-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aIGc5tUt6qcN4uzp2qTarZHwCVGqRjpq585obmc8e8iJgtNb6Zt8ry9D6j5izfmD /jl/a+FUkZjnk0poAnFqbQ== 0000803016-94-000007.txt : 19941005 0000803016-94-000007.hdr.sgml : 19941005 ACCESSION NUMBER: 0000803016-94-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940928 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMPLICON INC CENTRAL INDEX KEY: 0000803016 STANDARD INDUSTRIAL CLASSIFICATION: 7377 IRS NUMBER: 953162444 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15641 FILM NUMBER: 94550605 BUSINESS ADDRESS: STREET 1: 5 HUTTON CENTRE DR STE 500 CITY: SANTA ANA STATE: CA ZIP: 92707 BUSINESS PHONE: 7147517551 MAIL ADDRESS: STREET 1: 5 HUTTON CENTER DRIVE STREET 2: SUITE 500 CITY: SANTA ANA STATE: CA ZIP: 92707 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended June 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File number 0-15641 AMPLICON, INC. (Exact name of registrant as specified in its charter) California 95-3162444 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 5 Hutton Centre Drive, Suite 500 Santa Ana, CA 92707 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714)751-7551 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title of each 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 and 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 10-K. _____________________ The aggregate market value of the Common Stock held by nonaffiliates of the Registrant as of September 16, 1994 was $38,077,368. Number of shares outstanding as of September 16, 1994: Common Stock 5,857,022. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference from Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Registrant's fiscal year. Total Number of Pages ___________ AMPLICON, INC. AND SUBSIDIARIES TABLE OF CONTENTS PAGE PART I Item 1. Business 2 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for Company's Common Equity and Related Stockholder Matters 5 Item 6. Selected Financial Data 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Item 8. Financial Statements and Supplementary Data 10-23 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 24 PART III Item 10. Directors and Executive Officers of the Registrant 24 Item 11. Executive Compensation 24 Item 12. Security Ownership of Certain Beneficial Owners and Management 24 Item 13. Certain Relationships and Related Transactions 24 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 25 Signatures 26 Schedules 27-28 Exhibit Index 29-31 AMPLICON, INC. AND SUBSIDIARIES PART I ITEM 1. BUSINESS General Amplicon leases and sells mid-range computers, peripherals, work stations, personal computer networks, telecommunications equipment, computer automated design and manufacturing equipment, office automation equipment, computer software and other items of personal property to customers located throughout the United States. The Company was incorporated in California in 1977. Unless the context otherwise requires, the terms "Amplicon" and "Company" as used herein refer to Amplicon, Inc. and its subsidiaries. Mid-Range Computers and Computer Networks. The Company concentrates on the market for mid-range computers and computer networks since this market is particularly receptive to leasing services. A growing portion of the Company's business consists of personal computers, workstations, printers, and software which are integrated into complete networks. Mid- range computers generally cost between $100,000 and $750,000 and are used primarily by subsidiaries and divisions of large companies to supplement mainframe computer systems, by middle-market companies for centralized data processing, and to upgrade personal computer networks. Mid-range computer systems typically consist of a central processing unit, multiple display terminals, printers, disk and tape drives, communications equipment and operating software. Computer networks typically consist of a central server, which may be a mid-range computer or high-end microcomputer, multiple personal computers and workstations, network communications hardware and software, printers and associated products for microcomputer based networks. Computer networks generally range in cost from $100,000 to $3,000,000. Mid range systems and computer networks are modular and can be expanded to satisfy additional data processing requirements and perform additional functions by upgrading the central processing unit and/or server, and adding data storage devices and workstations to support additional users. Advances in microcomputer technology and enhancements to the capabilities of mid-range computer systems have led to the development of systems that better integrate data processing with word processing, file and retrieval systems, and electronic mail. The Company leases and sells mid-range computer systems manufactured primarily by International Business Machines Corporation ("IBM"), Digital Equipment Corporation ("DEC"), and Hewlett-Packard Co. ("HP"). Vendors of computer network products include IBM and HP, as well as AST Research, Compaq, Gateway, among many others, and software vendors such as Microsoft and Novell. Other Electronic Equipment. Advances in microcomputer technology have also expanded the scope of other electronic equipment utilized by Amplicon's existing and targeted customer base. Amplicon leases and sells telecommunications equipment, computer automated design and computer automated manufacturing ("CAD/"CAM") equipment, and office automation equipment. The telecommunications equipment leased by the Company consists primarily of digital private branch equipment, switching equipment and voice mail systems manufactured by American Telephone & Telegraph Company, Rolm Corporation and International Telephone & Telegraph Company and generally costs between $50,000 and $500,000. The CAD/CAM systems leased by the Company include those produced by IBM, Hewlett Packard, and Sun Microsystems, Inc. and cost between $50,000 and $700,000 per system. The Company also leases word processing systems, copying equipment, retail point of sale equipment and bank automatic teller machines. Production Equipment and Other Personal Property. The Company is leasing an increasing amount of technology related manufacturing and production management systems. These systems include complex computer controlled manufacturing equipment, printing presses and warehouse distribution systems. In addition, the Company leases a wide variety of personal property in the "non-high technology" area, including manufacturing equipment, trucks and office furniture. Software. Amplicon leases specialized application software packages. These application software packages typically cost between $50,000 and $500,000. In addition to leasing stand-alone software packages, an increasing percentage of the cost of mid-range computer systems and networks consists of operating and application software. AMPLICON, INC. AND SUBSIDIARIES Marketing Strategy The Company has developed and refined a direct marketing system utilizing a centralized telemarketing program. The program includes a system which creates and maintains a data base of current and potential users of personal property, a comprehensive formal training program to introduce new marketing employees to Amplicon's telemarketing techniques, and an in-house computer and telecommunications system. The Company implemented its current marketing system in 1981 after having determined that a centralized telemarketing program would be more cost effective than the field sales representatives it had previously used to conduct its marketing activities. The use of telemarketing techniques rather than field sales representatives has enabled the Company to limit selling, general and administrative expenses to seven percent (7%) or less of revenues during each of its last five fiscal years and, consequently, allows the Company to offer more competitive rates to its customers. Amplicon identifies potential customers through a variety of methods. The Company purchases lists of computer users from private sources, conducts direct mail and telephone campaigns to generate sales leads, and maintains records of contacts made with potential customers by its account executives. In 1991, Amplicon installed a personal computer network and customized software to further enhance the productivity of the sales force. Specific information about potential customers is entered into an on-line data base accessible to each account executive through the personal computer network. As potential customers are contacted by account executives, the database is updated and supplemented with information about what computer and other equipment they are using, related lease expiration dates and any future equipment needs or replacement plans. The data base allows account executives to identify efficiently the most likely purchaser or lessee of equipment and to concentrate efforts on these prospective customers. Amplicon's data base, combined with the telemarketing software, and an integrated in-house telecommunications system, permit the Company's sales management to monitor account executive activity, daily prospect status and pricing information. The ability to monitor account activity and offer immediate assistance in negotiating or pricing a transaction makes it possible for Amplicon to be responsive to its customers and potential customers. Leasing and Sales Activities The Company's leases are generally for terms ranging from two to five years. All of the Company's leases are noncancelable "net" leases which contain "hell-or-high-water" provisions under which the lessee must make all lease payments regardless of any defects in the equipment, and which require the lessee to maintain and service the equipment, insure the equipment against casualty loss and pay all property, sales and other taxes on the equipment. The Company retains ownership of the equipment it leases, and in the event of default by the lessee, the Company or the lender to whom the lease had been assigned may declare the lessee in default, accelerate all lease payments due under the lease and pursue other available remedies, including repossession of the equipment. Upon the expiration of the leases, the lessee typically has an option, which is dependent upon each lease's defined end of term options, to either purchase the equipment at a mutually agreeable price, or in the case of a "conditional sales contract", at a predetermined minimum price, or to renew the lease. If the purchase option is not exercised by the original lessee, once the equipment is returned to the Company, the Company will endeavor to locate a new lessee -- however, if a new lessee cannot be located then the Company seeks to sell the equipment. The terms of the Company's software leases are substantially similar to its equipment leases. AMPLICON, INC. AND SUBSIDIARIES Leasing and Sales Activities (Continued) The Company conducts its leasing business in a manner designed to conserve its working capital and minimize its credit exposure. The Company does not purchase equipment until it has received a noncancelable lease from its customer and, generally, has determined that the lease can be discounted with a bank or financial institution on a nonrecourse basis. Accordingly, a substantial portion of the Company's leases are discounted to banks or finance companies on a nonrecourse basis at fixed interest rates that reflect the customers' financial condition. Approximately 91.4% and 83.6% of the total dollar amount of new leases entered into by the Company during the fiscal years ended June 30, 1994 and 1993, respectively, were discounted to financial institutions. The lender to which a lease has been assigned has no recourse against the Company, unless the Company is in default of the terms under the agreement by which a lease was assigned to the lender. The lender to which a lease has been assigned may take title to the leased equipment in the event the lessee fails to make lease payments or initiates certain other defaults under the terms of the lease. If this occurs, the Company may not realize its residual investment in the leased equipment. From time to time, the Company invests cash generated from its activities into lease transactions meeting credit standards set by the Company. Some of these transactions are entered into when the value of the underlying property, or the credit rating of the lessee, would not be acceptable to a financial institution for purposes of making a nonrecourse loan to the Company. Each of these transactions must meet or exceed certain profitability requirements as established, on a case by case basis, by the Company's executive management. In addition the Company invests in lease transactions which the Company believes could be placed at a later date to nonrecourse lenders on a lease by lease basis or in a portfolio debt placement or securitization. During the year ended June 30, 1994, the Company completed three debt placements of lease receivable portfolios accumulated under such investment guidelines for aggregate cash proceeds of $23,406,774. At June 30, 1994 and 1993, the discounted minimum lease payments receivable relative to leases maintained in the Company's portfolio amounted to $31,123,678 and $31,052,728, respectively. Customers The Company's customers are primarily subsidiaries and divisions of Fortune 1000 companies and middle-market companies with credit ratings acceptable to the lenders providing nonrecourse loans. The Company does not believe that the loss of any one customer would have a material adverse effect on its operations taken as a whole. Competition The Company competes in the distribution and lease financing of mid- range computer equipment and software and other equipment with equipment brokers and dealers, leasing companies, banks and other financial institutions and credit corporations which are affiliated with equipment manufacturers, such as, IBM, DEC and HP. The Company believes that there is increased competition for new business and that such competition is heightened during periods when key vendors introduce significant new products. Changes by the manufacturers of equipment leased by the Company with respect to pricing, maintenance or marketing practices could materially affect the Company. In addition, if credit corporations affiliated with manufacturers become more aggressive with respect to the financing terms offered, the Company's operations could be adversely affected. Many of the Company's competitors have substantially greater resources, capital, and more extensive and diversified operations than Amplicon. The Company believes the principal competitive factors in the industry which it serves are price, responsiveness to customer needs, flexibility in structuring financing arrangements, financial technical proficiency and the offering of a broad range of financial options. Employees The Company, as of June 30, 1994, had 196 employees, including 125 sales managers and account executives and 15 professionals engaged in finance and credit. None of the Company's employees is represented by a labor union. The Company believes that its relations with its employees are satisfactory. AMPLICON, INC. AND SUBSIDIARIES ITEM 2. PROPERTIES At June 30, 1994, Amplicon occupied approximately 27,000 square feet of office space in Santa Ana, California leased from unaffiliated parties. The lease covering the majority of the space provides for monthly rental payments which average $30,377 from inception through January 1998. ITEM 3. LEGAL PROCEEDINGS The Company is sometimes named as a defendant in litigation relating to the services it provides. Management does not expect the outcome of any existing suit to have a material adverse effect on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of Amplicon, Inc. trades on the NASDAQ Stock Market under the symbol AMPI. The following high and low closing sale prices for the periods shown reflect interdealer prices without retail markup, markdown or commissions and may not necessarily reflect actual transactions.:
High Low Fiscal year ended June 30,1994 First Quarter $20.00 $18.00 Second Quarter 20.25 18.25 Third Quarter 21.50 18.75 Fourth Quarter 21.50 20.00 Fiscal year ended June 30, 1993 First Quarter $16.00 $11.50 Second Quarter 16.75 14.00 Third Quarter 21.00 15.50 Fourth Quarter 20.25 18.50
The Company had approximately 48 stockholders of record and in excess of 500 beneficial owners as of September 16, 1994. In September, 1994, after considering the Company's profitability, liquidity and future operating cash requirements, the Board of Directors authorized a regular quarterly cash dividend policy. The first quarterly cash dividend will be $.05 per share and issued on October 7, 1994 to stockholders of record at the close of business on September 23, 1994. AMPLICON, INC. AND SUBSIDIARIES ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial data and operating information of the Company. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Results of Operations and Financial Condition contained herein.
