<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to .
Commission file number: 0-21121
TRANSACT TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-1456680
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
7 LASER LANE, WALLINGFORD, CT 06492
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-269-1198
</TABLE>
Securities registered pursuant to Section 12 (b) of the Act:
NONE
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class
COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any other amendment
to this Form 10-K. [ ]
As of MARCH 20, 1998 the aggregate market value of the registrant's issued and
outstanding voting stock held by non-affiliates of the registrant was
$62,800,000.
As of MARCH 20, 1998 the registrant had outstanding 6,307,500 shares of common
stock, $0.01 par value.
<PAGE> 2
PART I
GENERAL
TransAct Technologies Incorporated ("TransAct" or the "Company") designs,
develops, manufactures and markets transaction based printers and related
products under the ITHACA and MAGNETEC brand names. The Company's printers are
used to provide transaction records such as receipts, tickets, coupons, register
journals and other documents. The Company focuses on four vertical markets:
point-of-sale ("POS") (from which the Company derived approximately 40% of its
net sales in the year ended December 31, 1997); gaming and lottery
(approximately 40% of net sales); kiosk (approximately 11% of net sales); and
financial services (approximately 9% of net sales). The Company sells its
products directly to end users, original equipment manufacturers ("OEMs"), value
added resellers ("VARs") and selected distributors, primarily in the United
States, Canada and Europe. TransAct has two operating facilities located in
Wallingford, Connecticut and Ithaca, New York, and five sales offices, four
located in the United States and one in the United Kingdom.
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS
In November 1995, the Board of Directors of Tridex Corporation ("Tridex")
approved a plan to combine the business operations of two of its wholly-owned
subsidiaries, Magnetec Corporation ("Magnetec") and Ithaca Peripherals
Incorporated ("Ithaca"), under unified management. TransAct was incorporated in
Delaware on June 17, 1996 as a wholly-owned subsidiary of Tridex. Following the
incorporation, Tridex, TransAct, Magnetec and Ithaca entered into a Plan of
Reorganization, pursuant to which: (i) Ithaca merged into Magnetec; (ii)
TransAct transferred to Tridex certain assets of Magnetec used in manufacturing
a printer ribbon product line; (iii) TransAct issued 5,400,000 shares of its
common stock to Tridex in exchange for all the outstanding shares of Magnetec;
(iv) TransAct sold in an initial public offering 1,322,500 shares or
approximately 19.7% of its common stock; (v) TransAct repaid $8,500,000 of
intercompany indebtedness to Tridex; (vi) Tridex applied to the Internal Revenue
Service (the "IRS") for a ruling that the distribution of the 5,400,000 shares
of TransAct owned by Tridex to Tridex stockholders (the "Distribution") would
constitute a tax-free reorganization for federal income tax purposes; and (vii)
Tridex agreed to effect the Distribution promptly after receipt of a favorable
ruling from the IRS and the satisfaction of certain other conditions.
On August 22, 1996, the Company sold 1,150,000 shares of its common stock
at a price of $8.50 per share in an initial public offering (the "Offering"). On
September 18, 1996, the Company sold an additional 172,500 shares upon exercise
of the underwriters' over-allotment option. Net proceeds from the Offering
(including the exercise of the underwriters' over-allotment option) were
approximately $9 million after payment of approximately $2.3 million of Offering
expenses.
On February 12, 1997, Tridex received a favorable ruling from the IRS
confirming the tax-free nature of the Distribution. On March 31, 1997 Tridex
distributed its 5,400,000 shares, or 80.3%, of TransAct's common stock, pro rata
to persons who were Tridex stockholders of record on March 14, 1997, on the
basis of approximately one share of TransAct for each share of Tridex. Upon
completion of the Distribution, Tridex no longer owned any shares of TransAct
capital stock.
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(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
TransAct presently operates in one industry segment, the design,
development, manufacture and marketing of printers and printer peripheral
products.
(C) NARRATIVE DESCRIPTION OF BUSINESS
(i) PRINCIPAL PRODUCTS AND SERVICES
TransAct designs, develops, manufactures and markets customizable and
custom dot matrix and thermal printers for applications requiring up to 60
character columns in each of its four vertical markets: POS, gaming and lottery,
kiosk and financial services. The Company also sells an 80 column laser printer
for kiosk applications. The Company's customizable products include several
series of printers which offer customers the ability to choose from a variety of
features and functions. Options typically include paper cutting devices, paper
handling capacities and number of print stations. In addition to its
customizable printers, TransAct manufactures custom printers for certain OEM
customers. In collaboration with these customers, the Company provides
engineering and manufacturing expertise for the design and development of
specialized printers.
The Company also manufactures and sells document transport mechanisms
which deliver the finished printed output to the consumer in unattended
applications, such as ATMs and kiosks. The Company also offers printer ribbons,
paper and replacement parts for all of its products.
The Company provides customers with telephone sales and technical
support, a personal account representative for orders, shipping and general
information and expedited shipping for orders of its customizable and custom
products. Technical and sales support personnel receive training in all of the
Company's products and services manufactured at their facility. The Company's
printers generally carry a one- or two-year limited warranty; extended
warranties are available for purchase on selected printers to supplement the
original warranty. The Company's costs to provide services and parts required
under warranties historically have not been material.
(ii) STATUS OF PRODUCT REQUIRING MATERIAL INVESTMENT
None.
(iii) SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal materials used in manufacturing are copper wire, magnetic
metals, injection molded plastic parts, formed metal parts and electronic
components. Although the Company could experience temporary disruption if
certain suppliers ceased doing business with the Company, the Company's
requirements generally are available from a number of sources. However, the
Company is dependent upon Okidata, Division of Oki America, Inc. ("Okidata") for
a printer component kit consisting of a printhead, control board and carriage
(the "Oki Kit"), which is used in all of the Company's ITHACA brand impact
printers. The loss of the supply of Oki Kits would have a material adverse
effect on the Company. TransAct has a supply agreement with Okidata to provide
Oki Kits until May 2001. Pricing for the Oki Kits was fixed through August 1997;
the Company has placed orders since August 1997 at the prices then in effect,
which orders have been accepted by Okidata. The Company and Okidata are
currently negotiating for future pricing. TransAct believes its relations with
Okidata are good and has received no indication that the supply agreement will
not be renewed beyond the expiration of the current contract. TransAct cannot be
certain, however, that the supply agreement will be renewed, or if renewed, that
the terms will be as favorable as those under the current contract.
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(iv) PATENTS AND PROPRIETARY INFORMATION
The Company owns several patents, one of which it considers material.
That patent covers an automated paper cut-off device, which is a feature offered
on certain of the Company's POS printers. The Company regards certain
manufacturing processes and designs to be proprietary and attempts to protect
them through employee and third-party nondisclosure agreements and similar
means. It may be possible for unauthorized third parties to copy certain
portions of the Company's products or to reverse engineer or otherwise obtain
and use, to the Company's detriment, information that the Company regards as
proprietary. Moreover, the laws of some foreign countries do not afford the same
protection to the Company's proprietary rights as do United States laws. There
can be no assurance that legal protections relied upon by the Company to protect
its proprietary position will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to the Company's technologies.
(v), (vi) SEASONALITY AND PRACTICES RELATING TO WORKING CAPITAL ITEMS
Retailers typically reduce purchases of new POS equipment in the fourth
quarter, due to the increased volume of consumer transactions in that period,
and the Company's sales of printers in the POS market historically have
increased in the third quarter and decreased in the fourth quarter. However, the
Company has not experienced material seasonality in its total net sales, due to
offsetting sales in other markets.
(vii) CERTAIN CUSTOMERS
The Company has an OEM purchase agreement with GTECH Corporation
("GTECH") to provide on-line lottery printers and spare parts, at prices to be
negotiated, through October 2001. Sales to GTECH accounted for approximately
29.1%, 16.0% and 12.4% of net sales for the years ended December 31, 1997,
December 31, 1996, and the nine months ended December 31, 1995, respectively.
(viii) BACKLOG
The Company's backlog of firm orders was approximately $26,700,000 as of
March 13, 1998 and $39,700,000 as of March 22, 1997. Based on customers' current
delivery requirements, TransAct expects to fill approximately $18,200,000 of its
backlog within the current fiscal year, and the remainder within the next fiscal
year.
(ix) MATERIAL PORTION OF BUSINESS SUBJECT TO RENEGOTIATION OF PROFITS
None.
(x) COMPETITION
The market for transaction based printers is extremely competitive, and
the Company expects such competition to intensify in the future. The Company
competes with a number of companies, many of which have greater financial,
technical and marketing resources than the Company. TransAct believes its
ability to compete successfully depends on a number of factors both within and
outside its control, including durability, reliability, quality, design
capability, product customization, price, customer support, success in
developing new products, manufacturing expertise and capacity, supply of
component parts and materials, strategic relationships with suppliers, the
timing of new product introductions by the Company and its competitors, general
market and economic conditions and, in some cases, the uniqueness of its
products. Two of the Company's competitors, Epson America, Inc. and Star
Micronics America, Inc. together control approximately 50% to 60% of the United
States market for POS printers, a market in which the Company's strategy calls
for increased market share. Other principal competitors in the POS market
include Axiohm Transaction Solutions (a recent merger of Axiohm Incorporated and
DH Technology Incorporated) and Citizen -- CBM America Corporation. Certain
competitors of the Company have lower costs, attributable to higher volume
production and off-shore manufacturing locations, and offer lower prices than
the Company from time to time.
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In the gaming and lottery, financial services and kiosk markets, no
single supplier holds a dominant position. Certain of the Company's products
sold for gaming and lottery, kiosk and financial service applications compete
based upon the Company's ability to provide highly specialized products, custom
engineering and ongoing technical support.
The Company's strategy for competing in its markets is to continue to
develop new products and product line extensions, to increase its geographic
market penetration, and to take advantage of strategic relationships. Although
the Company has historically maintained or increased sales with this strategy
and believes that its products, operations and relationships provide a
competitive foundation, there can be no assurance that the Company will compete
successfully in the future.
(xi) RESEARCH AND DEVELOPMENT ACTIVITIES
The Company spent approximately $2,773,000 in the year ended December 31,
1997, $2,467,000 in the year ended December 31, 1996 and $1,533,000 in the nine
months ended December 31, 1995 on engineering, design and product development
efforts in connection with specialized engineering and design to introduce new
products and to customize existing products.
(xii) ENVIRONMENT
The Company is not aware of any material non-compliance with federal,
state and local provisions which have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment.
(xiii) EMPLOYEES
As of February 21, 1998, TransAct Technologies and its subsidiaries
employed 256 persons, of which 226 were full-time and 30 were temporary
employees. None of the Company's employees are unionized and the Company
considers its relationships with its employees to be good.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
The Company has foreign operations primarily from Ithaca Peripherals
Ltd., a wholly-owned subsidiary located in the United Kingdom, which had sales
to its customers of $4,204,000, $397,000 and $332,000 in the year ended December
31, 1997, December 31, 1996 and the nine months ended December 31, 1995,
respectively. The Company had export sales to its customers from its domestic
operations of approximately $5,618,000 in the year ended December 31, 1997,
$1,622,000 in the year ended December 31, 1996 and $1,211,000 in the nine months
ended December 31, 1995.
(E) EXECUTIVE OFFICERS OF THE REGISTRANT AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Name Age Position
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas R. Schwarz 61 Chairman of the Board
Bart C. Shuldman 40 President, Chief Executive Officer and Director
Richard L. Cote 56 Executive Vice President, Chief Financial Officer, Treasurer,
Secretary and Director
David A. Ritchie 38 Executive Vice President - Sales and Marketing
Lucy H. Staley 46 Senior Vice President - General Manager (Ithaca, NY facility)
John Cygielnik 52 Senior Vice President - General Manager (Wallingford, CT facility)
Michael S. Kumpf 47 Senior Vice President - Engineering
</TABLE>
5
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THOMAS R. SCHWARZ, Chairman of the Board, has been a Director of the
Company since its formation in June 1996. Mr. Schwarz was Chairman and Chief
Executive Officer of Grossman's Inc., a retailer of building materials, from
1990 to 1994. Mr. Schwarz is a Director of Tridex, Foilmark, Inc.,
Lebhar-Friedman Publishing Company and A&W Root Beer.
BART C. SHULDMAN has been Chief Executive Officer, President and a
Director of the Company since its formation in June 1996. He joined Magnetec as
Vice President of Sales and Marketing in April 1993 and has served as President
of Magnetec since August 1993 and President of the combined operations of Ithaca
and Magnetec since December 1995. Prior to joining Magnetec, he held several
management positions with Mars Electronics International, a division of Mars,
Incorporated from 1989 to 1993. Most recently, he was Business Manager for the
North American Amusement, Gaming and Lottery operations.
RICHARD L. COTE has been Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of the Company since its formation
in June 1996. Prior thereto, he served as Senior Vice President and Chief
Financial Officer of Tridex since September 1993. Mr. Cote joined Tridex as a
Vice President in June 1993. From October 1991 to March 1993, he was a
self-employed management consultant.
DAVID A. RITCHIE, was appointed Executive Vice President of Sales and
Marketing in July 1997, and served as Vice President of Sales at TransAct's
Ithaca division from March 1996 to July 1997. Mr. Ritchie joined the Company in
April 1995 as Southeast National Sales Manger. Prior to joining TransAct's
Ithaca division, Mr. Ritchie held several sales management positions including
Regional Sales Manager at Medintell Systems Corporation form March 1994 to April
1995 and Manager of Distribution Channels at AT&T from January 1992 to February
1994.
LUCY H. STALEY, Senior Vice President-General Manager (Ithaca, NY
facility) since June 1996, served as a Vice President of Ithaca since she joined
the Company in 1984.
JOHN CYGIELNIK, Senior Vice President-General Manager (Wallingford, CT
facility) since June 1996, joined Magnetec as Controller in 1992, and has served
as Vice President of Finance of Magnetec since 1993. From 1976 until 1992, Mr.
Cygielnik was employed by Data General Corporation, a computer hardware
manufacturer, where he served in various positions, most recently as Controller
for Manufacturing and Field Service Operations.
MICHAEL S. KUMPF, Senior Vice President-Engineering since June 1996,
served as Vice President of Engineering of Ithaca since he joined the Company in
1991.
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ITEM 2. DESCRIPTION OF PROPERTIES.
The Company's operations are currently conducted at the facilities
described below:
<TABLE>
<CAPTION>
Size Owned or Lease Expiration
Location Operations Conducted (Approx. Sq. Ft.) Leased Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wallingford, Connecticut Manufacturing facility and 49,000 Leased March 31, 2008
executive offices
Ithaca, New York Manufacturing facility 59,000 Leased June 30, 2007
Georgia (2), New Jersey, New Five (5) regional sales 1,500 Leased Various
York and the United Kingdom offices
</TABLE>
The Company believes that its facilities generally are in good condition,
adequately maintained and suitable for their present and currently contemplated
uses.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the last
quarter of the year covered by this report.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The Company's common stock is traded on the NASDAQ National Market under
the symbol TACT. As of March 4, 1998, there were 1,171 holders of record of the
common stock. The Company completed its initial public offering in the third
quarter of 1996. The high and low prices of the common stock reported during
each quarter of the years ended December 31, 1997 and December 31, 1996, since
the date of the Offering, were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
--------------------------- ---------------------------
High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First Quarter 15 -1/2 10 N/A N/A
Second Quarter 14 10 -3/4 N/A N/A
Third Quarter 20 13 -1/2 10-1/4 8
Fourth Quarter 20 -1/4 10 13 3/8 9-1/4
</TABLE>
No dividends on the common stock have been declared and the Company does
not anticipate declaring dividends in the foreseeable future. The Company's
credit agreement with Fleet National Bank restricts the payment of cash
dividends for the term of the agreement.
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ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
---------------------------- ---------------------------- -----------------------
December 31, December 31, December 31, December 31, April 1, April 2,
1997 1996 1995 1994 1995 1994
------------ ----------- ------------ ------------ --------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales $58,400 $42,134 $25,497 $25,426 $33,362 $23,798
Gross profit 18,173 13,933 7,968 8,391 11,013 8,213
Operating income 7,831 5,233 1,579 3,030 3,705 1,723
Net income 4,893 3,340 916 1,883 2,304 1,093
Earnings per share:
Basic 0.72 0.57 0.17 0.35 0.43 0.20
Diluted 0.71 0.57 0.17 0.35 0.43 0.20
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, April 1, April 2,
1997 1996 1995 1994 1995 1994
------------ ----------- ------------ ------------ --------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $24,699 $20,784 $15,969 $14,392 $15,358 $13,916
Shareholders' equity 17,903 14,407 - - - -
Tridex investment in the
Company - - 11,645 10,591 11,280 10,839
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION.
Because the Company was wholly-owned by Tridex until August 22, 1996, the
Selected Financial Data which appear in Item 6 and the Consolidated Financial
Statements which appear in Item 8 of this report with respect to periods prior
to the year ended December 31, 1997 may not necessarily reflect the results of
operations or financial position of the Company or what the results of
operations would have been if the Company had been a stand alone entity during
the periods presented. This discussion should be read in conjunction with those
Consolidated Financial Statements and notes thereto. See Note 1 of Notes to
Consolidated Financial Statements (Basis of Presentation).
(A) RESULTS OF OPERATIONS
Certain statements included in this Management's Discussion and Analysis
of the Results of Operations and Financial Condition which are not historical
facts may be deemed to contain forward looking statements with respect to events
the occurrence of which involves risks and uncertainties, including, without
limitation, the Company's expectation regarding gross profit, operating income
and capital expenditures.
IMPACT OF THE YEAR 2000 ISSUE. The Year 2000 Issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
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The Company's products and key financial and operating systems are being
reviewed and, where required, detailed plans have been or are being developed
and implemented on a schedule intended to permit the Company's computer systems
and products to continue to function properly. The Company presently believes
that with modifications to existing software and conversions to new software,
the Year 2000 Issue can be mitigated. However, if such modifications and
conversions are not made, or are not completed timely, the Year 2000 Issue could
have a material impact on the operations of the Company. Furthermore, there can
be no guarantee that the systems of other companies on which the Company's
system rely will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have an material adverse effect on the Company. Management does not expect
costs associated with the Year 2000 Issue to have a material adverse impact on
the Company's financial position, results of operations or cash flows.
(i) YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
NET SALES. Net sales into each of the Company's four vertical markets for
the current and prior year were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
(In thousands) December 31, 1997 December 31, 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Point of sale $23,342 40.0 % $21,414 50.8 %
Gaming and lottery 23,584 40.4 12,217 29.0
Kiosk 6,349 10.8 3,379 8.0
Financial services 5,125 8.8 5,124 12.2
------------- -------- -- ----------- ---------- --
$58,400 100.0 % $42,134 100.0 %
======================== =========================
</TABLE>
Net sales for the year ended December 31, 1997 increased $16,266,000, or
39%, to $58,400,000 from $42,134,000 in the prior year, substantially due to
increased shipments into the gaming and lottery market. Shipments of the
Company's on-line lottery printers increased approximately $10,200,000, to
approximately $17,000,000, or 29% of net sales, in the current year, from
approximately $6,800,000, or 16%, in the prior year. Additionally, shipments of
the Company's gaming printers for use in video lottery terminals increased
approximately $1,800,000 from the prior year. Sales into the kiosk market
increased by approximately $2,970,000, or 88%, substantially due to increased
shipments of the Company's thermal kiosk printers. Shipments of the Company's
financial services printers during 1997 were essentially unchanged from 1996.
Sales of the Company's POS printers during 1997 increased approximately
$1,928,000, or 9%, from 1996 due largely to an increase in printer shipments in
to the international POS market, largely offset by a decline in domestic POS
printer shipments. The Company's international sales during 1997 were
$9,822,000, or 17% of net sales, compared to $2,019,000, or 5% of net sales in
the prior year.
GROSS PROFIT. Gross profit increased $4,240,000, or 30%, to $18,173,000
from $13,933,000 in the prior year due primarily to the higher volume of sales.
The gross margin declined to 31.1% from 33.1%, due primarily to a larger
proportion of printer sales at lower average selling prices resulting from
volume discount pricing, particularly in the gaming and lottery market. The
Company expects that its gross margin will remain relatively stable. Operating
income as a percentage of net sales has increased (see "Operating Income"
below).
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ENGINEERING AND PRODUCT DEVELOPMENT. Engineering, design and product
development costs increased $306,000, or 12%, to $2,773,000 from $2,467,000 for
the prior year, but decreased as a percentage of net sales to 4.7% from 5.9%.
This increase was due primarily to increased product development and design
costs, primarily for new products and enhancements to existing products in the
POS and kiosk markets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $1,336,000, or 21%, to $7,569,000 from $6,233,000 in the
prior year. Selling expenses increased by $442,000 due primarily to increases in
the level of sales staff and increased commissions resulting from a higher
volume of sales principally in the kiosk and POS markets. General and
administrative expenses increased $894,000 over the prior year, primarily
reflecting an increase of general and administrative expenses incurred by the
Company as a stand alone, public company. In the prior year, such expenses were
allocated from Tridex, its former parent. Additionally, the increase reflects
increased incentive compensation and, to a lesser extent, additional
administrative staff expenses to support higher business volumes. Selling,
general and administrative expenses decreased as a percentage of net sales to
13.0% from 14.8% due primarily to management's ability to control these expenses
while increasing sales.
OPERATING INCOME. Operating income increased $2,598,000, or 50%, to
$7,831,000 from $5,233,000 in the prior year. Operating income improved as a
percentage of net sales, increasing to 13.4% from 12.4%, due primarily to the
Company's ability to control operating expenses while increasing sales.
OTHER INCOME. Other income (expense) for the year ended December 31, 1996
included a gain of $285,000 from the sale of securities acquired in the sale of
the Company's solenoid product line in 1994.
PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended December 31, 1997 reflects an effective tax rate of 37.5%. The effective
rate in the prior year's period was 39.6%. The decline in the Company's
effective tax rate is largely due to tax benefits derived from the establishment
of a foreign sales corporation and certain tax credits.
NET INCOME. Net income for the current year was $4,893,000, or $0.72 per
share (basic) and $0.71 per share (diluted). Net income for the prior year was
$3,340,000, or $0.57 per share (basic and diluted).
(ii) YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1995
NET SALES. Net sales into each of the Company's four vertical markets for
the years ended December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
(In thousands) December 31, 1996 December 31, 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
Point of sale $21,414 50.8 % $17,190 51.4 %
Gaming and lottery 12,217 29.0 8,586 25.7
Kiosk 3,379 8.0 3,238 9.7
Financial services 5,124 12.2 4,419 13.2
------------- ----------- ---------- -------------
$42,134 100.0 % $33,433 100.0 %
============= ========== =========== ===========
</TABLE>
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Net sales for the year ended December 31, 1996 increased $8,701,000, or
26%, to $42,134,000 from $33,433,000 in the prior year. Approximately $4,200,000
of the increase was due to increased shipments into the POS market. Sales of POS
printers increased to approximately $21,400,000, or 50.8% of net sales, in 1996,
from $17,200,000, or approximately 51.4% of net sales, in 1995. The remainder of
the increase principally reflects increased shipments of the Company's on-line
lottery printers. Sales of these printers increased to approximately $6,800,000,
or 16.1% of net sales, in 1996, from $3,400,000, or 10.2%, in the prior year.
GROSS PROFIT. Gross profit increased $3,343,000, or 32%, to $13,933,000
from $10,590,000 in the prior year due primarily to increased sales in the POS
and gaming and lottery markets. The gross margin increased to 33.1% from 31.7%.
The gross margin for 1995 of 31.7% reflected certain production start-up costs
associated with the Company's new on-line lottery printer and the relocation of
the Company's Connecticut facility in 1995. The Company expects that although
gross profit will increase with increased sales, gross margin will decrease
slightly due to a growing proportion of sales of printers at lower average
selling prices resulting from volume discount pricing, particularly in the POS
and gaming and lottery markets.
ENGINEERING AND PRODUCT DEVELOPMENT. Engineering, design and product
development costs increased $470,000, or 24%, to $2,467,000 from $1,997,000 for
the prior year, but decreased slightly as a percentage of net sales to 5.9% from
6.0%. This increase was due primarily to increased product development and
design costs, primarily for new products in the POS market, as well as increases
in the level of engineering staff.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $194,000, or 3%, to $6,233,000 from $6,039,000 in 1995.
Selling expenses increased by $178,000 due primarily to increases in the level
of sales staff and increased commissions resulting from higher unit sales
volumes. General and administrative expenses increased only slightly over the
prior year. Selling, general and administrative expenses decreased as a
percentage of net sales to 14.8% from 18.1% due primarily to management's
continuing effort to control these expenses while increasing sales.
OPERATING INCOME. Operating income increased $2,979,000, or 132%, to
$5,233,000 from $2,254,000 in the prior year. Operating income increased as a
percentage of net sales to 12.4% from 6.7%, due primarily to the Company's
ability to control operating expenses while increasing its level of sales during
1996, and the absence of certain production start-up costs associated with the
Company's new on-line lottery printer and the relocation of the Company's
Connecticut facility during 1995.
PROVISION FOR RESTRUCTURING. During the year ended December 31, 1995, the
Company recorded a provision for restructuring of $300,000 primarily to cover
severance costs related to the combination of the Ithaca and Magnetec businesses
under unified management.
OTHER INCOME. Other income (expense), net increased $292,000, to $295,000
from $3,000 in the year ended December 31, 1995. This increase was primarily the
result of a $285,000 gain on the sale of securities acquired in the sale of the
Company's solenoid product line in 1994.
11
<PAGE> 12
PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended December 31, 1996 reflects an effective tax rate of 39.6%. The provision
for this period includes a benefit resulting from certain tax credits. The
effective rate in the prior year's period was 41.0%.
NET INCOME. Net income for the year ended December 31, 1996 was
$3,340,000, or $0.57 per share (basic and diluted), as compared to $1,332,000,
or $0.25 per share (basic and diluted), in the prior year.
(iii) LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operations of $3,835,000, $1,972,000
and $1,881,000 for the year ended December 31, 1997, December 31, 1996, and the
nine months ended December 31, 1995, respectively. The Company's working capital
at December 31, 1997 increased to $11,438,000 from $8,609,000 at December 31,
1996. The current ratio improved to 2.87 to 1.0 at December 31, 1997 from 2.47
to 1.0 at December 31, 1996. The increase in working capital was funded
primarily through cash generated from operations.
On August 22, 1996, the Company sold 1,150,000 shares of its common stock
at a price of $8.50 per share in the Offering. On September 18, 1996, the
Company sold an additional 172,500 shares upon exercise of the underwriters'
over-allotment option. Net proceeds from the Offering (including the exercise of
the underwriters' over-allotment option) were approximately $8,991,000 after
payment of $2,250,000 of Offering expenses. In conjunction with the Offering,
the Company also repaid $7,500,000 of a total of $8,500,000 of intercompany
indebtedness to Tridex and issued a $1,000,000 subordinated promissory note to
Tridex. The note, which bore interest at the rate paid by Tridex under its
revolving credit facility (8.25% at December 31, 1996), was repaid on February
14, 1997.
Prior to the Offering, the Company participated in Tridex's centralized
cash management system. While under this system, cash deposits from the Company
were transferred to Tridex and Tridex funded the Company's disbursement bank
accounts. On August 22, 1996, the Company ceased to participate in the Tridex
cash management system.
On August 29, 1996, the Company entered into an agreement with Fleet
National Bank ("Fleet") to provide the Company with a $5,000,000 revolving
credit facility (the "Credit Facility"). The Credit Facility bears interest on
outstanding borrowings at Fleet's prime rate (8.25% at December 31, 1997) and
bears a commitment fee of 0.25% on any unused portion of the Credit Facility.
The Credit Facility also permits the Company to designate a LIBOR rate on
outstanding borrowings with a margin of 1.5 percentage points over the market
rate. The Credit Facility is secured by a lien on substantially all of the
assets of the Company, imposes certain financial and restricts the payment of
cash dividends. During 1997, the Company borrowed $1,500,000 under the Credit
Facility, with $300,000 outstanding at December 31, 1997.
12
<PAGE> 13
On January 29, 1998, the Company replaced its existing $5,000,000
Credit Facility with a new $15,000,000 facility (the "New Credit Facility"). The
New Credit Facility, also with Fleet, provides the Company with a $5,000,000
revolving working capital facility, and a $10,000,000 revolving credit facility
that may be used for activities such as acquisitions and repurchases of the
Company's common stock. Borrowings under the $10,000,000 revolving credit
facility may, at the Company's election, be converted to a four-year term loan
commencing on June 30, 1999, the expiration date of the New Credit Facility. Any
term loan borrowings mature on June 30, 2003. Borrowings under the New Credit
Facility bear interest on outstanding borrowings at Fleet's prime rate and bear
a commitment fee ranging from 0.25% to 0.50% on any unused portion of the New
Credit Facility. The New Credit Facility also permits the Company to designate a
LIBOR rate on outstanding borrowings with a margin ranging from 1.25 to 1.75
percentage points over the market rate, depending on the Company meeting certain
ratios. The New Credit Facility is secured by a lien on substantially all of the
assets of the Company, imposes certain financial covenants (including, among
other things, a minimum tangible net worth, a maximum leverage ratio, a maximum
debt to cash flow ratio, a minimum interest coverage ratio, a minimum fixed
charge coverage ratio and a minimum collateral coverage ratio) and restricts the
payment of cash dividends and the creation of liens. The Company expects to use
borrowings under the New Credit Facility to fund its short-term working capital
requirements, as they arise.
During November 1997, the Board of Directors approved the repurchase of
up to 500,000 shares of the Company's common stock at a price no more than $12
per share. As of December 31, 1997, the Company acquired 200,000 shares of its
common stock for $2,251,000. Management intends to complete the repurchase of
the remaining 300,000 shares during the first quarter of 1998. The Company
anticipates temporarily financing the repurchases under the New Credit Facility.
The Company's capital expenditures were approximately $2,266,000,
$1,836,000 and $1,334,000 for the year ended December 31, 1997, December 31,
1996 and the nine months ended December 31, 1995, respectively. These
expenditures primarily included new product tooling, computer equipment, and
factory machinery and equipment. In addition, capital expenditures in the nine
months ended December 31, 1995 included new leasehold and equipment purchases
related to the relocation of the Company's Connecticut facility. The Company's
capital expenditures for 1998 are expected to be approximately $3,400,000, a
majority for new product tooling.
The Company believes that cash flows generated from operations and
borrowings available under the New Credit Facility, as necessary, will provide
sufficient resources to meet the Company's working capital needs, finance its
capital expenditures and common stock repurchases, and meet its liquidity
requirements through December 31, 1998.
(B) IMPACT OF INFLATION
TransAct believes that its business has not been affected to a
significant degree by inflationary trends because of the low rate of inflation
during the past three years.
13
<PAGE> 14
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Page
Number
------
<S> <C>
Report of Independent Accountants 15
TransAct Technologies Incorporated consolidated financial statements:
Consolidated balance sheets as of December 31, 1997 and December 31, 1996. 16
Consolidated statements of income for the years ended December 31, 1997, December 31, 1996 17
and December 31, 1995 (unaudited), and the nine months ended December 31, 1995 and
December 31, 1994 (unaudited).
Consolidated statements of cash flows for the years ended December 31, 1997, December 31, 18
1996 and December 31, 1995 (unaudited), and the nine months ended December 31, 1995 and
December 31, 1994 (unaudited).
Consolidated statement of changes in shareholders' equity for the period from August 22, 19
1996 through December 31, 1997.
Notes to consolidated financial statements. 20
</TABLE>
14
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of TransAct Technologies Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the financial position of
TransAct Technologies Incorporated and its subsidiaries, as described in Note 1,
at December 31, 1997 and 1996, and the results of their operations and their
cash flows for the years ended December 31, 1997 and December 31, 1996 and the
nine months ended December 31, 1995, and their changes in shareholders' equity
for the year ended December 31, 1997 and the period from August 22, 1996 through
December 31, 1996 in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Hartford, Connecticut
February 12, 1998
15
<PAGE> 16
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
-------- ---------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 391 $ 1,041
Receivables, net (Note 4) 6,941 5,179
Receivable from Tridex 294 266
Inventories (Note 5) 8,570 7,370
Other current assets 1,365 628
-------- ---------
Total current assets 17,561 14,484
-------- ---------
Plant and equipment, net (Note 6) 4,989 3,964
Excess of cost over fair value of net assets acquired, net
(Note 2) 2,073 2,246
Other assets 76 90
-------- ---------
7,138 6,300
-------- ---------
$ 24,699 $ 20,784
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank loans payable (Note 9) $ 300 $ -
Accounts payable 3,043 2,463
Accrued liabilities (Note 7) 2,780 2,412
Note payable to Tridex (Note 15) - 1,000
-------- ---------
Total current liabilities 6,123 5,875
-------- ---------
Other liabilities 673 502
-------- ---------
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock, $0.01 par value; 20,000,000
authorized; 6,810,300 and 6,722,500 issued 68 67
Preferred stock, 5,000,000 authorized, no issued
and outstanding - -
Additional paid-in capital 14,975 13,186
Retained earnings 6,062 1,169
Unamortized restricted stock compensation (942) -
Cumulative translation adjustment (9) (15)
-------- ---------
20,154 14,407
Less: Treasury stock, at cost, 200,000 shares (Note 18) (2,251) -
-------- ---------
Total shareholders' equity 17,903 14,407
-------- ---------
$ 24,699 $ 20,784
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 17
<TABLE>
<CAPTION>
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Year Ended Nine Months Ended
--------------------------------------------- ----------------------------
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1995 1994
--------- -------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 58,400 $ 42,134 $ 33,433 $ 25,497 $ 25,426
Cost of sales 40,227 28,201 22,843 17,529 17,035
--------- -------- --------- --------- ---------
Gross profit 18,173 13,933 10,590 7,968 8,391
--------- -------- --------- --------- ---------
Operating expenses:
Engineering, design and
product development costs 2,773 2,467 1,997 1,533 1,244
Selling, general and
administrative expenses 7,569 6,233 6,039 4,556 4,117
Provision for restructuring
(Note 15) - - 300 300 -
--------- -------- --------- --------- ---------
10,342 8,700 8,336 6,389 5,361
--------- -------- --------- --------- ---------
Operating income 7,831 5,233 2,254 1,579 3,030
--------- -------- --------- --------- ---------
Other income (expense):
Interest, net 16 (17) - - -
Other, net (Note 15) (19) 312 3 (15) 108
--------- -------- --------- --------- ---------
(3) 295 3 (15) 108
--------- -------- --------- --------- ---------
Income before income taxes 7,828 5,528 2,257 1,564 3,138
Income tax provision
(Note 13) 2,935 2,188 925 648 1,255
--------- -------- --------- --------- ---------
Net income $ 4,893 $ 3,340 $ 1,332 $ 916 $ 1,883
========= ========= ========= ======== =========
Net income per share
(pro forma prior to 1997):
Basic $ 0.72 $ 0.57 $ 0.25 $ 0.17 $ 0.35
========= ========= ========= ======== =========
Diluted 0.71 0.57 0.25 0.17 0.35
========= ========= ========= ======== =========
Weighted average common shares
outstanding (pro forma
prior to 1997):
Basic 6,767 5,864 5,400 5,400 5,400
========= ========= ========= ======== =========
Diluted 6,932 5,884 5,400 5,400 5,400
========= ========= ========= ======== =========
See accompanying notes to consolidated financial statements.
