstate Route 287.
Management continues to investigate possible uses of this property
which would be favorable to the Company's stockholders' equity.
Current Business Environment
The Company experienced a decline in revenues as its long-term
project for the U.S. Navy in the electronics segment was completed
and its new project for the U.S. Army entered its initial stages.
The receipt of the first production order quantity of Army tactical
generator sets is expected to restore a steady workflow. However,
there can be no assurances that the U.S. Army will continue to order
any additional amounts in future years.
In the leisure and recreation segment, the Company has experienced an
increase in domestic revenues which the Company believes is the
result of it marketing strategies and product development. But this
segment is also experiencing intense competition and the impact of a
difficult business environment as are other companies in the same or
similar industries.
10
Electronic Products
The electronics segment of business provides most of the Company's
revenues. Virtually all of the electronic product revenues are
attributable to business with the Department of Defense of the
Federal Government or with other government contractors. Aside from
replacement part and other short-term business, the Company's
electronics segment revenues have in recent years been dependent upon
single projects. Thus, until recently a single program, the ADCAP
torpedo program with the U.S. Navy, was responsible for all of the
Company's electronics segment revenues from long-term projects; and
currently the new tactical generator set contract with the U.S. Army
accounts for all such long-term revenues.
The Company expects that the U.S. Army will continue to consider the
generator set program as necessary to national defense and that the
Company will continue to participate in the program. However, there
can be no assurances that this will occur.
Electronic product revenues are determined by the percentage of
completion method of accounting. The use of estimates to complete
projects is required under this accounting method. These estimates
are reviewed by management on an ongoing basis and are adjusted when
necessary in the opinion of management. No significant adjustments
are anticipated to be made to current estimates, but changes in
contract requirements and the efforts needed to meet such changes are
normal events in the defense electronics industry.
Leisure and Recreation Products
Taking advantage of competitive pressures in the snowmaking machine
industry, ski areas have become reluctant to make purchase
commitments for machines in advance of required delivery dates,
forcing manufacturers to carry larger inventories and adding to such
uncertainties of the snowmaking machine business as weather
conditions.
Properties
The Company continues to seek alternative methods of increasing its
shareholders' equity by realizing the value of its 90 acres of land.
The methods presently being explored by management include but are
not limited to the sale of some or all of this property, a sale
lease-back arrangement, or other long term financing. The northern
New Jersey real estate market has not been favorable for such a
transaction in recent years and no assurance can be given that any
transaction will occur.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Page
Independent Auditors' Report 13
Financial Statements:
Balance Sheets, June 30, 1997 and 1996 14
Statements of Earnings, Years Ended June 30, 1997,
1996 and 1995 15
Statements of Stockholders' Equity/(Deficit), Years Ended June
30, 1997, 1996 and 1995 15
Statements of Cash Flows, Years Ended June 30, 1997
1996 and 1995 16
Notes to Financial Statements 17
12
Independent Auditors' Report
Board of Directors of
The Dewey Electronics Corporation
Oakland, New Jersey 07436
We have audited the accompanying balance sheets of The Dewey
Electronics Corporation as of June 30, 1997 and 1996, and the related
statements of earnings, stockholders' equity and cash flows for each
of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Dewey
Electronics Corporation at June 30, 1997 and 1996 and the results of
its operations and its cash flows for each of the three years in the
period ended June 30, 1997 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
September 18, 1997
Parsippany, New Jersey
13
Balance Sheets
June 30,
1997 1996
ASSETS:--
CURRENT ASSETS:--
Cash and cash equivalents $ 318,058 $ 88,402
Accounts receivable (includes U.S.
Government receivables of approximately
$159,000 in 1997 and $816,000 in 1996)
less allowance for doubtful accounts of
$8,571 at 1997 and 1996 377,478 1,020,675
Inventories 1,057,338 1,416,163
Contract costs and related estimated
profits in excess of billings 1,271,107 1,111,967
Prepaid expenses and other current
assets 52,032 19,905
TOTAL CURRENT ASSETS 3,076,013 3,657,112
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 513,161 513,161
Building and improvements 1,799,383 1,799,383
Machinery and equipment 2,314,608 2,298,705
Furniture and fixtures 147,512 147,512
4,774,664 4,758,761
Less accumulated depreciation and
amortization 3,689,404 3,556,102
1,085,260 1,202,659
DEFERRED TAX ASSET 421,280 422,295
OTHER NON-CURRENT ASSETS 62,666 89,876
TOTAL ASSETS $4,645,219 $5,371,942
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 116,082 $ 370,807
Accrued expenses and other liabilities 291,611 282,904
Pension costs accrued 116,033 90,497
Billings in excess of contract costs
and related estimated profits 701,608 701,608
Current portion of long-term debt 342,604 332,158
TOTAL CURRENT LIABILITIES 1,567,938 1,777,974
LONG-TERM DEBT 1,580,042 2,089,477
OTHER LONG-TERM LIABILITIES 62,699 77,179
DUE TO RELATED PARTY 200,000 200,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
authorized 250,000 shares, issued
and outstanding, none -- --
Common stock, par value $.01; authorized
3,000,000 shares; issued and outstanding
1,693,397 in 1997 and 1996. 16,934 16,934
Paid-in capital 2,835,307 2,835,307
Accumulated deficit (1,097,604) (1,104,832)
1,754,637 1,747,409
Less: Treasury stock, 353,866 shares
in 1997 and 1996, at cost 520,097 520,097
1,234,540 1,227,312
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $4,645,219 $5,371,942
See notes to financial statements
14
Statements of Earnings
Years ended June 30,
1997 1996 1995
Revenues $3,828,417 $4,594,993 $6,691,731
Cost of revenues 2,833,849 2,875,201 5,111,451
Gross profit 994,568 1,719,792 1,580,280
Selling, general and administrative
expenses 938,366 1,070,659 1,082,576
Operating profit 56,202 649,133 497,704
Interest expense (218,682) (262,905) (279,087)
Other income/(expense) -net 7,745 22,408 (39,738)
(Loss)/Earnings before income
taxes and extraordinary gain (154,735) 408,636 178,879
Income tax provision 62,281 (164,490) (72,005)
(Loss)/Earnings before extraordinary
gain (92,454) 244,146 106,874
Extraordinary gain (Net of income
taxes of $67,150) 99,682 -- --
NET EARNINGS $7,228 $244,146 $106,874
NET EARNINGS PER SHARE:
(Loss)/Earnings before
extraordinary item (0.06) 0.18 0.08
Extraordinary gain 0.07 -- --
NET EARNINGS PER SHARE $ 0.01 $ 0.18 $0.08
Statements of Stockholders' Equity
Treasury stock
Common Stock at cost
Paid-in Accumulated
Shares Amount capital (Deficit) Shares Amount
Balance,
June 30,1994 1,693,397 16,934 2,835,307 (1,455,852) 353,866 520,097
Net Earnings -- -- -- 106,874 -- --
Balance,
June 30,1995 1,693,397 16,934 2,835,307 (1,348,978) 353,866 $520,097
Net Earnings -- -- -- 244,146 -- --
Balance,
June 30,1996 1,693,397 16,934 2,835,307 (1,104,832) 353,866 520,097
Net Earnings -- -- -- 7,228 -- --
Balance,