YEARS ENDED JUNE 30, INCOME STATEMENT DATA 1994 1993 1992 1991 1990 (in thousands, except per share amounts) Revenues: Sales of equipment $156,740 $139,384 $103,969 $132,414 $141,953 Interest income 24,357 23,697 25,668 22,161 15,616 Rental income 263 747 803 1,153 724 Total revenues 181,360 163,828 130,440 155,728 158,293 Gross profit 29,453 26,083 23,194 20,312 18,429 Earnings before income taxes 17,352 15,421 14,487 12,118 9,180 Net earnings $ 11,019 $ 9,793 $ 9,111 $ 7,440 $ 5,644 COMMON SHARE DATA Net earnings per share $ 1.89 $ 1.68 $ 1.57 $ 1.26 $ .93 Weighted average number of common shares outstanding 5,849 5,831 5,813 5,925 6,095 Cash dividends $ -0- $ -0- $ -0- $ -0- $ -0- SELECTED ANNUAL GROWTH RATES Sales of equipment 12% 34% (21)% ( 7)% 12% Total revenues 11 26 (16) ( 2) 15 Net interest income 4 ( 5) 22 28 21 Gross profit 13 12 14 10 18 Net earnings 13 7 22 32 8 Net earnings per share 13 7 25 35 15 AS OF JUNE 30, BALANCE SHEET DATA 1994 1993 1992 1991 1990 (in thousands, except per share data) Total assets $384,584 $350,661 $307,529 $306,399 $257,249 Notes payable to bank 10,000 -0- -0- -0- 13 Nonrecourse debt 225,746 211,191 193,611 192,748 158,325 Stockholders' equity 80,875 69,772 59,955 50,724 45,486 Book value per common share $ 13.81 $ 11.96 $ 10.29 $ 8.75 $ 7.60
AMPLICON, INC. AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Fiscal Years Ended June 30, 1994 and 1993 REVENUES. Total revenues for the fiscal year ended June 30, 1994 were $181,360,291, an increase of $17,532,061 or 10.7% from the prior year. This change was primarily the result of increases in sales of equipment of $17,355,868 and interest income of $660,362 offset by lower rental income of $484,169. The Company believes the increase in sales of equipment was primarily due to increased effectiveness of a larger and more experienced salesforce at obtaining new business. Interest income for the fiscal year ended June 30, 1994 increased to $24,356,893 as compared to $23,696,531 for the fiscal year ended June 30, 1993, partially due to higher interest income on discounted lease rentals assigned to lenders (which is offset by interest expense on nonrecourse debt) of $11,659,414 in the fiscal year ended June 30, 1994 versus $11,452,119 for the prior year. Net interest income (interest income less interest expense on discounted lease rentals assigned to lenders) for the fiscal year ended June 30, 1994 increased by $453,067 or 3.7% to $12,697,479 as compared to $12,244,412 for fiscal year ended June 30, 1993. This net increase resulted primarily from higher amortization of deferred income and increases in interest accretion due to a larger residual value base. Rental income for the fiscal year ended June 30, 1994 of $263,060 decreased by $484,169 or 64.8% as compared to the fiscal year ended June 30, 1993, as a result of decreases in the volume of short-term lease renewals. GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1994 increased by $3,370,357, or 12.9%, to $29,453,424 compared to $26,083,067 for the fiscal year ended June 30, 1993. Gross profit as a percent of total revenues increased to 16.2% of total revenues for fiscal 1994 compared to 15.9% of total revenues for the prior year. Additionally, the cost of equipment sold as a percentage of sales of equipment decreased to 90.4% for the fiscal year ended June 30, 1994 versus 91.1% for the fiscal year ended June 30, 1993. The principal factors which contributed to higher gross profit were increased profits from lease renewals and extensions, sales of equipment at the end of the lease term and increases in net interest income as described above. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percentage of total revenues were 6.6% for the fiscal year ended June 30, 1994 as compared to 6.5% for the fiscal year ended June 30, 1993. Selling, general and administrative expenses for the fiscal year ended June 30, 1994 increased by $1,354,840 or 12.8% as compared to the prior year. This increase resulted primarily from higher sales and finance staff personnel costs, higher variable office costs related to the greater business volume and additions made to the management organization to support future growth. INTEREST EXPENSE-OTHER. Interest expense-other was $174,059 for the year ended June 30, 1994 as compared to $89,067 for the year ended June 30, 1993. The increase of $84,992 is primarily the result of greater fiscal year 1994 interest assessments made as the result of regulatory audits with various federal, state and local agencies. TAXES. The Company's tax rate was 36.5% for both the fiscal years ended June 30, 1994 and 1993 representing its estimated annual tax rates for the years ending June 30, 1994 and 1993. The Company expects that its tax rate for fiscal years beginning after July 1, 1994 will increase to reflect, as applicable, changes in the Federal statutory tax rate, various State tax rates and the expiration of certain tax benefits. AMPLICON, INC. AND SUBSIDIARIES Results of Operations (continued) Fiscal Years Ended June 30, 1993 and 1992 REVENUES. Total revenues for the fiscal year ended June 30, 1993 were $163,828,230, an increase of $33,388,084 or 25.6% from the prior year. This change was primarily the result of increases in sales of equipment of $35,415,050 offset by lower interest income of $1,970,989. The Company believes the increase in sales of equipment was primarily due to increased effectiveness of a larger and more experienced salesforce at obtaining new business. Interest income for the fiscal year ended June 30, 1993 decreased to $23,696,531 as compared to $25,667,520 for the fiscal year ended June 30, 1992, partially due to lower interest income on discounted lease rentals assigned to lenders (which is offset by interest expense on nonrecourse debt) of $11,452,119 in the fiscal year ended June 30, 1993 versus $12,818,915 for the prior year. Net interest income (interest income less interest expense on discounted lease rentals assigned to lenders) for the fiscal year ended June 30, 1993 decreased by $604,193 or 4.7% as compared to the fiscal year ended June 30, 1992. This net decrease resulted primarily from lower amortization of deferred income and lower investment income, offset by increases in interest accretion due to a larger residual value base, and increases in interest recognition on greater minimum lease payments receivable. Rental income for the fiscal year ended June 30, 1993 of $747,229 decreased by $55,977 or 7.0% as compared to the fiscal year ended June 30, 1992, as a result of decreases in the volume of short-term lease renewals. GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1993 increased by $2,888,741, or 12.5%, to $26,083,067 compared to $23,194,326 for the fiscal year ended June 30, 1992. Gross profit as a percent of total revenues decreased to 15.9% of total revenues for fiscal 1993 compared to 17.8% of total revenues for the prior year. Additionally, the cost of equipment sold as a percentage of sales of equipment increased to 91.1% for the fiscal year ended June 30, 1993 versus 90.8% for the fiscal year ended June 30, 1992. The principal factors which contributed to higher gross profit were (i) increased profits from lease renewals and extensions, (ii) higher profits from larger volume of new lease transactions, and (iii) gains realized from the debt placement of lease portfolios, offset by (iv) decreases in net interest income as described above. The lower gross profit margin and higher cost of equipment percentages reflect a greater percentage of the Company's revenues derived from new lease transactions and a decrease in the proportion of revenues from interest income during the most recent fiscal year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percentage of total revenues were 6.5% for the fiscal year ended June 30, 1993 as compared to 6.6% for the fiscal year ended June 30, 1992. Selling, general and administrative expenses for the fiscal year ended June 30, 1993 increased by $1,967,227 or 22.9% as compared to the prior year. This increase resulted primarily from higher sales and finance staff personnel costs, higher variable office costs related to the greater business volume and additions made to the management organization to support future growth. INTEREST EXPENSE-OTHER. Interest expense-other was $89,067 for the year ended June 30, 1993 as compared to $102,044 for the year ended June 30, 1992. The decrease of $12,977 is primarily the result of fewer fiscal year 1993 interest assessments made as the result of regulatory audits with various federal, state and local agencies. TAXES. The Company's tax rate was 36.5% and 37.1% for the fiscal years ended June 30, 1993 and 1992, respectively, representing its estimated annual tax rates for the years ending June 30, 1993 and 1992. AMPLICON, INC. AND SUBSIDIARIES Liquidity and Capital Resources The Company funds its operating activities through nonrecourse debt and internally generated funds. Capital expenditures for equipment purchases are primarily financed by assigning the lease payments to banks or other financial institutions. The lease payments are discounted at fixed rates such that the lease payments are sufficient to fully amortize the aggregate outstanding debt. The Company does not purchase equipment until it has received a noncancelable lease from its customer and, generally, has determined that the lease can be discounted on a nonrecourse basis. At June 30, 1994, the Company had outstanding nonrecourse debt aggregating $225,746,187 relating to equipment under capital and operating leases. In the past, the Company has been able to obtain adequate nonrecourse funding commitments, and the Company believes it will be able to do so in the future. The Company borrowed $10,000,000 in December 1993 which is secured by an in process lease transaction. The Company has a nonrecourse debt commitment from the same financial institution to finance the lease transaction once the lease transaction is completed. The lease is anticipated to be assigned on a nonrecourse basis prior to the due date of the note and the commencement of the assignment, at which time the recourse note will be paid in full (see Note 4 in the Notes to Consolidated Financial Statements). From time to time, the Company retains equipment leases in its own portfolio rather than assigning the leases to financial institutions. During the fiscal year 1994, the Company increased its net investment in leases held in its own portfolio by $70,950. This minimal increase was primarily due to i) a higher percentage of new lease transactions being assigned on a non-recourse basis, ii) the assignment of three lease portfolios during fiscal 1994 and iii) the cash flow from the Company's lease portfolio during fiscal 1994 exceeded the volume of new leases and renewals. The Company generally funds its equity investments in leased equipment and interim equipment purchases with internally generated funds and, if necessary, borrowings under a $20,000,000 general line of credit. At June 30, 1994, the Company did not have any borrowings outstanding on this line of credit. In November 1990, the Board of Directors authorized management, at its discretion, to repurchase up to 300,000 shares of the Company's Common Stock. During the year ended June 30, 1994, the Company repurchased 10,000 shares at an aggregate cost of $188,750. During the year ended June 30, 1993, the Company repurchased 2,322 shares at an aggregate cost of $43,988. As of August 20, 1994, 100,678 shares remain available under this authorization. The need for cash used for operating activities will continue to grow as the Company expands. The Company believes that existing cash balances, cash flow from operations, cash flows from its financing activities, available borrowings under its existing credit facility, and assignments (on a nonrecourse basis) of anticipated lease payments will be sufficient to meet its foreseeable financing needs. Inflation has not had a significant impact upon the operations of the Company. AMPLICON, INC. AND SUBSIDIARIES ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements and supplementary financial information are included herein at the pages indicated below: Page Number Report of Independent Public Accountants 11 Consolidated Balance Sheets at June 30, 1994 and 1993 12 Consolidated Statements of Earnings for the years ended June 30, 1994, 1993 and 1992 13 Consolidated Statements of Stockholders' Equity for the years ended June 30, 1994, 1993 and 1992 14 Consolidated Statements of Cash Flows for the years ended June 30, 1994, 1993 and 1992 15 Notes to Consolidated Financial Statements 16-23 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Amplicon, Inc.: We have audited the accompanying consolidated balance sheets of Amplicon, Inc. (a California corporation) and subsidiaries as of June 30, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity and cash flows for the years ended June 30, 1994, 1993 and 1992. 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 Amplicon, Inc. and subsidiaries as of June 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index of financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Irvine, California August 16, 1994 AMPLICON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, ASSETS 1994 1993 Cash and cash equivalents (Notes1 & 8) $ 29,334,914 $ 18,083,839 Net receivables (Note 2) 39,905,181 33,069,938 Inventories, primarily customer deliveries in process 4,975,392 5,840,993 Net investment in capital leases (Note 3) 59,304,999 55,698,547 Equipment on operating leases, less accumulated depreciation of $211,848 (1994) and $303,807(1993) 50,364 63,993 Other assets 1,074,912 1,142,093 Discounted lease rentals assigned to lenders (Note 3) 249,938,300 233,408,279 TOTAL ASSETS $384,584,062 $347,307,682 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Note payable to bank (Notes 4 & 8) $ 10,000,000 $ -0- Accounts payable 14,246,006 19,696,244 Accrued liabilities 3,149,416 4,192,557 Customer deposits 7,369,952 3,929,824 Nonrecourse debt (Note 3) 225,746,187 211,190,705 Deferred interest income (Note 5) 24,192,113 22,217,574 Net deferred income (Note 5) 3,743,479 2,035,797 Income taxes payable, including deferred taxes (Note 6) 15,261,498 14,272,822 Total Liabilities 303,708,651 277,535,523 Commitments and contingencies (Note 9) Stockholders' equity (Notes 4 & 7): Preferred stock; 2,500,000 shares authorized; none issued -0- -0- Common stock; $.01 par value; 20,000,000 shares authorized; 5,857,022 (1994) and 5,834,856 (1993) issued and outstanding 58,570 58,349 Additional paid in capital 6,001,240 5,916,748 Retained earnings 74,815,601 63,797,062 Total Stockholders' Equity 80,875,411 69,772,159 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $384,584,062 $347,307,682