17
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended Nine Months Ended
-------------------------------------------- ----------------------------
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1995 1994
-------- -------- -------- ------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,893 $ 3,340 $ 1,332 $ 916 $ 1,883
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,591 1,135 957 729 686
Deferred income taxes (51) (82) 168 82 -
Gain on sale of securities available - (285) - - -
for sale
Gain on sale of solenoid product
line (Note 15) - - - - (115)
Loss on disposal of equipment 8 6 1 5 8
Changes in operating assets and
liabilities:
Receivables (1,790) (2,199) 752 532 (154)
Inventories (1,200) (1,017) (1,653) (656) (16)
Other current assets (623) 30 (45) (54) (1)
Other assets (50) (27) 41 150 (56)
Accounts payable 580 (248) (50) 35 409
Accrued liabilities and other
liabilities 477 1,319 327 142 315
-------- -------- -------- ------- --------
Net cash provided by operating
activities 3,835 1,972 1,830 1,881 2,959
-------- -------- -------- ------- --------
Cash flows from investing activities:
Purchases of plant and equipment (2,266) (1,836) (1,586) (1,334) (956)
Proceeds from sale of securities available
for sale - 508 - - -
Proceeds from sale of solenoid product line
(Note 15) - - - - 115
Proceeds from sale of equipment 3 13 4 4 13
Other - (5) 30 - -
-------- -------- -------- ------- --------
Net cash used in investing activities (2,263) (1,320) (1,552) (1,330) (828)
-------- -------- -------- ------- --------
Cash flows from financing activities:
Bank line of credit borrowings 1,500 - - - -
Bank line of credit repayments (1,200) - - - -
Purchases of treasury stock (2,251) - - - -
Proceeds from option exercises 76 - - - -
Tax benefit related to employee stock sales 647 - - - -
Payment of intercompany debt (1,000) (7,500) - - -
Net proceeds from issuance of stock - 8,991 - - -
Net transactions with Tridex prior to the
initial public offering - (1,087) (278) (551) (2,131)
-------- -------- -------- ------- --------
Net cash provided by (used in)
financing activities (2,228) 404 (278) (551) (2,131)
-------- -------- -------- ------- --------
Effect of exchange rate changes on cash 6 (15) - - -
-------- -------- -------- ------- --------
Increase (decrease) in cash and cash (650) 1,041 - - -
equivalents
Cash and cash equivalents at beginning of
period 1,041 - - - -
-------- -------- -------- ------- --------
Cash and cash equivalents at end of period $ 391 $ 1,041 $ 0 $ 0 $ 0
======== ======== ======== ======= ========
Supplemental cash flow information:
Interest paid $ 52 $ 28 $ - $ - $ -
Income taxes paid 2,775 592 - - -
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
<TABLE>
<CAPTION>
TRANSACT TECHNOLOGIES INCORPORATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
Common Stock Additional Unamortized Cumulative
-------------------- Paid-in Retained Restricted Stock Translation Treasury
Shares Amount Capital Earnings Compensation Adjustment Stock
--------- --------- ---------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 22, 1996 5,400,000 $ 54 $ 4,207 $ - $ - $ - $ -
Issuance of Offering shares 1,322,500 13 8,978 - - - -
Purchase of warrants - - 1 - - - -
Translation adjustments - - - - - (15) -
Net income subsequent to the
Offering - - - 1,169 - - -
--------- --------- ---------- --------- -------- --------- ----------
Balance, December 31, 1996 6,722,500 67 13,186 1,169 - (15) -
Issuance of restricted stock 78,800 1 1,066 - (1,066) - -
Issuance of shares from
exercise of stock options 9,000 - 76 - - - -
Amortization of restricted
stock compensation - - - - 124 - -
Tax benefit related to
employee stock sales - - 647 - - - -
Purchase of treasury shares (200,000) - - - - - (2,251)
Translation adjustments - - - - - 6 -
Net income - - - 4,893 - - -
--------- --------- ---------- --------- -------- --------- ----------
Balance, December 31, 1997 6,610,300 $ 68 $ 14,975 $ 6,062 $ (942) $ (9) $ (2,251)
========= ========= ========== ========= ======== ========= ==========
See accompanying notes to consolidated financial statements.
19
</TABLE>
<PAGE> 20
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
TransAct Technologies Incorporated ("TransAct" or the "Company") was
incorporated on June 17, 1996, as a wholly-owned subsidiary of Tridex
Corporation ("Tridex"). Following the incorporation, TransAct and two of
Tridex's wholly-owned subsidiaries, Magnetec Corporation ("Magnetec") and
Ithaca Peripherals Incorporated ("Ithaca"), entered into a Plan of
Reorganization (the "Plan of Reorganization"), pursuant to which: (i)
Ithaca merged into Magnetec; (ii) TransAct transferred to Tridex certain
assets of Magnetec used in manufacturing a printer ribbon product line;
(iii) TransAct issued 5,400,000 shares of its common stock to Tridex in
exchange for all the outstanding shares of Magnetec; (iv) TransAct sold in
an initial public offering (the "Offering") 1,322,500 shares or
approximately 19.7% of its common stock; (v) TransAct repaid $8,500,000 of
intercompany indebtedness to Tridex; (vi) Tridex applied to the Internal
Revenue Service (the "IRS") for a ruling that the distribution of the
5,400,000 shares of TransAct owned by Tridex to Tridex stockholders (the
"Distribution") would constitute a tax-free reorganization for federal
income tax purposes; and (vii) Tridex agreed to effect the Distribution
promptly after receipt of a favorable ruling from the IRS and the
satisfaction of certain other conditions.
On February 12, 1997, Tridex received a favorable ruling from the IRS
confirming the tax-free nature of the Distribution. On March 31, 1997
Tridex distributed its 5,400,000 shares, or 80.3% of TransAct's common
stock, pro rata to persons who were Tridex stockholders of record on March
14, 1997, on the basis of approximately one share of TransAct for each
share of Tridex. Upon completion of the Distribution, Tridex no longer
owned any shares of TransAct capital stock.
The financial statements of the Company have been prepared principally
on the basis of items (i) and (ii) of the Plan of Reorganization outlined
above and include the financial position and consolidated (combined prior
to the implementation of the Plan of Reorganization) results of operations
and cash flows of the business described. The term consolidated as used
herein refers to both the consolidated and combined financial statements.
The Company carries its assets and liabilities at historical cost. The
financial results in these financial statements are not necessarily
indicative of results that would have occurred if the Company had been a
separate stand alone entity during the periods presented or of future
results of the Company.
2. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND PRODUCTS: TransAct, through its two operations, one in
Wallingford, CT and the other in Ithaca, NY, operates in one industry
segment, printers and printer peripheral products. TransAct designs,
develops, manufactures and markets transaction based printers and related
products under the ITHACA and MAGNETEC brand names. The Company's printers
are used to provide transaction records such as receipts, tickets, coupons,
register journals and other documents. The Company focuses on four vertical
markets: point-of-sale ("POS") (from which the Company derived
approximately 40% of net sales for the year ended December 31, 1997);
gaming and lottery (approximately 40% of net sales); kiosk (approximately
11% of net sales); and financial services (approximately 9% of net sales).
The Company sells its products directly to end users, original equipment
manufacturers ("OEM"), value added resellers and selected distributors,
primarily in the United States, Canada, Europe and Latin America.
TransAct manufactures and sells customizable and custom dot matrix and
thermal printers for applications requiring up to 60 character columns in
each of its four vertical markets. The Company also sells an 80 column
laser printer for kiosk applications. The Company's customizable products
include several series of printers which offer customers the ability to
choose from a variety of features and functions. Options typically include
paper cutting devices, paper handling capacities and number of print
stations. In addition to its customizable printers, TransAct manufactures
custom printers for certain OEM customers. In collaboration with these
customers, the Company provides engineering and manufacturing expertise for
the design and development of specialized printers.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, after elimination of all material intercompany accounts and
transactions.
CHANGE IN FISCAL YEAR END: In December 1995, the Company's fiscal year
end was changed to December 31 from the Saturday closest to March 31.
20
<PAGE> 21
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments purchased with an initial maturity of three months or less to
be cash equivalents.
USE OF ESTIMATES: 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.
FOREIGN CURRENCY: The financial position and results of operations of
the Company's foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of such subsidiaries have been
translated at end of period exchange rates, and related revenues and
expenses have been translated at weighted average exchange rates. The
aggregate effect of translation adjustments so calculated for periods prior
to the Offering, which would be ordinarily included as a separate component
of shareholders' equity, is de minimis. Transaction gains and losses are
included in other income.
INVENTORIES: Inventories are stated at the lower of cost (principally
standard cost which approximates actual cost on a first-in, first-out
basis) or market.
PLANT AND EQUIPMENT AND DEPRECIATION: Plant and equipment and leasehold
improvements are stated at cost. Depreciation is provided for primarily by
the straight-line method over the estimated useful lives. The estimated
useful life of machinery, furniture and equipment is three to ten years.
Leasehold improvements are amortized over the shorter of the term of the
lease or the useful life of the asset. Depreciation amounted to $1,227,000,
$905,000 and $521,000 in the year ended December 31, 1997, December 31,
1996 and the nine months ended December 31, 1995, respectively.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED: The excess of
cost over fair value of net assets acquired (goodwill) resulted from the
acquisition of Ithaca in 1991. The original amount applicable to this
acquisition totaled $3,536,000 and is being amortized on the straight line
method over 20 years. Accumulated amortization of goodwill was $1,463,000
and $1,290,000 at December 31, 1997 and December 31, 1996, respectively.
The Company periodically reviews goodwill to assess recoverability based
upon expectations of non-discounted cash flows from operations for Ithaca.
The Company believes that no impairment of goodwill exists at December 31,
1997.
REVENUE RECOGNITION: Sales are recognized when the product is shipped.
Revenue from extended warranty and maintenance agreements is recognized
over the term of such agreements as services are performed. Sales to one
customer accounted for approximately 29%, 16% and 12% of net sales for the
year ended December 31, 1997, December 31, 1996 and the nine months ended
December 31, 1995, respectively.
INCOME TAXES: Through the date of the Distribution, the Company was
included in the consolidated federal and certain state income tax returns
of Tridex. The income tax amounts reflected in the accompanying financial
statements are accounted for under the liability method in accordance with
FAS 109 "Accounting for Income Taxes," and for the periods presented
through the date of the Distribution are an allocation of Tridex's
consolidated balances, and are computed as if a separate return had been
filed for the Company, using those elements of income and expense as
reported in the consolidated statements of income. Subsequent to the
Distribution, the Company will file federal and state income tax returns
separately from Tridex. See Note 13.
EARNINGS PER SHARE: TransAct adopted FAS 128 "Earnings per Share,"
effective December 15, 1997, which requires the dual presentation of basic
and diluted earnings per share for complex capital structures. In
accordance with FAS 128, earnings per share presented in the accompanying
financial statements for periods prior to adoption have been restated. For
the year ended December 31, 1996, December 31, 1995 (unaudited), the nine
months ended December 31, 1995 and the nine months ended December 31, 1994
(unaudited), pro forma basic and diluted earnings per share are based on
the weighted average number of shares outstanding during the period, as if
all shares issued to Tridex prior to the Offering had been outstanding
throughout these periods.
21
<PAGE> 22
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION: The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and related interpretations in accounting for its stock
options. Under APB 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). See Note
11.
3. RELATED PARTY TRANSACTIONS
Prior to the Offering, the Company participated in Tridex's centralized
cash management system. While under this system, cash deposits from the
Company were transferred to Tridex and Tridex funded the Company's
disbursement bank accounts as required. In August 1996, the Company ceased
to participate in the Tridex cash management system.
Prior to the Offering, Tridex provided certain general and
administrative services to the Company, including tax, treasury, risk
management and insurance, legal, marketing, accounting, auditing, human
resources and executive management. For periods prior to the Offering,
these expenses were allocated to the Company based upon actual usage for
those expenses directly attributable to the Company, and otherwise
allocated based upon other methods which management believes to be
reasonable. These allocations were $869,000 and $1,203,000 for the year
ended December 31, 1996 and the nine months ended December 31, 1995,
respectively. These costs may have been different had the Company operated
as a separate stand-alone entity during the periods presented.
Included as a component of Tridex investment in the Company are net
cash advances from Tridex to the Company and general and administrative
expenses allocated from Tridex to the Company. No interest expense on net
advances from Tridex has been reflected in the accompanying financial
statements.
On July 31, 1996, the Company entered into a Corporate Services
Agreement with Tridex. Under the terms of this agreement, Tridex agreed to
provide the Company with certain services, including employee benefit
administration, human resource and related services, administrative
services, risk management, regulatory compliance, preparation of tax
returns and certain financial and other services. Such services were
provided and reimbursed at actual cost, which amounted to approximately
$96,000 and $91,000 for the year ended December 31, 1997 and December 31,
1996, respectively. Certain services ceased to be provided after March 31,
1997. Also, pursuant to the terms of the agreement, Tridex agreed to pay
15% of the direct employment costs of the Company's chief financial officer
through March 31, 1997, which amounted to approximately $7,000 and $8,000
for the year ended December 31, 1997 and December 31, 1996, respectively.
The Corporate Services Agreement expired on December 31, 1997.
On July 31, 1996, the Company entered into a Tax Sharing Agreement with
Tridex. The agreement provides for the treatment of certain tax attributes
of the Company including the method of allocating tax obligations,
treatment of tax carryforwards and the computation of income tax provisions
for the Company between the date of the Offering and the Distribution. In
addition, tax benefits related to certain tax carryforwards arising prior
to the Distribution will be paid to Tridex as the carryforwards are
utilized. For the year ended December 31, 1997 and December 31, 1996, the
Company paid, net of refunds from Tridex, approximately $410,000 and
$527,000, respectively, to Tridex pursuant to the agreement.
The Company and Tridex also entered into an Asset Transfer Agreement
dated July 31, 1996, under which the Company agreed to transfer to Tridex
certain assets used in the manufacturing process of the printer ribbon
product line. Additionally, on September 28, 1996, the Company and Tridex
entered into a Manufacturing Support Services Agreement. Under this
agreement, the Company agrees to provide Tridex with space within its
Wallingford, CT manufacturing facility and certain support services for the
ribbon business through September 28, 1998. Tridex agrees to pay the
Company a monthly fee calculated to compensate the Company for the direct
and indirect costs incurred by the Company to provide the space and render
such services. These fees amounted to approximately $254,000 and $67,000
during the year ended December 31, 1997 and December 31, 1996,
respectively. The Company also purchased approximately $4,000 and $5,000 of
ribbons from Tridex during the same periods.
22
<PAGE> 23
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company sells certain POS printers to a wholly-owned subsidiary of
Tridex. Revenues from the sale of such printers amounted to $2,675,000,
$3,178,000 and $2,340,000 for the year ended December 31, 1997, the year
ended December 31, 1996 and the nine months ended December 31, 1995,
respectively. On July 30, 1996, the Company entered into a Printer Supply
Agreement which will require the subsidiary, in consideration for continued
favorable price terms, to purchase from the Company at least three quarters
of its total POS printer requirements through December 31, 1999.
On April 1, 1997, the Company established the TransAct Technologies
Retirement Savings Plan (the "Plan"), a defined contribution plan under
Section 401(k) of the Internal Revenue Code. Prior to the Distribution, the
Company's employees participated in the Tridex Corporation Retirement
Savings Plan. All full-time employees are eligible to participate in the
Plan at the beginning of the calendar quarter immediately following their
date of hire. The Company matches employees' contributions at a rate of
37.5% of employees' contributions up to the first 4% of the employees'
compensation contributed to the Plan. The Company's matching contributions
were $101,000, $80,000 and $51,000 in the year ended December 31, 1997,
December 31, 1996 and the nine months ended December 31, 1995,
respectively, and are included in general and administrative expense.
Effective January 1, 1998, the Company increased its rate of matching
contributions to 50% of the employees' contributions up to the first 4% of
the employees' compensation contributed to the Plan.
4. RECEIVABLES
Receivables are net of the allowance for doubtful accounts. The
reconciliation of the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
----------------------------- Ended
December 31, December 31, December 31,
(In thousands) 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of period $ 106 $ 40 $ 76
Provision for doubtful accounts 18 66 12
Accounts written off, net of recoveries (22) - (48)
------ ------ ------
Balance at end of period $ 102 $ 106 $ 40
====== ====== ======
</TABLE>
5. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
December 31, December 31,
(In thousands) 1997 1996
-------- --------
<S> <C> <C>
Raw materials and component parts $ 7,482 $ 5,828
Work-in-process 588 810
Finished goods 500 732
-------- --------
$ 8,570 $ 7,370
======== ========
</TABLE>
23
<PAGE> 24
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PLANT AND EQUIPMENT
The components of plant and equipment, net are:
<TABLE>
<CAPTION>
December 31, December 31,
(In thousands) 1997 1996
------- --------
<S> <C> <C>
Machinery and equipment $ 8,399 $ 6,798
Furniture, office and computer equipment 2,545 2,276
Leasehold improvements 339 276
------- --------
11,283 9,350
Less: accumulated depreciation (6,294) (5,386)
------- --------
$ 4,989 $ 3,964
======= ========
</TABLE>
7. ACCRUED LIABILITIES
The components of accrued liabilities are:
<TABLE>
<CAPTION>
December 31, December 31,
(In thousands) 1997 1996
------- --------
<S> <C> <C>
Payroll and fringe benefits $ 1,225 $ 931
Income taxes payable 415 330
Customer advances, deferred revenue and
warranty 436 324
Due to Tridex 24 103
Other 680 724
------- --------
$ 2,780 $ 2,412
======= =======
</TABLE>
8. TRIDEX INVESTMENT IN THE COMPANY
Tridex investment in the Company includes the original investment in
the Company and the net intercompany payable from the Company to Tridex
reflecting transactions described in Note 3. The following analyzes Tridex's
investment in the Company for the periods presented. The amounts presented
below for the year ended December 31, 1996 reflect activity through the
Offering date, August 22, 1996.
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, December 31,
(In thousands) 1996 1995
-------- --------
<S> <C> <C>
Balance at beginning of the period $ 11,645 $ 11,280
Net income 2,171 916
Net transactions with Tridex:
Allocation of general and administrative
expenses from Tridex (869) (1,203)
Sales to affiliates 1,998 2,340
Net transfers to Tridex (2,216) (1,688)
Reclassification of note payable to Tridex (8,500) --
Issuance of shares to Tridex in exchange
for all outstanding shares of Magnetec (4,229) --
-------- --------
Balance at end of the period $ -- $ 11,645
======== ========
</TABLE>
24
<PAGE> 25
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. BANK CREDIT AGREEMENT
On August 29, 1996, the Company entered into an agreement with Fleet
National Bank ("Fleet") to provide the Company with a $5,000,000 revolving
credit facility (the "Credit Facility"). The Credit Facility bears interest
on outstanding borrowings at Fleet's prime rate (8.25% at December 31,
1997) and bears a commitment fee of 0.25% on any unused portion of the
Credit Facility. The Credit Facility also permits the Company to designate
a LIBOR rate on outstanding borrowings with a margin of 1.5 percentage
points over the market rate. The Credit Facility is secured by a lien on
substantially all of the assets of the Company, imposes certain financial
covenants and restricts the payment of cash dividends. The Company had
borrowings of $1,500,000 under the Credit Facility during the year ended
December 31, 1997 and none during the year ended December 31, 1996. The
Company had $300,000 of borrowings outstanding at December 31, 1997.
On January 29, 1998, the Company replaced its existing $5,000,000
Credit Facility with a new $15,000,000 facility (the "New Credit
Facility"). The New Credit Facility, also with Fleet, provides the Company
with a $5,000,000 revolving working capital facility, and a $10,000,000
revolving credit facility that may be used for activities such as
acquisitions and repurchases of the Company's common stock. Borrowings
under the $10,000,000 revolving credit facility may, at the Company's
election, be converted to a four-year term loan commencing on June 30,
1999, the expiration date of the New Credit Facility. Any term loan
borrowings mature on June 30, 2003. Borrowings under the New Credit
Facility bear interest at Fleet's prime rate and bear a commitment fee
ranging from 0.25% to 0.50% on any unused portion of the New Credit
Facility. The New Credit Facility also permits the Company to designate a
LIBOR rate on outstanding borrowings with a margin ranging from 1.25 to
1.75 percentage points over the market rate, depending on the Company
meeting certain ratios. The New Credit Facility is secured by a lien on
substantially all of the assets of the Company, imposes certain financial
covenants and restricts the payment of cash dividends and the creation of
liens.
10. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company was lessee on operating leases for
equipment and real property. The terms of certain leases provide for
escalating rent payments in later years of the lease as well as payment of
minimum rent and real estate taxes. Rent expense amounted to approximately
$713,000, $682,000 and $532,000 in the year ended December 31, 1997,
December 31, 1996 and the nine months ended December 31, 1995,
respectively. Minimum aggregate rental payments required under operating
leases that have initial or remaining non-cancelable lease terms in excess
of one year as of December 31, 1997 are as follows: $836,000 in 1998;
$864,000 in 1999; $842,000 in 2000; $826,000 in 2001; $806,000 in 2002 and
$4,516,000 thereafter.
The Company has a long-term purchase agreement for certain printer
components. Under the terms of the agreement, the Company receives
favorable pricing for volume purchases over the life of the contract. In
the event anticipated purchase levels are not achieved, the Company would
be subject to retroactive price increases on previous purchases. Management
currently anticipates achieving sufficient purchase levels to maintain the
favorable prices.
In conjunction with the Plan of Reorganization, as described in Note 1,
Tridex indemnified the Company from any liabilities, including
environmental liabilities, which could arise in connection with a
manufacturing facility owned by Tridex and formerly operated by the
Company.
25
<PAGE> 26
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS. On July 30, 1996, the Company adopted the 1996 Stock
Plan which provides for the grant of awards to officers and other key
employees of the Company, and the Directors' Stock Plan which provides for
non-discretionary awards to non-employee directors. The plans provide for
awards in the form of: (i) incentive stock options, (ii) non-qualified
stock options, (iii) shares of restricted stock, (iv) restricted units, (v)
stock appreciation rights or (vi) limited stock appreciation rights.
Options granted are at prices equal to 100% of the fair market value of the
common stock at the date of grant. Options granted have a ten-year term and
vest over a five-year period, unless automatically accelerated. At December
31, 1997, the Company has reserved 660,000 shares of common stock for
issuance under the 1996 Stock Plan and Directors' Stock Plan.
The 1996 Stock Plan and Directors' Stock Plan option activity is
summarized below:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
----------------------------- ------------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 339,300 $ 8.50 - -
Granted 227,500 14.45 339,300 $ 8.50
Exercised 9,000 8.50 - -
Canceled 15,200 10.04 - -
----------- ------------ ---------- ------------
Outstanding at end of period 542,600 10.97 339,300 8.50
=========== ============ ========== ============
Options exercisable at end of period 57,060 $ 8.50 - $ -
----------- ------------ ---------- ------------
</TABLE>
The Company applies APB 25 and related interpretations in accounting
for its long-term incentive stock plans. Accordingly, no compensation cost
has been recognized for its stock options.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- ---------------------------------
Outstanding at Weighted-Average Weighted-Average Exercisable at Weighted-Average
December 31, Exercise Price Remaining December 31, Exercise Price
Range of Exercise Prices 1997 Contractual Life 1997
-------------- --------------- ---------------- -------------- ----------------
(In years)
<S> <C> <C> <C> <C> <C>
$ 7.50 - $10.00 318,100 $ 8.50 8.4 57,060 $8.50
10.01 - 12.50 15,500 11.75 9.4 - -
12.51 - 15.00 134,000 13.73 9.0 - -
15.01 - 17.50 75,000 16.33 9.6 - -
</TABLE>
26
<PAGE> 27
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS (CONTINUED)
Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in FAS 123, the Company's net
income and net income per share would have been as follows:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------
December 31, December 31,
(In thousands, except per share data) 1997 1996
------------- ------------
<S> <C> <C>
Net income:
As reported $ 4,893 $ 3,340
Pro forma under FAS 123 4,422 3,248
Net income per share:
Basic:
As reported 0.72 0.57
Pro forma under FAS 123 0.65 0.55
Diluted:
As reported 0.71 0.57
Pro forma under FAS 123 0.64 0.55
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions
used for the grants made during the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended
----------------------------
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Risk-free interest rate 6.400% 5.062%
Dividend yield 0% 0%
Expected volatility factor 0.600 0.595
Expected option term 10 years 10 years
Weighted average fair value of options granted during period $ 10.97 $ 6.25
</TABLE>
RESTRICTED STOCK: Under the 1996 Stock Plan, in 1997 the Company
granted 78,800 shares of restricted common stock to its Chairman of the
Board, officers and certain key employees. Restricted stock totaling 49,800
shares vest over a five-year period, while 29,000 shares vest at the end of
a five-year period. Under certain conditions vesting may be automatically
accelerated. Upon issuance of the restricted stock, unearned compensation
equivalent to the market value at the date of grant is charged to
stockholders' equity and subsequently amortized over the vesting period.
Amortization expense of $124,000 was recorded during 1997.
WARRANTS: On August 22, 1996, the Company sold to the underwriters of
the Offering, for nominal consideration, a warrant to purchase from the
Company up to 115,000 shares of common stock at an exercise price of $10.20
per share. The warrant is exercisable for a period of five years beginning
April 1, 1998. No warrants were exercisable at December 31, 1997.
12. STOCKHOLDER RIGHTS PLAN
In December 1997, the Board of Directors adopted a stockholder rights
plan declaring a distribution of one right (the "Rights") for each
outstanding share of the Company's common stock to shareholders of record
at December 15, 1997. Initially, each of the Rights will entitle the
registered holder to purchase from the Company one one-thousandth of a
share of Series A Preferred Stock, $0.01 par value, at a price of $69 per
one one-thousandth of a share. The Rights, however, will not become
exercisable unless and until, among other things, any person or group of
affiliated persons acquires beneficial ownership of 15 percent or more of
the then outstanding shares of the Company's Common Stock. If a person, or
group of persons, acquires 15 percent or more of the outstanding Common
Stock of the Company (subject to certain conditions and exceptions more
fully described in the Rights Agreement), each Right will entitle the
holder (other than the person, or group of persons, who acquired 15 percent
or more of the outstanding Common Stock) to purchase Preferred Stock of the
Company having a market value equal to twice the exercise price of the
Right. The Rights are redeemable, under certain circumstances, for $0.0001
per Right and will expire, unless earlier redeemed, on December 2, 2007.
27
<PAGE> 28
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
-------------------------------- Ended
December 31, December 31, December 31,
(In thousands) 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal $ 2,461 $ 1,934 $ 476
State 525 336 90
------------ ------------ ------------
2,986 2,270 566
------------ ------------ ------------
Deferred:
Federal (46) (73) 73
State (5) (9) 9
------------ ------------ ------------
(51) (82) 82
------------ ------------ ------------
Total income tax provision $ 2,935 $ 2,188 $ 648
=========== ============ ============
</TABLE>
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The Company's gross deferred tax assets and liabilities were
comprised of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(In thousands) 1997 1996
------------ ------------
<S> <C> <C>
Gross deferred tax assets:
Liabilities and reserves $ 710 $ 586
======== ========
Gross deferred tax liabilities:
Depreciation $ 363 $ 290
======== ========
</TABLE>
At December 31, 1997 and 1996, the Company had foreign net operating
loss carryforwards of approximately $21,000 and $152,000, respectively,
which do not expire. A valuation allowance was recorded with respect to the
foreign net operating loss carryforwards at December 31, 1996.
Differences between the U.S. statutory federal income tax rate and the
Company's effective income tax rate are analyzed below:
<TABLE>
<CAPTION>
Year Ended Nine Months
-------------------------------- Ended
December 31, December 31, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Federal statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal income taxes 4.4 4.0 4.4
Non-deductible purchase accounting adjustments 0.9 1.1 2.8
Tax benefit from foreign sales corporation (1.0) - -
Other (0.8) 0.5 0.2
------------ ------------ ------------
Effective tax rate 37.5% 39.6% 41.4%
============ ============ ============
</TABLE>
28
<PAGE> 29
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DISCLOSURE REGARDING FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of trade accounts receivable, other current assets,
trade accounts payable, accrued expenses and bank loans approximate fair
value because of the short maturity of those instruments.
15. SIGNIFICANT TRANSACTIONS
On August 22, 1996, the Company sold 1,150,000 shares of its common
stock at a price of $8.50 per share in the Offering. On September 18, 1996,
the Company sold an additional 172,500 shares upon exercise of the
underwriters' over-allotment option. Net proceeds from the Offering
(including the exercise of the Underwriters' over-allotment option) were
approximately $8,991,000, after payment of approximately $2,250,000 of
Offering expenses.
Concurrent with the Offering, the Company repaid $7,500,000 of a total
of $8,500,000 of intercompany indebtedness to Tridex and issued a
$1,000,000 subordinated promissory note to Tridex. The note was due on
March 31, 1998 and bore interest, payable monthly in arrears, at the rate
paid by Tridex under its revolving credit facility. On February 14, 1997,
the Company repaid the note, plus accrued interest, to Tridex.
In December 1995, the operations of Magnetec and Ithaca were combined
under unified management. In connection with this combination, the Company
recorded a provision for restructuring costs of $300,000, which covers the
costs associated with combining operations under unified management and is
primarily comprised of severance costs.
In 1994 the Company sold its solenoid product line. Proceeds from the
sale were cash and shares of common stock of the purchaser ("marketable
securities"). During the nine months ended December 31, 1994 (unaudited),
the Company recognized a gain of $115,000 as the result of a contingent
payment received from the purchaser. In addition, during the year ended
December 31, 1996, the Company sold the remainder of the marketable
securities and recognized a gain of $285,000. These gains are included in
other income.
16. INTERNATIONAL OPERATIONS
The Company has foreign operations primarily from Ithaca Peripherals
Ltd., a wholly-owned subsidiary, which had sales to its customers of
$4,204,000, $397,000 and $332,000 in the year ended December 31, 1997,
December 31, 1996 and the nine months ended December 31, 1995,
respectively. The Company had export sales to its customers from the United
States of approximately $5,618,000 in the year ended December 31, 1997,
$1,622,000 in the year ended December 31, 1996 and $1,211,000 in the nine
months ended December 31, 1995.
29
<PAGE> 30
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company's quarterly results of operations for the years ended
December 31, 1997 and 1996 (unaudited) are as follows:
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------
(In thousands, except per share amounts) March 29 June 28 September 27 December 31
-------------- -------------- -------------- ---------------
1997:
<S> <C> <C> <C> <C>
Net sales $ 14,014 $ 15,569 $ 16,040 $ 12,777
Gross profit 4,352 4,963 5,065 3,793
Net income 1,087 1,360 1,582 864
Net income per share:
Basic 0.16 0.20 0.23 0.13
Diluted 0.16 0.20 0.23 0.12
<CAPTION>
March 30 June 29 September 28 December 31
-------------- -------------- -------------- ---------------
1996:
<S> <C> <C> <C> <C>
Net sales $ 10,463 $ 9,762 $ 10,794 $ 11,115
Gross profit 3,479 3,328 3,655 3,471
Net income 865 868 927 680
Net income per share:
Basic 0.16 0.16 0.16 0.10
Diluted 0.16 0.16 0.16 0.10
</TABLE>
18. SUBSEQUENT EVENTS
As of February 9, 1998 the Company had purchased an additional 164,500
shares of its common stock on the open market for approximately $1,841,000.
30
<PAGE> 31
\ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information contained in "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" of the Company's Proxy Statement (the
"Proxy Statement") for its Annual Meeting of Shareholders which is scheduled to
be held on May 7, 1998 is hereby incorporated herein by reference. Also, see
information under "Executive Officers of Registrant" in Item 1.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained in "Executive Compensation" of the Proxy
Statement is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in "Security Ownership of Certain Beneficial
Owners and Management" of the Proxy Statement is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in "Certain Relationships and Related
Transactions" of the Proxy Statement is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING FINANCIAL STATEMENTS AND EXHIBITS ARE FILED AS PART OF
THIS REPORT:
(i) Financial statements
See Item 8.
(ii) Financial statement schedules
All schedules are omitted since the required information is
either (a) not present or not present in amounts sufficient to
require submission of the schedule or (b) included in the
financial statements or notes thereto.
31
<PAGE> 32
<TABLE>
<CAPTION>
(iii) List of exhibits
<S> <C>
3.1(a) Certificate of Incorporation of the Company, filed with the Secretary of State of (2)
Delaware on June 17, 1996.
3.1(b) Certificate of Amendment of Certificate of Incorporation of the Company, filed with (1)
the Secretary of State of Delaware on May 30, 1997.
3.2 By-laws of the Company. (2)
4.1 Specimen Common Stock Certificate. (2)
4.2 See Exhibits 3.1 and 3.2 for provisions in the Certificate of Incorporation and (2)
By-laws of the Company defining the rights of the holders of common stock.
4.3 Form of Rights Agreement dated as of December 2, 1997, between TransAct and American (5)
Stock Transfer & Trust Company.
10.1 Plan of Reorganization dated as of June 24, 1996 among Tridex, Magnetec, TransAct (2)
and Ithaca.
10.2 Amendment to Plan of Reorganization dated as of August 30, 1996 among Tridex, (3)
Magnetec, TransAct and Ithaca.
10.3 Agreement and Plan of Merger dated as of July 16, 1996 between Magnetec and Ithaca. (2)
10.4 Asset Transfer Agreement dated as of July 31, 1996 between Magnetec and Tridex. (2)
10.5 Manufacturing Support Services Agreement between Magnetec and Tridex, dated as of (3)
September 28, 1996.
10.6 Corporate Services Agreement dated as of July 30, 1996 between Tridex and TransAct. (3)
10.7 Printer Supply Agreement dated as of July 31, 1996 between Magnetec and Ultimate (2)
Technology Corporation.
10.8 Tax Sharing Agreement dated as of July 31, 1996 between Tridex and TransAct. (3)
10.9 Credit Agreement dated as of August 29, 1996 among TransAct, Magnetec and Fleet (3)
National Bank.
