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NOTE 5 - LINE OF CREDIT:

Under the terms of a revolving line of credit with Bank of America, the company may borrow up to $2,000,000 through April 30, 1998. At any time prior to May 1998, the Company may convert borrowings, if any, into a three-year term loan with principal and interest payable monthly commencing May 31, 1998. The interest rate is at the bank's reference rate unless the Company elects an optional interest rate. The borrowing agreement contains various covenants, the more significant of which require the Company to maintain certain levels of shareholders' equity and working capital. The Company was in compliance with all provisions of the agreement during the year. There were no borrowings under this line of credit during the year.

NOTE 6 - CONTINGENCIES AND COMMITMENTS:

The preparation of financial statements in conformity with generally accepted accounting principles, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the respective reporting periods. Actual results could differ from those estimates.

The Company leases certain transportation equipment under an operating lease expiring in 1999. The terms of the lease provide for annual renewal options and contingent rental payments based upon mileage and adjustments of rental payments based on the Consumer Price index. Minimum rental payments were $263,000, $272,000 and $290,000 in fiscal years 1996, 1995 and 1994, respectively. Contingent payments were $95,000 in 1996 and 1995, and $92,000 in 1994. Future minimum lease payments are approximately $257,000 per year from 1996 through 1998, and $130,000 in 1999. The Company also leases certain other properties which do not result in material commitments.