June 30,1997 1,693,397 $16,934 $2,835,307 $(1,097,604) 353,866 $520,097
See notes to financial statements
15
Statements of Cash Flows
Years ended June 30,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $7,228 $244,146 $106,874
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation 133,302 125,479 122,696
Amortization 2,210 4,043 6,789
Deferred financing costs 8,072 8,072 59,535
Decrease/(Increase) in accounts
receivable 643,197 (523,046) 280,433
Decrease/(Increase) in Inventories 358,825 (65,760) 3,343
(Increase)/Decrease in contract
costs and related estimated profits
in excess of applicable billings (159,140) 76,222 693,858
Decrease in billings in excess of
contract costs and related estimated
profits -- (343,606) --
(Increase)/Decrease in prepaid
expenses and other current assets (32,127) 35,686 2,855
Decrease in other noncurrent assets 25,000 -- --
Decrease in deferred tax asset 4,869 165,043 72,558
(Decrease)/Increase in accounts
payable. (254,725) 101,699 (116,867)
Increase/(Decrease) in accrued
expenses and other liabilitie 8,707 99,616 (24,716)
Increase/(Decrease) in pension
costs accured 25,536 10,139 (38,648)
(Decrease)/Increase other long
term liabilities (18,334) 19,861 18,662
Total adjustments 745,392 (286,552) 1,080,498
Net cash (used)/provided by
operating activities 752,620 (42,406) 1,187,372
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property,
plant and equipment (15,903) (124,897) (79,383)
Net cash used in investing
activities (15,903) (124,897) (79,383)
CASH USED IN FINANCING ACTIVITIES:
Payment of long-term debt (507,061) (322,609) (896,877)
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 229,656 (489,912) 211,112
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 88,402 578,314 367,202
CASH AND CASH EQUIVALENTS AT
END OF YEAR $318,058 $88,402 $578,314
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash (paid)/received during the
year for:
Interest (paid) $(233,458) $(246,594) $(279,785)
Interest received. $11,159 $ 8,679 $ 15,398
See notes to financial statements
16
Notes to Financial Statements
Years ended June 30, 1997, 1996, and 1995
A. Summary of Significant Accounting Policies
1. Government Contract Accounting
Revenues and estimated earnings under defense contracts are recorded
using the percentage-of-completion method of accounting, measured as
the percentage of costs incurred to estimated total costs for each
contract. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes
in job performance, job conditions, and estimated profitability may
result in revisions to costs and income and are recognized in the
period in which the revisions are determined. An amount equal to
contract costs and estimated profit (limited to estimated net
realizable value) attributable to claims is included in revenue when
realization is probable and the amount can be reasonably estimated.
Claims settled in excess of recorded amounts are recognized as
collected. During fiscal year 1996, the Company recorded $343,000 of
income related to the settlement of a government contract
2. Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits in banks and
U.S. Treasury Securities with a maturity at date of acquisition not
in excess of three months. The carrying amount of cash and cash
equivalents approximates fair value due to the short maturity of such
investments.
3. Fair value of financial instruments
Due to the short term nature of accounts receivable and accounts
payable, their carrying value is a reasonable estimate of fair value.
4 Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Components of cost include materials, direct
labor and factory overhead.
5. Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
17
6. Property, plant and equipment
Property, plant and equipment are stated at cost. Allowance for
depreciation and amortization is provided on a straight-line basis
over estimated useful lives of three to ten years for machinery and
equipment, ten years for furniture and fixtures, and twenty years for
building and improvements.
In 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of ("SFAS 121").
This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to measure
an impairment loss, and what disclosures are necessary in the
financial statements. The effect of adopting SFAS 121 was not
considered significant.
7. Reclassification
Certain 1996 amounts have been reclassified in the accompanying
financial statements to conform with 1997 presentation.
B. Inventories
Inventories consist of:
June 30,
1997 1996
Finished goods $219,890 $546,731
Work in progress 344,032 376,103
Raw materials 493,416 493,329
$1,057,338 $1,416,163
C. Costs and Estimated Earnings on Uncompleted Contracts
June 30,
1997 1996
Costs incurred on
contracts in progress $57,118,035 $63,685,233
Estimated contract
Profit 10,752,272 9,082,983
67,870,307 72,768,216
Less: billings to
Date 67,300,808 72,357,857
$569,499 $410,359
18
Included in the accompanying balance sheets under the following
captions:
June 30,
1997 1996
Contract costs and
related estimated
profits in excess of
applicable billings $1,271,107 $1,111,967
Billings in excess
of contract costs
and related
estimated profits (701,608) (701,608)
$569,499 $410,359
D. Stock Option Plan
The Company's stock option plan, which expires in 1998, authorizes
the granting of options to various executives and key employees to
purchase shares of common stock. Such options are granted at fair
market value of the stock on the date of grant and are exercisable
over a five-year period. At June 30, 1997, options for a maximum of
90,000 shares are authorized and 74,650 shares are available for
grant. Shares granted are exercisable at $.9375 and have expected
lives of 0.92 years.
The changes in the number of shares under option are as follows:
Shares Granted
And Reserved
Balance, June 30, 1995 40,000
Cancelled/Expired (25,000)
Balance, June 30, 1996
and 1997 15,000
Exercisable at June 30,
1997 15,000
The Company applies Accounting Principles Board (APB) Opinion 25 and
related interpretations in accounting for the Plan. Accordingly, no
compensation cost has been recognized for the Plan. Had compensation
cost for the Plan been determined consistent with Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123), it would not have materially impacted the
financial statements for 1997 and 1996, respectively.
E. Commitments and Contingencies
The Company has leased under operating leases certain machinery,
equipment and warehouse facilities. Future minimum rental
commitments as of June 30, 1997 are as follows:
1998 $11,594
1999 3,916
2000 --
$15,510
19
Total rent expense was $12,837, $97,572 and $194,869, for each of the
years ended June 30, 1997, 1996 and 1995, respectively.
F. Long-Term Debt
June 30,
1997 1996
Long-term debt at June 30, consists
of:
9% mortgage note payable to New
Jersey Economic Development
Authority, due through 2000, due
in monthly installments of
$12,461 including interest,
collateralized by the Company's
office building and plant. $363,046 $474,405
9% Term loan payable to Fleet
Bank due in monthly
installments of $18,400 plus
interest. 1,559,600 1,947,230
1,922,646 2,421,635
Less current portion 342,604 332,158
$1,580,042 $2,089,477
On September 18, 1997, the Company entered into an agreement with
Sovereign Bank, under which Sovereign Bank loaned the Company
$2,300,000 against delivery of a mortgage note payable at the rate of
8.25%. The proceeds of the loan were used to replace all outstanding
indebtedness to Fleet Bank and the New Jersey Economic Development
Authority and for working capital. See Note M ("Subsequent Events")
of the Notes to Financial Statements.