The accompanying notes are an integral part of these consolidated balance sheets. AMPLICON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
Years ended June 30, 1994 1993 1992 Revenues: Sales of equipment $156,740,338 $139,384,470 $103,969,420 Interest income (Notes 1, 3 & 5) 24,356,893 23,696,531 25,667,520 Rental income 263,060 747,229 803,206 Total Revenues 181,360,291 163,828,230 130,440,146 Costs: Cost of equipment sold 140,186,036 126,276,178 94,316,854 Interest expense on nonrecourse debt (Notes 1, 3 & 5) 11,659,414 11,452,119 12,818,915 Depreciation of equipment on operating leases 61,417 16,866 110,051 Total Costs 151,906,867 137,745,163 107,245,820 Gross profit 29,453,424 26,083,067 23,194,326 Selling, general and administrative expenses 11,927,826 10,572,986 8,605,759 Interest expense-other 174,059 89,067 102,044 Earnings before income taxes 17,351,539 15,421,014 14,486,523 Income taxes (Note 6) 6,333,000 5,628,000 5,376,000 Net earnings $ 11,018,539 $ 9,793,014 $ 9,110,523 Net earnings per common share $ 1.89 $ 1.68 $ 1.57 Weighted average number of common shares outstanding 5,848,594 5,830,561 5,813,291
The accompanying notes are an integral part of these consolidated financial statements. AMPLICON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Common Stock paid in Retained Shares Amount capital earnings Total Balance, June 30, 1991 5,799,093 $57,991 $5,772,765 $44,893,525 $50,724,281 Shares issued- Stock options exercised 26,443 264 119,763 -0- 120,027 Net earnings -0- -0- -0- 9,110,523 9,110,523 Balance, June 30, 1992 5,825,536 58,255 5,892,528 54,004,048 59,954,831 Shares issued- Stock options exercised 11,642 117 68,185 -0- 68,302 Shares repurchased ( 2,322)( 23)( 43,965) -0- ( 43,988) Net earnings -0- -0- -0- 9,793,014 9,793,014 Balance, June 30, 1993 5,834,856 58,349 5,916,748 63,797,062 69,772,159 Shares issued- Stock options exercised 32,166 321 273,142 -0- 273,463 Shares repurchased ( 10,000)( 100) ( 188,650) -0- ( 188,750) Net earnings -0- -0- -0- 11,018,539 11,018,539 Balance, June 30, 1994 5,857,022 $58,570 $6,001,240 $74,815,601 $80,875,411
The accompanying notes are an integral part of these consolidated financial statements. AMPLICON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 11,018,539 $ 9,793,014 $ 9,110,523 Adjustments to reconcile net earnings to cash flows used for operating activities: Depreciation 61,417 16,866 110,051 Sale or lease of equipment previously on operating leases, net 13,646 59,867 17,322 Interest accretion of estimated unguaranteed residual values ( 3,115,186) ( 2,869,943) ( 2,492,262) Estimated unguaranteed residual values recorded on leases ( 7,733,445) ( 6,406,835) ( 4,110,784) Interest accretion of net deferred income ( 984,918) ( 1,241,855) ( 3,074,709) Increase in net deferred income 2,691,736 1,424,429 156,652 Net increase (decrease) in income taxes payable, including deferred taxes 988,676 2,992,800 ( 523,336) Net increase in net receivables ( 6,835,242) (19,260,057) ( 1,072,218) Net (increase) decrease in inventories 865,601 ( 2,972,596) ( 1,825,064) Net increase (decrease) in accounts payable and accrued liabilities ( 6,493,379) 9,300,441 ( 2,325,311) Net cash used for operating activities ( 9,522,555) ( 9,163,869) ( 6,029,136) CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in short term investments -0- 2,513,813 ( 2,513,813) Net increase in minimum lease payments receivable (23,476,863) (27,353,268) ( 4,031,809) Purchase of equipment on operating leases ( 61,433) ( 57,372) ( 88,252) Net decrease (increase) in other assets 67,181 ( 97,312) ( 233,446) Decrease in estimated unguaranteed residual values 7,313,130 4,580,601 4,000,232 Net cash used for investing activities (16,157,985) (20,413,538) ( 2,867,088) CASH FLOWS FROM FINANCING ACTIVITIES: Assignment of discounted lease rentals 23,406,774 36,346,343 -0- Borrowing on note payable secured by lease 10,000,000 -0- -0- Payments to repurchase common stock ( 188,750) ( 43,988) -0- Payments to reduce nonrecourse debt, excluding lease rentals assigned to lenders -0- ( 10,159) ( 16,098) Increase in customer deposits 3,440,128 837,047 493,823 Proceeds from exercise of stock options 273,463 68,302 120,027 Net cash provided by financing activities 36,931,615 37,197,545 597,752 NET CHANGE IN CASH AND CASH EQUIVALENTS 11,251,075 7,620,138 ( 8,298,472) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,083,839 10,463,701 18,762,173 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,334,914 $ 18,083,839 $ 10,463,701 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Increase in lease rentals assigned to lenders and related nonrecourse debt $ 14,555,482 $ 17,589,394 $ 879,114 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 174,059 $ 88,725 $ 100,143 Income taxes $ 5,366,715 $ 2,635,200 $ 5,899,623
The accompanying notes are an integral part of these consolidated financial statements. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED JUNE 30, 1994 Note 1 - Summary of Significant Accounting Policies: Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Leases Capital Leases The Company engages in the lease and sale of computer hardware and software, and other equipment. The Company adopted Financial Accounting Standards Board Technical Bulletin No. 88-1 ("88-1") in fiscal year 1989 which addressed certain issues relating to accounting for leases. The discounted value of the aggregate lease rentals is recorded as sales revenue. Equipment cost, less the discounted value of the residual, if any, is recorded as cost of sales. Under 88-1, except for capital lease transactions in which the Company no longer has a continuing interest in the leased equipment, the Company defers gross profit on new capital leases through a reduction of sales revenue recognized at lease origination. Gross profit which is deferred together with the unearned interest income (and interest expense if assigned) is recognized as interest income (and expense) over the lease term based on an internal rate of return method. The Company recognizes certain interim rentals received as operating income prior to commencement of capital leases. At the time of closing capital leases, the Company records on its balance sheet the present value of the lease receivable as minimum lease payments receivable and, if appropriate, the estimated residual values of the leased equipment. The Company typically assigns, on a nonrecourse basis, the noncancelable lease rentals to financial institutions at fixed interest rates. When leases are assigned to financial institutions, without recourse, the discounted value of the lease rentals is recorded on the balance sheet as discounted lease rentals assigned to lenders. The related obligation resulting from the discounting of the leases is recorded as nonrecourse debt. In the event of default by a lessee, the lender has a first lien against the underlying leased equipment, with no further recourse against the Company. Effective July 1, 1988, the Company adopted Statement of Financial Accounting Standards No. 91, "Accounting for Nonrefundable Fees and Costs Associated With Originating or Acquiring Loans and Initial Direct Costs of Leases." A portion of the Company's selling, general and administrative costs directly related to originating capital leases transactions during the period is deferred as an increase in revenues and amortized over the lease term utilizing the effective interest method. See Note 5. Operating Leases Lease contracts which do not meet the criteria of capital leases are accounted for as operating leases. Equipment on operating leases is recorded at cost and depreciated on a straight-line basis over the lease term to the estimated residual value at the termination of the lease. Rental income is recorded monthly or quarterly when due. Selling costs directly associated with the operating leases are deferred and amortized over the lease term. Inventories Inventories, which primarily represent partial deliveries of equipment on in-process lease transactions whereby the lessee is legally obligated to accept, are stated at the lower of cost (first-in, first-out method) or market value. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net Earnings per Common Share Net earnings per common share are computed based on the weighted average number of common shares outstanding during each fiscal year (5,848,594 in 1994, 5,830,561 in 1993 and 5,813,291 in 1992). Reclassifications Certain reclassifications have been made to the fiscal 1993 and 1992 consolidated financial statements to conform with the presentation of the fiscal 1994 consolidated financial statements. Note 2 - Receivables: The Company's net receivables consist of the following:
June 30, 1994 1993 Financial institutions $32,241,312 $26,611,057 Lessees 7,640,218 5,323,373 Other 868,976 1,680,633 Total before allowances 40,750,506 33,615,063 Less allowance for doubtful accounts ( 845,325) ( 545,125) Net receivables $39,905,181 $33,069,938
Note 3 - Capital Leases: The Company's net investment in capital leases consists of the following:
June 30, 1994 1993 Minimum lease payments receivable, less allowance for doubtful accounts of $475,000 $34,370,750 $40,450,902 Estimated unguaranteed residual value, less valuation allowance of $542,274 and $394,403, respectively 35,252,670 30,492,767 Total before unearned income 69,623,420 70,943,669 Less: unearned income (10,318,421) (15,245,122) Net investment in capital leases $59,304,999 $55,698,547
The interest rates used to discount lease payments reflect the underlying lease rates and range from 6.3% to 14.95%. The estimated unguaranteed residual value represents the estimated amount to be received at lease termination from the disposition of equipment under the capital leases, discounted using the internal rate of return related to each specific capital lease. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At June 30, 1994, a summary of the installments due on minimum lease payments receivable and the expected realization of the Company's estimated unguaranteed residual value is as follows:
Estimated Minimum unguaranteed Years ending lease payments residual June 30, receivable value Total 1995 $ 19,892,304 $ 11,633,273 $ 31,525,577 1996 8,360,097 7,800,020 16,160,117 1997 3,418,093 8,807,799 12,225,892 1998 1,376,563 3,700,452 5,077,015 1999 1,323,693 3,115,975 4,439,668 Thereafter -0- 195,151 195,151 34,370,750 35,252,670 69,623,420 Less unearned income ( 3,247,072) ( 7,071,349) ( 10,318,421) Net investment in capital leases and estimated unguaranteed residual value excluding deferred interest income $ 31,123,678 $ 28,181,321 $ 59,304,999
Nonrecourse debt, which relates to the discounting of capital lease receivables, bears interest at rates ranging from 5.87% to 16.5%. Maturities of such obligations at June 30, 1994 are as follows:
Years ending Capital June 30, leases 1995 $ 92,649,791 1996 68,912,031 1997 39,956,428 1998 17,642,059 1999 5,992,138 Thereafter 593,740 225,746,187 Deferred interest (Note 5) 24,192,113 Total discounted lease rentals assigned to lenders $249,938,300
