<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to:
Commission file number: 0-21121
TRANSACT TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 06-1456680
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 LASER LANE, WALLINGFORD, CT 06492
(Address of principal executive offices)
(Zip Code)
(203) 269-1198
(Registrant's telephone number, including area code)
Not applicable (Former name, former address and former fiscal year, if changed
since last report.)
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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING JULY 30, 1999
- - ----- -------------------------
COMMON STOCK,
$.01 PAR VALUE 5,558,900
<PAGE> 2
TRANSACT TECHNOLOGIES INCORPORATED
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information: Page No.
<S> <C>
Item 1 Financial Statements
Consolidated condensed balance sheets as of June 26, 1999 and December
31, 1998 3
Consolidated condensed statements of operations for the three and six
months ended June 26, 1999 and June 27, 1998 4
Consolidated condensed statements of cash flows for the six months ended
June 26, 1999 and June 27, 1998 5
Notes to consolidated condensed financial statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Item 3 Quantitative and Qualitative Disclosures about Market Risk 13
PART II. Other Information:
Item 1 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 26, December 31,
(In thousands) 1999 1998
--------------- --------------
ASSETS: (UNAUDITED)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 486 $ 546
Receivables, net 6,048 5,153
Inventories 7,746 8,744
Other current assets 1,417 1,651
-------- --------
Total current assets 15,697 16,094
-------- --------
Plant and equipment, net 5,854 5,664
Excess of cost over fair value of net assets acquired 1,991 1,900
Other assets 144 130
-------- --------
7,989 7,694
-------- --------
$ 23,686 $ 23,788
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank loans payable $ -- $ 725
Accounts payable 3,772 2,188
Accrued liabilities 2,899 3,074
-------- --------
Total current liabilities 6,671 5,987
-------- --------
Long term debt 4,900 5,075
Other liabilities 520 549
-------- --------
5,420 5,624
-------- --------
Shareholders' equity:
Common stock 55 56
Additional paid-in capital 5,535 5,763
Retained earnings 7,135 7,268
Unamortized restricted stock compensation (777) (903)
Loan receivable from officer (330) --
Accumulated other comprehensive income (23) (7)
-------- --------
Total shareholders' equity 11,595 12,177
-------- --------
$ 23,686 $ 23,788
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JUNE 26, June 27, JUNE 26, June 27,
(In thousands, except per share data) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 12,524 $ 12,500 $ 21,725 $ 25,780
Cost of sales 9,286 9,065 16,059 18,599
-------- -------- -------- --------
Gross profit 3,238 3,435 5,666 7,181
-------- -------- -------- --------
Operating expenses:
Engineering, design and product
development costs 789 983 1,590 1,816
Selling and marketing expenses 997 843 1,856 1,616
General and administrative expenses 1,118 1,161 2,206 2,262
-------- -------- -------- --------
2,904 2,987 5,652 5,694
-------- -------- -------- --------
Operating income 334 448 14 1,487
-------- -------- -------- --------
Other income (expense):
Interest, net (95) (87) (185) (128)
Other, net 11 6 26 15
-------- -------- -------- --------
(84) (81) (159) (113)
-------- -------- -------- --------
Income (loss) before income taxes 250 367 (145) 1,374
Income tax provision (benefit) 104 136 (12) 509
-------- -------- -------- --------
Net income (loss) $ 146 $ 231 $ (133) $ 865
======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.03 $ 0.04 $ (0.02) $ 0.14
======== ======== ======== ========
Diluted $ 0.03 $ 0.04 $ (0.02) $ 0.14
======== ======== ======== ========
Weighted average common shares outstanding:
Basic 5,559 6,239 5,568 6,347
======== ======== ======== ========
Diluted 5,576 6,264 5,570 6,394
======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JUNE 26, June 27,
(In thousands) 1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (133) $ 865
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,137 1,047
Loss on disposal of equipment -- 9
Changes in operating assets and liabilities:
Receivables (814) (130)
Inventories 1,036 (1,841)
Other current assets 234 (94)
Other assets (46) (63)
Accounts payable 1,574 1,384
Accrued liabilities and other liabilities (207) (223)
------- -------
Net cash provided by operating activities 2,781 954
------- -------
Cash flows from investing activities:
Purchases of plant and equipment (1,056) (1,760)
Proceeds from sale of equipment -- 2
Loans to officers (345) --
Acquisition of Tridex Ribbon business (295) --
------- -------
Net cash used in investing activities (1,696) (1,758)
------- -------
Cash flows from financing activities:
Bank line of credit borrowings 4,900 8,200
Bank line of credit repayments (5,800) (2,700)
Purchases of treasury stock (229) (4,771)
Proceeds from option exercises -- 2
------- -------
Net cash (used in) provided by financing activities (1,129) 731
------- -------
Effect of exchange rate changes on cash (16) 3
------- -------
Decrease in cash and cash equivalents (60) (70)
Cash and cash equivalents at beginning of period 546 391
------- -------
Cash and cash equivalents at end of period $ 486 $ 321
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of TransAct Technologies Incorporated (the "Company"),
the accompanying unaudited consolidated condensed financial statements
contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly its financial position as of
June 26, 1999, and the results of its operations and cash flows for the
three and six months ended June 26, 1999 and June 27, 1998. The
December 31, 1998 consolidated condensed balance sheet has been derived
from the Company's audited financial statements at that date. These
interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K.
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.
Transaction gains and losses are included in other income.
The results of operations for the three and six months ended
June 26, 1999 and June 27, 1998 are not necessarily indicative of the
results to be expected for the full year.
2. Earnings per share
Basic earnings per common share for the three and six months
ended June 26, 1999 and June 27, 1998 were based on the weighted
average number of shares outstanding during the period. Diluted
earnings per share for the same periods were based on the weighted
average number of shares after consideration of any dilutive effect of
stock options and warrants.
3. Inventories:
The components of inventory are:
<TABLE>
<CAPTION>
June 26, December 31,
(In thousands) 1999 1998
------ ------
<S> <C> <C>
Raw materials and component parts $6,576 $7,754
Work-in-process 771 495
Finished goods 399 495
------ ------
$7,746 $8,744
====== ======
</TABLE>
4. Commitments and contingencies
The Company has a long-term purchase agreement with Okidata,
Division of Oki America, Inc., 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 purchase levels sufficient
to maintain the favorable prices.
5. Significant transactions
On May 28, 1999, the Company acquired the business and
substantially all the assets of the Tridex Ribbon Business for total
cash consideration of approximately $295,000. The acquisition has been
accounted for by the purchase method of accounting. The purchased
assets and liabilities have been recorded in the Company's financial
statements at their estimated fair values at the acquisition date. The
results of operations of the acquired company have been included with
those of the Company since the date of acquisition. The acquisition
cost exceeded the fair value of the net assets acquired by $180,000.