During the fourth quarter of the fiscal year ended June 30, 1997, it
was determined, based upon an agreement with Fleet Bank, that
financing fees that the Company had been recording on a prorated
basis would not be due and payable. As a result, the amount of
$166,832 previously provided was recorded as an extraordinary gain.
Aggregate annual principal payments applicable to long-term debt for
the years subsequent to June 30, 1997, based on the amended term loan
agreement in place at June 30, 1997 are:
1998 342,604
1999 354,030
2000 328,812
2001 $897,200
$1,922,646
20
G. Taxes on Income
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes, and b) operating loss and tax credit carryforwards.
Federal income tax net operating loss carryforwards mainly arise from
temporary differences between financial and taxable income. The
Company's net operating loss ("NOL") carryforwards for tax purposes
were $1,335,000 at June 30, 1997 and are scheduled to expire in the
year 2006.
The Company believes that it is more likely than not that the NOL
carryforwards will be utilized prior to their expiration. This
belief is based upon the expectation that the Company's real
property, or a portion thereof, will generate income prior to the
expiration of the loss carryforwards in an amount at least sufficient
to realize the deferred tax benefit.
The provision for income taxes is summarized as follows:
Years Ended June 30,
1997 1996 1995
Deferred
Federal $3,723 $125,772 $55,056
State 1,146 38,718 16,949
$4,869 $164,490 $72,005
The provision (benefit) for income taxes allocated between continuing
operations and extraordinary items as summarized below:
Years Ended June 30,
1997 1996 1995
Continuing operations $(62,281) $164,490 $72,005
Extraordinary items 67,150 -- --
Total $4,869 $164,490 $72,005
The following is a reconciliation of income taxes at the federal
statutory rate and the Company's effective income tax rate:
Years ended June 30,
1997 1996 1995
Statutory Federal
Income tax Rate 34% 34% 34%
State taxes, net of
federal income tax
benefit 6 6 6
Effective income tax
Rate 40% 40% 40%
21
Deferred tax assets and liabilities as of June 30, 1997 and June 30,
1996 consisted of the following:
Deferred tax assets: 1997 1996
Net operating loss carryforward $557,170 $510,629
Deferred financing fees -- 64,719
Vacation accrual 28,276 32,130
$585,446 $607,478
Deferred tax liabilities:
Depreciation $135,892 $153,053
Deferred contract income 67,860 67,860
$203,752 $220,913
H. Pension Plan
The Company has a non-contributory defined benefit retirement plan
covering all its employees. The plan is qualified under the Internal
Revenue Code. The method of determining the accrued benefit of an
employee is the amount equal to .8% of an employee's average monthly
salary times the number of years employed by the Company, to a
maximum of 35 years. The Company's policy is to contribute the
amounts allowable under Internal Revenue Service regulations. The
plan assets are invested primarily in a fixed income investment
account.
Net pension expense consists of the following:
Years ended June 30,
1997 1996 1995
Service cost $24,089 $29,721 $33,259
Interest cost on
projected benefit
obligations 48,588 47,195 46,726
Actual return on assets (28,783) (28,913) (28,391)
Net amortization and
Deferrals 17,676 20,489 19,025
Net pension expense $61,570 $68,492 $70,619
22
In both 1997 and 1996, the Company recorded its minimum pension
liability as an other long term liability and a corresponding
intangible asset included in other non-current assets. The funded
status of the plan and the amount recognized on the balance sheet are
as follows:
June 30,
1997 1996
Actuarial present value of benefit
obligations:
Accumulated benefit obligation
(including vested benefits of $501,014 and
$663,052 as of June 30, 1997 and 1996,
respectively) $504,906 $674,366
Projected benefit obligation $576,129 $771,662
Plan assets at fair value, consisting of
investments held in a fixed income
investment account 350,665 479,337
Projected benefit obligation in excess
of plan assets 225,464 292,325
Unrecognized net gain/(loss) 28,527 (10,804)
Unrecognized net obligation (72,299) (86,759)
Prior service cost not yet recognized
in net periodic pension cost (43,965) (51,293)
Adjustment required to recognize minimum
liability - intangible asset 16,514 51,560
Accrued pension cost 154,241 $195,029
Expected long-term rate of return on
plan assets 8.0% per annum 8.0% per annum
Discount rate 7.5% 7.5%
compounded compounded
annually annually
Salary increase 3.0% per annum 3.0% per annum
I. Earnings Per Share
Earnings per share for the years ended June 30, 1997, 1996 and 1995
are based upon the weighted average number of shares outstanding.
Stock options have not been considered in 1997, 1996 and 1995, as the
effect would not be dilutive. The number of shares used in the
computation of earnings per share was 1,339,531 in each of the years
ended June 30, 1997, 1996 and 1995.
23
J. Information About the Company's Operations in Different
Industries (in thousands)
Year ended June 30, 1997
Electronics Leisure Total
And Company
Recreation
Total revenue $2,841 $987 $3,828
Operating profit(loss) $ 58 $ (2) $ 56
Interest expense and
other income - net (211)
Loss before income taxes
and extraordinary gain $(155)
Identifiable assets at
June 30, 1997 $2,375 $1,487 $3,862
Corporate assets 783
Total assets at
June 30, 1997 $4,645
Year ended June 30, 1996
Electronics Leisure Total
and Company
Recreation
Total revenue $3,925 $ 670 $4,595
Operating profit/(loss) $883 $(234) $649
Interest expense and
other income - net (240)
Earnings before income
Taxes $409
Identifiable assets at
June 30, 1996 $2,949 $1,901 $4,850
Corporate assets 522
Total assets
at June 30, 1996 $5,372
Year ended June 30, 1995
Electronics Leisure Total
and Company
Recreation
Total revenue $5,866 $826 $6,692
Operating profit/(loss) $603 $(105) $498
Interest expense and
other income - net (319)
Earnings before income
Taxes $179
Identifiable assets at
June 30, 1995 $2,420 $1,873 $4,293
Corporate assets 1,262
Total assets
at June 30, 1995 $5,555
24
The Company operates in two industries: electronics; and leisure and
recreation. Operations in the electronics industry involve primarily
supplying electronics and electrical products and systems for the
United States Government as a prime contractor or subcontractor.
Operations in the leisure and recreation industry involve the
production and sale of snowmaking machinery and servicing of such
machinery at the purchaser's expense beyond the warranty period.
Total revenue by industry represents sales to unaffiliated customers,
as reported in the Company statement of earnings. There are no
inter-segment sales.
Some operating expenses, including general corporate expenses, have
been allocated by specific identification or based on direct labor
for items which are not specifically identifiable. In computing
operating profit, none of the following items have been added or
deducted: interest expense, income taxes, and non-operating income.
Depreciation for the electronics industry and the leisure and
recreation industry, respectively, was approximately $104,000 and
$29,000 in 1997, $95,000 and $30,000 in 1996, and $91,000 and $32,000
in 1995. Capital expenditures for the electronics industry were
approximately $16,000 in 1997, $125,000 in 1996, $79,000 in 1995.
There were no capital expenditures for the leisure and recreation
industry.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry. Corporate assets are
principally cash, prepaid expenses, and other current assets.