10.10 Purchase Agreement dated as of October 17, 1996 between ICL Pathway Limited, Ithaca (3)
Peripherals Limited and Transact. (Pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Company has requested
confidential treatment of portions of this exhibit deleted from the filed copy.)
10.11(x) 1996 Stock Plan, effective July 30, 1996. (3)
10.12(x) Non-Employee Directors' Stock Plan, effective August 22, 1996. (3)
10.13 Sales and Marketing Agreement by and between the Company and Oki Europe Limited, (2)
dated May 9, 1996. (Pursuant to Rule 477 under the Securities Act of 1993, as
amended (the "Securities Act"), the Company has requested confidential treatment of
portions of this exhibit deleted from the filed copy.)
10.14 OEM Purchase Agreement by and between GTECH, TransAct and Magnetec, commencing (4)
October 1, 1996. (Pursuant to Rule 24b-2 under the Exchange Act, the Company has
requested confidential treatment of portions of this exhibit deleted from the filed
copy.)
10.15 OEM Purchase Agreement by and between OKIDATA and Tridex, dated January 21, 1991. (2)
(Pursuant to Rule 477 under the Securities Act, the Company has requested
confidential treatment of portions of this exhibit deleted from the filed copy.)
10.16 Strategic Agreement by and between OKIDATA and Tridex, dated May 9, 1996. (Pursuant (2)
to Rule 477 under the Securities Act, the Company has requested confidential
treatment of portions of this exhibit deleted from the filed copy.)
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
Page
Number
<S> <C>
10.17 Lease Agreement by and between Pyramid Construction Company and Magnetec, dated (2)
August 1, 1994.
10.18 Lease Agreement by and between Bomax Properties and Ithaca, dated as of March 23, (2)
1992.
10.19 First Amendment to Lease Agreement by and between Bomax Properties and Ithaca, dated (2)
as of October 18, 1993.
10.20(x) Employment Agreement, dated July 31, 1996, by and between the Company and Bart C. (2)
Shuldman.
10.21(x) Employment Agreement, dated July 31, 1996, by and between the Company and Richard L. (2)
Cote.
10.22(x) Severance Agreement by and between TransAct and Lucy H. Staley, dated September 4, (3)
1996
10.23(x) Severance Agreement by and between TransAct and John Cygielnik, dated September 10, (3)
1996.
10.24(x) Severance Agreement by and between TransAct and Michael S. Kumpf, dated September 4, (3)
1996.
10.25(x) Severance Agreement by and between TransAct and David A. Ritchie, dated July 1, 1997. (1)
10.26 Credit Agreement dated as of January 29, 1998 among TransAct, Magnetec and Fleet (1)
National Bank.
10.27 Second Amendment to Lease Agreement by and between Bomax Properties and Ithaca, dated (1)
December 2, 1996.
10.28 Lease Agreement by and between Pyramid Construction Company and Magnetec, dated (1)
July 30, 1997.
10.29 Amendment to OEM Purchase Agreement by and between Okidata and Tridex, dated
May 31, 1996. (Pursuant to Rule 24b-2 under the Exchange Act, the Company has
requested confidential treatment of portions of this exhibit deleted from the filed
copy.) (1)
11.1 Computation of earnings per share. (1)
21.1 Subsidiaries of the Company. (1)
27.1 Financial Data Schedule. (1)
(1) These exhibits are filed herewith.
(2) These exhibits, which were previously filed with the Company's Registration
Statement on Form S-1 (No. 333-06895), are incorporated by reference.
(3) These exhibits, which were previously filed with the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1996, are incorporated by reference.
(4) This exhibit, which was previously filed with the Company's Current Report on Form
8-K filed October 11, 1996, is incorporated by reference.
(5) This exhibit, which was previously filed with Amendment No. 1 to the Company's
Current Report on Form 8-K filed December 12, 1997, is incorporated by reference.
x Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c).
</TABLE>
(B) REPORTS ON FORM 8-K.
On December 2, 1997, the Company filed a report on Form 8-K to
report under Item 5, "Other Events", and Item 7, "Exhibits", the adoption
of a Stockholder Rights Plan. An amendment to the Form 8-K was filed on
December 12, 1997.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRANSACT TECHNOLOGIES INCORPORATED
By: /s/ Bart C. Shuldman
-----------------------------------
Bart C. Shuldman
President, Chief Executive Officer
and Director
Date: March 27, 1998
Pursuant to the requirements of the Securities 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/ Bart C. Shuldman President, Chief Executive Officer and March 27, 1998
- ------------------------------------ Director
Bart C. Shuldman (Principal Executive Officer)
/s/ Richard L. Cote Executive Vice President, Chief Financial March 27, 1998
- ------------------------------------ Officer, Treasurer, Secretary and Director
Richard L. Cote (Principal Financial Officer)
/s/ Steven A. DeMartino Corporate Controller March 27, 1998
- ------------------------------------ (Principal Accounting Officer)
Steven A. DeMartino
/s/ Thomas R. Schwarz Chairman of the Board and Director March 27, 1998
- ------------------------------------
Thomas R. Schwarz
/s/ Graham Y. Tanaka Director March 27, 1998
- ------------------------------------
Graham Y. Tanaka
/s/ Charles A. Dill Director March 27, 1998
- ------------------------------------
Charles A. Dill
</TABLE>
34
<PAGE> 35
EXHIBIT LIST
The following exhibits are filed herewith.
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
3.1(b) Certificate of Amendment of Certificate of Incorporation of the Company, filed with
the Secretary of State of Delaware on May 30, 1997.
10.25(x) Severance Agreement by and between TransAct and David A. Ritchie, dated July 1,
1997.
10.26 Credit Agreement dated as of January 29, 1998 among TransAct, Magnetec and Fleet
National Bank.
10.27 Second Amendment to Lease Agreement by and between Bomax Properties and
Ithaca, dated December 2, 1996.
10.28 Lease Agreement by and between Pyramid Construction Company and Magnetec,
dated July 30, 1997.
10.29 Amendment to OEM Purchase Agreement by and between Okidata and Tridex, dated
May 31, 1996. (Pursuant to Rule 24b-2 under the Exchange Act, the Company has
requested confidential treatment of portions of this exhibit deleted from the
filed copy.)
11.1 Computation of earnings per share.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
TransAct Technologies Incorporated (the "Company"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at the January 23, 1997 meeting of the Board of Directors of
the Company, resolutions were duly adopted setting forth a proposed amendment
(the "Amendment") of the Certificate of Incorporation of said corporation,
declaring said Amendment to be advisable and directing that such Amendment be
considered at the annual meeting of the stockholders of the Company. The
resolution setting forth the proposed Amendment is as follows:
VOTED: That, subject to approval by the stockholders at the 1997 annual
meeting, the Certificate of Incorporation of the Company shall be amended by
adding a new Article 14, as follows:
14. Stockholders may take action only by a vote taken at a meeting held
pursuant to prior notice and may not act by written consent in lieu of a
meeting.
SECOND: That on May 1, 1997, at the annual meeting of the stockholders of
the Company, duly called and held, upon notice in accordance with Section 222 of
the General Corporation Law of the State of Delaware, a majority of the
outstanding shares voted in favor of the Amendment as required by statute.
THIRD: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said the Company has caused this certificate to be
signed by Bart C. Shuldman, its President, and Richard L. Cote, its Secretary,
this 16th day of May, 1997.
BY: /s/ Bart C. Shuldman
---------------------------
Bart C. Shuldman, President
ATTEST: /s/ Richard L. Cote
---------------------------
Richard L. Cote, Secretary
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.25
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is entered into as of the 1st
day of July, 1997, by and between David A. Ritchie, an individual with a
residence address of 540 Morning Mist Court, Alpharetta, Georgia 30202 (the
"Executive"), and TransAct Technologies Incorporated, a Delaware corporation
with a mailing address of 7 Laser Lane, Wallingford, Connecticut 06492 (the
"Company"). As used in this Agreement, the "Company" shall also include all
subsidiaries of the Company, as the context requires.
INTRODUCTION
1. The Company is in the business of designing, developing,
manufacturing and marketing printers for point of sale, gaming and wagering,
financial service and kiosk applications (the "Business").
2. The Company desires that the Executive continue to serve in his
position with the Company and that the Company be able to rely upon his advice
when requested as to the best interests of the Company, and its shareholders.
3. The Board of Directors of the Company believe Executive can best
serve the Company without the distractions of personal uncertainties and risks
that might be created in the event a change in control of the Company is
proposed or his employment by the Company is terminated.
AGREEMENT
In consideration of the premises and mutual promises herein below set
forth, the parties hereby agree as follows:
1. Definitions. The following terms shall have the meanings
indicated for the purposes of this Agreement:
(a) "Cause" shall mean: (i) the death or disability of the
Executive (For purposes of this Agreement, "disability" shall mean the
Executive's incapacity due to physical or mental illness which has caused the
Executive to be absent from the full-time performance of his duties with the
Company for a period of six (6) consecutive months.) (ii) any action or inaction
by the Executive that constitutes larceny, fraud, gross negligence, a willful or
negligent
<PAGE> 2
misrepresentation to the directors or officers of the Company, their
successors or assigns, a crime involving moral turpitude; or (iii) the refusal
of the Executive to follow the reasonable and lawful written instructions of the
President or the Board of Directors of the Company with respect to the services
to be rendered and the manner of rendering such services by Executive, provided
such refusal is material and repetitive and is not justified or excused either
by the terms of this Agreement or by actions taken by the Company in violation
of this Agreement, and with respect to the first two refusals Executive has been
given reasonable written notice and explanation thereof and reasonable
opportunity to cure and no cure has been effected within a reasonable time after
such notice.
(b) "Change in Control" will be deemed to have occurred if: (1)
the Company effectuates a Takeover Transaction; or (2) any election of directors
of the Company (whether by the directors then in office or by the stockholders
at a meeting or by written consent) where a majority of the directors in office
following such election are individuals who were not nominated by a vote of
two-thirds of the members of the Board of Directors immediately preceding such
election; or (3) the Company effectuates a complete liquidation of the Company
or a sale or disposition of all or substantially all of its assets. A "Change in
Control" shall not be deemed to include, however, a merger or sale of stock,
assets or business of the Company if the Executive immediately after such event
owns, or in connection with such event immediately acquires (other than in the
Executive's capacity as an equity holder of the Company or as a beneficiary of
its employee stock ownership plan or profit sharing plan), any stock of the
buyer or any affiliate thereof.
(c) A "Takeover Transaction" shall mean (i) a merger or
consolidation of the Company with, or an acquisition of the Company or all or
substantially all of its assets by, any other corporation, other than a merger,
consolidation or acquisition in which the individuals who were members of the
Board of Directors of the Company immediately prior to such transaction continue
to constitute a majority of the Board of Directors of the surviving corporation
(or, in the case of an acquisition involving a holding company, constitute a
majority of the Board of Directors of the holding company) for a period of not
less than twelve (12) months following the closing of such transaction, or (ii)
when any person or entity or group of persons or entities (other than any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company) either related or acting in concert becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
of securities of the Company representing more than fifty percent (50%) of the
total number of votes that may be cast for the election of directors of the
Company.
(d) "Terminating Event" shall mean: (i) termination by the
Company of the employment of the Executive for any reason other than retirement
or for Cause occurring within twelve (12) months of a Change of Control; or (ii)
resignation of the Executive from the
<PAGE> 3
employ of the Company, while the Executive is not receiving payments or benefits
from the Company by reason of the Executive's disability, subsequent to any of
the following events occurring within twelve (12) months of a Change of Control:
(A) a significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from the
responsibilities, authorities, powers, functions or duties exercised by the
Executive immediately prior to the Change in Control; (B) a decrease in the
salary payable by the Company to the Executive from the salary payable to the
Executive immediately prior to the Change in Control except for across-the-board
salary reductions similarly affecting all management personnel of the Company;
or (C) the relocation of the Company's facility at which the Executive is
currently employed by more than 50 miles from its current location (unless such
new location is closer than such facility to the Executive's then residence)
provided, however, that a Terminating Event shall not be deemed to have occurred
solely as a result of the Executive being an employee of any direct or indirect
successor to the business or assets of the Company, rather than continuing as an
employee of the Company, following a Change in Control; or (D) elimination or
reduction of the Executive's participation in the Company's Executive Incentive
Compensation Plan.
2. Severance.
(a) Without Cause. If the Company terminates the employment of
the Executive without Cause, other than as a result of a Terminating Event, then
commencing on the date of such termination and for a period of six (6) months
thereafter, the Company shall provide Executive with a severance package which
shall consist of the following: (i) payment on the first business day of each
month of an amount equal to one-twelfth of the Executive's then current annual
base salary; (ii) payment on the first business day of each month of an amount
equal to one-sixth of the Executive's annual target bonus amount under the
TransAct Executive Incentive Compensation Plan, pro rated for the portion of the
fiscal year occurring prior to termination; and (iii) continuation of all
benefits under Section 4.
(b) With A Terminating Event. If the Company terminates the
employment of the Executive as a result of a Terminating Event, then commencing
on the date of such termination and for a period equal to one (1) year
thereafter, the Company shall provide Executive with a severance package which
shall consist of the following: (i) payment on the first business day of each
month an amount equal to one-twelfth of the Executive's then current annual base
salary; (ii) payment on the first business day of each month of an amount equal
to one-twelfth of the Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan; and (iii) continuation of all benefits
under Section 4. In addition, if the Company terminates the employment of the
Executive as a result of a Terminating Event, then the Company shall cause the
immediate vesting of all options granted by the Company to the Executive under
the Company's stock plans. At any time when the
<PAGE> 4
Company is obligated to make monthly payments under Section 2(b), the Company
shall, ten (10) days after receipt of a written request from the Executive, pay
the Executive an amount equal to the balance of the amounts payable under
Section 2(b)(i)-(ii), provided that the obligation of the Company to continue to
provide benefits pursuant to Section 2(b)(iii) or to make monthly payments under
2(b)(i)-(ii) shall cease upon the payment of such amount.
(c) General Release. As a condition precedent to receiving any
severance payment, the Executive shall execute a general release of any and all
claims which Executive or his heirs, executors, agents or assigns might have
against the Company, its subsidiaries, affiliates, successors, assigns and their
past, present and future employees, officers, directors, agents and attorneys.
(d) Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Employer under applicable law.
3. Non-Competition. During Executive's employment with the
Company and the term of this Agreement and (a) in the case of termination other
than as a result of a Terminating Event, for six (6) months following the
termination of Executive's employment with the Company or (b) in the case of
termination as a result of a Terminating Event, for one (1) year following the
termination of Executive's employment with the Company, Executive will not
directly or indirectly whether as a partner, consultant, agent, employee,
co-venturer, greater than two percent owner or otherwise or through any other
person (as hereafter defined): (a) be engaged in any business or activity which
is competitive with the Business of the Company in any part of the world in
which the Company is at the time of the Executive's termination engaged in
selling their products directly or indirectly; or (b) attempt to recruit any
employee of the Company, assist in their hiring by any other person, or
encourage any employee to terminate his or her employment with the Company; or
(c) encourage any customer of the Company to conduct with any other person any
business or activity which such customer conducts or could conduct with the
Company. For purpose of this Section 3, the term "Company" shall include any
person controlling, under common control with or controlled by, the Company,
provided, however, that with respect to Tridex Corporation ("Tridex")and any
subsidiary of Tridex, the provisions of this Section 3 shall cease and be of no
force and effect on April 1, 1998.
For purposes of this Section 3, the term "Person" shall mean an
individual or corporation, association or partnership in estate or trust or any
other entity or organization.
The Executive recognizes and agrees that because a violation by him of
this Section 3 will cause irreparable harm to the Company that would be
difficult to quantify and for which
<PAGE> 5
money damages would be inadequate, the Company shall have the right to
injunctive relief to prevent or restrain any such violation, without the
necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of
this covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed. However,
should a determination nonetheless be made by a court of competent jurisdiction
at a later date that the character, duration or geographical scope of this
covenant not to compete is unreasonable in light of the circumstances as they
then exist, then it is the intention of both Executive and the Company that this
covenant not to compete shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of Executive which are reasonable
in light of the circumstances as they then exist and necessary to provide the
Company the intended benefit of this covenant to compete.
4. Confidentiality Covenants. Executive understands that the Company may
impart to him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans, product
development information and the like (collectively "Confidential Information").
Executive hereby acknowledges Company's exclusive ownership of such Confidential
Information.
Executive agrees as follows: (1) only to use the Confidential
Information to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents and representatives of the
Company on a need-to-know basis; and (3) not to otherwise disclose or use any
Confidential Information. Upon demand by the Company or upon termination of
Executive's employment, Executive will deliver to the Company all manuals,
photographs, recordings, and any other instrument or device by which, through
which, or on which Confidential Information has been recorded and/or preserved,
which are in Executive's possession, custody or control. Executive acknowledges
that for purposes of this Section 4 the term "Company" means any person or
entity now or hereafter during the term of this Agreement which controls, is
under common control with, or is controlled by, the Company.
The Executive recognizes and agrees that because a violation by him of
this Section 4 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond.
5. Governing Law/Jurisdiction. This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered into in
Connecticut and each party hereby consents to
<PAGE> 6
the jurisdiction of a competent court in Connecticut to hear any dispute arising
out of this Agreement.
6. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
7. Notices. All notices, requests, demands and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or certified
mail, return receipt requested.
(a) to the Company at:
7 Laser Lane
Wallingford, Connecticut 06492
Attn: President
(b) to the Executive at:
540 Morning Mist Court
Alpharetta, GA 30202
Any such notice or other communication will be considered to have been
given (i) on the date of delivery in person, (ii) on the third day after mailing
by certified mail, provided that receipt of delivery is confirmed in writing,
(iii) on the first business day following delivery to a commercial overnight
courier or (iv) on the date of facsimile transmission (telecopy) provided that
the giver of the notice obtains telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
8. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such terms to the persons or under circumstances other than those as to which
it is invalid or unenforceable, shall be considered severable and shall not be
affected thereby, and each term of this Agreement shall be valid and enforceable
to the fullest extent permitted by law. The invalid or unenforceable provisions
<PAGE> 7
shall, to the extent permitted by law, be deemed amended and given such
interpretation as to achieve the economic intent of this Agreement.
9. Waiver. The failure of any party to insist in any one instance or
more upon strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as a
waiver of such terms, conditions, rights or privileges, but same shall continue
to remain in full force and effect. Any waiver by any party of any violation of,
breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon the
Company and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TRANSACT TECHNOLOGIES INCORPORATED
By: /s/ Bart C. Shuldman
-----------------------------------
Title: President and Chief
Executive Officer
EXECUTIVE:
/s/ David A. Ritchie
-----------------------------------
David A. Ritchie
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.26
CREDIT AGREEMENT
Dated as of January 29, 1998
among
TRANSACT TECHNOLOGIES INCORPORATED,
MAGNETEC CORPORATION
and
FLEET NATIONAL BANK
CREDIT AGREEMENT dated as of January 29, 1998 among TRANSACT
TECHNOLOGIES INCORPORATED, a Delaware corporation ("TransAct"), MAGNETEC
CORPORATION, a Connecticut corporation ("Magnetec") (collectively, the
"Borrowers" and each, individually a "Borrower"), and FLEET NATIONAL BANK, a
national banking association organized under the laws of the United States of
America (the "Bank").
WHEREAS, the Borrowers desire that the Bank extend credit as
provided herein and the Bank is prepared to extend such credit; and
WHEREAS, the Borrowers are and will be operated on an
integrated basis in connection with their respective financial resources and
each of the Borrowers will receive direct and indirect economic and financial
benefits from the credit to be extended under this Agreement, and each of the
Borrowers acknowledges that the Bank would not provide the financing hereunder
but for the joint and several obligations of each such Borrower hereunder with
respect to all such indebtedness incurred hereunder.
NOW THEREFORE, in consideration of the foregoing, which is
incorporated by reference, and other valuable consideration, receipt of which is
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS
Section 1.1. Definitions. As used in this Agreement, the following terms have
the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
"Acceptable Acquisition" means any Acquisition: (i) which has
been either (A) approved by the Board of Directors of the corporation, or
governing body of any other business entity, which is the subject of such
Acquisition or (B) recommended by such Board or governing body to the
shareholders of such corporation or equity owners of such other business entity;
and (ii) with respect to which the following conditions are satisfied:
(a) no Default or Event of Default exists or
would result from such Acquisition;
(b) the company or assets acquired involve
substantially the same or similar line of business as the Borrowers;
(c) the Borrowers demonstrate that, on a
combined basis with the acquired assets and/or entity, in accordance with GAAP,
they would have been in compliance with the financial covenants contained in
Article 8 on a trailing four quarters pro forma basis as of the end of the
immediately preceding fiscal quarter; and will be in
<PAGE> 2
such compliance prospectively on a pro forma basis for the next succeeding four
fiscal quarters;
(d) the Borrowers remain as surviving entities;
(e) the total consideration for such Acquisition
(not including reasonable fees and expenses payable by the Borrower in
connection therewith) does not exceed $4,000,000; and
(f) the Bank obtains a perfected security
interest in the acquired assets or in the assets of the acquired company,
subject only to Liens permitted by Section 7.3 hereof.
"Acquisition" means any transaction pursuant to which any
Borrower (a) acquires greater than 5% of the equity securities (or warrants,
options or other rights to acquire such securities) of any Person, (b) causes or
permits any Person to be merged into any Borrower, in any case pursuant to a
merger, purchase of assets or any reorganization providing for the delivery or
issuance to the holders of such Person's then outstanding securities, in
exchange for such securities, of cash or securities of any Borrower, or a
combination thereof, or (c) purchases all or substantially all of the business
or assets of any Person.
"Acquisition Commitment" means the obligation of the Bank to
make the Acquisition Loans under this Agreement in the aggregate principal
amount of up to $10,000,000, as such amount may be reduced or otherwise modified
from time to time.
"Acquisition Loans" shall have the meaning set forth in
Section 2.1(b) herein, and includes both (i) the revolving loans made pursuant
to the Acquisition Commitment during the period prior to the Revolving Credit
Termination Date and (ii) the Term Loan into which such revolving loans are
converted pursuant to Section 2.1(c), thereafter.
"Acquisition Note" means the promissory note of the Borrowers
in the form of Exhibit A1 hereto evidencing the Acquisition Loans made by the
Bank hereunder and all promissory notes delivered in substitution or exchange
therefor, as amended or supplemented from time to time.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any Borrower or
any of their respective Subsidiaries; (b) which directly or indirectly
beneficially owns or holds five percent or more of any class of voting stock of
any Borrower or any of their respective Subsidiaries; (c) five percent or more
of the voting stock of which is directly or indirectly beneficially owned or
held by any Borrower or any of their respective Subsidiaries; or (d) which is a
partnership in which any Borrower or any of their respective Subsidiaries is a
general
<PAGE> 3
partner. The term "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.
"Agreement" means this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections, Exhibits,
Schedules and the like refer to the Articles, Sections, Exhibits, Schedules and
the like of this Agreement unless otherwise indicated.
"Amortization Date" means the last day of each calendar
quarter, commencing on the first such day occurring after the Revolving Credit
Termination Date, up to (and including) the Termination Date, provided that if
any such day is not a Banking Day, such day shall be the next succeeding Banking
Day.
"Banking Day" means, a day on which commercial banks settle payments in (i) New
York or London if the payment obligation is calculated by reference to any LIBO
Rate, or (ii) New York, if the payment obligation is calculated by reference to
the Prime Rate.
"Borrowing" means any Loan requested by any Borrower hereunder.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" means any one or more of the following
events:
(a) the failure by Bart Shuldman or Richard Cote to
remain active in the day to day senior management of TransAct; or
(b) the stockholders of any Borrower shall approve a
plan or proposal for the acquisition of, merger, liquidation or dissolution of
such Borrower, or a sale of more than 25% of its assets in one or a series of
related transactions; or
(c) a Person or group of Persons acting in concert
(other than the direct or indirect beneficial owners of the capital stock of any
Borrower as of the date of this Agreement) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from
time to time) of securities of such Borrower representing 15% or more of the
combined voting power of the outstanding voting securities for the election of
directors or shall have the right to elect a majority of the board of directors
of such Borrower.
"Closing Date" means the date this Agreement has been executed
by the Borrowers and the Bank.
<PAGE> 4
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitments" means the Acquisition Commitment and the Working
Capital Commitment.
"Consolidated Subsidiary" means any Subsidiary whose accounts
are or are required to be consolidated with the accounts of a Person in
accordance with GAAP.
"Current Assets" of any Person at any time means all cash,
Receivables and Inventory of such Person.
"Current Funded Bank Debt" means, with respect to any Person,
all Debt of such Person for money borrowed, other than Subordinated Debt.
"Current Liabilities" means all liabilities of a Person
treated as current liabilities in accordance with GAAP, including without
limitation (a) all obligations payable on demand or within one year after the
date in which the determination is made and (b) installment and sinking fund
payments required to be made within one year after the date on which
determination is made, but excluding all such liabilities or obligations which
are renewable or extendible at the option of such Person to a date more than one
year from the date of determination.
"Debt" means, with respect to any Person: (a) indebtedness of
such Person for borrowed money; (b) indebtedness for the deferred purchase price
of property or services (except trade payables in the ordinary course of
business); (c) Unfunded Benefit Liabilities of such Person; (d) the face amount
of any outstanding letters of credit issued for the account of such person; (e)
obligations arising under acceptance facilities; (f) guaranties, endorsements
(other than for collection in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person, or otherwise to assure a creditor against loss,
including any contingent obligations under swaps, derivatives, currency
exchanges and similar transactions; (g) obligations secured by any Lien on
property of such Person; and (h) obligations of such Person as lessee under
Capital Leases.
"Default" means any event which with the giving of notice or
lapse of time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any
Loan and, to the extent permitted by law, any other amount payable by the
Borrowers under this Agreement or the Notes that is not paid when due (whether
at stated maturity, by acceleration or otherwise), a rate per annum during the
period from and including the due date, to, but excluding the date on which such
amount is paid in full equal to four percentage points above the Prime Rate as
in effect from time to time plus the applicable Margin (provided
<PAGE> 5
that, if the amount so in default is principal of a LIBOR Loan and the due date
thereof is a day other than the last day of the Interest Period therefor, the
"Default Rate" for such principal shall be, for the period from and including
the due date and to but excluding the last day of the Interest Period therefor,
4% above the interest rate for such Loan as provided in Section 2.10 hereof and,
thereafter, the rate provided for above in this definition).
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"EBIT" means, for any Person, for any period, earnings before
Interest Expense and taxes for such Person determined in accordance with GAAP.
"EBITDA" means, for any Person, for any period, earnings
before Interest Expense, taxes, depreciation, amortization and extraordinary
items for such Person determined in accordance with GAAP.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of any group of organizations (i) described in section 414(b)
or (c) of the Code of which any Borrower is a member, or (ii) solely for
purposes of potential liability under section 302(c)(11) of ERISA and section
412(c)(11) of the Code and the lien created under section 302(f) of ERISA and
section 412(n) of the Code, described in section 414(m) or (o) of the Code of
which any Borrower is a member.
"Event of Default" has the meaning given such term in Section
9.1.
"Facility Documents" means this Agreement, the Notes, the
Subordination Agreement, the Security Agreement and each of the documents,
certificates or other instruments referred to in Article 4 hereof as well as any
other document, instrument or certificate to be delivered by the Borrowers in
connection with this Agreement or in
<PAGE> 6
connection with the documents, certificates or instruments referred to in
Article 4, including documents delivered in connection with any Borrowing.
"Fixed Charge Coverage Ratio" means, with respect to any
Person, for any period, the ratio of (i) EBITDA minus taxes paid, dividends paid
and any capital expenditures, to (ii) current maturities of long term Debt, plus
Interest Expense, for such period.
"Forfeiture Proceeding" means any action, proceeding or
investigation affecting the Parent or any of its Subsidiaries or Affiliates
before any court, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or the receipt of notice by any such party
that any of them is a suspect in or a target of any governmental inquiry or
investigation, which may result in an indictment of any of them or the seizure
or forfeiture of any of their property.
"Funded Debt" means, with respect to any Person, all Debt
(senior and subordinated) of such Person for money borrowed, including Capital
Lease obligations.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the financial statements
referred to in Section 5.5 (except for changes concurred in by the Borrowers'
independent public accountants).
"Interest Coverage Ratio" means, with respect to any Person,
for any period, the ratio of (i) EBIT to (ii) Interest Expense for such period.
"Interest Expense" shall mean, with respect to any Person, for
any period, the sum, for such Person in accordance with GAAP, of (a) all
interest on Debt that is accrued as an expense during such period (including,
without limitation, imputed interest on Capital Lease obligations), plus (b) all
amounts paid, accrued or amortized as an expense during such period in respect
of interest rate protection agreements, minus (c) all amounts received or
accrued as income during such period in respect of interest rate protection
agreements.
"Interest Period" means with respect to any LIBOR Loan, the
period commencing on the date such Loan is made, converted from another type of
Loan or renewed, as the case may be, and ending, as the Borrowers may select
pursuant to Section 2.11, on the numerically corresponding day in the first,
second, third, sixth (or if available through the Bank, the ninth or twelfth)
calendar month thereafter, provided that each such Interest Period which
commences on the last Banking Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Banking Day of the appropriate calendar month.
<PAGE> 7
"Inventory" means all inventory, now or hereafter owned and
wherever located, of the Borrowers, including (without limitation) raw
materials, work-in-process, finished goods, supplies and packaging materials.
"Lending Office" means the lending office of the Bank set
forth on the signature page.
"LIBO Rate" means, as applicable to any LIBOR Loan, the rate
per annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S. dollars, for a
period of time comparable to such LIBOR Loan which appears on the Telerate page
3750 as of 11:00 a.m. London time on the day that is two London Banking Days
preceding the first day of 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 rate shall be the rate (rounded upwards
as described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period 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 Banking Days prior to the beginning of such interest period.
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 U.S. dollars for a period of time comparable to such LIBOR Loan
which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of such LIBOR Loan as selected by the Bank. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable 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 its two London Banking Days preceding
the first day of such LIBOR Loan. In the event that Bank is unable to obtain any
such quotation as provided above, it will be deemed that LIBOR pursuant to a
LIBOR Loan cannot be determined.
In the event that the Board of Governors of the Federal
Reserve System shall impose a Reserve Requirement with respect to LIBOR deposits
of the Bank then for any period during which such Reserve Requirement shall
apply, LIBO Rate shall be equal to the amount determined above divided by an
amount equal to 1 minus the Reserve Requirement.
<PAGE> 8
"LIBOR Loan" means any Loan when and to the extent the
interest rate therefor is determined on the basis of the definition "LIBO Rate."
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, priority, pledge, negative pledge, charge,
conditional sale, title retention agreement, financing lease or other
encumbrance or similar right of others, or any agreement to give any of the
foregoing.
"Loan" means any of the Acquisition Loans or the Working
Capital Loans, and "Loans" means the Acquisition Loans and the Working Capital
Loans.
"Margin" means the percentage points to be added to the Bank's
Prime Rate or the then applicable LIBOR Rate, in each case based upon the
following performance criteria:
<TABLE>
<CAPTION>
Total Consolidated Funded Debt/EBITDA LIBOR Margin Prime Rate Margin
of the Borrowers (Percentage Points) (Percentage Points)
<S> <C> <C>
Greater than 2.00 1.75 0.00
Greater than 1.00, but less than or equal to 2.00 1.50 0.00
Less than or equal to 1.00 1.25 0.00
</TABLE>
"Multiemployer Plan" means a Plan defined as such in section
3(37) of ERISA to which contributions have been made by the Borrowers or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income (Loss)" of any Person for any period means the net
income (loss) of such Person for such period determined in accordance with GAAP.
"Net Income Increase" means, for any period, the aggregate of
fifty percent (50%) of the Borrowers' Net Income, on a consolidated basis, in
respect of such period.
"Notes" means the Acquisition Note and the Working Capital
Note.
"Notice of Borrowing" shall mean the notice of each Borrowing
described in Section 2.8 and in the form of Exhibit E hereto.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
<PAGE> 9
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by any Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Prime Rate" means that rate of interest from time to time
announced by the Bank at its office located at 111 Westminster Street,
Providence, Rhode Island 02903, which rate may not be the Bank's lowest or best
rate.
"Prime Rate Loan" means any Loan when and to the extent the
interest rate therefor is determined in relation to the Prime Rate.
"Receivables" means all accounts owing to a Person arising out
of or in connection with the bona fide sale or lease of goods or services in the
ordinary course of business.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulatory Change" means any change after the date of this
Agreement in United States federal, state, municipal or foreign laws or
regulations (including without limitation Regulation D) or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including the Bank of or under any United States, federal,
state, municipal or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reserve Requirement" means, for any Interest Period for any
LIBOR Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in Boston with deposits exceeding $1,000,000,000 against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the LIBO Rate for LIBOR Loans is to be determined as provided
in the definition of "LIBO Rate" in this Section 1.1 or (ii) any category of
extensions of credit or other assets which include LIBOR Loans.
<PAGE> 10
"Revolving Credit Termination Date" means June 30, 1999;
provided that if such date is not a Banking Day, the Revolving Credit
Termination Date shall be the next succeeding Banking Day (or, if such next
succeeding Banking Day falls in the next calendar month, the next preceding
Banking Day) or (b) the earlier date of termination of the Commitments pursuant
to Section 9.2.
"Revolving Loan" means any loan made by the Bank pursuant to
Sections 2.1(a) or 2.1(b).
"Security Agreement" means the security agreement dated as of
the Closing Date by the Borrowers in favor of the Bank, in substantially the
form of Exhibit C.
"Senior Liabilities" means for any Person at any time, all
Debt, other than contingent liabilities and Subordinated Debt.
"Subordinated Debt" means Funded Debt of a Person subordinated
to the Loans on terms satisfactory to the Bank.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which at least a majority of the securities or
other ownership interests having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by such Person.
"Tangible Net Worth" means, at any date of determination
thereof, the excess of total assets of a Person over total liabilities of such
Person, excluding, however, from the determination of total assets: loans and
advances to officers and non-consolidated Affiliates, goodwill, trademarks,
patents, organizational costs, unamortized debt discounts and expenses and other
like intangible assets as defined by GAAP.
"Term Loan" shall have the meaning set forth in Section
2.1(c).
"Termination Date" means June 30, 2003; provided that if such
date is not a Banking Day, the Termination Date shall be the next succeeding
Banking Date.
"Total Liabilities" means all liabilities of a Person which
would be classified as such on a balance sheet in accordance with GAAP.
