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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended September 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER 0-27678
TRIDENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-6403301
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1114 FEDERAL ROAD 06804
BROOKFIELD, CONNECTICUT (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 740-9333
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of exchange on
Title of each class which registered
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
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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 voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on December 7,
1998 as reported on the Nasdaq National Market, was approximately $55,143,000.
Shares of Common Stock held by each officer and director and by each person who
owns 10% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
On December 7, 1998 there were 6,464,639 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Registrant.
Part III incorporates information by reference from the definitive Proxy
Statement in connection with the Registrant's Annual Meeting of Shareholders to
be held in 1999.
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT
ON FORM 10-K
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PAGE
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PART I
Item 1: Business.............................................................................. 3
Item 2: Properties............................................................................ 9
Item 3: Legal Proceedings..................................................................... 9
Item 4: Submission of Matters to a Vote of Security Holders................................... 9
PART II
Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters............. 11
Item 6: Selected Financial Data............................................................... 11
Item 7: Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 13
Item 7A: Quantitative and Qualitative Disclosures About Market Risk............................ 19
Item 8: Financial Statements and Supplementary Data........................................... 19
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................................... 19
PART III
Item 10: Directors and Executive Officers of the Registrant.................................... 20
Item 11: Executive Compensation................................................................ 20
Item 12: Security Ownership of Certain Beneficial Owners and Management........................ 20
Item 13: Certain Relationships and Related Transactions........................................ 20
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K....................... 21
Signatures ............................................................................................. 24
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PART I
This Form 10-K contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Factors that might cause such a
difference include those discussed herein under "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Business Environment
and Future Results."
ITEM 1: Business
COMPANY OVERVIEW
Trident International, Inc. (hereafter, together with its consolidated
subsidiaries referred to as the "Company" or "Trident") designs, manufactures
and markets piezoelectric impulse ink jet subsystems including printheads, inks
and other consumables, and related components for the industrial market. The
Company's proprietary products are used for a variety of printing applications
which require high speed, good print quality, durable equipment and the ability
to change the printed text or pattern frequently. The Company's printing
subsystems are marketed worldwide, primarily through approximately 75 original
equipment manufacturer (OEM) customers that integrate them into
computer-controlled, application-specific products which are then sold to
end-users. The Company's contracts with its OEM customers also provide for
ongoing sales by the Company of consumables, consisting principally of inks and
printing subsystem components.
The largest application in which the Company's products are used is carton
coding, which involves printing directly onto shipping cartons. Carton coding
systems which incorporate the Company's products allow end-users to print any
combination of high quality text, bar codes, and graphics directly onto blank
cartons as they move down an assembly or production line. The Company's products
allow this information to be changed frequently, even carton by carton. This
eliminates the need to maintain a substantial inventory of preprinted cartons or
labels, while also reducing production time and costs and allowing for frequent
changeover between products. Other current industrial applications for the
Company's products include check coding, addressing and business forms
imprinting, postal bar coding and stamp cancellation and garment pattern
plotting. The Company also has products for use in printing date and batch codes
onto items and primary packages.
PRODUCTS
General. The Company specializes in the design and manufacture of
proprietary impulse ink jet imaging subsystems, including printheads, inks and
other consumables and related components. To support its OEM customers, Trident
also offers a comprehensive range of accessories and components, and a printhead
repair service. Trident is committed to providing its OEM customers and their
end-users with all of their piezoelectric impulse ink jet product and service
requirements.
Imaging Subsystems. The Company has developed a series of imaging subsystems
which are based on its proprietary impulse ink jet technology. This technology
employs a piezoelectric crystal, which is a ferroelectric ceramic material that
changes shape when an electric field is applied across it. Thus, a voltage
applied across two faces can cause it to grow or shrink in length, or to be
distorted sideways, depending on the mode of operation selected. Trident's
patented technology utilizes the piezoelectric crystal as a piston opposite the
orifice through which the ink is projected onto the printing surface. A voltage
waveform is smoothly increased which causes sub-micron reductions in the length
of the piezoelectric crystal. This draws ink into the chamber preparing it for
firing onto the printing surface. Surface tension forces in the orifice prevent
air from entering the chamber, which would interfere with the printing process.
Next, the voltage across the piezoelectric crystal is rapidly reduced, which
allows the length of the crystal to return to its original size and create a
sudden pressure pulse inside the chamber, which forces a droplet of ink out of
the orifice. The process of printing each droplet takes approximately 0.0001
seconds.
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One of the principal advantages of the Company's technology is that
relatively large droplets can be generated at high frequencies and velocities.
The high pressures generated also enable more than one orifice to be placed in
each chamber, which increases the print area without adding chambers, thereby
avoiding additional cost. The arrangement of the piezoelectric crystal and ink
chambers found in the Company's printheads is proprietary to Trident. It enables
ink droplets to be formed at frequencies as high as 10,000 droplets per second
with an initial velocity of more than 10 meters per second. This enables the
droplets to travel across a small gap through the air, which is an important
feature in industrial marking applications where the printing surfaces are
rarely flat, smooth or traveling at a fixed distance from the printhead.
The Company's printing products are modular to enable its OEM customers to
order the most suitable configuration for their system and to minimize
development and production costs. The imaging subsystem consists of a printhead,
tubing, cables and, at the option of the OEM, an ink reservoir and electronic
driver printed circuit boards. The printheads are available in a range of
orifice configurations according to the desired print height and resolution.
Some configurations are also available with either stainless steel or nickel
orifice plates depending on the selection of ink. The orifice plate can have
from one to eleven orifices for each chamber. The use of multiple orifices per
chamber in a liquid impulse ink jet printhead is proprietary to Trident. The
benefits are increased print area without added cost and complexity. Resolution
is sacrificed in applications where print height and cost are more critical,
such as bar coding, which does not require high vertical resolution. Multiple
printheads may be stacked to create even taller images.
In the industrial market, the typical spacing between printed droplets is
five to seven thousandths of an inch, which provides a resolution of 140 to 200
dots per inch. In these industrial applications, resolution greater than 200
dots per inch is generally not required, while speed, print distance and print
area are often critical. By contrast, impulse ink jet printers developed for the
office and home markets are required to generate images with 300 to 1200 dots
per inch resolution, which creates a requirement for droplets which are
substantially smaller than those produced by the Company's technology and which
consequently cannot travel as far across air gaps to the printing surface. The
higher resolution and smaller droplet volume typical of the printers developed
for the office and home markets also reduce the printing speed when compared to
the Company's printheads.
The Company's imaging subsystem products are priced according to the print
area (number of orifices), the type of ink and the ink reservoir. The typical
prices range from $800 for the Company's least expensive imaging subsystem to
$2,200 for its premium performance bar code product.
The Company currently markets three printhead subsystems to OEM customers:
Ultrajet(TM)
The Ultrajet is a 32 channel printhead available with 3, 6 and 8 orifices
per channel configuration. The subsystem is utilized in current applications
including carton coding, check coding, addressing and business forms imprinting,
postal bar coding and stamp cancellation, and garment pattern plotting and
miscellaneous other porous media. The majority of the Company's current
printhead revenue derives from sales of the Ultrajet subsystem.
The Company has released a new generation of Ultrajet products called the
Ultrajet II. This product is available with 3, 6 and 11 orifices per channel
configuration. It is available with V-300 and ScanTrue(TM) ink, a newly
developed pigment based ink. The Company believes that the UltraJet II printhead
has significant improvements over the Ultrajet. These improvements include
faster speed, improved print quality and enhanced reliability.
PixelJet(TM)
The PixelJet printhead was launched in 1997. It has 64 channels for higher
resolution printing and is available with one or two orifices per channel
configuration. The subsystem is constructed from stainless steel and is
therefore compatible with a wider range of ink chemistries. Initial applications
of the PixelJet are for addressing, where higher resolution is required, as well
as for textile applications.
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MicroCoder(TM)
The MicroCoder printhead was also launched in 1997. It has 16 channels with
two orifices per channel. The printhead is available with AllWrite A3000(TM) ink
designed to print onto non-porous surfaces such as primary packages and
industrial parts. The Company believes that the MicroCoder-AllWrite A3000
combination provides unique competitive features and will compete effectively
with the more expensive and complex Continuous Ink Jet systems.
Ink Products. The Company offers seven basic ink products: PostBrite,
VersaPrint, FastDri, AllWrite, HiDef, JetWrite and ScanTrue.
ScanTrue is a recently developed pigment based ink. This ink was designed
to print UCC/EAN 128, I 2 of 5 and other tall bar codes on corrugated cartons.
It supports high resolution printing for narrow bar width requirements and
printing with greater edge definition. It has better light fastness and optical
density than dye based inks. ScanTrue also minimizes ink bleed on porous
surfaces.
All inks except PostBrite (an ultraviolet fluorescent ink for postal bar
coding) are offered in black. The Company's VersaPrint products are also
available in red, blue and green colors. Most of the Company's inks are
manufactured from oil or glycol liquids and are, therefore, non-volatile and
non-toxic. Two exceptions are the FastDri and AllWrite inks which are formulated
for semi-porous and non-porous printing surfaces and, therefore, require small
quantities of volatile solvents to allow drying. While impulse ink jet ink for
non-porous surfaces typically require maintenance at start-up following shut
down periods of one or more hours, the AllWrite A3000 in combination with the
Company's patented printhead pulsing technique does not require additional
maintenance. The carton coding market uses mainly VersaPrint and HiDef inks
which are entirely non-volatile. This property provides end-user customers with
increased reliability, resulting in fewer production delays.
Accessories and Options. The Company offers a range of accessories and
options to assist OEM customers in the development of systems. These are
sometimes employed by OEMs only for their initial evaluation of one of the
Company's products, while the OEMs develop their own version of the accessory
for the final production product. Larger volume producers are generally more
inclined to attempt to create their own accessories than smaller ones. Smaller
companies, or companies using systems in which the accessories represent a
relatively small percentage of the total system cost, are more likely to
purchase these components from Trident. An OEM may also purchase equipment from
Trident to repair and calibrate printheads itself, provided that it has been
trained and certified by Trident.
SALES AND MARKETING
The Company sells its products both domestically and internationally through
OEMs and to major end-users who have in-house engineering resources capable of
developing a printing system utilizing the Company's products. The Company has
approximately 75 active customers worldwide, of which approximately one-half
currently purchase from five to several hundred printheads per month. Several of
the Company's OEM customers sell systems incorporating the Company's products
worldwide, although the Company recognizes sales to the region where the
products are billed.
Sales are divided into three regions: North America, Europe and the Far
East. Sales for the years ended September 30, 1996, 1997, and 1998 to these
three regions were as follows:
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TWELVE MONTHS ENDED SEPTEMBER 30,
(000'S OMITTED)
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Region 1996 1997 1998
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North America $17,994 $21,507 $24,082
Europe 5,986 6,150 6,970
Far East 1,945 2,626 1,780
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Total $25,925 $30,283 $32,832
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All sales are denominated in US dollars.
The Company believes that international use of impulse ink jet applications
currently lags behind that of the U.S. The Company expects that the North
American region will continue to be its largest due to the strength of domestic
OEM customers, particularly those utilizing carton coding applications. European
sales improved during Fiscal 1998 due to increased activity with one major
customer and due to a European customer using Trident's products for stamp
cancellation, which is growing ink sales in the region. The growing use of the
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EAN128 bar code symbology in Europe is placing demands on the Company's products
performance which the Company believes will be corrected with the Ultrajet II
printhead and ScanTrue inks. Sales to the Far East are down due in part to the
weak Asian economy. The Far East currently trails the rest of the world in
utilization of impulse ink jet printing technologies. The Company believes,
however, that the ability of systems using the Company's subsystems to print
certain Asian language characters and the continuing industrialization of Far
East/Pacific Rim countries will create additional demand for the Company's
products in that region.
All of the Company's OEM customers are sub-licensed by the Company on a
non-exclusive basis to use the Company's products. New customers are required to
purchase an evaluation kit from the Company, which includes training on the
equipment and an evaluation kit license, before the Company agrees to fully
license the customer. Trident believes that this allows it to control the use of
the product and to ensure that it is applied competently and professionally in
the market. The Company's licenses provide for the ongoing purchase of ink from
the Company and the right to use the printheads and inks as a system. The
Company is aware of a small number of third-party ink manufacturers offering ink
for use with some of the Company's printheads. Use of these third-party inks
would be an unlicensed activity by the OEM and its end-user customer, and could
damage the Company's printheads which would void the warranty on such
printheads. Most of the Company's inks, bottles and cartridges are currently
protected by patents.
During 1998, Andrew Borg joined the Company as Vice President of Worldwide
Marketing and Sales. Mr. Borg has fifteen years of experience in digital image
printing and processing.
The sales organization is divided into the same three regions and each
region is managed by a local business manager. The Company believes that this
structure provides for optimum response and support to the local customer. The
Company's largest sales region is North America where, in addition to the
business manager, three application engineers respond to day-to-day customer
needs. The business manager and one of the application engineers are located in
Park Ridge, Illinois. The European business manager is located in Dublin,
Ireland along with a Manager of Major Accounts. The Company's sales in the Far
East are concentrated in Japan, where the Company employs a business manager and
uses the services of one Japanese technical consultant. Sales inquiries are
generally developed from word of mouth recommendations, product exhibits and
advertisements. Senior managers of the Company are frequently involved with
industry conferences, which also generate high visibility for the Company. The
marketing department is responsible for sales to new customers and for
developing an end-user identity for the Company. The marketing department is
organized in three business groups. These groups are responsible for market
development, product development, revenue growth and profitability with their
respective industry group.
The Company's applications engineers provide training both at Trident and at
the customers' premises. They assist with diagnosing and solving end-user
problems as required. Service of the end-user system is provided by the OEM
customers or their distributors. In applications where products cannot be
shipped without the printed code or image, responsive service close to the
customers' sites is essential. Therefore, training the customer is a high
priority activity. The applications engineers also ensure that the OEMs have
properly designed their systems to optimize the performance of the printing
system.
The Company sells its products to approximately 75 OEM customers worldwide.
Historically, the Company has not required its OEM customers to display the
Trident label on their equipment and ink. Some customers sell ink with the
Trident label. Others request the Company to manufacture ink with the OEM's
label attached. The Company also allows customers to package the ink in their
own containers in response to such customers' desires to differentiate
themselves as much as possible from their competitors.
During the years ended September 30, 1996, 1997, and 1998 sales to the
following customers accounted for more than 10% of the Company's net sales:
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Year Ended September 30,
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Customer Name 1996 1997 1998
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Videojet Systems
International, Inc.* 5% 6% 33%
Marsh Company* 22% 23% --
Foxjet, Inc. 13% 9% 11%
BancTec, Inc. 12% 8% 7%
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* Videojet Systems International, Inc. acquired Marsh Company in 1998.
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During the years ended September 30, 1996, 1997, and 1998, approximately
79%, 70% and 77%, respectively, of the Company's net sales were to its top ten
customers.
The Company enters into sales and license agreements with its OEM customers
that provide the general terms on which sales of the Company's products will be
made. These agreements typically license the OEM's to manufacture, use and sell
equipment employing and including certain of the Company's proprietary
technology. The OEM customers generally agree to assign to the Company any
interest they obtain in any proprietary rights, including inventions and
resulting patents and patent applications and confidential technical
information, comprising improvements in or technology relating to the Company's
technology. The sales and license agreements are non-exclusive in nature and of
indefinite length but are terminable by either party upon material breach by the
other party.
ENGINEERING, RESEARCH AND DEVELOPMENT AND INTELLECTUAL PROPERTY
The Company conducts engineering development programs for the purpose of new
product development, enhancing existing products and reducing manufacturing
costs. The Company produces all designs on a computer aided drafting system and
has invested in modeling software and other analytical tools. The engineering
and research functions are divided between two departments. The research
department concentrates on fundamental improvements in the Company's
understanding of the technology and in producing computer simulations of new
concepts to rapidly evaluate and optimize performance without requiring physical
prototypes to be made. The Company's research is performed primarily by its own
staff, although, outside development consultants are occasionally employed. The
engineering development department includes multiple disciplines for the
development of printheads, ink systems, inks and electronics printed circuit
boards. The Company has entered into a strategic alliance with Xennia
Technology, Ltd., (Xennia), a leading developer of ink for industrial and
commercial ink jet printing, under which Xennia will develop proprietary ink
formulations exclusively for the Company in industrial applications. The Company
expended approximately $2,326,000, $3,027,000, and $4,142,000 for research and
development during the years ended September 30, 1996, 1997, and 1998,
respectively.
The Company's research and development objectives are to fully exploit the
benefits of its technology by creating computer models in order to design
products which increase the travel distance of the ink droplets through the air,
increase the frequency and velocity of droplet generation, increase channel
density and lower production costs through the use of innovative designs and
materials. The Company believes that its technology offers significant benefits
over other impulse ink jet technologies and that further advancements are
achievable.
The Company operates under a patent portfolio covering its printheads, ink
delivery systems and inks. In addition to the Company's own patent applications,
the Company has an exclusive license from Dataproducts Corporation
(Dataproducts) to Dataproducts' rights and certain patents relating to liquid
inks and impulse ink jet printing (the Dataproducts License) within the
"industrial marking field". The technology used by the Company under the
Dataproducts License is integral to the Company's impulse ink jet products.
Several of the patents relating to this technology expire over the next four to
seven years. The Dataproducts License provides the Company with the right to use
Dataproducts' liquid ink technology, which rights are generally exclusive in
industrial markets, and nonexclusive in the general or office printing market.
The areas of preprinted documents and wide format liquid ink printing are shared
with Dataproducts.
In March 1996, the Company acquired from Dataproducts Corporation a
non-exclusive license for patented solid ink jet printhead technology in certain
licensed industrial marking fields. This agreement allows the Company to use
these patents in the development and commercialization of its own solid ink
printhead. At the time of the purchase of the solid ink jet technology, certain
technological hurdles had not been overcome to enable the Company to
commercialize a product. Commercialization of this technology by the Company
will require extensive development work both on the solid ink itself and the ink
jet printheads used to apply that ink in commercial applications. Consequently,
the Company recorded a charge of approximately $3.1 million during Fiscal 1996
as a write-off of purchased in-process research and development to record the
cost of evaluating and acquiring this license. The Company intends to continue
to evaluate potential acquisitions and licenses of new technologies.
Significant patents for which applications have been filed by the Company
and which are licensed from Dataproducts are directed to: the mode of operation
and structure of the piezoelectric transducer assembly; multiple orifices;
multiple drops that merge in flight or on the printing surface; a method to
prevent evaporative inks from clogging the orifices; method of melting and
delivery of ink to printheads; and numerous inks.
MANUFACTURING AND SUPPLIERS
All of the Company's products are manufactured in Brookfield, Connecticut.
The assembly process for printheads essentially requires the high precision
assembly and testing of various purchased components, several of which are
proprietary to the Company and are custom-made according to the Company's
design. The assembly process includes several discrete steps, each of which is
considered a trade
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secret and has been developed and refined since the Company's inception. These
processes are closely monitored, in some cases using statistical process
control.
One of the most critical components of the Company's printheads is the
orifice plate. The Company has two suppliers for its current production designs
which utilize nickel, and has developed a new technique for the manufacture of
stainless steel orifice plates working with a sole supplier. This supplier has
signed a development contract with the Company but does not yet have a full
production supply agreement. Any future interruption or termination of supplies
of these stainless steel orifice plates could have a material adverse effect on
the Company's business and results of operations.
The Company's assembly operation is performed under filtered air hoods. The
assembly and test operations are organized into work cells and employ
just-in-time methodologies for work flow and materials control. Most of the
Company's production personnel are cross-trained in several operations,
affording greater flexibility to balance the production flow and to add new
employees.
Due to the harsh nature of the industrial environment, printheads require
occasional repair for orifice clogs and physical damage. The Company offers its
customers this service at the facility in Brookfield, Connecticut. A rapid
turnaround is important to the customer and, therefore, the Company's repair
department has also been organized into a work cell. In addition, as the volume
of the installed base of printheads grows, the Company anticipates that repair
facilities will be opened in Europe and the Far East.
All ink formulations and processes are the property of the Company. Pursuant
to the Company's supply agreement with Micropore, Inc. (Micropore), the Company
has agreed to purchase all of its requirements of certain of its current ink
products from Micropore.
The Company's manufacturing-engineering and quality groups are responsible
for the productivity and quality improvements in production and for the
introduction of new products into production. Simultaneous engineering is
employed by the Company to ensure that new products are manufacturable and to
shorten the development time.
BACKLOG
The order backlog as of September 30, 1998 was approximately $4.9 million
compared with $8.9 million as of September 30, 1997. This decrease is due
principally to a major customer changing its order policy from a twelve month
purchase order to 90 day purchase orders. Backlog consists of purchase orders
scheduled for shipment within 12 months following the order date. Purchasers of
standard products may generally cancel or reschedule orders without significant
penalty and, accordingly, the Company's backlog at any time is not necessarily
indicative of future sales.
COMPETITION
The Company considers its direct competition to be other providers of
on-demand, variable information printers which primarily employ ink jet printing
technology and thermal transfer labeling systems.
With respect to applications for carton coding, the Company's principal
competition is from manufacturers of thermal transfer labeling systems, which
apply labels either manually off-line, on-line with a label applicator, or
on-line with a print-and-apply system. These systems typically have an initial
purchase price comparable to that of ink jet coding systems sold by the
Company's OEMs, but the cost of labeling or coding using thermal transfer
labeling systems can be as much as ten times greater. These systems are provided
by companies such as Willett Systems Limited and Diagraph Corporation, who also
sell the Company's ink jet products, and by Zebra Technologies Corporation,
Intermec Corporation, Sato America, Inc., Datamax International Corp. and Weber
Marking Systems Inc. Simple alphanumeric codes are typically applied by
valve-jet ink jet systems which are manufactured by the Company's OEMs and do
not directly compete with the Company's current high resolution products.
Competition in the Company's other applications is primarily from other ink
jet printing technologies. An example is the use of continuous ink jet systems
in the addressing and imprinting market which are manufactured by Scitex Digital
Printing, Inc. and Videojet Systems International, Inc. Other examples are the
use of bubble jet systems manufactured by Hewlett Packard for addressing and
solid ink piezo based systems manufactured by Markem, Inc. for carton coding.
The Company is aware that Nu-Kote Holdings, Inc. (Nu-kote) has acquired a
new ink jet technology and has released a piezoelectric impulse ink jet
printhead for industrial and other applications. This printhead is being used
for applications for which the Company currently manufactures and markets ink
jet subsystems. It is unclear how much market penetration this printhead will
achieve, although it is anticipated that the price of this printhead will be
substantially lower than the price of comparable Trident printheads. In
November,
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1998, Nu-kote and certain of its subsidiaries filed for protection from
creditors under Chapter 11 of the Federal Bankruptcy law. It is unclear how this
filing may affect the commercialization of this printhead.
The markets for the Company's products are highly competitive. The Company
believes that its ability to compete successfully depends upon a number of
factors both within and beyond its control, including product performance,
product features, product availability, price, quality, timing of new product
introductions by the Company and its competitors, customer support, and industry
and general economic trends. The Company seeks to compete by offering a broad
product line, emphasizing high performance and quality with a continuing
commitment to product improvements and new product introductions. The Company's
current and prospective competitors include many companies that have greater
financial, technical and marketing resources than the Company. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors.
EMPLOYEES
As of September 30, 1998, Trident had 150 full time employees including
temporary direct employees. Of these employees, 17 were in sales and marketing,
37 were in engineering and research and development, 15 were in administration
and finance, 2 in facilities, 31 in production overhead and 48 were factory
direct employees. None of the Company's employees are represented by a labor
union. The Company believes its relationships with its employees are good.
ITEM 2: PROPERTIES
Trident's main facility consists of approximately 35,000 square feet of
leased space in Brookfield, Connecticut, divided between two buildings. One of
the buildings in Brookfield is occupied by sales and marketing, engineering and
research and development, and ink production. The other building is occupied by
administration and finance, production and production support. The leases expire
in 2003. The buildings are in good condition and have been extensively remodeled
by the Company to accommodate new processes and the growth in employees. The
Company has rented an additional 12,000 square feet of leased space in
Brookfield, Connecticut and is currently planning the renovation of this space
for ink production. This lease expires in 2003. The Company also rents 6,000
square feet of additional office and research and development space in New
Milford, Connecticut. The Company has a European office located in Dublin,
Ireland and a Midwest office located in Park Ridge, Illinois. The Company
believes it will have sufficient operating facilities for the foreseeable
future. One of the buildings currently leased by the Company in Brookfield is
located on property that may require remediation due to releases of hazardous
substances in prior operations by a previous occupant. The site investigation
and remediation, if needed, is subject to the Property Transfer Act program
administered by the Connecticut Department of Environmental Protection.
ITEM 3: LEGAL PROCEEDINGS
In December, 1997, the Company filed a civil action in the U.S. District
Court for the Southern District of Illinois charging Applied Technology Group of
Belleville, Illinois, AP Products, Inc. of Deer Park, New York, Renewable
Resources, Inc. of Deer Park, New York and Franklin, Tennessee and Independent
Ink, Inc. of Gardena, California with infringing two of the Company's patents.
Renewable Resources, Inc., Applied Technology Group and Independent Ink have
asserted claims against the Company for a declaration of noninfringement and
patent invalidity and unenforceability while also alleging violations of the
antitrust laws and unfair and fraudulent business practices relating to the
Company's sales of ink products.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended September 30, 1998.
9
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and positions held with the
Company of all executive officers of the Registrant as of December 7, 1998.
There were no family relationships between any director or executive officer of
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Elaine A. Pullen .......... 44 President, Chief Executive Officer and Chief Operating Officer
J. Leo Gagne .............. 42 Vice President and Chief Financial Officer
Robert L. Rogers .......... 44 Vice President of Research
Andrew S. Borg............. 44 Vice President of Worldwide Marketing and Sales
</TABLE>
ELAINE A. PULLEN joined the Company as President and Chief Operating Officer
in August 1994. She has been President since that time and, in addition, has
served as a director and Chief Executive Officer since April 1, 1995. Prior to
joining the Company, Ms. Pullen served as a director of Linx Printing
Technologies, PLC ("Linx") from September 1992 to August 1994, where she also
served as Business Operations Director from February 1994 to August 1994 and as
Engineering Director from September 1992 to February 1994. Prior to that, Ms.
Pullen served as President of Linx USA from 1991 to 1992, and as Vice President
of Applied Research and Engineering of Videojet Systems International, Inc. from
1988 to 1991. Ms. Pullen holds a B.S. in Applied Physics from the British
Institute of Physics. She has 25 years of experience in research and
development, marketing and operations management in the ink jet printing field.
J. LEO GAGNE joined the Company as Vice President and Chief Financial
Officer in February, 1996. Prior to joining the Company, Mr. Gagne served as
Director - Enterprise Group of the Hartford office of Arthur Andersen LLP, where
he was employed since 1977. Mr. Gagne is a Certified Public Accountant and holds
a B.S. in Accounting from the University of Connecticut.
ROBERT L. ROGERS joined the Company in 1989 as Director of Engineering. He
served as Director of Research and Development prior to his promotion to Vice
President of Research in August, 1996. Prior to 1989, Mr. Rogers was involved in
ink jet research at Exxon Enterprises Printing Systems, Inc. and Dataproducts
Corporation. Mr. Rogers holds a B.S. in Mechanical Engineering from Cornell
University.
ANDREW S. BORG joined the Company in May 1998. Prior to joining the Company,
Mr. Borg served as Director of Corporate Communications Worldwide, and Director
of Marketing for Electronics for Imaging, Inc. from June 1996 to April 1998. Mr.
Borg served as Industry Marketing Manager, Digital Trade Services for Scitex
America Corporation form Marsh 1995 to June 1996. He was the Senior Director,
Strategic and Product Marketing for Splash Technologies, Inc. (formerly ColorAge
Inc.) from January 1993 to February 1995. Prior to that, Mr. Borg held a variety
of marketing positions at DuPont Printing and Publishing, E. I. Du Pont de
Nemours and Co., and Crosfield Electronics, Inc. Mr. Borg holds a Bachelor of
Arts degree with honors from Harvard College and a Master of Communication Arts
from the New York Institute of Technology. He is 44 years old.
10
<PAGE> 11
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on the Nasdaq National Market under the
Nasdaq symbol "TRDT".
The following table set forth, for the periods indicated, the high and low
closing sales prices for the Common Stock on such market:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997:
First quarter ........................................... 20.00 16.00
Second quarter.......................................... 24.00 14.88
Third quarter ........................................... 24.75 17.25
Fourth quarter.......................................... 18.00 14.13
1998:
First quarter............................................ 17.38 11.75
Second quarter........................................... 16.75 12.13
Third quarter............................................ 18.38 14.50
Fourth quarter........................................... 17.50 8.38
</TABLE>
At December 7, 1998, the Company had 27 holders of record of its Common
Stock, although the Company believes that the number of beneficial owners of its
Common Stock as of that date was substantially greater. There were 6,464,639
shares of Common Stock outstanding on December 7, 1998.
The market price of the Company's Common Stock has fluctuated significantly
since the initial public offering in February 1996. The market price of the
Common Stock could be subject to significant fluctuation in the future based on
factors such as announcements of new products by the Company or its competitors,
quarterly fluctuations in Trident's financial results or other industrial
printing companies' financial results, changes in analysts' estimates of the
Company's financial performance, general conditions in the industrial printing
market and conditions in the financial markets. In addition, the stock market in
general has experienced extreme price and volume fluctuations, which have
particularly affected the market prices for many companies and which have often
been unrelated to the operating performance of the specific companies. There can
be no assurance that the market price of the Common Stock will not decline
substantially or otherwise continue to experience significant fluctuations in
the future.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain all cash for use in the operation and expansion of
the Company's business and does not anticipate paying any cash dividends in the
near future.
ITEM 6: SELECTED FINANCIAL DATA
The following selected consolidated financial data for each of the five
reporting periods presented has been derived from the audited consolidated
financial statements of the Company. The selected consolidated financial data
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Form 10-K.
11
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED (1) THE COMPANY
------------ -----------------------------------------------------
FOR THE
12 MONTHS
ENDED FISCAL YEAR
SEPTEMBER 30, -----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales ........................................... $ 12,493 $ 17,330 $ 25,925 $ 30,283 $ 32,832
Cost of sales ....................................... 5,853 6,604 9,392 10,818 11,914
-------- -------- -------- -------- --------
Gross profit ........................................ 6,640 10,726 16,533 19,465 20,918
-------- -------- -------- -------- --------
Operating expenses:
Marketing and selling ............................ 701 912 1,415 2,358 2,865
Research and development ......................... 1,078 1,317 2,326 3,027 4,142
Write-off of in-process research and
development ................................. -- -- 3,052 -- --
General and administrative ....................... 1,137 1,580 2,405 2,134 2,973
Amortization of intangibles ...................... 486 802 800 802 751
Amortization of deferred compensation ............ -- 1,183 443 -- --
-------- -------- -------- -------- --------
Total operating expenses ............................ 3,402 5,794 10,441 8,321 10,731
-------- -------- -------- -------- --------
Operating income .................................... 3,238 4,932 6,092 11,144 10,187
Interest (income) expense, net ...................... 482 1,845 241 (1,072) (1,138)
Other expense, net .................................. -- -- -- -- 207
Redeemable warrant interest charge .................. -- 4,561 1,710 -- --
-------- -------- -------- -------- --------
Income (loss) before income taxes ................... 2,756 (1,474) 4,141 12,216 11,118
Provision for income taxes .......................... 1,280 1,965 2,752 4,703 4,052
-------- -------- -------- -------- --------
Net income (loss) before extraordinary item ......... 1,476 (3,439) 1,389 7,513 7,066
Extraordinary item (net of income tax benefit of
$1,253) ......................................... -- -- (1,803) -- --
-------- -------- -------- -------- --------
Net income (loss) ................................... $ 1,476 $ (3,439) $ (414) $ 7,513 $ 7,066
======== ======== ======== ======== ========
CONSOLIDATED BALANCE
SHEET DATA:
Working capital ..................................... $ 2,103 $ 3,232 $ 21,056 $ 23,518 $ 26,603
Total assets ........................................ 20,967 23,133 38,331 40,907 43,340
Total long-term debt ................................ 14,738 12,361 -- -- --
Redeemable common stock warrants .................... -- 4,561 -- -- --
Redeemable preferred stock .......................... 3,123 3,311 -- -- --
Stockholders' equity (deficit) ...................... 1,072 (1,311) 35,962 37,889 40,589
</TABLE>
12
<PAGE> 13
(1) The pro forma combined statement of operations data for the 12 months
ended September 30, 1994 represents the Predecessor's results from
October 1, 1993 through June 23, 1994, and the Company's results from
inception (June 24, 1994) through September 30, 1994, and does not
purport to represent the results of operations as if Trident
International, Inc.'s acquisition of the Predecessor (the "1994
Acquisition") occurred on September 30, 1993. This information is
presented to provide more meaningful period to period comparisons. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." The Predecessor (the "Predecessor") refers to Trident,
Inc., the Company's operating subsidiary prior to its acquisition on
June 24, 1994 from Porelon, Inc. ("Porelon"), a wholly owned subsidiary
of Johnson Worldwide Associates, Inc. ("JWA").
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company designs, manufactures and markets impulse ink jet subsystems,
including printheads, inks and other consumables, and related components for the
industrial market. The Company markets its products worldwide principally to
OEMs, who integrate the products into systems which are then sold to end-users
directly or via distributors. The largest market segment currently addressed by
the Company's products is that of printing onto shipping cartons. Other
industrial market segments in which the Company's products are currently being
utilized include check coding, addressing and imprinting business forms, postal
bar coding and stamp cancellation and plotting garment patterns.
The Predecessor was founded in 1989 as Trident, Inc. Shortly after its
incorporation, a majority interest in the Predecessor was purchased by JWA
through JWA's direct subsidiary, Porelon. At that time, the Predecessor also
obtained the Dataproducts License from Dataproducts Corporation, which gave the
Predecessor exclusive rights to a series of liquid ink jet technology patents
for use in the "industrial marking field." The technology covered by the
Dataproducts License is at the core of the Company's current line of industrial
printing subsystems. In December 1992, Porelon purchased the remaining minority
interests in the Predecessor and the Predecessor became a wholly-owned
subsidiary of Porelon.
On June 24, 1994, the Company acquired all of the capital stock of the
Predecessor (the 1994 Acquisition). The aggregate cash consideration paid by the
Company in the 1994 Acquisition was approximately $19.9 million, including $1.0
million for a consulting agreement. The 1994 Acquisition has been accounted for
as a purchase and, accordingly, the total consideration has been allocated to
the assets acquired and liabilities assumed based on their estimated fair value
at the date of the 1994 Acquisition. The excess of the purchase price over the
fair value of the net assets acquired ($13.9 million) is being amortized over 20
years. Periodically, the Company evaluates the realizability of this asset based
upon expectations of undiscounted cash flows and operating income. Based upon
its most recent analysis, the Company believes that no impairment of the current
net book value of this asset exists. The $1.0 million payment made by the
Company under the consulting agreement was being amortized. The services
provided under the consulting agreement largely related to transition services
in connection with the establishment of stand-alone operations and assistance in
preparation for an initial public offering. Other long-term assets acquired in
the 1994 Acquisition are being depreciated over their respective useful lives of
5 years.
In February 1996, the Company completed the initial public offering of its
common stock which provided proceeds, after underwriting discounts and
commissions, of $28.3 million. The Company incurred certain significant charges
relating to the 1994 Acquisition from the beginning of fiscal year 1996 through
the consummation of the offering. The Company incurred charges of $4.2 million,
net of related income tax benefits, comprised of $2.1 million of recurring
charges which were expensed through consummation of the offering and did not
recur thereafter, and $2.1 million of extraordinary or non-recurring charges
which were expensed at the closing of the offering. The Company used
approximately $10.8 million to repay the outstanding indebtedness under its
credit facility and $4.5 million to retire all of the $5.0 million in principal
amount of the zero coupon notes issued by the Company for $1.9 million in
connection with the 1994 Acquisition. The remaining net proceeds were used for
working capital and general corporate purposes. As a result of the offering, the
Company incurred extraordinary charges to earnings for approximately $2.2
million of unamortized original issue discount and approximately $898,000 of
unamortized financing costs relating to the credit facility and the zero coupon
notes. The Company also recognized a non-recurring charge of approximately
$438,000, representing the unamortized portion of the cost of the consulting
agreement as of the offering date, which was terminated at the time of the
offering. Collectively, these items resulted in extraordinary or non-recurring
charges to earnings of approximately $2.1 million, net of related income tax
benefits, at the time of the offering.