This year, a new tactical generator set project with the U.S. Army
accounted for 49% of electronic product revenues. The U.S. Navy's
MK48 ADCAP torpedo program, which has in recent years provided most
of such revenues and is now substantially completed, accounted for
19%. The other 32% of electronic product revenues was from various
orders which were more limited in scope and duration. These orders
were generally for replacement parts for previously supplied
Department of Defense equipment and other projects performed as a
subcontractor. A large part of such other revenues is attributable
to the Company's Pitometer Log Division, which manufactures speed and
distance measuring instrumentation for the Navy.
In the two preceding fiscal years, production efforts under the
Navy's ADCAP Torpedo Program accounted for the following percentages
of electronics segment revenues: 1996 - 74%; 1995 - 68%. Remaining
electronics segment revenues were derived from various orders,
limited in scope and duration, for Department of Defense and
replacement equipment.
Last year's fourth quarter revenues were favorably affected by
approximately $343,000 of revenues attributable to operations in
prior years, recognized in this quarter upon receipt of advice from
the Government following contract review, amounting to approximately
$.15 net earnings per share.
In the leisure and recreation industry segment, export sales amounted
to approximately $92,000, $92,000 and $121,000 in 1997, 1996 and
1995, respectively.
25
K. Related Party Transaction
Due to Related Party represents notes payable to an officer
(stockholder) of the Company. The notes are due upon demand and are
subordinate to the term loan payable to Fleet National Bank and
subsequently to the mortgage note held by Sovereign Bank (See Note M
"Subsequent Event"). The officer (stockholder) has agreed not to
seek repayment of the notes until the mortgage loan has been repaid.
Accordingly, the notes have been classified as long-term obligations.
The notes bear interest at the fixed rate of 9% (which is the same
interest rate payable on secured indebtedness to the Company's
principal commercial bank lender, Fleet National Bank).
L. Other Income/(Expense) - Net
Other income/(expense) consists of the following for the year ended
June 30:
1997 1996 1995
Interest Income $11,159 $8,679 $15,398
Sales of Scrap and
miscellaneous (net) $(3,414) $20,376 $4,399
Gain on equipment sold -- 1,425 --
Bank financing fees -- (8,072) (59,535)
$7,745 $22,408 $(39,738)
M. Subsequent Event
On September 18, 1997, the Company entered into a mortgage note
agreement with Sovereign Bank, under which the Bank has loaned the
Company $2,300,000 against delivery of a mortgage note payable at the
rate of 8.25%. The proceeds are to be used to replace all
outstanding indebtedness to Fleet Bank and the New Jersey Economic
Development Authority and for working capital.
The mortgage note to Sovereign Bank requires monthly payments of
approximately $20,000 and creates a lien on the Company's real
property. The note has a five year term. There are no financial
covenants or restrictions.
The Bank has also agreed to provide an additional $500,000 under a
line of credit to be secured by a lien on machinery, equipment and
other personal property at the rate of 3/4 of 1% above the prime rate.
The line of credit will mature October 21, 1998 at which time the
outstanding balance shall be due and payable. The line of credit may
be renewed at the sole discretion of the Bank.
The Company has not drawn any funds under this line of credit.
26
N. New Accounting Pronouncements
During 1997, the Financial Accounting Standards Board (FASB) issued
new accounting pronouncements, Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share", (SFAS) No. 129,
"Disclosure of Information about Capital Structure", (SFAS) No. 130,
"Reporting Comprehensive Income", and (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The
pronouncements are effective for the Company's fiscal year ending
June 30, 1998. The Company has assessed that there would be no
material impact on the financial statements by adopting these
pronouncements.
27
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors and Executive Officers of the
Registrant is incorporated herein by reference from the Company's
definitive proxy statement for the 1997 Annual Meeting of
Stockholders.
Item 11. EXECUTIVE COMPENSATION
Executive compensation information is incorporated herein by
reference from the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial
owners and management is incorporated herein by reference from the
Company's definitive proxy statement for the 1997 Annual Meeting of
Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated herein by
reference from the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders.
28
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) The following financial statements are included in Part II
Item 8:
Page
Independent Auditors' Report 13
Balance Sheets, June 30, 1997 and 1996 14
Statements of Earnings, Years Ended June 30,
1997, 1996 and 1995 15
Statements of Stockholders' Equity/(Deficit), Years Ended
June 30, 1997, 1996 and 1995 15
Statements of Cash Flows, Years Ended June 30,
1997, 1996 and 1995 16
Notes to Financial Statements 17
(2) Exhibits 31
A list of the exhibits required to be filed as part
of this report is set forth in the Index to Exhibits,
which immediately precedes such exhibits, and is
incorporated herein by this reference.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant
during the last quarter of the period covered by this
report.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, The Dewey Electronics Corporation has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized:
THE DEWEY ELECTRONICS CORPORATION
BY: Gordon C. Dewey BY: Thom A. Velto, Treasurer
President, Chief Executive
Officer and Chief Financial
Officer
DATE: October 8, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
Alexander A. Cameron, Director Date October 8, 1997
Frances D. Dewey, Director Date October 8, 1997
Gordon C. Dewey, Director Date October 8, 1997
Peter Eustis, Director Date October 8, 1997
John G. McQuaid, Director Date October 8, 1997
30
THE DEWEY ELECTRONICS CORPORATION
INDEX TO EXHIBITS
The following exhibits are filed as part of this report. For
convenience of reference, exhibits are listed according to the
numbers assigned in the Exhibit table to Regulation S-K.
Number Page No.
3(a)- Certificate on Incorporation as amended. This item was
filed as part of the Registrant's Form 10-K for the year ended June 30,
1988 and is herein incorporated by reference. --
3(b)- By Laws as amended. This item was filed as part of the
Registrant's Form 10-K for the year ended June 30, 1988 and is herein
incorporated by reference. --
4(a)- Agreement dated as of September 18, 1997 with Sovereign
Bank providing for the borrowing of $2,300,000 against issuance of a
mortgage note payable to the Bank. This item is filed herewith. --
4 (b)- Line of credit agreement dated as of September 18, 1997
with Sovereign Bank providing for the borrowing of up to $500,000. This item
is filed herewith. --
4(c)- 1983 Stock Option Plan. This item was filed with the Registrant's
Definitive Proxy Statement for the 1983 annual meeting of stockholders
on December 6, 1983 and is herein incorporated by reference. --
31
Fairfield, New Jersey
September 18, 1997
MORTGAGE NOTE
$2,300,000.00
FOR VALUE RECEIVED, The Dewey Electronics Corporation (the
"Borrower") promises to pay to the order of SOVEREIGN BANK, a
Federal Savings Bank, or its successors or assigns or any subsequent
holder of this Note, as the case may be (the term "Obligee" being used
hereinafter to refer to Sovereign Bank, a Federal Savings Bank or to
such successors, assigns or subsequent holders, as the case may be),
at 165 Passaic Avenue, New Jersey 07004 or such other address as
the holder hereof may notify the Borrower, the sum of Two Million
Three Hundred Thousand Dollars ($2,300,000.00) with interest thereon
computed on the basis of a 360 day year consisting of twelve 30 day
months at the rate of eight and one-quarter percent (8.25%) per year
from the date hereof (the "Indebtedness"), the Indebtedness to be paid
as fol-lows:
On October 1, 1997, there shall be due and payable interest on the
unpaid principal from the date hereof to September 30, 1997.