Note 4 - Notes Payable to Bank: In August 1993, the Company negotiated a $20,000,000 general business loan agreement (the "Agreement") with a Bank. The Agreement, which provides for borrowings at the Bank's reference rate or the Bank's Offshore rate plus 1.25%, allows for advances through December 31, 1994 with rollover provisions to a term note, provided certain conditions are met by the Company. The term note is to be secured by certain qualifying leases and is to bear interest at the Bank's reference rate plus .50% or the Bank's Offshore rate plus 1.75%. The term note requires repayment in three equal quarterly installments of one eighth of the outstanding balance at the expiration date, commencing April 1, 1995, and one final payment on December 31, 1995 for the remaining balance. The Agreement is unsecured and excludes any arrangements for compensating balances; however, the Bank requires a commitment fee on the daily average unused amount of the Bank's $20,000,000 commitment. Under the provisions of the Agreement, the Company must maintain certain net worth requirements, a defined debt to net worth ratio and a defined ratio of certain assets to defined debt. As of June 30, 1994 there were no outstanding balances on this Agreement. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In December 1993, the Company entered into an agreement, as amended in August 1994, to borrow $10,000,000 (the "Note") at an interest rate equal to the prime rate. This Note is secured by an in-process lease transaction (the "Lease"). This Lease is secured by an $11,000,000 letter of credit issued by a different financial institution. Interest is payable monthly commencing January 15, 1994 and the Note is due on October 31, 1994. The financial institution which issued the Note has agreed to finance the Lease on a nonrecourse basis through the due date of the Note. Note 5 - Deferred Interest Income and Net Deferred Income: At June 30, 1994, deferred interest income of $24,192,113 is offset by deferred interest expense related to the Company's discounted lease rentals assigned to lenders of $24,192,113. See Note 3. At June 30, 1994, the expected recognition of net deferred income (deferred gross margin of $9,870,422 less deferred selling expenses of $6,126,943) on the Company's future statements of earnings is as follows:
Years ending June 30, 1995 $1,320,749 1996 1,397,680 1997 432,042 1998 443,470 1999 100,494 Thereafter 49,044 Total net deferred income $3,743,479
Note 6 - Income Taxes: Effective July 1, 1993, the Company adopted Financial Accounting Standards No. 109 on Accounting for Income Taxes ("SFAS No. 109"). Among other provisions, this standard requires deferred tax balances to be determined using the enacted income tax rate for the years in which taxes will be paid or refunds received. The adoption of SFAS No. 109 did not result in a charge to net income in 1994. Prior year financial statements were not restated to reflect the new accounting standard. The provision for income taxes is summarized as follows:
Years ended June 30, 1994 1993 1992 Current tax expense: Federal $2,667,000 $3,161,000 $2,811,000 State 600,000 1,000,000 810,000 Total current 3,267,000 4,161,000 3,621,000 Deferred tax expense: Federal 2,371,000 1,360,000 1,655,000 State 695,000 107,000 100,000 Total deferred 3,066,000 1,467,000 1,755,000 Total provision for income taxes $6,333,000 $5,628,000 $5,376,000
Deferred taxes result principally from the method of recording lease income on capital leases and depreciation methods for tax reporting, which differ from financial statement reporting. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred income tax liabilities (assets) are composed of the following:
June 30, 1994 Deferred income tax liabilities: Tax operating leases $24,461,748 Other book/tax differences 866,775 Total liabilities 25,328,523 Deferred income tax assets: Allowances and reserves ( 1,158,522) Minimum tax credits/carryforwards ( 6,339,043) Refunds due on overpayments ( 2,369,123) State income taxes ( 200,337) Total assets (10,067,025) Net deferred income tax liabilities $15,261,498
The sources of differences between the federal statutory income tax rate and the Company's effective tax rate are as follows:
Years ended June 30, 1994 1993 1992 Federal statutory rate 35.0% 34.0% 34.0% State tax, net of federal benefit 4.8 4.8 4.8 Other (3.3) (2.3) (1.7) Effective rate 36.5% 36.5% 37.1%
Note 7 - Capital Structure: In September 1986, the Board of Directors and stockholders approved an increase in the number of authorized shares of common stock to 20,000,000. The Board of Directors and stockholders further authorized the issuance of 2,500,000 shares of preferred stock from time to time in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other rights, if any, of any wholly unissued series of preferred stock. In September 1984, the Company's stockholders approved a Stock Option Plan (the "Plan"), which, as amended, provides that stock options may be granted to officers, employees, consultants and other persons who have made, or will make, major contributions toward the growth and development of the Company. Stock options that are granted may entitle the recipient to purchase shares of the Company's common stock at prices greater than, equal to or less than the estimated fair market value at the date of the grant. Under the Plan, stock options become exercisable over a three or five year period, commencing with the first anniversary of the date of the grant, and expire ten years from the date of the grant. The Company has reserved 650,000 shares of common stock for issuance under the Plan. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the activity in the Plan for the periods indicated:
Exercise Option price Options outstanding per share exercisable Outstanding at June 30, 1991 271,654 $ .28 - 16.25 Granted 122,833 13.00 - 15.00 Canceled ( 31,911) 7.00 - 16.25 Exercised ( 26,443) 1.92 - 8.25 Outstanding at June 30, 1992 336,133 .28 - 15.00 Granted 100,500 11.75 - 19.50 Canceled ( 8,734) 7.00 - 13.00 Exercised ( 11,642) 1.68 - 9.50 Outstanding at June 30, 1993 416,257 .28 - 19.50 Granted 124,667 18.00 - 20.25 Canceled ( 52,867) 7.00 - 20.25 Exercised ( 32,166) 7.00 - 17.25 Outstanding at June 30, 1994 455,891 $ .28 - 20.25 218,784
Note 8 - Fair Value of Financial Instruments: The Company has estimated the fair value of its financial instruments in compliance with Financial Accounting Standards No. 107 on Disclosure About Fair Value of Financial Instruments. The estimates were made as of June 30, 1994 based on relevant market information. Fair value is a subjective and imprecise measurement that is based on assumptions and market data which require significant judgement and may only be valid at a particular point in time. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Accordingly, management cannot provide assurance that the fair values presented are indicative of the amounts that the Company could realize in a current market exchange. The estimated fair value of financial instruments and the valuation techniques used to estimate the fair value were as follows:
Estimated At June 30, 1994 Book Value Fair Value Financial Assets: Cash and cash equivalents $29,334,914 $29,407,845 Financial Liabilities: Note payable to bank 10,000,000 10,000,000
Cash and Cash Equivalents: For cash, the book value is a reasonable estimate of fair value. For cash equivalents with original maturities less than three months, the estimated fair value is based on the respective market prices. Note Payable to Bank: The fair value of the Note payable to bank approximates book value because the interest rate on this instrument adjusts with changes in market interest rates due to its short-term maturity. The fair value of the Company's net investment in capital leases is not a required disclosure under SFAS No. 107. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Commitments and Contingencies: Leases The Company leases the majority of its corporate offices under an operating lease which expires in fiscal 1998. Rent expense was $419,526 (1994), $427,327 (1993) and $386,500 (1992). Future minimum lease payments under operating leases are as follows:
Years Ending Future Minimum June 30, Lease Payments 1995 $ 543,221 1996 501,217 1997 501,217 1998 292,377 Thereafter -0- Total minimum lease payments $1,838,032
Litigation The Company has been named in lawsuits arising out of the Company's normal business activities. The Company is vigorously defending such actions. Management does not expect the outcome of any of these lawsuits, individually and in the aggregate, to have a material adverse effect on the financial condition and results of operations of the Company. 401(k) Plan Effective July 1, 1992, employees of the Company may participate in a voluntary defined contribution plan (the "401K Plan") qualified under Section 401(k) of the Internal Revenue Code of 1986. Under the 401K Plan, employees who have met certain age and service requirements may contribute up to a certain percentage of their compensation. The Company will make contributions equal to 25 percent of employee contributions which will completely vest over a seven year period. The Company has made contributions during the years ended June 30, 1994 and 1993 of $39,602 and $27,622, respectively. AMPLICON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Selected Quarterly Financial Data (Unaudited): Summarized quarterly financial data for the fiscal years ended June 30, 1994 and 1993 is as follows:
Three Months Ended September 30, December 31, March 31, June 30, 1994 (In thousands, except per share amounts) Total revenues $45,746 $50,398 $49,090 $36,126 Gross profit 6,515 7,224 7,749 7,965 Net earnings 2,344 2,712 2,999 2,964 Net earnings per common share $ .40 $ .47 $ .51 $ .51 1993 Total revenues $40,536 $41,824 $40,511 $40,957 Gross profit 6,076 6,518 6,711 6,778 Net earnings 2,253 2,524 2,489 2,527 Net earnings per common share $ .39 $ .43 $ .43 $ .43
AMPLICON, INC. AND SUBSIDIARIES ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1994 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1994 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1994 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1994 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. AMPLICON, INC. AND SUBSIDIARIES PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of this Report (1) Financial Statements All financial statements of the Registrant as set forth under Part II Item 8 of this report on Form 10-K (2) Financial Statement Schedules: Schedule Number Description Page Number II. Amounts receivable from Related Parties and Underwriters, Promoters and Employees other than Related Parties................................. 27 VIII. Valuation and Qualifying Accounts.................... 28 All other schedules are omitted because of the absence of conditions under which they are required or because all material information required to be reported is included in the consolidated financial statements and notes thereto. (3) Exhibits: See Index to Exhibits filed as part of this Form 10-K 29-31 (b) Reports on Form 8-K There were no reports on Form 8-K filed during the fourth quarter of fiscal 1994. AMPLICON, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMPLICON, INC. By S. Leslie Jewett /s/ Date: Sept. 27, 1994 S. Leslie Jewett Chief Financial Officer POWER OF ATTORNEY Each person whose signature appears below hereby authorizes each of Patrick E. Paddon, S. Leslie Jewett and Glen T. Tsuma as attorney-in-fact to sign on his behalf, individually in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K. 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 in the capacities and on the dates indicated. Signature Title Date Patrick E. Paddon /s/ President, Chief Executive Sept. 27, 1994 Patrick E. Paddon Officer and Director Glen T. Tsuma /s/ Vice President, Treasurer, Chief Sept. 26, 1994 Glen T. Tsuma Operating Officer and Director S. Leslie Jewett /s/ Chief Financial Officer Sept. 27, 1994 S. Leslie Jewett Michael H. Lowry /s/ Director Sept. 22, 1994 Michael H. Lowry Harris Ravine /s/ Director Sept. 23, 1994 Harris Ravine AMPLICON, INC. AND SUBSIDIARIES SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Balance at Balance at Deductions End of Period Deductions Beginning Amounts Amounts Not Name of Debtor of Period Additions Collected Written Off Current Current Year Ended June 30, 1992: David E. Brill(1) $ 277,483 $ 8,566 $250,000 -0- $ 36,049 -0- Year Ended June 30, 1993: David E. Brill(1) $ 36,049 $ 2,400 -0- -0- $ 38,449 -0- Year Ended June 30, 1994: David E. Brill(1) $ 38,449 $ 2,477 -0- -0- $ 40,926 -0- (1) Interest bearing note at the prime rate plus 1% with principal and interest due one year after the funding or renewal dates.