Such excess cost is being amortized over a five-year period on a
straight-line basis.
6
<PAGE> 7
5. Significant transactions (continued)
On May 7, 1999, the Company entered into a new two-year $10,000,000
revolving credit facility (the "New Credit Facility") with Fleet National
Bank ("Fleet"), expiring on May 31, 2001. The New Credit Facility
replaced both the existing $5,000,000 revolving working capital facility
and $10,000,000 revolving credit facility (the "Credit Facility"), also
with Fleet. The New Credit Facility provides the Company with a
$10,000,000 credit facility that may be used to fund working capital.
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 0.625% 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 1.50 to 2.25 percentage
points over the market rate, depending on the Company meeting certain
ratios. Concurrent with the New Credit Facility, the Company entered into
a swap agreement with Fleet under which the Company fixed its interest
rate at 7.88% for two years on $3,000,000 of outstanding borrowings under
the New Credit Facility. The New Credit Facility is secured by a lien on
substantially all the assets of the Company, imposes certain financial
covenants and restricts the payment of cash dividends and the creation of
liens.
6. Subsequent events
On June 25, 1999, the Company and its wholly-owned subsidiary,
Magnetec Corporation ("Magnetec"), commenced a lawsuit in the United
States District Court for the District of Rhode Island against GTECH
Corporation ("GTECH") for misappropriation of trade secrets, breach of
contract and related claims, seeking injunctive relief and compensatory
and punitive damages. Magnetec has manufactured and sold printers to
GTECH for use in the GTECH Isys(R) on-line terminal system under various
OEM agreements since 1994. The lawsuit asserted that GTECH attempted to
use proprietary Magnetec information in violation of Magnetec's rights
under the OEM agreements and applicable law. The lawsuit was subsequently
refiled in the Rhode Island Superior Court. On June 30, 1999, the Rhode
Island Superior Court issued a temporary restraining order against GTECH,
which among other things, prohibited GTECH from working with or giving
information to third parties about the design or manufacture of a printer
to replace the printer designed and produced by Magnetec for the GTECH
Isys(R) on-line lottery system. On July 15, 1999, GTECH and the Company
signed a new five-year agreement under which Magnetec will be the
exclusive manufacturer and supplier to GTECH of an impact printer for use
in GTECH's Isys(R) online lottery terminal. As part of the agreement,
GTECH agreed to pay the Company $1 million for past design efforts,
development costs and manufacturing interruption costs and agreed to
place a non-cancelable order for delivery of a minimum of approximately
$8 million of printers in the year 2000. In connection with the execution
of this agreement, the parties agreed to have all claims under the
lawsuits dismissed and subsequently filed dismissal stipulations to
terminate the federal and state lawsuits.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements included in this report, including without limitation
statements in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, which are not historical facts are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements involve risks and uncertainties, including, but not
limited to, customer acceptance and market share gains, both domestically and
internationally, in the face of substantial competition from competitors that
have broader lines of products and greater financial resources; successful
product development; dependence on significant customers; dependence on third
parties for sales in Europe and Latin America; economic conditions in the United
States, Europe and Latin America; marketplace acceptance of new products; risks
associated with foreign operations; availability of third-party components at
reasonable prices; and the absence of price wars or other significant pricing
pressures affecting the Company's products in the United States or abroad.
Actual results may differ materially from those discussed in, or implied by, the
forward-looking statements.
7
<PAGE> 8
IMPACT OF THE YEAR 2000 ISSUE.
General.
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.
Program.
The Company has begun a program to resolve its Year 2000 issue. This program
consists of four phases; assessment, remediation, testing and contingency
planning. The Company completed the assessment phase in December 1998 and is
currently in the remediation and testing phases. During the assessment phase,
the Company assessed its products, key financial and operating systems and other
systems for Year 2000 compliance. The assessment included identifying all
critical information management systems and other critical systems on which the
Company relies, testing Year 2000 compliance of such systems, and recommending
steps for replacing/making corrective fixes to non-compliant systems.
Additionally, as part of the assessment phase, the Company obtained compliance
verification from third party vendors supplying critical parts or services to
the Company in order to determine their plans to address their own Year 2000
issues.
Upon completion of the detailed assessment, the Company concluded that
substantially all its critical financial operating systems and other systems are
Year 2000 compliant. However, certain software and hardware components were
identified as noncompliant. As of June 26, 1999, substantially all critical
noncompliant software and hardware have been replaced . Also, the Company
believes that its products will be unaffected by the Year 2000 Issue, as none of
its products contain embedded date information.
The testing phase of the program has been ongoing, and will continue to be
conducted as noncompliant software and hardware are replaced. The Company
estimates that the testing phase is virtually 100% completed as of June 26,
1999.
The Company has begun to develop a contingency plan to address third party
factors which are out of its control, and expects completion of this plan by
September 1999.
Costs.
The Company plans completion of all phases, including contingency planning, of
the Year 2000 program by September 1999. All costs associated with the Company's
Year 2000 program are being expensed as incurred. The Company's total cost
associated with the Year 2000 program has not been, and based on results of its
detailed assessment, is not expected to be, material to the Company's business,
financial position, results of operations or cash flows. The estimated total
cost of the Year 2000 Program is approximately $25,000, which primarily includes
the cost of replacing/upgrading noncompliant software identified during the
assessment phase with compliant software. The Company incurred costs of
approximately $15,000 through June 26, 1999.
Risks.
The Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 Issue can be mitigated. However, the
Company may not timely identify and remediate all significant Year 2000 problems
and remedial efforts may involve significant time and expense. If such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the results of operations,
financial position or cash flows of the Company.
The Company is currently identifying and analyzing the most reasonably likely
worst case scenarios for third party relationships affected by the Year 2000
Issue. These scenarios could include the inability of certain suppliers to
supply critical parts on a timely basis or the inability of customers to place
orders. Either of these scenarios, which is outside of the Company's control,
could result in a delay or an inability to ship product in the year 2000,
depending on the nature and severity of the problems. Furthermore, there can be
no assurance that any Year 2000 compliance problems of the Company or its
customers or suppliers will not have a material adverse effect on the results of
operations, financial position or cash flows of the Company.