"Unfunded Benefit Liabilities" means, with respect to any
Plan, the amount (if any) by which the present value of all benefit liabilities
(within the meaning of section 4001(a)(16) of ERISA) under the Plan exceeds the
fair market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrowers
or any ERISA Affiliate under Title IV of ERISA.
<PAGE> 11
"Working Capital Commitment" means the obligation of the Bank
to make the Working Capital Loans under this Agreement in the aggregate
principal amount of up to $5,000,000, as such amount may be limited or reduced
pursuant to Article 2 or otherwise modified from time.
"Working Capital Loans" shall have the meaning set forth in
Section 2.1(a) herein.
"Working Capital Note" means the promissory note of the
Borrowers in the form of Exhibit A2 hereto evidencing the Working Capital Loans
made by the Bank hereunder and all promissory notes delivered in substitution or
exchange therefor, as amended or supplemented from time to time.
Section 1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
required to be delivered hereunder shall be prepared in accordance with GAAP.
Section 1.3. Currency Equivalents. For all purposes of this Agreement, all
amounts denominated in a currency other than Dollars shall be converted into the
Dollar equivalent of such amounts. The equivalent in another currency of an
amount in Dollars shall be determined at the rate of exchange quoted by Fleet
National Bank in Boston at 9:00 a.m. (Boston time) on the date of determination,
to prime banks in Boston for the spot purchase in the Boston foreign exchange
market of such amount of Dollars with such other currency.
ARTICLE 2. THE CREDIT
Section 2.1. The Loans.
(a) Subject to the terms and conditions of this
Agreement, the Bank agrees to make revolving loans (the "Working Capital Loans")
to the Borrowers from time to time from and including the date hereof to and
including the Revolving Credit Termination Date, up to but not exceeding in the
aggregate principal amount at any one time outstanding the amount of the Working
Capital Commitment. The Working Capital Loans may be outstanding as Prime Rate
Loans or LIBOR Loans (each a "type" of Loan). The Working Capital Loans shall be
due and payable on the Revolving Credit Termination Date. Each type of Loan
shall be made and maintained at the Bank's Lending Office for such type of Loan.
(b) Subject to the terms and conditions of this
Agreement, the Bank agrees to make revolving loans (the "Acquisition Loans") to
the Borrowers from time to time from and including the date hereof to and
including the Revolving Credit Termination Date, up to but not exceeding in the
aggregate principal amount at any one time outstanding the amount of the
Acquisition Commitment. The Acquisition Loans may
<PAGE> 12
be outstanding as Prime Rate Loans or LIBOR Loans (each a "type" of Loan). The
Acquisition Loans will be due and payable on the Revolving Credit Termination
Date unless the Borrowers exercise their option under Section 2.1(c) herein.
Each type of Loan shall be made and maintained at the Bank's Lending Office for
such type of Loan.
(c) At the option of the Borrowers, to be
exercised by giving written notice to the Bank not later than 30 days prior to
the Revolving Credit Termination Date, the Borrower shall have the right to
convert the revolving Acquisition Loans to a term loan (the "Term Loan") which
shall then be payable in equal consecutive quarterly principal payments, plus
accrued interest thereon, on each Amortization Date, commencing September 30,
1999, calculated to amortize the loan over a four year period, with a final
payment due on the Termination Date.
Section 2.2. The Notes. The Working Capital Loans shall be evidenced by a
promissory note in favor of the Bank in the form of Exhibit A-2, dated the date
of this Agreement, duly completed and executed by the Borrowers. The Acquisition
Loans shall be evidenced by a promissory note in favor of the Bank in the form
of Exhibit A-1, dated the date of this Agreement, duly completed and executed by
the Borrowers.
Section 2.3. Purpose. The Borrowers shall use the proceeds of the Working
Capital Loans for general corporate purposes, including working capital,
leasehold improvements and equipment needs, but not for any Acquisitions. The
Borrowers shall use the proceeds of the Acquisition Loans for Acceptable
Acquisitions and to repurchase shares of the common stock of TransAct in
open-market transactions. No proceeds of the Loans shall be used to directly or
indirectly fund the needs of any Subsidiary of any Borrower if such Subsidiary
is not also a Borrower hereunder. No proceeds of the Loans shall be used for the
purpose, whether immediate, incidental or ultimate, of buying or carrying
"margin stock" within the meaning of Regulation U.
Section 2.4. Borrowing Procedures. The Borrowers shall give the Bank notice of
each Borrowing to be made hereunder as provided in Section 2.8. Not later than
1:00 p.m. Hartford, Connecticut time on the date of such Borrowing, the Bank
shall, subject to the conditions of this Agreement, make the amount of the Loan
to be made by it on such day available to the Borrowers, in immediately
available funds, by the Bank crediting an account of the Borrowers designated by
the Borrowers and maintained with the Bank at the Lending Office.
Section 2.5. Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The
Borrowers shall have the right to make prepayments of principal, or to convert
one type of Loan into another type of Loan, at any time or from time to time;
provided that: (i) the Borrowers shall give the Bank notice of each such
prepayment or conversion as provided in Section 2.8; and (ii) LIBOR Loans may be
prepaid or converted only on the last day of an Interest Period
<PAGE> 13
for such Loans, and (iii) prepayments made after the Revolving Credit
Termination Date in respect of the Term Loan shall be applied to the
installments of principal in the inverse order of their maturities. Amounts
prepaid after the Revolving Credit Termination Date may not be reborrowed.
(b) Mandatory Prepayments. The Borrowers shall
immediately repay the excess by which (i) the aggregate principal amount of all
outstanding Working Capital Loans exceeds the Working Capital Commitment, (ii)
the aggregate principal amount of all outstanding Acquisition Loans exceeds the
Acquisition Commitment, and (iii) Current Funded Bank Debt exceeds the amount
otherwise required for compliance with the collateral coverage covenant in
Section 8.6 hereof. In addition, amounts outstanding as Loans will be reduced by
100% of the net cash proceeds from any sale by either of the Borrowers of any
material assets outside of the normal course of business or from any new
issuances of stock otherwise permitted under this Agreement. In addition, upon
the occurrence of any Change of Control, the Borrowers shall immediately, at the
option of and upon demand by the Bank, repay all outstanding amounts under the
Loans. Each such prepayment in accordance with the foregoing provisions shall be
applied first to any expensed incurred by the Bank, second to any interest due
on the amount prepaid, and last to the outstanding principal amount of the Loans
prepaid, in each case in such manner as the Bank in its discretion shall
determine.
(c) Yield Maintenance Fee. If, at any time (i)
the interest rate on any Loan is a fixed rate, and (ii) the Bank in its sole
discretion should determine that current market conditions can accommodate a
prepayment request, Borrowers shall have the right at any time and from time to
time to prepay the Loan in whole (but not in part), and Borrowers shall pay to
the Bank a yield maintenance fee in an amount computed as follows: The current
rate for United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the maturity
date of the term chosen pursuant to the Fixed Rate Election as to which the
prepayment is made, shall be subtracted from the "cost of funds" component of
the fixed rate in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by the amount
of the principal balance being prepaid. The resulting amount shall be devided by
360 and multiplied by the number of the days remaining in the term chosen
pursuant to the Fixed Rate Election as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury security rate and the number of days remaining in the term chosen shall
be the yield maintenance fee due to the Bank upon prepayment of the fixed rate
Loan. Each reference in this paragraph to "Fixed Rate Election" shall mean the
election by Borrowers pursuant to Section 2.11 hereof.
<PAGE> 14
If by reason of an Event of Default the Bank elects
to declare such Loan to be immediately due and payable, then any yield
maintenance fee with respect to the Loan shall become due and payable in the
same manner as though Borrowers had exercised such right of prepayment.
Section 2.6. Late Charges. Payments not received within 10 days of the due date
therefor will be subject to a one-time charge equal to 5% of the amount overdue.
Section 2.7. Changes of Commitment. The Borrowers shall have the right to reduce
or terminate the amount of the unused portion of either of the Commitments at
any time or from time to time, provided that: (i) the Borrowers shall give
notice of each such reduction or termination to the Bank as provided in Section
2.8; and (ii) each partial reduction shall be in an aggregate amount at least
equal to $500,000 (and integral multiples of $100,000 in excess thereof). Once
reduced or terminated, such Commitment may not be reinstated.
Section 2.8. Certain Notices. Notices by the Borrowers to the Bank of each
Borrowing pursuant to Section 2.4, and each prepayment or conversion pursuant to
Section 2.5(a), and each reduction or termination of a Commitment pursuant to
Section 2.7 shall be irrevocable and shall be effective only if received by the
Bank not later than 12:00 noon Hartford, Connecticut time, and (a) in the case
of Borrowings and prepayments of, conversions into and (in the case of LIBOR
Loans) renewals of (i) Prime Rate Loans, given one Banking Day prior thereto;
and (ii) LIBOR Loans, given two Banking Days prior thereto; and (b) in the case
of reductions or termination of the Commitments, given three Banking Days prior
thereto. Each such Notice of Borrowing shall be in the form of Exhibit E hereto
and shall specify the Loans to be borrowed, prepaid, converted or renewed and
the amount (subject to Section 2.9) and type of the Loans to be borrowed, or
converted, or renewed or prepaid and the date of the Borrowing or prepayment, or
conversion or renewal (which shall be a Banking Day). Each such notice of
reduction or termination shall specify the amount of the Commitment to be
reduced or terminated.
Section 2.9. Minimum Amounts. Except for Borrowings which exhaust the full
remaining amount of the unused portion of either of the Commitments or
prepayments or conversions which result in the prepayment or conversion of all
Loans, as the case may be, of a particular type, each Borrowing, optional
prepayment, conversion and renewal of principal of Loans of a particular type
shall be in an amount at least equal to (a) $100,000 with respect to Prime Rate
Loans, and (b) $500,000 and integral multiples of $100,000 in excess thereof
with respect to LIBOR Loans (borrowings, prepayments, conversions or renewals of
or into Loans of different types or, in the case of LIBOR Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, prepayments, conversions and renewals for the purposes of the
foregoing, one for each type of Interest Period).
<PAGE> 15
Section 2.10. Interest.
(a) Interest shall accrue on the outstanding and
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan is due at the following rates
per annum: (i) for Prime Rate Loans, at a variable rate per annum equal to the
Prime Rate plus the Margin and; (ii) for LIBOR Loans, at a fixed rate equal to
the LIBO Rate plus the Margin, for the period from and including the first day
of the Interest Period therefore to but excluding the last day of such Interest
Period. If the principal amount of any Loan and any other amount payable by the
Borrowers hereunder or under the Notes shall not be paid when due (at stated
maturity, by acceleration or otherwise), interest shall accrue on such amount to
the fullest extent permitted by law from and including such due date to but
excluding the date such amount is paid in full at the Default Rate for such type
of Loan.
(b) The interest rate on Prime Rate Loans shall
change when the Prime Rate changes and interest on each such Loan shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed. Interest on each LIBOR Loan shall be calculated on the basis of a year
of 360 days for the actual number of days elapsed.
(c) Accrued interest on all types of Loans shall be
due and payable in arrears upon any payment of principal and on the last day of
each calendar month, commencing February 28, 1998, and on the Revolving Credit
Termination Date, and on the Termination Date; provided that interest accruing
at the Default Rate shall be due and payable from time to time on demand of the
Bank.
Section 2.11. Interest Periods; Renewals.
(a) In the case of each LIBOR Loan, the Borrowers
shall select an Interest Period of any duration in accordance with the
definition of Interest Period in Section 1.1, subject to the following
limitations: (i) no Interest Period may extend beyond the Revolving Credit
Termination Date, except with respect to the Term Loan for which no Interest
Period may extend beyond an Amortization Date unless, after giving effect
thereto, the aggregate principal amount of the LIBOR Loans having Interest
Periods which end after such Amortization Date shall be equal to or less than
the principal amount to be outstanding hereunder after such Amortization Date;
(iii) notwithstanding clauses (i) and (ii) above, no Interest Period shall have
a duration less than one month, and if any such proposed Interest Period would
otherwise be for a shorter period, such Interest Period shall not be available;
(iv) if an Interest Period would end on a day which is not a Banking Day, such
Interest Period shall be extended to the next Banking Day; and (v) no more than
five Interest Periods may be outstanding at any one time.
(b) Upon notice to the Bank as provided in Section
2.8, the Borrowers may renew any LIBOR Loan on the last day of the Interest
Period therefor as the same type of Loan with an Interest Period of the same or
different duration in
<PAGE> 16
accordance with the limitations provided above. If the Borrowers shall fail to
give notice to the Bank of such a renewal, such LIBOR Loan shall automatically
become a Prime Rate Loan on the last day of the current Interest Period.
Section 2.12. Fees.
(a) Commitment Fee. During the period ending on the
Revolving Credit Termination Date, there will be a per annum commitment fee
payable on the average unused daily availability under each Commitment, payable
quarterly in arrears on the first Banking Day after the end of each quarter and
calculated on a 360 day year for actual days elapsed. The commitment fee rate
will vary based on the then prevailing ratio of total consolidated Funded Debt
to EBITDA of the Borrowers (the applicable ratio for such quarter will be the
ratio determined as of the last day of the previous quarter for the twelve month
period then ended), as follows:
Total Consolidated Funded Debt/EBITDA
of the Borrowers
Commitment Fee
Greater than 2.00 0.50%
Greater than 1.00, but less than or equal to 2.00 0.375%
Less than or equal to 1.00 0.25%
(b) Facility Fee. The Borrowers shall pay to the
Bank, on the Closing Date, $12,500, representing the unpaid balance of the
$25,000 facility fee in respect of the Acquisition Commitment.
Section 2.13. Payments Generally. All payments under this Agreement or the Notes
shall be made in Dollars in immediately available funds not later than 1:00 p.m.
Hartford, Connecticut, time on the relevant dates specified above (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Banking Day) at the Lending Office of the Bank. The Bank may
(but shall not be obligated to) debit the amount of any such payment which is
not made by such time to any ordinary deposit account of the Borrowers with the
Bank. Until the Bank and the Borrowers otherwise agree, the Bank shall debit the
Borrowers' account number 9368994710 with the Bank for the amount of any payment
required hereunder, but the Bank may also debit any ordinary deposit account of
the Borrowers if the amount in account number 9368994710 is insufficient to make
any required payment. The Borrowers shall, at the time of making each payment
under this Agreement or the Notes, specify to the Bank the principal or other
amount payable by the Borrowers under this Agreement or the Note to which such
payment is to be applied (and in the event that it fails to so specify, or if a
Default or Event of Default has occurred and is continuing, the Bank may apply
<PAGE> 17
such payment as it may elect in its sole discretion). If the due date of any
payment under this Agreement or the Notes would otherwise fall on a day which is
not a Banking Day, such date shall be extended to the next succeeding Banking
Day and interest shall be payable for any principal so extended for the period
of such extension.
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1. Additional Costs.
(a) The Borrowers shall pay to the Bank from time to
time on demand such amounts as the Bank may determine to be necessary to
compensate it for any costs which the Bank determines are attributable to its
making or maintaining any LIBOR Loans under this Agreement or the Notes or its
obligation to make any such Loans hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any such Loans or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to the Bank under this
Agreement or the Notes in respect of any of such Loans (other than taxes imposed
on the overall net income of the Bank or of its Lending Office for any of such
Loans by the jurisdiction in which the Principal Office or such Lending Office
is located); or (ii) imposes or modifies any reserve, special deposit, deposit
insurance or assessment, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, the Bank (including any of such Loans or any deposits
referred to in the definition of "LIBO Rate" in Section 1.1); or (iii) imposes
any other condition affecting this Agreement or the Notes (or any of such
extensions of credit or liabilities). The Bank will notify the Borrowers of any
event occurring after the date of this Agreement which will entitle the Bank to
compensation pursuant to this Section 3.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing
provisions of this Section 3.1, in the event that, by reason of any Regulatory
Change, the Bank either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of the Bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of the Bank which includes
LIBOR Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Bank so elects
by notice to the Borrowers, the obligation of the Bank to make or renew, and to
convert Loans of any other type into, Loans of such type hereunder shall be
suspended until the date such Regulatory Change ceases to be in effect, and the
Borrowers shall on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of such type, either prepay such Loans or convert such
Loans into another type of Loan in accordance with Section 2.5.
<PAGE> 18
(c) Without limiting the effect of the foregoing
provisions of this Section 3.1 (but without duplication), the Borrowers shall
pay to the Bank from time to time on request such amounts as the Bank may
determine to be necessary to compensate the Bank for any costs which it
determines are attributable to the maintenance by it or any of its affiliates
pursuant to any law or regulation of any jurisdiction or any interpretation,
directive or request (whether or not having the force of law and whether in
effect on the date of this Agreement or thereafter) of any court or governmental
or monetary authority of capital in respect of its Loans hereunder or its
obligation to make Loans hereunder (such compensation to include, without
limitation, an amount equal to any reduction in return on assets or equity of
the Bank to a level below that which it could have achieved but for such law,
regulation, interpretation, directive or request). The Bank will notify the
Borrowers if it is entitled to compensation pursuant to this Section 3.1(c) as
promptly as practicable after it determines to request such compensation.
(d) Determinations and allocations by the Bank for
purposes of this Section 3.1 of the effect of any Regulatory Change pursuant to
subsections (a) or (b), or of the effect of capital maintained pursuant to
subsection (c), on its costs of making or maintaining Loans or its obligation to
make Loans, or on amounts receivable by, or the rate of return to, it in respect
of Loans or such obligation, and of the additional amounts required to
compensate the Bank under this Section 3.1, shall be conclusive, provided that
such determinations and allocations are made on a reasonable basis; provided,
however, that the Bank shall provide ninety days' notice of any additional
amounts required to compensate the Bank under this Section 3.1 (the
"Adjustment"), and the Borrowers may thereafter attempt to negotiate the amount
of the Adjustment in good faith with the Bank within ninety days of the day on
which the Borrowers are so notified. If the Borrowers and the Bank are unable to
agree on the amount of the Adjustment within such ninety-day period, then the
amount of the Adjustment shall be the amount set forth in the aforementioned
notice from the Bank to the Borrowers. Whatever the final Adjustment may be, if
the Bank shall still have any Loans outstanding to the Borrowers upon the
expiration of such ninety-day period, then the Adjustment shall be effective
retroactive to the date on which the Borrowers first received notice of the
Adjustment. The Bank shall not be obligated to offer LIBO Rates with respect to
Interest Periods commencing during the period following any such notice and
prior to agreement by the Bank and the Borrowers as to the amount of the
Adjustment.
Section 3.2. Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if the Bank determines (which determination shall be
conclusive) that:
(a) quotations of interest rates for the relevant
deposits referred to in the definition of "LIBO Rate" in Section 1.1 are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for any LIBOR Loans as provided in
this Agreement; or
<PAGE> 19
(b) the relevant rates of interest referred to in the
definition of "LIBO Rate" in Section 1.1 upon the basis of which the rate of
interest for any LIBOR Loans is to be determined do not adequately cover the
cost to the Bank of making or maintaining such Loans; then the Bank shall give
the Borrowers prompt notice thereof, and so long as such condition remains in
effect, the Bank shall be under no obligation to make or renew Loans of such
type or to convert Loans of any other type into Loans of such type and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of the affected type, either prepay such Loans or convert
such Loans into another type of Loans in accordance with Section 2.5.
Section 3.3. Illegality. Notwithstanding any other provision in this Agreement,
in the event that it becomes unlawful for the Bank or its Lending Office to (a)
honor its obligation to make or renew LIBOR Loans hereunder or convert Loans of
any type into Loans of such type, or (b) maintain LIBOR Loans hereunder, then
the Bank shall promptly notify the Borrowers thereof and the Bank's obligation
to make or renew LIBOR Loans and to convert other types of Loans into Loans of
such type hereunder shall be suspended until such time as the Bank may again
make, renew or convert and maintain such affected Loans and the Borrowers shall,
on the last day(s) of the then current Interest Period for the outstanding LIBOR
Loans, as the case may be (or on such earlier date as the Bank may specify to
the Borrowers), either prepay such Loans or convert such Loans into another type
of Loans in accordance with Section 2.5.
Section 3.4. Certain Compensation. The Borrowers shall pay to the Bank, upon the
request of the Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost or expense
which the Bank determines is attributable to:
(a) any payment, prepayment, conversion or renewal of
a LIBOR Loan on a date other than the last day of an Interest Period for such
Loan (whether by reason of acceleration or otherwise); or
(b) any failure by the Borrowers to borrow, convert
into or renew a LIBOR Loan to be made, converted into or renewed by the Bank on
the date specified therefor in the relevant notice under Section 2.4, 2.5 or
2.11, as the case may be.
Without limiting the foregoing, such compensation shall include an
amount equal to the excess, if any, of: (i) the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, converted
or renewed or not borrowed, converted or renewed for the period from and
including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of
<PAGE> 20
interest for such Loan provided for herein; over (ii) with respect to a LIBOR
Loan, the amount of interest (as reasonably determined by the Bank) the Bank
would have bid in the London interbank market for Dollar deposits for amounts
comparable to such principal amount and maturities comparable to such period. A
determination of the Bank as to the amounts payable pursuant to this Section 3.4
shall be conclusive absent manifest error.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1. Documentary Conditions Precedent. The obligation of the Bank to
make the Loans is subject to the conditions precedent that the Bank shall have
received on or before the date of such Borrowing each of the following, in form
and substance satisfactory to the Bank and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) the Security Agreement duly executed by the
Borrowers, together with (i) acknowledgment copies of the financing statements
(UCC-1) duly filed under the Uniform Commercial Code of all jurisdictions
necessary or, in the opinion of the Bank, desirable to perfect the security
interest created by the Security Agreement; (ii) certified copies of requests
for information (Form UCC-11) identifying all of the financing statements on
file with respect to the Borrowers in all jurisdictions referred to under (i),
including the financing statements filed by the Bank against the Borrowers,
indicating that no party claims an interest in any of the Collateral (as defined
in the Security Agreement);
(c) a certificate of the Secretary or Assistant
Secretary of each Borrower, dated the Closing Date, attesting to all corporate
action taken by such Borrower, including resolutions of its Board of Directors
authorizing the execution, delivery and performance of the Facility Documents to
which it is a party and each other document to be delivered pursuant to this
Agreement and certifying copies of the Certificate of Incorporation and by-laws
of such Borrower;
(d) a certificate of the Secretary or Assistant
Secretary of each Borrower, dated the Closing Date, certifying the names and
true signatures of the officers of such Borrower authorized to sign the Facility
Documents to which it is a party and the other documents to be delivered by such
Borrower under this Agreement;
(e) a certificate of a duly authorized officer of
each Borrower, dated the Closing Date, stating that the representations and
warranties in Article 5 of this Agreement, and Article 2 of the Security
Agreement, and in each other Facility Document, are true and correct on such
date as though made on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(f) an Environmental Indemnification Agreement duly
signed by the Borrowers in form and substance satisfactory to the Bank;
<PAGE> 21
(g) a certificate of good standing for each Borrower
from the Secretary of the State of the state in which such Borrower is
incorporated and each other jurisdiction in which such Borrower is qualified to
do business;
(h) payment by the Borrowers to the Bank of the
balance of the facility fee as required by Section 2.12(b), and all other
expenses and fees incurred by the Bank;
(i) a favorable opinion of counsel for the Borrowers,
dated the Closing Date, in substantially the form of Exhibit D and as to such
other matters as the Bank may reasonably request;
(j) copies of all instruments evidencing any
Subordinated Debt of any Borrower and a satisfactory review of the same;
(k) evidence of no material adverse change in the
business, management, operations, properties, prospects or condition (financial
or otherwise) of any Borrower or any of their respective Subsidiaries since the
date of the commitment letter; and
(l) evidence of the absence of any change in market
conditions which, in the Bank's opinion, would materially impair a financial
institution's ability to fund Loans of this type.
Section 4.2. Additional Conditions Precedent. The obligation of the Bank to make
the Loans pursuant to a Borrowing which increases the amount outstanding
hereunder (including the initial Borrowing) shall be subject to the further
conditions precedent that on the date of such Borrowing:
(a) the following statements shall be true:
(i) the representations and warranties
contained in Article 5 herein, and in Article 2 of the Security Agreement, and
in each other Facility Document, are true and correct on and as of the date of
such Loan as though made on and as of such date; and
(ii) no Default or Event of Default has
occurred and is continuing, or would result from such Loan; and
(iii) there has been no material adverse
change in the business, management, operations, properties, prospects or
condition (financial or otherwise) of any Borrower or any of their respective
Subsidiaries since the Closing Date;
<PAGE> 22
(b) the Bank shall have received such approvals,
opinions or documents as the Bank may reasonably request.
Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder and
acceptance by any Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty that the statements contained in Section 4.2(a) are
true and correct both on the date of such notice and, unless any Borrower
otherwise notifies the Bank prior to such Borrowing, as of the date of such
Borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants that:
Section 5.1. Incorporation, Good Standing and Due Qualification. Each of such
Borrowers and its Subsidiaries is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
Section 5.2. Corporate Power and Authority; No Conflicts. The execution,
delivery and performance by such Borrower of the Facility Documents to which it
is a party have been duly authorized by all necessary corporate action and do
not and will not: (a) require any consent or approval of its stockholders; (b)
contravene its charter or by-laws; (c) violate any provision of, or require any
filing (other than the filing of the financing statements contemplated by the
Security Agreement), registration, consent or approval under, any law, rule,
regulation (including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such Borrower or any of its Subsidiaries or Affiliates; (d)
result in a breach of or constitute a default or require any consent under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Borrower is a party or by which it or its properties
may be bound or affected; (e) result in, or require, the creation or imposition
of any Lien (other than as created under the Security Agreement), upon or with
respect to any of the properties now owned or hereafter acquired by such
Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as the
case may be) to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
Section 5.3. Legally Enforceable Agreements. Each Facility Document to which
such Borrower is a party is, or when delivered under this Agreement will be, a
legal, valid and binding obligation of such Borrower enforceable against such
Borrower in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
<PAGE> 23
Section 5.4. Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of such Borrower, threatened, against or affecting such
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator, which may, in any one case or in the aggregate, materially adversely
affect the financial condition, operations, properties or business of such
Borrower or any such Subsidiary or of or the ability of such Borrower to perform
its obligation under the Facility Documents to which it is a party.
Section 5.5. Financial Statements. The consolidated and consolidating balance
sheet of such Borrower and its Consolidated Subsidiaries as at December 31,
1996, and the related consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity of such Borrower
and its Consolidated Subsidiaries for the fiscal year then ended, and the
accompanying footnotes, together with the opinion thereon as to the consolidated
statements, of Price Waterhouse, independent certified public accountants, and
the interim consolidated and consolidating balance sheet of such Borrower and
its Consolidated Subsidiaries as at September 27, 1997, and the related
consolidated and consolidating income statement and statements of cash flows and
changes in stockholders' equity for the nine-month period then ended, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of such Borrower and its Consolidated
Subsidiaries as at such dates and the results of the operations of such Borrower
and its Consolidated Subsidiaries for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements). There are no
liabilities of such Borrower or any of its Consolidated Subsidiaries, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business since September 27, 1997. No information, exhibit or report
furnished by such Borrower to the Bank in connection with the negotiation of
this Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading. Since September 27, 1997, there has been no material
adverse change in the condition (financial or otherwise), business, operations
or prospects of such Borrower or any of its Subsidiaries.
Section 5.6. Ownership and Liens. Such Borrower and each of its Consolidated
Subsidiaries has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties and assets,
and leasehold interests reflected in the financial statements referred to in
Section 5.5 (other than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets owned by such
Borrower or any of its Subsidiaries and none of its leasehold interests is
subject to any Lien, except as disclosed in such financial statements or as may
be permitted hereunder and except for the Lien created by the Security
Agreement.
<PAGE> 24
Section 5.7. Taxes. Such Borrower and each of its Subsidiaries has 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
interests and penalties.
Section 5.8. ERISA. Each Plan, and, to the best knowledge of such Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other applicable federal or state law, and
no event or condition is occurring or exists concerning which such Borrower
would be under an obligation to furnish a report to the Bank in accordance with
Section 6.8(k) hereof. As of the most recent valuation date for each Plan, each
Plan was "fully funded," which for purposes of this Section 5.8 shall mean that
the fair market value of the assets of the Plan is not less than the present
value of the accrued benefits of all participants in the Plan, computed on a
Plan termination basis. To the best knowledge of such Borrower, no Plan has
ceased being fully funded as of the date these representations are made with
respect to any Loan under this Agreement.
Section 5.9. Subsidiaries and Ownership of Stock. Schedule 5.9 is a complete and
accurate list of the Subsidiaries of such Borrower, showing the jurisdiction of
incorporation or organization of each Subsidiary and showing the percentage of
such Borrower's ownership of the outstanding stock or other interest of each
such Subsidiary. All of the outstanding capital stock or other interest of each
such Subsidiary has been validly issued, is fully paid and nonassessable and is
owned by such Borrower free and clear of all Liens.
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and correct list
of all credit agreements, indentures, purchase agreements, guaranties, Capital
Leases and other investments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which such Borrower or any of its Subsidiaries is in any manner
directly or contingently obligated; and the maximum principal or face amounts of
the credit in question, 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 such Schedule.
Section 5.11. Operation of Business. Such Borrower and each of its Subsidiaries
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade names, or rights thereto, to conduct its business substantially as now
conducted and as presently proposed to be conducted, and neither such Borrower
nor any of its Subsidiaries is in violation of any valid rights of others with
respect to any of the foregoing.
<PAGE> 25
Section 5.12. Hazardous Materials. Such Borrower and each of its Subsidiaries
have obtained all permits, licenses and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a material adverse effect on the
consolidated financial condition, operations, business or prospects of such
Borrower and its Consolidated Subsidiaries. Such Borrower and each of its
Subsidiaries are in compliance with the terms and conditions of all such
permits, licenses and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not have a material adverse effect
on the consolidated financial condition, operations, business or prospects of
such Borrower and its Consolidated Subsidiaries.
In addition, except as set forth in Schedule 5.12 hereto:
(a) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by such Borrower or any of its Subsidiaries to have any permit, license
or authorization required in connection with the conduct of the business of such
Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. s/s 9601(22) ("Release") of any substance
regulated under Environmental Laws ("Hazardous Materials") generated by such
Borrower or any of its Subsidiaries.
(b) Neither such Borrower nor any of its Subsidiaries
has handled any Hazardous Material, other than as a generator, on any property
now or previously owned or leased by such Borrower or any of its Subsidiaries to
an extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrowers and their Consolidated Subsidiaries;
and
(i) to the best of its knowledge, no PCB
is or has been present at any property now or previously owned or leased by such
Borrower or any of its Subsidiaries;
(ii) to the best of its knowledge, no
asbestos is or has been present at any property now or previously owned or
leased by such Borrower or any of its Subsidiaries;
<PAGE> 26
(iii) there are no underground storage
tanks for Hazardous Materials, active or abandoned, at any property now or
previously owned or leased by such Borrower or any of its Subsidiaries;
(iv) no Hazardous Materials have been
Released, in a reportable quantity, where such a quantity has been established
by statute, ordinance, rule, regulation or order, at, on or under any property
now or previously owned by such Borrower or any of its Subsidiaries.
(c) Neither such Borrower nor any of its Subsidiaries
has transported or arranged for the transportation of any Hazardous Material to
any location which is listed on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), listed for possible inclusion on the National Priorities
List by the Environmental Protection Agency in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLIS") or on any similar
state or foreign list or which is the subject of federal, state, foreign or
local enforcement actions or other investigations which may lead to claims
against such Borrower or any of its Subsidiaries for clean-up costs, remedial
work, damages to natural resources or for personal injury claims, including, but
not limited to, claims under CERCLA.
(d) No Hazardous Material generated by such Borrower
or any of its Subsidiaries has been recycled, treated, stored, disposed of or
Released by such Borrower or any of its Subsidiaries at any location other than
those listed in Schedule 5.12 hereto.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of such Borrower or any of its
Subsidiaries and no property now or previously owned or leased by such Borrower
or any of its Subsidiaries is listed or proposed for listing on the National
Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state
or foreign list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to
any Environmental Laws on any of the real property or properties owned or leased
by such Borrower or any of its Subsidiaries, and no government actions have been
taken or are in process which could subject any of such properties to such Liens
and neither such Borrower nor any of its Subsidiaries would be required to place
any notice or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.
(g) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are in
the possession of such Borrower or any of its Subsidiaries in relation to any
property or facility now or previously
<PAGE> 27
owned or leased by such Borrower or any of its Subsidiaries which have not been
made available to the Bank.
Section 5.13. No Default on Outstanding Judgments or Orders. Such Borrower and
each of its Subsidiaries has satisfied all judgments and neither such Borrower
nor any of its Subsidiaries is in default with respect to any judgment, writ,
injunction, decree, rule or regulation of any court, arbitrator or federal,
state, municipal or other governmental authority, commission, board, bureau,
agency or instrumentality, domestic or foreign.
Section 5.14. No Defaults on Other Agreements. Neither such Borrower nor any of
its Subsidiaries is a party to any indenture, loan or credit agreement or any
lease or other agreement or instrument or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations or conditions, financial or otherwise, of such
Borrower or any of its Subsidiaries, or the ability of such Borrower to carry
out its obligations under the Facility Documents to which it is a party. Neither
such Borrower nor any of its Subsidiaries is in default in any respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its business to
which it is a party.
Section 5.15. Labor Disputes and Acts of God. Neither the business nor the
properties of such Borrower or of any of its Subsidiaries are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of such Borrower or such
Subsidiary.
Section 5.16. Governmental Regulation. Neither such Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act,
the Federal Power Act or any statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
Section 5.17. Partnerships. Neither such Borrower nor any of its Subsidiaries is
a partner in any partnership.
Section 5.18. No Forfeiture. Neither such Borrower nor any of its Subsidiaries
or Affiliates is engaged in or proposes to be engaged in the conduct of any
business or activity which could result in a Forfeiture Proceeding and no
Forfeiture Proceeding against any of them is pending or threatened.
<PAGE> 28
Section 5.19. Solvency.
(a) The present fair salable value of the assets
of such Borrower after giving effect to all the transactions contemplated by the
Facility Documents and the funding of all Commitment hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such Borrower and
its Subsidiaries as they mature.
(b) The property of such Borrower does not
constitute unreasonably small capital for such Borrower to carry out its
business as now conducted and as proposed to be conducted, including the capital
needs of such Borrower.
(c) Such Borrower does not intend to, nor does
it believe that it will, incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be received
by such Borrower, and of amounts to be payable on or in respect of debt of such
Borrower). The cash available to such Borrower, after taking into account all
other anticipated uses of the cash of such Borrower, is anticipated to be
sufficient to pay all such amounts on or in respect of debt of such Borrower
when such amounts are required to be paid.