AMPLICON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance Charged to Accounts Balance Beginning Costs and Written at End Classifications of Period Expenses Off Period Year ended June 30, 1992: Allowance for doubtful accounts $1,020,125 $ -0- $ -0- $1,020,125 Allowance for valuation of unguaranteed residual value $ 324,368 $ 70,035 $ -0- $ 394,403 Year ended June 30, 1993: Allowance for doubtful accounts $1,020,125 $ -0- $ -0- $1,020,125 Allowance for valuation of unguaranteed residual value $ 394,403 $ -0- $ -0- $ 394,403 Year ended June 30, 1994: Allowance for doubtful accounts $1,020,125 $300,200 $ -0- $1,320,325 Allowance for valuation of unguaranteed residual value $ 394,403 $147,871 $ -0- $ 542,274 Note: The allowance for doubtful accounts includes balances related to receivables and capital leases described in Notes 2 and 3 of the Notes to Consolidated Financial Statements.
AMPLICON, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. 3.1 Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form S-1 File No. 33-9094 (the "Registration Statement on Form S-1")) 3.2 Certificate of Amendment of Articles of Incorporation of the Company, filed April 15, 1988 (incorporated by reference to Exhibit 3.2 to Registrant's 1988 Form 10-K) 3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1) 3.4 Amendment and Restatement of Article VI of the Bylaws of the Company (incorporated by reference to Exhibit 3.4 to Registrant's 1988 Form 10-K) 10.1 1984 Stock Option Plan, as amended to date (incorporated by reference to Exhibit 10.1 to Registrant's Statement on Form S-8 File No. 33-27283) 10.2 Master Agreement for Lease Arrangement Transactions, dated as of October 14, 1985, between the Company and Chrysler Financial Corporation (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1) 10.3 Master Loan Agreement, dated as of July 18, 1986, between the Company and General Electric Credit Corporation (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1) 10.4 Master Agreement for Rental Payment Purchase Transactions, dated as of July 8, 1982, between the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1) 10.5 Form of Assignment of Lease - Without Recourse between the Company and CIT Group/Equipment Financing, Inc. (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1) 10.6 Form of Assignment of Lease - Without Recourse between the Company and CircleBusiness Credit, Inc. (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1) AMPLICON, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. 10.7 Master Agreement for Rental Payment Purchase Transactions, dated as of February 27, 1990, between the Company and Security Pacific Credit Corporation (incorporated by reference to Exhibit 10.7 to the Registrant's 1990 Form 10-K) 10.8 Credit Agreement, dated as of April 13, 1990 (the "Credit Agreement), between the Company and Security Pacific National Bank (now Bank of America National Trust and Savings Association, and together with Security Pacific National Bank, "Bank of America") (incorporated by reference to Exhibit 10.8 to the Registrant's 1990 Form 10-K) 10.9 First Amendment to the Credit Agreement, dated November 19, 1990, between the Company and Bank of America (incorporated by reference to Exhibit 10.9 to the Registrant's 1991 Form 10-K) 10.10 Second Amendment to the Credit Agreement, dated December 17, 1991, between the Company and Bank of America (incorporated by reference to Exhibit 10.10 to the Registrant's 1992 Form 10-K) 10.11 Third Amendment to the Credit Agreement, dated February 25, 1992, between the Company and Bank of America (incorporated by reference to Exhibit 10.11 to the Registrant's 1992 Form 10-K) 10.12 Fourth Amendment to the Credit Agreement, dated April 27, 1992, between the Company and Bank of America (incorporated by reference to Exhibit 10.12 to the Registrant's 1992 Form 10-K) 10.13 Sublease Agreement and Amendment No. 1, dated October 31, 1990 and November 28, 1990, respectively, between the Company and Griffin Financial Services (incorporated by reference to Exhibit 10.13 to the Registrant's 1992 Form 10-K) 10.14 Fifth Amendment to the Credit Agreement, dated June 28, 1993, between the Company and Bank of America (incorporated by reference to Exhibit 10.14 to the Registrant's 1993 Form 10-K) 10.15 Business Loan Agreement, dated as of August 12, 1993, between the Company and Bank of America (incorporated by reference to Exhibit 10.15 to the Registrant's 1993 Form 10-K) AMPLICON, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. 10.16 Security Agreement dated as of December 23, 1993 32-44 and all amendments C, D, & E, dated April 19, 1994, July 18, 1994 and August 30, 1994, respectively between the Company and The CIT Group/Equipment Financing, Inc. 11 Computation of Earnings per Share of Common Stock 45 22 List of Subsidiaries (incorporated by reference to Exhibit 22 to the Registrant's 1988 Form 10-K) EX-10 2 EXHIBIT 10.16 SECURITY AGREEMENT For Business Loans other than Inventory Loans in all States (except Texas) by The CIT Group/Equipment Financing, Inc. or Dealer. In Louisiana, form 5-SA-2305 must accompany this Agreement. 1. GRANT OF SECURITY INTEREST; DESCRIPTION OF COLLATERAL. Debtor grants to Secured Party a security interest in the property described below, along with all present and future attachments and accessories thereto and replacements and proceeds thereof, including amounts payable under any insurance policy, all hereinafter referred to collectively as "Collateral". Describe Collateral fully including make, kind of unit, model and serial and model numbers and any other pertinent information. Lease Agreement No. OL-7071, dated 12/18/92 with Hills Stores Company, Inc., as Lessee and Amplicon, Inc., as Lessor, together with Lease Schedule No. 1 (Collectively, the "Lease"), and all related riders, addendums, amendments and documents related thereto including but not limited to a Letter of Credit No. T-203116 issued by Chemical Bank, along with all rents and other payments due and to become due thereunder, plus leased equipment more fully described on attached Exhibit "A". (INITIALED BY SIGNERS) 2. WHAT OBLIGATIONS THE COLLATERAL SECURES. EACH ITEM OF COLLATERAL SHALL SECURE [NOT] (INITIALED BY SIGNERS) ONLY THE SPECIFIC AMOUNT WHICH DEBTOR PROMISES TO PAY IN PARAGRAPH 3 BELOW. [BUT ALSO ALL OTHER PRESENT AND FUTURE INDEBTEDNESS OR OBLIGATIONS OF DEBTOR TO SECURED PARTY OF EVERY KIND AND NATURE WHATSOEVER.] (INITIALED BY SIGNERS) 3. PROMISE TO PAY; TERMS AND PLACE OF PAYMENT. Debtor promises to pay Secured Party (i) the total principal sum of $10,000,000.00 in 1 (total number) principal payments of $10,000,000.00 on 4/15, 1994, plus (ii) interest payable monthly at 0 percent in excess of the "governing rate" payable monthly on unpaid principal balances, but in no event greater than the highest rate permitted by relevant law in effect from time to time during the term of this Security Agreement even if this Security Agreement shall state a minimum of rate of interest. The interest payments shall be payable monthly, commencing 1/15/94. "Governing rate" shall mean a rate equal to the highest of (i) the Prime Rate of Chemical Bank or (ii) "The Wall Street Journal Prime Rate" or (iii) the commercial paper rate in effect from time to time. Interest shall be computed on the basis of a year of 360 days. The Prime Rate of Chemical Bank shall mean the rate of interest publicly announced by Chemical Bank in New York from time to time as its Prime Rate. The Prime Rate is listed in the Wall Street Journal, then the highest rate shall apply. "Commercial paper rate" shall mean the average rate quoted by the Wall Street Journal or such other source as Secured Party may determine for 30-day dealer commercial paper. 4. USE AND LOCATION OF COLLATERAL. Debtor warrants and agrees that the Collateral is to be used primarily for: (X) business or commercial purposes (other than agricultural), ( ) agricultural purposes (see definition on the final page), or ( ) both agricultural and business or commercial purposes. Location: 4300 Janitrol Road Columbus Franklin OH 4200 Westward Avenue Columbus Franklin OH Address City County State Debtor and Secured Party agree that regardless of the manner of affixation, the Collateral shall remain personal property and not become part of the real estate.* Debtor agrees to keep the Collateral at the locations set forth above, and will notify Secured Party promptly in writing of any change in the location of the Collateral within such State, but will not remove the Collateral from such State without the prior written consent of Secured Party (except that in the State of Pennsylvania, the Collateral will not be moved from the above location without such prior written consent). *Except to the extent that any personal property becomes part of the real estate debtor will provide appropriate waivers and fixture filings. (INITIALED BY SIGNERS) 5. LATE CHARGES Any payment not made when due shall, at the option of Secured Party, bear late charges thereon calculated at the rate of [one] (INITIALED BY SIGNERS) one/half percent per month, but in no event greater than the highest rate permitted by relevant law. 6. DEBTOR'S WARRANTIES AND REPRESENTATIONS. Debtor warrants and represents: (a) that Debtor is justly indebted to Secured Party for the full amount of the indebtedness described in Paragraph 3; (b) that, except for the security interest granted hereby, the Collateral is free from and will be kept free from all liens, claims, security interests and encumbrances; (c) that no financing statement covering the Collateral or any proceeds thereof is on file in favor of anyone other than Secured Party, but if such other financing statement is on file, it will be terminated or subordinated; (d) that all information supplied and statements made by Debtor in any financial, credit or accounting statement or application for credit prior to, contemporaneously with or subsequent to the execution of this Security Agreement with respect to this transaction are and shall be true, correct, valid and genuine; and Bracketed items have been deleted on the original document. (e) that Debtor has full authority to enter into this Security Agreement and in so doing it is not violating its charter or by-laws, and any law or regulation or agreement with third parties, and it has taken all such action as may be necessary or appropriate to make this Security Agreement binding upon it. 7. DEBTOR'S AGREEMENTS Debtor agrees: (a) to defend at Debtor's own cost any action, proceeding, or claim affecting the Collateral: (b) to pay reasonable attorneys' fees [at least 15% of the unpaid balance if not prohibited by law] (INITIALED BY SIGNERS) and other expenses incurred by Secured Party in enforcing its rights against Debtor under this Security Agreement in the event that Secured Party's the prevailing party. (INITIALED BY SIGNERS) The parties agree that in all cases the prevailing party* (INITIALED BY SIGNERS) *shall be entitled to reimbursement from the non-prevailing party. (c) to pay promptly all taxes, assessments, license fees and other public or private charges when levied or assessed against the Collateral of this Security Agreement; and this obligation shall survive the termination of this Security Agreement; (d) that, if a certificate of title is required or permitted by law, Debtor shall obtain such certificate with respect to the Collateral, showing the security interest of Secured Party thereon and in any event do everything necessary or expedient to preserve or perfect the security interest of Secured Party; (e) that Debtor will not misuse, fail to keep in good repair, secrete