8
<PAGE> 9
The estimates and conclusions herein contain forward-looking statements and are
based on management's best estimates of future events. Risks to completing the
remaining portions of the program include the availability of outside resources,
the Company's ability to discover and correct potential Year 2000 problems which
could have an impact on the Company's operations and the ability of suppliers or
customers to bring their systems into Year 2000 compliance.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 26, 1999 COMPARED TO THREE MONTHS ENDED JUNE 27, 1998
NET SALES. Net sales into the Company's vertical markets for the current and
prior year's quarter were as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
(In thousands, except %) June 26, 1999 June 27, 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
Point of sale $ 6,305 50.3% $ 7,349 58.8%
Gaming and lottery 3,937 31.5 4,598 36.8
Other 2,282 18.2 553 4.4
--------------------- ---------------------
$12,524 100.0% $12,500 100.0%
===================== =====================
</TABLE>
Net sales for the second quarter of 1999 increased $24,000, or less than 1%, to
$12,524,000 from $12,500,000 in the prior year's second quarter. Increased
shipments into the Company's other markets were almost entirely offset by
decreased sales into the point of sale ("POS") and gaming and lottery markets.
Point of sale: Sales of the Company's POS printers decreased approximately
$1,044,000, or 14%, from the second quarter of 1998. International POS printer
shipments decreased approximately $1,048,000 due largely to the absence of
printer shipments for the British Post Office project. Shipments for this
project totaled approximately $1,600,000 in the second quarter of 1998. The
Company does not anticipate making any printer shipments related to this project
during 1999, however, printer shipments are expected to resume in the first
quarter of 2000. The absence of printer shipments for the British Post Office
project was partially offset by increased shipments to Europe and Latin America
through the Company's distribution partner, Okidata. Domestic POS printer sales
were consistent with those of the prior year's second quarter.
Gaming and lottery: Sales of the Company's gaming and lottery printers decreased
approximately $661,000, or 14%, from the second quarter a year ago. The overall
decrease primarily reflects a decrease of approximately $3,800,000 in shipments
of the Company's on-line lottery printers and spare parts to one customer. The
Company does not anticipate making any further on-line lottery printer
shipments, other than spares, to this customer until 2000. The decrease in sales
of printers for use in on-line lottery terminals was largely offset by (1) sales
of in-lane and other lottery printers to this same customer of approximately
$800,000 and (2) an increase of approximately $2,400,000 in shipments of
printers for use in video lottery terminals, primarily for use in South
Carolina's video poker industry. During the second quarter of 1998, shipments of
these printers were significantly lower due to uncertainty in South Carolina's
video poker industry concerning the industry's continued future in the state.
Other: Sales of the Company's printers into other markets increased $1,729,000,
or 313%, to $2,282,000 from $553,000. Sales for the second quarter of 1999
included resumed shipments of approximately $500,000 of the Company's thermal
kiosk printers for use in a Canadian government application. No shipments of
these printers were made in the second quarter of 1998. Additionally, sales in
the Company's other markets increased due to shipments of printers to a new
customer for use in a bank teller application and, to a lesser extent, increased
shipments of printers used in automated teller machines.
GROSS PROFIT. Gross profit decreased $197,000, or 6%, to $3,238,000 from
$3,435,000 in the prior year's quarter. The gross margin also declined to 25.9%
from 27.5%. Both gross profit and gross margin declined largely due to the
impact of fixed overhead costs on significantly lower sales volume at the
Company's Wallingford, Connecticut facility. The Company expects its gross
margin for the remainder of 1999 to be relatively consistent with that of the
most recent quarter.
9
<PAGE> 10
ENGINEERING AND PRODUCT DEVELOPMENT. Engineering, design and product development
expenses decreased $194,000, or 20%, to $789,000 from $983,000 in the second
quarter of 1998. This decrease is primarily due to a reduction in engineering
staff resulting from the downsizing and reorganization of the Company's
manufacturing facility in Wallingford, Connecticut in December 1998. This
reduction was somewhat offset by increased product development and design
expenses, primarily for new products in the POS market, including expenses
related to the development of printers utilizing inkjet printing technology.
Engineering and product development expense decreased as a percentage of net
sales to 6.3% from 7.9%.
SELLING AND MARKETING. Selling and marketing expenses increased $154,000, or
18%, to $997,000 from $843,000 in the quarter ended June 27, 1998, and increased
as a percentage of net sales to 8.0% from 6.7%. Such expenses increased due to
additional marketing staff related to the establishment of a corporate marketing
department in the second half of 1998 and increased sales commission resulting
from an increase in sales eligible for commissions in the second quarter of 1999
compared to 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
$43,000, or 4%, to $1,118,000 from $1,161,000 in the comparable prior year's
quarter, due primarily to the downsizing and reorganization of the Company's
manufacturing facility in Wallingford, Connecticut in December 1998. General and
administrative expenses decreased as a percentage of net sales to 8.9% from
9.3%.
OPERATING INCOME. Operating income decreased $114,000, or 25%, to $334,000 from
$448,000 in the second quarter of 1998. Operating income as a percentage of net
sales declined to 2.7% from 3.6%, primarily due to lower gross margin on
significantly lower sales volume in the Company's manufacturing facility in
Wallingford, CT in the second quarter of 1999 compared to 1998.
INTEREST. The Company incurred net interest expense of $95,000, compared to
$87,000 in the second quarter of 1998, due to slightly higher interest rates on
outstanding borrowings on the Company's line of credit during the second quarter
of 1999. See "Liquidity and Capital Resources" below.
INCOME TAXES. The provision for income taxes for the current quarter reflects an
effective tax rate of 41.6% compared to 37.1% in the prior year's period. The
increase in the Company's effective tax rate is due to the impact of
nondeductible goodwill compared to relatively low income before taxes in the
current quarter.
NET INCOME. Net income for the second quarter of 1999 was $146,000, or $0.03 per
share (basic and diluted) compared to $231,000, or $0.04 per share (basic and
diluted) for the second quarter of 1998.
SIX MONTHS ENDED JUNE 26, 1999 COMPARED TO SIX MONTHS ENDED JUNE 27, 1998
NET SALES. Net sales into the Company's vertical markets for the current and
prior six-month periods were as follows:
<TABLE>
<CAPTION>
Six months ended Six months ended
(In thousands, except %) June 26, 1999 June 27, 1998
----------------------- -----------------------
<S> <C> <C> <C> <C>
Point of sale 11,137 51.3 % $15,162 58.8 %
Gaming and lottery 6,131 28.2 8,786 34.1
Other 4,457 20.5 1,832 7.1
----------------------- -----------------------
21,725 100.0 % $25,780 100.0 %
======================= =======================
</TABLE>
Net sales for the first half of 1999 decreased $4,055,000, or 16%, to
$21,725,000 from $25,780,000 in the prior year's period, due to decreased
shipments into the POS and gaming and lottery markets, offset by an increase in
the Company's other markets.