Thereafter, the sum of Nineteen Thousand Five Hundred Ninety Seven
and 51/100 Dollars ($19,597.51) shall be due and payable on the first
(1st) day of November, 1997, and a like sum on the first day of each and
every month thereafter, until the first (1st) day of October, 2002 (the
"Maturity Date"), when the balance of the unpaid principal and interest
shall be due and payable. Each of said monthly payments shall be applied
first on account of interest, and the balance, if any, toward reduction of
the principal.
1. As security for the payment of the moneys owing hereon, the Borrower
has executed and delivered to Obligee a mortgage (the "Mortgage") on lands
in the Boro of Oakland, County of Bergen and the Boro of Wanague, County
of Passaic, State of New Jersey (the "Mortgaged Premises") and an
Assignment of Leases (the "Assignment"), all of the above documents
bearing even date herewith.
2. Notwithstanding the foregoing, the unpaid balance of the principal sum
of this Note and interest hereon shall immediately become due and payable,
at the election of Obligee, in the event of:
a. Default, when due, in any payment due hereunder and such failure
continues uncured for fifteen (15) days; or
b. Any default in the covenants and conditions of, or under this Note,
the Mortgage, the Assignment or any other document executed and delivered
in connection herewith (the "Loan Documents"), which covenants and
conditions are made a part hereof as though set forth herein at length, or in
the covenants and conditions of any other mortgage encumbering the
Mortgaged Premises or any part thereof and which failure remains uncured
for a period of thirty (30) days of notice thereof. In no event shall such
documents be construed inconsistently with the terms of this Note, and in
the event of any discrepancy between any such documents and this Note,
the terms hereof shall govern.
c. The occurrence of an Event of Default under any of the
Loan Documents.
3. The Borrower and all other parties who at any time may be liable
hereon in any capacity, jointly and severally, waive demand, notice,
presentment, demand for payment, protest and notice of dishonor of
this Note, and authorize Obligee, without notice, to grant extensions
in the time of payment of and reductions in the rate of interest on any
monies owing on this Note, before, at or after maturity, and any of the
foregoing shall be binding upon each and all of the Borrower and the
Borrower shall continue to be bound for all payments under this Note.
No release of any of the Borrower from liability hereunder shall release
any other maker, endorser or guarantor hereof.
4. Any and all prepayments of the Indebtedness, whether voluntary or
involuntary, shall be subject to the provisions of this paragraph.
a. If the Borrower shall not be in default hereunder, the privilege
is reserved to prepay the Indebtedness in full on any installment payment
date after upon thirty (30) days' prior written notice to the Obligee, and
upon payment, in addition to said payment of principal and accrued interest
thereon, of a prepayment fee on the principal amount so prepaid equal to
three percent (3%) provided said prepayment is made during the first (1st)
Loan Year, two percent (2%) during the second (2nd) Loan Year and one
percent (1%) thereafter provided there shall be no prepayment fee if the
prepayment occurs during the final six (6) months of the term hereof,
(a "Loan Year" is herein defined as each successive twelve (12) calendar
month period following the first day of the first calendar month after the
date of this Note).
b. In the event that the Mortgaged Premises shall be taken by
any governmental authority by exercise of eminent domain, or shall be
conveyed to a grantee in lieu of such taking, and the Obligee exercises
its option that the award, proceeds or compensation for such taking or
conveyance be paid to Obligee as prepayment of the Indebtedness, there
shall not be due a prepayment premium, provided the Borrower is not
otherwise in default hereof. Similarly, in the event of damage to the
Mortgaged Premises which is covered by fire and other insurance required
to be maintained by the Borrower pursuant to this Note and/or the
Mortgage, any insurance proceeds which are paid to Obligee and are
applied by Obligee to reduce the Indebtedness shall not be deemed to
be a prepayment hereunder, and the amount so applied shall not be subject
to a prepayment premium, provided the Borrower is not otherwise in default
hereof. The monthly payments hereunder shall remain unaffected by any
partial prepayment pursuant to this paragraph, the effect of which shall be,
rather, to reduce the principal balance remaining upon maturity, or, if there
be no such principal balance remaining, the term of this Note.
c. Prepayment is hereby defined as receipt by Obligee of all or a part
of the principal balance and the outstanding interest due under this Note
irrespective of the source of such payment and irrespective of whether same
was paid by the Borrower "voluntarily" or "involuntarily." Without limiting
the generality of the foregoing, prepayment shall include prepayment from
the Borrower, irrespective of whether before or after default and
acceleration of the entire principal balance by virtue of default.
Further, it is expressly agreed that the prepayment premium shall be due
and owing in the event of any payment of the principal balance and
outstanding interest after the institution of foreclosure proceedings,
and upon sale in foreclosure.
5. After the Maturity Date, or earlier default and acceleration of this Note,
any outstanding principal and unpaid interest shall thereafter bear interest
at a rate that is two percent (2%) per annum above the interest rate that
would otherwise be charged under this Note (the "Default Rate").
6. It is intended by the parties hereto that the interest paid or agreed to
be paid to the Obligee under this Note and the Mortgage on the Indebtedness
shall not exceed the maximum interest rate permissible under applicable
state and federal law. If any interest payment hereunder or under the
Mortgage shall be in an amount in excess of said maximum rate, then the
excess shall, at the election of the Obligee, either be (a) waived; (b)
applied without premium or penalty to the reduction of the principal
amount owing under this Note or on account of any other indebtedness
secured by the Mortgage and not to the payment of interest; or (c) retained
until the full satisfaction of this Note and the Mortgage as additional
security for repayment of the Indebtedness.
7. The word "Borrower," as used herein, shall mean and include all makers
and endorsers hereof. Words used in the singular herein shall include
plural, as the context may require..
8. The Borrower agrees to pay a late charge of five (5%) percent of any
installments of interest and/or principal or any portion thereof which are
not paid within fifteen (15) days after the same shall become due and payable
under this Note, to cover the extra expense involved in handling delinquent
payments.
9. If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, or to enforce its collection, or to protect the security
for its payment, the Borrower immediately and without demand will pay all
costs of collection and litigation together with reasonable attorneys'
fees.
10. The remedies of Obligee, as provided herein, shall be cumulative and
concurrent and may be pursued singly, successively or together, at the sole
discretion of Obligee, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release thereof.
11. This Note shall be construed and enforced in accordance with the
substantive law of the State of New Jersey; the Courts of New Jersey shall
have exclusive jurisdiction over suits as to the Indebtedness and the other
documents described above; and the Borrower hereby consents to the
jurisdiction of the Courts of New Jersey.
12. This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought. All of the
rights, privileges and obligations hereunder shall inure to the benefit of
the heirs, successors and assigns of the Obligee and shall bind the heirs,
successors and assigns of the Borrower.