or without the prior written consent of Secured Party, sell, rent, lend, encumber or transfer any of the Collateral notwithstanding Secured Party's right to proceed to the extent that Debtor will ensure that Lessee under Lease No. OL-7071 will comply with this provision. (INITIALED BY SIGNERS) (f) that Secured Party may enter upon Debtor's premises or wherever the Collateral may be located at any reasonable time to inspect the Collateral and Debtor's books and records pertaining to the Collateral, and Debtor shall assist Secured Party in making such inspection; and [(g) that the security interest granted by Debtor to Secured Party shall continue effective irrespective of the payment of the amount in Paragraph 3, or in any promissory note executed in connection herewith so long as there are any obligations of any kind, including obligations under guaranties or assignments, owed by Debtor to Secured Party, provided, however, upon any assignment of this Security Agreement the Assignee shall thereafter be deemed for the purpose of this Paragraph the Secured Party under this Security Agreement.] (INITIALED BY SIGNERS) 8. INSURANCE AND RISK OF LOSS All risk of loss, damage to or destruction of the Collateral shall at all times be on Debtor. Debtor will procure forthwith and maintain at Debtor's expense insurance against all risks of loss or physical damage to the Collateral for the full insurable value thereof for the life of this Security Agreement plus breach of warranty insurance and such other insurance thereon in amounts and against such risks as Secured Party may specify, and shall promptly deliver each policy to Secured Party with a standard long- form mortgagee endorsement attached thereto showing loss payable to Secured Party; and providing Secured Party with not less than 30 days written notice of cancellation; each such policy shall be in form, terms and amount and with insurance carriers satisfactory to Secured Party; Secured Party's acceptance of policies in lesser amounts or risks shall not be a waiver of Debtor's foregoing obligations. As to Secured Party's interest in such policy, no act or omission of Debtor or any of its officers, agents, employees or representatives shall affect the obligations of the insurer to pay the full amount of any loss. Debtor hereby assigns to Secured Party any monies which may become payable under any such policy of insurance and irrevocably constitutes and appoints Secured Party as Debtor's attorney in fact (a) to hold each original insurance policy, (b) to make, settle and adjust claims under each policy of insurance, (c) to make claims for any monies which may become payable under such and other insurance on the Collateral including returned or unearned premiums, and (d) to endorse Debtor's name on any check, draft or other instrument received in payment of claims or returned or unearned premiums under each policy and to apply the funds to the payment of the indebtedness owing to Secured Party; provided, however, Secured Party is under no obligation to do any of the foregoing. Should Debtor fail to furnish such insurance policy to Secured Party, or to maintain such policy in full force, or to pay any premium in whole or in part relating thereto, then Secured Party, without waiving or releasing any default or obligation by Debtor, may (but shall be under no obligation to do so) obtain and maintain insurance and pay the premium therefor on behalf of Debtor and charge the premium to Debtor's indebtedness under this Security Agreement. The full amount of any such premium paid by Secured Party shall be payable by Debtor upon demand, and failure to pay same shall constitute an event of default under this Security Agreement. For insurance obligations under this paragraph it is acceptable to Secured Party that the policies are maintained by Lessee under Lease Agreement No. OL-7071, but it is Debtor's responsibility to ensure that Lessee maintains proper insurance. (INITIALED BY SIGNERS) 9. EVENTS OF DEFAULT; ACCELERATION. A very important element of this Security Agreement is that Debtor make all its payments promptly as agreed and that the Collateral continue to be in good condition and adequate security for the indebtedness. The following are events of default under this Security Agreement which will allow Secured Party to take such action under this Paragraph and under Paragraph 10 as it deems necessary provided that Secured Party has given Debtor written notice of such default and Debtor has failed to cure such default within 10 days of receipt of such notice. (INITIALED BY SIGNERS) (a) any of Debtor's obligations to Secured Party under [any] (INITIALED BY SIGNERS) agreement with Secured Party is not paid promptly when due. (b) Debtor breaches any warranty or provision hereof, or of any note or of any other instrument or agreement delivered by Debtor to Secured Party in connection with this [or any other] (INITIALED BY SIGNERS) transaction; (c) Debtor dies, becomes insolvent or ceases to do business as a going concern; (d) it is determined that Debtor has given Secured Party materially misleading information regarding its financial condition; (e) any of the Collateral is lost or destroyed; (f) a petition or complaint in bankruptcy or for arrangement or reorganization or for relief under any insolvency law be filed by or against Debtor or Debtor admits its inability to pay its debts as they mature; (g) property of Debtor is attached or a receiver is appointed for Debtor; Bracketed items have been deleted on the original documents. [(h) whenever Secured Party in good faith believes the prospect of payment or performance is impaired or in good faith believes the Collateral is insecure; or] (INITIALED BY SIGNERS) [(i) any guarantor, surety or endorser for Debtor dies or defaults in any obligation or liability to Secured Party or any guaranty obtained in connection with this transaction is terminated or breached.] (INITIALED BY SIGNERS) IF DEBTOR SHALL BE IN DEFAULT HEREUNDER the indebtedness herein described [and all other indebtedness] (INITIALED BY SIGNERS) then owing by Debtor to Secured Party under this [or any other present or future] (INITIALED BY SIGNERS) agreement (collectively, the "indebtedness") shall, if Secured Party shall so elect, become immediately due and payable and the unpaid principal balance of the indebtedness described in Paragraph 3, or in any promissory note executed in connection herewith, shall bear interest at the same rate as before maturity until paid in full. In no event shall the Debtor, upon demand by Secured Party for payment of the indebtedness, by acceleration of the maturity thereof or otherwise, be obligated to pay any interest in excess of the amount permitted by law. Any acceleration of the indebtedness, if elected by the Secured Party, shall be subject to all applicable laws, including laws relating to rebates and refunds of unearned charges. 10. SECURED PARTIES REMEDIES AFTER DEFAULT; CONSENT TO ENTER PREMISES. UPON DEBTOR'S DEFAULT AND AT ANY TIME THEREAFTER, SECURED PARTY SHALL HAVE ALL THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE UNIFORM COMMERCIAL CODE AND ANY OTHER APPLICABLE LAWS, INCLUDING THE RIGHT TO ANY DEFICIENCY REMAINING AFTER DISPOSITION OF THE COLLATERAL FOR WHICH DEBTOR HEREBY AGREES TO REMAIN FULLY LIABLE. DEBTOR AGREES THAT SECURED PARTY, BY ITSELF OR ITS AGENT, MAY WITHOUT NOTICE TO ANY PERSON AND WITHOUT JUDICIAL PROCESS OF ANY KIND, ENTER INTO ANY PREMISES OR UPON ANY LAND OWNED, LEASED OR OTHERWISE UNDER THE REAL OR APPARENT CONTROL OF DEBTOR OR ANY AGENT OF DEBTOR WHERE THE COLLATERAL MAY BE OR WHERE SECURED PARTY BELIEVES THE COLLATERAL MAY BE, AND DISASSEMBLE, RENDER UNUSABLE AND/OR REPOSSESS ALL OR ANY ITEM OF THE COLLATERAL, DISCONNECTING AND SEPARATING ALL COLLATERAL FROM ANY OTHER PROPERTY. Debtor expressly waives all further rights to possession of the collateral after default and all claims for injuries suffered through or loss caused by such entering and/or repossession. Secured Party may require Debtor to assemble the collateral and return it to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Secured Party may sell or lease the Collateral at a time and location of its choosing provided the Secured Party acts in good faith and in a commercially reasonable manner. Secured Party will give Debtor reasonable notice of the time and place of any public sale of the Collateral or of the time after which any private sale or any other intended disposition of the Collateral is to be made. Unless otherwise provided by law, the requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to the address of Debtor shown herein at least ten days before the time of the sale or disposition. Expenses of retaking, holding, preparing for sale, selling and the like shall include reasonable attorneys' fees and other legal expenses. Debtor understands that Secured Party's rights are cumulative and not alternative. 11. WAIVER OF DEFAULTS; AGREEMENT INCLUSIVE Secured Party may in its sole discretion waive a default, or cure, at Debtor's expense, a default. Any such waiver in a particular instance or of a particular default shall not be a waiver of other defaults or the same kind of default at another time. No modification or change in this Security Agreement or any related note, instrument or agreement shall bind Secured Party unless in writing signed by Secured Party. No oral agreement shall be binding. 12. FINANCING STATEMENTS; CERTAIN EXPENSES. If permitted by law, Debtor authorizes Secured Party to file a financing statement with respect to the Collateral signed only by Secured Party, and to file a carbon, photograph or other reproduction of this Security Agreement or of a financing statement. At the request of Secured Party, Debtor will execute any financing statements, agreements or documents, in form satisfactory to Secured Party which Secured Party may deem necessary or advisable to establish and maintain a perfected security interest in the Collateral, and will pay the cost of filing or recording the same in all public offices deemed necessary or advisable by Secured Party. Debtor also agrees to pay all costs and expenses incurred by Secured Party in conducting UCC, tax or other lien searches against the Debtor or the Collateral and such other fees as may be agreed. [13. WAIVER OF DEFENSES ACKNOWLEDGMENT] [If Secured Party assigns this Security Agreement to a third party ("Assignee"), then after such assignment:] (INITIALED BY SIGNERS) [(a) Debtor will make all payments directly to such Assignee at such place as Assignee may from time to time designate in writing; (b) Debtor agrees that it will settle all claims, defenses, set-offs and counterclaims it may have against Secured Party directly (INITIALED BY SIGNERS) with Secured Party and will not set up any such claim, defense, set-off or counterclaim against Assignee, Secured Party hereby agreeing to remain responsible therefor; (c) Secured Party shall not be Assignee's agent for any purpose and shall have no authority to change or modify this Security Agreement or any related document or instrument; and (d) Assignee shall have all of the rights and remedies of Secured Party hereunder but none of Secured Party's obligations.] (INITIALED BY SIGNERS) 14. MISCELLANEOUS Debtor waives all exemptions. Secured Party may correct patent errors herein and fill in such blanks as serial numbers, date of first payment and the like. Any provisions hereof contrary to, prohibited by or invalid under applicable laws or regulations shall be inapplicable and deemed omitted herefrom, but shall not invalidate the remaining provisions hereof. Except as