10
<PAGE> 11
Point of sale: Sales of the Company's POS printers decreased approximately
$4,025,000, or 27% from the first six months of 1998. International POS printer
shipments decreased approximately $2,638,000 due largely to the absence of
printer shipments for the British Post Office project. Shipments for this
project totaled approximately $3,200,000 in the first half of 1998. The Company
does not anticipate making any printer shipments related to this project during
1999, however, printer shipments are expected to resume in the first quarter of
2000. The absence of printer shipments for the British Post Office project was
partially offset by increased shipments to Europe and Latin America through the
Company's distribution partner, Okidata. Domestic POS printer sales also
declined by approximately $1,387,000 due primarily to specific sales in the
first half of 1998 related to several large POS printer installations that did
not repeat in the first half of 1999.
Gaming and lottery: Sales of the Company's gaming and lottery printers decreased
approximately $2,655,000, or 30%, from the first half a year ago. The overall
decrease primarily reflects a decrease of approximately $7,500,000 in shipments
of the Company's on-line lottery printers and spare parts to one customer. The
Company does not anticipate making any further on-line lottery printer
shipments, other than spares, to this customer until 2000. The decrease in sales
of printers for use in on-line lottery terminals was largely offset by (1) sales
of in-lane lottery printers to this same customer of approximately $800,000 and
(2) an increase of approximately $4,200,000 in shipments of printers for use in
video lottery terminals, primarily for use in South Carolina's video poker
industry. During the first six months of 1998, shipments of these printers were
significantly lower due to uncertainty in South Carolina's video poker industry
concerning the industry's continued future in the state.
Other: Sales of the Company's printers into other markets increased $2,625,000,
or 143%, to $4,457,000 from $1,832,000 in the first half of 1998 due primarily
to resumed shipments of approximately $1,100,000 of the Company's thermal kiosk
printers for use in a Canadian government application. No shipments of these
printers were made in the first half of 1998. Additionally, sales into the
Company's other markets increased due to shipments of printers to a new customer
for use in a bank teller application and, to a lesser extent, increased
shipments of printers used in automated teller machines.
GROSS PROFIT. Gross profit decreased $1,515,000, or 21%, to $5,666,000 from
$7,181,000 in first half of 1998 due primarily to lower volume of sales. The
gross margin declined to 26.1% from 27.9% largely due to the impact of fixed
overhead costs on lower sales volume at the Company's Wallingford, Connecticut
facility. The Company expects its gross margin for the remainder of 1999 to be
relatively consistent with that of the most recent quarter.
ENGINEERING AND PRODUCT DEVELOPMENT. Engineering, design and product development
expenses decreased $226,000, or 12%, to $1,590,000 from $1,816,000 in the six
months ended June 27, 1998. This decrease is primarily due to a reduction in
engineering staff resulting from the downsizing and reorganization of the
Company's manufacturing facility in Wallingford, Connecticut. This reduction was
somewhat offset by increased product development and design expenses, primarily
for new products in the POS market, including expenses related to the
development of printers utilizing inkjet printing technology. Engineering and
product development expense increased as a percentage of net sales to 7.3% from
7.1%, due to lower sales volume in the first half of 1999 compared to 1998.
SELLING AND MARKETING. Selling and marketing expenses increased $240,000, or
15%, to $1,856,000 from $1,616,000 in the first half of 1998, and increased as a
percentage of net sales to 8.5% from 6.2%. Such expenses increased due to
increased sales commission resulting from an increase in sales eligible for
commissions in the second half of 1999 compared to 1998, and additional
marketing staff related to the establishment of a corporate marketing department
in the second half of 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased by
$56,000, or 2%, to $2,206,000 from $2,262,000 in the comparable prior year's
period primarily due to a reduction in staff resulting from the downsizing and
reorganization of the Company's manufacturing facility in Wallingford,
Connecticut. General and administrative expenses increased as a percentage of
net sales to 10.2% from 8.8%, primarily due to a lower volume of sales in the
first half of 1999 compared to 1998.
OPERATING INCOME. Operating income decreased $1,473,000, or 99%, to $14,000 from
$1,487,000 in the first six months of 1998. Operating income as a percentage of
net sales declined to 0.1% from 5.8%, due primarily to lower gross margin on
significantly lower sales volume in the first half of 1999, and to a lesser
extent, increased selling and marketing expenses.
11
<PAGE> 12
INTEREST. Net interest expense increased to $185,000 from $128,000 in the first
six months of 1998 due primarily to increased outstanding borrowings on the
Company's line of credit, and to a lesser extent, a slightly higher average
borrowing rate in the first half of 1999 compared to the same period in 1998.
See "Liquidity and Capital Resources" below.
INCOME TAXES. As a result of the Company's loss before income taxes, the Company
recorded an income tax benefit of $12,000 for the six months ended June 26,
1999. The relatively low tax benefit is due to the impact of nondeductible
goodwill in the current six-month period. The effective tax rate for the
comparable prior year's period was 37.0%.
NET INCOME (LOSS). The Company incurred a net loss during the first half of 1999
of $133,000, or $0.02 per share (basic and diluted) compared to net income of
$865,000, or $0.14 per share (basic and diluted) for the first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $2,781,000 during the six months
ended June 26, 1999, compared to $954,000 during the six months ended June 27,
1998. The Company's working capital declined to $9,026,000 at June 26, 1999 from
$10,107,000 at December 31, 1998. The current ratio also slightly decreased to
2.35 June 26, 1999 from 2.69 at December 31, 1998.
During 1997 and 1998, the Board of Directors authorized the repurchase of up to
1.5 million shares of the Company's common stock (the "Stock Buyback Program").
As of December 31, 1998, the Company had acquired 1,203,000 shares of its common
stock for $9,421,000. During the first half of 1999, the Company repurchased an
additional 70,800 shares of its common stock for $229,000. Since the Company
began the stock repurchase program in December 1997, it has repurchased
1,273,800 shares for $9,650,000 (an average cost of $7.58 per share) under the
Stock Buyback Program. Further repurchases of the Company's common stock will
depend upon future cash flow of the Company and stock market conditions.
The Company had in place a $15,000,000 revolving credit facility (the "Credit
Facility") with Fleet National Bank ("Fleet"). The Credit Facility provided the
Company with a $5,000,000 revolving working capital facility, and a $10,000,000
revolving credit facility to be used for activities such as acquisitions and
repurchases of the Company's common stock. Borrowings under the $10,000,000
revolving credit facility could have been, at the Company's election, converted
to a four-year term loan commencing on June 30, 1999, the expiration date of the
Credit Facility. Any term loan borrowings would have matured on June 30, 2003.
Borrowings under the Credit Facility bore interest at Fleet's prime rate and
bore a commitment fee ranging from 0.25% to 0.50% on any unused portion of the
Credit Facility.