13. If any provision of this Note shall, for any reason, be held to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as
if such invalid or unenforceable provision had never been contained herein.
14. THE BORROWER WAIVES TRIAL BY JURY IN ANY AND
ALL ACTIONS AND PROCEEDINGS UNDER OR RELATING TO
ANY OF THE LOAN DOCUMENTS.
IN WITNESS WHEREOF, the Borrower has signed and delivered this
Note on the day and year first above written.
Attest: The Dewey Electronics Corporation
By:
Name: Thom. A. Velto Name: Gordon C. Dewey
Title: Treasurer Title: President
Line of Credit Note
Fairfield, New Jersey
September 18 , 1997
$500,000.00
FOR VALUE RECEIVED, and intending to be legally bound hereby,
The Dewey Electronics Corporation (the "Borrower"), unconditionally
promises to pay to the order of Sovereign Bank, at 165 Passaic Avenue,
Fairfield, NJ 07004 (the "Bank") the amount of all advances hereunder
up to the principal sum of Five Hundred Thousand Dollars ($500,000.00)
in accordance with the payment provisions hereinafter set forth.
A. Terms of Note.
1. Principal Payments. The outstanding principal balance
hereunder shall be paid on October 31, 1998.
2. Interest Payments. The Borrower agrees to pay to the Bank,
interest, in arrears, on the outstanding principal balance hereunder, monthly
on the first day of each month hereafter until the entire principal balance
hereunder, together with accrued, unpaid interest thereon is paid in full,
and on the maturity date. Interest on the principal balance outstanding
hereunder shall accrue at the Bank's Prime Rate (hereinafter defined) plus
three quarters of one percent (3/4%) per annum.
3. Computation of Interest. Interest charged hereunder
shall be computed daily on the basis of a 360 day year for the actual
number of days elapsed.
4. Payment Terms. All payments made hereunder shall be
made on the due date thereof, in immediately available funds and in lawful
currency of the United States of America. All payments made hereunder
shall be made to the Bank at its offices set forth in this Note or at such
otheraddress as the Bank shall notify the Borrower of in writing.
5. Debiting of Account. The Borrower agrees to maintain
its primary operating account at the Bank continuously until the Liabilities
due hereunder are paid in full (the "Account"). The Bank may, and the
Borrower authorizes the Bank to, debit the Account for the amount of any
payment as and when such payment becomes due hereunder. The foregoing
rights of the Bank to debit the Borrower's accounts shall be in addition
to, and not in limitation of, any rights of set-off which the Bank may have
hereunder or under any Loan Document.
6. Late Charge. If any payment is not paid in full when
the same is due, the Borrower shall pay the Bank a fee on such unpaid
amount equal to five percent (5%) of such amount.
7. Default Rate. At the Bank's option, interest will be
assessed on any principal which remains unpaid at the maturity of this Note,
whether by acceleration or otherwise, at a rate which is two percent (2%)
higher than the rate otherwise charged hereunder (the "Default Rate")
provided that at no time shall the Default Rate exceed the highest rate
of interest allowed by law. Such Default Rate of interest shall also be
charged on the amounts owed by the Borrower to the Bank pursuant to
any judgment entered in favor of Bank with respect to this Note.
8. Prepayment. This Note may be prepaid in whole or in
part without prepayment penalty or premium
B. Definitions. As used herein, the following terms shall have the
following meanings:
1. Borrower. The term "Borrower" means every person or entity
that is a signatory to this Note other than the Bank.
2. Liabilities. The term "Liabilities" means any and all obligations
and indebtedness of every kind and description of the Borrower owing to
the Bank or to any Affiliate, whether or not under the Loan Documents,
and whether such debts or obligations are primary or secondary, direct or
indirect, absolute or contingent, sole, joint or several, secured or
unsecured, due or to become due, contractual or tortious, arising by
operation of law, by overdraft, or otherwise, or now or hereafter existing,
including, without limitation, principal, interest, fees, late fees,
expenses, attorneys' fees and costs and/or allocated fees and costs of Bank's
in-house legal counsel, that have been or may hereafter be contracted or
incurred.
3. Loan. The term "Loan" shall mean the principal balance outstanding
hereunder together with any accrued, unpaid interest hereon and any fees
and/or expenses of the Bank payable hereunder.
4. Loan Documents. The term "Loan Documents" means this Note,
the Commitment Letter dated July 15, 1997 (which shall survive the
execution hereof), and any and all credit accommodations, notes, loan
agreements, and any other agreements and documents, now or hereafter
existing, creating, evidencing, guarantying, securing or relating to any
or all of the Liabilities, together with all amendments, modifications,
renewals, or extensions thereof.
5. Note. The term "Note" shall mean this Installment Note
together with all attachments hereto and all amendments and
modifications hereto in effect from time to time.
6. Obligor. The term "Obligor" means the Borrower and each
and every maker, endorser, guarantor or surety of or for the Liabilities.
7. Prime Rate. The term "Prime Rate" means the rate of interest
established by the Bank as its primee rate in making loans, and is not tied
to any external rate of interest or index. The rate of interest charged
hereunder shall change automatically and immediately as of the date
of any change in thePrime Rate without notice to the Borrower.
C. Representations and warranties. The Borrower represents
and warrants to the Bank that:
1. Use of Proceeds. The proceeds of the Loan will be used only
for working capital purposes;
2. Financial Statements. All financial statements heretofore
delivered by the Borrower to the Bank are true, correct, and complete in
all material respects, fairly represent the Borrower's financial condition
as of the date hereof, disclose all outstanding indebtedness and obligations
of the Borrower and liens and encumbrances against its properties and
assets, and no information has been omitted which would make the
information previously furnished misleading or incorrect in any material
respect. There have been no adverse changes in the Borrower's financial
condition or business since the date of such statements; 3. Suits and
Defaults. There are no actions, suits, proceedings, or claims pending or
to the Borrower's knowledge threatened against the Borrower or any of its
property; and the Borrower's business is in compliance with all applicable
orders, laws, rules and regulations. The Borrower is not in default under
any agreement to which the Borrower is a party or by which the Borrower
or any of its property is bound, or under any instrument evidencing any
indebtedness of the Borrower, and neither the Borrower's execution of nor
performance under the Loan Documents will create a default or any lien
or encumbrance under any such agreement or instrument other than a lien
or encumbrance in favor of the Bank; and
4. Tax Returns and Taxes. The Borrower has filed all federal, state,
and local tax returns required to be filed and has paid all taxes, assessments,
and governmental charges and levies thereon, including interest and
penalties, except where the same are being contested in good faith by
appropriate proceedings.
D. Affirmative Covenants. The Borrower covenants and agrees that
so long as there are any outstanding Liabilities, the Borrower shall:
1. Financial Statements. The Borrower agrees to supply
the Bank the following information:
(A) Within 90 days of the close of each fiscal year or calendar year,
whichever is used by the Borrower for federal income tax purposes, an audited
financial statement report prepared by an independent certified public
accountant of recognized standing and satisfactory to the Bank in accordance
with generally accepted accounting principles consistently applied or if
Borrower is required to file a Form 10-K under the Securities Exchange
Act of 1934 and Borrower obtains an extension to file such 10-K for any
fiscal year, Borrower shall furnish to Bank said annual financial statements
within ten (10) days of filing said Form 10-K.