In March 1996, the Company acquired from Dataproducts Corporation a
non-exclusive license for patented solid ink jet printhead technology in certain
licensed industrial marking fields. This agreement allows the Company to use
these patents in the development and commercialization of its own solid ink
printhead. At the time of the purchase of the solid ink jet technology, certain
technological hurdles had not been overcome to enable the Company to
commercialize a product. Commercialization of this technology by the
13
<PAGE> 14
Company required extensive development work both on the solid ink itself and the
ink jet printheads used to apply that ink in commercial applications. The
Company has made significant progress and plans to further develop this
technology. Over the life of the development process, the Company anticipates
that it will have expended in excess of $750,000 to complete the development of
this technology. Consequently, the Company recorded a charge of approximately
$3.1 million during Fiscal 1996 as a write-off of purchased in-process research
and development to record the cost of evaluating and acquiring this license. The
Company intends to continue to evaluate potential acquisitions and licenses of
new technologies.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of net
revenues for the years ended September 30, 1996, 1997, and 1998:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net sales ......................................... 100.0% 100.0% 100.0 %
Cost of sales ..................................... 36.2 35.7 36.3
------ ------ ------
Gross profit ...................................... 63.8 64.3 63.7
------ ------ ------
Operating expenses:
Marketing and selling ........................ 5.4 7.8 8.7
Research and development ..................... 9.0 10.0 12.6
Write-off of purchased in-process research
and development .............................. 11.8 -- --
General and administrative ................... 9.3 7.1 9.1
Amortization of intangibles .................. 3.1 2.6 2.3
Amortization of deferred compensation ........ 1.7 -- --
------ ------ ------
Total operating expenses .......................... 40.3 27.5 32.7
------ ------ ------
Operating income .................................. 23.5 36.8 31.0
Interest (income) expense, net .................... 0.9 (3.5) (3.5)
Other (income) expense, net ....................... -- -- 0.6
Redeemable warrant interest charge ................ 6.6 -- --
------ ------ ------
Income (loss) before income taxes ................. 16.0 40.3 33.9
Provision for income taxes ........................ 10.6 15.5 12.4
------ ------ ------
Net income (loss) before extraordinary item ....... 5.4 24.8 21.5
Extraordinary item ................................ (7.0) -- --
------ ------ ------
Net income (loss) ................................. (1.6)% 24.8% 21.5%
====== ====== ======
</TABLE>
14
<PAGE> 15
Fiscal 1998 Compared to Fiscal 1997.
Net Sales. Net sales increased $2.6 million, or 8.4% to $32.8 million in
Fiscal 1998 from $30.3 million in Fiscal 1997. Printhead sales decreased by
approximately $1.0 million due to a decrease in printhead unit volume of 7.8%.
This decrease was partially offset by a 1.8% increase in average selling price
per printhead. Sales of ink products increased by 29.5% in Fiscal 1998 as
compared to Fiscal 1997 due to a 32.5% increase in the unit volume of ink. This
was partially offset by a reduction in ink average selling price of 2.2% as
customers obtained volume discounts. Net sales to international customers
decreased $27,000 or less than 1% in Fiscal 1998. This decline resulted from a
decrease in direct sales to Asian customers of 32.2% offset by a 13.3% increase
in direct sales to European customers.
Gross Profit. Gross profit increased by $1.5 million, or 7.5%, to $20.9
million in Fiscal 1998 from $19.5 million in Fiscal 1997. Gross profit as a
percentage of net sales decreased from 64.3% in Fiscal 1997 to 63.7% in Fiscal
1998. The decrease in gross profit as a percentage of sales was due to increased
average unit cost of the Company's printhead products partially offset by higher
average selling price per printhead and a higher percentage of ink revenue.
Marketing and Selling Expenses. Marketing and selling expenses increased
$507,000, or 21.5% to $2.9 million in Fiscal 1998 from $2.4 million in Fiscal
1997 due to an increase in salaries, recruiting, relocation, travel expenses and
marketing literature. As a percentage of net sales, these expenses increased to
8.7% in Fiscal 1998 from 7.8% in Fiscal 1997. The Company believes that
marketing and selling expenses will continue to increase in both dollar terms
and as a percentage of net sales as the Company introduces new products, opens
new markets and increases end user awareness.
Research and Development Expenses. Research and development expenses
increased $1.1 million, or 36.8%, to $4.1 million in Fiscal 1998 from $3.0
million in Fiscal 1997. As a percentage of net sales, these expenses increased
to 12.6% in Fiscal 1998 from 10.0% in Fiscal 1997 due to the increases in
engineering and research and development spending to develop new technologies
and products. The increase was due to increases in payroll expense and
associated materials and tools expenses.
General and Administrative Expenses. General and administrative expenses
increased $839,000, or 39.3%, to $3.0 million in Fiscal 1998 from $2.1 million
in Fiscal 1997. As a percentage of net sales, these expenses increased to 9.1%
in Fiscal 1998 from 7.1% in Fiscal 1997. The increase was principally due to
higher legal fees due to the Company's initiation of a patent infringement suit
against certain third party ink suppliers. Other increases were attributable to
increases in payroll, recruiting, professional fees and insurance.
Amortization of Intangibles and Amortization of Deferred Compensation.
Amortization of the excess of purchase price over the fair value of net assets
acquired and other intangibles decreased $51,000, or 6.4%, to $751,000 in Fiscal
1998 from $802,000 in Fiscal 1997. The decrease was due to certain intangibles
becoming fully amortized.
Interest (Income) Expense, net. Net interest income was $1.1 million for
Fiscal 1998 and 1997, respectively.
Provision for Income Taxes. The effective tax rate for Fiscal 1998 was 36.4%
compared to an effective tax rate for Fiscal 1997 of 38.5%. The effective tax
rate for 1998 decreased due principally to increased research and development
tax credits. The effective tax rate for Fiscal 1998 differed from the statutory
rate principally due to state income taxes and the non-deductibility of
amortization costs related to the excess of purchase price over fair value of
assets acquired and tax credits.
15
<PAGE> 16
Fiscal 1997 Compared to Fiscal 1996.
Net Sales. Net sales increased $4.4 million, or 17% to $30.3 million in
Fiscal 1997 from $25.9 million in Fiscal 1996. Approximately $1.1 million of the
increase in net sales was due to a 7.2% increase in average selling price per
printhead unit due to a change in product mix to the higher priced Ultrajet
256/32 printhead. This was partially offset by a 2.2% decrease in unit volume
sales. In certain cases, one Ultrajet 256/32 printhead replaces two printheads
of other configurations. Sales of ink products increased 39% in Fiscal 1997 as
compared to Fiscal 1996 due to a 55.0% increase in the unit volume of ink as the
installed base of printheads expanded during the year. This was partially offset
by a reduction of average selling price of 10.4% as customers obtained higher
volume discounts. Net sales to international customers increased by $845,000 or
10.7%,in Fiscal 1997.
Gross Profit. Gross profit increased by $2.9 million, or 18%, to $19.5
million in Fiscal 1997 from $16.5 million in Fiscal 1996. Gross profit as a
percentage of net sales increased from 63.8% in Fiscal 1996 to 64.3% in Fiscal
1997. The increase in gross profit as a percentage of sales was due to increased
average selling prices of the Company's printhead products and a higher
percentage of ink revenue.
Marketing and Selling Expenses. Marketing and selling expenses increased
$943,000, or 67% to $2.4 million in Fiscal 1997 from $1.4 million in Fiscal 1996
due to an increase in personnel and associated travel expense and marketing
literature. As a percentage of net sales, these expenses increased to 7.8% in
Fiscal 1997 from 5.4% in Fiscal 1996. The Company believes that marketing and
selling expenses will increase in both dollar terms and as a percentage of net
sales as the Company introduces new products, opens new markets and increases
end user awareness.
Research and Development Expenses. Research and development expenses
increased $701,000, or 30%, to $3.0 million in Fiscal 1997 from $2.3 million in
Fiscal 1996. As a percentage of net sales, these expenses increased to 10.0% in
Fiscal 1997 from 9.0% in Fiscal 1996 due to the increases in engineering and
research and development spending to develop new technologies and products. The
increase was due to increases in payroll expense and contract research. Research
and development expenses were 10.6% of net sales for the three months ended
September 30, 1997 and the Company expects that the Company will continue to
make research and development expenditures at this level for the foreseeable
future.
Write-off of Purchased In-Process Research and Development. In March 1996,
the Company acquired from Dataproducts Corporation a non-exclusive license for
patented solid ink jet printhead technology in certain licensed industrial
marking fields. This agreement allows the Company to use these patents in the
development and commercialization of its own solid ink printhead. The Company
recorded a charge of approximately $3.1 million during Fiscal 1996 as a
write-off of purchased in process research and development to record the cost of
evaluating and acquiring this license. There were no similar expenses in the
year ended September 30, 1997.
General and Administrative Expenses. General and administrative expenses
decreased $271,000, or 11%, to $2.1 million in Fiscal 1997 from $2.4 million in
Fiscal 1996. Included in general and administrative expenses for the year ended
September 30, 1996 was the write-off of a consulting agreement in the amount of
$438,000. As a percentage of net sales, these expenses decreased to 7.1% for
Fiscal 1997 from 9.3% for Fiscal 1996. If the write-off of the consulting
agreement had not occurred, these expenses would have been 7.6% of net sales for
Fiscal 1996.
Amortization of Intangibles and Amortization of Deferred Compensation.
Amortization of the excess of purchase price over the fair value of net assets
acquired and other intangibles of $802,000 and $800,000, respectively, did not
vary in amount for Fiscal 1997 as compared to Fiscal 1996. Amortization of
deferred compensation decreased by $443,000 to $0 for Fiscal 1997 because
deferred compensation expense was fully amortized effective February, 1996.
Interest (Income) Expense, net. Net interest income was $1.1 million for
Fiscal 1997 compared to net interest expense of $241,000 for Fiscal 1996. This
was due to repayment of all outstanding borrowings with the proceeds of the
initial public offering and an increase in interest income on higher cash
balances.
Redeemable Warrant Interest Charge. Redeemable warrant interest charge
decreased by $1.7 million to $0 for Fiscal 1997 because the redeemable warrants
were fully accreted as of February, 1996. (See Note 11 of "Notes to Consolidated
Financial Statements").
Provision for Income Taxes. The provision for income taxes for Fiscal 1997
was $4.7 million on income before income taxes of $12.2 million. The effective
tax rate for Fiscal 1997 differed from the statutory rate principally due to
state income taxes and the non-deductibility of amortization costs related to
the excess of purchase price over fair value of assets acquired.
16
<PAGE> 17
Extraordinary Item. In connection with the initial public offering, the
Company expensed approximately $2.2 million of unamortized original issue
discount upon prepayment of certain zero coupon notes issued in the 1994
transaction and approximately $898,000 of unamortized deferred financing cost.
The extraordinary item represents the write-off of these items less a related
income tax benefit of approximately $1.3 million. There were no similar expenses
in 1997.
Business Environment and Future Results.
The industrial printing industry is highly competitive and the Company
believes it will need to continue to develop new products and applications in
order to remain competitive. Several of the Company's competitors are larger and
have greater financial, research and development, marketing and other resources
than the Company. For example, Nu-Kote Holdings, Inc. released a piezoelectric
printhead intended for use in industrial printing and other applications. Also,
Markem Corporation has introduced a solid ink jet printer targeted for carton
marking and coding applications. No assurance can be given that the Company will
be able to compete successfully against current or future competitors or that
the competitive pressures faced by the Company will not adversely affect its
results of operations.
The Company is aware that manufacturers of certain ink products are
claiming that their inks could be utilized with certain of the Company's impulse
ink jet printheads. Although the use of such other inks will void the Company's
warranties on its printheads, and could, in the Company's judgement, result in
inferior performance and permanent damage to its printheads, there can be no
assurance that the introduction and sale of such other inks will not have a
material adverse effect on the Company's financial condition or results of
operation or that end users will continue to purchase their ink requirements
from the Company. In December, 1997, the Company filed a civil action charging
several such manufacturers with infringing two of the Company's patents (see
"ITEM 3: Legal Proceedings"). This has resulted in counterclaims by two
defendants that include patent invalidity and antitrust violations. No assurance
can be given that the Company's litigation in this area will result in a
favorable decision, or that any adverse decision on the counterclaims would not
have a material adverse effect on the Company's results of operations.
The markets for the Company's products are characterized by changing
technology, evolving industry standards and changing customer needs. The
Company's future success will depend in part on its ability to enhance its
current products and to develop new products on a timely and cost-effective
basis in order to respond to technological developments and changing customer
needs. There can be no assurance that the Company will be successful in
developing new products or enhancing its existing products on a timely or
cost-effective basis.
New products could also have the effect of decreasing customer demand for
the Company's current products. Although the Company historically has not
experienced any material adverse impact on its business attributable to delays
in the introduction of new products, there can be no assurance that delays will
not occur in the future. The Company expects a component of its growth strategy
to be the acquisition of new technologies, whether through entering into
licensing arrangements, acquiring businesses owning desirable technology, or
otherwise. An example of this is the solid ink jet printing technology. There
can be no assurance that the Company's investments in new technologies,
including solid ink, will lead to the successful development of new products.
The Company's net sales are dependent upon the ability of its OEM customers
to develop and sell products that incorporate the Company's impulse ink jet
products. Factors such as economic conditions, inventory position, limited
marketing resources and other factors affecting these OEM customers could have a
substantial impact upon the Company's financial results. No assurances can be
given that the Company's OEM customers will not experience financial or other
difficulties that could adversely affect their operations and, in turn, the
results of operations of the Company.
For the year ended September 30, 1998, approximately 77% of the Company's
net sales were to its top ten OEM customers, while approximately 33% of the
Company's net sales for this period were to Videojet Systems International, Inc.
A significant diminution in the sales to or loss of any of the Company's major
customers would have a material adverse effect on the Company's results of
operations.
For the year ended September 30, 1998, approximately 69% of the Company's
net sales were derived from carton coding and the Company anticipates that
carton coding will continue to account for a substantial portion of the
Company's total net sales. A reduction in demand for carton coding systems would
have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company's annual and quarterly operating results may fluctuate due to
factors such as the timing of new product announcements and introduction by the
Company and its competitors, market acceptance of new or enhanced versions of
the Company's products, changes in product mix, changes in manufacturing costs
or other expenses, competitive pricing pressures, the gain or loss of
significant customers,
17
<PAGE> 18
increased research and development expenses and general economic conditions.
The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarterly variations in the Company's operating
results, shortfalls in such operating results from levels forecast by securities
analysts and other events or factors. In addition, the stock market has, from
time to time, experienced extreme price and volume fluctuations that have often
been unrelated to the operating performance of the affected companies.
In connection with the consummation of the Company's initial public offering
in February, 1996, the Company paid down all of its indebtedness and fully
amortized a number of expenses incurred in connection with the 1994 Acquisition.
As a result, period to period comparisons involving periods through March 31,
1996 may not necessarily be meaningful or indicative of trends in operating
results.
Liquidity and Capital Resources. At September 30, 1998, the Company had
working capital of $26.6 million compared to $23.5 million at September 30,
1997. At September 30, 1998, the Company had cash and marketable securities of
$20.4 million. The primary investing and financing cash flows activities for the
year ended September 30, 1998 were the purchase of marketable securities of $1.8
million and the purchase of treasury stock of $4.4 million, respectively. Cash
flows from operations of $6.1 million results primarily from net income of $7.1
million plus depreciation and amortization of $1.2 million less increases in
current assets. The Company has a working capital line of credit with Fleet Bank
which allows it to borrow up to $1,000,000. In addition, the Company has an
acquisition line of credit with Fleet Bank which allows it to borrow up to
$10,000,000. There were no borrowings under these lines at September 30, 1998.
The Company's long-term capital requirements will depend on numerous factors
including the rate at which the Company identifies, evaluates and acquires new
technologies, whether through entering into licensing arrangements or acquiring
businesses, the timing of the expansion of the Company's facilities and the
purchase of additional factory automation equipment. The Company believes that
it has sufficient cash resources to meet its anticipated needs for working
capital and capital expenditures through at least the next 12 months.
Year 2000 Compliance. The "Year 2000" (or "Y2K") issue affects computer and
information technology ("IT") systems, as well as non-IT systems which may
include embedded technology such as micro-processors and micro-controllers (or
micro-chips) that have date sensitive programs that may not properly recognize
the year 2000. Systems that do not properly recognize such information could
generate inaccurate data or cause a system to fail, resulting in business
interruption. The Company is currently developing a plan to provide measured
assurances that its computer and IT-systems, non-IT systems, including
instruments and equipment, and those of third parties which have a material
relationship with the Company are or will be Y2K compliant.
The Company expects to complete in January, 1999 a comprehensive inventory
and assessment of its existing IT and non-IT systems and those of third parties,
as well as planned and anticipated systems, and third parties' services which
the Company may purchase or use. Assessment will include identifying critical
systems - internal and external (including third parties) - in order to
formulate a remediation and verification plan. The Company currently believes
that remediation and verification, which includes obtaining written assurances
from key vendors and suppliers, as well as testing, will be completed by March
31, 1999.
The Company believes, based on preliminary information, that the costs
associated with remediation and verification to become Y2K compliant will not
have a material adverse impact on the Company's financial position, results of
operations, or cash flow. In the event that the Company's Y2K compliance plan is
not successfully implemented, the Company may experience temporary disruptions
of the Company's operations - presuming broad Y2K compliance by general services
providers such as utilities, telephone, data transfer, and other government and
private entities. While the Company has not yet developed contingency plans for
such events, the Company expects to prepare such plans by March, 1999.
Although the Company has taken steps to address the Y2K problem, there can
be no assurance that the failure of the Company and/or its material third
parties to timely attain Y2K compliance or that the failure and/or the impacts
of broader compliance failures by telephone, mail, data transfer or other
utility or general service providers or government or private entities will not
have a material adverse effect on the Company. Further, there can be no
assurance that the costs associated with achieving such compliance or any
failure to become Y2K compliant will not be material to the Company's financial
position, its results of operations, or its cash flows.
The Company's discussion above regarding Y2K compliance contains several
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including,
without limitation, the Company's expectations as to the approximate time of
completion of (i) the inventory and assessment stage, (ii) the remediation and
verification stage, and (iii) its contingency plan, as well as the Company's
estimates of the costs involved in achieving Y2K compliance. The actual results
of the Company's Y2K compliance efforts could differ materially from those
projected in the forward-looking statements. Factors that might cause such a
difference include the availability of Y2K compliant replacement software and
hardware as
18
<PAGE> 19
well as qualified personnel and other information technology resources and the
actions of third parties and governmental agencies with respect to Y2K issues.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company sells products to customers located in Europe and the Far East.
All of these sales are denominated in U.S. dollars. In addition, the Company has
never entered into any derivative or other transactions for speculative
purposes.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and notes thereto are included elsewhere
in the report on Form 10-K as follows:
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................................... F-1
Consolidated Balance Sheets at September 30, 1997 and 1998............................................. F-2
Consolidated Statements of Operations for the three years ended September 30, 1996,
1997, and 1998....................................................................................... F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the three years ended
September 30, 1996, 1997, and 1998................................................................... F-4
Consolidated Statements of Cash Flows for the three years ended September 30, 1996,
1997, and 1998....................................................................................... F-5
Notes to Consolidated Financial Statements............................................................. F-6
Financial Statement Schedules:
Report of Independent Public Accountants on Financial Statement Schedule............................... F-16
Schedule II - Valuation and Qualifying Accounts........................................................ F-17
</TABLE>
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or notes
thereto.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
19
<PAGE> 20
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 of Form 10-K with respect to
identification of directors is incorporated by reference to the information
contained in Trident's definitive Proxy Statement for the Company's 1999 Annual
Meeting of Stockholders (the "Proxy Statement"), to be filed with the Securities
and Exchange Commission. For information with respect to the executive officers
of the Registrant, see "Executive Officers of the Registrant" at the end of Part
I of this report.
ITEM 11: EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is incorporated by
reference to such information contained in the Proxy Statement.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is incorporated by
reference to such information contained in the Proxy Statement.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is incorporated by
reference to the information contained in the Proxy Statement.
20
<PAGE> 21
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements - See Item 8 of Part II.
(2) Financial Statement Schedules- See Item 8 of Part II.
(3) Exhibits - See Exhibit Index at pages 22 and 23 of this Form 10-K.
(b) Reports on Form 8-K - On September 21, 1998 the Company filed a
Current Report on Form 8-K for the purposes of filing a press release
the Company had issued on September 9, 1998 announcing estimated
results for the quarter ended September 30, 1998.
21
<PAGE> 22
EXHIBIT INDEX
Exhibit
Number Description
3.1 Third Amended and Restated Certificate of Incorporation of Trident
International, Inc. (incorporated herein by reference to the
Company's quarterly report on Form 10-Q for the three months ended
March 31, 1996)
3.2 Form of Amended and Restated By-laws of Trident International,
Inc. (incorporated herein by reference to the Form 10-Q for the
three months ended March 31, 1996)
4.1 Specimen certificate for shares of Common Stock, $.01 par value of
the Company (incorporated herein by reference to the Company's
Registration Statement on Form S-1 (File No. 33-80549)
("Registration Statement"))
4.2 Warrant to Purchase 235,192 Shares of Common Stock of the Company
dated as of June 24, 1994 (incorporated herein by reference to the
Registration Statement)
4.3 Registration Rights Agreement by and among Trident Holding Corp.,
the Management Investors, the Brean Murray Investors, the West
Point Investors, the TA Investors, and Nations Financial Capital
Corporation dated June 24, 1994 (incorporated herein by reference
to the Registration Statement)
10.1 Employment Agreement between the Company and Elaine A. Pullen
dated as of November 1, 1997 (incorporated herein by reference to
the form 10-Q for the three months ended December 31, 1997.)
10.2 Consulting Agreement between the Company and R. Hugh van Brimer
dated as of July 1, 1998 (incorporated herein by reference to the
form 10-Q for the three months ended June 30, 1998.)
10.3 Stock Purchase and Restriction Agreement by and between the
Company and Elaine A. Pullen dated as of October 27, 1994
(incorporated herein by reference to the Registration Statement)
10.4 Memorandum of Understanding by and between Trident, Inc. and
Micropore, Inc. dated as of May 24, 1994 (incorporated herein by
reference to the Registration Statement)
10.5 License Agreement by and between Dataproducts Corporation and
Trident, Inc. dated as of March 17, 1989 (incorporated herein by
reference to the Registration Statement)
10.6 Letter Amendment by and between Dataproducts Corporation and
Trident, Inc. dated as of January 5, 1994 (incorporated herein by
reference to the Registration Statement)
10.7 Amendment to License Agreement by and between Dataproducts
Corporation and Trident, Inc. dated as of March 17, 1989,
effective as of December 1, 1992 (incorporated herein by reference
to the Registration Statement)
10.8 Lease by and between Oskar G. Rogg and Trident, Inc. for premises
at 1114 Federal Road, Brookfield, Connecticut dated as of June 30,
1998 incorporated herein by reference to the form 10-Q for the
three months ended June 30, 1998.
10.9 Lease by and between Oskar G. Rogg and Trident, Inc. for premises
at 1112 Federal Road, Brookfield, Connecticut dated as of June 30,
1998 incorporated herein by reference to the form 10-Q for the
three months ended June 30, 1998.
10.10 Third Amended and Restated 1994 Stock Option and Grant Plan
(incorporated herein by reference to the Form 10-Q for the three
months ended December 31, 1997.)
10.11 Sales and License Agreement between Marsh Company and Trident,
Inc. dated as of July 28, 1993 (incorporated herein by reference
to the Registration Statement)
10.12 Sales and License Agreement between Foxjet, Inc. and Trident, Inc.
dated as of February 20, 1991 (incorporated herein by reference to
the Registration Statement)
10.13 Ink Jet Printer OEM Kit Agreement between BancTec, Inc. and
Dataproducts, Corp. as assigned to Trident, Inc. on March 17, 1989
(incorporated herein by reference to the Registration Statement)
**10.14 Arrangements for the Purchase and Supply of Inks with Porelon
Group dated August 7, 1996 (incorporated herein by reference to
the Company's amended annual report on Form 10-K for the fiscal
year ended September 30, 1996 (the "1996 Form 10-K/A"))
10.15 Patent License Agreement dated March 15, 1996 between the Company
and Dataproducts Corporation (incorporated herein by reference to
the Form 10-Q for the three months ended March 31, 1996.)
10.16 Lease by and between Oskar G. Rogg and Trident, Inc. for Premises
at 1112 and 1114 Federal Road, Brookfield, Connecticut dated as of
August 6, 1997 (incorporated herein by reference to the Company's
annual report on form 10-K for the fiscal year ended September 30,
1997.)
10.17 Lease by and between Robert and Laura E. Lore and Trident, Inc.
for Premises at 129 Danbury Road, New Milford, Connecticut dated
as of October 23, 1997 (incorporated herein by reference to the
Company's annual report on form 10-K for the fiscal year ended
September 30, 1997).
*10.18 Credit Agreement, Replacement Revolving Loan Note, and Continuing
Guaranty Agreement between Fleet Bank and the Company dated July
31, 1998.
10.19 Employment Agreement between the Company and J. Leo Gagne dated as
of June 1, 1998 (incorporated herein by reference to the Form 10-Q
for the three months ended June 30, 1998).
22
<PAGE> 23
10.20 Letter of addendum to the leases for the premises located at 1114
Federal Road and 1112 Federal Road, Brookfield, Connecticut dated
July 20, 1998 (incorporated herein by reference to the form 10-Q
for the three months ended June 30, 1998).
*10.21 Lease by and between Thomas G. Taylor, John D. Gerrasoni, and
Gordon E. Tayler, doing business as Modern Realty Associates and
the Company for Premises located at 1120 Federal Road, Brookfield,
Connecticut dated as of August 25, 1998.
*21.1 Schedule of Subsidiaries of Registrant
*23.1 Consent of Arthur Andersen LLP
*27 Financial Data Schedule
*Filed herewith
** Certain portions of this document have been omitted pursuant to a grant
of confidential treatment from the Securities and Exchange Commission ("the
Commission"). The omitted portions have been filed separately with the
Commission.
23
<PAGE> 24
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.
Trident International, Inc.
(Registrant)
Dated: December 21, 1998 By: /s/ Elaine A. Pullen
-----------------------------------------
Elaine A. Pullen
President & Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R. Hugh Van Brimer Director and December 21, 1998
- ------------------------ Chairman of the Board
(R. Hugh Van Brimer)
President,
/s/ Elaine A. Pullen Chief Executive Officer December 21 , 1998
- ----------------------- and Director
(Elaine A. Pullen) (Principal Executive Officer)
Vice President
/s/ J. Leo Gagne and Chief Financial Officer December 21, 1998
- ----------------------- (Principal Financial and
(J. Leo Gagne) Accounting Officer)
/s/ Robert S. Anderson Director December 21, 1998
- -----------------------
(Robert S. Anderson)
/s/ Russell Greenberg Director December 21, 1998
- -----------------------
(Russell Greenberg)
/s/ Michael K. Lorelli Director December 21, 1998
- -----------------------
(Michael K. Lorelli)
/s/ Norman Norris Director December 21, 1998
- -----------------------
(Norman Norris)
/s/ John R. Webb Director December 21, 1998
- -----------------------
(John R. Webb)
</TABLE>
24
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Trident International, Inc.:
We have audited the accompanying consolidated balance sheets of Trident
International, Inc. (a Delaware corporation) and subsidiaries as of September
30, 1997 and 1998 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended September 30, 1998. 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 consolidated financial position of Trident
International, Inc. and subsidiaries as of September 30, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1998 in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Hartford, Connecticut
October 29, 1998
F-1
<PAGE> 26
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1997 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................ $ 7,065 $ 5,887
Marketable securities .................................................... 12,728 14,541
Accounts receivable, net of allowance for doubtful accounts of $300,000
in 1997 and 1998 ...................................................... 4,385 5,283
Inventories .............................................................. 1,745 2,103
Deferred income taxes .................................................... 465 464
Other current assets ..................................................... 148 1,076
------- -------
Total current assets .............................................. 26,536 29,354
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, net ................................. 1,924 2,538
DEFERRED INCOME TAXES ..................................................... 704 457
INTANGIBLE ASSETS, net .................................................... 11,743 10,991
------- -------
$40,907 $43,340
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................ $ 1,540 $ 1,336
Accrued expenses ........................................................ 1,067 1,049
Income taxes payable .................................................... 411 366
------- -------
Total current liabilities ......................................... 3,018 2,751
------- -------
COMMITMENTS AND CONTINGENCIES (Note 14)
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; 30,000,000 shares authorized; 7,167,981 and
7,180,939 shares issued and outstanding at September 30, 1997 and
1998, respectively .................................................... 72 72
Additional paid-in capital .............................................. 40,146 40,216
Retained earnings ....................................................... 3,346 10,412
------- -------
43,564 50,700
Less - Treasury stock at cost, 345,000 shares in 1997 and 646,600 in 1998 5,675 10,111
------- -------
Total stockholders equity ......................................... 37,889 40,589
------- -------
$40,907 $43,340
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE> 27
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
NET SALES ............................................................. $ 25,925 $ 30,283 $ 32,832
COST OF SALES ......................................................... 9,392 10,818 11,914
----------- ----------- -----------
Gross profit .................................................... 16,533 19,465 20,918
----------- ----------- -----------
OPERATING EXPENSES:
Marketing and selling ........................................... 1,415 2,358 2,865
Research and development ........................................ 2,326 3,027 4,142
Write-off of purchased in-process research and development ...... 3,052 -- --
General and administrative ...................................... 2,405 2,134 2,973
Amortization of excess of purchase price over the fair value of
net assets acquired and other intangibles........................ 800 802 751
Amortization of deferred compensation ........................... 443 -- --
----------- ----------- -----------
Total operating expenses .................................. 10,441 8,321 10,731
----------- ----------- -----------
Operating income .......................................... 6,092 11,144 10,187
OTHER (INCOME) EXPENSE:
Interest (income) expense, net .................................. 241 (1,072) (1,138)
Other expense, net .............................................. -- -- 207
Redeemable warrant interest charge .............................. 1,710 -- --
----------- ----------- -----------
Income before income taxes and extraordinary item .......... 4,141 12,216 11,118
PROVISION FOR INCOME TAXES ............................................ 2,752 4,703 4,052
----------- ----------- -----------
Net income before extraordinary item ........................ 1,389 7,513 7,066
EXTRAORDINARY ITEM, net of income tax benefit of $1,253 ............... (1,803) -- --
----------- ----------- -----------
NET INCOME (LOSS) ..................................................... (414) 7,513 7,066
INCREASE IN REDEMPTION VALUE OF PREFERRED STOCK ....................... (83) -- --
----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS ................... $ (497) $ 7,513 $ 7,066
=========== =========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Net income before extraordinary item ........................... $ 0.28 $ 1.07 $ 1.06
Extraordinary item, net of tax .................................. (0.38) -- --
----------- ----------- -----------
Net income (loss) ............................................... $ (0.10) $ 1.07 $ 1.06
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING FOR BASIC EARNINGS PER SHARE
4,770,743 7,039,157 6,636,313
=========== =========== ===========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Net income before extraordinary item ............................. $ 0.26 $ 1.05 $ 1.05
Extraordinary item, net of tax ................................... (0.36) -- --
----------- ----------- -----------
Net income (loss) ................................................ $ (0.10) $ 1.05 $ 1.05
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING FOR DILUTED EARNINGS PER
SHARE ................................................................. 5,030,112 7,151,722 6,742,586
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE> 28
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(000'S OMITTED, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK ADDITIONAL RETAINED
$.01 PAR VALUE COMMON STOCK PAID-IN DEFERRED EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT)
------ ------ ------ ------ ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1995 .. 1,560,000 $ 16 -- $ -- $ 2,786 $ (443) $ (3,670)
Net loss ................... -- -- -- -- -- -- (414)
Conversion of Class A common
Stock to common stock .... (1,560,000) (16) 1,560,000 16 -- -- --
Issuance of common stock ... -- -- 1,900,000 19 28,245 -- --
Payment of offering costs .. -- -- -- -- -- (1,065) --
Exercise of warrants and
options ...................... -- -- 477,064 4 459 -- --
Conversion of preferred
stock to common stock ........ -- -- 3,073,170 31 3,363 -- --
Conversion of redeemable
Common stock warrants to
Stockholders' equity ..... -- -- -- -- 6,271 -- --
Increase in redemption value
of Preferred stock ........... -- -- -- -- -- -- (83)
Amortization of deferred
Compensation ............. -- -- -- -- -- 443 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1996 .. -- -- 7,010,234 70 40,059 -- (4,167)
Net income ................. -- -- -- -- -- -- 7,513
Issuance of common stock ... -- -- 3,689 -- 55 -- --
Purchase of treasury stock . -- -- -- -- -- -- --
Exercise of warrants and
Options .................. -- -- 154,058 2 32 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1997 .. -- -- 7,167,981 72 40,146 -- 3,346
Net income ................. -- -- -- -- -- -- 7,066
Issuance of common stock ... -- -- 4,396 -- 50 -- --
Purchase of treasury stock . -- -- -- -- -- -- --
Exercise of warrants and
Options .................. -- -- 8,562 -- 20 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1998 .. -- $ -- 7,180,939 $ 72 $ 40,216 $ -- $ 10,412
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TREASURY
STOCK TOTAL
----- -----
<S> <C> <C>
BALANCE, September 30, 1995 .. $ -- $ (1,311)
Net loss ................... -- (414)
Conversion of Class A common
Stock to common stock .... -- --
Issuance of common stock ... -- 28,264
Payment of offering costs .. -- (1,065)
Exercise of warrants and
options ...................... -- 463
Conversion of preferred
stock to common stock ........ -- 3,394
Conversion of redeemable
Common stock warrants to
Stockholders' equity ..... -- 6,271
Increase in redemption value
of Preferred stock ........... -- (83)
Amortization of deferred
Compensation ............. -- 443
---------- ----------
BALANCE, September 30, 1996 .. -- 35,962
Net income ................. -- 7,513
Issuance of common stock ... -- 55
Purchase of treasury stock . (5,675) (5,675)
Exercise of warrants and
Options .................. -- 34
---------- ----------
BALANCE, September 30, 1997 .. (5,675) 37,889
Net income ................. -- 7,066
Issuance of common stock ... -- 50
Purchase of treasury stock . (4,436) (4,436)
Exercise of warrants and
Options .................. -- 20
---------- ----------
BALANCE, September 30, 1998 .. $ (10,111) $ 40,589
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 29
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................................... $ (414) $ 7,513 $ 7,066
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization ............................................ 1,315 1,152 1,235
Amortization of deferred compensation .................................... 443 -- --
Extraordinary item ....................................................... 3,056 -- --
Write-off of consulting agreement ........................................ 438 -- --
Deferred income taxes .................................................... (1,162) 181 248
Accretion of interest on zero coupon notes ............................... 108 -- --
Accretion of redeemable warrant interest charge .......................... 1,710 -- --
Changes in operating assets and liabilities:
Accounts receivable ................................................... (986) (470) (898)
Inventories ........................................................... (514) (182) (358)
Other current assets .................................................. (72) 19 (928)
Accounts payable, accrued expenses and income taxes payable ........... 875 649 (267)
-------- -------- --------
Net cash provided by operating activities .......................... 4,797 8,862 6,098
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities, net .................................. -- (12,728) (1,813)
Purchases of leasehold improvements and equipment, net ................... (848) (832) (1,097)
-------- -------- --------
Net cash used in investing activities .............................. (848) (13,560) (2,910)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................... 28,264 55 50
Payments of offering costs ............................................... (1,065) -- --
Exercise of warrants and stock options ................................... 463 34 20
Purchases of treasury stock .............................................. -- (5,675) (4,436)
Repayments of long-term indebtedness ..................................... (17,250) -- --
-------- -------- --------
Net cash (used in) provided by financing activities ............... 10,412 (5,586) (4,366)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................... 14,361 (10,284) (1,178)
CASH AND CASH EQUIVALENTS, beginning of period ............................. 2,988 17,349 7,065
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period ................................... $ 17,349 $ 7,065 $ 5,887
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest ............................................................... $ 3,120 $ -- --
Income taxes ........................................................... $ 2,506 $ 4,381 $ 3,800
Non-cash transactions --
Increase in redemption value of preferred stock ....................... $ 83 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE> 30
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS:
Trident International, Inc. (the Company) designs, manufactures and markets
impulse ink jet subsystems, including printheads, inks and other consumables,
and related components for the industrial market. The Company markets its
products worldwide principally to original equipment manufacturers (OEMs), who
integrate the products and systems which are then sold to end-users directly or
via distributors. The largest market application currently addressed by the
Company's products is that of printing onto shipping cartons. Other industrial
applications for which the Company's products are currently being utilized
include check coding, addressing and imprinting business forms, postal bar
coding and stamp cancellation and plotting garment patterns.
In February 1996, Trident International, Inc. completed its initial public
offering of its common stock which provided proceeds, after underwriting
discounts and commissions, of $28,264,000. The Company used approximately
$10,755,000 to repay the outstanding indebtedness under a previously existing
credit facility (the Credit Agreement) and $4,500,000 to retire all of the
Company's zero coupon notes (see Note 9).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The accompanying consolidated financial statements include the Company and
its wholly-owned subsidiaries, Trident, Inc. and Trident Overseas, F.S.C. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all investment instruments purchased with a maturity of three months
or less to be cash equivalents.
Marketable securities
The Company invests in marketable securities of highly rated financial
institutions and investment grade debt instruments and limits the amount of
credit exposure in any one entity. The Company has classified its marketable
securities as "available for sale" and accordingly carries such securities at
aggregate fair value. Unrealized gains or losses are included in stockholders'
equity as a component of additional paid-in capital. At September 30, 1997 and
1998, the fair value of the Company's marketable securities approximated their
cost.
Inventories
Inventories are stated at the lower of cost, under the first-in, first-out
(FIFO) method, or market and include materials, labor and manufacturing
overhead. The Company periodically evaluates the realizability of its
inventories and establishes a reserve for excess or obsolete inventories, as
necessary.