otherwise provided herein or by applicable law, the Debtor shall have no right to prepay the indebtedness described in Paragraph 3, or in any promissory note executed in connection with this Security Agreement. Debtor and Secured Party each hereby waive any right to a trial by jury in any action or proceeding with respect to, in connection with, or arising out of this Security Agreement, or any note or document delivered pursuant to this Security Agreement. DEBTOR ACKNOWLEDGES RECEIPT OF A TRUE COPY AND WAIVES ACCEPTANCE HEREOF. If Debtor is a corporation, this Security Agreement is executed pursuant to authority of its Board of Directors. Except where the context otherwise requires, "Debtor" and "Secured Party" include the heirs, executors or administrators, successors or assigns of those parties, but nothing herein shall authorize Debtor to assign this Security Agreement or its rights in and to the Collateral. If more than one Debtor executes this Security Agreement, their obligations under this Security Agreement shall be joint and several. Bracketed items have been deleted from the original document If at any time this transaction would be usurious under applicable law, then regardless of any provision contained in this Security Agreement or in any other agreement made in connection with this transaction, it is agreed that: (a) the total of all consideration which constitutes interest under applicable law that is contracted for, charged or received upon this Security Agreement or any such other agreement shall under no circumstances exceed the maximum rate of interest authorized by applicable law and any excess shall be credited to the Debtor; and (b) if Secured Party elects to accelerate the maturity of, or if Secured Party permits Debtor to prepay the indebtedness, any amounts which because of such action would constitute interest may never include more than the maximum rate of interest authorized by applicable law, and any excess interest, if any, provided for in this Security Agreement or otherwise, shall be credited to Debtor automatically as of the date of acceleration or prepayment. 15. SPECIAL PROVISIONS See Special Provisions Instructions below. 1. The Security Agreement may be prepaid at any time without penalty. (INITIALED BY SIGNERS) 2. The Security Agreement incorporates all the terms of the Assignment of Lease, dated 12-23-93, between Secured Party as Assignee, and Debtor as Assignor. In the event of a contradiction between the terms of the Assignment of Lease and the terms of this Security Agreement, this Security Agreement shall control. (INITIALED BY SIGNERS) 3. When Security Agreement has been paid in full, Secured Party, will return all underlying documents and UCC-1 Terminations, as appropriate. (INITIALED BY SIGNERS) DATED: 12/23 1993 SECURED PARTY: DEBTOR: The CIT Group/Equipment Amplicon, Inc. Financing, Inc. By: G. A. Theisman, Jr. By: Patrick E. Paddon 1620 W. Fountainhead Pkwy., #600 5 Hutton Centre Dr., Ste. 500 Tempe, AZ 85282 Santa Ana, CA 92707 If Debtor is a partnership, enter: PARTNERS' NAMES HOME ADRESSES SPECIAL PROVISIONS INSTRUCTIONS - THE NOTATIONS TO BE ENTERED IN THE SPECIAL PROVISIONS SECTION OF THIS DOCUMENT FOR USE IN ALABAMA, FLORIDA, GEORGIA, IDAHO, NEW HAMPSHIRE AND OREGON ARE SHOWN IN THE APPLICABLE STATE PAGES OF THE LOANS AND MOTOR VEHICLES MANUAL. NOTICE: DO NOT USE THIS FORM FOR TRANSACTIONS FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. FOR AGRICULTURAL AND OTHER TRANSACTIONS SUBJECT TO FEDERAL OR STATE REGULATIONS, CONSULT LEGAL COUNSEL TO DETERMINE DOCUMENTATION REQUIREMENTS. AGRICULTURAL PURPOSES generally means farming, including dairy farming, but it also includes the transportation, harvesting, and processing of farm, dairy, or forest products if what is transported, harvested, or processed is farm, dairy, or forest products grown or bred by the user of the equipment itself. It does not apply, for instance, to a logger who harvests someone else's forest, or a contractor who prepares land or harvests products on someone else's farm. IN LOUISIANA, form 5-SA-2305 (Addendum to Security Agreements 5-SA-1700, 5-SA-1702 and 5-SA-1703) must accompany this Agreement. RIDER "A" ATTACHED TO AND MADE A PART OF SECURITY AGREEMENT DATED 12/23/93, 1993, BY AND BETWEEN AMPLICON, INC. ("AMPLICON") AS DEBTOR AND THE CIT GROUP/EQUIPMENT FINANCING, INC.("CIT") AS SECURED PARTY WHEREAS Amplicon is the beneficiary of an Irrevocable Standby Letter of Credit No. T-203116 from Chemical Bank in the amount of $11,000,000.00 ("LC") a copy of which Letter of Credit is attached hereto. WHEREAS, the Lease, as defined in this Security Agreement was amended by the Interim Rental Agreement ("Agreement") dated December 9, 1992, and thereunder, on or after August 15, 1993, Amplicon has the right to cut off further installation of equipment and commence the Lease transaction which shall be limited to the then installed equipment. NOW THEREFORE, for and in consideration of the mutual covenants, conditions, stipulations, agreements, and obligations hereinafter set forth, Debtor and Secured Party agree as follows: 1. Amplicon, as beneficiary under the LC, shall act solely for the benefit of CIT so long as there is any remaining Indebtedness due under this Security Agreement and CIT continues to have a security interest in the Lease, and to take any and all actions, legal, equitable or otherwise, that CIT might otherwise take, and at CIT's direction, as if CIT were the beneficiary under the LC.** (INITIALED BY SIGNERS) 2. An occurrence of a *default (*material(typed above)) (INITIALED BY SIGNERS) under the Lease or Agreement shall be considered events of default under Section 9 of this Security Agreement. The failure of the lessee to make any payment of rent under the Lease or the Agreement within 10 days after the due date shall also be considered an event of default under Section 9 of this Security Agreement. 3. In addition to any remedies set forth in Section 9 of the Security Agreement, and not in lieu thereof, upon the occurrence of a default under the Lease or Agreement, Debtor agrees to forthwith make a draw under the LC for the full amount then available and immediately pay the proceeds to Secured Party, and Debtor further agrees that the unpaid principal balance of the Indebtedness described in Paragraph 3 of this Security Agreement, shall become immediately due and payable. 4. The LC presently expires on January 31, 1994. It is hereby agreed that Amplicon will ensure that the LC, in a minimum amount of $11,000,000.00, will remain in full force and effect throughout the term of the Security Agreement, and that the LC will be renewed at least 30 days prior to expiration, proof of said renewal to be submitted by Debtor to Secured Party. **CIT acknowledges and agrees that Amplicon shall hold the original LC for the term of this Agreement. (INITIALED BY SIGNERS) letter of credit is not included as part of this exhibit. 5. If, at any time prior to the payment by Debtor to Secured Party of all Indebtedness described in Paragraph 3 of this Security Agreement, Debtor exercises its right to commence the Lease transaction under the Agreement, or if the Lease transaction commences for any other reason, then Debtor shall be required to obtain a new letter of credit, for CIT's benefit, marked "transferable and assignable", with terms, conditions, and an amount, acceptable to Secured Party, within Secured Party's sole discretion, in accordance with terms relayed to Debtor by approval letters issued by Secured Party. (INITIALED BY SIGNERS) 6. Failure to comply with any provisions of this Rider "A" shall constitute an event of default under Section 9 of the Security Agreement and will permit Secured Party to exercise any or all remedies set forth therein. Amplicon, Inc. The CIT Group/Equipment Financing, Inc. Name: Patrick E. Paddon Name: G. A. Theisman, Jr. Title: President Title: Officer Dated: 12/23/93 Dated: 12/23/93 EXHIBIT "A" Attached to and made a part of Security Agreement dated December 23, 1993, between Amplicon, Inc. as Debtor and The CIT Group/Equipment Financing, Inc. as Secured Party. Various Types of Distribution Center Equipment Including But Not Limited to The Following: QTY DESCRIPTION CONVEYOR EQUIPMENT-TILT TRAY SORTER CONVEYOR EQUIPMENT-PACKAGE CONVEYOR SYSTEM 6,600 STORAGE EQUIPMENT 1. SELECTIVE PALLET RACK 2. DRIVE-IN RACK 3. PALLETS 4. ESFR SPRINKLER SYSTEM FOR RACK AREAS MOBILE MATERIAL HANDLING EQUIPMENT 14 1. COUNTER BALANCE 12 2. REACH FORK 15 3. ORDER PICKER 10 4. WALK/RIDE (1 PALLET) 12 5. WALK/RIDE (2 PALLET) 40 6. HYDRAULIC PALLET J 03 7. PERSONNEL CARRIERS 02 8. BATTERY EQUIPMENT 02 9. SWEEPER/SCRUBBER WAREHOUSE MANAGEMENT SYSTEMS 1. SOFTWARE 2. COMPUTER HARDWARE % R.F. DEVICES SUPPORT EQUIPMENT 01 1. TRASH EQUIPMENT a. Pallet Shredder b. Bailer 2. MAINTENANCE SCISSOR LIFT 3. MOBILE RADIOS 4. ELECTRICAL 5. DOCK EQUIPMENT & UPGRADES 6. PARTS SUPPLY 7. BUILDING FIXTURING & UPGRADES 8. MAINTENANCE TOOLS & EQUIPMENT DESCRIPTION CAPITAL IMPROVEMENTS-FLOW THROUGH 1. FIRE ALARM REPAIRS 2. DOOR REPLACEMENTS 3. RESTROOM UPGRADES 4. OFFICE UPGRADES 5. ROOF REPAIRS 6. GUTTER CLEANING 7. EXTERIOR STAIR REPAIRS 8. ELECTRICITY FOR CONVEYOR CAPITAL IMPROVEMENTS-CENTRAL STOCK 1. DOCK EQUIPMENT 2. DOCK DOORS 3. RESTROOM UPGRADES 4. OFFICE UPGRADES 5. ELECTRICAL 6. PARKING LOT All of the above to include attachments, replacements, substitutions and additions, and proceeds. (INITIALED BY SIGNERS) Debtor: Secured Party: AMPLICON, INC. THE CIT GROUP/EQUIPMENT FINANCING, INC. By: Patrick E. Paddon By: G. A. Theisman Title: President Title: Officer This Assignment is only effective and binding upon the undersigned Assignor until such time that all Indebtness of Assignor to Assignee under the Security Agreement dated 12/23/93, is paid in full by Assignor. ASSIGNMENT OF LEASE - FULL RECOURSE Re: Lease No. 0l-7071, Schedule 1 To: The CIT Group/Equipment Financing, Inc. RE: Lease between Hills Stores Company, as lessee and the undersigned, dated 12/18, 1992, having aggregate unpaid rentals of $ *an amount as yet undetermined. For value received, undersigned ("Assignor") hereby [sells] (INITIALED BY SIGNERS) assigns, transfers and sets over to The CIT Group/Equipment Financing, Inc., its successors and assigns ("Assignee"), the annexed above-named lease ("lease"), together with all rental payments due and to become due thereunder, and all amounts due and to become due in connection with the exercise by lessee of an option, if any, to purchase the property described in the lease. Assignor also assigns to Assignee all of Assignor's rights and remedies under the lease and any guaranty thereof, including the right to take, in Assignor's or Assignee's name, any and all proceedings legal, equitable or otherwise, that Assignor might otherwise take, save for this assignment. As security for all amounts due to Assignor under the lease, [and all other present and future indebtedness or obligations of Assignor to Assignee of every kind and nature whatsoever,] (INITIALED BY SIGNERS) Assignor hereby grants to Assignee a security interest in all property covered by and described in the lease. Title to all such property shall remain in the Assignor and is not transferred to Assignee for any purpose. Assignee shall have no obligation of Assignor as lessor under the lease. Assignor warrants that: Assignor is the owner of the property described in the lease free of all liens and encumbrances except the lease; the lease and any accompanying guaranties, waivers and/or other instruments (collectively, "lease") [are complete and include all amendments, addendums and riders,] (INITIALED BY