(B) At the Bank's option, the Borrower will also provide the Bank,
within 120 days of the close of the tax year, with a copy of the federal
income tax return filed by the Borrower for that tax year, or if Borrower
has obtained an extension to file such return, Borrower shall promptly
furnish to Bank a copy of such extension and a copy of the return within
10 days of the filing thereof.
(C) All financial statements of the Borrower submitted to the Bank will
be accompanied by the certificate of a financial officer of the Borrower, dated
within five (5) days of the delivery of such statements to the Bank, stating
that he/she knows of no event of default, nor of any event that after notice
or lapse of time or both would constitute an event of default that has
occurred and is continuing, and stating that the Borrower has fulfilled all
its obligations under this loan as of the date of such certificate, or if
such event or event of default has occurred and is continuing, specifying
the nature and period of existence thereof and what action the Borrower
has taken or proposes to take with respect thereto.
2. Notice of Certain Events. Promptly give written notice to the Bank of (i)
the occurrence of any event which alone or with notice, the passage ot time,
or both, would constitute an Event of Default; (ii) the commencement of any
proceeding or litigation which, if adversely determined, would adversely
affect its financial condition or ability to conduct its business; and (iii)
the formation of any subsidiary of the Borrower after the date of this Note.
3. Preservation of Property; Insurance. Keep and maintain, and require
its subsidiaries to keep and maintain, all of its and their property and
assets in good order and repair, maintain extended coverage, general liability,
business interruption, hazard, property and other insurance in amounts deemed
sufficient by the Bank and as is customary for businesses similar to the
Borrower's business, and deliver to the Bank certificates of all such
insurance in effect; and cause all such policies covering any collateral
for the Liabilities and business interruption
to contain loss payee endorsements in favor of the Bank and to be subject to
cancellation or reduction in coverage only upon 30 days prior written notice
thereof to the Bank at its address set forth in this Note;
4. Taxes. Pay and discharge, and require its subsidiaries to pay and
discharge, when due, all taxes, assessments or other governmental charges
imposed on them or any of their respective properties, unless the same are
currently being contested in good faith by appropriate proceedings and
adequate reserves are maintained therefor;
5. Environmental Liens; Removal of Hazardous Substance. (A) In the
event of any release or threatened release of any Hazardous Materials at,
under or about any property owned or occupied by Borrower, Borrower
shall at its sole cost and expense immediately take all necessary steps to
initiate and expeditiously complete all remedial and corrective action in
accordance with all applicable Environmental Laws and to the satisfaction
of Bank, including the payment of any and all costs and penalties penalties
assessedagainst Borrower or the subject premises. In the event Borrower
fails to comply with the foregoing covenant, Bank may, in addition to
all other remedies set forth herein, cause any necessary remediation,
removal or corrective action to be undertaken at Borrower's sole cost
and expense, and Borrower hereby grants Bank, its agents and employees
access to the premises for such purposes. Any and all costs and expenses
incurred by Bank shall be added to and become part of the Indebtedness
under this Note and shall bear interest at the Default Rate;
(B) In the event that there shall be filed a lien against any property
owned or occupied by Borrower, Borrower by the DEP, EPA, or any
other governmental authority, Borrower agrees, in addition to taking
immediate corrective measures to remediate any Hazardous Materials
which are the subject of such lien, Borrower shall either (i) cause said
lien to be removed from the premises or (ii) provide a bond reasonably
satisfactory to the Bank within sixty (60) days from the date that Borrower
is given notice that the lien is placed against the premises or within such
shorter period of time in the event that the State of New Jersey, the
United States or such other governmental authority may take steps to
cause the Premises to be sold pursuant to the lien. In the event that the
Borrower shall not accomplish the foregoing within the required period
of time, the Borrower agrees that this Note shall, at Bank's option, become
accelerated, due and payable.
6. Additional Affirmative Covenants. The Borrower further
affirmatively covenants and agrees that it shall perform any other
affirmative covenants set forth in the Loan Documents to which the Borrower
is a party.
E. Negative Covenants. So long as any Liabilities are outstanding, the
Borrower shall not, without the prior written consent of the Bank undertake
any activities prohibited by any negative covenant set forth in the
Loan Documents to which the Borrower is a party.
F. Events of Default. The occurrence of any one of the following
shall constitute an event of default ("Event of Default") under this Note:
1. Payment Default. Failure by the Borrower to pay any principal,
accrued interest, or fees within 15 days when due;
2. Misrepresentation. Breach in any material respect of any
representation, warranty, or statement by or on behalf of the Borrower
or any Guarantor in connection with the loan, or any such representation,
warranty, or statement having been false or misleading in any material
respect;
3. Covenant Default. Breach of any other covenant described in
the Loan Documents and failure to cure same within 30 days of notice thereof;
4. Cross Default. Default under any other indebtedness of the
Borrower to Bank which remains uncured after any applicable grace
or cure period;
5. Judgment. Entry of any judgment against the Borrower which
remains undischarged or unstayed or bonded against for a period of 45 days;
6. Bankruptcy. Commencement against the Borrower of any
proceeding under any bankruptcy or similar law and failure to dismiss
same within 60 days or the entry of an Order for Relief against Borrower,
or the inability of the Borrower generally to pay its debts, or assignment
of the Borrower of its assets for the benefit of creditors.
7. Seizure. All or any substantial part of the property of the
Borrower having been condemned, seized, or otherwise appropriated.
8. ERISA. Any material liability of the Borrower arising in respect
to any pension, retirement, or similar plan, subject to the provisions of
the Employees Retiree Income Security Act of 1974.
9. Adverse Change. There occurs any event which in the Bank's
good faith judgment materially adversely affects (i) the ability of the
Borrower to perform any of its obligations under the Loan Documents;
(ii) the business or financial condition of the Borrower; or (iii) the
operation or value of the collateral posted by the Borrower with the Bank,
or the Bank's security therein.
G. Remedies.
1. Acceleration of Liabilities; Rights of Bank. Upon the occurrence
of an Event of Default described in Section F hereof, at the Bank's sole
option, the Bank's commitment, if any, to make any further advances or
loans to the Borrower under any Loan Document shall terminate and the
Loan and all other Liabilities shall immediately become due and payable
in full, all without protest, presentment, demand or further notice of any
kind to the Borrower or any other Obligor, all of which are expressly
waived. Upon and following an Event of Default, the Bank, at its option,
may exercise any and all rights and remedies it has under this Note,
the other Loan Documents and under applicable law, including, without
limitation, the right to charge and collect interest on the principal portion
of the Liabilities at the Default Rate, which rate shall, at the Bank's option,
apply upon and after an Event of Default, maturity, whether by acceleration
or otherwise, and the entry of judgment with respect to any or all of the
Liabilities. Upon and following an Event of Default hereunder, the Bank
may proceed to protect and enforce the Bank's rights under any Loan
Document and/or under applicable law by action at law, in equity, or
other appropriate proceeding, including, without limitation, an action
for specific performance to enforce or aid in the enforcement of any
provision contained herein or in any other Loan Document.