F-6
<PAGE> 31
Leasehold improvements and equipment
Leasehold improvements and equipment are comprised of the following:
<TABLE>
<CAPTION>
September 30,
(000's omitted)
1997 1998
---- ----
<S> <C> <C>
Leasehold improvements ............ $ 567 $ 975
Machinery and equipment ........... 2,021 2,614
Furniture and fixtures ............ 207 303
------ ------
2,795 3,892
Less - Accumulated depreciation and
amortization .................... 871 1,354
------ ------
$1,924 $2,538
====== ======
</TABLE>
Leasehold improvements and equipment are stated at cost less accumulated
depreciation and amortization. Expenditures for repairs and maintenance are
charged to expense as incurred. Depreciation and amortization are computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
<S> <C>
Leasehold improvements................................. 6
Machinery and equipment................................ 5 - 7
Furniture and fixtures................................. 10
</TABLE>
Intangible assets
Intangible assets are stated at cost less accumulated amortization. The
excess of purchase price over fair value of net assets acquired is being
amortized on a straight-line basis over 20 years. Periodically, the Company
evaluates the realizability of this asset based upon expectations of
undiscounted cash flows and operating income. Based upon its most recent
analysis, the Company believes that no impairment of the excess of purchase
price over fair value of net assets acquired exists at September 30, 1998. Other
intangibles are amortized on a straight-line basis over their estimated useful
lives which are 5 years.
Revenue recognition
Revenue is recorded upon the shipment of products.
Research and development costs
The Company's research and development costs are charged to expense as
incurred.
Warranty costs
The Company provides, by a current charge to operations, an amount it
estimates will be needed to cover future warranty obligations for products sold
during the applicable period which is generally between one and three years. The
related liabilities are included in accrued expenses in the accompanying
consolidated balance sheets.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
statement requires the Company to recognize deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax bases of assets and liabilities and
tax net operating loss carry forwards available for tax reporting purposes,
using applicable tax rates for the years in which the differences are expected
to reverse.
F-7
<PAGE> 32
Net income (loss) per common share
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share",
which established new standards for computing and presenting earnings per share.
This new standard replaces the computation of primary earnings per share with a
new computation of basic earnings per share. Additionally, on February 4, 1998,
the Securities and Exchange Commission released Staff Accounting Bulletin (SAB)
No. 98 on computations of earnings per share, which changed the guidance on how
cheap stock is treated in earnings per share computations. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997 and SAB No. 98 was effective on February 4, 1998. Accordingly, period
earnings per share data presented has been restated and all earnings per share
data presented is in accordance with SFAS No. 128 and SAB No. 98. As a result,
the Company's recorded earnings per share for the year ended September 30, 1997
were restated from $1.05 primary earnings per share to $1.07 basic earnings per
share.
Basic earnings (loss) per common share are based on the average number of
common shares outstanding during the year. Diluted earnings per common share
assumes, in addition to the above, a dilutive effect of common share equivalents
during the year. Common share equivalents represent dilutive stock options and
warrants using the treasury stock method. The number of shares used in the
earnings (loss) per common share computation were as follows (in thousands):
<TABLE>
<CAPTION>
For the Year Ended
------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Shares used in basic net income (loss) per
share calculations ......................................... 4,771 7,039 6,636
Dilutive effect of stock options and warrants .............. 259 113 107
----- ----- -----
Shares used in diluted net income (loss) per
share calculations ......................................... 5,030 7,152 6,743
===== ===== =====
</TABLE>
Effect of recent accounting pronouncements
In July 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for the reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of the statement is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners
("comprehensive income"). SFAS No. 130 is effective for financial statements
issued for fiscal years beginning after December 15, 1997 with earlier
application permitted. The Company believes that the impact of adoption of this
statement will not have a significant effect on the Company's financial position
and results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which requires disclosures for each
segment of an enterprise that are similar to those required under current
standards with the addition of quarterly disclosure requirements and a finer
partitioning of geographic disclosures. SFAS No. 131 is effective for financial
statements issued for periods beginning after December 15, 1997. The Company has
adopted this disclosure standard (see Note 7).
F-8
<PAGE> 33
3. INVENTORIES:
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30,
-------------------
(000's omitted)
1997 1998
---- ----
<S> <C> <C>
Raw materials......................... $ 943 $1,237
Work-in-process....................... 511 502
Finished goods........................ 291 364
------ ------
$1,745 $2,103
====== ======
</TABLE>
4. INTANGIBLE ASSETS:
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
September 30,
-------------
(000's omitted)
1997 1998
---- ----
<S> <C> <C>
Excess of purchase price over fair value of
net assets acquired ..................... $13,945 $13,945
Prepaid license fees ...................... 378 378
Other ..................................... 45 45
------- -------
14,368 14,368
Less -- Accumulated amortization .......... 2,625 3,377
------- -------
$11,743 $10,991
======= =======
</TABLE>
5. ACCRUED EXPENSES:
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
September 30,
-------------
(000's omitted)
1997 1998
---- ----
<S> <C> <C>
Bonuses payable $ 150 $ 100
Accrued warranty 625 500
Salaries payable 172 322
Other .......... 120 127
------ ------
$1,067 $1,049
====== ======
</TABLE>
6. SIGNIFICANT CUSTOMERS:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Number of customers with sales greater than 10% of total 3 1 2
Percentage of total sales represented by these customers 47% 23% 44%
Accounts receivable from these customers ............... $1,736,000 $1,260,000 $2,188,000
</TABLE>
F-9
<PAGE> 34
7. SALES BY REGION AND PRODUCT:
The Company sells into three major regions worldwide. Sales to these regions
are as follows (000's omitted):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Americas ............. $17,994 $21,507 $24,082
Europe ............... 5,986 6,150 6,970
Far East ............. 1,945 2,626 1,780
------- ------- -------
$25,925 $30,283 $32,832
======= ======= =======
</TABLE>
The Company sells both printheads and ink products to its customers as well as
spare parts and repair service (referred to in the category labeled "Other").
Sales by product type are as follows (000's omitted):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-----------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Printheads ... $15,820 $16,580 $15,562
Ink Products.. 8,211 11,415 14,783
Other ........ 1,894 2,288 2,487
------- ------- -------
$25,925 $30,283 $32,832
======= ======= =======
</TABLE>
8. WRITE-OFF OF PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT:
In March 1996, the Company acquired from Dataproducts Corporation a
non-exclusive license for patented solid ink jet printing technology in certain
licensed industrial marking fields. This agreement allows the Company to use
these patents in the development and commercialization of its own solid ink
printhead. At the time of the purchase of the solid ink jet technology, certain
technological hurdles had not been overcome to enable the Company to
commercialize a product. Commercialization of this technology by the Company
still will require extensive development work both on the solid ink itself and
the ink jet printheads used to apply that ink in commercial applications.
Consequently, during fiscal 1996, the Company recorded a charge of $3,052,000 as
a write-off of purchased in-process research and development to record the cost
of evaluating and acquiring this license.
F-10
<PAGE> 35
9. EXTRAORDINARY ITEM:
In connection with the initial public offering in 1996, the Company expensed
approximately $2,158,000 of unamortized original issue discount upon the
prepayment of the Company's zero coupon notes and approximately $898,000 of
unamortized deferred financing costs upon the repayment of the outstanding
balance under the Company's Credit Agreement. The write-off of these items, less
the related income tax benefit of approximately $1,253,000 has been reflected as
an extraordinary item in the consolidated statements of operations.
10. LINES-OF-CREDIT:
The Company has a line of credit agreement with a bank which allows it to
borrow up to $1,000,000 at either the prime rate or LIBOR plus 1.5%. Borrowings
would be collateralized by all corporate assets. There were no outstanding
borrowings under this agreement at September 30, 1998.
The Company also has an acquisition line of credit agreement with a bank
that allows it to borrow up to $10,000,000 at either the prime rate or LIBOR
plus 1.5%. Borrowings would be collateralized by all corporate assets. There
were no outstanding borrowings under this agreement at September 30, 1998.
11. STOCKHOLDERS' EQUITY:
Redeemable Convertible Participating Preferred Stock
In June 1994, the Company authorized and issued 307,317 shares of Series A
Convertible Participating Preferred Stock, $.01 par value, with a redemption
feature (the Preferred Stock). Total proceeds from this sale were $3,073,170.
The holders were entitled to dividends at the same rate as dividends were paid
on the common stock. Each share of the Preferred Stock entitled the holder to
the number of votes per share equal to the number of shares of common stock into
which each share of Preferred Stock is then convertible. The Preferred Stock was
automatically converted into shares of common stock simultaneously with the
initial public offering of the Company's common stock.
Common and Preferred Stock
In February, 1996, the Certificate of Incorporation was amended to authorize
30,000,000 shares of common stock, $.01 par value, and 5,000,000 shares of
undesignated preferred stock. All outstanding shares of Class A voting common
stock were converted to common stock. Class A voting common stock and Class B
non-voting common stock were canceled. There were no outstanding shares of
preferred stock at September 30, 1998.
Employee Stock Purchase Plan
In January, 1997, the stockholders approved the Trident International, Inc.
Employee Stock Purchase Plan (ESPP). The ESPP allows eligible employees the
right to purchase common stock on a quarterly basis at the lower of 85% of the
market price at the beginning or end of each three-month offering period. During
fiscal 1997 and 1998, 3,689 and 4,396 shares were issued under the ESPP for
$55,437 and $50,050, respectively. At September 30, 1998, the Company had a
balance of 91,915 shares reserved for the ESPP.
Stock options
Under the Company's Third Amended and Restated 1994 Stock Option and Grant
Plan (the Plan) the Company may grant options to purchase up to a maximum of
1,000,000 shares of common stock to employees, directors, consultants and other
key persons. Options granted may be incentive stock options or non-qualified
options and must be granted at a price not less than fair market value on the
date of grant. The vesting of these options is determined by the Board of
Directors. The options expire no later than 10 years from the date of grant. At
September 30, 1998, 505,152 shares were available for granting of additional
options.
F-11
<PAGE> 36
The Company accounts for stock-based compensation for employees under
Accounting Principles Board Opinion No. 25 and has elected the disclosure-only
alternative under SFAS 123. The Company has computed the pro forma disclosures
required under SFAS 123 for options granted in fiscal 1996, 1997, and 1998,
using the Black Scholes option pricing model prescribed by SFAS 123. The
weighted average assumptions used are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Risk free interest rate (range) 5.63% - 5.86% 6.21% - 6.66% 5.39% - 5.92%
Expected dividend yield 0% 0% 0%
Expected lives 5 years 5 years 5 years
Expected volatility 49% 49% 51%
</TABLE>
Had compensation cost for the Company's stock option plan and employee stock
purchase plan been determined based on the fair value at the grant dates of
awards under these plans consistent with the method of SFAS 123, the Company's
earnings(loss) and pro forma earnings (loss) per common share would have been
the following amounts:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net income (loss), as reported (000's omitted) $(414) $7,513 $7,066
Net income (loss), pro forma (000's omitted) (414) 7,466 6,819
Basic earnings (loss) per common share,
pro forma (0.10) 1.07 1.06
Basic earnings (loss) per common share,
pro forma (0.10) 1.06 1.03
Diluted earnings (loss) per common share,
as reported (0.10) 1.05 1.05
Diluted earnings (loss) per common share,
pro forma (0.10) 1.04 1.01
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost may
be not representative of that to be expected in future years.
A summary of the status of the Company's stock options plan at September 30,
1996, 1997 and 1998 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at October 1, 108,000 $ 3.52 127,750 $ 5.52 251,275 $12.21
Granted 26,000 13.69 139,100 17.73 221,748 13.19
Exercised 4,750 5.00 7,775 4.15 7,100 2.73
Canceled 1,500 5.00 7,800 8.99 31,065 15.15
------- ------ ------- ------- -------
Outstanding at September 30, 127,750 $ 5.52 251,275 $ 12.21 434,858 $12.66
======= ====== ======= ======= ======= ======
Options exercisable
at September 30, 22,250 $ 3.20 50,850 $ 5.10 98,675 $ 8.97
====== ====== ====== ====== ====== ======
Weighted average fair value
options granted during the year $ 6.81 $ 9.02 $ 6.71
====== ====== ======
</TABLE>
F-12
<PAGE> 37
The following table represents weighted average price and life information
about significant option groups outstanding at September 30, 1998:
<TABLE>
<CAPTION>
Weighted Average
Remaining
Range of Exercise Number Contractual Weighted Average Number
Prices Outstanding Life (Yrs) Exercise Price Exercisable
------ ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
$1.00 33,000 6 $ 1.00 23,000
$5.00 46,850 7 $ 5.00 33,850
$11.00 - $15.99 219,058 9 $12.46 8,750
$16.00 - $20.25 135,950 8 $17.64 33,075
------- ------
434,858 98,675
======== ======
</TABLE>
Redeemable warrants
In June, 1994, under the Credit Agreement, the Issuer (the Lender) was
issued warrants with both the right to purchase shares of the Company's common
stock and the right to require the Company to repurchase some or all of the
warrants at the earlier of June 30, 1998 or the occurrence of certain events,
including repayment of the indebtedness under the Credit Agreement or upon a
qualified public offering.
In connection with the Credit Agreement, the Company granted the Lender
warrants to purchase between 418,118 and 653,310 shares of common stock
depending upon the fair market valuation of the Company. These warrants had an
exercise price of $1.00 per share. The warrants contained a put option which
required that the Company purchase the warrants at the fair market value of the
Company's common stock, net of the associated warrant exercise price, at the
time the put option was exercised (the Option Price). The Company had the option
to repurchase the warrants at 110% of the Option Price at the earlier of June
30, 1998 or upon a qualified public offering, as defined.
The Company accounted for the initial value of the redeemable warrants based
on their fair market value at the time the warrants were issued, using a formula
contained in a Warrantholders Rights Agreement entered into in connection with
the issuance of the warrants. The Company did not assign any value to the
warrants at the time of issuance, as their fair market value did not exceed the
warrant exercise price. Commencing at the beginning of fiscal 1995, the carrying
value of the redeemable warrants has been increased by periodic accretions, so
that their carrying amount would equal the mandatory redemption amount at the
time of the Company's initial public offering (the Offering). During the year
ended September 30, 1996, the Company expensed $1,710,000 of this estimated
cost. At the time of the initial public offering, these warrants were exercised
for 418,118 shares of common stock and the Company's liability for redeemable
common stock warrants was converted to stockholders' equity.
Contingent warrants
In June 1994, contingent warrants to purchase up to 235,192 shares of common
stock at $1.00 per share were granted on a pro rata basis to all of the
Company's common stockholders of record. These warrants were to become
exercisable in the event that the Lender was entitled to exercise warrants to
purchase less than 653,310 shares of common stock. In the event this occurred,
the holders of contingent warrants would be able to exercise warrants to
purchase shares of common stock for the difference between the amount of shares
the Lender exercised and 653,310 total shares of common stock. In connection
with the initial public offering, warrants to purchase 235,192 common shares
were issued. During Fiscal 1997 and 1998, warrants to purchase 153,828 and 1,568
shares, respectively were exercised. At September 30, 1998, warrants to purchase
23,820 shares of common stock at $1.00 per share were outstanding.
In Fiscal 1995, the Company recorded deferred compensation expense of
$1,626,000 for the difference between the exercise price on the date of grant
and the deemed fair value of the warrants held by management at the time it was
probable that the number of warrants (108,400) which could be exercised could be
determined (the Offering Date). This amount was amortized over the period
commencing October 1, 1994 through the Offering Date. Deferred compensation
expense recognized during the year ended September 30, 1996, was $443,000.
F-13
<PAGE> 38
12. INCOME TAXES:
The provision (benefit) for income taxes includes the following (000's
omitted):
<TABLE>
<CAPTION>
For the Years Ended
September 30,
-------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Current:
Federal .......................... $ 3,314 $ 3,838 $ 3,248
State ............................ 600 684 556
------- ------- -------
3,914 4,522 3,804
------- ------- -------
Deferred:
Federal .......................... (962) 154 211
State ............................ (200) 27 37
------- ------- -------
(1,162) 181 248
------- ------- -------
Income tax before extraordinary item $ 2,752 $ 4,703 $ 4,052
======= ======= =======
</TABLE>
The Company's effective tax rate, as a percent of income (loss) before
extraordinary item, differs from the statutory federal rate as follows:
<TABLE>
<CAPTION>
For the Years Ended
September 30,
-------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate ...................... 34% 34% 34%
State taxes net of Federal benefit .............. 4 4 4
Non-deductible amortization of the excess of
purchase price over fair value of net
assets acquired .............................. 4 1 1
Non-deductible redeemable warrant interest charge 14 -- --
Benefit from foreign sales corporation .......... (3) (1) (1)
Non-deductible amortization of deferred
compensation .................................... 4 -- --
Benefit from R & D tax credits .................. -- (1) (2)
Other ........................................... 7 2 --
--- --- ---
Effective tax rate before extraordinary item..... 66% 39% 36%
=== === ===
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the basis of assets and liabilities for financial reporting and income
tax purposes. The approximate tax effects of temporary differences which give
rise to net deferred tax assets are as follows (000's omitted):
<TABLE>
<CAPTION>
September 30,
-------------
1997 1998
---- ----
<S> <C> <C>
Current:
Accrued warranty expense ...... $ 225 $ 180
Inventories ................... 97 121
Allowance for doubtful accounts 108 108
Other accrued expenses ........ 35 55
------- -------
465 464
------- -------
Non-Current:
Depreciation and amortization ... (61) (121)
Intangible assets ............... 765 578
------- -------
704 457
------- -------
Net deferred tax assets ...... $ 1,169 $ 921
======= =======
</TABLE>
F-14
<PAGE> 39
13. EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution retirement plan which is available to
substantially all employees. The Company pays plan expenses and a matching
contribution of 50% of every qualifying dollar contributed by plan participants
to a maximum of 3% of compensation. Contributions by the Company amounted to
$69,000, $98,000, and $108,000 for the years ended September 30, 1996, 1997, and
1998, respectively.
14. COMMITMENTS AND CONTINGENCIES:
The Company leases certain operating facilities and equipment under
long-term, noncancelable operating leases. There are two leases for the
Brookfield operating facilities, with one expiring June 30, 2003, and the other
expiring August 31, 2003. Each lease has an option to renew, one for three years
at prevailing market rates, and the other for five years. Approximate future
minimum rental commitments under noncancelable operating leases having a term in
excess of one year are approximately $1,013,000. Rental expense amounted to
$154,000, $180,000, and $254,000 for the years ended September 30, 1996, 1997
and 1998, respectively.
The Company entered into a three-year employment agreement with its chief
executive officer which requires minimum annual compensation through October
2000. The agreement also provides for certain incentive bonus payments. The
Company has also entered into a two year contract with its chief financial
officer. The agreement requires minimum annual compensation through May 2000 as
well as certain incentive bonus payments.
In 1994, the Company undertook an environmental compliance audit which
identified certain environmental deficiencies on properties leased by the
Company. The site of one of the Company's leased facilities was contaminated due
to prior uses by a prior occupant and may require remedial action. Although the
Company obtained an indemnification agreement with respect to such prior
contamination, if the Company is found to be liable as a result of any
contamination of the site, there can be no assurance that such indemnification
will be available or that, if available, it will be sufficient. While the
ultimate results of future claims, if any, against the Company with regard to
these matters cannot be determined, management does not anticipate that these
matters will have a material adverse impact on the consolidated results of
operations or financial position of the Company.
In December, 1997, the Company filed a civil action against four companies,
charging them with infringing two of the Company's patents. Two of these
companies have since counterclaimed against the Company for a declaration of
noninfringement and patent invalidity while also alleging violations of the
antitrust laws relating to the Company's sales of ink products. Management does
not anticipate that these proceedings will have a material adverse impact on the
consolidated results of operations or financial position of the Company.
15. RELATED PARTY TRANSACTION:
The Company has had legal services in the normal course of business with a
firm whose partner is also a director of the Company. Fees incurred from
services provided by the firm were approximately $190,000, $255,000 and
$620,000 for the years ended September 30, 1996, 1997 and 1998, respectively.
At September 30, 1997 and 1998 amounts due to the firm totaled approximately
$15,000 and $130,000, respectively. Management believes these services were
under terms no less favorable to the Company than those arranged with other
parties.
F-15
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
Trident International, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated balance sheets of Trident International, Inc. and Subsidiaries as
of September 30, 1997 and 1998 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
September 30, 1996, 1997, and 1998 included in this Form 10-K, and have issued
our report thereon dated October 29, 1998. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
accompanying schedule on page F-17 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The information reflected in the schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Hartford, Connecticut
October 29, 1998
F-16
<PAGE> 41
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Cost and End of
Description Period Expenses Deductions Period
----------- ------ -------- ---------- ------
Allowance for Doubtful Accounts -
<S> <C> <C> <C> <C>
October 1, 1995 to September 30, 1996. $220,000 $80,000 $ - $300,000
October 1, 1996 to September 30, 1997 $300,000 $ - $ - $300,000
October 1, 1997 to September 30, 1998. $300,000 $ - $ - $300,000
</TABLE>
F-17
<PAGE> 1
EXHIBIT 10.18
CREDIT AGREEMENT
DATED JULY 31, 1998
BETWEEN
TRIDENT INTERNATIONAL, INC.,
AS BORROWER
AND
FLEET NATIONAL BANK,
AS LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
Section 1.1 Defined Terms......................................................................................1
Section 1.2 Terms Generally...................................................................................16
Section 1.3 Computation of Time Periods.......................................................................16
ARTICLE II AMOUNT AND TERMS OF THE CREDITS......................................................................16
Section 2.1 The Revolving Loans...............................................................................16
Section 2.2 The Line of Credit Loans..........................................................................16
Section 2.3 Procedure for Revolving Loans; Certain Conditions; Revolving Loan Note............................17
Section 2.4 Procedure for Line of Credit Loans; Certain Conditions; Line of Credit Notes......................18
Section 2.5 Method of Payment, Direct Debits..................................................................19
Section 2.6 Use of Proceeds...................................................................................20
Section 2.7 Unused Line of Credit Fees........................................................................20
Section 2.8 Interest Rates....................................................................................20
Section 2.9 Election and Continuation of Interest Periods.....................................................21
Section 2.10 Conversion of Revolving Loans....................................................................22
Section 2.11 Late Payment.....................................................................................22
Section 2.12 Repayments and Prepayments.......................................................................22
Section 2.13 Illegality.......................................................................................23
Section 2.14 Reserve Requirements, Change in Circumstances....................................................23
Section 2.15 Basis for Determining LIBOR Base Rate Inadequate or Unfair.......................................25
Section 2.16 Indemnity........................................................................................25
Section 2.17 Payments Free of Taxes and Other Deductions......................................................26
Section 2.18 Obligations Absolute.............................................................................26
ARTICLE III CONDITIONS PRECEDENT................................................................................27
Section 3.1 Conditions Precedent to Effectiveness.............................................................27
Section 3.2 Conditions Precedent to Loans.....................................................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................................................29
Section 4.1 Incorporation, Good Standing, and Due Qualification...............................................29
Section 4.2 Corporate Power and Authority.....................................................................29
Section 4.3 Legally Enforceable Agreement.....................................................................29
Section 4.4 Governmental Approvals............................................................................29
Section 4.5 Financial Statements and Condition: Full Disclosure...............................................30
Section 4.6 Other Agreements, No Default......................................................................30
Section 4.7 Litigation........................................................................................30
Section 4.8 Ownership and Liens...............................................................................30
Section 4.9 Subsidiaries......................................................................................31
Section 4.10 Operation of Business............................................................................31
Section 4.11 Taxes............................................................................................31
Section 4.12 Debt and Liens Securing Same.....................................................................31
Section 4.13 Capital Stock....................................................................................31
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 4.14 Federal Reserve Regulations......................................................................31
Section 4.15 Fiscal Year......................................................................................32
Section 4.16 No Broker's Fees, etc............................................................................32
Section 4.17 Investment Company Act, Public Utility Holding Company Act.......................................32
Section 4.18 Use of Proceeds..................................................................................32
Section 4.19 Environmental Matters............................................................................32
Section 4.20 Compliance with Laws.............................................................................33
Section 4.21 Events of Default................................................................................33
Section 4.22 Labor Disputes and Acts of God...................................................................33
Section 4.23 ERISA............................................................................................33
Section 4.24 Consolidated Assets..............................................................................34
Section 4.25 Insurance........................................................................................34
Section 4.26 Location of Real Property and Leased Premises....................................................34
Section 4.27 Year 2000 Compliance.............................................................................34
ARTICLE V AFFIRMATIVE COVENANTS.................................................................................34
Section 5.1 Maintenance of Existence..........................................................................35
Section 5.2 Maintenance of Records............................................................................35
Section 5.3 Business and Properties...........................................................................35
Section 5.4 Maintenance of Insurance..........................................................................35
Section 5.5 Obligations and Taxes.............................................................................35
Section 5.6 Right of Inspection...............................................................................36
Section 5.7 Reporting Requirements............................................................................36
Section 5.8 Litigation and other Notices......................................................................37
Section 5.9 Operating and Deposit Accounts....................................................................37
Section 5.10 New Guarantors...................................................................................37
Section 5.11 Use of Proceeds..................................................................................37
Section 5.12 Further Assurances...............................................................................37
ARTICLE VI NEGATIVE COVENANTS...................................................................................37
Section 6.1 Liens.............................................................................................37
Section 6.2 Debt..............................................................................................39
Section 6.3 Mergers, Consolidations and Acquisitions..........................................................40
Section 6.4 Sale and Leaseback................................................................................40
Section 6.5 Dividends and Distributions, Restrictions on Ability of Subsidiaries to Pay Dividends.............40
Section 6.6 Sale of Assets....................................................................................40
Section 6.7 Investments.......................................................................................41
Section 6.8 Guaranties, Etc...................................................................................41
Section 6.9 Transactions With Affiliates......................................................................41
Section 6.10 Fiscal Year......................................................................................41
Section 6.11 Business and Accounting Methods..................................................................41
ARTICLE VII FINANCIAL COVENANTS.................................................................................41
Section 7.1 Consolidated Interest Coverage Ratio..............................................................42
Section 7.2 Consolidated Leverage Ratio.......................................................................42
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 7.3 Consolidated Fixed Charge Coverage Ratio..........................................................42
Section 7.4 Consolidated Tangible Net Worth...................................................................42
ARTICLE VIII EVENTS OF DEFAULT..................................................................................42
Section 8.1 Events of Default.................................................................................42
ARTICLE IX GENERAL PROVISIONS...................................................................................44
Section 9.1 Amendments, Etc...................................................................................44
Section 9.2 Notices, Etc......................................................................................44
Section 9.3 No Waiver: Remedies...............................................................................45
Section 9.4 Successors and Assigns............................................................................46
Section 9.5 Transfer of the Lender's Interests................................................................46
Section 9.6 Costs, Expenses, and Taxes, Indemnification.......................................................46
Section 9.7 Right of Setoff...................................................................................48
Section 9.8 Governing Law; Jurisdiction; Waivers..............................................................48
Section 9.9 Payment Set-Aside.................................................................................50
Section 9.10 Entire Agreement, Severability of Provisions.....................................................50
Section 9.11 Estoppel Certificates............................................................................51
Section 9.12 Waiver of Jury Trial.............................................................................51
Section 9.13 Replacement of a Note............................................................................51
Section 9.14 Survival of Agreement............................................................................52
Section 9.15 Further Assurances...............................................................................52
Section 9.16 Construction.....................................................................................52
Section 9.17 Captions.........................................................................................52
Section 9.18 Counterparts.....................................................................................52
Section 9.19 Confidentiality..................................................................................52
</TABLE>
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<PAGE> 5
CREDIT AGREEMENT
CREDIT AGREEMENT ("AGREEMENT"), dated this 31st day of July, 1998, by
and between TRIDENT INTERNATIONAL, INC., a Delaware corporation with its
principal place of business located at 1114 Federal Road, Brookfield,
Connecticut 06804 ("BORROWER"), and FLEET NATIONAL BANK, a national bank with a
place of business at 777 Main Street, Hartford, Connecticut 06115 ("LENDER")
PREAMBLE
WHEREAS, pursuant to that certain Commercial Promissory Grid Note from
the Borrower in favor of the Lender dated as of September 30, 1997 (the
"EXISTING REVOLVING LOAN NOTE"), the Lender has extended to the Borrower a
commercial revolving loan in the maximum principal amount of up to $1,000,000
for general working capital purposes (the "EXISTING REVOLVING LOAN"); and
WHEREAS, the Borrower has requested the Lender to extend additional
credit to it in the form of a declining line of credit/term loan facility in an
amount of up to $10,000,000 to be used for business acquisitions and equipment
purchases; and
WHEREAS, the Lender is willing to provide the foregoing accommodations,
but only on the terms and subject to the conditions contained in this Agreement;
and
WHEREAS, with respect to the Existing Revolving Loan, the Borrower and
the Lender desire to confirm that the terms of this Agreement and the Revolving
Loan Note (as defined below) shall supersede and replace the Existing Revolving
Loan Note and control and govern the Existing Revolving Loan.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties to this Agreement do each
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. The following capitalized terms are used in
this Agreement with the respective meanings set forth in this Section 1.1:
"Adjustment Date" means each date which is the first day of the first
full month following the Lender's receipt of (a) the annual financial statements
required under Section 5.7(a) hereof, or (b) the Borrower's Quarterly Reports on
Form 10-Q required under Section 5.7(b) hereof for the fiscal year-to-date
period ending on March 31, commencing on the first day of the first full month
following the Lender's receipt of the first of such financial statements which
follow the Borrower's initial borrowing hereunder (the "FIRST ADJUSTMENT DATE").
-1-
<PAGE> 6
"Affiliate" means, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with, the Person
specified and shall include another Person who Controls ten percent (10%) or
more (on a fully diluted basis) of the voting securities or other equity
interest of the Person specified.
"Agreement" means this Credit Agreement, as amended, supplemented, or
otherwise modified and in effect from time to time.
"Acquisition Loan" means each Line of Credit Loan the proceeds of which
are being used by the Borrower to finance a Permitted Acquisition.
"Applicable LIBOR Rate Margin means:
(a) for the period commencing on the date hereof and ending on
the day immediately preceding the First Adjustment Date, 1.50%, and
(b) for each period commencing on an Adjustment Date
(including, but not limited to, the First Adjustment Date) and ending on the day
immediately preceding the next Adjustment Date, the percentage rate set forth
below opposite the Consolidated Funded Debt-to-EBIT Ratio as determined on the
basis of the financial statements required to be delivered in respect of such
Adjustment Date:
<TABLE>
<CAPTION>
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO APPLICABLE LIBOR RATE MARGIN
<S> <C>
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO IS
EQUAL TO OR GREATER THAN 2.50-TO-1.00 2.00%
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO IS
LESS THAN 2.50-TO-1.00, BUT EQUAL TO OR GREATER THAN
1.75-TO-1.00 1.75%
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO IS
LESS THAN 1.75-TO-1.00, BUT EQUAL TO OR GREATER THAN
1.25-TO-1.00 1.50%
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO IS
LESS THAN 1.25-TO-1.00, BUT EQUAL TO OR GREATER THAN
.75-TO-1.00 1.25%
CONSOLIDATED FUNDED DEBT-TO-EBIT RATIO IS LESS
THAN .75-TO-1.00 1.00%
</TABLE>
Any change in the Applicable LIBOR Rate Margin due to a change in the
Consolidated Funded Debt-to-EBIT Ratio shall be effective on the applicable
Adjustment Date and shall apply to all of the LIBOR Loans that are outstanding
at any time during the period commencing on such Adjustment Date and ending on
the day immediately preceding the next Adjustment Date.
"Borrower" means Trident International, Inc., a Delaware corporation.
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<PAGE> 7
"Business Day" means a day other than a Saturday, Sunday, or other day
on which banks in the State of Connecticut are required or authorized by law to
be closed.
"Capital Leases" means all leases of property (whether real, personal
or mixed) which have been or should be capitalized on the books of the lessee
thereof in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitments" means the Revolving Loan Commitment and the Line of
Credit Commitment.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability) by the Borrower and its Subsidiaries during such period
that, in accordance with GAAP, are or should be included in "additions to
property, plant and equipment" or similar items reflected in the consolidated
statement of cash flows of the Borrower and its Subsidiaries for such period
(including the amount of assets leased in connection with any Consolidated
Capital Lease Obligation).
"Consolidated Capital Lease Obligations" means all obligations of the
Borrower and its Subsidiaries to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property, or
a combination thereof, which obligations would properly be classified and
accounted for as Capital Leases on the consolidated balance sheet of the
Borrower and its Subsidiaries under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.
"Consolidated CMLTD" means, for any period with respect to all Debt of
the Borrower and its Subsidiaries which, in accordance with GAAP, may be
properly classified as long-term debt, the portion of such Debt which was due
and payable (whether or not paid) during such period, including, but not limited
to, Consolidated Capital Lease Obligations payable during such period.
"Consolidated EBIT" means, for any period, the sum of (a) Consolidated
Net Income for such period, (b) any provision for (or less any benefit from)
income and franchise taxes included in the determination of such Consolidated
Net Income, and (c) Consolidated Interest Expense for such period.
"Consolidated EBITDA" means, for any period, the sum of (a)
Consolidated Net Income for such period, (b) any provision for (or less any
benefit from) income and franchise taxes included in the determination of such
Consolidated Net Income, (c) Consolidated Interest Expense for such period, and
(d) amortization and depreciation deducted in determining such Consolidated Net
Income.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (a) Consolidated EBITDA for such period, minus the aggregate amount of
all Distributions paid during such period, minus amounts paid in cash during
such period for income taxes, minus the non-financed portion of Consolidated
Capital Expenditures for such period (including, but not
-3-
<PAGE> 8
limited to, the Borrower's twenty percent (20%) funding obligation in connection
with each Equipment Loan made during such period), to (b) the sum of (i)
Consolidated Interest Expense for such period, and (iii) Consolidated CMLTD for
such period.
"Consolidated Funded Debt-to-EBIT Ratio" means, as of the end of the
Borrower's second or fourth fiscal quarters, as applicable, the ratio of (a) all
Debt of the Borrower and its Subsidiaries as of the last day of such quarter,
including, but not limited to, Consolidated Capital Lease Obligations,
Subordinated Debt and contingent Debt under undrawn letters of credit, to (b)
Consolidated EBIT as of the end of such second or fourth fiscal quarter, as
applicable, for the then ended Rolling Period.
"Consolidated Intangibles" means, at a particular date, all assets of
the Borrower and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP, that would properly be classified as intangible assets in
accordance with GAAP, but in any event including, without limitation, goodwill,
franchises, licenses, patents, trademarks, copyrights, service marks, brand
names, costs in excess of the net asset value of acquired companies, and the
amount of any write-up in the book value of any asset resulting from any
revaluation (other than revaluations arising out of foreign currency valuations
in accordance with GAAP) thereof after the date hereof.
"Consolidated Interest Coverage Ratio" means, for any period, the ratio
of (a) Consolidated EBIT for such period, to (b) Consolidated Interest Expense
for such period.
"Consolidated Interest Expense" means, for any period, the interest
expense (without giving effect to interest income) of the Borrower and its
Subsidiaries for such period (whether paid or accrued) on all Debt outstanding
during all or any part of such period, whether such interest was or is required
to be reflected as an item of expense or capitalized, including without
limitation, payments consisting of interest in respect of Capital Leases and
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money.
"Consolidated Leverage Ratio" means, for any period, the ratio of (a)
all Debt of the Borrower and its Subsidiaries as of the last day of such period,
including, but not limited to, Consolidated Capital Lease Obligations,
Subordinated Debt and contingent Debt under undrawn letters of credit, to (b)
Consolidated EBITDA for such period.
"Consolidated Net Income" means, for any period, net income (or loss)
for such period of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP (on a "first in, first out" inventory basis),
but excluding: (a) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or such Person's assets are acquired by the Borrower or any of its
Subsidiaries, and (b) extraordinary or non-recurring gains or losses, as defined
under GAAP, net of related tax effects.
"Consolidated Net Worth" means, at a particular date, (a) Consolidated
Total Assets as of such date, minus (b) Consolidated Total Liabilities as of
such date.
-4-
<PAGE> 9
"Consolidated Tangible Net Worth" means, at a particular date, (a)
Consolidated Net Worth as of such date minus (b) Consolidated Intangibles as of
such date.
"Consolidated Total Assets" means, as of any date of determination,
assets that would properly be classified as assets of the Borrower and its
Subsidiaries as of such date, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Total Liabilities" means, as of any date of
determination, all Debt and other liabilities that would properly be classified
as liabilities of the Borrower and its Subsidiaries as of such date, determined
on a consolidated basis in accordance with GAAP, but in any event including,
without limitation, Consolidated Capital Lease Obligations, Subordinated Debt,
reserves for deferred taxes and other deferred sums appearing or which should
properly appear as "liabilities" on the consolidated balance sheet of the
Borrower and its Subsidiaries in accordance with GAAP.
"Contaminant" means any pollutants, hazardous or toxic substances or
wastes or contaminated materials, including, but not limited to, oil and oil
products, asbestos, asbestos containing materials, urea formaldehyde foam
insulation, transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls, flammables, explosives,
radioactive materials, laboratory wastes, biohazardous wastes, chemicals,
elements, compounds or any other materials and substances (including materials,
substances or things which are composed of or which have as constituents any of
the foregoing substances), which are or may be subject to regulation under, or
the Release of which or exposure to which is prohibited, limited or regulated
under any Environmental Law.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise,
and the terms "Controlling" and "Controlled" shall have the meanings correlative
thereto.