(d) Such Borrower does not believe that final
judgments against it in actions for money damages will be rendered at a time
when, or in an amount such that, such Borrower will be unable to satisfy any
such judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash available
to such Borrower after taking into account all other anticipated uses of the
cash of such Borrower (including the payments on or in respect of debt referred
to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to
pay all such judgments promptly in accordance with their terms.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank
shall have either of the Commitments under this Agreement, the Borrowers shall:
Section 6.1. Maintenance of Existence. Preserve and maintain, and cause each of
their respective Subsidiaries to preserve and maintain, their corporate
existence and good standing in the jurisdiction of their incorporation, and
qualify and remain qualified, and cause each of their respective Subsidiaries to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is required.
Section 6.2. Conduct of Business. Continue, and cause each of their respective
Subsidiaries to continue, to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
<PAGE> 29
Section 6.3. Maintenance of Properties. Maintain, keep and preserve, and cause
each of their respective Subsidiaries to maintain, keep and preserve, all of
their properties (tangible and intangible), necessary or useful in the proper
conduct of their business in good working order and condition, ordinary wear and
tear excepted.
Section 6.4. Maintenance of Records. Keep, and cause each of their respective
Subsidiaries to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrowers and their respective Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain, and cause each of their
respective Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
Section 6.6. Compliance with Laws. Comply, and cause each of their respective
Subsidiaries to comply, in all respects with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
Section 6.7. Right of Inspection. At any reasonable time and from time to time,
permit the Bank or any agent or representative thereof, to examine and make
copies and abstracts from the records and books of account of, and visit the
properties of, the Borrowers and any of their respective Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrowers and any such
Subsidiary with any of its officers and directors and the Borrowers' independent
accountants.
Section 6.8. Reporting Requirements. Furnish to the Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, a consolidated and consolidating
balance sheet of the Borrowers and their respective Consolidated Subsidiaries as
of the end of such fiscal year and a consolidated and consolidating income
statement and statements of cash flows and changes in stockholders' equity and
working capital of the Borrowers and their respective Consolidated Subsidiaries
for such fiscal year, all in reasonable detail and stating in comparative form
the respective consolidated and consolidating figures for the corresponding date
and period in the prior fiscal year and all prepared in accordance with GAAP and
as to the consolidated statements accompanied by an opinion thereon acceptable
to the Bank by Price Waterhouse or other independent accountants of national
standing selected by the Borrowers;
<PAGE> 30
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Borrowers, a true and complete copy of
TransAct's Report on Form 10-Q;
(c) as soon as available and in any event within 45 days after
the end of each fiscal quarter, a consolidating balance sheet of the Borrowers
and their respective Consolidated Subsidiaries as of the end of such month and a
consolidating income statement and statements of cash flows and changes in
stockholders' equity and working capital, of the Borrowers and their respective
Consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such month, all in reasonable detail and
stating in comparative form the consolidating figures for the corresponding date
and period in the previous fiscal year and all prepared in accordance with GAAP
and certified by the Chairman or Chief Financial Officer of each Borrower
(subject to year-end adjustments);
(d) promptly upon receipt thereof, copies of any reports,
inclusive of any management letters, submitted to any Borrower or any of its
Subsidiaries by independent certified public accountants in connection with
examination of the financial statements of such Borrower or any such Subsidiary
made by such accountants;
(e) promptly at the end of each fiscal quarter, a certificate
of the Chairman or Chief Financial Officer of each Borrower (i) certifying that
to the best of his knowledge no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto, and (ii) with computations demonstrating compliance
with the covenants contained in Articles 7 and 8;
(f) as soon as available and in any event within 90 days after
the end of each fiscal year of TransAct, a true and complete copy of TransAct's
Report on Form 10-K;
(g) within 30 days after the Closing Date, and thereafter, as
soon as available and in any event within 90 days after the end of each fiscal
year of the Borrowers, management's projected financial statements inclusive of
a balance sheet, an income statement and a statement of cash flow (supported by
key assumptions) for each upcoming fiscal year, prepared on a quarter-by-quarter
basis;
(h) simultaneously with the delivery of the projected
financial statements referred to in Section 6.8(g), a copy of the Borrowers'
business plan for each upcoming fiscal year;
(i) simultaneously with the delivery of the annual financial
statements referred to in Section 6.8(a), a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the
<PAGE> 31
audit of such statements, they have obtained no knowledge of any condition or
event which constitutes a Default or Event of Default, or if such accountants
shall have obtained knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have knowledge and the
nature and status thereof;
(j) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Borrower or any of its Subsidiaries which, if determined adversely
to such Borrower or such Subsidiary, could have a material adverse effect on the
financial condition, properties or operations of such Borrower or such
Subsidiary;
(k) as soon as possible and in any event within five days
after the occurrence of each Default or Event of Default a written notice
setting forth the details of such Default or Event of Default and the action
which is proposed to be taken by any Borrower with respect thereto;
(l) as soon as possible, and in any event within ten days
after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in section
4043(b) of ERISA, with respect to a Plan, as to which PBGC has not by regulation
waived the requirement of section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event (provided that a failure to meet the
minimum funding standard of section 412 of the Code or section 302 of ERISA
including, without limitation, the failure to make on or before its due date a
required installment under section 412(m) of the Code or section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any waivers in
accordance with section 412(d) of the Code) and any request for a waiver under
section 412(d) of the Code for any Plan;
(ii) the distribution under section 4041 of ERISA of
a notice of intent to terminate any Plan or any action taken by such Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under
section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Borrower or any ERISA Affiliate of
a notice from a
<PAGE> 32
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by such Borrower or any ERISA Affiliate that results in
liability under section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
of such Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against such Borrower or any ERISA Affiliate to enforce
section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that
pursuant to section 401(a)(29) of the Code or section 307 of ERISA would result
in the loss of tax-exempt status of the trust of which such Plan is a part if
such Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which may
reasonably be expected to constitute grounds for such Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of one or
more Plans increase after the date of this Agreement in an amount which is
material in relation to the financial condition of such Borrower and its
Subsidiaries, on a consolidated basis; provided, however, that such increase
shall not be deemed to be material so long as it does not exceed during any
consecutive 2-year period $200,000;
(m) promptly after the request of the Bank, copies of each
annual report filed pursuant to section 104 of ERISA with respect to each Plan
(including, to the extent required by section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in section 103) and each
annual report filed with respect to each Plan under section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to such Borrower or an ERISA
Affiliate;
(n) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan or credit
<PAGE> 33
or similar agreement and not otherwise required to be furnished to the Bank
pursuant to any other clause of this Section 6.8;
(o) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which any Borrower or any
of its Subsidiaries sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements which any Borrower
or any of its Subsidiary files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national securities exchange;
(p) as soon as available, and in any event within 10 days of
the end of each fiscal month, an aging schedule with respect to Receivables of
each Borrower with names of all account debtors, as of the end of such calendar
month and certified by the Chairman or Chief Financial Officer of each Borrower;
(q) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding; and
(r) such other information respecting the condition or
operations, financial or otherwise, of any Borrower or any of its Subsidiaries
as the Bank may from time to time reasonably request.
Section 6.9. Operating Accounts. Maintain, and cause each of their respective
Subsidiaries to maintain, all United States operating accounts at the Bank.
ARTICLE 7. NEGATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank shall
have either of the Commitments under this Agreement, the Borrowers shall not:
Section 7.1. Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist any Debt, except:
(a) Debt of the Borrowers under this Agreement or the Notes;
(b) Debt described in Schedule 5.10, including renewals,
extensions or refinancings thereof, provided that the principal amount thereof
does not increase; and
(c) Debt of the Borrowers or any of their respective
Subsidiaries secured by purchase money Liens permitted by Section 7.3.
Section 7.2. Guaranties, Etc. Assume, guaranty, endorse or otherwise be or
become directly or contingently responsible or liable, or permit any of their
respective
<PAGE> 34
Subsidiaries to assume, guarantee, endorse or otherwise be or become directly or
indirectly 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 an agreement 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 the
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
Section 7.3. Liens. Create, incur, assume or suffer to exist, or permit any of
their respective Subsidiaries to create, incur, assume or suffer to exist, any
Lien, upon or with respect to any of its properties, now owned or hereafter
acquired, except:
(a) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(c) Liens under workers' compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(d) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(e) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by any Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
<PAGE> 35
(g) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary;
(h) Liens set forth on Schedule 7.3, provided the Debt secured
by such Liens is permitted by Section 7.1;
(i) purchase money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(i) any property subject to any of the foregoing is
acquired by a Borrower or any such Subsidiary in the ordinary course of its
business and the Lien on any such property is created contemporaneously with
such acquisition or such property is acquired pursuant to an Acceptable
Acquisition and is subject to a pre-existing purchase money Lien;
(ii) the obligation secured by any Lien so created,
assumed or existing shall not exceed 80 percent of the lesser of cost or fair
market value as of the time of acquisition of the property covered thereby to a
Borrower or any such Subsidiary acquiring the same;
(iii)each such Lien shall attach only to the property
so acquired and fixed improvements thereon; and
(iv) the obligations secured by such Lien are
permitted by the provisions of Section 7.1; and
Section 7.4. Leases. Create, incur, assume or suffer to exist, or permit their
respective Subsidiaries to create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except: (a) leases existing on the date of this Agreement and any extensions or
renewals thereof; (b) leases (other than Capital Leases) which do not in the
aggregate require the Borrowers and their respective Subsidiaries on a
consolidated basis to make payments (including taxes, insurance, maintenance and
similar expense which any Borrower or any Subsidiary is required to pay under
the terms of any lease) in any fiscal year of the Borrowers in excess of
$250,000; (c) Capital Leases permitted by Section 7.3.
Section 7.5. Investments. Make, or permit any of their respective Subsidiaries
to make, any loan or advance to any Person or purchase or otherwise acquire, or
permit any such Subsidiary to purchase 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: (a) direct
obligations of the United States of America or any agency thereof with
maturities of one year or less from the date of
<PAGE> 36
acquisition; (b) commercial paper of a domestic issuer rated at least "A-1" by
Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; (c)
certificates of deposit with maturities of one year or less from the date of
acquisition issued by any commercial bank operating within the United States of
America having capital and surplus in excess of $500,000,000; (d) for stock,
obligations or securities received in settlement of debts (created in the
ordinary course of business) owing to a Borrower or any such Subsidiary and (e)
Acceptable Acquisitions.
Section 7.6. Dividends. Declare or pay any dividends, purchase, redeem, retire
or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets or in obligations of any Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any of their respective
Subsidiaries to purchase or otherwise acquire for value any stock of any
Borrower or another such Subsidiary, except that: (a) any Borrower may declare
and deliver dividends and make distributions payable solely in common stock of
such Borrower; (b) any Borrower may purchase or otherwise acquire shares of its
capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock; (c) TransAct
may make the payments to Tridex as permitted under the Subordination Agreement;
and (d) any Subsidiary may declare and deliver dividends and make distributions
to the Parent.
Section 7.7. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of, or permit any of their respective Subsidiaries to sell, lease, assign,
transfer or otherwise dispose of, any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock and indebtedness of such
Subsidiaries, receivables and leasehold interests); except: (a) for inventory
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;
and (c) that any such Subsidiary may sell, lease, assign or otherwise transfer
its assets to the Parent.
Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise dispose of any shares
of capital stock of any of their respective Subsidiaries or permit any such
Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 7.9. 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 or permit any of their respective
Subsidiaries to 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 such Borrower's or such Subsidiary's business
<PAGE> 37
and upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary than it would obtain in a comparable arms' length transaction with a
Person not an Affiliate, and except as set forth on Schedule 7.9.
Section 7.10. Mergers, Etc. Merge or consolidate with, or sell, assign, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to, any Person, or acquire all or substantially all of the assets or the
business of any Person (or enter into any agreement to do any of the foregoing),
or permit any of their respective Subsidiaries to do so except that any such
Subsidiary may merge into or transfer assets to a Borrower, and except for
Acceptable Acquisitions.
Section 7.11. No Activities Leading to Forfeiture. Neither the Borrowers nor any
of their respective Subsidiaries or Affiliates shall engage in or propose to be
engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding.
ARTICLE 8. FINANCIAL COVENANTS
So long as either of the Notes shall remain unpaid or the Bank
shall have either of the Commitments under this Agreement:
Section 8.1. Minimum Tangible Net Worth. The Borrowers, on a consolidated basis,
shall maintain at all times, as measured at the end of each fiscal quarter,
commencing March 28, 1998, Tangible Net Worth of not less than $15,000,000, and
such minimum dollar amount shall increase from quarter to quarter by the sum of
(a) 50% of the Borrowers' Net Income for each previous quarter (including the
quarter ending on March 31, 1998) (with no reduction for losses) plus (b) 100%
of net proceeds from the sale of stock or asset sales after January 1, 1998, and
provided further that this minimum dollar amount will be adjusted downward by
100% of the cost of common stock of TransAct repurchased in open-market
transactions by TransAct, but in no event shall such minimum dollar amount fall
below $9,000,000.
Section 8.2. Maximum Leverage Ratio. The Borrowers, on a consolidated basis,
shall maintain at all times, as measured at the end of each fiscal quarter,
commencing March 28, 1998, a ratio of Total Liabilities to Tangible Net Worth of
not greater than 2.75 to 1.0.
Section 8.3. Maximum Debt to Cash Flow Ratio. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998 for the twelve month period then ended (a
rolling twelve month calculation measured as of the end of each successive
quarter), a ratio of total Funded Debt to EBITDA, of not more than 3.0 to 1.0.
<PAGE> 38
Section 8.4. Minimum Interest Coverage Ratio. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998 for the twelve month period then ended (a
rolling twelve month calculation measured as of the end of each successive
quarter), an Interest Coverage Ratio of not less than 3.0 to 1.0.
Section 8.5. Minimum Fixed Charge Coverage Ratio. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured at the end of each
fiscal quarter, commencing March 28, 1998 for the twelve month period then ended
(a rolling twelve month calculation measured as of the end of each successive
quarter), a Fixed Charge Coverage Ratio of not less than 1.50 to 1.0.
Section 8.6. Minimum Collateral Coverage. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998, a ratio of (a) the sum of (i) 80% of
Receivables less than 90 days of invoice date plus (ii) 60% of Inventory
adjusted for obsolescence plus (iii) 50% of the net book value of fixed assets,
divided by (b) Current Funded Bank Debt, of not less than 1.0 to 1.0.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1. Events of Default. Any of the following events shall be an "Event
of Default":
(a) the Borrowers shall: (i) fail to pay the principal of any
Note as and when due and payable; or (ii) fail to pay interest on any Note or
any fee or other amount due hereunder as and when due and payable;
(b) any representation or warranty made or deemed made by any
Borrower in this Agreement or in any other Facility Document or which is
contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection with any Facility Document shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made;
(c) any Borrower shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.3 or Articles 7 or 8; or (ii)
fail to perform or observe any term, covenant or agreement on its part to be
performed or observed (other than the obligations specifically referred to
elsewhere in this Section 9.1) in any Facility Document and such failure shall
continue for 20 consecutive days;
(d) any Borrower, or any of its respective Subsidiaries: (i)
shall generally not, or be unable to, or shall admit in writing its inability
to, pay its debts as such debts become due; or (ii) shall make an assignment for
the benefit of creditors, petition or apply to any tribunal for the appointment
of a custodian, receiver or trustee for it or a
<PAGE> 39
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 30 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture (other than a proceeding in respect of a
Lien permitted under Section 7.3(b)); or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (vi)
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 30 days or more;
(e) one or more judgments, decrees or orders for the payment
of money in excess of $100,000 in the aggregate shall be rendered against any
Borrower, or any of its respective Subsidiaries and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of 30 consecutive
days without being vacated, discharged, satisfied or stayed or bonded pending
appeal;
(f) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Borrower is under an
obligation to furnish a report to the Bank in accordance with Section 6.8(h)
hereof and as a result of such event or condition, together with all other such
events or conditions, such Borrower or any ERISA Affiliate has incurred or in
the opinion of the Bank is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC or a section 4042 Trustee (or any combination of
the foregoing) which is material in relation to the financial position of such
Borrower and its Subsidiaries, on a consolidated basis; provided, however, that
any such amount shall not be deemed to be material so long as all such amounts
do not exceed in the aggregate during any consecutive 2-year period $200,000;
(g) the Unfunded Benefit Liabilities of one or more Plans have
increased after the date of this Agreement in an amount which is material (as
specified in Section 9.1(g) hereof);
(h) (A) any Forfeiture Proceeding shall have been commenced or
any Borrower shall have given the Bank written notice of the commencement of any
Forfeiture Proceeding as provided in Section 6.8 or (B) the Bank has a good
faith basis to believe that a Forfeiture Proceeding has been threatened or
commenced;
(i) there shall be any material adverse change in the
condition (financial or otherwise), business, management, operations, properties
or prospects of the Borrowers and their respective Subsidiaries since the
Closing Date; or
<PAGE> 40
(j) the Security Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to such agreement; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the party thereto, or such party shall deny it has further
liability or obligation thereunder or such party shall fail to perform any of
its obligations thereunder.
Section 9.2. Remedies. If any Event of Default shall occur and be continuing,
the Bank may, by notice to the Borrowers, (a) declare the Commitments to be
terminated, whereupon the same shall forthwith terminate, and (b) declare the
outstanding principal of the Notes, all interest thereon and all other amounts
payable under this Agreement and the Notes or any one of them to be forthwith
due and payable, whereupon the Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrowers; provided that, in the case of an Event of Default referred to
in Section 9.1(d) or Section 9.1(i)(A) above, the Commitments shall be
immediately terminated, and the Notes, all interest thereon and all other
amounts payable under this Agreement shall be immediately due and payable
without notice, presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers.
ARTICLE 10. MISCELLANEOUS
Section 10.1. Amendments and Waivers. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by the Borrowers and the Bank, and any
provision of this Agreement may be waived by the Borrowers and the Bank. No
failure on the part of the Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 10.2. Usury. All agreements between the Borrowers and the Bank are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the indebtedness evidenced by the Notes
or otherwise, shall the amount paid or agreed to be paid to the Bank for the use
or the forbearance of the indebtedness evidenced by the Notes exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however that in the
event there is a change in the law which results in a higher permissible rate of
interest, then the Notes shall be governed by such new law as of its effective
date. In this regard, it is expressly agreed that it is the intent of the
Borrowers and the Bank in the execution, delivery and acceptance of the Notes to
contract in strict
<PAGE> 41
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Facility Documents at the time of performance
of such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever the Bank should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between the Borrowers and the Bank.
Section 10.3. Expenses. The Borrowers shall reimburse the Bank on demand for all
reasonable costs, expenses and charges (including, without limitation,
telephone, telex, courier expenses, printing costs, reasonable fees and charges
of external legal counsel for the Bank and reasonable costs allocated after the
Closing Date by its internal legal department) incurred by the Bank in
connection with the preparation, negotiation, execution, delivery, filing,
recording, performance, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Notes or any Facility Document (subject to a limit of $20,000,
plus disbursements, for the fees of external counsel in preparing the Facility
Documents). The Borrowers agree to indemnify the Bank and its directors,
officers, employees and agents from, and hold each of them harmless against, any
and all losses, liabilities, claims, damages or expenses incurred by any of them
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to any actual or proposed use by the Borrowers or any of
their respective Subsidiaries of the proceeds of the Loans, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
Section 10.4. Survival. The obligations of the Borrowers under Section 10.3
shall survive the repayment of the Loans and the termination of the Commitments.
Section 10.5. Assignment; Participations. This Agreement shall be binding upon,
and shall inure to the benefit of, the Borrowers, the Bank and their respective
successors and assigns, except that no Borrower may assign or transfer its
rights or obligations hereunder. The Bank may assign, or sell participations in,
all or any part of any Loan to another bank or other entity, in minimum amounts
of $5,000,000, in which event (a) in the case of an assignment, upon notice
thereof by the Bank to the Borrowers, the assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights, benefits
and obligations as it would have if it were the Bank hereunder; and (b) in the
case of a participation, the participant shall have no rights under
<PAGE> 42
the Facility Documents. The agreement executed by the Bank in favor of the
participant shall not give the participant the right to require the Bank to take
or omit to take any action hereunder except action directly relating to (i) the
extension of a payment date with respect to any portion of the principal of or
interest on any amount outstanding hereunder allocated to such participant, (ii)
the reduction of the principal amount outstanding hereunder or (iii) the
reduction of the rate of interest payable on such amount or any amount of fees
payable hereunder to a rate or amount, as the case may be, below that which the
participant is entitled to receive under its agreement with the Bank. The Bank
may furnish any information concerning the Borrowers in the possession of the
Bank from time to time to assignees and participants (including prospective
assignees and participants); provided that the Bank shall require any such
prospective assignee or such participant (prospective or otherwise) to agree in
writing to maintain the confidentiality of such information. The Bank shall have
the right at any time to pledge all or any portion of its rights under the Loans
or this Agreement or the Notes to any of the twelve (12) Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or enforcement thereof shall release the Bank from its obligations
under any of the Facility Documents.
Section 10.6. Notices. Unless the party to be notified otherwise notifies the
other party in writing as provided in this Section, and except as otherwise
provided in this Agreement, notices shall be delivered in person or sent by
overnight courier, facsimile, ordinary mail, cable or telex addressed to such
party at its "Address for Notices" on the signature page of this Agreement.
Notices shall be effective: (a) on the day on which delivered to such party in
person, (b) on the first Banking Day after the day on which sent to such party
by overnight courier, (c) if given by mail, 48 hours after deposit in the mails
with first-class postage prepaid, addressed as aforesaid, and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Bank shall be effective upon receipt.
Section 10.7. Setoff. The Borrowers hereby grant to the Bank, a lien, security
interest and right of setoff as security for all liabilities and obligations to
the Bank, whether now existing or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time, without demand
or notice, the Bank may set off the same or any part thereof and apply the same
to any liability or obligation of the Borrowers even though unmatured and
regardless of the adequacy of any other collateral securing the Loans. ANY AND
ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWERS
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
<PAGE> 43
SECTION 10.8. JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED STATES FEDERAL COURT
SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE NOTES, AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH CONNECTICUT STATE OR FEDERAL COURT. EACH BORROWER IRREVOCABLY CONSENT TO
THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO EACH BORROWER AT ITS ADDRESS SPECIFIED IN
SECTION 10.6. EACH 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. EACH BORROWER
FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN
ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. EACH
BORROWER FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE BANK
SHALL BE BROUGHT ONLY IN CONNECTICUT STATE OR UNITED STATES FEDERAL COURT
SITTING IN CONNECTICUT. EACH BORROWER WAIVES ANY RIGHT IT MAY HAVE TO JURY
TRIAL.
(a) Nothing in this Section 10.8 shall affect the right of the
Bank to serve legal process in any other manner permitted by law or affect the
right of the Bank to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdictions.
(b) To the extent that any 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 itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Note.
Section 10.9. Table of Contents; Headings. Any table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 10.10. Severability. The provisions of this Agreement are intended to be
severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
<PAGE> 44
Section 10.11. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
Section 10.12. Integration. The Facility Documents set forth the entire
agreement between the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CONNECTICUT.
Section 10.14. Confidentiality. The Bank agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with safe and sound
banking practices, any nonpublic information supplied to it by the Borrowers
pursuant to this Agreement which is identified by the Borrowers as being
confidential at the time the same is delivered to the Bank, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in
connection with any litigation to which the Bank is a party or (v) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) agrees to
maintain the confidentiality of such information; and provided finally that in
no event shall the Bank be obligated or required to return any materials
furnished by the Borrowers.
Section 10.15. Treatment of Certain Information. Each Borrower (a) acknowledges
that services may be offered or provided to it (in connection with this
Agreement or otherwise) by the Bank or by one or more of its subsidiaries or
affiliates and (b) acknowledges that information delivered to the Bank by any
Borrower may be provided to each such subsidiary and affiliate.
SECTION 10.16. COMMERCIAL WAIVER. EACH BORROWER ACKNOWLEDGES THAT THE LOANS
EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY RIGHT TO
NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE CONNECTICUT
GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE ATTORNEY OF THE
BANK, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT REMEDY WITHOUT
COURT ORDER. FURTHER, EACH BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY
LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD,
<PAGE> 45
EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY
HEREAFTER BECOME LAWS. EACH BORROWER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS
AND THE WAIVERS CONTAINED IN SECTION 10.8 KNOWINGLY, VOLUNTARILY AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE WAIVERS WITH ITS
ATTORNEYS.
SECTION 10.17. WAIVER OF JURY TRIAL BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE BORROWERS AND THE BANK WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE BORROWERS
AND THE BANK DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE BORROWERS AND THE BANK HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER FACILITY
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 10.18. Multiple Borrowers.
(a) It is understood and agreed by each Borrower that the
handling of this credit facility on a joint borrowing basis as set forth in this
Agreement is solely as an accommodation to the Borrowers and at their request,
and that the Bank shall not incur liability to the Borrowers as a result
thereof. To induce the Bank to do so and in consideration thereof, each Borrower
hereby agrees to indemnify the Bank and to hold the Bank harmless from and
against any and all liabilities, expenses, losses, damages and claims of damage
or injury asserted against the Bank by any Borrower or by any other Person
arising from or incurred by reason of the Bank's handling of the financing
arrangements of the Borrowers as provided herein, reliance by the Bank on any
request or instruction from any other Borrower or any other action taken by the
Bank with respect to this Section 10.18.
(b) Each Borrower represents and warrants to the Bank that the
request for joint handling of the Loans to be made by the Bank hereunder was
made because the Borrowers are engaged in an integrated operation which required
financing on a basis permitting the availability of credit from time to time to
each Borrower as required for the continued successful operation of each
Borrower of the integrated operation of the Borrowers. Each Borrower expects to
derive benefit, directly or indirectly, from such
<PAGE> 46
availability because the successful operation of the Borrowers is dependent on
the continued successful performance of the functions of the integrated group.
(c) Each Borrower hereby irrevocably designates TransAct as
its attorney to borrow, sign and endorse notes, and execute and deliver all
instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of each Borrower, and does hereby authorize the
Bank to pay over or credit all Loan proceeds hereunder to TransAct as the
Borrowers' attorney in fact, recognizing, however, that Lender is not bound by
such authorization and may elect either to disburse loan proceeds to each
Borrower directly for its use, to TransAct as attorney for any Borrower or to
TransAct for its own account, in which case TransAct may advance or lend such
proceeds to the other Borrowers. Each Borrower further agrees that all
obligations hereunder or referred to herein or under any other Facility Document
shall be joint and several, and that each Borrower shall make payment upon any
notes issued pursuant hereto and any and all other obligations hereunder or
referred to herein or under any other Facility Document upon their maturity by
acceleration or otherwise, and that such obligation and liability on the part of
each Borrower shall in no way be affected by any extensions, renewals and
forbearances granted by the Bank to any Borrower, failure of the Bank to give
any Borrower notice of borrowing or any other notice, any failure of the Bank to
pursue or preserve its rights against any other Borrower, the release by the
Bank of any collateral now or hereafter acquired from any Borrower, failure of
the Bank to realize upon such collateral in a commercially reasonable manner,
and that such agreement by each Borrower to pay upon any notice issued pursuant
hereto is unconditional and unaffected by prior recourse by the Bank to the
other Borrowers or any collateral for such Borrowers' obligations or the lack
thereof.
(d) Each Borrower hereby grants a right of contribution to
each other Borrower for any amount paid by such other Borrower in satisfaction
of any obligations under this Agreement, the Note or any other Facility
Document; provided, however, that the aggregate of the rights of contribution
against any Borrower hereunder shall not exceed such Borrower's net worth. In
calculating the net worth of any Borrower for purposes of this paragraph, such
Borrower's obligations under the Facility Documents will not be included in its
liabilities and such Borrower's rights of contribution against other Borrowers
for amounts paid under the Facility Documents will not be included in its
assets.
(e) All notices to, or other communications with, the
Borrowers or any one of them shall be sufficient if given to any of the
Borrowers. Although the Bank may require that all of the Borrowers or a
particular Borrower execute any document (including any Notice of Borrowing) in
any matter pertaining to this Agreement or any of the other Facility Documents,
any one of the Borrowers may bind all of the Borrowers and any document
(including any Notice of Borrowing) signed by any Borrower, and any and all
action taken by any Borrower, is sufficient to represent all of the Borrowers.
Without
<PAGE> 47
limiting the foregoing, any single Borrower may make representations and
warranties on behalf of all the Borrowers or any other Borrower, and such
representations and warranties shall be of the same force and effect as if made
directly by such other Borrowers.
Section 10.19. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or Event of Default if such action is taken or
condition exists.
Section 10.20. Time of the Essence. Time and punctuality shall be of the essence
with respect to this instrument, but no delay or failure of the Bank to enforce
any of the provisions herein contained and no conduct or statement of the Bank
shall waive or affect any of the Bank's rights hereunder.
Section 10.21. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of this Agreement, on and after the
date hereof each reference in the Facility Documents to the Credit Agreement or
the Note, shall mean and be a reference to this Credit Agreement as amended and
restated hereby or the Note as amended and restated in connection with the
execution and delivery of this Agreement.
(b) The execution, delivery and effectiveness of this
Agreement shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank under any of the Facility Documents, nor
constitute a waiver of any provision of any of the Facility Documents.
Section 10.22. Replacement Promissory Note. Upon receipt of an
affidavit of an officer of the Bank as to the loss, theft, destruction or
mutilation of any Note or any other security document which is not of public
record, and, in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such Note or other security document,
Borrower will issue, in lieu thereof, a replacement Note or other security
document in the same principal amount thereof and otherwise of like tenor.
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ Richard L. Cote
-------------------------------------
Richard L. Cote
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ Richard L. Cote
-------------------------------------
Richard L. Cote
Title: Vice President
Address for Notices to Borrowers:
7 Laser Lane
Wallingford, Connecticut 06492
FLEET NATIONAL BANK
By /s/ Frederick A. Meagher
-------------------------------------
Frederick A. Meagher
Vice President
Address for Notices and Lending Office:
One Landmark Square
Stamford, Connecticut 06901
Attn: Frederick A. Meagher
Vice President
Facsimile No.: (203) 964-4836
<PAGE> 49
EXHIBITS
Exhibit A-1 - Acquisition Note
Exhibit A-2 - Working Capital Note
Exhibit B - Subordination Agreement (Reserved)
Exhibit C - Security Agreement
Exhibit D - Opinion of Counsel for Borrowers*
Exhibit E - Notice of Borrowing*
SCHEDULES*
Schedule 5.9 - Subsidiaries of Borrowers
Schedule 5.10 - Credit Arrangements
Schedule 5.12 - Hazardous Materials
Schedule 7.3 - Liens
Schedule 7.9 - Transactions with Affiliates Outside the Ordinary
Course of Business
* Exhibits D and E and Schedules are not filed herewith as they do not contain
information which is material to an investment decision which is not otherwise
disclosed in the Form 10-K. Any omitted Exhibit or Schedule will be furnished
supplementally to the Commission upon request.
<PAGE> 50
EXHIBIT A-1
PROMISSORY NOTE
$10,000,000 Stamford, Connecticut
January 29, 1998
For value received, TRANSACT TECHNOLOGIES INCORPORATED. and MAGNETEC
CORPORATION (the "Borrowers"), hereby jointly and severally promise, to pay to
the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank at One
Landmark Square, Stamford, Connecticut 06901, for the account of the appropriate
Lending Office of the Bank, the principal sum of TEN MILLION DOLLARS
($10,000,000) or, if less, the amount of Acquisition Loans made by the Bank to
the Borrowers pursuant to the Credit Agreement referred to below, in lawful
money of the United States of America and in immediately available funds, on the
date(s) and in the manner provided in said Credit Agreement. The Borrowers also
promise to pay interest on the unpaid principal balance hereof, for the period
such balance is outstanding, at said principal office for the account of said
Lending Office, in like money, at the rates of interest as provided in the
Credit Agreement referred to below, on the date(s) and in the manner provided in
said Credit Agreement.
The date and amount of each Acquisition Loan made by the Bank to the
Borrowers under the Credit Agreement referred to below, and each payment of
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other time),
endorsed by the Bank on the schedule attached hereto or any continuation
thereof.
This is the Acquisition Note referred to in that certain Credit
Agreement (as amended from time to time the "Credit Agreement") dated of even
date herewith among the Borrowers and the Bank and evidences the Acquisition
Loans made by the Bank thereunder and upon any conversion of the Acquisition
Loans to the Term Loan, this Note will thereafter evidence the Term Loan. All
terms not defined herein shall have the meanings given to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain Events of Default and for prepayments
on the terms and conditions specified therein.
The Borrowers waive presentment, notice of dishonor, protest and any
other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ACCEPT THIS NOTE AND MAKE THE ACQUISITION LOANS.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ Richard L. Cote
--------------------------------------
Richard L. Cote
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ Richard L. Cote
---------------------------------------
Richard L. Cote
Title: Vice President
<PAGE> 51
EXHIBIT A-2
PROMISSORY NOTE
$5,000,000 Stamford, Connecticut
January 29, 1998
For value received, TRANSACT TECHNOLOGIES INCORPORATED. and
MAGNETEC CORPORATION (the "Borrowers"), hereby jointly and severally promise, to
pay to the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank
at One Landmark Square, Stamford, Connecticut 06901, for the account of the
appropriate Lending Office of the Bank, the principal sum of FIVE MILLION
DOLLARS ($5,000,000) or, if less, the amount of Working Capital Loans made by
the Bank to the Borrowers pursuant to the Credit Agreement referred to below, in
lawful money of the United States of America and in immediately available funds,
on the date(s) and in the manner provided in said Credit Agreement. The
Borrowers also promise to pay interest on the unpaid principal balance hereof,
for the period such balance is outstanding, at said principal office for the
account of said Lending Office, in like money, at the rates of interest as
provided in the Credit Agreement referred to below, on the date(s) and in the
manner provided in said Credit Agreement.
The date and amount of each Working Capital Loan made by the
Bank to the Borrowers under the Credit Agreement referred to below, and each
payment of principal thereof, shall be recorded by the Bank on its books and,
prior to any transfer of this Note (or, at the discretion of the Bank, at any
other time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof.
This is the Working Capital Note referred to in that certain
Credit Agreement (as amended from time to time the "Credit Agreement") dated of
even date herewith among the Borrowers and the Bank and evidences the Working
Capital Loans made by the Bank thereunder. All terms not defined herein shall
have the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrowers waive presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE WORKING CAPITAL LOANS.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ Richard L. Cote
-------------------------------------
Richard L. Cote
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ Richard L. Cote
------------------------------------
Richard L. Cote
Title: Vice President
<PAGE> 52
EXHIBIT C
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 29, 1998, made by TRANSACT
TECHNOLOGIES INCORPORATED and MAGNETEC CORPORATION (collectively, the "Grantors"
and each, individually, a "Grantor"), to FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States of America (the
"Bank").