2. Right of Set-off. If any of the Liabilities shall be due and
payable or any one or more Events of Default shall have occurred,
whether or not the Bank shall have made any demand under this Note
and regardless of the adequacy of any collateral for the Liabilities or
other means of obtaining repayment of the Liabilities, the Bank shall
have the right, without notice to the Borrower or to any other Obligor,
and is specifically authorized hereby to set-off against and apply to
the then unpaid balance of the Liabilities any items or funds of the
Borrower and/or any Obligor held by the Bank, any and all deposits
(whether general or special, time or demand, matured or unmatured)
or any other property of the Borrower and/or any Obligor, including,
without limitation, securities and/or certificates of deposit, now or
hereafter maintained by the Borrower and/or any Obligor for its or
their own account with the Bank, and any other indebtedness at any
time held or owing by the Bank to or for the credit or the account of
the Borrower and/or any Obligor, even if effecting such set-off results
in a loss or reduction of interest or the imposition of a penalty applicable
to the early withdrawal of time deposits. For such purpose, the Bank
shall have, and the Borrower hereby grants to the Bank, a first lien
on and security interest in such deposits, property, funds, and accounts,
and the proceeds thereof.
3. Remedies Cumulative; No Waiver. The rights, powers and
remedies hereunder and under the other Loan Documents are cumulative
and concurrent, and are not exclusive of any other rights, powers or
remedies available to the Bank. No failure or delay on the part of the
Bank in the exercise of any right, power or remedy shall operate as
a waiver thereof, nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
4. Continuing Enforcement of the Loan Documents. If, after
receipt of any payment of all or any part of the Note or the Liabilities,
the Bank is compelled or in good faith agrees, for settlement purposes,
to surrender such payment to any person or entity for any reason, then this
Note and the other Loan Documents shall continue in full force and effect
or be reinstated, as the case may be. The provisions of this Paragraph shall
survive the termination of this Note and the other Loan Documents and shall
be and remain effective notwithstanding the payment of the Liabilities, the
cancellation of the Note, the release of any security interest, lien or
encumbrance securing the Liabilities or any other action which the Bank
may have taken in reliance upon its receipt of such payment.
H. Miscellaneous.
1. Waiver of Demand. The Borrower (i) waives demand, presentment,
protest, notice of protest, and notice of dishonor of this Note; (ii) consents
to any and all extensions of time, renewals, waivers, or modifications
that may be granted by the Bank with respect to the payment or other
provisions of this Note; and (iii) agrees that makers, endorsers, guarantors,
and sureties for the indebtedness evidenced hereby may be added or released
without notice to the Borrower and without affecting the Borrower's liability
hereunder. The liability of the Borrower hereunder shall be absolute and
unconditional.
2. Notices. Notices and communications under this Note shall be
in writing and shall be given by: (i) hand-delivery, (ii) first class mail
(postage prepaid), or (iii) reliable overnight commercial courier (charges
prepaid) to the addresses listed in this Note. Notice by overnight courier
shall be deemed to have been given and received on the date scheduled for
delivery. Notice by mail shall be deemed to have been given and received
three (3) calendar days after the date first deposited in the United States
Mail. Notice by hand-delivery shall be deemed to have been given and
received upon delivery. A party may change its address by giving written
notice to the other party as specified herein.
3. Costs and Expenses. Whether or not the transactions contemplated
by the Loan Documents are fully consummated, the Borrower shall promptly
pay (or reimburse, as the Bank may elect) all costs and expenses which the
Bank has incurred or may hereafter incur in connection with the negotiation,
preparation, reproduction, interpretation, perfection, protection of
collateral, administration and enforcement of this Note and the other Loan
Documents, the collection of all amounts due under this Note and the other
Loan Documents, and all amendments, modifications, consents or waivers, if
any, to the Loan Documents. The Borrower's reimbursement obligations
under this Paragraph shall survive any termination of this Note or any
other Loan Document.
4. Payment Due on a Day Other than a Business Day. If any payment
due or action to be taken under this Note or any other Loan Document falls
due or is required to be taken on a day that the Bank is not open for
business, such payment or action shall be made or taken on the next
succeeding day when the Bank is open for business and such extended time
shall be included in the computation of interest.
5. Governing Law. This Note shall be construed in accordance with
and governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
6. Integration; Amendment. This Note and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject
matter hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof. No
amendment of this Note, and no waiver of any one or more of the provisions
hereof shall beeffective unless set forth in writing and signed by the
parties hereto.
7. Successors and Assigns. This Note (i) shall be binding upon the
Borrower and the Bank and, where applicable, their respective heirs, executors,
administrators, successors and permitted assigns, and (ii) shall inure to the
benefit of the Borrower and the Bank and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns; provided,
however, that the Borrower may not assign its rights or obligations hereunder
or any interest herein without the prior written consent of the Bank, and any
such assignment or attempted assignment by the Borrower shall be void and
of no effect with respect to the Bank. The Bank may from time to time sell
or assign, in whole or in part, or grant participations in the Loan and/or
the Note and/or the obligations evidenced thereby. The Borrower authorizes
the Bank to provide information concerning the Borrower to any prospective
purchaser, assignee or participant.
8. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Note or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Note or
any instrument or agreement required hereunder. The Loan Documents
are intended to be consistent. However, in the event of any inconsistencies
among any of the Loan Documents, such inconsistency shall not affect the
validity or enforceability of any Loan Document. The Borrower agrees
that in the event of any inconsistency or ambiguity in any of the Loan
Documents, the Loan Documents shall not be construed against any one
party but shall be interpreted consistent with the Bank's policies and
procedures.
9. Consent to Jurisdiction and Service of Process. The Borrower
irrevocably appoints each and every owner and/or officer of the Borrower
as its attorneys upon whom may be served, by regular or certified mail
at the address set forth in this Note, any notice, process or pleading in
any action or proceeding against it arising out of or in connection with
this Note or any of the other Loan Documents. The Borrower hereby
consents and agrees that (i) any action or proceeding against it may be
commenced and maintained in any court within the State of New Jersey
or in the United States District Court for the District of New Jersey by
service of process on any such owner and/or officer and (ii) the courts of
the State of New Jersey and the United States District Court for the
District of New Jersey shall have jurisdiction with respect to the subject
matter hereof and the person of the Borrower and all collateral for the
Liabilities. The Borrower agrees that any action brought by the Borrower
shall be commenced and maintained only in a court in the federal judicial
district or county in which the Bank has its principal place of business in
New Jersey.
10. Judicial Proceedings; Waivers.
THE BORROWER WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING UNDER OR RELATING
TO THIS NOTE AND EVERY OTHER LOAN DOUCMENTS.
IN WITNESS WHEREOF, the Borrower has executed and delivered
to the Bank this Note, as of the day and year first above written.
THE DEWEY ELECTRONICS CORPORATION
By:
Name: Gordon C. Dewey
Title: President
Address:27 Muller Road
Oakland, NJ 07436