"Debt", of any Person, means, without duplication, (a) all indebtedness
or liability of such Person for borrowed money, or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (d) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (including trade
obligations and accrued obligations incurred in the ordinary course of
business), (e) all Debt of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any Lien
on property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (f) all obligations of such Person under
Capital Leases, (g) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements, (h) current liabilities of such Person in
respect of unfunded vested benefits under any Plan, (i) obligations of such
Person under letters of credit, bankers acceptances or comparable arrangements,
and (j) all obligations of such Person under guaranties, endorsements (other
than for collection or deposit in the ordinary course of business), and other
contingent obligations of such Person to purchase, to
-5-
<PAGE> 10
provide funds for payment, to supply funds to invest in any Person, or otherwise
to assure a creditor against loss.
"Default" means an event or condition the occurrence or existence of
which, with the lapse of time or the giving of a required notice, or both, would
constitute an Event of Default.
"Default Rate" means that term as defined in Section 2.8(b) hereof.
"Distributions" means, for any period of measurement with respect to
the Borrower, the following: (i) the declaration or payment of any dividend or
distribution on or in respect of the shares of any class of capital stock of the
Borrower, except dividends payable solely in shares of Borrower's capital stock;
and (ii) any other dividend or distribution for any purpose by the Borrower
(however characterized, except for salaries, directors' fees, bonuses and other
forms of compensation for services rendered to the Borrower), including without
limitation, inter-company loans and guarantees, to or for the benefit of any or
all of its shareholders, Affiliates and/or Subsidiaries, whether paid on or in
respect of shares of any class of the capital stock of the Borrower or
otherwise.
"Dollar" and the sign "$" means lawful money of the United States of
America.
"Domestic Subsidiary" means a Subsidiary incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"Drawdown Date" means the date on which any Revolving Loan or Line of
Credit Loan is made.
"Eligible Equipment" means new or used equipment to be purchased by the
Borrower which is (a) being purchased for use in the ordinary course of the
Borrower's business, (b) at all times pertinent hereto of good and merchantable
quality, free from defects and of a type which the Lender determines to be
eligible for an Equipment Loan, in its sole but reasonable discretion, and (c)
not subject to any Lien, security interest, charge or other encumbrance in favor
of any Person other than the Lender, except for Permitted Liens of the nature
described in subsections (b), (d) or (f) of Section 6.1 hereof.
"environment" means ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" means any accusation, allegation, notice of
violation, claim, demand, order, directive, cost recovery action or other cause
of action by, or on behalf of, the U.S. Environmental Protection Agency, any
other Governmental Authority or any other Person for damages, injunctive or
equitable relief, personal injury (including sickness, disease or death),
Remedial Action costs, tangible or intangible property damage, natural resource
damages, nuisance, pollution, any adverse effect on the environment cause by any
Contaminant, or for fines, penalties or restrictions, resulting from or based
upon (a) the existence, or the continuance of the existence, of a Release
(including sudden or non-sudden, accidental or non-accidental Releases), (b)
exposure to any Contaminant, (c) the presence, use, handling, transportation,
-6-
<PAGE> 11
storage, treatment, or disposal of any Contaminant, or (d) the violation or
alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" means any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
use, treatment, storage, disposal, transportation, transfer, generation,
processing, production, refining, control, handling, Release or threatened
Release of any Contaminant or to health and safety matters (including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. Section 9601 et seq. (collectivELY, "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et
seq.; the Federal Water Pollution Control Act, as amended by the Clean Water Act
of 1977, 33 U.S.C. Section 1251 et seq.; the Clean Air Act of 1970, as amended,
42 U.S.C. Section 7401 et seq.; The Toxic Substances Control Act of 1976, as
amended, 15 USC Section 2601 et seq.; the Emergency Planning and Community
Right-to-Know Act of 1986 (also known as SARA Title III), as amended, 42 USC
Section 11001 et seq.; the Safe Drinking Water Act of 1974, as amended, 42 USC
Section 300(f) et seq.; the Federal Insecticide, Fungicide and Rodenticide Act,
as amended, 7 USC Section 136 et seq.; the Occupational Safety and Health Act of
1970, as amended, 29 USC Section 651 et seq.; the Endangered Species Act, as
amended, 16 USC Section 1531 et seq.; the National Environmental Policy Act, as
amended, 42 USC Section 4321 et seq.; the Rivers and Harbors Act of 1899 33 USC
Section 401 et seq., and any similar or implementing state or local law, rule or
regulation); all laws, rules and regulations governing underground or
above-ground storage tanks, conditioning transfer of property upon a form of
negative declaration or other approval of a Governmental Authority of the
environmental condition of a property or requiring the disclosure of conditions
relating to Contaminants in connection with transfer of title to or interest in
property; conditions or requirements imposed in connection with any
Environmental Permits; government orders and demands and judicial orders
pursuant to any of the foregoing; any and all other laws, rules, regulations,
guidance, guidelines and common law of any Governmental Authority relating to
the protection of human health or the environment from Contaminants; and all
amendments or regulations promulgated under any of the foregoing. The reference
in this paragraph to State laws specifically includes, but is not limited to,
the applicable laws of the State of Connecticut and each other State in which
the Borrower or any Subsidiary is conducting business.
"Environmental Permit" means any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equipment Loan" means each Line of Credit Loan the proceeds of which
are being used by the Borrower to purchase Eligible Equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
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<PAGE> 12
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan, (b)
the adoption of any amendment to a Plan that would required the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived, (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan, (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or Multiemployer Plan, (f) the
receipt by the Borrower or any ERISA Affiliate from the PPGC or a plan
administrator of any notice relating to the intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan, (g) the receipt by the
Borrower or any ERISA Affiliate of any notice concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA, (h) the occurrence of a "prohibited transaction" with respect to which
the Borrower or any of its Subsidiaries is a "disqualified person" (within the
meaning of Section 4975 of the Code) or with respect to which the Borrower or
any such Subsidiary could otherwise be liable, and (i) any other event or
condition with respect to a Plan or Multiemployer Plan that could reasonably be
expected to result in liability of the Borrower.
"Event of Default" means any of the events specified in Section 8.1 of
this Agreement.
"Existing Revolving Loan" means that term as defined in the Preamble to
this Agreement.
"Existing Revolving Loan Note" means that term as defined in the
Preamble to this Agreement.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries ending on September 30 of each calendar year. For purposes of this
Agreement, any particular Fiscal Year shall be designated by reference to the
calendar year in which such Fiscal Year ends.
"GAAP" means generally accepted accounting principles which are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, consistently applied from year
to year, (b) generally accepted in the United States of America, and (c) such
that certified public accountants would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an unqualified opinion as
to financial statements in which such principles have been properly applied.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government.
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"Guarantor" means Trident, Inc., a Connecticut corporation and each
other Subsidiary of the Borrower that becomes a party to a Guaranty Agreement
pursuant to Sections 2.4(b) and 5.10 hereof and the permitted successors and
assigns of each such Subsidiary.
"Guaranty Agreement" means each guaranty agreement executed a Guarantor
in favor of the Lender in substantially the form of Exhibit C attached hereto.
"Head Office" means the office of the Lender at 777 Main Street,
Hartford, Connecticut.
"Interest Period" means (a) as to any Revolving Loan, or any portion or
portions thereof, which bears interest at a rate determined by reference to the
LIBOR Rate, an available period of one (1), two (2), three (3) or six (6)
months, commencing on the date upon which such Revolving Loan is made or is
continued as a LIBOR Loan or is converted from a Prime Rate Loan to a LIBOR
Loan, as the case may be, and shall end on the last day of such Interest Period,
and (b) as to each Line of Credit Loan, or any portion or portions thereof,
which bears interest at a rate determined by reference to the LIBOR Rate, an
available period of one (1) month, commencing on the date upon which such Line
of Credit Loan is made or is continued as a LIBOR Loan or is converted from a
Prime Rate Loan to a LIBOR Loan, as the case may be, and shall end on the last
day of such Interest Period, PROVIDED, however, that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a London Business Day, such Interest Period shall be extended to
occur on the next succeeding London Business Day; provided, however,
that if such extension would cause the last day of such Interest Period
to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding London Business Day;
(ii) any Interest Period that begins on the last London
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last London Business Day of a
calendar month;
(iii) no Interest Period with respect to any Line of Credit
Loan shall end after any regularly scheduled principal payment date as
set forth in the applicable Line of Credit Loan Note, unless at the
time of any such Interest Period election and after giving effect
thereto a portion of such Line of Credit Loan remains as a Prime Rate
Loan in an amount at least equal to the sum of all installments of
principal due thereunder prior to the expiration of the Interest Period
being requested by the Borrower; and
(iv) no Interest Period with respect to any Loan shall end
after the Maturity Date applicable thereto.
"Lender" means Fleet National Bank, or any successors or assigns
thereof.
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"Lender Parties" means that term as defined in Section 9.6(b).
"LIBOR Base Rate" means, as applicable to any LIBOR Loan, the rate per
annum (rounded upwards, if necessary, to the next higher 1/32nd of 1%) as
determined on the basis of the offered rates for deposits in Dollars, for a
period of time comparable to the Interest Period applicable to any such LIBOR
Loan, which appears on the Telerate page 3750 as of 11:00 a.m. London time on
the day that is two (2) London Business Days prior to the first day of the
Interest Period applicable to such LIBOR Loan; PROVIDED, HOWEVER, if the rate
described above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR Base Rate shall be the rate (rounded
upwards, if necessary, to the next higher 1/32nd of 1%) for deposits in Dollars
for a period substantially equal to the Interest Period applicable to such LIBOR
Loan on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page
on that service for the purpose of displaying such rates), as of 11:00 a.m.
London time on the day that is two (2) London Business Days prior to the first
day of the Interest Period applicable to such LIBOR Loan.
If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for deposits
in Dollars for a period of time comparable to the Interest Period applicable to
such LIBOR Loan which are offered by four (4) major banks in the London
interbank market at approximately 11:00 a.m. London time on the day that is two
(2) London Business Days prior to the first day of the Interest Period
applicable to such LIBOR Loan as selected by the calculation agent. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its Dollar deposit offered rate. If at least two (2)
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer that two (2) quotations are provided as requested,
the rate for that date will be determined on the basis of the rates quoted for
loans in Dollars to leading European banks for a period of time comparable to
the Interest Period applicable to such LIBOR Loan offered by major banks in New
York City at approximately 11:00 a.m. New York City time, on the day that is two
(2) London Business Days prior to the first day of the Interest Period
applicable to such LIBOR Loan. In the event that the Lender is unable to obtain
any such quotation as provided above, it will be deemed that a LIBOR Loan is
unavailable and, accordingly, such requested LIBOR Loan shall initially be made
as, or be converted to, a Prime Rate Loan, as the case may be.
"LIBOR Loan" means any Loan, or any portion or portions thereof,
bearing interest at a rate determined by reference to the LIBOR Rate.
"LIBOR Rate" means, for any LIBOR Loan for any Interest Period, an
interest rate per annum determined pursuant to the following formula, as
adjusted from time to time in accordance with the applicable provisions of this
Agreement:
LIBOR Rate = LIBOR Base Rate
----------------------
1 - Reserve Percentage
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"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, whether based on common law, statute, or contract, (b) the interest of a
vendor or a lessor under any conditional sale agreement, Capital Lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such asset, and (c) in the
case of securities, any purchase option, call or similar right of a third party
with respect to such securities.
"Line of Credit Commitment" means the Lender's commitment to make Line
of Credit Loans to the Borrower pursuant to Section 2.2 of this Agreement in an
outstanding aggregate principal amount not to exceed at any time TEN MILLION AND
NO/100 DOLLARS ($10,000,000).
"Line of Credit Loan" means that term as defined in Section 2.2 of this
Agreement, and also mean an Acquisition Loan or an Equipment Loan.
"Line of Credit Loan Note" means each promissory note of the Borrower
dated the date the applicable Line of Credit Loan is made and payable to the
order of the Lender, in substantially the form of Exhibit B attached hereto,
evidencing the Obligations arising under such Line of Credit Loan, and any and
all substitutions and replacements thereof, all as the same may be amended
and/or modified from time to time.
"Line of Credit Notice of Borrowing" means that term as defined in
Section 2.4(a) of this Agreement.
"Line of Credit Termination Date" means July 31, 2000.
"Loan" means, as the context requires, a Revolving Loan or a Line of
Credit Loan.
"Loan Documents" means all now existing or hereafter arising
instruments, loan agreements and any other agreements and documents governing,
evidencing, guarantying, securing or otherwise relating to any or all of the
Obligations, together with all amendments, modifications, renewals or extensions
thereof, including without limitation, this Agreement, the Notes, the Guaranty
Agreements, and all other promissory notes, guaranties, mortgages, security
documents, deeds to secure debt, deeds of trust, pledges, assignments,
contracts, negative pledges, powers of attorney, landlord waivers, trust account
agreements, and written matters, whenever executed and delivered to the Lender,
with respect to the transactions contemplated by this Agreement.
"London Business Day" means a Business Day other than a day on which
banks in London, England are required or authorized by law to be closed.
"Margin Stock" means that term as defined in Regulation U.
"Material Adverse Effect" means (a) a material adverse effect on the
business, condition (financial or otherwise), operations or properties of the
Borrower and its Subsidiaries, on a consolidated basis, (b) material impairment
of the validity or enforceability of this Agreement or any of the other Loan
Documents, (c) material impairment of the ability of the Lender to enforce
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<PAGE> 16
any of the material rights and remedies of the Lender hereunder or under any
other Loan Document, or (d) material impairment of the ability of the Borrower
or any Guarantor to perform its obligations under any Loan Document to which it
is or will be a party.
"Maturity Date" means: (a) with respect to the Revolving Loan
Commitment, July 31, 1999, and (b) with respect to each Line of Credit Loan, the
sixty-six (66) month anniversary date of the making of such Line of Credit Loan.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
"Note" means the Revolving Loan Note or a Line of Credit Note.
"Obligations" means all loans, advances, interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding), Debt (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), liabilities,
obligations, guaranties, indemnities, covenants and duties at any time owing by
the Borrower to the Lender and/or to any of the Lender's direct and indirect
affiliates and subsidiaries, of every kind and description, whether or not
evidenced by any note or other instrument, whether or not for the payment of
money, whether direct or indirect, primary or secondary, absolute or contingent,
due or to become due, now existing or hereafter arising, including, but not
limited to, the Loans, all obligations of the Borrower under any interest rate
protection agreements, foreign exchange agreements and/or controlled
disbursement check cashing or other cash management agreements with the Lender,
all obligations of the Borrower in respect of any letter of credit issued by the
Lender for its account or for the account of a Subsidiary or other Person and
all other Debt, liabilities and obligations arising under this Agreement and the
other Loan Documents, and all reasonable costs, expenses, fees, charges and
attorneys' (both outside and in-house), paralegals' and professional fees
incurred in connection with any of the foregoing, or in any way connected with,
involving or relating to the preservation, enforcement, protection or defense
of, or realization under this Agreement, any Note, any of the other Loan
Documents, any related agreement, document or instrument, and the rights and
remedies hereunder or thereunder, including without limitation, all reasonable
costs, expenses and fees incurred in conducting environmental studies or tests,
and all reasonable costs, expenses and fees incurred in connection with any
"workout" or default resolution negotiations involving legal counsel or other
professionals and further in connection with any re-negotiation or restructuring
of the any of the Debt evidenced by this Agreement, any Note and/or any of the
other Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisitions" means acquisitions by the Borrower of not less
than a Controlling interest in the outstanding capital stock or other equity
interests of any corporation,
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partnership, joint venture, a division of any corporation or any similar
business unit (or of substantially all the assets and business of any of the
foregoing) engaged in a Related Business (each, an "ACQUISITION") so long as (a)
in the case of each such Acquisition of capital stock, such Acquisition was not
preceded by an unsolicited tender offer for such capital stock by the Borrower
or any of its Affiliates, (b) in the case of each Acquisition, the aggregate
principal amount of Line of Credit Loans used to finance the cash consideration
paid in connection with such Acquisition does not exceed eighty percent (80%) of
the total cost (including without limitation, assumption of Debt and fees and
expenses) of such Acquisition, and (c) the Borrower shall have delivered to the
Lender (i) a pro forma consolidated financial statement in form, scope and
substance satisfactory to the Lender, in its sole but reasonable discretion,
reflecting the full financial effects of the Acquisition and the projected
financial effects of the Acquisition over the immediately succeeding twelve (12)
month period and indicating, after giving effect to such Acquisition, the
Borrower's continued compliance with the financial covenants set forth in
Article VII hereof, and (ii) a certificate certifying that at the time of and
immediately after giving effect to such Acquisition, no Default or Event of
Default shall have occurred and be continuing.
"Permitted Investments" means (a) investments of the Borrower existing
on the date hereof and described on Schedule 1.1 hereof, (b) direct obligations
of, or obligations the principal and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), (c) investments in certificates of deposit, banker's
acceptances and time deposits issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, the Lender or by any domestic
office of any commercial bank organized under the laws of the United States of
America or any State thereof having a tier one capital ratio of not less than
six percent (6%) and then in an amount not exceeding ten percent (10%) of the
issuing bank's unimpaired capital and surplus, (d) investments in commercial
paper having, on the date of the acquisition thereof, a credit rating from
Standard & Poor's Rating Service or from Moody's Investors Service, Inc. of BBB
or better, (e) operating deposit accounts of the Borrower and its Subsidiaries,
(f) advances to employees in the ordinary course of business in an aggregate
amount outstanding not exceeding $100,000 at any time, (g) deposits made in
connection with a proposed acquisition in an amount not in excess of ten (10%)
percent of the purchase price, PROVIDED that the acquisition will be a Permitted
Acquisition upon consummation thereof, (h) investments by the Borrower in any
Guarantor, and (i) other investments not exceeding $500,000 in the aggregate at
any one time outstanding, PROVIDED that any investment which, when made,
constituted a Permitted Investment may continue to be held (but not reinvested)
notwithstanding that such investment may thereafter cease to constitute a
Permitted Investment.
"Permitted Liens" means that term as defined in Section 6.1 hereof.
"Person" means any natural person, sole proprietorship, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, organization, joint venture, institution,
Governmental Authority, or other entity of any nature whatsoever.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and
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in respect of which the Borrower or any ERISA Affiliate is (or, if such plan
were terminated, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Prime Rate" means, at any time of reference, the variable per annum rate
of interest so designated from time to time by the Lender as its prime rate. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate being charged to any customer.
"Prime Rate Loan" means any Loan, or any portion or portions thereof,
bearing interest at a rate determined by reference to the Prime Rate.
"Property" means each real property owned, leased or occupied by the
Borrower.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
all official rulings and interpretations thereunder or thereof.
"Related Business" means any business of the Borrower and its
Subsidiaries as conducted on the date hereof and any business related, ancillary
or complementary thereto.
"Release" means any spilling, leaking, migrating, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Contaminant in,
into, onto or through the environment.
"Remedial Action" means (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to (i) clean up, remove, treat,
abate or in any way address any Contaminant in the environment, (ii) prevent the
Release or threat of Release, or minimize the further Release of any Contaminant
so it does not migrate or endanger or threaten to endanger public health,
welfare or the environment, or (iii) perform studies and investigations in
connection with, or as a precondition to, (i) or (ii) above.
"Reserve Percentage" means, for any Interest Period for all LIBOR
Loans, the maximum reserve percentage requirement (including any marginal,
special, emergency or supplemental reserves, and rounded to the next higher
1/100th of 1% and expressed as a decimal) in effect for
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any day during such Interest Period under Regulation D of the Board of Governors
of the Federal Reserve System for Eurocurrency Liabilities as defined therein
(or in the case of the fallback rate, for the type of deposits or liabilities on
which the fallback rate is based).
"Revolving Loan" means that term as defined in Section 2.1 of this
Agreement.
"Revolving Loan Commitment" means the Lender's commitment to make
Revolving Loans to the Borrower pursuant to Section 2.1 of this Agreement in an
outstanding aggregate principal amount not to exceed at any time ONE MILLION AND
NO/100 DOLLARS ($1,000,000).
"Revolving Loan Note" means the revolving loan promissory note of the
Borrower dated the date of this Agreement and payable to the order of the
Lender, in substantially the form of Exhibit A attached hereto, evidencing the
Obligations arising under the Revolving Loans, and any and all substitutions and
replacements thereof, all as the same may be amended and/or modified from time
to time, which Revolving Loan Note shall amend to the extent is amends, restate
to the extent is restates, supersede and replace the Existing Revolving Loan
Note in its entirety. The amendment and restatement of the Existing Revolving
Loan Note shall in no way be construed as a novation of the Borrower's
indebtedness evidenced by the Existing Revolving Loan Note.
"Revolving Loan Notice of Borrowing" means that term as defined in
Section 2.3(a) of this Agreement.
"Rolling Period" means, with respect to any fiscal quarter of the
Borrower, such fiscal quarter and the three consecutive fiscal quarters
immediately prior thereto.
"Subordinated Debt" means any and all Debt of the Borrower and its
Subsidiaries which is fully and absolutely subordinated in right of payment to
the full and final payment in cash of the Obligations pursuant to agreements
satisfactory to the Lender as to form and substance, in its sole discretion, as
evidenced by its written approval thereof.
"Subsidiary" means, with respect to the Borrower, any corporation,
partnership, association or other business entity (a) of which securities or
other ownership interests representing more than fifty percent (50%) of the
equity or more than fifty percent (50%) of the ordinary voting power or more
than fifty percent (50%) of the general partnership interests are, at the time
any determination is being made, owned, Controlled, or held, or (b) that is, at
the time any determination is made, otherwise Controlled, by the Borrower or one
or more Subsidiaries of the Borrower or by the Borrower and one or more
Subsidiaries of the Borrower.
"Type", when used in respect of any Loan, shall refer to the Rate by
reference to which interest on such Loan is determined. For purposes hereof, the
term "RATE" shall include the LIBOR Rate and the Prime Rate.
"Unused Line of Credit Commitment" means, at any time, an amount equal
to (a) the Line of Credit Commitment minus (b) the aggregate principal amount of
all Line of Credit Loans outstanding at such time (without giving effect to the
requested Line of Credit Loan, if any).
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"Unused Revolving Loan Commitment" means, at any time, an amount equal
to (a) the Revolving Loan Commitment minus (b) the aggregate principal amount of
all Revolving Loans outstanding at such time (without giving effect to the
requested Revolving Loan, if any).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time (subject to the restrictions on such amendments, restatements,
supplements or modifications set forth herein), and (b) all terms of an
accounting or financial nature be construed, and all computations or
classifications of assets and liabilities and of income and expenses shall be
made or determined in accordance with, GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
each mean "to but excluding".
ARTICLE II
AMOUNT AND TERMS OF THE CREDITS
Section 2.1 The Revolving Loans. Subject to the terms and conditions
contained in this Agreement, the Lender agrees to make advances (each, a
"REVOLVING LOAN") to the Borrower from time to time on any Business Day during
the period from the date hereof until the Maturity Date of the Revolving Loan
Commitment in an amount for each such Revolving Loan not to exceed the Unused
Revolving Loan Commitment on such Business Day, PROVIDED, HOWEVER, that for the
period commencing on the date hereof and continuing through and including the
Maturity Date of the Revolving Loan Commitment, there shall be no borrowings or
reborrowings and no outstanding Revolving Loans for at least thirty (30)
consecutive days (the "CLEAN-UP PERIOD"). Within the limits of the Unused
Revolving Loan Commitment and the Clean-Up Period, the Borrower may request
Revolving Loans under this Section 2.1, repay all or a portion of outstanding
Revolving Loans pursuant to Section 2.12 hereof, and request to re-borrow
Revolving Loans under this Section 2.1.
Section 2.2 The Line of Credit Loans. Subject to the terms and
conditions contained in this Agreement, the Lender agrees to make advances
(each, a "LINE OF CREDIT LOAN") to the Borrower from time to time on any
Business Day during the period from the date hereof until the
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Line of Credit Termination Date in an amount for each such Line of Credit Loan
not to exceed the Unused Line of Credit Commitment on such Business Day,
subject, however, to the minimum borrowing amount set forth in Section 2.4(a)
hereof. Within the limits of the Unused Line of Credit Commitment and the
minimum borrowing amount set forth in Section 2.4(a) hereof, the Borrower may
request Line of Credit Loans under this Section 2.2 and repay all or a portion
of outstanding Line of Credit Loans pursuant to Section 2.12 hereof. No Line of
Credit Loan made and subsequently repaid, in whole or in part, may be
re-borrowed by the Borrower.
Section 2.3 Procedure for Revolving Loans; Certain Conditions;
Revolving Loan Note.
(a) Notices of Borrowing. Requests for Revolving Loans may be
made only once per Business Day and shall be made on notice, given by the
Borrower to the Lender not later than (i) 12:00 p.m. (Hartford, Connecticut
time) on the proposed Drawdown Date, in the case of requests for Prime Rate
Loans, and (ii) 10:00 a.m. (Hartford, Connecticut time) on the second London
Business Day prior to the proposed Drawdown Date, in the case of requests for
LIBOR Loans. Each such notice (which notice shall be irrevocable and binding on
the Borrower) of a proposed borrowing (each, a "REVOLVING LOAN NOTICE OF
BORROWING") shall be by telephone, confirmed immediately in writing, or by
telex, telecopier or other electronic mode of communication, specifying the
proposed Drawdown Date (which shall be a Business Day), the amount to be
borrowed, the Type of borrowing (which shall be either a Prime Rate Loan or a
LIBOR Loan or any combination thereof) as the Borrower may elect subject to the
provisions of this Agreement, and, if a LIBOR Loan, the duration of the initial
available Interest Period. If no election as to the Type of Revolving Loan
borrowing is specified in any such Revolving Loan Notice of Borrowing, then the
Borrower shall be deemed to have requested such Revolving Loan to be a Prime
Rate Loan. If no Interest Period with respect to any requested available LIBOR
Loan borrowing is specified in any such Revolving Loan Notice of Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one (1)
month's duration. In the event that written confirmation of a telephonic
Revolving Loan Notice of Borrowing differs in any respect from the action taken
by the Lender, the records of the Lender shall control absent manifest error.
Subject to the fulfillment of the applicable conditions set forth in Article III
hereof, the Lender will, on the Drawdown Date, make the requested Revolving Loan
in immediately available funds by crediting the amount thereof to an operating
account of the Borrower maintained with the Lender as requested by the Borrower
or as the Borrower may otherwise direct.
(b) Revolving Loan Note, Evidence of Debt. The Revolving Loans
shall be evidenced by the Revolving Loan Note, and repaid with interest in
accordance with Section 2.8(a) and the Revolving Loan Note. The Borrower hereby
authorizes the Lender to record on the Revolving Loan Note or in its internal
computerized records (i) the amount of each Revolving Loan made hereunder, the
Type thereof and, for each LIBOR Loan, the Interest Period applicable thereto,
(ii) the amount of any principal or interest received by the Lender on account
of the Revolving Loans, which recordation shall, in the absence of manifest
error, be conclusive as to the outstanding aggregate principal balance of the
Revolving Loans and shall be considered correct and binding on the Borrower;
PROVIDED, HOWEVER, that the failure of the Lender to make any such recordation
or any error therein shall not in any manner limit or otherwise affect the
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obligation of the Borrower under this Agreement or the Revolving Loan Note,
including without limitation, its obligation to repay the Revolving Loans in
accordance with their terms.
Section 2.4 Procedure for Line of Credit Loans; Certain Conditions;
Line of Credit Notes.
(a) Notices of Borrowing. Requests for Line of Credit Loans
may be made only once per Business Day and shall be made on notice, given by the
Borrower to the Lender not later than (i) 12:00 p.m. (Hartford, Connecticut
time) on the proposed Drawdown Date, in the case of requests for Prime Rate
Loans, and (ii) 10:00 a.m. (Hartford, Connecticut time) on the second Business
Day prior to the proposed Drawdown Date, in the case of requests for LIBOR
Loans. Each such notice (which notice shall be irrevocable and binding on the
Borrower) of a proposed borrowing (each, an "LINE OF CREDIT NOTICE OF
BORROWING") shall be by telephone, confirmed immediately in writing, or by
telex, telecopier or other electronic mode of communication, specifying the
proposed Drawdown Date (which shall be a Business Day), the amount to be
borrowed, and the Type of borrowing (which shall be either a Prime Rate Loan or
a LIBOR Loan or any combination thereof) as the Borrower may elect subject to
the provisions of this Agreement. Each borrowing under the Line of Credit
Commitment which the Borrower elects to be a LIBOR Loan shall be in an amount
equal to $250,000 or an integral multiple thereof. If no election as to the Type
of Line of Credit Loan borrowing is specified in any such Line of Credit Notice
of Borrowing, then the requested Line of Credit Loan shall be a Prime Rate Loan.
In the event that written confirmation of a telephonic Line of Credit Notice of
Borrowing differs in any respect from the action taken by the Lender, the
records of the Lender shall control absent manifest error. Subject to (i) the
fulfillment of the applicable conditions set forth in subsections (b) and (c)
below, (ii) the applicable conditions set forth in Article III hereof, and (iii)
the Borrower's execution and delivery to the Lender of the applicable Line of
Credit Note, the Lender will, on the Drawdown Date, make the requested Line of
Credit Loan in immediately available funds by crediting the amount thereof to
the operating account of the Borrower maintained with the Lender or as the
Borrower may otherwise direct.
(b) Copies of Acquisition Documents, Etc. To be eligible to
obtain any Acquisition Loan, the Borrower shall have also submitted to the
Lender the following at least three Business Days prior to the requested
Drawdown Date: (i) copies of all instruments and documents being executed and/or
delivered in connection with such Permitted Acquisition in substantially final
form; (ii) evidence reasonably satisfactory to the Lender that the aggregate
principal amount of the Line of Credit Loan(s) being used to finance the
purchase price of such Permitted Acquisition is not greater than eighty percent
(80%) of the total cost (including without limitation, assumption of Debt and
fees and expenses) of such Permitted Acquisition, (iii) evidence reasonably
satisfactory to the Lender that (A) the Borrower has paid or has sufficient
funds (including the proceeds of the requested Line of Credit Loan(s)) to pay
the total cost for such Permitted Acquisition, including without limitation, all
costs and expenses associated therewith, (B) upon payment of such purchase
price, the Borrower (or any Subsidiary of the Borrower) will obtain physical
possession of, and acquire good title to, the acquired assets, if any, and (C)
that such acquired assets are not subject to any pledge, Lien, lease,
encumbrance or charge of any kind whatsoever, other than Permitted Liens, and
(iv) the documents specified in clause (d) of the definition of the term
"Permitted Acquisitions"
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contained in Section 1.1 of this Agreement. In the event of any Permitted
Acquisition by the Borrower of any assets or business other than capital stock
of any corporation, the Borrower may, at the time of such Permitted Acquisition,
either continue to hold such assets or business or contribute such assets or
business to an existing or newly created Domestic Subsidiary. If such assets or
business are contributed to a Domestic Subsidiary of the Borrower, the Borrower
shall then cause such Subsidiary, if not then a Guarantor, to become a Guarantor
by executing and delivering to the Lender a Guaranty Agreement.
(c) Copies of Invoices, Etc. To be eligible to obtain any
Equipment Loan, the Borrower shall have also submitted to the Lender the
following at least three (3) Business Days prior to the requested Drawdown Date:
(i) (a) with respect to each specific piece of Eligible Equipment having a cost
(including installation costs) in excess of $250,000, copies of invoices which
reflect the actual net cost of the Eligible Equipment being purchased with the
proceeds of such Equipment Loan (specifically excluding, if any, taxes, freight
and similar charges, but including installation charges) and which contain a
description of and the serial number of such Eligible Equipment, and (b) with
respect to Eligible Equipment having a cost (including installation costs) equal
to or less than $250,000, a descriptive listing of such Eligible Equipment,
including the purchase price thereof, certified by a duly authorized officer of
the Borrower as true and correct, and (ii) evidence reasonably satisfactory to
the Lender that (A) the Borrower has paid or has sufficient funds (including the
proceeds of the requested Equipment Loan) to pay the entire purchase price for
such Eligible Equipment, including without limitation, taxes, freight,
installation and other services and costs associated therewith, (B) upon payment
of such purchase price, the Borrower or a Guarantor will obtain physical
possession of, and acquire good title to, such Eligible Equipment at its
principal place of business, and (C) that such Eligible Equipment is not subject
to any pledge, Lien, lease, encumbrance or charge of any kind whatsoever other
than in favor of the Lender and Permitted Liens of the nature described in
subsections (b), (d) or (f) of Section 6.1.
(d) Line of Credit Loan Notes, Evidence of Debt. Each Line of
Credit Loan shall be evidenced by a separate Line of Credit Note, and repaid
with interest in accordance with Section 2.8(b) and the applicable Line of
Credit Loan Note. The Borrower hereby authorizes the Lender to record on each
Line of Credit Note or in its internal computerized records (i) the amount of
each Line of Credit Loan made hereunder and the Type thereof, (ii) the amount of
any principal or interest received by the Lender on account of the Line of
Credit Loan evidenced by such Note, which recordation shall, in the absence of
manifest error, be conclusive as to the outstanding principal balance of such
Line of Credit Loan and shall be considered correct and binding on the Borrower;
PROVIDED, HOWEVER, that the failure of the Lender to make any such recordation
or any error therein shall not in any manner limit or otherwise affect the
obligation of the Borrower under this Agreement or the Line of Credit Loan
Notes, including without limitation, its obligation to repay the Line of Credit
Loans in accordance with their respective terms.
Section 2.5 Method of Payment, Direct Debits. The Borrower shall make
each payment due under this Agreement and under any of the Notes to the Lender
at its Head Office not later than 3:00 P.M., Hartford, Connecticut time, on the
date when due in lawful money of the United States in immediately available
funds, without setoff, defense or counterclaim. The
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Borrower hereby authorizes the Lender to charge from time to time (including
without limitation any time at which any amount is due under this Agreement) any
amount due under this Agreement or any of the Notes, including without
limitation principal, interest, fees and charges, against any account of the
Borrower with the Lender if not otherwise paid on the due dates thereof.
Whenever any payment to be made under this Agreement or under any of the Notes
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of the payment of interest.
Section 2.6 Use of Proceeds. The Borrower represents that the proceeds
of (a) the Revolving Loans shall be used for general working capital purposes in
the ordinary course of the Borrower's business, and (b) the Line of Credit Loans
shall be used for Permitted Acquisitions and/or for acquisitions of and upgrades
to the Borrower's machinery and equipment.
Section 2.7 Unused Line of Credit Fees. With respect to the Line of
Credit Loans, the Borrower shall pay to the Lender a non-refundable fee on the
first day of each April, July, October and January, commencing on July 1, 1998
and continuing through and including the Line of Credit Termination Date, in an
amount equal to one quarter of one percent (.25%) per annum of the average daily
Unused Line of Credit Commitment for the prior three (3) month period or portion
thereof.
Section 2.8 Interest Rates.
(a) Pre-default Rates.
(i) Revolving Loans. Subject to the provisions of
Section 2.8(b) hereof, during the period from the date made through and
including the date of payment in full, each Revolving Loan shall bear interest
on the outstanding principal amount thereof at a rate per annum equal to, at the
election of the Borrower: (i) the Prime Rate, on a floating basis; or (ii) the
LIBOR Rate (as determined for each available Interest Period) plus the
Applicable LIBOR Rate Margin (as adjusted from time to time pursuant to the
terms of this Agreement) for available Interest Periods as set forth under the
definition of "Interest Period" herein.
(ii) Line of Credit Loans. Subject to the provisions
of Section 2.8(b) hereof, during the period from the date made through and
including the date of payment in full, each Line of Credit Loan shall bear
interest on the outstanding principal amount thereof at a rate per annum equal
to, at the election of the Borrower: (i) the Prime Rate, on a floating basis; or
(ii) the LIBOR Rate (as determined for each available Interest Period) plus the
Applicable LIBOR Rate Margin (as adjusted from time to time pursuant to the
terms of this Agreement) for an available Interest Period as set forth under the
definition of "Interest Period" herein.
(b) Default Interest. Notwithstanding the foregoing, at all
times after the occurrence and during the continuance of an Event of Default or
after maturity (by acceleration or otherwise) or judgment, the right of the
Borrower to select pricing options shall cease and interest on all Loans, and
interest on all payments of interest that are not paid when due, shall
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accrue at a floating rate per annum equal to four percent (4%) above the
otherwise applicable pre-default rates (the "DEFAULT RATE").
(c) Calculation of Interest, Interest Rate Changes. Interest
on each Prime Rate Loan and on any per annum fee charged hereunder which is not
paid when due shall be calculated on the basis of a 360 day year and the actual
number of days elapsed. With respect to each Prime Rate Loan, any change in the
interest rate because of a change in the Prime Rate shall become effective,
without notice or demand, immediately upon any change in the Prime Rate . With
respect to each LIBOR Loan, any change in the interest rate because of a change
in the Reserve Percentage shall become effective, without notice or demand, on
the date on which such change in the Reserve Percentage becomes effective as to
such LIBOR Loan.
(d) Payment of Interest.
(i) Prime Rate Loans. Interest on each Prime Rate
Loan shall, subject to the provisions of this Agreement, be payable monthly in
arrears beginning on the first day of the month immediately succeeding the month
in which such Prime Rate Loan was made or converted from a LIBOR Loan and
continuing on the first day of each and every month thereafter, without notice
or demand, so long as such Prime Rate Loan remains outstanding or until such
Prime Rate Loan is converted to a LIBOR Loan in accordance with the provisions
of this Agreement.