PRELIMINARY STATEMENT. The Bank has entered into a Credit Agreement
dated as of even date herewith (said Credit Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Grantors. It is a condition precedent to the making of
Loans by the Bank under the Credit Agreement that the Grantors shall have
granted the security interest contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to make Loans under the Credit Agreement, the Grantors hereby agree for
the benefit of the Bank as follows:
ARTICLE 1. THE COLLATERAL
Section 1.1. Grant of Security. As security for the Obligations (as
defined in Section 1.2 hereof), the Grantors hereby assign and pledge to the
Bank and hereby grant to the Bank a security interest in, general lien upon
and/or right of setoff of all of the Grantors' right, title and interest in and
to all of their personal property (the "Collateral"), including the following:
(a) All equipment in all of its forms, wherever located, now
or hereafter existing (including, but not limited to, any specific items or
types of equipment set forth in the Schedule hereto), and all parts thereof and
all accessions thereto (any and all such equipment, parts and accessions being
the "Equipment");
(b) All inventory in all of its forms, wherever located, now
or hereafter existing (including, but not limited to (i) any specific items or
types of inventory set forth in the Schedule hereto and raw materials and work
in process therefor, finished goods thereof, and materials used or consumed in
the manufacture or production thereof, (ii) goods in which a Grantor has an
interest in mass or a joint or other interest or right of any kind and (iii)
goods which are returned to or repossessed by a Grantor), and all accessions
thereto and products thereof (any and all such inventory, accessions and
products being the "Inventory");
(c) All accounts, contract rights, receivables, chattel paper,
instruments. general intangibles and other obligations of any kind now or
hereafter existing arising out of or in connection with the sale or lease of
goods or the rendering of services, and all rights now or hereafter existing in
and to all security agreements. leases and other
<PAGE> 53
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, general intangibles or obligations (any and all such
accounts, contract rights, chattel paper, instruments, general intangibles and
obligations being the "Receivables," and any and all such leases, security
agreements and other contracts being the "Related Contracts");
(d)
(i) all United States or other patents and
applications for patents, including without limitation those listed on Exhibit A
to this Agreement and all licenses thereof (collectively, the "Patents");
(ii) all United States or other trademarks, service
marks, trade names, logos, registrations and applications for trademarks and
service marks, filed and unfiled, including without limitation those listed on
Exhibit B to this Agreement, together with the goodwill of the business
connected with the use of, and symbolized by, all such trademarks, service
marks, trade names, logos, registrations and applications and all licenses of
United States or other trademarks and service marks, including without
limitation those listed on said Exhibit B (collectively, the "Trademarks");
(iii) all United States or other copyrights
(including without limitation those listed as Exhibit C to this Agreement),
registered and unregistered, published and unpublished, under or pursuant to the
domestic law of all countries and any applicable convention or treaty, including
all rights of reproduction, publication, modification, derivation and the like
owned or used by a Grantor (collectively, the "Copyrights"), and good will
relating to the same;
(iv) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part of the items referred to in the
preceding clauses (i), (ii) and (iii);
(v) all licenses, sublicenses or other agreements
granted to a Grantor with respect to any of the items referred to in the
preceding clauses (i), (ii), (iii) and (iv);
(vi) the right to sue for past, present and future
infringements and dilutions of the foregoing; and
(vii) all rights corresponding to all of the
foregoing throughout the world, including utility models, utility patents,
patents of addition confirmation patents, registration patents, petty patents,
registered designs, and all priority and convention rights in connection with
any of the foregoing;
(e) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used or useful in the
business of a Grantor, all rights in and to any improvements or modifications
thereof, and all licenses, sublicenses or other agreements granted to a Grantor
with respect to any of the foregoing, in each
<PAGE> 54
case whether now or hereafter owned, used, or granted, by any party; all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogues, computer and automatic machinery
software and programs, and the like pertaining to present or future operations
by a Grantor in, on or about any of its plants, facilities or warehouses; all
field repair data, sales data and other information relating to sales or service
of products now or hereafter manufactured on or about any of its plants or
facilities; and all accounting information pertaining to operations in, on or
about any of its plants or facilities and all media in which or on which is now
or hereafter recorded or stored any of the foregoing information, knowledge,
records or data and all computer programs used for the compilation or printout
of such information, knowledge, records or data;
(f) all licenses and sublicenses given, granted or conveyed
by a Grantor, to the full extent of and subject to such Grantor's rights
therein; and
(g) all products and proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which constitute property of
the types described in clauses (a)-(f) of this Section 1.1 and proceeds of
infringement suits) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Bank is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral, (ii) license
royalties and (iii) cash.
Section 1.2. Security for Obligations. This Agreement secures the
payment of all obligations of the Grantors now or hereafter existing under the
Facility Documents, whether for principal, interest, fees, expenses or otherwise
(all such obligations being the "Obligations").
Section 1.3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Grantors shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Bank of any of the
rights hereunder shall not release the Grantors from any of their duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Bank shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Bank be obligated to perform any of the obligations or duties of the Bank
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
Section 1.4. Continuing Agreement. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until the indefeasible payment in full of the Obligations and until
the Commitments shall no longer be in effect. Upon the indefeasible payment in
full of the Obligations and when the Commitments shall no longer be in effect,
the security interest granted hereby shall
<PAGE> 55
terminate and all rights to the Collateral shall revert to the Grantor. Upon any
such termination, the Bank shall, at the Grantor's expense, execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
Section 1.5. Security Interest Absolute. All rights of the Bank and
security interests hereunder, and all obligations of the Grantors hereunder,
shall be absolute and unconditional, irrespective of any defenses whatsoever
available to the Grantors, including but not limited to the following:
(a) any extension of credit by the Bank to or for the account
of a Grantor other than under the Credit Agreement and Notes;
(b) any lack of validity or enforceability of any Facility
Document;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any Facility Document;
(d) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or
(e) any law, regulation or order of any jurisdiction affecting
or purporting to affect any term of any Obligation or any Facility Document or
the Bank's rights with respect thereto.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
The Grantors represent and warrant as follows:
Section 2.1. Location of Collateral. All of the Equipment and Inventory
are located at the places specified in the Schedule hereto. The chief place of
business and chief executive office of the Grantors and the office where the
Grantors keep their records concerning the Receivables, and all originals of all
chattel paper which evidence Receivables, are located at the address specified
for the Grantors in Section 6.3. None of the Receivables is evidenced by a
promissory note or other instrument.
Section 2.2. Ownership and Liens. The Grantors own the Collateral free
and clear of any Lien, except for the security interest created by this
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Bank relating to this
Agreement.
Section 2.3. Perfection.. This Agreement creates a valid and perfected
first priority security interest in the Collateral, securing the payment of the
Obligations, and
<PAGE> 56
all filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
Section 2.4. No Authorization Required. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (a) for the grant by the Grantors of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Grantors or (b) for the perfection of or the exercise
by the Bank of its rights and remedies hereunder.
Section 2.5. Solvency of Account Debtors. Each account debtor, to the
best of the Grantors' knowledge, as of the date each Receivable is created, is
and will be solvent and able to pay all Receivables on which the account debtor
is obligated in full when due or, with respect to such account debtors of the
Grantors who are not solvent, the Grantors have set up on their books and
financial records bad debt reserves adequate to cover such Receivables.
Section 2.6. Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the account debtor therein named, for a fixed sum as set forth in the invoice
relating thereto (provided immaterial or unintentional invoice errors shall not
be deemed to be a breach hereof) with respect to an absolute sale or lease and
delivery of goods upon stated terms of a Grantor, or work, labor and/or services
theretofore rendered by a Grantor and as of the date each Receivable is created,
shall be due and owing in accordance with a Grantor's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by such Grantor to the Bank.
ARTICLE 3. COVENANTS
Section 3.1. Further Assurances.
(a) The Grantors agree that from time to time, at the expense
of the Grantors. the Grantors shall promptly execute and deliver all further
instruments and documents. and take all further action, that may be necessary or
desirable, or that the Bank may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Bank to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the Grantors
shall: (i) mark conspicuously each item of chattel paper included in the
Receivables and each Related Contract and, at the request of the Bank, each of
their recordings pertaining to the Collateral with a legend, in form and
substance satisfactory to the Bank, indicating that such chattel paper, Related
Contract or Collateral is subject to the security interest granted hereby; (ii)
if any Receivable shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Bank hereunder such note, instrument or
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Bank; and
(iii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
<PAGE> 57
desirable, or as the Bank may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Bank to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Grantor where
permitted by law.
(c) The Grantors shall furnish to the Bank from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Bank may reasonably
request, all in reasonable detail.
Section 3.2. As to Equipment and Inventory. The Grantors shall:
(a) Keep the Equipment and Inventory (other than Inventory
sold in the ordinary course of business) at the places therefore specified in
Section 2.1 or, upon 30 days' prior written notice to the Bank, at such other
places in jurisdictions where all action required by Section 3.1 shall have been
taken with respect to the Equipment and Inventory.
(b) Cause the Equipment to be maintained and preserved in the
same condition. repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual and shall forthwith,
or in the case of any loss or damage to any of the Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith which are necessary
or desirable to such end. The Grantors shall promptly furnish to the Bank a
statement respecting any loss or damage to any of the Equipment.
(c) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment and
Inventory except to the extent the validity thereof is being contested in good
faith.
Section 3.3. Insurance.
(a) The Grantors shall, at their own expense, maintain
insurance with respect to the Equipment and Inventory to such amounts against
such risks, in such form and with such insurers as shall be satisfactory to the
Bank from time to time. Each policy for (i) liability insurance shall provide
for all losses to be paid to the Bank and the Grantors as their respective
interests may appear and (ii) property damage insurance shall provide for all
losses (except for losses of less than $100,000 per occurrence) to be paid
directly to the Bank. Each such policy shall in addition (i) name the Grantors
and the Bank as insured parties thereunder (without any representation or
warranty by or obligation upon the Bank) as their interests may appear, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Bank notwithstanding any action,
<PAGE> 58
inaction or breach of representation or warranty by a Grantor, (iii) provide
that there shall be no recourse against the Bank for payment of premiums or
other amounts with respect thereto and (iv) provide that at least ten days'
prior written notice of cancellation or of lapse shall be given to the Bank by
the insurer. The Grantors shall, if so requested by the Bank, deliver to the
Bank original or duplicate policies of such insurance and, as often as the Bank
may reasonably request, a report of a reputable insurance broker with respect to
such insurance. Further, the Grantors shall, at the request of the Bank, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 3.1 and cause the respective insurers to
acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
a Grantor pursuant to this Section 3.3 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section
3.3 is not applicable, the Grantors shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantors pursuant to this Section 3.3 shall be paid
to the Grantors as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any
event which permits or would permit the Bank to declare the entire Loan to be
immediately due and payable, with the giving of notice, if required (any such
event being an "Event of Default"), or (ii) the actual or constructive total
loss (in excess of $100,000 per occurrence) of any Equipment or Inventory, all
insurance payments in respect of such Equipment or Inventory shall be paid to
and applied by the Bank as specified in Section 5.1.
Section 3.4. As to Receivables.
(a) The Grantors shall keep their chief place of business and
chief executive office and the office where they keep their records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, at the location therefor specified in Section 2.1 or, upon 30 days'
prior written notice to the Bank, at such other locations in a jurisdiction
where all action required by Section 3.1 shall have been taken with respect to
the Receivables. The Grantors shall hold and preserve such records and chattel
paper and shall permit representatives of the Bank at any time during normal
business hours to inspect and make abstracts from such records and chattel
paper.
(b) Except as otherwise provided in this subsection (b), the
Grantors shall continue to collect, at their own expense, all amounts due or to
become due the Grantors under the Receivables. In connection with such
collections, the Grantors may take (and, at the Bank's direction, shall take)
such action as the Grantors or the Bank may deem necessary or advisable to
enforce collection of the Receivables; provided, however, that the Bank shall
have the right at any time upon the occurrence and during the continuance
<PAGE> 59
of an Event of Default or an event which, with the giving of notice or the lapse
of time, or both, would become an Event of Default and upon written notice to
the Grantors of its intention to do so, to notify the account debtors or
obligors under any Receivables of the assignment of such Receivables to the Bank
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to a Grantor thereunder directly to the Bank and, upon such
notification and at the expense of the Grantors, to enforce collection of any
such Receivables, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as a Grantor might have done.
After receipt by the Grantors of the notice from the Bank referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
instruments) received by a Grantor in respect of the Receivables shall be
received in trust for the benefit of the Bank hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Bank in
the same form as so received (with any necessary endorsement) to be held as cash
collateral and either (A) released to the Grantors so long as no Event of
Default shall have occurred and be continuing or (B) if any Event of Default
shall have occurred and be continuing, applied as provided by Section 5. l(b),
and (ii) no Grantor shall adjust, settle or compromise the amount or payment of
any Receivable, or release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon.
(c) The Grantors shall take all steps necessary to protect the
Bank's interest in the Collateral under the Federal Assignment of Claims Act,
the Social Security Act, or other applicable federal, state, or local statutes,
ordinances or regulations and deliver to the Bank appropriately endorsed, any
instrument or chattel paper connected with any Receivable, arising out of
contracts between any Grantor and the United States, any state or any
department, agency or instrumentality of any of them.
Section 3.5. Transfers and Other Liens. The Grantors shall not:
(a) Except as permitted by the Credit Agreement, sell, assign
(by operation of law or otherwise) or otherwise dispose of any of the
Collateral, except Inventory in the ordinary course of business.
(b) Create or suffer to exist any Lien upon or with respect to
any of the Collateral to secure Debt of any Person, except for Liens permitted
by this Agreement.
ARTICLE IV. THE BANK
Section 4.1. Bank Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Bank such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Bank's discretion, to take any action and
to execute any instrument which the Bank may deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of such Grantor
under Section 3.4), including without limitation:
<PAGE> 60
(a) to obtain and adjust insurance required to be paid to the
Bank pursuant to Section 3.3,
(b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) or (b)
above, and
(d) to file any claims or take any action or institute any
proceedings which the Bank may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Bank with
respect to any of the Collateral.
Section 4.2. Bank May Perform. If a Grantor fails to perform
any agreement contained herein, the Bank may itself perform, or cause
performance of, such agreement and the expenses of the Bank incurred in
connection therewith shall be payable by the Grantors under Section 6.2.
Section 4.3. The Bank's Duties. The powers conferred on the
Bank hereunder are solely to protect the Bank's interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Bank shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
ARTICLE V. DEFAULT
Section 5.1. Remedies. If any Event of Default shall have occurred and
be continuing:
(a) The Bank may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code (the "UCC") (whether or not the UCC applies to the
affected Collateral) and also may (i) require any Grantor to, and each Grantor
hereby agrees that it shall at its expense and upon request of the Bank
forthwith, assemble all or part of the Collateral as directed by the Bank and
make it available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Bank's offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Bank may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to such Grantor of the time and place of any public sale or
<PAGE> 61
the time after which any private sale is to be made shall constitute reasonable
notification. The Bank shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Bank may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by the Bank in respect of any
sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Bank, be held by the Bank as collateral
for, and/or then or at any time thereafter applied (after payment of any amounts
payable to the Bank pursuant to Section 6.2) in whole or in part by the Bank
against, all or any part of the Obligations in such order as the Bank shall
elect. Any surplus of such cash or cash proceeds held by the Bank and remaining
after payment in full of all the Obligations shall be paid over to the Grantors
or to whomsoever may be lawfully entitled to receive such surplus.
ARTICLE VI. MISCELLANEOUS
Section 6.1. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by any Grantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Bank.
Section 6.2. Expenses; Etc. The Grantors shall reimburse the Bank on
demand for all reasonable costs, expenses and charges (including, without
limitation, reasonable fees and charges of external legal counsel for the Bank
and reasonable costs allocated by its internal legal department) incurred by the
Bank in connection with the preparation, performance or enforcement of this
Agreement. The Grantors agree to indemnify the Bank from and against any and all
claims, losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the Bank's gross negligence or willful
misconduct. The obligations of the Grantors under this Section are joint and
several and shall survive the termination of this Agreement.
Section 6.3. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, notices shall
be delivered in person or sent by overnight courier, facsimile, ordinary mail,
cable or telex, to such party at its address specified in the Credit Agreement.
Notices shall be effective: (a) on the day on which delivered to such party in
person, (b) on the first Banking Day after the day on which sent to such party
by overnight courier, (c) if given by mail, 72 hours after deposit in the mails
with first-class postage prepaid, addressed as aforesaid; and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Bank shall be effective upon receipt.
Section 6.4. Transfer of Facility Documents. This Agreement shall (a)
be binding upon the Grantors, their respective successors and assigns and (b)
inure together with the rights and remedies of the Bank hereunder, to the
benefit of the Bank and its
<PAGE> 62
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (b), the Bank may assign or otherwise transfer the Facility
Documents held by it, or grant participations therein, to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to the Bank herein or otherwise.
Section 6.5. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of Connecticut. Unless
otherwise defined herein or in the Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of Connecticut are used herein as therein
defined.
Section 6.6. COMMERCIAL WAIVER. EACH GRANTOR ACKNOWLEDGES THAT THE
OBLIGATIONS ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY RIGHT TO NOTICE AND
HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE CONNECTICUT GENERAL
STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE ATTORNEY OF THE BANK, OR
ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT REMEDY WITHOUT COURT
ORDER. FURTHER, EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE
BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD, EXEMPTION, STAY, REDEMPTION
AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAWS. EACH
GRANTOR ACKNOWLEDGES THAT IT MAKES THESE WAIVERS KNOWINGLY, VOLUNTARILY AND ONLY
AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE WAIVERS WITH ITS
ATTORNEYS.
Section 6.7. WAIVER OF JURY TRIAL. THE GRANTORS AND THE BANK MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS AGREEMENT AND MAKE
THE LOANS.
ARTICLE VlI. INTELLECTUAL PROPERTY
Section 7.1. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. Each Grantor
represent and warrant that they are the true and lawful exclusive owners of the
Trademarks listed in Exhibit B attached hereto and that said listed Trademarks
constitute all the trademarks registered in the United States Patent and
Trademark Office that the Grantors now own or use in connection with their
business. Each Grantor represents and warrants that it
<PAGE> 63
owns or is licensed to use all Trademarks that it uses. Each Grantor further
warrants that it is aware of no third-party claim that any aspect of such
Grantor's present or contemplated business operations infringes or will infringe
any Trademark.
(b) Licenses and Assignments. Each Grantor hereby agrees not
to divest itself of any right under a Trademark absent prior written approval of
the Bank.
(c) Infringements. Each Grantor agrees, promptly upon learning
thereof, to notify the Bank in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of such Grantor's rights
in and to any significant Trademark, or with respect to any party claiming that
such Grantor's use of any significant Trademark violates any property right of
that party.
(d) Preservation of Trademarks. To the extent such Trademarks
are material to its business, each Grantor agrees to use its significant
Trademarks in interstate commerce during the time in which this Agreement is in
effect, sufficiently to preserve such Trademarks as trademarks or service marks
registered under the laws of the United States.
(e) Maintenance of Registration. To the extent such Trademarks
are material to its business, each Grantor shall, at its expense, diligently
process all documents required by the Trademark Act of 1946, 15 U.S.C.
Sections 1051 et seq., to maintain trademark registration, including but
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Trademarks
pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all
fees and disbursements in connection therewith, and shall not abandon any such
filing of affidavit of use or any such application of renewal prior to the
exhaustion of all administrative and judicial remedies without prior written
consent of the Bank. Each Grantor agrees to notify the Bank six (6) months prior
to the dates on which the affidavits of use or the applications for renewal
registration are due that the affidavit of use or the renewal is being
processed.
(f) Future Registered Trademarks. If any trademark
registration issues hereafter to a Grantor as a result of any application now or
hereafter pending before the United States Patent and Trademark Office, within
thirty (30) days of receipt of such certificate such Grantor shall deliver a
copy of such certificate and an updated Exhibit B to Annex I and, if Annex I has
previously been filed, an agreement in proper form for filing, modifying Annex I
to include such Trademark.
(g) Remedies. If an Event of Default shall occur and be
continuing, the Bank may, by written notice to any Grantor, take any or all of
the following actions: (i) declare the entire right, title and interest of such
Grantor in and to each of the Trademarks, together with all trademark rights and
rights of protection to the same, vested, in which event such rights, title and
interest shall immediately vest, in the Bank, in which case such Grantor agrees
to execute an assignment in form and substance
<PAGE> 64
satisfactory to the Bank, of all its rights, title and interest in and to the
Trademarks to the Bank; (ii) take and use or sell the Trademarks and the
goodwill of such Grantor's business symbolized by the Trademarks and the right
to carry on the business and use the assets of such Grantor in connection with
which the Trademarks have been used; and (iii) direct such Grantor to refrain,
in which event such Grantor shall refrain, from using the Trademarks in any
manner whatsoever, directly or indirectly, and, if requested by the Bank, change
such Grantor's corporate name to eliminate therefrom any use of any Trademark
and execute such other and further documents that the Bank may request to
further confirm this and to transfer ownership of the Trademarks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Bank.
Section 7.2. Special Provisions Concerning Patents and Copyrights.
(a) Additional Representations and Warranties. The Grantors
represents and warrants that they are the true and lawful exclusive owner or
licensee of all rights in the Patents listed in Exhibit A attached hereto and in
the Copyrights listed in Exhibit C attached hereto, that said Patents constitute
all the United States patents and applications for United States patents that
the Grantors now own and that said Copyrights constitute all the United States
copyrights that the Grantors now own. Each Grantor represents and warrants that
it owns or is licensed to practice under all Patents and Copyrights that it now
owns, uses or practices under. Each Grantor further warrants that it is aware of
no third-party claim that any aspect of such Grantor's present or contemplated
business operations infringes or will infringe any Patent or any Copyright.
(b) Licenses and Assignments. Each Grantor hereby agrees not
to divest itself of any right under a Patent or Copyright absent prior written
approval of the Bank.
(c) Infringements. Each Grantor agrees, promptly upon learning
thereof, to furnish the Bank in writing with all pertinent information available
to such Grantor with respect to any infringement or other violation of such
Grantor's rights in any significant Patent or Copyright, or with respect to any
claim that practice of any significant Patent or Copyright violates any property
right of that party. Each Grantor further agrees, absent direction of the Bank
to the contrary, diligently to prosecute any person infringing any significant
Patent or Copyright.
(d) Maintenance of Patents. At its own expense, to the extent
such Patents are material to its business, the Grantors shall make timely
payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to
maintain in force rights under each Patent.
(e) Prosecution of Patent Application. At its own expense, to
the extent such Patents are material to its business, each Grantor shall
diligently prosecute all applications for United States patents listed on
Exhibit A hereto, and shall not abandon any such application prior to exhaustion
of all administrative and judicial remedies, absent written consent of the Bank.
<PAGE> 65
(f) Other Patents and Copyrights. Within thirty (30) days of
acquisition of a United States Patent or Copyright, or of filing of an
application for a United States Patent or Copyright, each Grantor shall deliver
to the Bank a copy of said Patent or Copyright, as the case may be, and an
updated Exhibit A or Exhibit C to Annex I and, if Annex I has previously been
filed, an agreement in proper form for filing, modifying Annex I to include such
Patent or Copyright, as the case may be.
(g) Remedies. If an Event of Default shall occur and be
continuing, the Bank may by written notice to any Grantor take any of all of the
following actions: (i) declare the entire right, title and interest of such
Grantor in each of the Patents and Copyrights vested, in which event such right,
title and interest shall immediately vest in the Bank, in which case such
Grantor agrees to execute an assignment in form and substance satisfactory to
the Bank of all its right, title and interest to such Patents and Copyrights to
the Bank; (ii) take and practice or sell the Patents and Copyrights; (iii)
direct such Grantor to refrain, in which event such Grantor shall refrain, from
practicing the Patents and Copyrights directly or indirectly, and such Grantor
shall execute such other and further documents as the Bank may request further
to confirm this and to transfer ownership of the Patents and Copyrights to the
Bank.
IN WITNESS WHEREOF, the Grantors have caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ Richard L. Cote
--------------------------------------
Richard L. Cote
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ Richard L. Cote
--------------------------------------
Richard L. Cote
Title: Vice President
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.27
LEASE AMENDMENT
This Lease Amendment, dated as of December 2, 1996, is by and between
BOMAX PROPERTIES, a New York general partnership with an office at 42 Esty
Drive, Ithaca, New York 14850 ("Lessor"), ITHACA PERIPHERALS, a division of
MAGNETEC CORPORATION, a Connecticut corporation with an office at 20 Bomax
Drive, Ithaca, New York 14850 ("Lessee"), THE TOMPKINS COUNTY INDUSTRIAL
DEVELOPMENT AGENCY, a New York public benefit corporation organized pursuant to
the New York Public Authorities Law ("IDA"), and TRANSACT TECHNOLOGIES
INCORPORATED, a Delaware corporation with an office at 7 Laser Lane,
Wallingford, Connecticut 06492 ("Guarantor").
RECITALS
A. Lessor and Lessee are parties to a Lease Agreement dated as of March
23, 1992 ("Lease"), pursuant to which Lessor leased to Lessee approximately 5.34
acres of land in the Village of Lansing, Tompkins County, State of New York, and
agreed to construct a manufacturing and office building for Lessee on the
Premises. Permanent occupancy of the building was obtained by Lessee on or about
November 20, 1992 and the Lease commencement date under the Lease was November
20, 1992.
B. Lessor transferred the Premises to the IDA, subject to the Lease, on
or about June 11, 1993 and entered into an installment sales contract to
purchase the property back from the IDA. Under the installment sales contract,
Lessor retained all beneficial rights and interest in the Premises.
<PAGE> 2
C. The Lease was guaranteed by Tridex Corporation, the then parent
company of Lessee.
D. Lessee previously requested Lessor to construct an Addition of
approximately 10,476 square feet (hereafter referred to as "Addition No. 1") to
the Leased Property (as defined in the Lease) and the parties entered into a
Lease Amendment dated as of October 18, 1993 providing for the construction of
such Addition No. 1 and to amend the Lease accordingly.
E. Pursuant to the provisions of Article I, Section B of the Lease,
Lessee is granted the option to lease Parcel 2 as shown on the map annexed
hereto as Exhibit A, subject to agreement of the Landlord.
F. Lessee has requested Lessor to construct another Addition of
approximately 23,000 square feet (hereafter referred to as "Addition No. 2" ) in
part on the Leased Property (as defined in the Lease and the Amendment of
October 18, 1993) and in part on Parcel 2 as shown on Exhibit A. The purpose of
this Lease Amendment is to provide for the.construction of the new Addition No.
2, to add Parcel 2 as shown on the annexed Exhibit A to the premises leased, and
to amend the Lease and the Amendment above mentioned accordingly.
NOW, THEREFORE, in consideration of the following mutual covenants, the
parties agree as follows:
1. All capitalized terms used herein which are not otherwise defined
shall have the same meaning given to those
2
<PAGE> 3
terms in the Lease.
2. Lessee hereby exercises the option to lease Parcel 2. Accordingly,
the last sentence of Article I, Section A is amended to read as follows.
Exhibit A depicts two parcels of land, Parcel 1 of approximately 5.3 4
acres and Parcel 2 of approximately 2 acres (Parcels 1 and 2 hereafter
referred to as the "Premises").
3. The last sentence of the first paragraph of Article I, Section C of
the Lease (and the Amendment of October 18, 1993) is amended to read as follows-
The Premises, building and improvements, including the Addition No. 1
constructed pursuant to the Lease Amendment of October 18, 1993 and the
Addition No. 2 referenced below are hereafter referred to as the
"Leased Property".
4. The following paragraph is hereby added to Article I, Section C and
the Amendment thereto:
Lessor agrees to construct on the Premises, at its own cost and
expense, an Addition of approximately 23,000 sq. ft. on the west side
of the building currently located on the Premises (along with parking
space for 35 additional cars) (hereinafter referred to as the "Addition
No. 2" ). The Addition No. 2 shall be constructed in accordance with
the following plans and drawings prepared by Tallman & Tallman,
Architects, which plans have previously been reviewed and approved by
Lessor and Lessee, along with such other changes thereto as may be
hereinafter approved by Lessor and Lessee.
<TABLE>
<CAPTION>
Description Date Revised
----------- ---- -------
<S> <C> <C>
A-1 Addition to Ithaca Peripherals, 6/25/96 8/19/96
Inc. Site Plan
A-2 Overall Plan 6/25/96 8/26/96
A-3 Foundation Plan 6/25/96 8/26/96
A-4 First Floor Plan 6/25/96 8/26/96
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C>
A-5 Elevations and Details 6/25/96 8/26/96
A-6 Wall Sections 6/25/96 8/26/96
A-7 Details/Elevations/Schedules 8/20/96
H-1 Addition HVAC Plan 8/26/96
H-2 HVAC Plan Existing Plant 8/26/96
H-3 Details and Schedules 8/26/96
P-1 Addition - Plumbing Plan 8/26/96
P-2 Schedules and Details 8/26/96
SP-1 Floor Plan- Sprinkler System 8/26/96
SP-2 Existing Plant - Sprinkler Plan 8/26/96
E-1 Addition to Power Plan 8/26/96
E-2 Addition to Lighting Plan 8/26/96
E-3 Existing Plant - Power Plan 8/26/96
E-4 Lighting Plan Existing Plant 8/26/96
E-5 Schedules and Details 8/26/96
</TABLE>
5. The following new paragraph shall be added at the end of Article I,
Section. E (as previously amended):
Construction of the Addition No. 2 shall commence within one week of
the date this Lease Amendment is executed and shall be completed and
delivered to Lessee for lawful occupation by January 1, 1997. The
Addition No. 2 shall be constructed, and the Addition shall be rendered
to Lessee for occupancy, in compliance with the Building Code of the
Town and Village of Lansing, County of Tompkins and State of New York
for use as a light manufacturing facility.
6. Article I, Section F(1) of the Lease (as previously amended) is
hereby amended to read as follows.
(1) The Lessor has obtained or will obtain all governmental permits,
licenses, certificates and approvals, including subdivision approval,
if
4
<PAGE> 5
required, necessary to construct and occupy the building and
improvements (including the Addition No. 2) set forth in the plans as
described in paragraph C of the Lease.
7. The Lessor repeats each of the other representations and warranties
set forth in Article I, Section F and acknowledges that the representations and
warranties apply with equal force to Addition No. 2 and to the construction to
be undertaken hereunder.
8. The first sentence of Article II of the Lease and the Amendment of
October 18, 1993 is amended as follows:
Upon completion of the Addition No. 2 provided for by this Amendment
and issuance of a certificate of occupancy, the term of this Lease
shall extend for a period of ten (10) years thereafter.
9. Effective upon the date of the issuance of a certificate of
occupancy for the Premises (including the Addition No. 2 to be constructed
pursuant to this Amendment), Article III, Section A of the Lease (including the
Amendment of October 18, 1993 thereto) is hereby amended as follows.
Lessee shall pay to Lessor rent for the Leased Property during the term
of this Lease on a gross square footage basis as determined by the
exterior dimensions of the building, including the Addition No. 1
previously constructed and the Addition No. 2 to be constructed
pursuant to this Amendment (but excluding the courtyard) at the
following annual rates:
<TABLE>
<S> <C>
Years 1 through 5 - $7.00 per gross square foot
Years 6 through 10 - $7.50 per gross square foot
</TABLE>
Payment of rent pursuant to this Amendment shall commence only upon
completion of the Addition No. 2 and issuance of a certificate of
occupancy for the Addition. If the Addition No. 2 is completed on a day
other than the first of a month, the first and last month's rent for
the Addition No. 2 shall be
5
<PAGE> 6
prorated accordingly. Until such date, rent shall continue to be paid
in accordance with the provisions of the Lease Amendment of October 18,
1993.
10. During the construction of Addition No. 2, Lessor agrees to use its
best efforts to coordinate construction so as to minimize disruption of Lessee's
business operations.
11. All references in the Lease to the "building and improvements" or
phrases of similar meaning shall be deemed to include the Addition No. 1
constructed pursuant to the Amendment of October 18, 1993 and the Addition No. 2
as described herein after the issuance of a certificate of occupancy for
Addition No. 2.
12. Except as specifically amended hereby, the Lease Agreement and the
Lease Amendment of October 18, 1993 remain in full force and effect in
accordance with their terms.
13. The IDA is signing this Lease Amendment solely for the purpose of
signifying its consent to this Amendment, but does not undertake and shall not
be liable or responsible for any of the obligations or liabilities of the
landlord under the Lease Agreement, as amended.
14. Lessor consents to the substitution of Transact Technologies
Incorporated for Tridex Corporation as Guarantor of the Lease. Tridex
Corporation is released from all obligations under its guarantee of the Lease.
Transact Technologies Incorporated shall guarantee Lessee's performance of this
Lease by signing the guarantee form attached to this Amendment.
6
<PAGE> 7
15. This Amendment is subject to and contingent upon Landlord obtaining
subdivision and site plan approval from the Village of Lansing and Parcel 2
being conveyed to IDA.
16. This Lease Amendment may be signed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have subscribed this Lease
Amendment as of the date first written above.
BOMAX PROPERTIES LLC TRANSACT TECHNOLOGIES
INCORPORATED
By: /s/ Robert T. Dean By /s/ Richard L. Cote
------------------------------------------ ---------------------------
Title: Executive VP & CFO
------------------------------------------ -----------------------
Title: Manager
--------------------------------------
THE TOMPKINS COUNTY
ITHACA PERIPHERALS, a division INDUSTRIAL DEVELOPMENT
of MAGNETEC CORPORATION AGENCY
By: /s/ Lucy H. Staley By /s/ Stuart W. Seton
------------------------------------------ ---------------------------
Title: Sr. Vice President and General Manager Title: Chairman
-------------------------------------- -----------------------
7
<PAGE> 8
GUARANTEE OF LEASE
WHEREAS, BOMAX PROPERTIES as Lessor, and ITHACA PERIPHERALS, a division
of MAGNETEC CORPORATION, as Lessee, have entered into a Lease Agreement dated as
of March 23, 1992, a Lease Amendment dated as of October 18, 1993, and a further
Lease Amendment dated December 2, 1996,
WHEREAS, BOMAX PROPERTIES has required that ITHACA PERIPHERALS, a
division of MAGNETEC CORPORATION furnish a guarantee of the Lease and Amendment
executed by its parent,- TRANSACT TECHNOLOGIES INCORPORATED;
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, TRANSACT TECHNOLOGIES INCORPORATED ("Guarantor")
hereby guarantees unto BOMAX PROPERTIES the full and faithful performance of all
of the obligations of ITHACA PERIPHERALS, a division of MAGNETEC CORPORATION,
under the Lease and Amendments, including without limitation, the prompt payment
of all rent and fees due under the Lease and Amendments or under any renewal or
extension thereof.