On May 7, 1999, the Company replaced the Credit Facility with a new two-year
$10,000,000 revolving credit facility (the "New Credit Facility") with Fleet,
expiring May 31, 2001. The New Credit Facility provides the Company with a
$10,000,000 credit facility that may be used to fund working capital. Borrowings
under the New Credit Facility bear interest at Fleet's prime rate (8.0% at June
26, 1999) and bear a commitment fee ranging from 0.25% to 0.625% on any unused
portion of the New Credit Facility (0.625% at June 26, 1999). The New Credit
Facility also permits the Company to designate a LIBOR rate on outstanding
borrowings with a margin ranging from 1.50 to 2.25 percentage points over the
market rate, depending on the Company meeting certain ratios. Concurrent with
the New Credit Facility, the Company entered into a swap agreement with Fleet
which permits the Company to fix its interest rate on a portion, or all, of its
outstanding borrowings under the New Credit Facility. The New Credit Facility is
secured by a lien on substantially all the assets of the Company, imposes
certain financial covenants and restricts the payment of cash dividends and the
creation of liens.
At December 31, 1998, the Company had outstanding borrowings of $5,800,000 under
the Credit Facility. In accordance with the Company's intent to convert the
outstanding borrowings to a four-year term loan at the expiration of the Credit
Facility, $5,075,000 ($5,800,000, less the current maturity of $725,000) had
been classified as long-term debt at December 31, 1998.
12
<PAGE> 13
During the first half of 1999, the Company had net repayments of $900,000,
reducing outstanding borrowings to $4,900,000 at June 26, 1999 from $5,800,000
at December 31, 1998. In accordance with the New Credit Facility, these
borrowings have been classified as long-term debt at June 26, 1999.
The Company's capital expenditures were approximately $1,056,000 and $1,760,000
for the six months ended June 26, 1999 and June 27, 1998, respectively. These
expenditures primarily included new product tooling, computer equipment, and
factory machinery and equipment. The Company's total capital expenditures for
fiscal 1999 are expected to be approximately $2,800,000, 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 meet its liquidity requirements through December 31, 1999.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
On June 25, 1999, the Company and its wholly-owned subsidiary,
Magnetec Corporation ("Magnetec"), commenced a lawsuit in the
United States District Court for the District of Rhode Island
against GTECH Corporation ("GTECH") for misappropriation of
trade secrets, breach of contract and related claims, seeking
injunctive relief and compensatory and punitive damages.
Magnetec has manufactured and sold printers to GTECH for use
in the GTECH Isys(R) on-line terminal system under various OEM
agreements since 1994. The lawsuit asserted that GTECH
attempted to use proprietary Magnetec information in violation
of Magnetec's rights under the OEM agreements and applicable
law. The lawsuit was subsequently refiled in the Rhode Island
Superior Court. On June 30, 1999, the Rhode Island Superior
Court issued a temporary restraining order against GTECH,
which among other things, prohibited GTECH from working with
or giving information to third parties about the design or
manufacture of a printer to replace the printer designed and
produced by Magnetec for the GTECH Isys(R) on-line lottery
system. On July 15, 1999, GTECH and the Company signed a new
five-year agreement under which Magnetec will be the exclusive
manufacturer and supplier to GTECH of an impact printer for
use in GTECH's Isys(R) online lottery terminal. As part of the
agreement, GTECH agreed to pay the Company $1 million for past
design efforts, development costs and manufacturing
interruption costs and agreed to place a non-cancelable order
for delivery of a minimum of approximately $8 million of
printers in the year 2000. In connection with the execution of
this agreement, the parties agreed to have all claims under
the lawsuits dismissed and subsequently filed dismissal
stipulations to terminate the federal and state lawsuits.
13
<PAGE> 14
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 6,
1999. Matters voted upon at the meeting and the number of
votes cast for, against or withheld, are as follows:
(1) To consider and act upon a proposal to elect two Directors
to serve until the Annual Meeting of Shareholders in the
year 2002 or until their successors have been duly elected
and qualified. Nominees were Thomas R. Schwarz and Bart C.
Shuldman. Votes cast were as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Thomas R. Schwarz 4,820,459 110,937
Bart C. Shuldman 4,544,862 386,534
</TABLE>
(2) To ratify the selection of PricewaterhouseCoopers LLP as
the Company's independent accountants for 1999. Votes cast
were as follows: 4,857,533 for; 74,026 against; 6,368
abstained.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits filed herein
Exhibit 10.35 Amendment No. 1 to Credit Agreement
dated as of May 7, 1999 by and
among TransAct Technologies
Incorporated, Magnetec Corporation
and Fleet National Bank
Exhibit 10.36 Asset Transfer Agreement dated as
of May 28, 1999 between Magnetec
Corporation and Tridex Corporation
Exhibit 11.1 Computation of earnings per share
Exhibit 27.1 Financial Data Schedule
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter covered by this report.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSACT TECHNOLOGIES INCORPORATED
(Registrant)
August 9, 1999 /s/ Richard L. Cote
-------------------------------------
Richard L. Cote
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
/s/ Steven A. DeMartino
-------------------------------------
Steven A. DeMartino
Corporate Controller
(Principal Accounting Officer)
15
<PAGE> 16
EXHIBIT LIST
The following exhibits are filed herewith.
<TABLE>
<CAPTION>
Exhibit
<S> <C>
10.35 Amendment No. 1 to Credit Agreement dated as of May 7, 1999
by and among TransAct Technologies Incorporated, Magnetec
Corporation and Fleet National Bank
10.36 Asset Transfer Agreement dated as of May 28, 1999 between
Magnetec Corporation and Tridex Corporation
11.1 Computation of earnings per share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.35
AMENDMENT NO. 1 TO CREDIT AGREEMENT
Dated May 7, 1999
AMENDMENT No. 1 to Credit Agreement (this "Amendment") by and 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").
PRELIMINARY STATEMENTS:
A. The Borrowers and the Bank have entered into a Credit
Agreement dated as of January 29, 1998. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given thereto in the Credit
Agreement. As used herein, the term "Credit Agreement" shall mean the Credit
Agreement as amended pursuant to this Amendment No.1.
B. For good and valuable consideration, the receipt of which
is acknowledged, the Borrowers and the Bank have agreed to amend the Credit
Agreement, as hereinafter set forth.
SECTION 1. Amendments. The Facility Documents are, effective
as of the date hereof and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The following definitions are hereby added
to the Credit Agreement:
"Borrowing Base" means an amount equal to the sum of
(a) 80% of Eligible Receivables, plus (b) 50% of Eligible
Inventory, provided, however, in no event shall the aggregate
amount under clause (b) exceed $4,000,000. Unless the Bank
shall otherwise determine, the Borrowing Base as of any date
shall be the Borrowing Base set forth on the most current
Borrowing Base Certificate certified and delivered by the
Borrower to the Bank. If, at any time, the Borrowing Base
shall exceed the Working Capital Commitment, for purposes of
this Agreement the Borrowing Base shall be deemed to be equal
to the Working Capital Commitment. The Bank reserves the right
to modify the percentages of
<PAGE> 2
2
Eligible Receivables and Eligible Inventory against which it
will lend under the Borrowing Base formula above, based on the
results of any field examinations of the Borrowers conducted
by the Bank.