(ii) LIBOR Loans. Interest on each LIBOR Loan shall,
subject to the provisions of this Agreement, be payable on the last day of each
applicable Interest Period, PROVIDED, HOWEVER, that interest on each LIBOR Loan
having an Interest Period of six (6) months shall be payable on the ninetieth
(90th) calendar day and the last day of such Interest Period.
(e) Lawful Interest. It being the intent of the parties that
the rate of interest and all other charges to the Borrower be lawful, if for any
reason the payment of a portion of interest, fees or charges as required by this
Agreement would exceed the limit established by applicable law which a
commercial lender such as the Lender may charge to a commercial borrower such as
the Borrower, then the obligation to pay interest or charges shall automatically
be reduced to such limit and, if any amounts in excess of such limits shall have
been paid, then such amounts shall be applied to the principal amount of the
Obligations or refunded so that under no circumstances shall interest or charges
required hereunder exceed the maximum rate allowed by law, as aforesaid.
Section 2.9 Election and Continuation of Interest Periods
(a) Election. The Borrower shall elect the initial available
Interest Period applicable to each Loan, or any portion or portions thereof,
which it elects to bear interest with respect to the LIBOR Rate by its
applicable Revolving Loan Notice of Borrowing or Line of Credit Notice of
Borrowing given to the Lender pursuant to Sections 2.3(a) and 2.4(a) hereof.
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(b) Continuation. Any LIBOR Loan may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable written notice to the Lender of the duration of the
next available Interest Period to be applicable to such LIBOR Loan, PROVIDED
that such written notice must be given not less than two (2) London Business
Days prior to the last Business Day of the then current Interest Period with
respect thereto, AND FURTHER PROVIDED that no LIBOR Loan may be continued as
such: (i) at a time when any Default has occurred and is continuing, (ii) in the
event a LIBOR Loan is unavailable pursuant to Sections 2.13 or 2.15 hereof, or
(iii) in the event the Borrower does not select an Interest Period or selects an
unavailable Interest Period. If the Lender does not receive a timely notice of
the next available Interest Period and interest option elected by the Borrower,
or if no such further LIBOR Loan is available, such LIBOR Loan shall be
automatically converted, without notice, to a Prime Rate Loan on the last day of
the then expiring Interest Period.
Section 2.10 Conversion of Loans. The Borrower may elect from time to
time, subject to the provisions of the Agreement, to convert any outstanding
Loan, or a portion or portions thereof, into a Loan of another available Type by
giving the Lender not less than two (2) Business Days' (or London Business Days
in the case of a conversion to a LIBOR Loan) prior irrevocable written notice of
such election, PROVIDED that any such conversion of a LIBOR Loan to a Prime Rate
Loan may only be made on the last Business Day of an Interest Period with
respect thereto, and PROVIDED FURTHER that any conversion of a Line of Credit
Loan from a Prime Rate Loan to a LIBOR Loan shall be in an amount not less than
$100,000 or an integral multiple thereof. Any such notice of conversion shall
specify the amount of the Loan being converted and, in the case of a conversion
of a Revolving Loan which is a Prime Rate Loan to a LIBOR Loan, the length of
the initial Interest Period. All or any part of any of the outstanding Loans may
be converted as provided herein, PROVIDED that no Prime Rate Loan may be
converted to a LIBOR Loan: (a) at a time when any Default has occurred and is
continuing; (b) in the event a LIBOR Loan is unavailable pursuant to Sections
2.13 or 2.15 hereof; or (c) in the event the Borrower does not select an
Interest Period or selects an unavailable Interest Period.
Section 2.11 Late Payment. If any amount due hereunder or under any of
the Notes is not paid within ten (10) days after the date it is due and payable,
without in any way affecting the Lender's right to declare an Event of Default
to have occurred, a late charge equal to five percent (5%) of such late payment
may be assessed against the Borrower and shall be immediately due and payable
without demand or notice of any kind, PROVIDED, HOWEVER, that the Lender shall
not be entitled to accrue and collect interest at the Default Rate and assess
and collect late charges against the Borrower, it being agreed and understood
that the Lender shall be entitled to only one such remedy.
Section 2.12 Repayments and Prepayments.
(a) Optional. The Borrower may, at its option and upon one (1)
Business Days' prior written notice, repay or prepay any Loan, at any time and
from time to time, in whole or in part, on the following conditions: (i) the
Borrower shall pay all accrued interest on the principal being paid to the date
of the repayment or prepayment and, in the case of repayments or prepayments in
full, all fees, charges, costs, expenses and other amounts then due under any of
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the Loans, and (ii) if any such Loan is then a LIBOR Loan, such LIBOR Loan shall
only be repaid or prepaid on the last Business Day of the then current Interest
Period with respect thereto. In its notice, the Borrower shall specify the date
and amount of the repayment or prepayment, whether the Loan being repaid or
prepaid is a Prime Rate Loan or a LIBOR Loan or a combination thereof, and, if a
combination thereof, the amount allocable to each. With respect to each Line of
Credit Loan, all payments shall be applied to the principal installments due in
respect thereof in the inverse order of maturity and shall not relieve the
Borrower's obligation to make regularly scheduled principal payments thereunder.
(b) Mandatory. In the event of a termination of the Revolving
Loan Commitment by the Borrower or the Lender for any reason whatsoever, the
Borrower shall repay all outstanding Revolving Loans on the date of such
termination.
(c) Payment of LIBOR Loans. In the event that a repayment or
prepayment of a LIBOR Loan is made, required or permitted on a date other than
the last Business Day of the then current Interest Period with respect thereto,
the Borrower shall indemnify the Lender therefor in accordance with Section 2.16
hereof.
Section 2.13 Illegality. Notwithstanding any other provision of this
Agreement, if, after the date hereof, any applicable law, regulation or
directive, or any change therein or in the interpretation or application thereof
after the date hereof shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for the Lender to make
or maintain any LIBOR Loan as contemplated by this Agreement, then (a) the
obligation of the Lender to make such LIBOR Loan, continue such LIBOR Loan as
such, or convert a Prime Rate Loan to a LIBOR Loan shall forthwith be suspended
until the Lender shall notify the Borrower that the Lender has determined that
the circumstances causing such suspension no longer exist, and (b) all such
Loans then outstanding as unlawful LIBOR Loans, if any, shall be converted
automatically, without notice on the last day of the then current Interest
Periods with respect thereto, or, within such earlier period as required by law,
to Prime Rate Loans. If any such conversion of a LIBOR Loan is made or required
on a day that is not the last Business Day of the then current Interest Period
applicable thereto, the Borrower shall pay the Lender such amount or amounts as
may be required pursuant to Section 2.16 hereof.
Section 2.14 Reserve Requirements, Change in Circumstances.
(a) Notwithstanding any other provision of this Agreement, in
the event that applicable law, treaty or regulation or directive from any
government, governmental agency or regulatory authority enacted after the date
hereof, or any change therein or in the interpretation or application thereof,
or compliance by the Lender with any request or directive (whether or not having
the force of law) enacted after the date hereof from any central bank or
government, governmental agency or regulatory authority, shall:
(i) subject the Lender to any tax of any kind
whatsoever (except taxes on the overall net income or gross receipts of the
Lender) with respect to this Agreement, the Notes or any of the Loans made by
it, or change the basis of taxation of payments to the Lender of principal,
interest or any other amount payable hereunder or thereunder (except for changes
in the rate of tax on the overall net income of the Lender);
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(ii) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirements against assets held by,
or deposits or other liabilities in or for the account of, advances or loans or
other extensions of credit by, or any other acquisition of funds by, any office
of the Lender, including (without limitation) pursuant to Regulations of the
Board of Governors of the Federal Reserve System; or
(iii) in the sole but reasonable opinion of the
Lender, cause the Notes, any Loans or this Agreement to be included in any
calculations used in the computation of regulatory capital standards; or
(iv) impose on the Lender any other material
condition;
and the result of any of the foregoing is to increase the cost to the Lender of
making, converting into, continuing and/or maintaining the Loans (or any part
thereof) by an amount that the Lender deems to be material, or to reduce the
amount of any payment (whether of principal, interest or otherwise) with respect
of any of the Loans by an amount that the Lender deems material, then, in any
case, the Borrower shall promptly pay the Lender, upon its demand, such
additional amounts necessary, in the reasonable judgment of the Lender, to
compensate the Lender for such additional costs or such reduction, as the case
may be (collectively the "ADDITIONAL COSTS").
(b) If the Lender shall have determined that the adoption
after the date hereof of any applicable law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted), or in the interpretation
or administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Lender or the Lender's holding company, if any, with any
request or directive regarding capital adequacy (whether or not having the force
of law and whether or not failure to comply therewith would be unlawful, so long
as the Lender believes in good faith that such has the force of law or that the
failure to so comply would be unlawful) of any such Government Authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on any of the Lender's capital or on the capital of the Lender's
holding company, if any, as a consequence of this Agreement or the Loans to a
level below that which the Lender or the Lender's holding company could have
achieved but for such applicability, adoption, change or compliance (taking into
consideration the Lender's policies and the policies of the Lender's holding
company with respect to capital adequacy) by an amount deemed by the Lender to
be material, then, promptly upon demand, the Borrower shall immediately pay to
the Lender, from time to time as specified by the Lender, such additional amount
or amounts as shall be sufficient to compensate the Lender for such reduced
return.
(c) A certificate of the Lender setting forth in reasonable
detail the amount or amounts necessary to compensate the Lender or the Lender's
holding company, as applicable, as specified in subsections (a) and (b) of this
Section 2.14 shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay the Lender the amount shown to be due on
any such certificate delivered by it within ten (10) days after its receipt.
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(d) Failure or delay on the part of the Lender to demand
compensation for any Additional Costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
the Lender's right to demand such compensation. The protection of this Section
shall be available to the Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or condition that shall have occurred or been imposed.
Section 2.15 Basis for Determining LIBOR Base Rate Inadequate or
Unfair. In the event, and on each occasion, that the Lender shall have
determined (which determination shall be conclusive absent manifest error and
binding upon the Borrower) that (a) by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not exist for
determining LIBOR Base Rate, or (b) Dollar deposits in the relevant amount and
for the relevant maturity are no longer available to the Lender in the London
interbank market, or (c) the making or continuation of LIBOR Loans has been made
impractical or unlawful by the occurrence of a contingency that materially and
adversely affects the London interbank market, or (d) the LIBOR Base Rate will
not adequately and fairly reflect the cost to the Lender of making, funding or
maintaining LIBOR Loans, or (e) the LIBOR Base Rate shall no longer represent
the effective cost to the Lender of Dollar deposits in the relevant market for
deposits in which it regularly participates, the Lender shall give the Borrower
notice of such determination as soon as practicable thereafter. If such notice
is given (i) each requested LIBOR Loan shall be made as a Prime Rate Loan,
unless the Borrower gives the Lender two (2) Business Days' prior written notice
that its request for such borrowing is canceled, (ii) each Loan that was to have
been converted to a LIBOR Loan shall be converted into or continued as a Prime
Rate Loan, and (iii) each outstanding LIBOR Loan shall be automatically
converted, without notice on the last Business Day of the then current Interest
Period applicable thereto, to a Prime Rate Loan. Until such notice has been
withdrawn, the obligation of the Lender to make LIBOR Loans, continue LIBOR
Loans as such and convert Prime Rate Loans to LIBOR Loans shall forthwith be
suspended.
Section 2.16 Indemnity. In the event of (a) a default by the Borrower
in the payment of principal of or interest on any LIBOR Loan, (b) the failure by
the Borrower to complete a borrowing of, conversion into or continuation of a
LIBOR Loan after notice thereof has been given, or (c) the making of a repayment
or prepayment of a LIBOR Loan (whether such repayment or prepayment is made
pursuant to Sections 2.12 or 2.13 hereof, as a result of termination and/or
acceleration following an Event of Default of such LIBOR Loan, or for any other
reason) on a day which is not the last day of the then current Interest Period
applicable thereto, the Borrower agrees to pay to the Lender, in addition to and
not in lieu of Additional Costs and any other amount due hereunder, on demand
such amount as shall be sufficient in the reasonable opinion of the Lender to
compensate the Lender for any loss (including loss of earnings and anticipated
profits), cost or expense (including, without limitation, costs or losses
associated with prepaying or redeploying deposits, whether or not the Lender
shall have actually funded a Loan with corresponding deposits) incurred as a
result of the occurrence of any of the foregoing conditions (a), (b) or (c). Any
demand by the Lender for payment pursuant to this Section 2.16 shall be
accompanied by a schedule in reasonable detail setting forth its
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computation of any such loss, cost or expense, such schedule to be conclusive
and binding on the Borrower absent manifest error.
Section 2.17 Payments Free of Taxes and Other Deductions. Any and all
payments by or on behalf of the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any and all current and future taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, liabilities,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein (collectively or individually called "TAXES").
The parties hereto acknowledge that the Borrower shall not be responsible for
the payment of any taxes on the overall net income of the Lender which may arise
as a result of the Loans. If any such obligation is imposed upon the Borrower
with respect to any amount payable by it hereunder or under any of the other
Loan Documents, the Borrower will pay to the Lender on the date on which such
amount is due and payable hereunder or under such other Loan Document (if not
otherwise paid to the appropriate taxing authority), such additional amount in
Dollars as shall be necessary to enable the Lender to receive the same net
amount which the Lender would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Lender certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under such other Loan Document. The Borrower will indemnify the Lender for the
full amount of Taxes paid by the Lender and any liability (including penalties,
interest and expenses (including reasonable attorneys' fees and expenses)
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally asserted by the relevant Government Authority. A
certificate as to the amount of such payment or liability prepared by the
Lender, absent manifest error, shall be final, conclusive and binding for all
purposes. Such indemnification shall be made within thirty (30) days after the
date the Lender makes written demand therefor.
Section 2.18 Obligations Absolute. All of the Obligations of the
Borrower under this Agreement, the Notes and the other Loan Documents shall (a)
be absolute, unconditional and irrevocable, (b) be paid strictly in accordance
with the terms of this Agreement and such other Loan Document under all
circumstances, and (c) not be affected, modified, released, discharged or
impaired, in whole or in part under any circumstances, irrespective of, in each
case, the following circumstances:
(i) any lack of validity or enforceability of all or any
portion of this Agreement, any of the other Loan Documents or any other
agreement or any instrument relating hereto;
(ii) the failure to give notice to the Borrower of the
occurrence of a Default or an Event of Default except as otherwise specifically
required under any Loan Document;
(iii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations;
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(iv) any modification, amendment, rescission, or waiver of, or
consent to departure from, any of the Loan Documents, or all or any of the
Obligations or this Agreement;
(v) any exchange, release or non-perfection of any collateral,
if any, or any release of any party primarily or secondarily liable on any of
the Obligations, including without limitation, the Borrower or any Guarantor, or
any amendment or waiver of or consent to departure from any Guaranty or any
other guarantee of all or any of the Obligations; or
(vi) the full or partial discharge of the Borrower or any
Guarantor in bankruptcy or similar proceeding or otherwise.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Effectiveness. The effectiveness of
this Agreement and the obligation of the Lender to make the initial Revolving
Loan and the initial Line of Credit Loan shall be subject to the prior
satisfaction of each of the following conditions, unless waived by the Lender in
writing:
(a) the Lender shall have received each of the following, in
form and substance reasonably satisfactory to the Lender and its counsel:
(i) this Agreement, the Revolving Loan Note and each
applicable Line of Credit Note duly executed and delivered by the Borrower;
(ii) a duly executed Guaranty Agreement from the
Guarantors, if any;
(iii) copies of all corporate action taken by each of
the Borrower and Guarantors, if any, including resolutions of the Board of
Directors, authorizing the execution, delivery, and performance of the Loan
Documents to which it is a party and each other document to be delivered
pursuant to this Agreement, certified as of the date of this Agreement by the
Secretary of the Borrower or each Guarantor, as the case may be;
(iv) a certificate, dated as of the date of this
Agreement, of the Secretary of the Borrower and each Guarantor, if any,
certifying the names and true signatures of the officers of the Borrower and
such Guarantor authorized to sign the Loan Documents to which the Borrower or
such Guarantor is a party and the other documents to be delivered by the
Borrower under this Agreement;
(v) a favorable opinion of independent counsel for
the Borrower and the Guarantors satisfactory to the Lender, dated the date of
this Agreement;
(vi) evidence of insurance and copies of insurance
policies evidencing compliance with the insurance requirements of this
Agreement;
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(vii) the certificates of incorporation or articles
of organization (certified by the Secretary of the State of the state of
incorporation) and bylaws of the Borrower and each Guarantor, if any;
(viii) a Certificate of Good Standing or Certificate
of Legal Existence issued by the Secretary of the State of the states of
incorporation and qualification of the Borrower and each Guarantor, if any,
evidencing that the Borrower or such Guarantor is a corporation in good standing
or legally exists in the state of its incorporation and in each State where it
is qualified to do business;
(ix) to the extent reasonably available, tax
clearance letters (Sales and Use, Corporate and Labor) from the Department of
Revenue or similar taxing Governmental Authority relating to the Borrower and
each Guarantor, if any;
(x) all other documents, instruments and agreements
that the Lender shall reasonably require in connection with this Agreement; and
(xi) evidence that the Borrower has established and
maintains its primary depository accounts with the Lender.
(b) All representations and warranties contained in this
Agreement shall be true and correct in all material respects.
Section 3.2 Conditions Precedent to Loans. The obligation of the Lender
to make each Revolving Loan (including the initial Revolving Loan) and each Line
of Credit Loan (including the initial Line of Credit Loan) shall be subject to
the prior satisfaction of each of the following additional conditions:
(a) On each Drawdown Date, the Lender shall have received the
applicable Revolving Loan Notice of Borrowing, Line of Credit Notice of
Borrowing and Line of Credit Loan Note.
(b) The representations and warranties contained in Article IV
of this Agreement and contained in each of the other Loan Documents containing
representations and warranties shall be true and correct in all material
respects on and as of such Drawdown Date with the same effect as though made on
and as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.
(c) The Borrower shall be in compliance in all material
respects with all of the terms and provisions set forth herein and in each other
Loan Document on its part to be observed or performed, and at the time of and
immediately after giving effect to such Loan, no Default or Event of Default has
occurred and is continuing.
Each request by the Borrower for a Revolving Loan or a Line of Credit
Loan shall be deemed to constitute a representation and warranty by the Borrower
that as of the date of such request and as of the applicable Drawdown Date the
matters specified in subsections (b) and (c) of this Section 3.2 have been
satisfied.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
Section 4.1 Incorporation, Good Standing, and Due Qualification. The
Borrower and each of its Subsidiaries (a) is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate power and authority necessary to
own its properties and assets and to carry on the business in which it is now
engaged or proposed to be engaged; (c) is duly qualified and in good standing as
a foreign corporation under the laws of the State of Connecticut and each other
jurisdiction in which such qualification is required, except where the failure
to so qualify could not reasonably be expected to result in a Material Adverse
Effect; and (d) has the corporate power and authority to execute, deliver and
perform its obligations under each Loan Document and each other agreement or
instrument contemplated hereby to which it is or will be a party.
Section 4.2 Corporate Power and Authority. The execution, delivery and
performance by the Borrower of the Loan Documents, and the borrowings hereunder,
are within the powers of the Borrower and have been duly authorized by all
necessary corporate and, if required, shareholder action, and do not and will
not (a) violate (i) the certificate of incorporation or bylaws of the Borrower,
or (ii) to the best knowledge of the Borrower, any provision of any law, rule,
regulation (including, without limitation, Regulation G, Regulation T,
Regulation U and Regulation X), order, writ, judgment, injunction, decree,
determination, or award presently in effect having applicability to the Borrower
or any Subsidiary, or (b) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
indenture or loan or credit agreement or any other material agreement, lease, or
instrument to which the Borrower is a party or by which the Borrower or its
properties may be bound or affected, except where such conflict, breach or
default could not reasonably be expected to result in a Material Adverse Effect,
or (c) result in the creation or imposition of any Lien upon or with respect to
any property or assets now owned or hereafter acquired by the Borrower or any
Subsidiary.
Section 4.3 Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when executed and delivered will be, the legal,
valid, and binding obligations, enforceable against the Borrower, in accordance
with their respective terms, except to the extent that enforcement thereof may
be limited by the effect of general principles of equity and bankruptcy and
similar laws affecting the rights and remedies of creditors generally.
Section 4.4 Governmental Approvals. As of the date of this Agreement,
no action, consent or approval of, registration or filing with or any other
action by any Governmental Authority is required in connection with the
transactions contemplated by this Agreement and the other Loan Documents, except
for such as have been made or obtained and are in full force and effect.
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Section 4.5 Financial Statements and Condition: Full Disclosure.
(a) The Borrower has heretofore submitted to the Lender its
consolidated and consolidating audited financial statements for the Fiscal Year
ended September 30, 1997, its Annual Report on Form 10-K for the Fiscal Year
ended September 30, 1997 and its Quarterly Report on Form 10-Q for the fiscal
quarter ended on December 31, 1997. The Borrower represents that, except as
disclosed therein, all of said financial information are true, complete and
correct in all material respects as of such respective dates; that such
financial information fairly presents the financial condition and the results of
operations of the Borrower and its consolidated Subsidiaries as of the dates
thereof and for the periods indicated therein (subject, in the case of the
Quarterly Reports on Form 10-Q, to changes resulting form normal year-end
adjustments); that such financial statements disclose all material liabilities,
direct or contingent of the Borrower and its consolidated Subsidiaries as of the
dates hereof and the periods indicated; that such financial statements have been
prepared in accordance with GAAP consistently maintained throughout the periods
involved; and that there has been no material adverse change in the business,
assets, operations or condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, from that set forth in said financial
statements.
(b) Except as set forth in Schedule 4.12 hereto, upon
consummation of the transactions contemplated under the Loan Documents, the
Borrower will not have any outstanding Debt other than the obligations and
indebtedness under this Agreement and the other Loan Documents and trade debt
incurred in the ordinary course of its business.
Section 4.6 No Default. Neither the Borrower nor any of its
Subsidiaries is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Debt, or any other material agreement
or instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, or is in violation of any law, rule, regulation,
order, judgment or decree of any Governmental Authority having jurisdiction over
it or any of its properties or assets, where such default or violation could
reasonably be expected to result in a Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in filings with the
Securities and Exchange Commission and on Schedule 4.7 hereto, there is no
pending or, to the best knowledge of the Borrower, threatened action, suit or
proceeding before any court, Governmental Authority, board of arbitration, or
arbitrator against the Borrower or any of its Subsidiaries or for or on behalf
of the Borrower or any of its Subsidiaries or in which the Borrower or any of
its Subsidiaries or any of their properties or assets are or may otherwise
become involved, which may, in any one case or in the aggregate, reasonably be
expected to have a Material Adverse Effect, nor is there any basis therefor.
Neither the Borrower nor any of its Subsidiaries has received any summons,
citation, directive, letter, or other communication from any Governmental
Authority concerning any intentional or unintentional violation or alleged
violation of any Environmental Laws which may, in any one case or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.8 Ownership and Liens. The Borrower and each of its
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all of their respective properties and assets,
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and none of their respective properties or assets are subject to any security
interest or Lien, except Permitted Liens.
Section 4.9 Subsidiaries. (a) Schedule 4.9 hereto sets forth as of the
date hereof a list of all Subsidiaries, their jurisdictions of incorporation and
the percentages of the various classes of capital stock owned by the Borrower or
another Subsidiary of the Borrower, (b) the Borrower or another Subsidiary, as
the case may be, has the unrestricted right to vote, and to receive dividends
on, all capital stock indicated on Schedule 4.9 as owned by the Borrower or such
Subsidiary (subject to limitations imposed by applicable law or by the Loan
Documents), and (c) all capital stock indicated on Schedule 4.9 has been duly
authorized and issued and is fully paid and non-assessable and owned by the
Borrower or such Subsidiary, free and clear of all Liens.
Section 4.10 Operation of Business. To the best of the Borrower's
knowledge, the Borrower and each of its Subsidiaries possesses all material
licenses, Environmental Permits and other permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct their
respective businesses substantially as now conducted, and the Borrower and its
Subsidiaries are not in violation of any rights of others with respect to any of
the foregoing, except where such violation could not reasonably be expected to
result in a Material Adverse Effect. Except as disclosed in filings with the
Securities and Exchange Commission and on Schedule 4.7 hereto, nothing has come
to the attention of any officer of the Borrower or any of its Subsidiaries to
the effect that (i) any product, process, method, substance, part or other
material presently contemplated to be sold by or employed by any of them in
connection with such business may infringe any patent, trademark, service marks,
trade name, copyright, license or other right owned by any other Person, or (ii)
there is pending or threatened any claim or litigation against or affecting it
contesting its right to sell or use any such product, process, method,
substance, part or other material.
Section 4.11 Taxes. The Borrower and its Subsidiaries have filed all
tax returns (federal, state, and local) required to be filed and has paid all
taxes, assessments, and governmental charges and levies thereon to be due,
including interest and penalties, except taxes that are being contested in good
faith by appropriate proceedings and for which the Borrower or such Subsidiary,
as applicable, shall have set aside on its books adequate reserves.
Section 4.12 Debt and Liens Securing Same. Set forth on Schedule 4.12
hereto is a complete and correct list of all Debt of the Borrower and each of
its Subsidiaries as of the date hereof other than trade debt incurred in the
ordinary course of its business. The maximum principal or face amounts of the
obligations set forth, which are outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in Schedule 4.12.
Section 4.13 Capital Stock. All of the outstanding shares of stock of
the Borrower have been duly authorized and are validly issued, fully paid, and
non-assessable, and are not subject to any right or claim of rescission.
Section 4.14 Federal Reserve Regulations. Neither the Borrower nor any
of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of
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extending credit for the purpose of buying or carrying Margin Stock. No part of
the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board of Governors of the Federal Reserve System of the United States of
America (the "BOARD"), including without limitation, Regulation G, Regulation T,
Regulation U or Regulation X. The Borrower will not take, nor permit any agent
acting on its behalf to take, any action which might cause any transaction or
obligation, or right created by this Agreement, or any document or instrument
delivered pursuant hereto, to violate any Regulation of the Board.
Section 4.15 Fiscal Year. The Fiscal Year for financial accounting
purposes ends on September 30 of each calendar year.
Section 4.16 No Broker's Fees, etc. The Borrower is not obligated to
pay any brokerage commissions, investment banker fees, finder's fees or
appraisal fees (other that reimbursing the Lender for such fees incurred by the
Lender) in connection with the execution of this Agreement.
Section 4.17 Investment Company Act, Public Utility Holding Company
Act. Neither the Borrower nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940, or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
Section 4.18 Use of Proceeds. The Borrower will use the proceeds of the
Loans only for the purposes and subject to the limitations specified herein.
Section 4.19 Environmental Matters. Except as disclosed in filings with
the Securities and Exchange Commission:
(a) None of the Properties contain any Contaminants in amounts
or concentrations which (i) constitute, or constituted a violation of, (ii)
require Remedial Action under, or (iii) could give rise to liability under,
Environmental Laws, which violations, Remedial Actions and liabilities, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
(b) The Properties and all operations of the Borrower and its
Subsidiaries are in compliance, and in the last five years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such
non-compliance or failure to obtain any necessary permits, in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
(c) There have been no Releases or threatened Releases at,
from, under or proximate to any of the Properties or otherwise in connection
with the operations of the Borrower and its Subsidiaries, which Releases or
threatened Releases, in the aggregate, could reasonably be expected to result in
a Material Adverse Effect.
(d) Neither the Borrower nor any of its Subsidiaries has
received any notice of an Environmental Claim in connection with any of the
Properties or the operations of the
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Borrower or its Subsidiaries or with regard to any person whose liabilities for
environmental matters the Borrower or any of its Subsidiaries has retained or
assumed, in whole or in part, contractually, by operation of law or otherwise,
which, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect, nor does the Borrower or any of its Subsidiaries have reason to
believe that any such notice will be received or is being threatened.
(e) Contaminants have not been transported from any of the
Properties, nor have Contaminants been generated, treated, stored or disposed of
at, on or under any of the Properties in a manner that could give rise to
liability under any Environmental Law, nor has the Borrower nor any of its
Subsidiaries retained or assumed any liability, contractually, by operation of
law or otherwise, with respect to the generation, treatment, storage or disposal
of Contaminants, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate could reasonably
be expected to result in a Material Adverse Effect.
Section 4.20 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries or any of their respective material properties or assets is in
violation of, nor to the Borrower's knowledge will the continued operation of
their material properties and assets as currently conducted be in violation, any
law, ordinance, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits)
applicable to it, issued by any Governmental Authority, including, without
limitation, ERISA and the United States Occupational Safety and Health Act of
1970, as amended, or in default with respect to any judgment, writ, injunction,
decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.
Section 4.21 Events of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.22 Labor Disputes and Acts of God. As of the date hereof,
there are no strikes, lockouts or slowdowns against the Borrower or any
Subsidiary pending or, to the knowledge of the Borrower, threatened. To the
Borrower's knowledge, the hours worked by and payments made to employees of the
Borrower and their Subsidiaries have not been in material violation of the Fair
Labor Standards Act or any other applicable Federal, state, local or foreign
law, dealing with such matters. The business and properties of the Borrower and
its Subsidiaries have not been affected by any fire, explosion, accident,
drought, storm, hail, earthquake, embargo, act of God, or other casualty
(whether or not covered by insurance) which could, in any one case or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.23 ERISA. The Borrower and its ERISA Affiliates are in
compliance in all material respects with all applicable provisions of ERISA and
the Code and the regulations and published interpretations thereunder. No ERISA
Event has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events, could reasonably be expected to result in a
Material Adverse Effect. The Borrower and each of its ERISA Affiliates have met
their minimum funding requirements under ERISA with respect to all of its Plans
and the present fair market value of all Plan assets exceeds the present value
of all vested benefits under each Plan, as determined on the most recent
valuation date of the Plan and in accordance with the
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provisions of ERISA and the regulations thereunder for calculating the potential
liability the Borrower or any ERISA Affiliate to the PBGC or the Plan under
Title IV of ERISA. Neither the Borrower, nor any ERISA Affiliate has incurred
any material liability to the PBGC under ERISA, and with respect to any Plan
that has been terminated, all Plan obligations have been settled and there
exists no unfunded liability of any kind.
Section 4.24 Consolidated Assets. No other Person, Affiliate or
Subsidiary accounts for more than five percent (5%) of the Borrower's
consolidated assets other than the Guarantors, if any.
Section 4.25 Insurance. Schedule 4.25 sets forth a true, complete and
correct description of all insurance maintained by the Borrower and its
Subsidiaries as of the date hereof. As of such date, such insurance is in full
force and effect and all premiums have been duly paid. The Borrower and its
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
Section 4.26 Location of Real Property and Leased Premises.
(a) Schedule 4.26(a) lists completely and correctly as of the
date hereof all real property owned by the Borrower or any Subsidiary and the
addresses thereof. The Borrower and its Subsidiaries own in fee all of the real
property set forth on Schedule 4.26(a).
(b) Schedule 4.26(b) lists completely and correctly as of the
date hereof all real property leased by the Borrower or any Subsidiary and the
addresses thereof. The Borrower and its Subsidiaries have valid leases in all of
the real property set forth on Schedule 4.26(b).
Section 4.27 Year 2000 Compliance. The Borrower and each Subsidiary has
(i) undertaken a review and assessment of all areas within its business and
operations that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computed applications used by the Borrower or any Subsidiary may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
detailed plan and timeline for addressing the Year 2000 Problem on a timely
basis, and (iii) to date, implemented that plan in accordance with than
timetable. The Borrower reasonably anticipates that all computer applications
that are material to its and each Subsidiary's business and operations will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "YEAR 2000 COMPLIANT").
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as this Agreement shall
remain in effect and until each of the Commitments has been terminated and all
of the Obligations shall have been paid and performed in full, unless the Lender
shall have consented in writing, the Borrower shall, and shall cause each of its
Subsidiaries to:
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Section 5.1 Maintenance of Existence. Preserve and maintain their
existence as corporations and good standing in the jurisdiction of their
organization, and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required, except where the failure
to remain so qualified could not reasonably be expected to result in a Material
Adverse Effect.
Section 5.2 Maintenance of Records. Keep proper books of record and
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all of their financial transactions.
Section 5.3 Business and Properties. Do or cause to be done all things
necessary in its reasonable business judgment to obtain, preserve, renew, extend
and keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is presently conducted and operated; comply in all material
respects with all applicable laws, rules, regulations and decrees and orders of
any Governmental Authority, whether now in effect or hereafter enacted, except
where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect; and at all times maintain, keep and preserve all of
their properties necessary or useful in the proper conduct of their businesses
in good working order and condition, ordinary wear and tear excepted, except
where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 5.4 Maintenance of Insurance. (a) Keep their properties and
each of the Properties which they own insured against fire, theft and other
hazards (so-called "ALL RISK" coverage) in amounts and with companies reasonably
satisfactory to the Lender to the same extent in covering such risks as is
customary in the same or a similar business, but in no event in an amount less
than the lesser of (i) the total Obligations hereunder or (ii) the amount
necessary to avoid any co-insurance penalty, (b) maintain public liability
coverage against claims for personal injuries, death or property damage in an
amount as is customary in the same or a similar business, and (c) maintain all
worker's compensation, employment or similar insurance as may be required by
applicable law. Such All Risk property insurance coverage shall provide for a
minimum of thirty (30) days' written cancellation notice to the Lender. The
Borrower agrees to deliver or cause to be delivered at the request of the Lender
copies of all of the aforesaid insurance policies to the Lender. In the event of
any loss or damage to a material portion of the Borrower's or any Guarantor's
assets, the Borrower shall give immediate written notice to the Lender and to
its insurers of such loss or damage and shall properly file its proofs of loss
with said insurers. In the event of failure to provide and maintain insurance as
herein provided, the Lender may, at its option, provide such insurance and the
amount thereof shall constitute Obligations.
Section 5.5 Obligations and Taxes. Pay its obligations promptly and in
accordance with their terms and pay and discharge promptly when due all taxes,
assessments, and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default; PROVIDED, HOWEVER, that such payment or discharge
shall not be required with respect to any tax, assessment, charge, levy or claim
so long as the validity or amount thereof shall be contested in good faith by
appropriate
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proceedings and the Borrower or its Subsidiary shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP and such contest
operates to suspend collection of the contested obligation, tax, assessment or
charge and enforcement of a Lien.
Section 5.6 Right of Inspection. Permit the Lender or any agent or
representative of the Lender to examine and make copies of and abstracts from
the records, including without limitation computer records, and books of account
of, and visit the properties of, the Borrower or any Subsidiary at reasonable
times but not more than once per calendar year (unless an Event of Default shall
have occurred and be continuing), and to discuss the affairs, finances, and
accounts of the Borrower or Subsidiary with any of its officers and directors
and its independent accountants (who, by this reference, are authorized by the
Borrower to discuss such matters with the Lender or any agent or representative
of the Lender). After the occurrence and during the continuance of a Default or
an Event of Default, the Lender may undertake any of the foregoing rights of
inspection at any time and at any frequency.
Section 5.7 Reporting Requirements. Furnish or cause to be furnished to
the Lender:
(a) As soon as available and in any event within ninety-two
(92) days after the end of each Fiscal Year, (i) consolidated and consolidating
audited balance sheets of the Borrower and its consolidated Subsidiaries
(including without limitation, the Guarantors) as of the end of such Fiscal Year
and the related consolidated and consolidating statements of income, operations,
retained earnings and cash flows with accompanying footnotes of the Borrower and
its consolidated Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the consolidated and consolidating figures for the previous
Fiscal Year, all in reasonable detail and accompanied by an unqualified report
thereon by an independent certified public accountant reasonably acceptable to
the Lender, which shall state that such financial statements were prepared on an
audited basis and present fairly the financial condition as of the end of such
Fiscal Year, and the combined results of operations and changes in financial
position for such Fiscal Year, of the Borrower and its consolidated Subsidiaries
in accordance with GAAP, and (ii) a copy of the Borrower's Annual Report on Form
10-K filed or to be filed with the Securities and Exchange Commission.
(b) As soon as available and in any event within sixty (60)
days after the end of each fiscal quarter of the Borrower, a copy of the
Borrower's Quarterly Report on Form 10-Q filed or to be filed with the
Securities and Exchange Commission.
(c) Promptly upon receipt thereof, and in any event
simultaneously with the delivery of the financial statements required by Section
5.7(a) hereof, copies of any final reports and management letters submitted to
the Borrower by independent certified public accountants in connection with the
examination of financial statements.
(d) Promptly after sending or filing thereof, copies of all
reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities Exchange Commission or any national
securities exchange.
(e) Upon request of the Lender, copies of all reports
(including annual reports) and notices which the Borrower files with or receives
from the PBGC or the U.S. Department of
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Labor under ERISA; and as soon as possible but not later than ten (10) days
after the Borrower knows that any ERISA Event has occurred with respect to any
Plan or that the PBGC or the Borrower or any of its Subsidiaries has instituted
or will institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Lender a certificate of the chief financial officer
of the Borrower setting forth details as to such ERISA Event or Plan termination
and the action the Borrower proposes to take with respect thereto.
Section 5.8 Litigation and other Notices. Promptly advise the Lender in
writing (a) of the filing or commencement of, or any written threat or notice of
intention of any Person to file or commence, any action, suit or proceeding,
whether at law or in equity, including arbitration proceedings and any
proceedings by or before any Governmental Authority, against the Borrower or any
Subsidiary that could reasonably be expected to result in a Material Adverse
Effect, (b) of the occurrence of any Default or Event of Default, specifying the
nature and extent thereof and the corrective action (if any) which is being
taken or proposed to be taken with respect thereto, and (c) any development that
has resulted in, or could reasonably be expected to result in, a Material
Adverse Effect.