BOMAX PROPERTIES agrees to give to Guarantor written notice of any
default by ITHACA PERIPHERALS under the Lease and Amendments at the address set
forth below (or at such other address as the Guarantor may designate in
writing), and to permit Guarantor to cure any such default within any
8
<PAGE> 9
applicable cure period set forth in the Lease.
Dated: December 2, 1996
Address for Notices: TRANSACT TECHNOLOGIES
INCORPORATED
7 Laser Lane By: /s/ Richard L. Cote
- ---------------------------------------- -------------------------------
Wallingford, CT 06492.. Title: Executive VP & CFO
- ---------------------------------------- ----------------------------
BOMAX PROPERTIES LLC
42 Esty Drive By: /s/ Robert T. Dean
- ---------------------------------------- -------------------------------
Ithaca, NY 14850
- ---------------------------------------- -------------------------------
Title: Manager
----------------------------
9
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.28
LEASE OF INDUSTRIAL PROPERTY
FOR AND IN CONSIDERATION of the mutual covenants herein contained, the
parties hereto do hereby agree as follows:
1. Incorporated Terms. The following terms are incorporated by
reference into this Agreement:
<TABLE>
<S> <C>
(a) DATE OF LEASE: July 30, 1997
(b) NAME AND ADDRESS OF LANDLORD: PYRAMID CONSTRUCTION COMPANY
275 North Franklin Turnpike
P.O. Box 369
Ramsey, NJ 07446-0369
(c) NAME AND ADDRESS OF TENANT: MAGNETEC CORP.
7 Laser Lane
Wallingford, CT 06492
(d) DESCRIPTION OF PROPERTY: 5,013 square feet of office space in Wallingford,
CT through March 31, 2005.
*Effective April 1, 2005 through March 31, 2008,
nine (9) acres in Wallingford, CT, consisting of
15,013 s.f. of office space and 32,000 s.f. of
light manufacturing located in Medway Park, and
shown as Lot 2 on the Resubdivision Plan prepared
by Angus L. McDonald & Associates dated November
2, 1993.
(e) TERM OF LEASE: Approximately Ten (10) Years
Commencement Date: At Completion
Expiration Date: March 31, 2008
(f) PERMITTED USE: Office and light manufacturing and use incidental
thereto.
(g) SECURITY DEPOSIT: None
(h) BROKER: None
(i) RIDER TO LEASE: Option to Renew # 1
Option to Renew # 2
(j) TENANT's S.I.C. NUMBER: 3577
(k) FIXED RENTAL SCHEDULE:
</TABLE>
The Fixed Rent payable by Tenant to Landlord shall be at the annual rate
and payable in the monthly installments as follows'
<TABLE>
<CAPTION>
Period Monthly Installment Annual Rate
------ ------------------- -----------
<S> <C> <C>
Completion-03/31/99 $ 3,500.00 $ 42,000.00
04/01/99-03/31/00 $ 3,570.00 $ 42,840.00
04/01/00-03/31/01 $ 3,641.33 $ 43,696.00
04/01/01-03/31/02 $ 3,714.17 $ 44,570.00
04/01/02-03/31/03 $ 3,788.50 $ 45,462.00
04/01/03-03/31/04 $ 3,864.25 $ 46,371.00
04/01/04-03/31/05 $ 3,941.50 $ 47,298.00
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
04/01/05-03/31/06 $34,056.83* $408,682.00*
04/01/06-03/31/07 $34,137.25* $409,647.00*
04/01/07-03/31/08 $34,219.25* $410,631.00*
</TABLE>
If Tenant chooses not to exercise option at Lease expiration, Tenant
must pay to Landlord the unamortized portion of the addition. If tenant vacates
at Lease end, the calculation formula for the unamortized portion of the
addition will be figured at 9-1/4% over a twenty (20) year amortization on
$350,000.00 as indicated on the attached loan progress chart. If, however, the
warehouse is expanded where the percentage of office space is twenty percent
(20%) or less, then no moneys will be due for the unamortized portion of this
$350,000.00 office expansion.
<TABLE>
<S> <C>
(l) ESTIMATED MONTHLY ADDITIONAL RENT: $ 540.00
*04/01/05-03/31/08: $5,265.00
</TABLE>
(m) GUARANTOR: TransAct Technologies, Inc.
2. Description of Property. Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord, the land (the "Land"), building (the "Building")
and other improvements described in Section l(d) (collectively the "Property")
and shown on the site plan attached hereto as Exhibit A. Exhibit A sets forth
the general layout of the building and property and no material changes shall be
made to the plan without Tenant's consent. Landlord shall, at its sole cost and
expense, obtain all necessary governmental approvals for construction of the
building, and Landlord shall perform all work with respect to the building and
site improvements in conformance with Exhibits B and C attached hereto. Landlord
and Tenant acknowledge that complete construction drawings will replace Exhibits
B and C in this Lease-once said drawings are prepared. The substituted Exhibits
B and C shall be in conformance with Exhibits B and C as originally made a part
hereto.
3. Term. The term of the Lease (the "Term") shall commence on the date
set forth in Section l(e) (the "Commencement Date") and terminate on the date
set forth in Section l(e) (the "Expiration Date"), except as hereinafter
provided.
Notwithstanding the above, the Lease Term shall commence on the
Occupancy Date, which shall be deemed to mean the earlier of (a) the date on
which Tenant takes occupancy and conducts business, or (b) the date on which
Landlord has obtained a Certificate of Occupancy or temporary Certificate of
Occupancy (provided the municipal authorities allow use and occupancy under a
temporary certificate of occupancy) for the Property and has substantially
completed same and made same available for Tenant's occupancy, provided that
Landlord shall have given Tenant thirty (30) days' written notice of the date on
which the Building is to be substantially completed and available to Tenant.
"Substantially completed" shall mean that Landlord's work is in compliance with
the plans and specs in Exhibits B and C and subject only to minor punchlist
items on the punchlist provided by Tenant pursuant to Article 10 which will not
materially interfere with Tenant's use and occupancy of the Premises.
When the commencement and expiration dates of the Lease term have been
determined, as provided herein, Landlord and Tenant shall execute and deliver a
written statement, in recordable form, specifying the commencement and
expiration dates of the Lease Term. Such statement, when so executed and
delivered, will be deemed to be incorporated in, and become a part of, this
Lease.
Landlord may not be able to deliver possession of the Property to
Tenant on the date specified in Section l(e) as the Commencement Date. Landlord
shall not be liable to Tenant if Landlord does not deliver possession of the
Property to Tenant on the specified Commencement Date. In such event the
Commencement Date shall be delayed until possession of the Property is delivered
to Tenant and the Term shall be extended for a period equal to the delay in
delivery of possession of the Property to Tenant, plus the number of days
necessary to end the Term on the last day of a month. If Landlord does not
deliver possession of the Property to Tenant within six (6) months after the
specified Commencement Date, Landlord or Tenant may elect to cancel
2
<PAGE> 3
this Lease by giving written notice to the other at any time after the six month
period ends, and neither party shall have any further obligations to the other
under this Lease.
If Tenant occupies and uses the Property for normal operations prior to
the Commencement Date, the Term of the Lease shall then commence, but the
Expiration Date shall not be advanced. Tenant's early occupancy of the Property
shall be subject to all of the provisions of this Lease and Tenant shall pay the
rent and all other charges specified in this Lease from the Tenant's occupancy
date.
If delivery of possession of the Property to Tenant is on a date other
than the specified Commencement Date, at the request of either party, Landlord
and Tenant shall execute an instrument setting forth the Commencement Date and
Expiration Date.
The first Lease year shall be the period commencing on the Commencement
Date and ending twelve calendar months thereafter, provided, however, that if
the Commencement Date is not the first day of a month, the first Lease Year
shall commence on the Commencement Date and end twelve calendar months from the
last day of the month in which the Commencement Date occurs. Each succeeding
twelve calendar month period thereafter shall be a Lease Year.
4. Fixed Rent. Tenant shall pay to Landlord at the address(es) set
forth in Section l(b), or to such other person or at such other place as
Landlord may from time to time designate, without previous demand therefor and
without counterclaim, deduction or set-off, the rent ("Fixed Rent") set forth in
Section l(k), such Fixed Rent to be payable in monthly installments in advance
on the first business day of each month during the term of the Lease. If the
Commencement Date shall be other than the first day of a calendar month, Tenant
shall pay on the Commencement Date, the proportionate amount of Fixed Rent for
the balance of such month. The first monthly installment of Fixed Rent will be
paid by Tenant upon closing title for the purchase of the property by Landlord
for Tenant's building.
5. Net Lease. It is the intention of Landlord and Tenant that this is a
net Lease and that the Fixed Rent shall be absolutely net to Landlord and that
Tenant shall be solely responsible for and pay all costs for the use, operation,
maintenance, care and repair of the Property, except as otherwise expressly
provided herein. All obligations with respect to the Property payable by tenant
other than the Fixed Rent are additional rent under this Lease. The term "rent"
means the Fixed Rent and additional rent.
6. Real Property Taxes. (a) Tenant shall pay all real property
impositions during the Term. As used herein, the term "real property
impositions" means (i) any tax, assessment or other governmental charge of any
kind which at any time during the Term may be assessed, levied, imposed upon or
become due and payable with respect to the Property; (ii) any tax on the
Landlord's right to receive, or the receipt of rent or income from the Property
(excluding all federal or state income tax), or against Landlord's business of
leasing the Property; (iii) any tax or charge for fire protection, refuse
collection, streets, sidewalks or road maintenance or other services provided to
the Property by any governmental agency; and (iv) any tax replacing or
supplementing in whole or in part any tax previously included within the
definition of real property impositions under this Lease. During the first and
last years of the Term, the real property impositions payable by Tenant shall be
prorated for the fraction of the tax fiscal year included in the Term.
(b) Tenant shall pay real property impositions (as defined in Paragraph
(a) of this Section) to Landlord in monthly installments (in the manner set
forth in Section 4) on an estimated basis as determined by Landlord. Landlord
may adjust such estimate at any time and from time to time based upon Landlord's
experience and anticipation of such impositions. After the end of each calendar
year during the term, Landlord shall deliver to Tenant a statement setting forth
the actual real property impositions for such calendar year for which estimated
payments were made, the amount paid by Tenant on account thereof, and the amount
due to or from Tenant. If Tenant has paid less than the actual amount due,
Tenant shall pay the difference to Landlord (in the manner set forth in Section
4) within ten (10) days after Landlord's request therefor. Any amount paid by
Tenant which exceeds the amount due shall be credited against the
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next succeeding estimated payments due hereunder, unless the Term has then
expired, in which amount the excess amount shall be refunded to Tenant.
(c) If an assessment for public improvements is levied against the
Property, Landlord shall be deemed to have elected to pay such assessment in the
maximum number of installments then permitted by law (whether or not Landlord
actually so elects), and Tenant shall pay the installments payable during or
attributable to the Term, together with any interest due as a result of the
installment payments. Any installment for a period during which the Commencement
Date or Expiration Date occurs shall be prorated for the fraction of the period
included in the Term. Tenant may prepay the entire assessment in one installment
on the balance at any time if this will result in a net tax savings on the
property.
(d) Real property impositions do not include Landlord's federal or
state income, franchise, inheritance or estate taxes and Tenant shall have no
obligation in connection therewith.
(e) Tenant shall not, without Landlord's prior written consent, which
shall not be unreasonably withheld, institute or prosecute any appeal or other
proceeding with respect to any assessments for real property impositions or
assessments for public improvements levied, assessed or imposed upon or against
the Property. Landlord will bring such proceeding at Tenant's cost. In the event
Landlord is not using a contingency firm to appeal taxes, and Landlord is in the
process of finding a firm to appeal the taxes, then Tenant may provide a
proposed contract with a firm to handle the appeal and Landlord will use said
firm so long as the cost for the firm proposed by Tenant is materially less than
one the Landlord would have employed.
7. Insurance. (a) Landlord's Insurance. At all times during the term of
this Lease, Landlord will carry and maintain fire and extended coverage
insurance at full replacement cost agreed value, boiler, rental value insurance,
and sprinkler insurance covering the Property, and public liability (at a
minimum of $5,000,000 on a per occurrence basis) and property damage insurance
in such amounts as Landlord determines from time to time in its reasonable
discretion. Tenant will pay Landlord, as additional rent, for the costs of all
such insurance in accordance with the manner set forth for real property taxes
under Section 6(b) of the Lease.
(b) Tenant's Insurance. At all times during the term of this
Lease, Tenant will carry and maintain, at Tenant's expense, the following
insurance, in the amounts specified below or such other amounts as Landlord may
from time to time reasonably request, with insurance companies and on forms
satisfactory to landlord:
(i) Public liability and property damage liability insurance,
with a combined single occurrence limit of not less than $1,000,000.00. All such
insurance will specifically include, without limitation, contractual liability
coverage for the performance by Tenant of the indemnity agreements set forth in
Section 25 of this Lease.
(ii) Fire and extended coverage. insurance covering all
leasehold improvements in the Premises and all of Tenant's merchandise,
equipment, trade fixtures, appliances, furniture, furnishings and personal
property, from time to time in, on, or upon the Premises, in an amount not less
than the full replacement cost without deduction for depreciation from time to
time during the term of this lease, providing protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended peril (all risk), boiler, flood, glass
breakage and sprinkler leakage. All policy proceeds will be used for the repair
or replacement of the property damaged or destroyed; however, if this Lease
ceases under the provisions of Section 19, Tenant will be entitled to any
proceeds resulting from damage to Tenant's merchandise, equipment, trade
fixtures, appliances, furniture and personal property, and Landlord will be
entitled to all other proceeds.
(iii) Workmen's compensation insurance insuring against and
satisfying Tenant's obligations and liabilities under the workmen's compensation
laws of the state in which the Premises are located.
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(c) Forms of the Policies. All policies of liability insurance
which Tenant is obligated to maintain according to this Lease (other than any
policy of workmen's compensation insurance) will name Landlord and such other
persons or firms as Landlord specifies from time to time as additional insureds.
Original or true copies of original policies (together with copies of the
endorsements naming Landlord and any others specified by Landlord as additional
insureds) and evidence of the payment of all premiums of such policies will be
delivered to Landlord prior to Tenant's occupancy of the Premises and from time
to time at least thirty (30) days prior to the expiration of the term of each
such policy. All public liability and property damage liability policies
maintained. by Tenant will contain a provision that Landlord and any other
additional insureds, although named as an insured, will nevertheless be entitled
to recover under such policies for any loss sustained by Landlord and such other
additional insureds, its agents and employees as a result of the acts or
omissions of Tenant. All such policies maintained by Tenant will provide that
they may not be terminated or amended except after thirty (30) days' prior
written notice to Landlord. All public liability, property damage liability and
casualty policies maintained by Tenant will be written as primary policies, not
contributing with and not supplemental to the coverage that Landlord may carry.
No insurance required to be maintained by Tenant by this Section 7 will be
subject to more than a $5,000.00 deductible limit without Landlord's prior
written consent. All Tenant's policies required to be maintained under this
Lease shall contain "severability of interests" and "cross liability"
endorsements, and such policies shall be written by an insurance company having
a Best Rating of A (VI) or better.
(d) Adequacy of Coverage. Landlord, its agents and employees
make no representation that the limits of liability specified to be carried by
Tenant pursuant to this Section 7 are adequate to protect Tenant. If Tenant
believes that any of such insurance coverage is inadequate, Tenant will obtain,
at Tenant's sole expense, such additional insurance coverage as Tenant deems
adequate.
(e) Inadequate Insurance. Upon failure of Tenant to comply
with the provisions of Section 7, in addition to any other rights and remedies
of the Landlord, Landlord shall have a right to obtain such insurance, to pay
the premiums for the same, and to recover the cost of such insurance at once as
additional rent due from Tenant to Landlord under this Lease. In the event
Landlord fails to obtain insurance as specified in 7(a), Tenant, after notice to
Landlord and Landlord not obtaining required insurance within seven (7) days,
shall have a right to obtain and pay premiums for same and to recover the cost
at once from Landlord.
(f) Waiver of Subrogation. Landlord and Tenant each waive any
and all rights to recover against the other or against any other tenant or
occupant of the property, or against the officers, directors, shareholders,
partners, joint venturers, employees, agents, customers, invitees or business
visitors of such other party or of such other tenant or occupant of the
property, for any loss or damage to such waiving party arising from any cause
covered by any insurance required to be carried by such party. Landlord and
Tenant, from time to time, will use their respective insurers to issue
appropriate waiver of subrogation fights endorsements to all policies of
insurance carried in connection with the property or the Premises or the
contents of the property or the Premises. Tenant agrees to cause all other
occupants of the Premises claiming by, under, or through Tenant to execute and
deliver to Landlord such a waiver of claims and to obtain such waiver of
subrogation rights endorsements.
8. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all light, power, natural gas, fuel, oil, sewer service, sprinkler
stand-by service, water, telephone, refuse disposal and other utilities and
services supplied to the Property. Landlord shall not be liable to Tenant, and
Tenant's obligations under the Lease shall not be abated, in the event of any
interruption or inadequacy of any utility or service supplied to the Property.
Landlord will, however, be liable to Tenant in the event of interruption or
inadequacy of any utility due to Landlord's negligence. Tenant shall have the
right to contract for additional utilities supplied to the Premises, provided
Tenant undertakes all costs necessary to bring such additional utilities to the
property and subject to Landlord's review and approval of plans and
specifications for additional utility service. Said Landlord consent is not to
be unreasonably withheld.
9. Use of Property. (a) The Property may only be used for the use set
forth in Section l(f) and all uses incidental thereto.
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(b) Notwithstanding the foregoing, Tenant shall not use or
permit the Property to be used for (i) any unlawful purpose; (ii) in violation
of any certificate of occupancy covering the Property; (iii) any use which may
constitute a public or private nuisance or make voidable any insurance in force
relating to the Property; (iv) any purpose which creates or produces noxious
odors, smoke, fumes, emissions, noise or vibrations; or (v) any use which
involves or results in the generation, manufacture, refining, transportation,
treatment, storage, handling or disposal of petroleum products or hazardous
substances or wastes. However, the Tenant may store and handle substances which
are classified as hazardous provided they are incidental to the normal operation
of an office and light industrial manufacturing facility, and further provided
that such substances are stored, handles and disposed of in accordance with
applicable State and Federal statutes and regulations.
(c) Tenant shall not cause or permit any overloading of the
floors of the Building. Tenant shall not install any equipment or other items
upon or through the roof, or cause openings to be made in the roof, without
Landlord's prior written consent. Tenant shall not install any underground
storage tanks or facilities at the Property.
(d) No storage of any goods, equipment or materials shall be
permitted outside the Building on the Property; however, overnight parking of
company vehicles not storing goods is permissible.
10. Existing Conditions. Upon five (5) days written notice by Landlord
to Tenant, Tenant will conduct a walk-through inspection of the Premises with
Landlord and prepare a punch-list of items needing additional work by Landlord.
Other than the items specified in the punch-list, by taking possession of the
Premises, Tenant will be deemed to have accepted the Premises in their condition
on the date of delivery of possession; however, Landlord will be responsible for
repairs of latent defects for twelve (12) months from the Commencement Date. The
punch-list will not include any damage to the Premises caused by Tenant's
move-in or early access, if permitted. Damage caused by Tenant will be repaired
or correct by Landlord, at Tenant's expense. Tenant acknowledges that neither
Landlord nor its agents or employees have made any representations or warranties
as to the suitability or fitness of the Premises for the conduct of Tenant's
business or for any other purpose, nor has Landlord or its agents or employees
agreed to undertake any alterations or construct any improvements to the
Premises except as expressly provided in this Lease and Exhibits B and C to this
Lease. If Tenant fails to submit a punch-list to Landlord within three (3) days
of Tenant's inspection, it will be deemed that there are no items needing
additional work or repair (except for latent defects). Landlord's contractor
will complete all reasonable punch-list items within thirty (30) days after the
walk-through inspection or as soon as practicable after such walk-through.
11. Maintenance and Repairs. (a) Tenant shall keep and maintain the
Property (including all structural, non-structural, exterior, interior and
landscaped areas, and systems and equipment) in good order, condition and repair
during the Term. Tenant shall promptly replace any portion of the property or
any systems or equipment thereof which cannot be fully repaired. All repairs and
replacements shall be performed in a good and workmanlike manner. All of
Tenant's obligations to maintain and repair the Property shall be accomplished
at Tenant's sole expense. Tenant shall not be responsible to repair damages
occasioned by Landlord's gross negligence.
(b) Tenant shall keep and maintain all portions of the
Property and the parking areas, sidewalks and landscaped areas, in the same
condition as received from Landlord, reasonable wear and tear excepted, free of
dirt and rubbish, and clear the parking areas and sidewalks of accumulations of
snow and ice.
(c) During the Term, Tenant shall procure and maintain the
following service contracts: (i) contract for inspection and maintenance of the
roof of the Building (the inspections pursuant to such contract shall be made at
least annually); (ii) contract for the inspection, service, maintenance and
repair of all heating, ventilating and air conditioning equipment installed in
the Building (the inspection pursuant to such contract shall be made at least
quarterly); (iii) contract for maintenance of the landscaped areas of the
Property; however, Tenant is not obligated to
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provide a service contract for maintenance of landscaping provided Tenant
adheres to the maintenance obligations set forth in (b) above; and (iv) contract
for the inspection, testing, service, maintenance, and repair of the sprinkler
system in accordance with the requirements of the National Fire Protection
Association (NFPA) and the governmental bodies having jurisdiction. The identity
of each contractor and each contract shall be subject to Landlord's reasonable
approval. Copies of reports of inspections made hereunder shall be promptly
supplied to Landlord.
12. Alterations and Improvements. (a) Tenant shall not make any
alterations, additions or improvements to the Property (the "Alterations")
without Landlord's prior written consent, except for interior non-structural
Alterations which do not exceed $10,000.00 in cost which are not visible from
the outside of the Building and which meet all applicable laws and building
codes, and which do not affect the insurability or cost of insuring the
Premises. In no event shall Alterations reduce the size of the Building or
reduce the value of the Property. Tenant shall submit to Landlord detailed plans
and specifications for Alterations requiring Landlord's consent and reimburse
Landlord for all reasonable expenses incurred by Landlord in connection with its
review thereof. Tenant shall also provide to landlord for its reasonable
approval the identity of the contractor Tenant proposes to employ to construct.
the Alterations for those Alterations requiring Landlord's consent. All
Alterations shall be accomplished in accordance with the following conditions:
(1) Tenant shall procure all governmental permits and
authorizations for the Alterations, and obtain and provide to Landlord an
official certificate of occupancy and/or compliance upon completion of the
Alterations, if appropriate.
(2) Tenant shall arrange for extension of its general
liability insurance to apply to the construction of the Alterations. Further,
Tenant shall procure and maintain Builders Risk Casualty Insurance in the amount
of the full replacement cost of the Alterations and statutory Workers
Compensation Insurance covering persons employed in connection with the work.
(3) Tenant shall construct the Alterations in a good
and workmanlike manner utilizing materials of quality commensurate with others
in the building and in compliance with all laws and governmental regulations.
(b) Upon completion of the Alterations, if Landlord so
requests, Tenant shall provide Landlord with "as built" reproducible
transparency plans of the Alterations; however, Tenant will not be required to
provide plans for non-structural alterations which do not require a building
permit.
(c) Alterations shall be the property of Landlord and shall
remain on the Property upon termination of the Lease or, if Landlord so
requires, a portion of or all Alterations shall be removed by Tenant on or prior
to the termination of the Lease and Tenant shall restore the Property to its
condition prior to such Alterations, reasonable wear and tear excepted. Landlord
will, upon Tenant's request, notify Tenant of those Alterations which must be
removed at Lease end.
13. Covenant Against Liens. Tenant shall not have any right to subject
Landlord's interest in the Property to any mechanic's lien or any other lien
whatsoever. If any mechanic's lien or other lien, charge or order for payment of
money shall be filed as a result of the act or omission of Tenant, Tenant shall
cause such lien, charge or order to be discharged or appropriately bonded within
twenty (20) days after written notice from Landlord thereof, and Tenant shall
indemnify and save Landlord harmless from all liabilities and costs resulting
therefrom.
14. Signs. Tenant shall not place any signs on the Property without
Landlord's prior written approval of its design, location and manner of
installation, such approval not to be unreasonably withheld. In no event shall
any sign be installed on the roof or above the parapet height of the Building.
Tenant shall remove its signs upon termination of this Lease and restore the
Property to its condition prior to installation of the signs, reasonable wear
and tear excepted.
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15. Compliance with Law. Tenant shall take all necessary action to
conform to and comply with all laws, orders and regulations of any governmental
authority or Landlord's or Tenant's insurers, or any Landlord's Mortgagee, now
or hereafter applicable to the Property or Tenant's use or occupancy. Tenant
shall obtain all permits, including a certificate of occupancy, necessary for
Tenant's occupancy or use of the Property. Tenant has no obligation to obtain a
certificate of occupancy for any work specified to be done by Landlord in the
approved plans and specifications in Exhibit B. If the Tenant must make any
capital expenditure in accordance with this section, which expenditure is not
due to Tenant's specific use, Tenant will only pay a portion of the expense,
said portion to be calculated as the number of years remaining on the Lease
Term, or Extended Lease Term, divided by the depreciable life of the capital
expenditure under generally accepted accounting principles multiplied by the
capital expenditure. Tenant will not be required to make any capital
expenditures to conform the property to any laws, orders and regulation or any
governmental authority which were in existence as of the date of receipt of a
building permit for construction of the facility.
16. Environmental Representations and Compliance. (a) The Tenant, its
officers, partners, employees, agents and subsidiaries, agree to indemnify,
defend and hold the Landlord, its officers, partners, employees, successors or
assigns, harmless from any and all claims, causes of action, and any and all
damages, liabilities, costs and expenses of any kind whatsoever, including
fines, assessments, clean-up costs, shut-down fees, contractor's costs and
actual attorney fees, which arise out of, are asserted on account of, or
traceable to Tenant's use, storage, manufacture, dumping, leakage or the
carrying on of any activities or occurrence upon the Premises that is the
subject of this Lease relating to oil, waste oil, thinners, spirits, materials
all petro-chemical by-products, and any substance, material or compound
classified as toxic or hazardous under any federal, state or local environmental
law, and any other material or compound known to have an adverse environmental
impact. However, nothing herein contained shall make Tenant responsible for
conditions existing prior to Tenant's occupancy.
(b) In addition, Tenant hereby makes the following
representations with respect to Tenant's occupancy and use of the Premises to
Landlord, understanding that Landlord shall and does in fact rely thereon.
Tenant shall also indemnify, defend and hold Landlord harmless from any and all
claims, costs, damages, expenses, attorney fees, and causes of action arising as
a result of, or associated with these representations made by Tenant. However,
nothing herein contained shall make Tenant responsible for conditions existing
prior to Tenant's occupancy. (Note: Although clauses (1) through (4) below are
representations made in the present tense, these representations shall be
considered in compliance provided the representations are in fact accurate at
the time of occupancy and thereafter):
(1) Air Quality:
(i) Tenant represents that any and all air emission permits
required by state, local or federal authorities have been properly obtained and
will remain in force.
(ii) Tenant represents that its facility is in compliance with
any conditions attendant to such permits.
(iii) Tenant represents that its facility is and will remain
in compliance with Occupational Safety Health Act requirements governing
exposure of workers to hazardous materials in the workplace.
(2) Water Pre-Treatment:
(i) Tenant represents that any present discharge of industrial
waste water into the sewer system has been properly permitted by local, state or
federal authorities.
(ii) Tenant represents that all permits have been properly
complied with and that Tenant is not in violation of any permits, ordinances, or
compliance requirements.
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(3) Underground Storage Tanks:
(i) Tenant acknowledges that there are presently no
underground storage tanks upon the property and that none will be installed
without Landlord's specific written consent.
(4) Water Discharge:
(i) Tenant represents that any permits for such water
discharge have been properly obtained and are current and that Tenant is in
compliance therewith.
However, in the event of unintentional violation of any of these
representations, Tenant shall be entitled to the notice and cure rights provided
in Section 23 hereof.
(c) Tenant further understands and agrees that Landlord shall
be entitled to enter upon the Premises to conduct environmental audit
inspections, tests, borings, samplings and the like which Landlord deems
reasonable and necessary to determine the environmental status of the property.
Landlord shall provide prior notice and agrees not to interfere with Tenant's
occupancy; Landlord to repair any damage done to Premises; Landlord to indemnify
Tenant for any damage or accidents.
(d) Tenant agrees that it shall, at its sole cost and expense,
fulfill, observe and comply with all of the terms and provisions of all federal,
state and local environmental laws now in effect or hereinafter enacted, as any
of the same may be amended from time to time, and all rules, regulations,
ordinances, opinions, orders and directives issued or promulgated pursuant
thereto or in connection therewith, as and to the extent any of the foregoing
may be applicable to the Property and Tenant's use and occupancy thereof except
that Tenant shall not be obligated to make any changes to the structural
elements or building systems unless necessitated by Tenant's specific use.
(e) Within ten (10) days after written request by the Landlord
or any mortgagee of Landlord, and, in any event, on each anniversary of the
commencement date hereof, Tenant shall deliver to Landlord or Landlord's
mortgagee, as the case may be, a duly executed and acknowledged affidavit of
Tenant or Tenant's chief executive officer, certifying:
(1) The proper four digit Standard Industrial
Classification number ("S.I.C. number") relating to Tenant's then current use of
the Property (said S.I.C. number to be obtained by reference to the then current
Standard Industrial Classification Manual prepared and published by the
Executive Office of the President, Office of Management and Budget or the
successor to such publication). Tenant hereby represents, warrants and covenants
that its S.I.C. number as of the date of this Lease is as set forth in Section I
(i) hereof; and
(2) (a) That Tenant's use of the Property does not
involve and has not involved the generation, manufacture, refining,
transportation, treatment, storage, handling, or disposal of petroleum products
or hazardous substances or wastes (as hazardous substances and hazardous wastes
are defined in any Environmental Laws) on site, above ground or below ground
(all of the foregoing being hereinafter collectively referred to as the Presence
of Hazardous Substances); or (b) that Tenant's use does involve or has involved
the Presence of Hazardous Substances, in which event, such affidavit shall
describe in detail that portion of Tenant's operations which involves or
involved the Presence of Hazardous Substances. Said description shall identify
each Hazardous Substance and describe the manner in which it is or was
generated, handled, manufactured, refined, transported, treated, stored, and/or
disposed of. Tenant shall supply Landlord or Landlord's mortgagee with such
additional information relating to said Presence of Harzardous Substances as
Landlord or Landlord's mortgagee may request. However, the Tenant may store and
handle substances which are classified as hazardous provided they are incidental
to the normal operation of an office and light industrial manufacturing
facility, and further provided that such substances are stored, handles and
disposed of in accordance with applicable State and Federal statutes and
regulations.
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(f) Tenant shall provide Landlord with copies of all reports,
information and materials filed with or provided to any governmental agency or
authority pursuant to any of the environmental laws.
(g) In the event that, upon the date of termination or
expiration of the term of this Lease, Tenant has not satisfied and complied with
all requirements imposed upon Landlord or Tenant under any environmental laws or
by any governmental agency or authority pursuant to any environmental laws,
Tenant shall continue to pay Fixed Rent at the annual rent payable immediately
prior to such date of termination or expiration plus an increase for each year
until such obligation terminates, each such annual increase to be determined by
the percentage increase in the Consumer Price Index published by the Bureau of
Labor Statistics of the United States for All Urban Consumers (1982-1984 = 100).
Such increased portion of rent over the Fixed Rent shall be computed by the
increase in the Index from three (3) months prior to the initial Term of the
Lease to the later of three (3) months prior to the expiration of the Lease or
three (3) months prior to the anniversary of each continuance of the Lease
multiplied by the annual rental during the last year of the Lease. The increased
rental when added to the previous Fixed Rent shall become the new Fixed Rent. In
no event shall Fixed Rent be reduced below the amount payable for the prior
year. Such Fixed Rent shall be payable notwithstanding that Tenant may be barred
and precluded from occupying and using the Property. Such payments of Fixed Rent
shall continue until Tenant has complied in full with the requirements imposed
by environmental laws or by governmental agencies and authorities having
jurisdiction with respect thereto and has provided to Landlord written
confirmation from governmental agency or authority having jurisdiction that such
compliance has in fact occurred. Tenant shall, in addition to payments of Fixed
Rent as aforesaid, promptly pay any fines, penalties, levies or assessments
against the Property or Landlord which are imposed at any time or from time to
time as a result of any action, act or failure to act of the Tenant relating to
environmental laws. For as long as Tenant shall remain liable for rent under
this subparagraph (g), Tenant shall have control over any remediation efforts,
provided such remediation is in compliance with all applicable federal, state
and local laws.
(h) Tenant agrees that each and every provision of this
Section shall survive the expiration or earlier termination of the Term of this
Lease.
17. Landlord's Access. Landlord and its representatives may enter the
Property at all reasonable times (or at any time in the event of emergency) for
the purpose of inspecting the Property, or making any necessary repairs, or to
show the Property to prospective purchasers, investors, encumbrancers, tenants
or other parties, or for any other purpose Landlord deems necessary. During the
final six (6) months of the Term, Landlord may place customary "For Sale" or
"For Lease" signs on the Property. Landlord shall, in the exercise of its rights
under this Section, use its best efforts not to unreasonably interfere with
Tenant's use and occupancy of the Property.
18. Assignment and Subletting. Except as otherwise provided herein,
Tenant shall not assign or encumber Tenant's interest in this Lease, sublet any
portion of the Property, or grant concessions or licenses with respect to the
Property.
(a) If Tenant requests Landlord's consent to an assignment of
this Lease or a subletting of all of any part of the Premises, Tenant shall
submit to Landlord: (1) the name of the proposed assignee or subtenant; (2) the
terms of the proposed assignment or subletting together with a conformed or
photostatic copy of the proposed assignment or sublease; (3) the nature of
business of the proposed assignee or subtenant's business and its proposed use
of the Premises; (4) such information as to its financial responsibility and
general reputation as Landlord may require; and (5) a summary of plans and
specifications for revising the floor layout of the Premises.
(b) Upon the receipt of such information from Tenant, Landlord
shall have the option, to be exercised in writing within fifteen (15) days after
such receipt, to cancel and terminate this Lease if the request is to assign
this Lease or to sublet all of the Premises or, if the request is to sublet a
portion of the Premises only, to cancel and terminate this Lease with respect
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to such portion, in each case as of the date set forth in Landlord's notice of
exercise of such option.