"Borrowing Base Certificate" means a certificate
substantially in the form of Exhibit B hereto or such other
form agreed to in writing by the Bank and the Borrower.
"Eligible Inventory" means, as of any date of
determination thereof, all Inventory (valued at the lower of
cost or its net realizable value as determined using GAAP)
owned by the Borrowers, but excluding(a) all Inventory in
which the Bank does not have a first perfected security
interest, subject to no other Lien prior to or on a parity
with such security interest, (b) all Inventory for which
warehouse receipts or documents of title have been issued,
unless the same are delivered to the Bank, (c) all
work-in-progress, and any finished Inventory units housed at
customer locations, and (d) all other Inventory which is
determined by the Bank, in the exercise of its reasonable
judgment, to be ineligible for any other reason generally
accepted in the commercial finance business as a reason for
ineligibility. Notwithstanding the preceding sentence,
"Eligible Inventory" shall not include any Inventory not
located at premises owned by or leased to or contracted to a
Borrower, unless such Inventory is in transit (and insured) or
such Borrower has made a formal financing statement filing
against the consignee of such Inventory and has given any
party claiming of record a security interest in such
consignee's Inventory, or other assets that might include such
Inventory, notice of such Borrower's consignment arrangements
with such consignee or has taken equivalent protective steps
satisfactory to the Bank.
"Eligible Receivables" means, as of any date of
determination thereof, all Receivables of the Borrowers net of
the Borrowers' customary reserves, discounts, credits,
returns, rebates, allowances or set-offs, excluding the
following:
(i) any Receivable unpaid for 90 or more days from
the date of the original invoice;
(ii) any Receivable evidenced by chattel paper or an
instrument of any kind unless such chattel paper or instrument
is pledged and delivered to the Bank or unless the total
amount of such Receivables at any one time does not exceed 5%
of total Eligible Receivables at such time;
<PAGE> 3
3
(iii) any Receivable which is owed by an account
debtor which is insolvent or the subject of any bankruptcy or
insolvency proceedings of any kind or of any other proceeding or
action, which might have an adverse effect on the business of such
account debtor;
(iv) all Receivables deemed uncollectable by a
Borrower or turned over to collection agencies or outside collection
attorneys;
(v) any Receivable which is not a valid, legally
enforceable obligation of the account debtor or is subject to any
present or contingent, or any fact exists which is the basis for any
future, offset or counterclaim or other defense on the part of such
account debtor;
(vi) any Receivable not evidenced by an invoice or
other documentation in form reasonably acceptable to the Bank;
(vii) any Receivable which arises out of any
transaction between (A) any Borrower and (B) any Subsidiary or any
Affiliate or any other Borrower;
(viii) any Receivable which is subject to any
provision prohibiting its assignment or requiring notice not theretofor
given of or consent not theretofor obtained to such assignment;
(ix) all Receivables arising out of or in connection
with advance billings of a customer's requirements of supplies over a
period of time;
(x) all Receivables that do not conform to the
representations and warranties contained in Article 2 of the Security
Agreement; (xi) all Receivables in which the Bank does not have a first
perfected security interest, subject to no other Lien prior to or on a
parity with such security interest;
(xii) all Receivables from an account debtor if more
than 50% of the aggregate Dollar amount of invoices billed with respect
to such account debtor is more than 90 days past due according to the
original terms of payment;
(xiii) any Receivable which is owed by an account
debtor who has disputed liability or made any claim with respect to any
other account due from such account debtor to a Borrower, except the
foregoing
<PAGE> 4
4
exclusion shall not apply to any account debtor unless and until such
disputed amounts equal or exceed twenty percent (20%) of the aggregate
Dollar amount of accounts due from such account debtor; and
(xiv) any Receivable which is determined by the Bank,
in the exercise of its reasonable judgment, to be ineligible for any
other reason generally accepted in the commercial finance business as a
reason for ineligibility.
"Guaranty" shall mean that certain Guaranty Agreement dated
May 7, 1999 from each of the Guarantors to the Bank.
"Guarantors" shall mean, collectively, TransAct.Com, Inc., a
Delaware corporation, Ithaca Peripherals Limited, a United Kingdom
corporation, and TransAct Technologies International Ltd, a Barbados
corporation, and each of whom may sometimes be referred to individually
as a "Guarantor".
"Net Worth" means, with respect to any Person, at any time,
the stockholders' equity of such Person and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with
GAAP.
(b) In Section 1.1, the dollar figure of "$4,000,000"
in subparagraph (e) under the definition of "Acceptable Acquisition" is hereby
reduced to the figure "$400,000".
(c) The definitions for "Amortization Date",
"Tangible Net Worth" and "Term Loan" set forth in the Credit Agreement are
hereby deleted. The following definitions in the Credit Agreement are hereby
amended and modified as follows:
"Commitments" means the Working Capital Commitment.
"Loan" means any of the Working Capital Loans and
"Loans" means the Working Capital Loans.
"Notes" means the Working Capital Note.
"Facility Documents" means this Agreement, the Notes,
the Subordination Agreements, the Security Agreement, the
Guaranty, 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
<PAGE> 5
5
Agreement or in connection with the documents, certificates or
instruments referred to in Article 4, including documents
delivered in connection with any Borrowing, as well as any
document or agreement relating to any interest rate swap,
hedging arrangements, foreign exchange transactions or credit
card transactions entered into with the Bank in connection
with any of the Obligations.
"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>
LIBOR PRIME RATE
MARGIN MARGIN
CONSOLIDATED INTEREST COVERAGE RATIO OF THE BORROWERS (PERCENTAGE (PERCENTAGE
POINTS) POINTS)
<S> <C> <C>
Greater than 5.0 1.50 0.00
Greater than 4.0, but less than or equal to 5.0 1.75 0.00
Greater than or equal to 3.0, but less than or equal to 2.00 0.00
4.0
Less than 3.0 2.25 0.00
</TABLE>
The Interest Coverage Ratio will be calculated on a cumulative
basis (i.e. year-to-date) for the period beginning on January
1, 2000 and ending on December 31, 2000, and thereafter the
measurement of this ratio will return to a rolling-four
quarters calculation, commencing in respect of the quarter
ending March 31, 2001. Notwithstanding the foregoing, the
LIBOR Margin in respect of the period ending June 24, 2000
will be 2.25 percentage points.
"Revolving Credit Termination Date" means the earlier
of (a) May 31, 2001, 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 date of termination of the
Commitments pursuant to Section 9.2.