Section 5.9 Operating and Deposit Accounts. Maintain at all times all
of their principal operating accounts, cash management accounts and principal
depository accounts, including without limitation, their principal checking
accounts, with the Lender.
Section 5.10 New Guarantors. Upon any Person becoming a direct or
indirect Subsidiary of the Borrower, cause such Person to become a Guarantor by
executing and delivering to the Lender a Guaranty Agreement.
Section 5.11 Use of Proceeds. Use the proceeds of the Loans only for
the purposes and subject to the limitations specified herein.
Section 5.12 Further Assurances. Execute any and all further documents,
agreements and instruments, and take all further action that may be required
under applicable law, or that the Lender may reasonably request, in order to
effectuate the transactions contemplated by the Loan Documents.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as this Agreement shall
remain in effect and until each of the Commitments has been terminated and all
of the Obligations shall have been paid and performed in full, unless the Lender
shall have consented in writing, the Borrower shall not, and shall not cause or
permit each of the Subsidiaries to:
Section 6.1 Liens. Create, incur, assume, or suffer to exist any Lien
upon or with respect to any of its properties or assets (including without
limitation, the Properties and securities and other investment property of any
Person, including any Subsidiary), now owned or
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hereafter acquired by it or on any income or revenues or rights in respect of
any thereof, except the following which shall constitute "PERMITTED LIENS":
(a) Liens created under the Loan Documents in favor of the
Lender;
(b) Liens for taxes or assessments or other government charges
or levies not yet due and payable or which are being contested in compliance
with Section 5.5 hereof;
(c) pledges and deposits made (other than Liens imposed by
ERISA) in the ordinary course of business in compliance with workers'
compensation, unemployment insurance or other social security laws or
regulations;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like statutory Liens (other than Environmental Liens)
arising in the ordinary course of business and securing obligations that are not
yet due and payable or which are being contested in compliance with Section 5.5
hereof;
(e) deposits made in the ordinary course of business to secure
liability to insurance carriers;
(f) any attachment or judgment Lien not constituting an Event
of Default under Section 8.1(a)(viii) hereof;
(g) Liens arising from precautionary uniform commercial code
financing statements with respect to assets leased by the Borrower or any
Subsidiary pursuant to operating leases;
(h) zoning restrictions, easements, rights-of-way,
restrictions on the use of real property and other similar encumbrances incurred
in the ordinary course of business which, in the aggregate, are not substantial
in amount and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the Borrower
or any of its Subsidiaries;
(i) purchase money security interests in equipment hereafter
acquired by the Borrower or any Subsidiary, provided that (i) such security
interests secures Debt permitted by Section 6.2(j) hereof and only the specific
Debt incurred in connection with such acquisition, (ii) such security interests
are incurred, and the Debt secured thereby is created, within ninety (90) days
of such acquisition, (iii) the Debt secured thereby does not exceed eighty
percent (80%) of the lesser of the cost or fair market price of such equipment
at the time of such acquisition, and (iv) such security interests do not apply
to any other property or assets of the Borrower or any Subsidiary, and any
replacement Lien arising out of the refinancing or replacement of the underlying
permitted Debt; and
(j) Liens in respect of Capital Leases.
In addition, neither the Borrower nor any of its Subsidiaries will
enter into or permit to exist any undertaking by it or affecting any of its
properties or assets (including without
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limitation, the Properties) whereby the Borrower or such Subsidiary shall agree
with any Person (other than the Lender) not to create or suffer to exist any
Liens on any such properties or assets in favor of the Lender.
Section 6.2 Debt. Create, incur, assume, or suffer to exist any
recourse or nonrecourse Debt, except:
(a) Debt of the Borrower created under this Agreement and
under the other Loan Documents;
(b) Debt incurred for borrowed money existing on the date
hereof and set forth on Schedule 4.12, but no increases thereof;
(c) Debt with respect to Capital Leases in an aggregate amount
outstanding at any time not to exceed $250,000;
(d) Debt owed by the Borrower to any Guarantor;
(e) Debt incurred or created in connection with a Permitted
Acquisition owing to seller of the assets so acquired but only if such Debt is
Subordinated Debt;
(f) Debt resulting from endorsement of negotiable instruments
for collection in the ordinary course of business;
(g) Debt arising with respect to customary indemnification and
purchase price adjustment obligations incurred in connection with Permitted
Acquisitions;
(h) Debt incurred in connection with interest rate protection
agreements with the Lender with respect to the Loans;
(i) accounts payable to trade creditors for goods or services
and current operating liabilities (other than for borrowed money), in each case
incurred in the ordinary course of business and paid within the required time,
unless contested in good faith and by appropriate proceedings;
(j) Purchase money Debt for the purchase of equipment which
shall not exceed $100,000 in the aggregate per Fiscal Year of the Borrower, on a
non-cumulative basis; and
(k) any extensions, renewals, refinancings or replacements of
Debt described in (b), (c), (d), (e) and (j) above to the extent that (i) the
aggregate principal amount of such Debt is not at any time increased and neither
the maturity nor the average life of such Debt is shortened, (ii) if the Debt
being refinanced is Subordinated Debt, the refinancing Debt shall be subordinate
to the same extent, and (iii) no material terms applicable to such Debt shall be
less favorable to the Lender than the terms of the Debt being refinanced.
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Section 6.3 Mergers, Consolidations and Acquisitions. Merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or sell, assign, lease, transfer or otherwise dispose of
(whether in one transaction or in a series of transactions) all or any
substantial part of its assets (whether now owned or hereafter acquired) or any
capital stock of any Subsidiary, or purchase, lease or otherwise acquire
(whether in one transaction or in a series of transactions) all or a substantial
part of the assets or business of any Person, except (a) asset sales and
dispositions otherwise permitted under Section 6.6 hereof, or (b) that if at the
time thereof and immediately after giving effect thereto no Default or Event of
Default shall have occurred and be continuing and the Borrower shall have
provided Lender with prior written notice thereof: (i) any wholly-owned Domestic
Subsidiary of the Borrower may merge into the Borrower in a transaction in which
the Borrower is the surviving corporation, and (ii) any wholly-owned Domestic
Subsidiary of the Borrower may merge into or consolidate with any other
wholly-owned Domestic Subsidiary of the Borrower in a transaction in which the
surviving entity is a wholly-owned Domestic Subsidiary of the Borrower and no
Person other than an Borrower receives any consideration, or (c) in connection
with a Permitted Acquisition in a transaction in which the surviving entity is
the Borrower or a Guarantor.
Section 6.4 Sale and Leaseback. Sell, transfer, or otherwise dispose of
any real or personal property to any Person and thereafter directly or
indirectly lease back the same or similar property.
Section 6.5 Dividends and Distributions, Restrictions on Ability of
Subsidiaries to Pay Dividends.
(a) Declare or pay, directly or indirectly, any dividend or
make any other Distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, with respect to any shares
of its capital stock or directly or indirectly purchase, redeem, retire or
otherwise acquire for value (or permit any Subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose, PROVIDED, HOWEVER, that (i) any Subsidiary of the Borrower may
declare and pay dividends or make other Distributions to the Borrower, and (ii)
the Borrower may pay dividends to its shareholders and/or redeem or repurchase
any shares of any class of its capital stock, PROVIDED that at the time of the
dividends and/or redemption or repurchase and after giving effect thereto, no
Default or Event of Default has occurred and is continuing or would arise as a
result thereof.
(b) Permit its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other Distributions on its capital stock or any other interests, or
(ii) make or repay any loans or advances to the Borrower or the parent of such
Subsidiary.
Section 6.6 Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of its now owned or hereafter acquired assets except: (a) for
inventory sold or otherwise disposed of in the ordinary course of business; (b)
the sale or other disposition of assets no longer used or useful in the conduct
of its business, (c) the sale or other disposition of assets which are promptly
replaced with similar assets of reasonably equivalent book value, and (d) the
sale or other
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disposition of assets which are not intended to be replaced having a book value
not in excess of $25,000, PROVIDED that the aggregate of all such sales or other
disposition does not exceed $250,000 in the aggregate during the term of this
Agreement.
Section 6.7 Investments. Make any loan or advance to any Person, or
purchase, hold or otherwise acquire any capital stock, assets, obligations, or
other securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person, except for (a) investments by the Borrower
in the capital stock of Subsidiaries operating in a Related Business that are
also Guarantors, (b) Permitted Investments, (c) Permitted Acquisitions so long
as the Borrower complies, and causes any acquired or newly created entity to
comply, with the applicable provisions of this Agreement with respect to the
Person or assets so acquired, and (d) acquisitions financed with funds other
than borrowed money if, at the time of such acquisitions: (i) no Default or
Event of Default shall have occurred and be continuing or would arise as a
result thereof, and (ii) the Lender shall have been provided with a pro forma
projection and compliance certificate containing detailed calculations which
demonstrate that no Default or Event of Default would occur during the
immediately succeeding year after giving effect to such acquisition.
Section 6.8 Guaranties, Etc. Assume, guaranty, endorse, or otherwise
be or become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets, goods, or
services, or to supply or advance any funds, assets, goods, or services, or to
maintain or cause such Person to maintain a minimum working capital or net
worth, or otherwise to assure the creditors of any Person against loss) for
obligations of any Person, except guaranties set forth on Schedule 4.12 hereof,
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business and guaranties in favor
of the Lender.
Section 6.9 Transactions With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's or Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
Section 6.10 Fiscal Year. Change its Fiscal Year.
Section 6.11 Business and Accounting Methods. Engage at any time in any
business or business activity other than a Related Business; or permit a
material change in its method of accounting as applicable.
ARTICLE VII
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as this Agreement shall
remain in effect and until each of the Commitments has been terminated and all
of the Obligations shall have
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been paid and performed in full, unless the Lender shall have consented in
writing, the Borrower shall:
Section 7.1 Consolidated Interest Coverage Ratio. Maintain a
Consolidated Interest Coverage Ratio of not less than 3.0-to-1.0 as of the end
of each fiscal quarter for the then ended Rolling Period.
Section 7.2 Consolidated Leverage Ratio. Maintain a Consolidated
Leverage Ratio of not greater than 1.5-to-1.0 as of the end of each fiscal
quarter for the then ended Rolling Period.
Section 7.3 Consolidated Fixed Charge Coverage Ratio. Maintain a
Consolidated Fixed Charge Coverage Ratio of not less than 1.5 to 1.0 as of the
end of each fiscal quarter for the then ended Rolling Period.
Section 7.4 Consolidated Tangible Net Worth. Maintain a Consolidated
Tangible Net Worth of not less than the following: (a) $22,000,000 as of
September 30, 1997, plus (b) the sum of (i) fifty percent (50%) of Consolidated
Net Income earned in each Fiscal Year commencing with the Fiscal Year ending
September 30, 1998, and (ii) the net proceeds from any equity securities issued
by the Borrower after the date of this Agreement, minus (c) the purchase price
for any equity securities purchased, redeemed, retired or otherwise acquired
after the date of this Agreement not to exceed $10,000,000 in the aggregate.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 Events of Default.
(a) Any one or more of the following events (whether voluntary
or involuntary or effected by operation of law or otherwise) shall be
an "EVENT OF DEFAULT":
(i) the Borrower shall fail to pay the principal of,
premium, if any, or interest on any of the Notes, or any amount of any fee, or
any other Obligation within five (5) calendar days after the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or by acceleration thereof or otherwise;
(ii) any representation or warranty made or deemed
made by or on behalf of the Borrower or any Guarantor in or in connection with
any Loan Document or the borrowings hereunder, or any representation, warranty
statement or information contained in any certificate, document, opinion,
report, financial statement or other instrument furnished at any time on behalf
of the Borrower or any Guarantor in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material respect
when so made, deemed made or furnished;
(iii) default in the due observance or performance by
the Borrower of any covenant, condition or agreement contained in Sections 5.1,
5.2 and 5.11, Article VI or Article VII hereof;
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(iv) default in the due observance or performance by
the Borrower or any Guarantor of any covenant or agreement contained in any Loan
Document (other than those specified elsewhere in this Section 8.1) and such
default shall continue unremedied for a period of thirty (30) calendar days
after the earlier to occur of (A) the Borrower's actual knowledge thereof, or
(B) written notice thereof from the Lender;
(v) the Borrower shall (A) prepay any Debt in the
principal amount in excess of $500,000 (other than such Debt owing to the
Lender) having a final maturity in excess of one year from the date of such
prepayment prior to its stated maturity, or (B) fail to pay any principal or
interest, regardless of the amount, due in respect of Debt in a principal amount
in excess of $500,000, when and as the same shall become due and payable, or (C)
fail to perform or observe any other term, covenant, condition or agreement
under any agreement or instrument evidencing, governing or relating to any such
Debt if the effect of any failure referred to in this clause (C) is to cause, or
to permit the holder or holders of such Debt or a trustee on its behalf (with or
without the giving of notice, or the lapse of time) to cause, such Debt to
become due prior to its stated maturity or to permit the acceleration after the
giving of notice or passage of time, or both, of the maturity;
(vi) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent jurisdiction
seeking (A) relief in respect of the Borrower or any Guarantor, or of a
substantial part of the property or assets of the Borrower or any Guarantor
under any Federal, state or foreign bankruptcy, insolvency, receivership,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar law or statute, whether now or hereafter in effect, or (B) the
appointment of a custodian, receiver, trustee, sequestrator, conservator or
similar official for the Borrower or any Guarantor or a substantial part of the
Borrower's assets, (C) the winding up or liquidation of the Borrower or any
Guarantor; and such proceeding or petition shall continue undismissed for a
period of ninety (90) days or an order or decree approving or ordering any of
the foregoing shall be entered;
(vii) the Borrower or any Guarantor (A) shall
generally not, or shall become unable to, or shall admit in writing its
inability to pay its Debts as such Debts become due; or (B) shall make an
assignment for the benefit of creditors; or (C) apply for or consent to the
appointment of a custodian, receiver, trustee, sequestrator, conservator or
similar official for it or a substantial part of its assets; or (D) shall
voluntarily commence any proceeding or file any petition seeking relief under
any Federal, state or foreign bankruptcy, insolvency, receivership,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar law or statute, whether now or hereafter in effect; or (E) consent to
the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (vii) above, (F) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, or (G) take any action for the purpose of effecting any of the
foregoing;
(viii) one or more tax liens, writ of garnishment or
attachment, judgments, decrees, or orders for the payment of money in excess of
$500,000 shall be rendered against the Borrower or any Guarantor and the same
shall remain undischarged for a period of thirty (30) consecutive days during
which execution shall not be effectively stayed;
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(ix) any ERISA Event shall have occurred or exist
with respect to the Borrower or any Guarantor which subjects the Borrower or
such Guarantor to any material tax, penalty, or other liability under or in
connection with ERISA;
(x) there shall occur any uninsured damage to or
loss, theft, or destruction of any assets of the Borrower or any Guarantor in an
aggregate amount or having an aggregate value in excess of $500,000
collectively; or
(xi) there shall have occurred a Material Adverse
Effect.
(b) Upon and after the occurrence of any Event of Default, the
Lender may, by notice to the Borrower (1) declare the Commitments to be
terminated, whereupon the same shall forthwith terminate, and/or (2) declare all
the outstanding Obligations to be forthwith due and payable, whereupon the
Commitments shall be terminated and all Obligations shall become and be
forthwith due and payable, without presentment, demand, protest, or any other
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in any Loan Document to the contrary
notwithstanding; PROVIDED, HOWEVER, that upon the occurrence of any Event of
Default described in Section 8.1(a)(vi) and Section 8.1(a)(vii), the Commitments
shall automatically terminate and the outstanding Obligations, all interest
thereon, and all such other amounts payable under this Agreement shall become
automatically due and payable, without presentment, demand, protest, or notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in any Loan Document to the contrary notwithstanding.
(c) The occurrence of an Event of Default under this Agreement
shall constitute an event of default under or within the meaning of any other
Loan Documents.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Amendments, Etc. No amendment, modification, termination,
or waiver of any provision of any Loan Document, or consent to any departure by
the Borrower from any terms of any Loan Document, shall in any event be
effective unless the same shall be in writing and signed by the Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances except as expressly provided under the Loan
Documents.
Section 9.2 Notices, Etc. All notices, demands, requests, and other
communications given under this Agreement shall only be effective if they are
(a) in writing, (b) sent by hand delivery, by facsimile transmission, by
reputable express delivery service, or by certified or registered mail, postage
prepaid, and (c) actually received by the addressee (if delivered by hand or
express delivery service, or sent by facsimile transmission), or on the date
three (3) Business Days after dispatch (if mailed by certified or registered
mail):
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(i) If to the Lender, to it at:
Fleet National Bank
777 Main Street, CT-MO-0237
Hartford, CT 06115
Attn: Matthew E. Hummel, Vice President
Telephone No: (860) 986-4923
Telecopier No.: (860) 986-3450
With a copy to:
Robinson & Cole LLP
One Commercial Plaza
Hartford, CT 06103-3597
Attn: Michael F. Maglio, Esq.
Telephone No.: (860) 275-8274
Telecopier No.: (860)275-8299
(ii) If to the Borrower, to it at:
Trident International, Inc.
1114 Federal Road
Brookfield, CT 06804
Attn: J. Leo Gagne, Vice President
and Chief Financial Officer
Telephone No.: (860) 740-9333
Telecopier No.: (860) 740-7355
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: John J. Egan, Esq.
Telephone No.: (617) 570-1514
Telecopier No.: (617) 570-8150
or to such other address (and/or facsimile transmission number) as the Borrower
or the Lender, as the case may be, shall have specified in the latest unrevoked
notice sent to the other in accordance with this Section 9.2.
Section 9.3 No Waiver: Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right, power, or remedy under any
of the Loan Documents shall
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operate as a waiver of such right, power, or remedy, nor shall any single or
partial exercise of any right, power, or remedy under any of the Loan Documents,
or any abandonment or discontinuance of steps to enforce such a right, power or
remedy, preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. The rights, powers and remedies provided in the
Loan Documents are cumulative and not exclusive of any rights, powers or
remedies that the Lender would otherwise have, whether under the Loan Documents,
at law, in equity, or otherwise.
Section 9.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns; PROVIDED, HOWEVER, that the Borrower shall
not (by agreement, operation of law, or otherwise) assign any of its rights, or
delegate any of its obligations, under any of the Loan Documents without the
prior written consent of the Lender, and any such assignment or delegation made
without such consent shall be null and void.
Section 9.5 Transfer of the Lender's Interests. The Borrower hereby
agrees that the Lender, in its sole discretion, shall have the unrestricted
right at any time and from time to time, and without the Borrower's consent, to
grant to one or more banks or other financial institutions (each, a
"PARTICIPANT") participating interests in the Lender's obligation to lend
hereunder and/or all or any part of the Obligations. In the event of any such
grant by the Lender of a participating interest to a Participant, whether or not
upon notice to the Borrower, the Lender shall remain responsible for the
performance of its obligations hereunder and the Borrower shall continue to deal
solely and directly with the Lender in connection with the Lender's rights and
obligations hereunder. The Lender may furnish any information concerning the
Borrower in its possession from time to time to Participants and prospective
Participants, PROVIDED that the Lender shall require any such Participants and
prospective Participants to agree in writing to maintain the confidentiality of
such information, except as required by applicable laws or Governmental
Authorities. In addition to the foregoing, the Lender may at any time pledge all
or any portion of its rights under this Agreement, any of the Notes or any other
Loan Agreement to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341, PROVIDED that no
such pledge or enforcement thereof shall release the Lender from its obligations
hereunder or thereunder.
Section 9.6 Costs, Expenses, and Taxes, Indemnification.
(a) The Borrower agrees to pay on demand all reasonable costs
and expenses in connection with the preparation, execution, delivery, filing and
recording of any of the Loan Documents or in connection with any amendments,
modifications or waivers of any of the provisions hereof or thereof (whether or
not the transactions hereby or thereby contemplated shall be consummated),
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender with respect thereto and with respect to advising the
Lender, after the occurrence of a Default, as to its rights and responsibilities
under any of the Loan Documents including without limitation, ongoing advice
relating to the administration, protection, collection and/or other enforcement
of this Agreement or any of the other Loan Documents following the effectiveness
of this Agreement and all costs and expenses, if any, in connection with the
administration, protection, collection and/or other enforcement of this
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Agreement or any of the Loan Documents. In addition, the Borrower shall pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing, and recording of any of the
Loan Documents and the other documents to be delivered under any of the Loan
Documents, and agrees to hold and save the Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
failure to pay such taxes and fees.
(b) To the fullest extent permitted by applicable law, the
Borrower agrees to defend, indemnify and hold harmless the Lender, any other
holder of the Obligations and each of the present and future shareholders,
partners, directors, officers, employees, agents, counsel and successors and
assigns of each of them (collectively with the Lender, the "LENDER PARTIES")
from and against any and all loss, cost, expense, claim, liability (including
strict liability) or asserted liability incurred from or out of the Loans, the
execution, delivery or performance of this Agreement, or any of the documents or
instruments to be executed and delivered hereunder, or otherwise arising out of
the debtor/creditor relationship between them, the Lender or Lender Parties
relating to the Loans or any of the other Obligations, the exercise of any of
the Lender's rights under the Loans or any of the other Obligations, any
litigation or proceeding instituted or conducted by any Governmental Authority,
any act or omission of the Lender or otherwise, except to the extent (and only
to the extent) that the same arises from the gross negligence or willful
misconduct of the Lender. The Borrower shall have the right to choose counsel to
defend any such action, provided that such counsel is reasonably acceptable to
the Lender and provided further that neither Borrower nor such counsel shall
settle or compromise any such claim with respect to the Lender without the prior
written consent of the Lender, which consent shall not be unreasonably withheld.
(c) Without limiting the generality of the preceding
subsection (b), the Borrower agrees to defend, protect, indemnify and hold
harmless the Lender Parties from and against, and to reimburse the Lender
Parties on demand with respect to, any and all matters of any and every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by Lender Parties at any time and from time to time by reason of or arising out
of any violation of any Environmental Laws, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, Release or threatened Release
of any Contaminant or any action, suit, proceeding or investigation brought or
threatened with respect to any Contaminant (including, but not limited to,
claims with respect to wrongful death, personal injury or damage to property),
in each case, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding. The Borrower shall have the right to choose
counsel to defend any such action, provided that such counsel is reasonably
acceptable to the Lender and provided further that neither Borrower nor such
counsel shall settle or compromise any such claim with respect to the Lender
without the prior written consent of the Lender, which consent shall not be
unreasonably withheld.
(d) The obligations of the Borrower described in this Section
9.6 shall survive the closing of the transactions described in this Agreement,
including the making of any and all Loans and the payment and satisfaction of
the Notes and the other Obligations.
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Section 9.7 Right of Setoff. The Borrower hereby gives the Lender a
lien and right of setoff for all of its Obligations and other liabilities to the
Lender, whether now existing or hereafter arising, upon and against all its
deposits (general or special, time or demand, provisional, or final, or trust or
agency account), credits, collateral and property now or hereafter in the
possession, custody, safekeeping or control of the Lender or any entity under
common control of Fleet Financial Group, or in transit to any of them. The
Lender may, at any time and from time to time, without notice (any such notice
being expressly waived by the Borrower), apply or set off the same, or any part
thereof, to any Obligation or liability of the Borrower to the Lender, even
thought unmatured, irrespective of whether or not the Lender shall have made any
demand under this Agreement or any other Loan Document and regardless of the
adequacy of any other collateral securing such Obligations and liabilities. ANY
AND ALL RIGHTS TO REQUIRE THE LENDER TO MARSHAL OR OTHERWISE EXERCISE ITS RIGHTS
OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OR ALL OF
SUCH OBLIGATIONS AND LIABILITIES PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY
KNOWINGLY, VOLUNTARILY OR IRREVOCABLY WAIVED. The rights of the Lender under
this Section 9.7 are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Lender may have.
Section 9.8 Governing Law; Jurisdiction; Waivers.
(a) This Agreement and the other Loan Documents shall be
construed in accordance with and governed by the laws of the State of
Connecticut (without regard to its conflict of laws rules). It is the express
intention of the Lender and the Borrower that the laws of the State of
Connecticut (but not its conflict of laws rules) apply to the entirety of the
transactions evidenced by the Loan Documents.
(b) The Borrower hereby irrevocably submits, for itself and
its property, to the nonexclusive jurisdiction of any Connecticut State or
United States Federal court sitting in the State of Connecticut, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect to such action or proceeding
may be heard and determined in such Connecticut State or Federal court. The
Borrower irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to the Borrower at
the address specified in Section 9.2. The Borrower agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(c) Nothing in this Section 9.8 shall affect the right of the
Lender to serve legal process in any other manner permitted by law or affect any
right that the Lender may otherwise have to bring an action or proceeding
relating to this Agreement or the other Loan Documents against the Borrower or
its properties in the courts of any jurisdiction.
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(d) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any Connecticut State or Federal Court (or other State or
Federal Court chosen by the Lender as provided above). The Borrower hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(e) To the extent that the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise,) with respect to the Borrower or its
property, the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement, the Notes and the other Loan Documents.
(f) TO INDUCE LENDER TO ENTER INTO THE COMMERCIAL LOAN
TRANSACTIONS EVIDENCED BY THIS AGREEMENT, THE NOTES, AND ANY OTHER LOAN
DOCUMENTS, THE BORROWER AGREES THAT THIS IS A COMMERCIAL TRANSACTION AND NOT A
CONSUMER TRANSACTION, AND WAIVES ANY RIGHT TO NOTICE AND A HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED, OR UNDER ANY OTHER FEDERAL
OR STATE STATUTE OR STATUTES OR FOREIGN LAWS AFFECTING PREJUDGMENT REMEDIES, AND
AUTHORIZES THE LENDER'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THIS
WAIVER, AND WAIVES ANY CLAIM IN TORT, CONTRACT OR OTHERWISE AGAINST THE LENDER'S
ATTORNEY WHICH MAY ARISE OUT OF SUCH ISSUANCE OF A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT COURT ORDER. FURTHER, IN THE EVENT THE LENDER SEEKS TO TAKE POSSESSION
OF ANY OR ALL OF THE COLLATERAL, IF ANY, BY COURT PROCESS OR OTHER METHOD
AVAILABLE UNDER THE LAW, THE BORROWER IRREVOCABLY WAIVES ANY BOND AND ANY SURETY
OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE, COURT RULE OR OTHERWISE AS
AN INCIDENT TO SUCH POSSESSION, AND WAIVES ANY DEMAND FOR POSSESSION PRIOR TO
THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH RESPECT THERETO.
SPECIFICALLY, THE BORROWER RECOGNIZES AND UNDERSTANDS THAT THE EXERCISE OF THE
LENDER'S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR LEVY AGAINST
THE BORROWER'S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY WILL NOT HAVE
THE PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER JUDICIAL
OFFICER AND THE BORROWER WILL NOT HAVE THE RIGHT TO ANY NOTICE OR PRIOR HEARING
WHERE THE BORROWER MIGHT CONTEST SUCH A PROCEDURE. THE INTENT OF THE BORROWER IS
TO GRANT TO THE LENDER FOR GOOD AND VALUABLE CONSIDERATION THE RIGHT TO OBTAIN
SUCH A PREJUDGMENT REMEDY AND TO EXPRESS THEIR BELIEF THAT ANY SUCH PREJUDGMENT
REMEDY OBTAINED IS VALID AND CONSTITUTIONAL UNLESS
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A COURT OF COMPETENT JURISDICTION SHOULD DETERMINE OTHERWISE. FURTHER, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY WAIVES DEMAND,
PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF PROTEST, NOTICE OF DISHONOR,
DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF THIS AGREEMENT AND ANY NOTES
AND ANY AND ALL NOTICES OF A LIKE NATURE. FURTHER, TO THE EXTENT NOT OTHERWISE
EXPRESSLY PROVIDED HEREIN, THE BORROWER EXPRESSLY WAIVES ALL DEFENSES OF
SURETYSHIP OR IMPAIRMENT OF COLLATERAL. THE BORROWER ACKNOWLEDGES AND STIPULATES
THAT THE WAIVERS AND AUTHORIZATIONS GRANTED ABOVE ARE MADE KNOWINGLY AND FREELY
AND AFTER FULL CONSULTATION WITH COUNSEL.
Section 9.9 Payment Set-Aside. To the extent that the Borrower or any
other person makes a payment or payments to the Lender (whether hereunder, under
any Note or under any of the other Loan Documents) with respect to the
Obligations, or the Lender enforces its security interests or rights or
exercises its right of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Borrower
or such person, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action) in each case in connection with any bankruptcy
or similar proceeding involving the Borrower or such person, then to the extent
of any such restoration, the Obligations or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred,
whereupon this Agreement shall be automatically reinstated without any further
action by the Borrower and the Lender and continue to be fully applicable to
such Obligations to the same extent as though the payment so repaid or recovered
had never been originally made on such Obligation.
Section 9.10 Entire Agreement, Severability of Provisions.
(a) This Agreement and the other Loan Documents collectively
constitute the entire agreement and understanding between the parties hereto
relating to the transactions contemplated by this Agreement and supersede any
and all contemporaneous and prior agreements, representations, arrangements and
understandings (written or oral, express or implied) relating to the subject
matter hereof. Nothing in this Agreement or in the other Loan Documents, express
or implied, is intended to confer upon any party other than the parties hereto
and thereto, any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
(b) If any one or more terms or provisions contained in this
Agreement or in any of the other Loan Documents or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be held invalid,
illegal or unenforceable, such terms or provisions shall be ineffective as to
such jurisdiction only to the extent of such invalidity, illegality or
unenforceability without invalidating or rendering unenforceable the remaining
terms and
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provisions hereof or thereof or the application of such term or provision to
circumstances other than those as to which it is held invalid, illegal or
unenforceable. The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
Section 9.11 Estoppel Certificates. Within fifteen (15) days after the
Lender requests the Borrower to do so, the Borrower shall cause its chief
financial officer to duly execute and deliver to the Lender a statement
certifying (a) that this Agreement, the Notes and the other Loan Documents to
which the Borrower is a party are in full force and effect and have not been
modified except as described in said statement, (b) the date to which interest
on the each of the Notes has been paid, (c) the unpaid principal balance of the
Notes, and (d) whether to the Borrower's knowledge a Default has occurred and is
continuing, and if so, describing in reasonable detail each such Default of
which it has knowledge.
Section 9.12 Waiver of Jury Trial. THE LENDER AND THE BORROWER HEREBY
EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL
RIGHTS THAT IT MAY HAVE TO TRIAL BY JURY (1) IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE BORROWER HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THE LENDER MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 9.12(a) WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE BORROWER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. THE
BORROWER ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS AND AUTHORIZATIONS GRANTED
ABOVE ARE MADE KNOWINGLY AND FREELY AND AFTER FULL CONSULTATION WITH COUNSEL.
Section 9.13 Replacement of a Note. Upon receipt by the Borrower of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction, or mutilation of any of the Notes, and (a) in the case of loss,
theft, or destruction, an indemnity reasonably satisfactory and furnished
without cost to the Borrower (provided, if the holder of any such Notes is the
Lender or a bank, insurance company, or other institutional lender, its own
unsecured agreement of indemnity shall be satisfactory), or (b) in the case of
mutilation, upon surrender and
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cancellation thereof, the Borrower will execute and deliver in lieu thereof a
replacement note of like tenor.
Section 9.14 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower in this Agreement and in the
certificates or other instruments prepared or delivered by it or on its behalf
in connection with or pursuant to this Agreement or any other Loan Document
shall be considered to have been relied upon by the Lender and shall survive the
making by the Lender of the Loans and delivery of this Agreement and the other
Loan Documents, regardless of any investigation made by the Lender or on its
behalf, and shall continue in full force and effect as long as any Obligation is
outstanding and so long as the Commitments have not both been terminated. The
provisions of Sections 2.14, 2.16, 2.17, 9.6 and 9.9 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Obligations, the expiration of the Commitments, the invalidity
or unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Lender for a period
of two (2) years after the indefeasible payment in full in cash of all
Obligations.
Section 9.15 Further Assurances. The Borrower from time to time shall
execute and deliver to the Lender such additional documents and will provide
such additional information as the Lender may reasonably require to carry out
the terms of this Agreement.
Section 9.16 Construction. Each covenant contained in Articles V, VI
and VII of this Agreement shall be construed (absent an express contrary
provision therein) as being independent of each other covenant contained herein,
and compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant.
Section 9.17 Captions. Article and Section titles in the Loan Documents
are included for convenience only and do not define, limit, or describe the
scope of the provisions thereof.
Section 9.18 Counterparts. This Agreement may be executed and delivered
in any number of counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute but one and the same agreement. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
Section 9.19 Confidentiality. The Lender will maintain the
confidentiality of any non-public information relating to the Borrower or any
Subsidiary (the "CONFIDENTIAL INFORMATION") and, except as provided below, will
exercise the same degree of care that the Lender exercises with respect to its
own proprietary information to prevent the unauthorized disclosure of the
Confidential Information to third parties. Confidential Information shall not
include information that either (a) is in the public domain or in the knowledge
or possession of the Lender when disclosed to the Lender, or becomes part of the
public domain after disclosure to the Lender through no fault of the Lender, or
(b) is disclosed by the Lender by a third party, provided that the Lender does
not have actual knowledge that such third party is prohibited from disclosing
such information. The terms of this section shall not apply to disclosure of
Confidential
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Information by the Lender that is, in its good faith opinion, compelled by laws,
regulations, rules, orders or legal process or proceedings or as disclosed to;
(x) any party, including a prospective Participant or assignee, who has signed a
confidentiality agreement containing terms substantially similar to those
contained herein, or (y) legal counsel, examiners, auditors and directors of the
Lender and examiners, auditors and investigators having regulatory authority
over the Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
WITNESSES (AS TO BOTH):
_________________________________ TRIDENT INTERNATIONAL, INC.
/s/ Daniel Ferrigno By:/s/ J. Leo Gagne
J. Leo Gagne
Its Vice President
FLEET NATIONAL BANK
By:/s/MatthewW. Hummel
Matthew E. Hummel
Its Vice President
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Schedule 1.1
Existing Permitted Investments
None.
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Schedule 4.7
Litigation
1. In December 1997, the Borrower filed a civil action in the U. S.
District Court for the Southern District of Illinois charging Applied
Technology Group of Belleville, Illinois, AP Products, Inc. of Deer
Park, New York, Renewable Resources, Inc. of Deer Park, New York and
Franklin Tennessee and Independent Ink, Inc. of Gardena, California
with infringing two of the Borrower's patents. Renewable Resources,
Inc. and Applied Technology Group have filed counterclaims against the
Borrower in which they have asked the court for declaration of (i)
noninfringement and (ii) invalidity of the Borrower's patents. In
addition, the counterclaims of Renewable Resources, Inc. and Applied
Technology Group also allege that certain of the Borrower's ink sales
practices violated federal antitrust laws.
2. The site of certain of the Borrower's leased premises in Connecticut
are listed on the "CERCLIS" list of the United States Environmental
Protection Agency (the "EPA"). None of these sites are owned by the
Borrower and the Borrower has not been identified as a "Potentially
Responsible Party" by the EPA. A contractor for the EPA informed the
owner of the property after a November 1994 assessment that "[i]t is
not anticipated that further investigation will be required by EPA
within the next 3 years, and EPA would most assuredly not pursue
placing this property on the National Priorities List based on
information currently available. Thus, the Connecticut General Statutes
are the lead set of regulations which require remedial response
compliance." The Connecticut Department of Environmental Protection
(the "DEP") has been notified that a release of hazardous wastes had
occurred on a Brookfield, Connecticut site leased by the Borrower. In
March 1995, the DEP requested further information from the Borrower,
which the Borrower provided. To date, the Borrower has received no
further formal correspondence regarding this matter.
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Schedule 4.9
Subsidiaries
1. Trident, Inc., a Connecticut corporation. Borrower owns 100% of the
outstanding capital stock of Trident, Inc.
2. Trident Overseas, F.S.C., a U.S. Virgin Islands corporation. Trident, Inc., a
wholly-owned subsidiary of Borrower (as stated above) owns 100% of the
outstanding capital stock of Trident Overseas, F.S.C.
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Schedule 4.12
Outstanding Debt
None.
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Schedule 4.25
Insurance
(See attached schedule of current insurance)
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Schedule 4.26(a)
Owned Real Property
None.