(c) If Landlord shall cancel this Lease, Tenant shall
surrender possession of the Premises, or the portion of the Premises which is
the subject of the request, as the case may be, on the date set forth in such
notice in accordance with the provisions of this lease relating to surrender of
the Premises. If this Lease shall be canceled as to a portion of the Premises
only, the Minimum Rent and Additional Rent payable by Tenant hereunder shall be
abated proportionately according to the ratio that the number of square feet in
the portion of space surrendered (as computed by Landlord) bears to the Rentable
Area of the Premises.
(d) If Landlord shall elect not to exercise its option to
cancel and terminate this Lease with respect to all of part of the Premises as
above provided, Landlord agrees not to unreasonably withhold its consent to the
proposed assignment or sublease. However, if the proposed assignee or subtenant
is or has been a tenant of Landlord or Landlord's affiliates, or if the proposed
assignee or subtenant has had contact with Landlord or Landlord's affiliates
within twelve (12) months preceding the proposed assignment or sublease
regarding potentially leasing space from the Landlord or Landlord's affiliates,
then failure of Landlord to consent shall not be unreasonable. Landlord shall
notify Tenant, within twenty (20) days after Landlord's receipt of the
information described herein, whether (i) Landlord consents to the proposed
assignment or sublease or (ii) does not consent to the proposed assignment or
sublease. The cumulative change of more than fifty-one (51%) percent of the
ownership interest of Tenant shall be deemed to be an assignment of this Lease
requiring Landlord's consent. However, Tenant may assign this Lease of sublet
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant, provided such
assignee shall assume all of Tenant's' obligations under this Lease, and such
assignee or sublessee shall then have a net worth at least equal to that of
Tenant on the date hereof.
(e) In the event of a permitted assignment or subletting,
Tenant shall remit to Landlord as additional rent each month during the
remainder of the Base Term fifty (50%) percent of any rent or other sums
received by Tenant from its assignee or sublessee in excess of the Fixed Rent
and other charges paid by Tenant allocable to the Property or portion thereof
sublet, as the case may be, and 100% of any rent or other sums received by
Tenant from its assignee or sublessee in excess of the Fixed Rent and other
charges paid by Tenant allocable to the Property or portion thereof sublet, as
the case may be for any term in effect beyond a ten (10) year term.
(f) No assignment or subletting hereunder, whether or not with
Landlord's consent, shall release Tenant from any obligations under this Lease,
and Tenant shall continue to be primarily liable hereunder. Unless otherwise
previously released from liability by Landlord, if Tenant's assignee or
sublessee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing its remedies against the assignee or sublessee. Consent
to one assignment or subletting shall not be deemed a consent to any subsequent
assignment or subletting. Landlord may consent to subsequem assignments or
modifications of this Lease or sublettings without notice to Tenant and Tenant
shall not be relieved of liability under this Lease.
(g) Tenant shall pay to Landlord upon demand all costs,
including reasonable legal fees, which Landlord shall incur in reviewing any
proposed assignment or subletting; however, Landlord will provide an estimate of
costs beforehand and Tenant may decline to have Landlord review or ask Landlord
to review and pay such amounts as are due.
19. Casualty. If the Building is damaged by fire or other casualty, and
(i) the insurance proceeds received by Landlord on account of such damage are
sufficient to pay for the necessary repairs, (ii) Landlord's Mortgagee permits
Landlord to utilize the insurance proceeds to repair such damage, and (iii) the
Building can be fully repaired within one hundred thirty-five (135) days after
such casualty occurred, this Lease shall remain in effect and Landlord shall
repair the damage as soon as reasonably possible. If any of the foregoing
conditions requiring Landlord to repair the Building is not met, Landlord may
elect either to (i) terminate this Lease; or (ii) repair the damage as soon as
reasonably possible, in which event this Lease shall remain in full force
11
<PAGE> 12
and effect (but Tenant shall then have the right to terminate this Lease if the
Building cannot be fully repaired within six (6) months after such casualty
occurred). Landlord shall notify Tenant, in writing, of its election within
thirty (30) days after Landlord receives notice of the occurrence of the
casualty. Tenant's notification, if any, shall be required within ten (10) days
thereafter. The Monthly Base Rent and other charges will be abated
proportionately during any period in which, by reason of any damage or
destruction not occasioned by the negligence or willful misconduct of Tenant or
Tenant's employees or invitees, there is a substantial interference with the
operation of the business of Tenant. Such abatement will be proportional to the
measure of business in the Premises which Tenant may be required to discontinue.
The abatement will continue for the period commencing with such destruction or
damage and ending with the completion by the Landlord of such work, repair, or
reconstruction as Landlord is obligated to do. Tenant waives the protection of
any law which grants a tenant the right to terminate a lease in the event of the
destruction of a leased property, and agrees that the provisions of this
paragraph shall govern in the event of any destruction of the Building. Landlord
shall not be required to repair improvements or alterations to the Property made
by Tenant.
20. Condemnation. If more than twenty-five (25%) percent of the Land
and/or Building shall be taken under the power of eminent domain or sold under
the threat thereof ("Condemnation") and Tenant's use of the Property is
materially adversely affected in the reasonable opinion of Tenant, this Lease
shall terminate on the date on which title to the Property or portion thereof
shall vest in the condemning authority. If this Lease shall remain in effect as
to the portion of the Property not taken, Landlord shall restore the
improvements of the Property not taken as nearly as reasonably practicable to
their condition prior to the Condemnation, and the Fixed Rent and Additional
Rent shall be reduced proportionately in accordance with the reduction in the
square foot area of the Building following the Condemnation. Landlord shall be
entitled to receive the entire award in any Condemnation proceeding relating to
the Property, except that Tenant may assert a separate claim to an award for its
moving expenses and for fixtures and personal property installed by Tenant at
its expense. It is understood that Tenant shall have no claim against Landlord
for the value of the unexpired Term of this Lease or any options granted under
this lease. Landlord shall not be required to restore improvements or
alterations to the Property made by Tenant.
21. Surrender of Property. Upon termination of the Lease, Tenant shall
surrender the Property to Landlord, broom clean, and in good order and
condition, except for ordinary wear and tear, and damage by casualty which
Tenant was not obligated to remedy under Section 19. Tenant shall remove its
machinery, equipment and personal property and repair any damage to the Property
caused by such removal. Tenant shall not remove any power wiring or power
panels, lighting or lighting fixtures, wall coverings, blinds or other window
coverings, carpets or other floor coverings, heaters or air conditioners or
fencing or gates, except if installed by Tenant and required by Landlord to be
removed from the Property. All personal property of Tenant remaining on the
Property after Tenant's removal shall be deemed abandoned and at Landlord's
election may either be retained by Landlord or may be removed from the property
at Tenant's expense.
22. Holdover. In the event Tenant remains in possession of the Property
after the expiration of the Term of this Lease (the "Holdover Period"), in
addition to any damages to which Landlord may be entitled or other remedies
Landlord may have by law, Tenant shall pay to Landlord a rental for the Holdover
Period at the rate of one hundred fifty (150%) percent the sum of (i) the annual
rent payable during the last lease year of the Term, plus (ii) all items of
additional rent and other charges with respect to the Property payable by Tenant
during the last lease year of the Term. Nothing herein contained shall be deemed
to give Tenant any right to remain in possession of the Property after the
expiration of the Term of this lease. The sum due to Landlord hereunder shall be
payable by Tenant upon demand. Prior to asserting a claim for damages due to a
lost or delayed prospective tenant, Landlord must provide evidence of any claim
against Tenant for missed rent or other damages from a lost prospective tenant
due to holdover of Tenant.
23. Events of Default; Remedies. (a) Tenant shall be in default upon
the occurrence of one or more of the following events (an "Event of Default")'
(i) Tenant fails to pay rent or any other sum of money required to be paid by
Tenant hereunder within five (5) days of the date
12
<PAGE> 13
when due; however, Tenant shall be entitled to pay within five (5) days written
notice from Landlord on two (2) occasions per year and not be in default; (ii)
Tenant fails to perform any of Tenant's non-monetary obligations under this
Lease for a period of thirty (30) days after written notice thereof from
Landlord. If Tenant is diligently pursuing to cure any non-monetary default and
such default cannot be effected within thirty (30) days, then Tenant will be
allowed additional time as required to effect such cure; (iii) Tenant abandons
the Property for thirty (30) days or more; or (iv) Tenant makes an assignment
for the benefit of creditors, or if a petition for adjudication of bankruptcy or
for reorganization is filed by or against Tenant and is not dismissed within
thirty (30) days, or if a receiver or trustee is appointed for a substantial
part of Tenant's property and such appointment is not vacated within thirty (30)
days.
(b) On the occurrence of an Event of Default, without limiting
any other fight or remedy Landlord may have, Landlord may give written notice to
Tenant of its intention to take the following actions on the earliest date
permitted by law or any later date specified in such notice:
(i) Terminate this Lease and Tenant's right to
possession of the Property by any lawful means, or, without terminating this
Lease, take possession of the Property. In any such event Tenant shall
immediately surrender possession of the Property to Landlord and shall remain
liable to Landlord as follows. At its option, Landlord may occupy the Property
or cause the Property to be redecorated, altered, divided, consolidated with
other adjoining property, or otherwise prepared for reletting, and may relet the
Property or any part thereof for a term or terms to expire prior to, at the same
time or subsequent to the original Expiration Date, and receive the rent
therefor, applying the sums received first to the payment of such expenses as
Landlord may have incurred in connection with the recovery of possession, and
restoring the Property to the condition in which Tenant was obligated to
maintain the Property under this Lease, to brokerage and attorneys' fees, and
then to the payment of damages in amounts equal to the rent hereunder and to the
cost and expense of performance of the other covenants of Tenant under this
Lease. Tenant agrees to pay to Landlord damages equal to the rent and other sums
payable by Tenant under this Lease, reduced by the net proceeds of the
reletting, if any, as ascertained from time to time. In reletting the Property,
Landlord may grant rent concessions, and Tenant shall not be entitled to any
credit therefor. Tenant shall not be entitled to any surplus resulting from any
reletting. If Landlord elects to occupy the Property or any part thereof, there
shall be allowed against Tenant's obligation for rent during the period of
Landlord's occupancy, the reasonable value of such occupancy, not to exceed in
any event the rent payable hereunder for such portion of the Property. Such
occupancy shall not be construed as a release of Tenant's liability hereunder.
In all respects hereto, the Landlord has an affirmative duty to mitigate its
damages by attempting to relet the Property.
(ii) Permit Tenant to remain in possession of the
Property, in which event this Lease shall continue in effect. Landlord shall be
entitled to enforce all of Landlord's rights and remedies under this Lease,
including the right to receive the rent as it becomes due under this lease.
(iii) Pursue any other remedy now or hereafter
available under the laws of the jurisdiction in which the Property is located.
(c) The remedies available to Landlord herein specified are
not intended to be exclusive and prevent Landlord from exercising any other
remedy or means of redress to which Landlord may be lawfully entitled. In
addition to other remedies provided in this Lease, Landlord shall be entitled to
restraint by injunction of any violation or threatened violation by Tenant of
any of the provisions of this Lease. Landlord's exercise of any fight or remedy
shall not prevent Landlord from exercising any other fight or remedy.
(d) Tenant, for itself and any person claiming through or
under Tenant, waives any equity or fight of redemption provided by any law.
24. Service Fee; Interest. (a) Tenant's failure to pay rent promptly or
make other payments required under this Lease may cause Landlord to incur
unanticipated costs, which are impractical to ascertain. Therefore, if Landlord
does not receive full payment of Fixed Rent,
13
<PAGE> 14
additional rent or other sums due from Tenant to Landlord within five (5) days
after it becomes due, Tenant shall pay Landlord as additional rent a service fee
equal to five (5%) percent of the overdue amount; however, Tenant will be
allowed one (1) written notice of delinquency per year without imposition of the
service fee, providing Tenant pays all amounts due with three (3) days of
receipt of Landlord's notice. This service fee shall be in addition to
reasonable legal fees and costs incurred by Landlord in enforcing this Lease in
the event of default.
(b) Any amount owed by Tenant to Landlord which is not paid
when due shall bear interest at the rate per annum of three (3%) percent in
excess of the then prime rate of CitiBank, N.A., of New York, New York ("Default
Interest") from the date of default in payment of such amount. The payment of
Default Interest on such amounts shall not extend the due date of any amount
owed. If the interest rate specified in this Lease shall exceed the rate
permitted by law, the Default Interest shall be deemed to be the maximum legal
interest rate permitted by law.
25. Indemnification by Tenant. Tenant shall indemnify and hold harmless
Landlord from and against all liability, claims or costs including reasonable
legal fees, arising from (i) Tenant's use of the Property; (ii) any breach of
this Lease by Tenant; (iii) any other act or omission of Tenant; or (iv) any
injury including claims for death to person or damage to property Occurring on
or about the Property, except for acts of gross negligence by Landlord. Tenant
shall defend Landlord against any such claim of a third party, with counsel
reasonably acceptable to Landlord or, at Landlord's election, Tenant shall
reimburse Landlord for reasonable legal fees incurred by Landlord's employment
of its own counsel.
26. Landlord's Right to Cure Tenant's Default. If Tenant fails to make
any payment or perform any act on its part to be made or performed, then
Landlord, without waiving or releasing Tenant from such obligation, may, but
shall not be obligated to, make such payment or perform such act on Tenant's
part, and the costs incurred by Landlord in connection with such payment or
performance, together with Default Interest thereon, shall be paid on demand by
Tenant to Landlord as additional rent.
27. Waiver of Liability. Landlord shall not be liable for any injury or
damage to the business, equipment, merchandise or other property of Tenant or
any of Tenant's employees or invitees or any other person on or about the
Property, resulting from any cause, including, but not limited to: (i) fire,
steam, electricity, water, gas or rain; (ii) leakage, obstruction or other
defects of pipes, sprinklers, wires, plumbing, air conditioning, boilers or
lighting fixtures; or (iii) condition of the Property. The preceding excludes
any acts of gross negligence by Landlord.
28. Force Majeure. If either party is unable to perform any of its
obligations due to events beyond such party's reasonable control, the time
provided to such party for performing such obligations shall be extended by a
period of time equal to the duration of such events, and the other party shall
not be entitled to any claim against such party by reason thereof. Events beyond
a party's reasonable control include, but are not limited to, acts of God, war,
civil commotion, labor disputes, strikes, casualty, weather conditions, labor or
material shortages, or government regulation or restriction. Nothing herein
shall delay or affect Tenant's obligation to pay Fixed Rent, real property
impositions or other items of additional rent payable by Tenant under this Lease
as the same becomes due.
29. Notice of Landlord's Default. Tenant shall give written notice of
any failure by Landlord to perform any of its obligations under this Lease to
Landlord and any ground lessor or Landlord's Mortgagee whose name and address
have been furnished to Tenant. Landlord shall not be in default under this Lease
unless Landlord (or such ground lessor or Landlord's Mortgagee) fails to cure
such non-performance within thirty (30) days after receipt of Tenant's notice.
If more than thirty (30) days are required to cure such non-performance,
Landlord shall not be in default if such cure is commenced within such thirty
(30) day period and thereafter diligently pursued to completion. If Landlord
shall be in default as aforesaid, Tenant's only right or remedy shall be to
perform such work or take such action as shall be reasonably necessary to cure
or correct such default. In no event shall Tenant have the right to terminate
this Lease by reason of any such default, and in no event shall Tenant have the
fight to deduct from Fixed Rent or additional rent any amounts expended by
Tenant pursuant to this Section.
14
<PAGE> 15
30. Landlord's Liability Limited. (a) There shall be no personal
liability of the Landlord or any partner, stockholder, officer, director or
other principal of Landlord in connection with this Lease. Tenant agrees to look
solely to the interest of Landlord in the Property for the collection of any
judgment or other judicial process requiring the payment of money by Landlord in
the event of any default or breach by Landlord with respect to this Lease or in
any way relating to the Property. No other assets of landlord or any principal
of Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Tenant's remedies.
(b) The term "Landlord" as used in this lease means only the
owner or mortgagee in possession for the time being of the Property or the owner
of a lease thereof so that, in the event of any sale of the Property, or an
assignment or transfer of such lease, or an assignment of this Lease, Landlord
shall be, and hereby is, entirely freed, relieved and released of all
obligations of Landlord hereunder, and it shall be deemed, without further
agreement between the parties and such purchaser(s) or assignee(s) that the
purchaser or assignee has agreed to perform all of the obligations of Landlord
hereunder. This provision shall relate only to obligations which arise after the
date of such transfer and do not relieve Landlord for liability for obligations
arising prior to such transfer.
31. Estoppel Statement; Financial Statement. (a) Upon Landlord's
request, Tenant shall execute, acknowledge and deliver to Landlord a written
statement certifying: (i) the Commencement Date; (ii) the Expiration Date; (iii)
that this Lease is in full force and effect and unmodified (or if modified,
stating the modifications); (iv) the last date of payment of the Fixed Rent and
other charges and the time period covered by each payment; (v) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating the nature of the default); and (vi) such other matters as may be
reasonably required by Landlord or any Landlord's Mortgagee. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's written
request. Any such statement may be given to and relied upon by any prospective
purchaser or encumbrancer of the Property.
(b) Within ten (10) days after Landlord's request, Tenant
shall deliver to Landlord such financial statements as are reasonably required
to verify the net worth of Tenant. Any such statement may be given by Landlord
to any Landlord's Mortgagee or prospective encumbrancer of the Property, but
otherwise shall be kept confidential by Landlord. Tenant represents to Landlord
that each such financial statement is a true and accurate statement as of the
date of such statement.
32. Quiet Enjoyment. Landlord covenants that as long as Tenant pays the
Fixed Rent and additional rent and performs its other obligations under this
Lease, Tenant shall peaceably and quietly have, hold and enjoy the Property for
the Term provided by this Lease, subject to the provisions of this Lease, any
mortgage or other agreements to which this Lease is subordinate.
33. Subordination; Attornment. (a) This Lease is subject and
subordinate to any mortgage and related documents or liens which may now or
hereafter encumber the Property, and any renewals, modifications,
consolidations, replacements or extensions thereof.
(b) If Landlord's interest in the Property is acquired by
Landlord's Mortgagee, or purchaser at a foreclosure sale, Tenant shall attom to
the transferee of or successor to Landlord's interest in the Property and
recognize such transferee or successor as landlord under this Lease. Such
transferee or successor shall not be liable for any act or omission of any prior
landlord, or be subject to any offsets or defenses which Tenant might have
against any prior landlord, or be bound by any Fixed Rent which Tenant might
have paid for more than the current month to any prior landlord, or be liable
for any security deposit under this lease unless actually transferred to such
transferee or successor.
(c) Tenant agrees that this Lease shall be modified in
accordance with the reasonable request of any institutional Landlord's
Mortgagee, provided no such modification adversely affects the business terms,
or operation of Tenant's business, of this lease.
15
<PAGE> 16
(d) The foregoing provisions shall be self-operative and no
further instrument or act on the part of Tenant shall be necessary to effect the
same, so long as Tenant is provided with a non-disturbance agreement. Tenant
shall nevertheless sign and deliver any document necessary or appropriate to
evidence the subordination, attornment or agreement above provided, providing
Tenant is provided with a non-disturbance agreement, acceptable to Tenant,
granting Tenant the right to have, hold and enjoy the Property for the Term (so
long as Tenant pays the Fixed and Additional Rent and performs its other
obligations under this Lease).
34. Brokerage. Each party represents to the other that it did not deal
with any real estate broker in connection with this Lease, other than the real
estate broker (if any) whose identity is set forth in Section l(h). The
commission of such broker (if any) shall be paid by the party as set forth in
Section l(h). Each party shall indemnify and hold the other harmless from any
claim for a commission or other fee made by any broker with whom the
indemnifying party has dealt, other than the broker identified in Section l(h).
35. Notices. All notices in connection with this Lease or the Property
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid or by overnight carrier which obtains
delivery receipts (e.g. Federal Express). Notices to Landlord shall be delivered
to the address specified in Section l(b). Notices to Tenant shall be delivered
to the address specified in Section l(c). All notices shall be effective upon
the earlier of delivery or attempted delivery in accordance with this provision.
Either party may change its notice address upon written notice to the other
party given in accordance with this provision.
36. Memorandum of Lease. Tenant shall not record this lease. However,
either Landlord or Tenant may require that a memorandum of this Lease executed
by both parties be recorded. Such memorandum shall include such portions of this
lease as either party may reasonably require, but shall not specify the amount
of Fixed rent payable hereunder.
37. Miscellaneous. (a) The failure of either party to insist on strict
performance of any provision of this Lease, or to exercise any right contained
herein, shall not be construed as a waiver of such provision or right in any
other instance. All amendments to this lease shall be in writing and signed by
both parties.
(b) The captions in this lease are intended to assist the
parties in reading this Lease and are not a part of the provisions of this
Lease. Whenever required by the context of this lease, the singular shall
include the plural and the plural shall include the singular. The masculine,
feminine and neuter genders shall each include the other.
(c) Landlord and Tenant hereby waive trial by jury in any
legal proceeding brought by either of them against the other with respect to any
matters arising out of or in any way connected with this Lease or the Property.
(d) The laws of the state in which the Property is located
shall govern this Lease.
(e) If Tenant is a corporation or partnership, each person
signing this lease on behalf of Tenant represents that he has full authority to
do so and that this Lease binds the corporation or partnership, as the case may
be.
(f) This Lease shall be binding upon, and inure to the benefit
of, Landlord and Tenant and their respective heirs, executors, administrators,
successors (by operation of law or otherwise) and assigns, subject, however, to
the limitations on Tenant's right to assign and sublet as set forth in Section
18 hereof.
(g) The submission of this lease to Tenant shall not be deemed
to be an offer and shall not bind either party until duly executed by Landlord
and Tenant.
(h) This Lease may be executed in counterparts, and, when all
counterpart documents are executed, the counterparts shall constitute a single
binding instrument.
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<PAGE> 17
(i) A determination by a court of competent jurisdiction that
any provision of this Lease or any part thereof is illegal or unenforceable
shall not invalidate the remainder of this Lease or such provision, which shall
continue to be in effect.
(j) Waiver of Jury Trial. Landlord and Tenant by this Section
38 waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties to this Lease against the other on any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, or any other
claims (including without limitation claims for personal injury or property
damage), and any emergency statutory or any other statutory remedy.
The riders enumerated in Section l(i) are attached hereto and make a
part of this Lease as fully as if set forth herein at length. The Terms used in
the rider have the same meanings as set forth in the Lease. The provisions of a
rider shall prevail over any provisions of the Lease which are inconsistent or
conflict with the provisions of the rider.
IN WITNESS WHEREOF, the parties hereby have duly executed this Lease as
of the date set forth in Section l(a).
WITNESS: LANDLORD:
PYRAMID CONSTRUCTION COMPANY
/s/ Michelle A. Cabibbo By: /s/ William J. Coleman
- ------------------------------ ------------------------------
ATTEST: TENANT:
MAGNETEC CORP.
By: /s/ By: /s/ Richard L. Cote
-------------------------- ------------------------------
Executive Vice President
17
<PAGE> 18
LOAN PROGRESS CHART
Showing dollar balance remaining on a $1,000 loan.. ... 9-1/4%
ORIGINAL TERM IN YEARS
<TABLE>
<CAPTION>
AGE OF LOAN 20
----------- --
<S> <C>
10 715
11 670
12 620
13 565
14 505
15 439
16 366
17 287
18 200
19 105
</TABLE>
<PAGE> 19
OPTION TO RENEW #1
The tenant shall have the option to renew this lease for an additional
five (5) year period, commencing April 1, 2008 and terminating March 31, 2013 at
the following rental rate:
<TABLE>
<CAPTION>
YEAR MONTHLY INSTALLMENT ANNUAL RATE
---- ------------------- -----------
<S> <C> <C>
04/01/08-03/31/09 $ 34,302.92 $ 411,635.00
04/01/09-03/31/10 $ 34,388.25 $ 412,659.00
04/01/10-03/31/11 $ 37,601.50 $ 451,218.00
04/01/11-03/31/12 $ 37,690.25 $ 452,283.00
04/01/12-03/31/13 $ 37,780.83 $ 453,370.00
</TABLE>
In order for the Tenant to renew the Lease for an additional five (5)
years, Tenant must provide written notice to the Landlord of the Tenant's intent
to exercise the option to renew the Lease at least six (6) months prior to the
expiration of the original Lease.
Upon Landlord's receipt of that written notice, the Lease will be
renewed for an additional five (5) years as set forth above, provided and on
condition that the Tenant has performed all the terms, conditions and covenants
stated in the Lease provisions during the Lease term, and is not in default of
any of the provisions of the Lease at the time the notice of intent to exercise
the option is given.
All other terms and conditions of the Lease shall remain the same and
in full force and effect.
<PAGE> 20
OPTION TO RENEW #2
The tenant shall have the option to renew this lease for an additional
five (5) year period, commencing April 1, 2013 and terminating March 31, 2018 at
the following rental rate:
<TABLE>
<CAPTION>
YEAR MONTHLY INSTALLMENT ANNUAL RATE
---- ------------------- -----------
<S> <C> <C>
04/01/13-03/31/14 $ 37,881.50 $ 454,578.00
04/01/14-03/31/15 $ 37,959.00 $ 455,508.00
04/01/15-03/31/16 $ 41,515.17 $ 498,182.00
04/01/16-03/31/17 $ 41,613.17 $ 499,358.00
04/01/17-03/31/18 $ 41,713.17 $ 500,558.00
</TABLE>
In order for the Tenant to renew the Lease for an additional five (5)
years, Tenant must provide written notice to the Landlord of the Tenant's intent
to exercise the option to renew the Lease at least six (6) months prior to the
expiration of the original Lease.
Upon Landlord's receipt of that written notice, the Lease will be
renewed for an additional five (5) years as set forth above, provided and on
condition that the Tenant has performed all the terms, conditions and covenants
stated in the Lease provisions during the Lease term, and is not in default of
any of the provisions of the Lease at the time the notice of intent to exercise
the option is given.
All other terms and conditions of the Lease shall remain the same and
in full force and effect.
<PAGE> 21
EXHIBIT A, B and C
MAGNETEC ADDITION 1997
COMPLETE SET OF CONSTRUCTION DOCUMENTS
Drawings and Specifications entitled "MAGNETEC BUILDING-ADDITION, WALLINGFORD,
CT" by Dyami Architects, dated June 24, 1997:
<TABLE>
<S> <C>
EXHIBIT A Site Plan
T- 1 Title, General Notes
01-AB1 Building Architectural and Demolition Plan
01-AAl Architectural Plan
01-AA2 Reflected Ceiling Plan
01-AA3 Electric & Telephone Plan
01-AA4 Finish Plan
01-AA5 Roof Plan
IE-1 Interior Elevation
EEl Exterior Elevation
DT1 Details Plan
DT2 Details Plan
DT3 Details Plan
S1 Foundation Plan (Revised 7/15/97)
S3 Structural Plan (Revised 7/15/97)
E-1 Power Plan
E-2 Lighting Plan
M-1 HVAC Plan
P-1 Plumbing Plan
</TABLE>
<PAGE> 22
GUARANTY OF LEASE
LANDLORD: PYRAMID CONSTRUCTION COMPANY
TENANT: MAGNETEC CORP.
LEASE: AT COMPLETION- MARCH 31, 2008
GUARANTOR: TRANSACT TECHNOLOGIES, INC.
DATE: July 31, 1997
The Tenant wishes to enter into the Lease dated July 30, 1997, with
the-Landlord. 'The Landlord is unwilling to enter into the Lease unless the
Guarantor assures Landlord of the full performance of the Tenant's obligations
under the Lease. The Guarantor is willing to do so.
Accordingly, in order to induce Landlord to enter into the Lease with
the Tenant, and for good and valuable consideration, whose receipt and adequacy
are acknowledged by Guarantor
1. The Guarantor unconditionally guarantees to the Landlord, and the
successors and assigns of the Landlord, the Tenant's full and punctual
performance of its obligations under the Lease. If Tenant defaults, Landlord
will notify Guarantor at TransAct Technologies, Inc., 7 Laser Lane, Wallingford,
CT 06492. If Tenant defaults in the performance of its obligations under the
Lease, upon the Landlord's request, the Guarantor will perform the Tenant's
obligations under the Lease.
2. Any act of the Landlord, or the successors or assigns of the
Landlord, consisting of a waiver of any of the terms or conditions of the Lease,
or the giving of any consent to any matter related to or thing relating to the
Lease, or the granting of any indulgences or extensions of time to the Tenant,
may be done without notice to the Guarantor and without affecting the
obligations of the Guarantor under this Guaranty.
3. The obligations of the Guarantor under this Guaranty will not be
released by the Landlord's receipt, application, or release of security given
for the performance of the Tenant's obligations under the Lease, nor by any
modification of the Lease. In case of any such modification, the liability of
the Guarantor will be deemed modified in accordance with the terms of any such
modification.
4. The liability of the Guarantor under this Guaranty will not be
affected by (a) the release or discharge of the Tenant from its obligations
under the Lease in any creditors' receivership, bankruptcy, or other
proceedings, or the commencement or pendency of the liability of the Tenant or
the estate of the Tenant in bankruptcy, or any remedy for the enforcement of the
Tenant's liability under the Lease, resulting from the operation of any present
or future bankruptcy code or other statute, or from the decision in any court;
(c) the rejection or disaffirmance of the Lease in any such proceedings; (d) the
assignment or transfer of the Tenant; or (f) the cessation from any cause (other
than full performance of all Tenant's obligations under the Lease) whatsoever of
the liability of the Tenant under the Lease.
5. Until all of the Tenant's obligations under the Lease are fully
performed, the Guarantor; (a) waives any right of subrogation against the Tenant
by reason of any payment or acts of performance by the Guarantor, in compliance
with the obligations of the Guarantor under this Guaranty; and (c) subordinates
any liability or indebtedness of the Tenant held by the Guarantor to the
obligations of the Tenant to the Landlord under the Lease.
6. This Guaranty will apply to the Lease, any extension or renewal of
the Lease, and any holdover term following the term, or any such extension or
renewal.
<PAGE> 23
7. This Guaranty may not be changed, modified, discharged, or
terminated orally or in any manner other than by an agreement in writing signed
by the Guarantor and the Landlord.
8. The Guarantor is primarily obligated under the Lease. Landlord may,
at its option, proceed against the Guarantor without proceeding against the
Tenant or anyone else obligated under the Lease.
9. The Guarantor will pay on demand the reasonable attorneys' fees and
costs incurred by the Landlord, or its successors and assigns, in connection
with the enforcement of this Guaranty.
10. The Guarantor irrevocably appoints the Tenant as its agent for
service of process related to this Guaranty.
The Guarantor has executed this Guaranty as of the date written above.
ATTEST: GUARANTOR: TRANSACT TECHNOLOGIES, INC.
By: /s/ Steven A. DeMartino By: /s/ Richard L. Cote
------------------------- -----------------------------
Executive Vice President and CFO
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.29
May 31, 1996
Mr. Bart Shuldman
Ithaca Peripherals Incorporated
7 Laser Lane
Wallingford, CT 06492
Re: OEM Agreement
Dear Bart:
The purpose of this letter is to renew our OEM Agreement for another two (2)
year pricing term which will begin August 28, 1995 and expire August 28, 1997,
with deliveries to be completed by February 28, 1998, and to replace Exhibit A
with the new Exhibit A as attached. The terms and conditions of this new
Agreement will be as stated in the OEM Agreement which we entered in January 21,
1991 and all subsequent agreed upon amendments made thereto.
This Agreement will be subject to the provisions of a Strategic Agreement dated
May 9, 1996, between the Parties. Accordingly, the term of this Agreement will
be five (5) years, coincident with the Strategic Agreement.
If you agree to this renewal contract, please indicate your acceptance by
signing both originals in the space provided. Retain one duplicate original for
your records and return the other to my attention.
Certainly we appreciate our long standing business relationship as we look
forward to continued success in the future.
Sincerely, Ithaca Peripherals Incorporated
/s/ Bart C. Shuldman
-------------------------------
(Signature)
/s/ David L. Vaughn
- -------------------------------
David L. Vaughn Bart C. Shuldman
Manager, Legal Affairs -------------------------------
(Name)
Enclosure May 31, 1996
c: T. Donahue -------------------------------
E. Morris (Date)
J. Rowley
<PAGE> 1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
--------------------------------------------- ----------------------------
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1995 1994
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net Income $ 4,893,000 $ 3,340,000 $ 1,332,000 $ 916,000 $ 1,883,000
============ ============ ============ ============ ============
SHARES:
Basic - Weighted average common
shares outstanding 6,767,000 5,864,000 5,400,000 5,400,000 5,400,000
Dilutive effect of outstanding options
and warrants as determined by the
treasury stock method 165,000 20,000 - - -
------------ ------------ ------------ ------------ ------------
Diluted - Weighted average common
and common equivalent shares
outstanding 6,932,000 5,884,000 5,400,000 5,400,000 5,400,000
============ ============ ============ ============ ============
Net income per common and
common equivalent share:
Basic $ 0.72 $ 0.57 $ 0.25 $ 0.17 $ 0.35
============ ============ ============ ============ ============
Diluted 0.71 0.57 0.25 0.17 0.35
============ ============ ============ ============ ============
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 21.1
SUBSIDIARIES OF TRANSACT TECHNOLOGIES INCORPORATED
Jurisdiction of Percentage
Name Incorporation Owner Owned
- --------------------------------------- ------------- ----- -----
<S> <C> <C> <C>
Magnetec Corporation Connecticut TransAct 100%
Technologies
Incorporated
Ithaca Peripherals Limited United Kingdom Magnetec 100%
Corporation
TransAct Technologies International Ltd Barbados TransAct 100%
Technologies
Incorporated
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
TRANSACT TECHNOLOGIES INCORPORATED ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 391
<SECURITIES> 0
<RECEIVABLES> 7,337
<ALLOWANCES> 102
<INVENTORY> 8,570
<CURRENT-ASSETS> 17,561
<PP&E> 11,283
<DEPRECIATION> 6,294
<TOTAL-ASSETS> 24,699
<CURRENT-LIABILITIES> 6,123
<BONDS> 0
0
0
<COMMON> 68
<OTHER-SE> 17,835
<TOTAL-LIABILITY-AND-EQUITY> 24,699
<SALES> 58,400
<TOTAL-REVENUES> 58,400
<CGS> 40,227
<TOTAL-COSTS> 50,569
<OTHER-EXPENSES> 19
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16)
<INCOME-PRETAX> 7,828
<INCOME-TAX> 2,935
<INCOME-CONTINUING> 4,893
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,340
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.71
</TABLE>