SIGNERS) are the only documents executed by the Assignor and the lessee with respect to such property [and are true, valid and genuine and represent existing valid obligations enforceable in accordance with their terms, and is and will continue free from defenses, setoffs and counterclaims; all signatures, names, addresses, amounts and other statements and facts contained therein are true and correct; the aggregate unpaid rentals shown above is correct, the property has been delivered to lessee under the lease on the date set forth below in satisfactory condition and has been accepted by lessee, and that Assignor will comply with all its warranties and other obligations with respect thereto:](INITIALED BY SIGNERS) the lease transaction conforms to all applicable laws and regulations; the lease constitutes and will continue to constitute a valid reservation of unencumbered title to or a perfected first priority security interest in the property covered thereby, effective against all persons; if filings, recordation or any other action or procedure is permitted or required by statute or regulation to perfect such reservation of title, lien or security interest, the same has been accomplished; and all down payments received have been made in cash except down payments represented by equipment trade-ins (INITIALED BY SIGNERS) [Subject to the terms and provisions of any applicable underlying agreement between Assignor and Assignee, Assignor guarantees the payment promptly when due of the amount of each any every sum payable under the lease and the payment on demand of the entire unpaid balance as of the date of default in the event of any default by lessee under the lease, without first requiring Assignee to proceed against lessee or any other person or any security. (INITIALED BY SIGNERS) In the event that Assignee reasonably determines that Assignor has or may have breached any of the terms hereof (including its guaranty of payment) or any of its warranties with respect to the lease, Assignor will, upon Assignee's request, promptly repurchase the lease for an amount equal to the unpaid balance thereof, plus any expenses of collection, repossession, transportation and storage incurred by Assignee, including attorneys' fees and costs. In addition, Assignor shall indemnify and save Assignee harmless from any loss, damage or expense, including attorneys' fees, incurred by Assignee as a result of Assignor's breach of any of the terms of this assignment or any of the warranties, obligations or undertakings described herein.] (INITIALED BY SIGNERS) Assignor agrees that Assignee may audit its books and records relating to all leases and paper assigned to Assignee and may in Assignor's name endorse all remittances received and Assignor waives notice of acceptance hereof and of presentment, demand, protest and notice of non-payment or protest as to all leases now or hereafter signed, accepted, endorsed or assigned to Assignee. Assignor waives all exemptions and homestead laws and any other demands and notices required by law, and Assignor waives all setoffs and counterclaims. Assignee may at any time*, without consent of Assignor with[out](INITIALED BY SIGNERS) notice to Assignor and without affecting or impairing the obligation of Assignor hereunder, do any of the following: *After event of default under the Security Agreement, dated 12/23/93, between Assignor & Assignee (a) renew, extend (including extensions beyond the original term of the lease), modify, release or discharge any obligation of leasee or any other person obligated on the lease or on any accompanying guaranty ("the lease obligations"); (b) agree to the substitution of a lessee; (c) accept partial payments of the lease obligations; (d) accept new or additional documents, instruments or agreements relating to or in substitution of the lease obligations; (e) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the lease obligations and the security therefor in any manner; (f) consent to the transfer or return of the property described in the lease and take and hold additional security or guaranties for the lease obligations; (g) amend, exchange, release or waive any security or guaranty; or Bracketed items have been deleted from the original document (h) bid and purchase at any sale of the lease or the property described in the lease and apply any security or proceeds and direct the order and manner of sale. [No payment by Assignor hereunder shall entitle the Assignor, by subrogation or otherwise, to any payment from the lessee except after the full payment and performance of all lessee's obligations to Assignee. Unless otherwise agreed under the provisions of any applicable underlying agreement, any amounts retained by Assignee as a reserve or holdback shall be held by Assignee as security for the performance of Assignor's obligations under the underlying agreement and hereunder, and shall be paid to Assignor without interest. When all payments under the lease have been paid in full, provided no obligation of any kind, direct or contingent, of Assignor whether hereunder or otherwise and no other leases or paper acquired by Assignee from Assignor or from any of Assignor's subsidiary or affiliated companies be in default: but in the event of any such default, Assignee may collect any amount owing by making an appropriate charge against any reserve or holdback which otherwise would be payable to Assignor in cash. Assignor shall have no authority to, and will not, without Assignee's prior written consent, accept payments of rents or of option prices, repossess or consent to the return of the property described in the lease or modify the terms thereof or of any accompanying guaranty. Assignee's knowledge at any time of any breach of or non-compliance with any of the foregoing shall not constitute any waiver by Assignee.] Property covered by the lease was delivered to lessee on 19 . Dated December 23, 1993. Lessor - Assignor: Amplicon, Inc. By: Patrick E. Paddon Title: President Bracketed items have been deleted from the original document. AMENDMENT "C" to Security Agreement between The CIT Group/Equipment Financing, Inc. as Secured Party and Amplicon, Inc. as Debtor, dated 12/23/93 (the Security Agreement, together with all Riders, Addenda, Amendments, and Attachments hereinafter referred to as "Security Agreement"). WHEREAS, Debtor wished to amend the terms and conditions set forth in the Security Agreement to reflect a new due date; and, WHEREAS, Debtor agrees to remain responsible for all of its obligations under the Security Agreement. NOW, THEREFORE, for and in consideration of the mutual covenants, conditions, stipulations, agreements, and obligations hereinafter set forth, Secured Party and Debtor agree as follows: 1. Secured Party agrees to an amendment of the terms and conditions in the Security Agreement to reflect in Paragraph 3 of the Security Agreement a new due date of July 15, 1994. 2. Debtor agrees to the above amendment to the terms and conditions in the Security Agreement. 3. Debtor agrees that this within Amendment does not release Debtor from any liability under the Security Agreement and that all other terms, covenants, and conditions of the Security Agreement remain in full force and effect, notwithstanding this Amendment, and this Amendment is made without prejudice to or waiver of Secured Party's rights and remedies in the Security Agreement in the event of Debtor's default. The CIT Group/Equipment Amplicon, Inc. Financing, Inc. By: G. A. Theisman By: Patrick E. Paddon Title: Senior Credit Analyst Title: President Date: 4/19/94 Date: 4/15/94 AMENDMENT "D" to Security Agreement between The CIT Group/Equipment Financing, Inc. as Secured Party and Amplicon, Inc. as Debtor, dated 12/23/93 (the Security Agreement, together with all Riders, Addenda, Amendments, and Attachments hereinafter referred to as "Security Agreement"). WHEREAS, Debtor wished to amend the terms and conditions set forth in the Security Agreement to reflect a new due date; and, WHEREAS, Debtor agrees to remain responsible for all of its obligations under the Security Agreement. NOW, THEREFORE, for and in consideration of the mutual covenants, conditions, stipulations, agreements, and obligations hereinafter set forth, Secured Party and Debtor agree as follows: 1. Secured Party agrees to an amendment of the terms and conditions in the Security Agreement to reflect in Paragraph 3 of the Security Agreement a new due date of September 1, 1994. 2. Debtor agrees to the above amendment to the terms and conditions in the Security Agreement. 3. Debtor agrees that this within Amendment does not release Debtor from any liability under the Security Agreement and that all other terms, covenants, and conditions of the Security Agreement remain in full force and effect, notwithstanding this Amendment, and this Amendment is made without prejudice to or waiver of Secured Party's rights and remedies in the Security Agreement in the event of Debtor's default. The CIT Group/Equipment Amplicon, Inc. Financing, Inc. By: G. A. Theisman By: Patrick E. Paddon Title: SCA Title: President Date: 7/18/94 Date: 7/15/94 AMENDMENT "E" to Security Agreement between The CIT Group/Equipment Financing, Inc. as Secured Party and Amplicon, Inc. as Debtor, dated 12/23/93 (the Security Agreement, together with all Riders, Addenda, Amendments, and Attachments hereinafter referred to as "Security Agreement"). WHEREAS, Debtor wished to amend the terms and conditions set forth in the Security Agreement to reflect a new due date; and, WHEREAS, Debtor agrees to remain responsible for all of its obligations under the Security Agreement. NOW, THEREFORE, for and in consideration of the mutual covenants, conditions, stipulations, agreements, and obligations hereinafter set forth, Secured Party and Debtor agree as follows: 1. Secured Party agrees to an amendment of the terms and conditions in the Security Agreement to reflect in Paragraph 3 of the Security Agreement a new due date of October 31, 1994. 2. Debtor agrees to the above amendment to the terms and conditions in the Security Agreement. 3. Debtor agrees that this within Amendment does not release Debtor from any liability under the Security Agreement and that all other terms, covenants, and conditions of the Security Agreement remain in full force and effect, notwithstanding this Amendment, and this Amendment is made without prejudice to or waiver of Secured Party's rights and remedies in the Security Agreement in the event of Debtor's default. The CIT Group/Equipment Amplicon, Inc. Financing, Inc. By: G. A. Theisman By: Patrick E. Paddon Title: SCA Title: President Date: 8/30/94 Date: 8/26/94 EX-11 3 EXHIBIT 11 AMPLICON, INC. AND SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Years Ended June 30, 1994 1993 1992 Net earnings $11,018,539 $9,793,014 $9,110,523 Weighted average number of common shares outstanding assuming no exercise of outstanding options 5,848,594 5,830,561 5,813,291 Dilutive stock options using the treasury stock method (A) (A) (A) Total 5,848,594 5,830,561 5,813,291 Net earnings per common share $ 1.89 $ 1.68 $ 1.57 (A) Dilution is less than 3% and deemed immaterial; therefore, stock options are not included for earnings per share calculation.
EX-27 4 FINANCIAL DATA SCHEDULE
5 0000803016 AMPLICON, INC. YEAR JUN-30-1994 JUN-30-1994 29,334,914 0 75,596,256 1,320,325 4,975,392 0 2,638,505 1,705,418 384,584,062 50,026,872 0 58,570 0 0 80,816,841 384,584,062 156,740,338 181,360,291 140,186,036 151,906,867 11,927,826 0 174,059 17,351,539 6,333,000 11,018,539 0 0 0 11,018,539 1.89 1.89
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