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Schedule 4.26(b)
Leased Real Property
Manufacturing Building- 1114 Federal Road
Brookfield, CT 06804
Manufacturing Building- 1112 Federal Road
Brookfield, CT 06804
Office Space- 1480 Renaissance, Suite 105
Park Ridge, IL 60068
Office Space- Route 7 Danbury Road
New Milford, CT 06776
Office Space- Bracetown Business Park
Bracetown, Clonee
Co. Meath, Ireland
Office Space- Plaza Yamao 101
2-8-13 Tennovdai
Chiba 270-1143
Japan
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<PAGE> 65
REPLACEMENT REVOLVING LOAN NOTE
$1,000,000 JULY 31, 1998
FOR VALUE RECEIVED, the undersigned, TRIDENT INTERNATIONAL, INC., a
Delaware corporation (the "MAKER"), does hereby promise to pay to the order of
FLEET NATIONAL BANK (the "LENDER"), at its office at 777 Main Street, Hartford,
Connecticut 06115, or at such other place as the holder hereof (including the
Lender, hereinafter referred to as the "HOLDER") may designate, the principal
sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000), or, if less, the aggregate
unpaid principal amount of all Revolving Loans which shall have been made by the
Holder to the Maker pursuant to the terms of that certain Credit Agreement
between the Maker and the Lender dated of even date herewith, as amended from
time to time (as amended, the "CREDIT AGREEMENT"), together with interest on the
unpaid principal amount of this Note beginning as of the date hereof, before or
after maturity or judgment, payable at the rates and in the manner as provided
in the Credit Agreement, and together with all taxes levied or assessed on this
Note or the debt evidenced hereby against the Holder, and together with all
costs, expenses and attorneys' and other professional fees incurred in any
action to collect this Note or to enforce, defend, protect, preserve, foreclose
or realize upon any mortgage, lien, security interest or other collateral
securing this Note or to enforce, foreclose, defend, preserve, protect or
sustain any such mortgage, lien or security interest or guaranty or other
agreement or in any litigation or controversy arising from or connected with any
of the foregoing. Capitalized terms used in this Note and not otherwise defined
herein shall have the meanings assigned in the Credit Agreement.
This Note is the Revolving Loan Note referred to in, evidences
Revolving Loans under, and has been issued by the Maker in accordance with the
terms of, the Credit Agreement. Payments on this Note may be evidenced by a grid
(if any) attached to this Note or similar certificates or documents, or by the
internal computerized records of the Holder, PROVIDED that any failure of the
Holder to make any such notation shall not affect the unconditional obligation
of the Maker to pay all amounts due hereunder as and when due. The Holder shall
be entitled to the benefits of the Credit Agreement and the other Loan Documents
and may enforce the agreements of the Maker contained therein, and the Holder
may exercise the respective remedies provided for thereby or otherwise available
in respect thereof, all in accordance with the terms thereof. The Holder shall
have the right (but not the obligation), in its sole discretion, to charge any
amounts due hereunder to any account maintained by the Maker with the Holder as
provided in the Credit Agreement.
All computations of interest with respect to this Note shall be made on
the basis of a 360 day year and the actual number of days elapsed. Interest
shall be due and payable at the times and in the manner provided in the Credit
Agreement. Unless sooner accelerated as a result of the occurrence of an Event
of Default, principal, accrued and unpaid interest and any other sums due
hereunder shall be due and payable in full, in Dollars and in immediately
available funds on the Maturity Date of the Revolving Loan Commitment. If any
payment becomes due hereunder other than on a Business Day, the due date for
such payment shall be
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extended to the next succeeding Business Day and interest hereunder shall accrue
during such extension.
The Maker has the right under certain circumstances to prepay in whole
or in part the principal of this Note on the terms and conditions specified in
the Credit Agreement.
The Maker agrees that: (i) if any installment of interest, principal or
any other sum due under this Note shall not be paid within five (5) calendar
days after the same is otherwise due and payable; or (ii) if any other Event of
Default shall occur, then, upon the happening of any such event, the entire
indebtedness with accrued interest thereon due under this Note shall become
immediately due and payable as provided in the Credit Agreement. Failure to
exercise such option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent Event of Default. Notwithstanding anything
to the contrary contained herein, upon the occurrence of such an Event of
Default or after maturity or judgment, the interest rate on this Note shall
automatically increase without notice or demand to a per annum rate equal to the
Default Rate.
In the event the Maker fails to pay any installment of interest,
principal and/or any other sum due hereunder or under the Credit Agreement for
more than ten (10) days from the date it is due and payable, without in any way
affecting the Holder's right to declare an Event of Default to have occurred, a
late charge equal to five (5%) percent of such late payment shall be assessed
against the Maker and shall be immediately due and payable without demand or
notice of any kind, PROVIDED, HOWEVER, that the Holder shall not be entitled to
accrue and collect interest at the Default Rate and assess and collect late
charges against the Maker, it being agreed and understood that the Lender shall
be entitled to only one such remedy.
The Maker agrees that no delay or failure on the part of the Holder in
exercising any power, privilege, remedy, option or right hereunder shall operate
as a waiver thereof or of any other power, privilege, remedy or right; nor shall
any single or partial exercise of any power, privilege, remedy, option or right
hereunder preclude any other or future exercise thereof or the exercise of any
other power, privilege, remedy, option or right. The rights and remedies
expressed herein and in the Credit Agreement are cumulative, and may be enforced
successively, alternatively, or concurrently and are not exclusive of any rights
or remedies which the Holder may or would otherwise have under the provisions of
all applicable laws, and under the provisions of all agreements between the
Maker and the Holder or between any endorser or guarantor and the Holder.
Notwithstanding any provisions of this Note, it is the understanding
and agreement of the Maker and the Holder (and any guarantors of the Maker's
liabilities, if any) that the maximum rate of interest to be paid by the Maker
(or guarantors of the Maker's liabilities) to the Holder shall not exceed the
highest or the maximum rate of interest permissible to be charged by a
commercial lender such as the Lender to a commercial borrower such as the Maker
under the laws of the State of Connecticut. Any amount paid in excess of such
rate shall be considered to have been payments in reduction of principal.
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The Maker hereby gives the Holder a lien and right of setoff for all of
its Obligations and other liabilities to Holder, whether now existing or
hereafter arising, upon and against all its deposits (general or special, time
or demand, provisional, or final, or trust or agency account), credits,
collateral and property now or hereafter in the possession, custody, safekeeping
or control of the Holder or, if the Holder is the Lender, any entity under
common control of Fleet Financial Group, or in transit to any of them. The
Holder may, at any time and from time to time, without notice (any such notice
being expressly waived by the Maker), apply or set off the same, or any part
thereof, to any Obligation or liability of the Maker to the Holder, even though
unmatured, irrespective of whether or not the Holder shall have made any demand
under the Credit Agreement or any other Loan Document and regardless of the
adequacy of any other collateral securing such Obligations and liabilities. ANY
AND ALL RIGHTS TO REQUIRE THE HOLDER TO MARSHAL OR OTHERWISE EXERCISE ITS RIGHTS
OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OR ALL OF
SUCH OBLIGATIONS AND LIABILITIES PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE MAKER ARE HEREBY
KNOWINGLY, VOLUNTARILY OR IRREVOCABLY WAIVED. The rights of the Holder under
this paragraph are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Holder may have.
Failure by the Holder to insist upon the strict performance by the
Maker of any terms and provisions herein shall not be deemed to be a waiver of
any terms and provisions herein, and the Holder shall retain the right
thereafter to insist upon strict performance by the Maker of any and all terms
and provisions of this Note or any document securing the repayment of this Note.
THE HOLDER AND THE MAKER HEREBY EXPRESSLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS THAT IT MAY HAVE TO TRIAL BY
JURY (I) IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE, THE CREDIT AGREEMENT, ANY OF THE OTHER
LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS NOTE, THE CREDIT AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS
OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE, AND THE MAKER HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THE HOLDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE MAKER TO
THE WAIVER OF
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<PAGE> 68
ITS RIGHT TO TRIAL BY JURY. THE MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER
KNOWINGLY, WILLINGLY AND VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS, AND FURTHER ACKNOWLEDGES THAT
THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THE
CREDIT AGREEMENT AND MAKE THE LOANS, INCLUDING WITHOUT LIMITATION, THE LOAN
EVIDENCED BY THIS NOTE. THE MAKER FURTHER ACKNOWLEDGES THAT THE LENDER HAS NOT
AGREED WITH OR REPRESENTED TO THE MAKER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
TO INDUCE THE LENDER TO ENTER INTO THE LOAN TRANSACTIONS EVIDENCED BY
THE CREDIT AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, THE MAKER AGREES
THAT THE LOAN TRANSACTIONS ARE COMMERCIAL TRANSACTIONS AND NOT CONSUMER
TRANSACTIONS, AND WAIVES ANY RIGHT TO NOTICE AND A HEARING UNDER CHAPTER 903a OF
THE CONNECTICUT GENERAL STATUTES, AS AMENDED, OR UNDER ANY OTHER FEDERAL OR
STATE STATUTE OR STATUTES OR FOREIGN LAWS AFFECTING PREJUDGMENT REMEDIES, AND
AUTHORIZES THE HOLDER'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THIS
WAIVER, AND WAIVES ANY CLAIM IN TORT, CONTRACT OR OTHERWISE AGAINST THE HOLDER'S
ATTORNEY WHICH MAY ARISE OUT OF SUCH ISSUANCE OF A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT COURT ORDER. FURTHER, IN THE EVENT THE HOLDER SEEKS TO TAKE POSSESSION
OF ANY OR ALL OF THE COLLATERAL BY COURT PROCESS OR OTHER METHOD AVAILABLE UNDER
THE LAW, THE MAKER IRREVOCABLY WAIVES ANY BOND AND ANY SURETY OR SECURITY
RELATING THERETO REQUIRED BY ANY STATUTE, COURT RULE OR OTHERWISE AS AN INCIDENT
TO SUCH POSSESSION, AND WAIVES ANY DEMAND FOR POSSESSION PRIOR TO THE
COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH RESPECT THERETO.
SPECIFICALLY, THE MAKER RECOGNIZES AND UNDERSTANDS THAT THE EXERCISE OF THE
HOLDER'S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR LEVY AGAINST
THE MAKER'S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY WILL NOT HAVE THE
PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER JUDICIAL OFFICER
AND THE MAKER WILL NOT HAVE THE RIGHT TO ANY NOTICE OR PRIOR HEARING WHERE THE
MAKER MIGHT CONTEST SUCH A PROCEDURE. THE INTENT OF THE MAKER IS TO GRANT TO THE
HOLDER FOR GOOD AND VALUABLE CONSIDERATION THE RIGHT TO OBTAIN SUCH A
PREJUDGMENT REMEDY AND TO EXPRESS ITS BELIEF THAT ANY SUCH PREJUDGMENT REMEDY
OBTAINED IS VALID AND CONSTITUTIONAL UNLESS A COURT OF COMPETENT JURISDICTION
SHOULD DETERMINE OTHERWISE. FURTHER, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE MAKER HEREBY WAIVES DEMAND, PRESENTMENT FOR PAYMENT,
PROTEST, NOTICE OF PROTEST, NOTICE OF
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<PAGE> 69
DISHONOR, DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF THE THIS NOTE AND ANY
AND ALL NOTICES OF A LIKE NATURE. FURTHER, TO THE EXTENT NOT OTHERWISE EXPRESSLY
PROVIDED HEREIN, THE MAKER EXPRESSLY WAIVES ALL DEFENSES OF SURETYSHIP OR
IMPAIRMENT OF COLLATERAL. THE MAKER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS
KNOWINGLY, WILLINGLY AND VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THESE WAIVERS WITH ITS ATTORNEYS, AND FURTHER ACKNOWLEDGES THAT
THESE WAIVERS CONSTITUTE A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THE
CREDIT AGREEMENT AND MAKE THE LOANS, INCLUDING WITHOUT LIMITATION, THE LOAN
EVIDENCED BY THIS NOTE. THE MAKER FURTHER ACKNOWLEDGES THAT THE LENDER HAS NOT
AGREED WITH OR REPRESENTED TO THE MAKER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
This Note shall be governed by the laws of the State of Connecticut
(but not its conflicts of law provisions).
This Note amends to the extent it amends, restates to the extent it
restates, supersedes and replaces that certain Commercial Promissory Grid Note
in the maximum principal amount of up to $1,000,000 of the Maker to the order of
the Lender dated September 30, 1997 (the "PRIOR NOTE"). The amendment and
restatement of the Prior Note shall in no way be construed as a novation of the
Maker's indebtedness previously evidenced by the Prior Note.
TRIDENT INTERNATIONAL, INC.
By /s/ J. Leo Gagne
---------------------------------
J. Leo Gagne
Its Vice President
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CONTINUING GUARANTY AGREEMENT
THIS CONTINUING GUARANTY AGREEMENT (the "GUARANTY"), dated July 31,
1998, by TRIDENT, INC., a Connecticut company ("GUARANTOR") in favor of FLEET
NATIONAL BANK, a national banking institution ("LENDER").
In consideration of and as a material inducement for Lender having
extended or in the future extending loans, advances or otherwise giving credit
to, or on behalf of, TRIDENT INTERNATIONAL, INC., a Delaware corporation
("BORROWER"), including without limitation, a $1,000,000 commercial revolving
loan for working capital purposes and a $10,000,000 acquisition revolving loan
being extended by the Lender to the Borrower on the date hereof (collectively,
the "LOANS"), such Loans being made pursuant to the terms and conditions of, and
evidenced by, among other things, a Credit Agreement between the Borrower and
the Lender (as the same may be amended, supplemented or modified from time to
time, the "CREDIT AGREEMENT") dated of even date herewith and related promissory
notes executed and to be executed by the Borrower in favor of the Lender (as the
same may be amended, supplemented, modified or replaced from time to time, the
"NOTES"), the Guarantor does hereby represent, warrant, covenant and agree as
follows:
ARTICLE X0
COVENANTS AND AGREEMENTS
Section 10.1 The Guaranty. The Guarantor hereby unconditionally,
absolutely and irrevocably guarantees to the Lender the full and punctual
payment, performance and discharge of all Liabilities of the Borrower to the
Lender, whenever and however arising. As used herein, "LIABILITIES" means any
and all indebtedness, liabilities and obligations of the Borrower to the Lender
of every kind and description, whether direct or indirect, primary or secondary,
absolute or contingent, joint, several or joint and several, due or to become
due by their terms or by acceleration, now existing or hereafter arising or
acquired, and whether created directly or acquired by assignment, purchase or
otherwise by the Lender, including, but not limited to, all Liabilities arising
under the Credit Agreement, the Notes and the other Loan Documents (as defined
below), or by whatever agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, and all extensions, renewals and
substitutions therefor, and further including without limitation, all reasonable
costs, expenses and attorneys' and other professionals' fees incurred in the
collection of said Liabilities and in any litigation arising from any of the
Liabilities or this Guaranty or in the defense, protection, preservation,
realization or enforcement of any rights, liens or remedies against the Borrower
or in the defense, protection, preservation, realization and enforcement of any
rights, liens or remedies against the Guarantor under this Guaranty or
otherwise. This Guaranty shall apply to any loan or other financial
accommodation the Lender may provide to the Borrower (whether as a
debtor-in-possession or otherwise) in any bankruptcy proceeding, whether such
accommodation is voluntary, by court order, or otherwise, and the Liabilities
shall include any such accommodations as fully as if they had been made outside
of
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bankruptcy, and shall include all pre- and post-bankruptcy interest and other
charges notwithstanding that such interest and charges may not be provable or
recoverable against the Borrower or its estate. Each and every payment
obligation or liability guaranteed hereunder shall give rise to a separate cause
of action, and separate suits may but need not be brought hereunder as each
cause of action arises.
Section 10.2 Unconditional and Absolute Nature of Guaranty.
A. The Guarantor guarantees that the Liabilities will be paid strictly
in accordance with the terms of the Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Lender with respect thereto. The obligations
of the Guarantor under this Guaranty are independent of the Liabilities, and a
separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against
the Borrower or any Other Guarantor (as defined below) or whether the Borrower
or any Other Guarantor is joined in any such action or actions. The liability of
the Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Guarantor hereby irrevocably waives any
defenses the Guarantor may now or hereafter have in any way relating to any or
all of the following:
(i) any compromise, settlement, release, change, modification
(whether material or otherwise), refusal or deferment to demand or enforce, or
termination of any or all of the Liabilities;
(ii) except to the extent expressly provided in the Loan
Documents, any failure to give notice to the Guarantor of the occurrence of a
default or an event of default under or within the meaning of this Guaranty, the
Credit Agreement, any of the Notes, or any of the other instruments, agreements
or documents evidencing, securing or otherwise relating to any of the
Liabilities or securing or otherwise relating to this Guaranty, all as the same
may be amended, restated, supplemented or modified from time to time
(collectively, including the Credit Agreement, the Notes and this Guaranty, the
"LOAN DOCUMENTS");
(iii) any lack of validity or enforceability of any of the
Loan Documents or any other agreement or instrument relating thereto;
(iv) any change in the time, manner or place of payment and/or
performance of any of the Liabilities, or any other modification, amendment,
rescission or waiver by the Lender of the payment, performance or observance by
the Borrower, the Guarantor or any Other Guarantor of any of their respective
obligations, conditions, covenants or agreements contained in any of the Loan
Documents;
(v) any failure of the Lender to disclose to the Guarantor any
information relating to the financial condition, operations, properties or
prospects of the Borrower now or in the future known to the Lender (the
Guarantor acknowledging and agreeing that the Lender has no duty to disclose
such information to the Guarantor), or the Lender's continuing to make
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advances under any of the Loan Documents to the Borrower after default and/or
after there is a material adverse change in the Borrower's financial condition;
(vi) any failure, omission, delay or lack on the part of the
Lender to take, enforce, assert or exercise any action, right, power or remedy
conferred on the Lender in any of the Loan Documents;
(vii) any release or discharge (in bankruptcy or similar
proceeding or otherwise), in whole or in part, or the death or any bankruptcy,
liquidation, dissolution, change, restructuring or termination of the corporate
existence of, the Borrower, any Guarantor or any other person or entity which is
primarily or secondarily liable with respect to the Liabilities;
(viii) the failure to obtain or maintain perfection of or to
protect any security interest in, or the taking, exchange, release, surrender,
disposal, impairment or loss of, or any manner of application or sale of, all or
any collateral for the Liabilities and/or the Guarantor's liabilities hereunder;
or
(ix) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower, the Guarantor or any
Other Guarantor or surety of the Liabilities.
B. To the extent the Borrower, any Other Guarantor or any other person
makes a payment or payments to the Lender (including by way of the Lender
realizing upon collateral), or the Lender exercises its right of setoff, and
such payment or payments or the proceeds of such setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Borrower, such Other Guarantor or such other person, or to a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause), whether by virtue of judicial decision, stipulation or settlement
agreement, then to the extent of any such payment or repayment, the Liabilities
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such setoff had not
occurred, shall be payable by the Guarantor to the Lender on demand, and this
Guaranty and any security therefor, if otherwise terminated, shall be
automatically reinstated without any further action by the Guarantor and/or the
Lender to the same extent as though the payment so repaid or recovered had never
been originally made on such Liabilities.
C. The Guarantor agrees that no delay or act of commission or omission
of any kind or at any time upon the part of the Lender or its successors and
assigns with respect to the exercise of any right or remedy available to the
Lender or any other matter whatsoever shall in any way impair the right of the
Lender to enforce any right, power or benefit under this Guaranty or under any
of the other Loan Documents to which the Guarantor is a party or be construed to
be a waiver thereof. Any such right may be exercised from time to time and as
often as may be deemed expedient.
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Section 10.3 Right of the Lender to Proceed Solely Against
Guarantor.
A. The liability of the Guarantor on this Guaranty shall be immediate
and shall not be contingent upon the Lender (i) proceeding against or exhausting
any other rights and remedies which it may have against the Borrower or any
other person primarily or secondarily liable for any of the Liabilities,
including without limitation, any of the Other Guarantors, and/or (ii)
enforcing, realizing upon or resorting to any security held by the Lender, and
the Guarantor hereby waives any rights, by statute or otherwise, to require the
Lender to institute any such proceeding, exhaust any such rights and remedies
and/or enforce, realize upon or resort to any such security. The Lender shall be
under no obligation to marshal any assets in favor of the Guarantor, or against
or in payment of any or all of the Liabilities, and shall not be required to
mitigate damages or take any other action to reduce, collect or enforce the
Liabilities or any collateral therefor.
B. The Lender shall have the right to seek recourse against the
Guarantor to the full extent provided for herein and in any Loan Document to
which the Guarantor is a party. No election to proceed in one form of action or
proceeding, or against any person, or on any of the Liabilities, shall
constitute a waiver of the Lender's right to proceed in any other form of action
or proceeding or against other persons unless the Lender has expressly waived
such right in writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by the Lender against the Borrower or any
Other Guarantor under any Loan Document shall serve to diminish the liability of
the Guarantor except to the extent the Lender fully and unconditionally realizes
full payment of the Liabilities by such action or proceeding, notwithstanding
the effect of any such action or proceeding upon the Guarantor's rights of
subrogation, reimbursement, exoneration, contribution or indemnification against
the Borrower, any Other Guarantor and/or any other person.
C. If any Event of Default (as defined in the Credit Agreement) shall
occur, then any and all of the Liabilities shall be deemed due and payable by
the Guarantor, without notice or demand.
Section 10.4 Continuing Guaranty, Transfer of Interest, Etc..
A. This Guaranty is a continuing, irrevocable guaranty of payment and
performance, and not of collection, and shall (i) remain in full force and
effect until indefeasible payment in full in cash of all of the Liabilities and
other amounts payable under this Guaranty and any commitment on the part of the
Lender to extend further Liabilities to the Borrower shall have expired or
terminated, (ii) be binding upon the Guarantor and the Guarantor's successors
and assigns (collectively, the "GUARANTOR'S SUCCESSORS"), PROVIDED that the
Guarantor shall have no right to assign or transfer any of the Guarantor's
obligations hereunder, and (iii) inure to the benefit of, and be enforceable by,
the Lender, its successors, transferees and assigns, and any person who shall
from time to time be the owner of holder of any of the Liabilities
(collectively, the "OBLIGEES"). Without limiting the generality of the foregoing
clause (iii), the Lender may assign or otherwise transfer (in the manner and to
the extent provided in the Credit Agreement) all or any portion of its rights
and obligations under
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the Credit Agreement and the other Loan Documents (including without limitation,
all or any portion of its commitment to lend thereunder, the Liabilities and the
Notes held by it) to any other person, and such other person shall be vested
with all of the benefits in respect thereof granted to the Lender herein or
otherwise. Except as expressly agreed in writing by the Lender, Nothing shall
discharge or satisfy the liability of the Guarantor hereunder except the
indefeasible payment in full in cash of all of the Liabilities and other amounts
payable under this Guaranty. This Guaranty shall be in addition to, cumulative
of, and not in substitution, novation or discharge of, any and all prior or
contemporaneous guaranties, indemnifications, indorsements, or recourse
agreements by the Guarantor in favor of the Lender or any other Obligee.
B. Without in anyway limiting the continuing and irrevocable nature of
this Guaranty, to the extent the Guarantor's waiver of any present or future
right the Guarantor may have to revoke or otherwise terminate this Guaranty as
provided below is not permitted by applicable law or is otherwise unenforceable,
this Guaranty shall continue until revoked in writing by the Guarantor, or the
Guarantor's Successors, and a copy of such revocation has been duly delivered to
the Lender by certified or registered main at least sixty (60) days prior to the
effective date of revocation. Such revocation shall not affect or impair the
obligation of the Guarantor, or of the Guarantor's Successors, with respect to
any of the Liabilities existing at the time of the receipt by the Lender of such
revocation or which may arise out of or in connection any transactions
previously entered into by the Lender or for the account of the Borrower. Any
Liabilities that are revolving loans shall not be deemed repaid or reduced by
reason of the collection and subsequent relending of the proceeds of accounts or
similar collateral securing such loans.
Section 10.5 Waivers, Payment of Costs and Other Agreements.
A. TO INDUCE THE LENDER TO ENTER INTO THE TRANSACTIONS EVIDENCED BY THE
NOTE AND THE OTHER LOAN DOCUMENTS, THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
SUCH TRANSACTIONS ARE COMMERCIAL TRANSACTIONS AND NOT CONSUMER TRANSACTIONS, AND
WAIVES ANY RIGHT TO NOTICE AND A HEARING UNDER CHAPTER 903A OF THE CONNECTICUT
GENERAL STATUTES, AS AMENDED, OR UNDER ANY OTHER FEDERAL OR STATE STATUTE OR
STATUTES OR FOREIGN LAWS AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES THE
LENDER'S ATTORNEYS TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER,
PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER, AND WAIVES ANY
CLAIM IN TORT, CONTRACT OR OTHERWISE AGAINST THE LENDER'S ATTORNEYS WHICH MAY
ARISE OUT OF SUCH ISSUANCE OF A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT
ORDER. FURTHER, IN THE EVENT THE LENDER SEEKS TO TAKE POSSESSION OF ANY OR ALL
OF ANY COLLATERAL SECURING THIS GUARANTY BY COURT PROCESS OR OTHER METHOD
AVAILABLE UNDER THE LAW, THE GUARANTOR IRREVOCABLY WAIVES ANY BOND AND ANY
SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE,
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COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND WAIVES ANY DEMAND
FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH
RESPECT THERETO. SPECIFICALLY, THE GUARANTOR RECOGNIZES AND UNDERSTANDS THAT THE
EXERCISE OF THE LENDER'S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF
OR LEVY AGAINST THE GUARANTOR'S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY
WILL NOT HAVE THE PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER
JUDICIAL OFFICER AND THE GUARANTOR WILL NOT HAVE THE RIGHT TO ANY NOTICE OR
PRIOR HEARING WHERE THE GUARANTOR MIGHT CONTEST SUCH A PROCEDURE. THE INTENT OF
THE GUARANTOR IS TO GRANT TO THE LENDER FOR GOOD AND VALUABLE CONSIDERATION THE
RIGHT TO OBTAIN SUCH A PREJUDGMENT REMEDY AND TO EXPRESS THE GUARANTOR'S BELIEF
THAT ANY SUCH PREJUDGMENT REMEDY OBTAINED IS VALID AND CONSTITUTIONAL UNLESS A
COURT OF COMPETENT JURISDICTION SHOULD DETERMINE OTHERWISE.
B. THE GUARANTOR WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, (I) NOTICE OF ACCEPTANCE OF THIS GUARANTY; (II) ANY RIGHT TO REVOKE OR
OTHERWISE TERMINATE THIS GUARANTY; (III) NOTICE OF ANY EXTENSION OF CREDIT OR
OTHER FINANCIAL ACCOMMODATION FROM TIME TO TIME GIVEN BY THE LENDER TO THE
BORROWER AND THE CREATION, EXISTENCE OR ACQUISITION OF ANY LIABILITIES,
INCLUDING, WITHOUT LIMITATION, NOTICE OF ADVANCES UNDER THE NOTE; (IV) NOTICE OF
THE AMOUNT OF LIABILITIES OF THE BORROWER TO THE LENDER FROM TIME TO TIME
OUTSTANDING; (V) NOTICE OF ANY ADVERSE CHANGE IN THE BORROWER'S FINANCIAL
CONDITION OR OF ANY OTHER FACT WHICH MIGHT INCREASE GUARANTOR'S RISK; (VI)
NOTICE OF DEMAND FOR PAYMENT, PRESENTMENT, PROTEST, NOTICE OF DISHONOR OR
NONPAYMENT; (VII) NOTICE OF DEFAULT BY THE BORROWER; (VIII) NOTICE OF ALL OTHER
DEMANDS AND NOTICES TO WHICH THE GUARANTOR MIGHT OTHERWISE BE ENTITLED, (IX) ANY
DUTY ON THE PART OF THE LENDER TO DISPOSE OF ANY COLLATERAL IN A COMMERCIALLY
REASONABLE MANNER, EXCEPT TO THE EXTENT REQUIRED BY LAW, AND (X) ANY NECESSITY,
WHETHER SUBSTANTIVE OR PROCEDURAL, THAT JUDGMENT PREVIOUSLY BE RENDERED AGAINST
THE BORROWER OR ANY OTHER PERSON, OR THAT THE BORROWER OR ANY OTHER PERSON BE
JOINED IN SUCH CAUSE, OR THAT A SEPARATE ACTION BE BROUGHT AGAINST THE BORROWER
OR ANY OTHER PERSON.
C. THE GUARANTOR AND THE LENDER MUTUALLY HEREBY EXPRESSLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS THAT ANY OF THEM
MAY HAVE TO TRIAL BY JURY (I) IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY
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ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY, THE NOTE, ANY OF THE
OTHER LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS GUARANTY, THE NOTE, ANY OF THE OTHER LOAN DOCUMENTS OR ANY
OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE, AND THE GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THE LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SUBSECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
GUARANTOR TO THE WAIVER OF THE GUARANTOR'S RIGHT TO TRIAL BY JURY.
D. TO THE EXTENT NOT OTHERWISE EXPRESSLY PROVIDED HEREIN, THE GUARANTOR
EXPRESSLY WAIVES ALL DEFENSES BASED ON SURETYSHIP OR IMPAIRMENT OF COLLATERAL.
E. The Guarantor shall not exercise, and hereby fully subordinates to
the Liabilities, any rights that the Guarantor may now or hereafter acquire
against the Borrower or any Guarantor that arise from the existence, payment,
performance or enforcement of the Guarantor's obligations under this Guaranty or
any other Loan Document, including without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Lender against the Borrower or any
Other Guarantor or any collateral, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including without
limitation, the right to take or receive from the Borrower or any Other
Guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right,
until all of the Liabilities and all other amounts payable under this Guaranty
shall have been indefeasibly paid in full in cash and any commitment on the part
of the Lender to extend further Liabilities to the Borrower shall have expired
or terminated. If any amount shall be paid to the Guarantor in violation of this
Section at any time, such amount shall be held in trust for the benefit of the
Lender and shall forthwith be paid to the Lender for credit and application to
the Liabilities and all other amounts payable under this Guaranty, whether
matured or unmatured, in such manner and order of priority as the Lender shall
determine, in its sole discretion.
F. THE GUARANTOR ACKNOWLEDGES THAT THE GUARANTOR MAKES THE WAIVERS AND
AGREEMENTS SET FORTH IN SUBSECTIONS (A), (B), (C), (D) AND (E) ABOVE KNOWINGLY
AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF
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THOSE WAIVERS WITH THE GUARANTOR'S ATTORNEYS, AND THAT THESE WAIVERS CONSTITUTE
A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE THE LOAN. THE GUARANTOR FURTHER
ACKNOWLEDGES THAT THE LENDER HAS NOT AGREED WITH OR REPRESENTED TO THE GUARANTOR
OR ANY OTHER PERSON THAT THE PROVISIONS OF SUBSECTIONS (A), (B), (C), (D) AND
(E) ABOVE WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
G. The Guarantor agrees to pay all reasonable costs and expenses,
including attorneys fees, arising out of or with respect to the validity,
enforcement, realization, protection or preservation of this Guaranty or any of
the Liabilities.
H. If, for any reason, the Borrower is under no legal obligation to
discharge any Liabilities or if any Liabilities have become irrecoverable from
the Borrower by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal obligor on all such Liabilities. In the
event that acceleration of the time for payment of any Liabilities is stayed
upon the bankruptcy of the Borrower, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of the Loan Documents shall be
immediately due and payable by the Guarantor, without notice or demand.
Section 10.6 No Reductions. All payments by the Guarantor shall be made
in lawful money of the United States of America in immediately available funds,
without any reduction or deduction whatsoever, including without limitation any
reduction or deduction for any set-off, counterclaim (whether sounding in tort,
contract or otherwise), reduction, defense of any kind or nature which the
Guarantor has or may have against the Lender, or any assignee or successor
thereof, or any and all current and future taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, liabilities, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein (collectively or individually called "TAXES"). If any
withholding or deduction from any payment to be made by the Guarantor is
required for any Taxes, then the Guarantor will pay to the Lender on the date on
which such payment is made (if not otherwise paid to the appropriate taxing
authority), such additional amount as shall be necessary to enable the Lender to
receive the same net amount which the Lender would have received on such due
date had no such withholding or deduction been required. The Guarantor will
deliver promptly to the Lender certificates or other valid vouchers for all
Taxes or other charges deducted from or paid with respect to payments made by
the Guarantor. The Guarantor will indemnify the Lender for the full amount of
Taxes paid by the Lender and any liability (including penalties, interest and
expenses (including reasonable attorneys' fees and expenses) arising therefrom
or with respect thereto, whether or not such Taxes were correctly or legally
asserted by the relevant government authority.
Section 10.7 Set-off. The Guarantor hereby gives the Lender a lien,
security interest and right of setoff for all of the Guarantor's indebtedness,
obligations and other liabilities to the Lender, whether now existing or
hereafter arising, upon and against all the Guarantor's deposits (general or
special, time or demand, provisional, or final, or trust or agency account),
credits, collateral and property now or hereafter in the possession, custody,
safekeeping or
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control of the Lender or any entity under common control of Fleet Financial
Group, or in transit to any of them. The Lender may, at any time and from time
to time after the occurrence of an Event of Default (as defined in the Credit
Agreement), without notice (any such notice being expressly waived by the
Guarantor), apply or set off the same, or any part thereof, to any indebtedness,
obligation or liability of the Guarantor to the Lender, even though unmatured,
irrespective of whether or not the Lender shall have made any demand under the
Credit Agreement or any other Loan Document and regardless of the adequacy of
any other collateral securing the Liabilities. ANY AND ALL RIGHTS TO REQUIRE THE
LENDER TO MARSHAL OR OTHERWISE EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES ANY OR ALL OF THE LIABILITIES PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE GUARANTOR ARE HEREBY KNOWINGLY, VOLUNTARILY OR IRREVOCABLY
WAIVED. The rights of the Lender under this paragraph are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which the Lender may have.
Section 10.8 Independent Investigation. The Guarantor is fully aware of
the financial condition of the Borrower. The Guarantor delivers this Guaranty
based solely upon its own independent investigation and in no part upon any
representation or statement of the Lender with respect thereto or with respect
to the Liabilities as they may now or hereafter exist. The Guarantor
acknowledges that the Guarantor is in a position to, and hereby assumes full
responsibility for, obtaining from time to time any additional information
concerning the Borrower's financial condition as the Guarantor may deem material
to its obligations hereunder and the Guarantor is not relying upon, nor
expecting the Lender to furnish to the Guarantor, any information in the
Lender's possession, from time to time, concerning the Borrower's financial
condition, the Liabilities, or any collateral. The Guarantor knowingly accepts
the full range of risk encompassed within a contract of "continuing guaranty"
which risk includes the possibility that the Borrower will contract additional
indebtedness for which the Guarantor may be liable hereunder after the
Borrower's financial condition or ability to pay its lawful debts when they fall
due has deteriorated. The Guarantor agrees that the Lender is in no respect
obligated to inquire into the rights or powers of the Borrower to incur the
Liabilities or grant security interests, liens or mortgages upon any collateral
security such Liabilities, or to inquire into the authority of any officer,
director or employee of the Borrower.
ARTICLE XI0
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.1 Guarantor Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and further covenants that:
A. The Guarantor is a Connecticut corporation and has the authority and
power to execute this Guaranty and to incur the obligations hereunder and
thereunder.
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B. To the best knowledge of the Guarantor, neither the execution and
delivery of this Guaranty and the other Loan Documents to which the Guarantor is
a party, the consummation of the transactions contemplated hereby nor the
fulfillment of or compliance with the terms and conditions of this Guaranty is
prevented or limited by or conflicts with or results in a breach of the terms,
conditions or provisions of any contractual or other restriction on the
Guarantor or any agreement or instrument of whatever nature to which the
Guarantor is now a party or by which the Guarantor or the Guarantor's property
is bound or constitutes a default under any of the foregoing, except where such
conflict, breach or default could not reasonably be expected to result in a
Material Adverse Effect (as such term is defined in the Credit Agreement).
C. The Guarantor has received and will receive a direct and material
financial benefit from the accommodations extended by the Lender to the
Borrower.
D. All authorizations, consents and approvals of governmental bodies or
agencies required in connection with the execution and delivery of this Guaranty
and the other Loan Documents to which the Guarantor is a party, or in connection
with the performance of the Guarantor's obligations hereunder or thereunder have
been obtained as required hereunder or by law.
E. There is no action or proceeding pending or threatened against the
Guarantor before any court or administrative agency that might materially
adversely affect the ability of the Guarantor to perform the Guarantor's
obligations under this Guaranty.
ARTICLE XII0
NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS
Section 12.1 Jurisdiction, Consent to Service of Process.
A. The Guarantor hereby irrevocably submits, for itself and its
property, to the nonexclusive jurisdiction of any Connecticut State or United
States Federal court sitting in the State of Connecticut, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Guaranty or the other Loan Documents, or for recognition or enforcement
of any judgment, and the Guarantor hereby irrevocably and unconditionally agrees
that all claims in respect to such action or proceeding may be heard and
determined in such Connecticut State or Federal court. The Guarantor irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Guarantor at the address
specified in Section 3.2 of this Guaranty. The Guarantor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 3.1A. shall affect the right of the
Lender to serve legal process in any other manner permitted by law or affect any
right that the Lender may otherwise have to bring an action or proceeding
relating to this Guaranty or the other Loan Documents against the Guarantor or
its properties in the courts of any other jurisdiction.
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<PAGE> 80
B. The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Guaranty or any other Loan Document in any
Connecticut State or Federal Court (or other State or Federal Court chosen by
the Lender as provided above). The Guarantor hereby further irrevocable waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
C. To the extent that the Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise,) with respect to the Guarantor or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Loan Documents.
Section 12.2 Notices. Except as otherwise expressly provided herein,
all notices, demands, requests, and other communications given under this
Guaranty shall only be effective if they are (a) in writing, (b) sent by hand
delivery, by facsimile transmission, by reputable express delivery service, or
by certified or registered mail, postage prepaid, and (c) (i) when delivered to
the addressee by hand, (ii) when received by the addressee as evidenced by a
return receipt signed by the addressee or its agent, and (iii) in the case of
facsimile transmissions, when transmitted, answer back received:
(A) If to the Lender, to it at:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attn: Matthew E. Hummel, Vice President
Telephone No: (860) 986-4923
Telecopier No.: (860) 986-3450
With a copy to:
Robinson & Cole LLP
280 Trumbull Street
Hartford, CT 06103-3597
Attn: Michael F. Maglio, Esq.