"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
$10,000,000, as such amount may by limited or reduced pursuant
to Article 2 or otherwise modified in accordance with this
Agreement from time to time.
<PAGE> 6
6
(d) Section 1.2 of the Security Agreement is hereby
amended in its entirety to read as follows:
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, together
with (i) any and all obligations of the Grantors with respect
to any interest rate swap agreements or other hedging
agreements entered into with the Bank with respect to the
obligations of the Grantors under the Facility Documents and
(ii) such other obligations of the Grantors owing to the Bank
of any kind now or hereafter existing, up to an amount of
$800,000 at any one time outstanding (all such obligations
described in this Section 1.2 being collectively the
"Obligations").
(e) Section 2.1(a) of the Credit Agreement is hereby
amended and restated in full to read as follows:
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, and provided that the aggregate
outstanding principal amount of Working Capital Loans shall at
no time exceed the Borrowing Base. 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.
(f) The Acquisition Commitment is hereby terminated
and any and all Acquisition Loans outstanding as of the date hereof shall
automatically be converted into and shall become Working Capital Loans under the
Working Capital Commitment. Accordingly, Sections 2.1(b) and 2.1 (c) and the
second sentence of Section 2.2 are hereby deleted from the Credit Agreement in
their entirety. The Acquisition Note is hereby canceled. From and after the date
hereof, only Working Capital Loans shall be available under the terms of the
Credit Agreement In addition, Section 2.3 of the Credit Agreement is hereby
deleted in its entirety and is hereby replaced by the following section:
<PAGE> 7
7
Section 2.3. Purpose. The Borrowers shall use the
proceeds of the Working Capital Loans for general corporate
purposes, including working capital, leasehold improvements,
equipment needs, and to finance Acceptable Acquisitions, but
shall not be used to repurchase shares of the common stock of
TransAct in open-market transactions or otherwise. No proceeds
of the Working Capital 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 Working Capital Loans shall be used for the purpose,
whether immediate, incidental or ultimate, of buying or
carrying "margin stock" within the meaning of Regulation U.
(g) Section 2.10(c) of the Credit Agreement is hereby
amended in its entirety to read as follows:
(c) Accrued interest on all types of Loans shall be
due and payable in arrears upon any payment of principal, and
otherwise on the last day of each calendar month in respect of
Prime Rate Loans and at the end of the applicable Interest
Period in respect of LIBOR Loans (but in no event less
frequently than every ninety days), commencing February 28,
1998, and on the Revolving Credit Termination Date; provided
that interest accruing at the Default Rate shall be due and
payable from time to time on demand of the Bank.
(h) Section 2.12(a) is hereby amended in its entirety
to read as follows:
(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 the
Working Capital 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
Interest Coverage Ratio of the Borrowers, on a consolidated
basis, which ratio will be calculated on a cumulative basis
(i.e. year-to-date) for the period beginning on January 1,
2000 and ending on December 31, 2000, and thereafter the
measurement of this ratio will return to a rolling-four
quarters calculation, commencing in respect of the quarter
ending March 31, 2001, as follows:
<PAGE> 8
8
<TABLE>
<CAPTION>
CONSOLIDATED INTEREST COVERAGE RATIO OF THE BORROWERS COMMITMENT FEE
<S> <C>
Greater than 5.0 0.25%
Greater than 4.0, but less than or equal to 5.0 0.375%
Greater than 3.0, but less than or equal to 4.0 0.50%
Less than or equal to 3.0 0.625%
</TABLE>
Notwithstanding the foregoing, the commitment fee payable in
respect of the period ending June 24, 2000 will be 0.625%.
(i) The word "and" at the end of Section 6.8(q) is
hereby deleted and Section 6.8(r) is hereby redesignated as Section 6.8(s) and
the following new section is added as a new Section 6.8(r) of the Credit
Agreement:
(r) As soon as available, and in any event within ten
Banking Days of the end of each fiscal month, a monthly
Borrowing Base Certificate signed by the Chairman or Chief
Financial Officer of each Borrower, in respect of the
immediately preceding month; and
(j) A new Section 7.12 is hereby added to the Credit
Agreement to read as follows:
Section 7.12. Capital Expenditures. Make Capital Expenditures
in excess of $3,000,000 in fiscal year 1999 and $3,200,000 in
fiscal year 2000 and each fiscal year thereafter. For purposes
of this Section, "Capital Expenditures" shall mean, in respect
of any relevant period, the dollar amount of gross
expenditures (including obligations under capital leases) made
for fixed assets, real property, plant and equipment, and all
renewals, improvements and replacements thereto (but not
repairs thereof) incurred during such period, as determined in
accordance with GAAP.
(k) Sections 8.5 and 8.6 of the Credit Agreement are
hereby deleted in their entirety. Section 8.1 of the Credit Agreement is hereby
deleted in its entirety and is hereby replaced by the following section:
Section 8.1. Minimum Net Worth. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured
at the end of each fiscal quarter, commencing June 26, 1999, a
Net Worth of not less than $11,000,000.
<PAGE> 9
9
Section 8.3 of the Credit Agreement is hereby deleted
in its entirety and is hereby replaced by the following section:
Section 8.3. Maximum Debt to Cash Flow Ratio. The
Borrowers, on a consolidated basis, shall maintain a ratio of
total Funded Debt to EBITDA, of not more than 3.4 to 1.0 in
respect of the twelve month period ending December 31, 1999,
as measured at December 31, 1999, and thereafter such ratio
shall be not more than 3.0 to 1.0 at all times, as measured at
the end of each fiscal quarter, commencing on March 25, 2000
for the twelve month period then ended (a rolling-twelve month
calculation measured as of the end of each successive
quarter).
Section 8.4 of the Credit Agreement is hereby deleted
in its entirety and is hereby replaced by the following section:
Section 8.4. Interest Coverage Ratio. The Borrowers,
on a consolidated basis, shall maintain an Interest Coverage
Ratio of not less than 3.0 to 1.0 as measured at the end of
each quarter, commencing March 25, 2000, on a cumulative basis
(i.e. year-to-date) for the period beginning on January 1,
2000. The measurement of this covenant will return to a
rolling-four quarters calculation (measured as of the end of
each successive quarter) commencing with the determination as
of March 31, 2001 for the twelve month period then ending and
for each quarter thereafter.
(l) The following section is added as a new section
8.5 to the Credit Agreement:
Section 8.5. Maximum Loss. The Borrowers, on a consolidated
basis, shall not suffer a Net Loss in respect of calendar year
1999 in excess of $860,000, as measured; first, in respect of
the six month period ending June 26, 1999; second, in respect
of the nine month period ending September 25, 1999; and third,
in respect of the twelvemonth period ending December 31, 1999.