Telephone No.: (860) 275-8274
Telecopier No.: (860) 275-8299
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<PAGE> 81
(B) If to the Guarantor, to it at:
Trident, Inc.
1114 Federal Road
Brookfield, CT 06804
Attn: J. Leo Gagne, Vice President
and Chief Financial Officer
Telephone No. (860) 740-9333
Telecopier No. (860) 740-7355
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: John J. Egan, Esq.
Telephone No.: (617) 570-1514
Telecopier No.: (617) 570-8150
or to such other address (and/or facsimile transmission number) as the Guarantor
or the Lender, as the case may be, shall have specified in the latest unrevoked
notice sent to the other in accordance with this Section 3.2.
ARTICLE XIII0
GENERAL
Section 13.1 No Remedy Exclusive; Effect of Waiver; Entire Agreement.
No right or remedy herein conferred upon or reserved to the Lender is intended
to be exclusive of any other available right or remedy, but each and every such
right and remedy shall be cumulative and shall be in addition to every other
right and remedy given under this Guaranty, any other Loan Document or now or
hereafter existing at law or in equity. In order to entitle the Lender to
exercise any remedy reserved to it in this Guaranty, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
No waiver, amendment, release or modification of this Guaranty shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized. A waiver on
one occasion shall not be a bar to or waiver of any right of any other occasion.
The Guarantor acknowledges that this Guaranty supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the transaction giving rise to the execution hereof, and is intended as a final
expression and a complete and exclusive statement of the terms of this Guaranty.
Section 13.2 Severability. The invalidity or unenforceability of any
one or more phrases, sentences, clauses or Sections contained in this Guaranty
shall not affect the validity or enforceability of the remaining portions of
this Guaranty, or any part thereof.
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<PAGE> 82
Section 13.3 . Connecticut Law. This Guaranty, and all transactions,
assignments and transfers hereunder, and all the rights of the parties, shall be
governed as to validity, construction, enforcement and in all other respects by
the laws of the State of Connecticut (without regard to its conflicts of law
provisions). It is the express intention of the Guarantor and the Lender that
the laws of the State of Connecticut (but not its conflicts of law provisions)
apply to the entirety of the transactions evidenced by this Guaranty.
Section 13.4 Other Guarantors. The Guarantor acknowledges that other
individuals or entities have or may also from time to time guaranty the
Liabilities (including each other guarantor, the "OTHER GUARANTORS"), in which
event the liability of the Guarantor hereunder shall be joint and several. The
Guarantor further acknowledges that the failure of any of the Other Guarantors,
if any, to execute and deliver their respective guarantees shall not discharge
the liability of the Guarantor under this Guaranty.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty on the
date first above written.
WITNESSES:
TRIDENT, INC.
/s/ Daniel Ferrigno By /s/ J. Leo Gagne
- -------------------------------- ---------------------------------
J. Leo Gagne
Its Vice President
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<PAGE> 1
EXHIBIT 10.21
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 25 day of August, 1998, by and
between THOMAS G. TAYLOR, JOHN D. GERVASONI AND GORDON E. TAYLOR, doing business
as MODERN REALTY ASSOCIATES in the Town of Brookfield, Connecticut (hereinafter
referred to as Lessor), and TRIDENT INTERNATIONAL, INC., a Delaware corporation
having its office at 1114 Federal Road, Brookfield, Connecticut, (hereinafter
referred to as Lessee).
W I T N E S S E T H:
THAT the Lessor, in consideration of the rents, terms, covenants,
conditions and agreements hereinafter reserved and contained on the part of the
Lessee to be paid, kept and performed, has granted, demised, leased and let, and
by these presents does grant, demise, lease and let, unto the Lessee, and the
Lessee does hereby take and hire from the Lessor, the premises hereinafter
described, subject to such rents, terms, covenants, conditions and agreements
which the Lessee agrees hereby to pay, keep and perform.
1. DESCRIPTION OF PREMISES.
Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor,
twelve thousand (12,000) square feet in the front of the building on the
premises hereinafter described, as more particularly shown on Exhibit A attached
hereto and made a part hereof, and the use of the right of way and the parking
rights hereinafter described (all hereinafter referred to as the "demised
premises"):
ALL THAT CERTAIN piece or parcel of land situated on the Westerly side
of Route #7 in the Town of Brookfield, shown and designated as LOT #1120 on a
certain map entitled, "Map Prepared for Oskar G. Rogg, 1106-1134 Federal Road,
Town of Brookfield, County of Fairfield, State of Connecticut, February, 1977,
Revised June 29, 1977, Certified Substantially Correct, Arthur H. Howland,
R.L.S., New Milford, Conn.," which map is on file in the Office of the
Brookfield Town Clerk at Book 12, Page 32.
<PAGE> 2
TOGETHER WITH the right to pass and repass, in common with others, over
the 60-foot right of way leading from U. S. Route #7 in a generally Westerly
direction, all as shown on said map, and as shown on a copy of the pertinent
portion of said map, which is attached hereto as Exhibit B and made a part
hereof.
The demised premises are leased TOGETHER ALSO WITH twenty-six (26)
parking spaces for the exclusive use of the Lessee, its agents and employees,
which parking spaces are more specifically designated on Exhibit C attached
hereto.
2. LENGTH OF TERM/COMMENCEMENT DATE.
The term of this Lease shall be for five (5) years, commencing on
September 1, 1998, and ending on August 31, 2003 unless sooner terminated or
extended, as hereinafter provided.
3. MINIMUM RENTAL.
During each year of the term of this Lease, Lessee covenants and agrees
to pay Lessor a fixed annual rental, in lawful money of the United States,
payable in monthly installments, in advance, on the first day of each month
during the term of this Lease, at the office of the Lessor or at such other
place as Lessor may designate, without any set-off or deduction whatsoever, as
follows:
A. Commencing September 1, 1998 through August 31, 2001, the
fixed minimum annual rental shall be FIFTY-FOUR THOUSAND AND 00/00 ($54,000.00)
DOLLARS, payable in monthly installments of FOUR THOUSAND FIVE HUNDRED AND 00/00
($4,500.00) DOLLARS.
B. Commencing September 1, 2001 through August 31, 2003, the
fixed minimum annual rental shall be SIXTY THOUSAND AND 00/00 ($60,000.00)
DOLLARS, payable in monthly installments of FIVE THOUSAND AND 00/00 ($5,000.00)
DOLLARS.
Simultaneous with the execution hereof, Lessor acknowledges receipt of
the sum of FOUR THOUSAND FIVE HUNDRED DOLLARS ($4,500.00), as payment by Lessee
of the first month's
<PAGE> 3
minimum rental due hereunder.
All adjustments of rent, costs, charges and expenses which Lessee
assumes, agrees or is obligated to pay to Lessor pursuant to this Lease shall be
deemed "Additional Rent", which Lessee covenants to pay when due. In the event
of nonpayment of such Additional Rent, Lessor shall have all the rights and
remedies with respect thereto as is herein provided for nonpayment of rent.
4. NET LEASE - TAXES/ADDITIONAL RENT.
a. Lessee shall pay, as Additional Rent:
i. Sixty percent (60%) of all real estate taxes and
assessments, and all such other charges, taxes, rents, levies and sums
of every kind or nature whatsoever, extraordinary as well as ordinary,
and whether or not now within the contemplation of the parties, as
shall, during the term herein demised, be imposed by any governmental
or public authority on, or become a lien in respect of, the demised
premises, or upon any building or appurtenance thereto or any part
thereof, or upon any sidewalk or street in front of or adjacent to the
demised premises, or which may become due and payable with respect
thereto, and any and all taxes, assessments and charges levied,
assessed or imposed upon the demised premises, in lieu or in addition
to the foregoing, under or by virtue of any present or future laws,
rules, requirements, orders, directives, ordinances or regulations of
the United States, or of the state, county or city government, or of
any municipal bureau, department or lawful authority whatsoever.
ii. All taxes, assessments, levies and charges for gas,
electricity, water and all other public utilities or similar service or
services furnished to the demised premises during the term hereof.
Lessor represents that the electricity is separately metered.
iii. All taxes and assessments which shall or may, during the
term of this Lease, be
<PAGE> 4
charged, levied, assessed or imposed upon, or become a lien upon, the
personal property of the Lessee used in the operation of the demised
premises or in connection with the Lessee's business conducted on said
premises.
b. Both at the commencement and at the expiration of the term of this
Lease, all taxes, assessments, water, water meter rents or charges, duties, and
impositions, charges for public utilities or similar services, and other
payments and charges of every kind and nature provided to be paid by Lessee
under this Paragraph 4 during the term of this Lease, whether accrued or
prepaid, as the case may be, shall be apportioned between Lessor and Lessee in
accordance with the usual practice and custom then in effect in the Town of
Brookfield.
5. LESSEE'S INSTALLATIONS.
Lessee, at its own cost and expense, shall obtain all permits and
approvals for renovations to the demised premises and shall perform all work,
and shall fully equip the demised premises with all trade equipment, lighting
fixtures, furniture, operating equipment, furnishings, fixtures, floor
coverings, exterior signs and any other equipment, necessary for the proper
operation of Lessee's business to be conducted on the demised premises. Prior to
commencing any work, however, Lessee shall submit to Lessor, for Lessor's
approval, all plans and specifications of contemplated renovations. Lessee shall
also deliver to Lessor copies of all permits, approvals and certificates of
occupancy, when obtained.
6. USE OF PREMISES.
Lessee shall use and occupy the demised premises for any use permitted
or allowed under applicable regulation of any municipal, state or federal
governmental authority.
7. FLOOR LOADS.
Lessee shall not place a load upon the floor of the demised premises
exceeding the floor load
<PAGE> 5
per square foot area which such floor was designed to carry and which is allowed
by law. Lessor reserves the right to prescribe reasonable regulations with
respect to weight of all machinery which must be placed, so as to distribute the
weight. Lessee's machines and mechanical equipment shall be placed and
maintained by Lessee, at Lessee's expense, in settings sufficient, in Lessor's
reasonable judgment, to absorb and prevent vibration, noise and annoyances.
Lessor agrees that in any leases with other tenants in the building,
executed after the date hereof, he will impose the same requirements as herein
contained and will use his reasonably best efforts to cause other tenants to
comply with the conditions. Lessor shall not, however, be required to institute
legal proceedings to enforce such compliance. Any dispute with respect to
Lessee's compliance herewith or Lessor's efforts to prevent tenants from causing
vibration, noise or annoyances, shall be determined by arbitration, in
accordance with the provisions of this Lease.
8. COMMON AREAS.
Lessee shall have the right to use the common areas and facilities in
or about the building of which the demised premises are a part, in common with
other tenants of said building. All such common areas and facilities which
Lessee may be permitted to use are to be used under a revocable license, and if
any such license be removed, or if the amount of such areas be changed or
diminished, Lessor shall not be subject to any liability, nor shall Lessee be
entitled to any compensation or diminution or abatement of rent, nor shall
revocation or diminution of such areas be deemed constructive or actual
eviction.
All common areas and other facilities in, about or appurtenant to the
building of which the demised premises are a part provided by Lessor shall be
subject to the exclusive control and management of Lessor. Lessor shall have the
right to construct, maintain and operate lighting and other facilities on all
said areas and improvements; to police the same; to change the area, level,
<PAGE> 6
location and arrangement of parking areas and other facilities; to restrict
parking by tenants, their officers, agents and employees; to close temporarily
all or any portion of the parking areas or facilities to discourage non-customer
parking. Lessor shall operate and maintain the common facilities in such manner
as Lessor, in his discretion, shall determine, provided, however, that the same
shall not disturb Lessee's reasonable rights of ingress to and egress from the
demised premises.
9. COST OF MAINTENANCE OF COMMON AREAS.
Lessee shall pay sixty percent (60%) of the operating costs of the
common areas of and facilities in the building of which the demised premises are
a part. "Operating costs" shall mean the total cost and expense incurred in
operating and maintaining the common facilities, including, without limitation,
gardening and landscaping, repairs, line painting, lighting, sanitary control,
removal of snow, and the cost of personnel to implement such services, and in
directing parking and policing the common facilities. "Common facilities and
common areas", whether such terms are used individually or collectively, shall
mean all areas, space, equipment, signs and special services, whether provided
by Lessor or Lessee, for the common or joint use and benefit of the occupants of
the building, their employees, agents, servants, customers and other invitees,
including, without limitation, parking areas, access roads, driveways, retaining
walls, landscaped areas, truck serviceways or tunnels, loading docks, pedestrian
malls (enclosed or open), courts, stairs, ramps and sidewalks, comfort and
first-aid stations, washrooms and parcel pick-up stations. Lessee shall be
responsible for the removal of its own trash, rubbish, garbage and other refuse.
10. UTILITIES.
The Lessor represents that the demised premises are presently serviced
by water, sewer, oil and electricity, but Lessor shall not be liable for any
failure of any water supply or electric current or any service by any such
utility.
<PAGE> 7
The Lessee shall pay all charges for water, gas, electricity, light,
heat, power and/or other services used or charges imposed in or about or
supplied to the demised premises, and shall indemnify the Lessor against any and
all liability on such account.
11. WAIVER OF DAMAGE.
The Lessor shall not be liable for any damage or injury to any property
or person (including death) resulting from steam, gas, electricity, water, rain
or snow which may flow or leak from any part of the building of which the
demised premises are a part, or from any pipes, appliances or plumbing works of
the same, or from the street or subsurface, or from any other place, or from
interference with light or other incorporeal hereditaments or easements, or by
reason of the break or leakage or obstruction of the water or soil pipes, or any
other leakage in or about said premises, however caused, except if due to the
affirmative acts of the Lessor; nor for any damage or injury which may be
sustained as a result of the carelessness, negligence or improper conduct on the
part of the Lessee, or any other tenant, their agents, servants or employees.
12. CONSTRUCTION OF ADDITIONAL FACILITIES.
The Lessor, without liability of any kind to the Lessee, at any time,
may construct additional buildings and change, alter, remodel or remove any of
the improvements, or enlarge or reduce the parking area of the demised premises,
or alter, change or add to said premises, close off, enlarge or decrease the
size or change the location of any skylight, window, door or opening in or about
said premises, or said additional buildings, provided that, at all times, there
shall be provided a public entry way to said premises, and provided, further,
that the same does not interfere with Lessee's use of said premises and its
parking rights in any way whatsoever, and shall not disturb Lessee's reasonable
rights of ingress to and egress from the demised premises.
<PAGE> 8
13. LESSOR'S RIGHT OF ENTRY.
The Lessor, his agents and representatives, at all reasonable times,
may enter the demised premises for the purpose of (i) inspection thereof, (ii)
making repairs, replacements, alterations or additions to the same, without
imposing any obligation upon the Lessor hereunder, and (iii) exhibiting said
premises to prospective tenants, purchasers, or other persons.
14. REPAIRS.
The Lessor, at his sole cost and expense, shall maintain and keep in
good condition, the roof, exterior and supporting walls of the building housing
the demised premises, and the Lessee shall, at his sole cost and expense,
effectuate major maintenance and repairs on the heating system, electrical,
plumbing, sewer, water supply and any air-conditioning systems, except
compressor, and power plant for heating system within the demised premises. In
addition, the Lessee, at his sole cost and expense, whether the same shall be
the property of the Lessee or Lessor, shall promptly repair and at all times
maintain in good condition the interior of the demised premises, including any
office, and shall make all other repairs to the interior thereof, including
those necessary on the electrical fixtures, equipment, electrical installation,
plumbing and plumbing equipment, heating and air-conditioning equipment and
fixtures, machinery, hardware, interior painting and decorations of every kind,
all door and window screens, and replace all broken or damaged glass, including
window glass and plate glass. All such repairs and replacements shall be made
only by persons approved, in advance, by the Lessor.
15. STRUCTURAL CHANGES/ALTERATIONS.
The Lessee shall make no structural changes or major interior changes
or alterations to the demised premises, or to the building of which the demised
premises are a part, without the express written consent of the Lessor, which
consent shall not be unreasonably withheld.
<PAGE> 9
16. FIRE CLAUSE.
a. If the demised premises shall be destroyed or so injured by any
cause as to be unfit, in whole or in part, for occupancy, and such destruction
or injury could reasonably be repaired within sixty (60) days from the happening
of such destruction or injury, then Lessee shall not be entitled to surrender
possession of the demised premises, nor shall Lessee's liability to pay rent
under this Lease cease, without the mutual consent of the parties hereto, but in
case of any such destruction or injury, Lessor shall repair the same with all
reasonable speed and shall complete such repairs within sixty (60) days from the
happening of such damage or injury, and if, during such period, Lessee shall be
unable to use all or any portion of the demised premises, a proportionate
allowance shall be made to Lessee from the rent, corresponding to the time
during which and to the portion of the demised premises of which Lessee shall be
so deprived of the use on account thereof.
b. If such destruction or injury cannot reasonably be repaired within
sixty (60) days from the happening thereof, Lessor shall notify Lessee within
twenty (20) days after the happening of such destruction or injury whether or
not Lessor will repair or rebuild. If Lessor elects not to repair or rebuild,
this Lease shall be terminated. If Lessor shall elect to repair or rebuild,
Lessor shall specify the time within which such repairs or reconstruction will
be completed, and Lessee shall have the option, within ten (10) days after the
receipt of such notice, to elect either to terminate this Lease and further
liability hereunder or to extend the term of the Lease by a period of time
equivalent to the time from the happening of such destruction or injury until
the demised premises are restored to their former condition. In the event Lessee
elects to extend the term of this Lease, Lessor shall restore the demised
premises to their former condition within the time specified in the notice, and
Lessee shall not be liable to pay rent for the period from the time of such
destruction or injury until the demised premises are so restored to their former
<PAGE> 10
condition.
c. Both the Lessor and Lessee hereby waive and relinquish any and all
rights which each may have against the other on account of any claims for
damages resulting from a loss to property owned by the other, it being the sole
intention of the parties to eliminate the right of either party to a subrogation
of his own rights to his insurance company.
17. INSURANCE.
During the term of this Lease, and any renewal thereof, the Lessor
shall carry and maintain on the entire building of which the demised premises
are a part, in amounts sufficient, in the sole opinion of Lessor, to adequately
protect the interests of the Lessor and Lessee, and the Lessee shall pay to
Lessor, as additional rent, sixty percent (60%) of the annual premiums for, the
following types of insurance:
a. All inclusive fire and extended coverage insurance covering said
premises against loss or damage by fire and against loss or damage by other
risks now or hereafter embraced by "extended coverage", so-called, in amounts
sufficient, in the opinion of the Lessor, to prevent the Lessor or the Lessee
from becoming co-insurer under the terms of the applicable policies.
b. Comprehensive public liability insurance, including property damage,
insuring the Lessor and the Lessee against liability for injury to persons or
property occurring in or about said premises or arising out of the ownership,
maintenance, use or occupancy thereof.
c. Rent or rental value insurance against loss of rent or rental value
due to fire, including extended coverage endorsement, in an amount equal to the
annual rent for said premises, plus the estimated amount of real estate taxes
payable thereon.
All policies of insurance (except liability insurance) shall provide,
by endorsement, that any loss shall be payable to the Lessor, Lessee, or any
Mortgagee, as their respective interests may
<PAGE> 11
appear.
18. SIGNS, ETC.
Lessee shall not permit, allow or cause to be erected, installed,
maintained, painted or displayed on, in or at the demised premises, or any part
thereof, any exterior or interior signs, lettering, placards, announcements,
decoration, advertising media or advertising material of any kind whatsoever,
visible from the exterior of said premises, without the prior written approval
of the Lessor, provided, however, that, subject to compliance with all other
applicable provision hereof, Lessee may display merchandise and advertising
media within said premises. Lessee shall not permit, allow or cause to be used
in or at said premises any advertising media or device, such as phonographs,
radios, public address systems, sound production or reproduction devices,
mechanical or moving display devices, motion pictures, television devices,
excessively bright lights, changing, flashing, flickering or moving lights or
lighting devices, or any similar devices, the effect of which shall be visible
or audible from the exterior of said premises.
In all respects, the Lessee shall comply with any and all applicable
rules and regulations concerning the erection and maintenance of signs within
the Town of Brookfield, and shall pay for all costs connected with the obtaining
of any necessary permits relative thereto.
19. ACCEPTANCE OF PREMISES.
The Lessee shall examine the demised premises before taking possession,
and the Lessee's entry into possession shall constitute conclusive evidence
that, as of the date thereof, said premises were in good order and satisfactory
condition.
20. MAINTENANCE OF PREMISES AND ABUTTING AREAS.
Lessee shall not permit, allow or cause any act or deed to be performed
or any practice to be adopted or followed in or about the demised premises which
shall cause or be likely to cause injury
<PAGE> 12
or damage to any person or to said premises or to the sidewalks and pavements
adjoining the building of which the demised premises are a part. Lessee, at all
times, shall keep said demised premises, and its appurtenances, in a neat and
orderly condition and clean and free from rubbish, dirt and other miscellaneous
items and accumulations.
21. NUISANCES.
The Lessee shall not permit, allow or cause any noxious or disturbing
odors, fumes, gas, noise or any smoke, dust, steam or vapors, or conduct sound
or cause vibration to originate in or to be emitted from the demised premises.
The Lessee will be manufacturing and bottling inks on the premises.
22. RODENTS, ETC.
The Lessee shall keep the demised premises clear and free of rodents,
bugs, vermin and, at the request of the Lessor, Lessee shall participate and
cooperate in carrying out any program of extermination that Lessor may
reasonably direct, and the Lessee shall bear the reasonable cost thereof,
regardless of whether or not any portion of the demised premises shall have been
sublet by Lessee.
23. HOUSEKEEPING.
The Lessee shall not use or permit the use of any portion of the
demised premises as sleeping or living quarters or as lodging rooms, or keep or
harbor therein any live animals, fish or birds, or use the same for any illegal
purpose. Lessee shall not permit, allow or cause any sinks, toilets or urinals
in said premises to be used for any purpose except that for which they were
designed and installed, and the expense of repairing any breakage or damage or
removal of any stoppage resulting from a contrary use thereof shall be paid by
Lessee. Lessee shall maintain the windows in a clean, neat and orderly
condition, and keep the glass thereof clean, and shall store all trash, rubbish
and
<PAGE> 13
garbage within said premises, and shall provide for the prompt and regular
removal thereof for disposal outside the area of the demised premises or as
directed by the Lessor. Lessee shall not burn or otherwise dispose of any trash,
waste, rubbish or garbage in or about the demised premises. Lessee agrees to
permit no waste of the property, but on the contrary, to take good care of same
and, upon termination of this Lease, to surrender possession of same, without
notice, in as good condition as at the commencement of the term or as they may
be put in during the term, as reasonable use thereof will permit. Lessee shall
have the right to place and maintain an outside dumpster.
24. OPTION TO RENEW.
The Lessee shall have the right and option of extending this Lease for
one (1) further successive term of five (5) years, subject to all the terms,
covenants and conditions of this Lease, upon Lessee notifying Lessor, in
writing, of his election to renew, at least six (6) months prior to the
expiration of the original term of this Lease.
However, during each of said renewal terms, Lessee agrees to pay to
Lessor an annual rental as follows:
A. Commencing September 1, 2003 through August 31, 2004, the fixed
minimum annual rental shall be SIXTY-SIX THOUSAND AND 00/00 ($66,000.00)
DOLLARS, payable in monthly installments of FIVE THOUSAND FIVE HUNDRED AND 00/00
($5,500.00) DOLLARS.
B. Commencing September 1, 2004 and annually thereafter, the fixed
minimum annual rental shall be computed as follows:
a. "The United States Bureau of Labor Statistics Price Items For The
City Of New York", hereinafter Index For All referred to as the "Index", shall
be used to determine the annual rent payable to Lessor during the renewal terms.
<PAGE> 14
b. The Index for the average first six (6) months of the
original term or first renewal term of this Lease, as the case may be, shall be
used as a denominator; the Index for the average last six (6) months of such
original term or first renewal term shall be used as a numerator; this fraction
shall be multiplied by the fixed minimum annual rent paid during the term being
renewed. The resulting amount shall be the amount of the annual rent payable
during the renewal term in question, except that it shall not be less than the
fixed minimum annual rent paid during the term being renewed.
25. SECURITY DEPOSIT.
Lessee, upon or prior to the execution hereof, has deposited with the
Lessor the sum of FOUR THOUSAND FIVE HUNDRED DOLLARS ($4,500.00), receipt of
which is hereby acknowledged by the Lessor, as security for the faithful
performance and observance by Lessee of the terms, provisions and conditions of
this Lease. It is agreed that in the event Lessee defaults in respect of any of
the terms, provisions and conditions of this Lease, including, but not limited
to, the payment of minimum and/or additional rent, Lessor may use, apply or
retain the whole or any part of the security so deposited to the extent required
for the payment of any minimum and/or additional rent or any other sum as to
which Lessee is in default, or for any sum which Lessor may expend or may be
required to expend by reason of Lessee's default in respect of any of the terms,
covenants and conditions of this Lease, including, but not limited to, any
damages or deficiency in the re-letting of the demised premises, whether such
damages or deficiency accrued before or after summary proceedings or other
re-entry by Lessor.
<PAGE> 15
In the event that Lessee shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the security
shall be returned to Lessee at the expiration of the term of this Lease, or any
renewal thereof, and after delivery of entire possession of the demised premises
to the Lessor.
26. LESSOR'S COVENANTS.
Lessor covenants and warrants that he is the owner of the demised
premises and the property of which they are a part, has full right and authority
to execute and perform this Lease and to grant the estate demised herein, and
covenants that the Lessee, on performance of his obligations hereunder, shall
peaceably and quietly hold and enjoy the demised premises throughout the term of
this Lease or any renewal thereof.
27. EMINENT DOMAIN.
The parties hereto agree that should the demised premises, or any
substantial part thereof, be taken or condemned by a competent authority for
public or quasi-public use, then, and in such event, this Lease shall cease and
terminate and come to an end as of the time of such actual taking, and the rent
shall be paid up to such time of actual taking, and, then and thenceforth, all
obligations of the parties hereunder, the one to the other, shall cease and
terminate. It is expressly agreed that the Lessee shall not be entitled to any
part or award by way of condemnation appeal therefrom, or settlement which may
be obtained by the Lessor as a result of such taking, except any award for
Lessee's fixtures and equipment, nor shall the Lessee have any right to appear
as a party in any condemnation proceeding or appeal therefrom. Nothing herein
contained, however, shall preclude the Lessee from seeking a separate award for
Lessee's relocation expenses and the like.
<PAGE> 16
28. CONDUCT OF LESSEE.
Lessee, at all times, shall fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority having jurisdiction
of the demised premises, which shall relate to the cleanliness, safety,
occupation and use of said premises, and the nature, character and manner of
operation of the business conducted in or at said premises, or the adoption or
use of any sales promotion devices or practices as shall attempt to mislead or
deceive the public, or which, directly or indirectly, would attempt to detract
from or impair the reputation or dignity of said business, said premises or the
general reputation or dignity of any business of others conducted in the entire
building of which the demised premises are a part.
29. ASSIGNMENT AND SUBLETTING.
Lessee shall not assign, or in any manner transfer, this Lease or any
estate, interest or benefit therein, or sublet the demised premises, or any part
or parts thereof, or permit the use of the same, or any part thereof, by anyone
other than the Lessee, without the prior written consent of the Lessor, which
will not be unreasonably withheld. Consent by the Lessor to any assignment or
transfer of interest under this Lease or subletting of said premises, or any
part thereof, shall be limited to the instance stated, and such written consent
shall not constitute consent to any other assignment, transfer of interest or
subletting, nor shall such consent relieve the Lessee of any of his obligations
hereunder.
30. BANKRUPTCY.
If, at any time during the term hereby demised, a petition shall be
filed in bankruptcy by or against the Lessee, or if the Lessee shall make an
assignment for the benefit of creditors, or a receiver shall be appointed over
the assets of the Lessee, whether by voluntary or involuntary act, or if an
attachment, lien or execution shall be levied upon the assets of the Lessee
located in the
<PAGE> 17
demised premises, and such attachment shall not be released within thirty (30)
days after levy, then, upon the happening of any of the aforesaid events and at
the option of the Lessor, this Lease shall expire and terminate with the same
force and effect as if the time of the happening of any such event were the date
fixed herein for the expiration of the term of this Lease. It is further
stipulated and agreed that in the event of the termination of the term of this
Lease by the happening of any such events, Lessor shall forthwith, upon such
termination, and any other provision of this Lease to the contrary
notwithstanding, become entitled to recover as and for liquidated damages caused
by such breach of the provisions of this Lease an amount equal to the difference
between the then cash value of the rent reserved hereunder for the unexpired
portion of the term hereby demised and the then cash rental value of the demised
premises for such unexpired portion of the term hereby demised, unless the
statute which governs or shall govern the proceeding in which such damages are
to be proved limits or shall limit the amount of such claim capable of being so
proved, in which case, the Lessor shall be entitled to prove as and for
liquidated damages an amount equal to that allowed by and under any such
statute. The provisions of this paragraph shall be without prejudice to the
Lessor's right to prove, in full, damages for rent accrued prior to the
termination of this Lease, but not paid. The provisions of this Lease shall be
without prejudice to any rights given to Lessor by any pertinent statute to
prove for any amounts allowed thereby.
In making any such computation, the then cash rental value of the
demised premises shall be deemed, prima facie, to be the rental realized upon
any reletting, if such reletting can be accomplished by the Lessor within a
reasonable time after such termination of this Lease, and the then present cash
value of the future rents hereunder reserved to the Lessor for the unexpired
portion of the term hereby demised shall be deemed to be such sum, invested at
the rate of six percent (6%) simple interest, as will produce the future rent
over the period of time in question.
<PAGE> 18
31. LESSEE'S DEFAULT.
The happening of any one or more of the following listed events
(hereinafter referred to as "Event of Default"), shall constitute a breach of
this Lease on the part of the Lessee:
a. The failure of the Lessee to pay any rent payable hereunder,
including, but not limited to, any additional rent or payments of money required
hereunder, and the continued failure to pay the same for ten (10) days or more
after mailing of written notice of such failure by Lessor; and
b. The failure of the Lessee to fully and promptly perform any act
required of him in the performance of this Lease or to otherwise comply with any
term or provision hereof, within a reasonable time after mailing of written
notice of such failure by Lessor.
Upon the happening of any Event of Default, Lessor, if he shall elect,
may (i) collect each installment of rental hereunder as and when the same
matures, or (ii) Lessor, or any other person by his order, may re-enter the
demised premises without process of law and without being liable to any
prosecution therefor, and may either elect to terminate this Lease, or if the
Lessor desires not to terminate this Lease but to terminate the right to
possession and occupancy and relet the demised premises to any person, firm or
corporation, as the agent of the Lessee or otherwise, for whatever rent he shall
obtain, apply the avails of such reletting first to the payment of such expenses
as the Lessor may incur in the re-entering and reletting of the same and then to
the payment of the rent due hereunder and the fulfillment of Lessee's covenants,
and pay over to the Lessee the balance, if any; and in case of its deficiency,
the Lessee shall remain liable therefor. Lessee agrees to pay a reasonable
attorney's fee and all costs, if it becomes necessary for Lessor to employ an
attorney to collect any of the rent or enforce any of the provisions of this
Lease, and any other cost of retaking or reletting said premises, including, but
not limited to, the payment of a commission for brokerage.
<PAGE> 19
32. ARBITRATION.
Any and all disputes, disagreements, claims or questions arising out of
this Lease or from the breach hereof shall be submitted to arbitration in
Brookfield, Connecticut, pursuant to and in accordance with the rules and
procedures of the American Arbitration Association then appertaining, and any
judgment upon the award rendered may be entered in the Court of the forum, state
or federal, having jurisdiction. It is mutually agreed that the decision of the
arbitrators shall be a condition precedent to any right of legal action that
either party may have against the other.
33. WAIVER OF SUMMARY PROCESS.
And it is further agreed between the parties hereto that whenever this
Lease shall terminate, either by lapse of time or by virtue of any of the
express stipulations herein, the Lessee waives all right to any notice to quit
possession, as prescribed by the statute relating to summary process.
34. HOLDING OVER.
And it is further agreed that in case the Lessee shall, with or without
the written consent of the Lessor endorsed hereon or on a duplicate hereof, at
any time hold over the demised premises beyond the period herein specified as
the termination of this Lease, then the Lessee shall hold said premises upon the
same terms and under the same stipulations and agreements as are in this Lease
contained, and no holding over by the Lessee shall operate to renew this Lease,
nor to create any tenancy.
35. NOTICES.
Any and all notices or the exercise of any option rights called for or
required by any provision of this Lease, unless specifically described herein,
shall be in writing, and shall be delivered to the respective parties by
certified mail, return receipt requested, at the following addresses:
<PAGE> 20
c. To the Lessor: Modern Realty Associates
c/o Thomas G. Taylor
Tower Realty Corp.
P. O. Box 5242
Brookfield, CT 06804
B. To the Lessee: Trident International, Inc.
c/o J. Leo Gagne
1114 Federal Road
Brookfield, CT 06804
Such addresses may be changed by either party by notifying the other
party in the manner required for notice.
36. WAIVER.
The failure of the Lessor to insist upon strict performance of any of
the covenants or conditions of this Lease, or to exercise any option herein
conferred to any one or more instance, shall not be construed as a waiver or
relinquishment of any such covenants, conditions or options, but the same shall
be and remain in full force and effect.
37. SUBORDINATION.
It is further agreed that this Lease shall not be a lien against the
demised premises in respect to any mortgages that are now or hereafter may be
placed against said premises, and the recording of such mortgage or mortgages
shall have preference and precedence, regardless of the date of record. Lessor
will, however, attempt, in good faith, to secure a non-disturbance agreement
from any future mortgagee. Lessee further agrees to execute any document
requested by Lessor to evidence or further effectuate this provision of this
Lease, and failing such execution, Lessee shall be liable to Lessor for all
damages, including reasonable attorney's fees, incurred by Lessor as a result of
such refusal. The term "mortgage" shall include each and every form and type of
security instrument. It is further understood and agreed that reference to the
execution of an additional
<PAGE> 21
instrument or evidence of subordination is not necessary for this subordination
to be effective.
38. BROKER.
The Lessee represents, to the best of its knowledge, that Tower Realty
Corp. was the procuring cause of this Lease and that no other brokers or agents
participated in bringing it about, and the Lessor, in reliance thereon, hereby
agrees to pay a commission for such services in an amount and in the manner
agreed upon between said broker and the Lessor.
39. BINDING EFFECT.
This Lease, together with any and all addenda or amendments hereto,
shall inure to the benefit of the respective parties hereto, their heirs,
personal representatives, successors or assigns (provided that any assignment by
the Lessee shall be effective only if made in strict accordance with the terms
of this Lease).
Signature page follows.
<PAGE> 22
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
on the day and year first above written.
LESSOR:
/s/ Thomas G. Taylor
----------------------------------------
THOMAS G. TAYLOR
/s/ Gordon E. Taylor
----------------------------------------
GORDON E. TAYLOR
/s/ John D. Gervasoni
----------------------------------------
JOHN D. GERVASONI
all d/b/a Modern Realty Associates
LESSEE:
TRIDENT INTERNATIONAL, INC.
By: /s/ J. Leo Gagne
------------------------------------
J. Leo Gagne, Vice President
duly authorized
This lease is subject to completion of the following items:
1. Final zoning approval by Brookfield Zoning Department
2. Satisfactory removal of underground oil tank and installation of double wall,
above ground oil tank.
3. Clean up of yard to Lessee's satisfaction.
4. Replacement of overhead door at Lessor's expense.
5. Repair of roof at Lessor's expense.
Lease is cancelable if not completed within 90 days.
<PAGE> 1
EXHIBIT 21.1
SCHEDULE OF SUBSIDIARIES OF THE REGISTRANT
1. Trident Overseas, F.S.C.
P.O. Box 309420
Charlotte Amalie, V.L 00803-9420
(809) 775-8850
2. Trident International, Inc.
1114 Federal Road
Brookfield, CT 06084-1140
(203) 740-9333
3. Trident Printing (Europe) Limited
Bracetown Business Park
Clonee, Co. Meath
Ireland
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated October 29, 1998, in this Form 10-K, into the Company's previously
filed Registration Statements File numbers 333-10745 and 333-22477.
Arthur Andersen LLP
Hartford, Connecticut
December 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated financial statements for the period ended September 30, 1998 and is
qualified in its entirety by references to such financial statements. Amounts
inapplicable or not disclosed as a separate line on the Condensed Consolidated
Balance Sheets or Condensed Consolidated Statements of Operations are reported
as 0 herein.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,887
<SECURITIES> 14,541
<RECEIVABLES> 5,583
<ALLOWANCES> 300
<INVENTORY> 2,103
<CURRENT-ASSETS> 29,354
<PP&E> 3,892
<DEPRECIATION> 1,354
<TOTAL-ASSETS> 43,340
<CURRENT-LIABILITIES> 2,751
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 40,517
<TOTAL-LIABILITY-AND-EQUITY> 43,340
<SALES> 32,832
<TOTAL-REVENUES> 32,832
<CGS> 11,914
<TOTAL-COSTS> 10,731
<OTHER-EXPENSES> 207
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,118
<INCOME-TAX> 4,052
<INCOME-CONTINUING> 7,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,066
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.05
</TABLE>