(m) The following sentence is added to the end of
Section 6.7 of the Credit Agreement:
The Bank or any agent or representative thereof shall have the
right to perform annual field audits of the Borrowers, at the
Borrowers' reasonable expense.
<PAGE> 10
10
(n) Notwithstandidng anything to the contrary in this
Amendment, the interest rates on any LIBOR Loans borrowed prior to the date of
this Amendment shall remain at such rates until the end of the applicable
Interest Period for such LIBOR Loans.
SECTION 2. Conditions of Effectiveness. This
Amendment shall become effective when, and only when, the Bank shall have
received counterparts of this Amendment executed by the Borrowers and the Bank,
and Section 1 hereof shall become effective when, and only when, the Bank shall
have additionally received all of the following documents or items, each
document (unless otherwise indicated) being dated the date of receipt thereof by
the Bank (which date shall be the same for all such documents), in form and
substance satisfactory to the Bank:
(a) Certified copies of (i) the resolutions of the
Board of Directors of each of the Borrowers and the Guarantors approving this
Amendment and the Guaranty and the matters contemplated hereby and (ii) all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Amendment and the matters contemplated
hereby.
(b) A certificate of the Secretary or an Assistant
Secretary of each of the Borrowers certifying the names and true signatures of
the officers of the Borrower authorized to sign this Amendment and the other
documents to be delivered hereunder.
(c) An amendment fee equal to $25,000 payable on the
date of execution and delivery of this Amendment.
(d) A legal opinion from legal counsel for the
Borrowers, satisfactory to the Bank and its legal counsel.
(e) The Guaranty, duly executed and delivered by each
of the Guarantors.
SECTION 3. Representations and Warranties of Each of
the Borrowers. Each Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) The execution, delivery and performance by the
Borrower of this Amendment and the Facility Documents, as amended hereby, to
which it is or is to be a party are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action and do not contravene (i)
the Borrower's charter or by-laws, (ii) any law or any contractual restriction
binding on or affecting the Borrower, or
<PAGE> 11
11
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 the Borrower.
(c) No authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower of
this Amendment or any of the Facility Documents, as amended hereby, to which it
is or is to be a party.
(d) This Amendment and each of the other Facility
Documents as amended hereby, constitute legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms, except to the extent that such enforecement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally.
(e) The Security Agreement creates a valid and
perfected first priority security interest in the Collateral securing the
payment of all Obligations, and the execution, delivery and performance of this
Amendment do not adversely affect the aforesaid security interest (f) Except as
set forth in the Credit Agreement, there is no pending or, to the knowledge of
the Borrower, threatened action or proceeding affecting the Borrower or any of
its Subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower or any Subsidiary. There is no pending or, to the knowledge of the
Borrower, threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator which purports
to affect the legality, validity or enforceability of this Amendment or any of
the other Facility Documents, as amended hereby.
(g) The Facility Documents existing on the date
hereof constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except to the extent that such enforecement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally. After giving effect to the amendments provided for in this Amendment,
no event has occurred and is continuing which constitutes a Default or an Event
of Default.
SECTION 4. Reference to and Effect on the Facility
Documents.
(a) Upon the effectiveness of Section 1 hereof, on
and after the date hereof each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference in any Facility Documents to the Credit Agreement or any other
Facility Document, shall mean and be a reference to the Credit Agreement or such
other Facility Document as amended hereby.
<PAGE> 12
12
(b) Except as specifically amended or modified
pursuant to this Amendment, the provisions of the Credit Agreement, the Notes
and the other Facility Documents shall remain in full force and effect and are
hereby ratified and confirmed. Without limiting the generality of the foregoing,
the Credit Agreement, the Security Agreement and all of the Collateral described
therein do and shall continue to secure the payment of all indebtedness and
liabilities of the Borrowers to the Banks and the Bank under the Credit
Agreement and the other Facility Documents, as amended hereby. In connection
with ratifying and confirming the representations and warranties set forth in
the Credit Agreement, as of the date hereof, the Borrowers hereby amend and
restate certain of the Schedules to the Credit Agreement such Schedules being
restated as set forth in the attachments hereto In addition, the representations
set forth in Section 5.5 of the Credit Agreement are hereby amended to refer to
the dates of the most recent annual and quarterly financial statements,
respectively, provided by the Borrowers to the Bank.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank or the Banks under any of the Facility
Documents, nor constitute a waiver of any provision of any of the Facility
Documents.
(d) Notwithstanding anything to the contrary herein,
the Bank agrees that the failure of the Borrowers to comply with the financial
covenants set forth in Article 8 of the Credit Agreement in effect prior to this
Amendment, in respect of the period ending March 27, 1999, shall not constitute
an Event of Default, provided that the financial covenants set forth in Article
8 as amended hereby shall remain in full force and effect in respect of all
periods ending subsequent to March 27, 1999.
SECTION 5. Costs, Expenses and Taxes. Each of the
Borrowers agrees to pay on demand all costs and expenses of the Bank in
connection with the preparation, execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Bank with respect thereto.. Each of the Borrowers further agrees to pay
on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 5. In addition, each of the Borrowers
shall pay any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
<PAGE> 13
13
SECTION 6. Execution in Counterparts. This Amendment
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 7. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of
Connecticut.
<PAGE> 14
14
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers 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
Address for Notices to Borrowers:
7 Laser Lane
Wallingford, Connecticut 06492
FLEET NATIONAL BANK
By /s/ H. Frazier Caner
H. Frazier Caner, Vice President
Address for Notices:
Fleet National Bank
One Landmark Square
2nd Floor
Stamford, CT 06901
Attn: H. Frazier Caner
Vice President
Facsimile No.: (203) 964-4850
<PAGE> 15
15
SCHEDULE 5.9
to
AMENDED CREDIT AGREEMENT
Dated May 7, 1999
SUBSIDIARIES OF TRANSACT
------------------------
Magnetec Corporation, a Connecticut corporation.
TransAct.Com, Inc., a Delaware corporation
TransAct Technologies International Ltd., a Barbados
corporation.
SUBSIDIARIES OF MAGNETEC
Ithaca Peripherals Limited, a UK corporation.
<PAGE> 16
SCHEDULE 5.10
to
AMENDED CREDIT AGREEMENT
Dated May 7, 1999
CREDIT ARRANGEMENTS
-------------------
<TABLE>
<CAPTION>
Lessee Lessor Security
------ ------ --------
<S> <C> <C>
Magnetec NTFC Capital Corp. Telecommunications equipment
Magnetec Pitney Bowes Mailing equipment
Ithaca Xerox Corporation Photocopy equipment
Ithaca Mullin Industrial Handling Corp. Forklift equipment
Ithaca Pitney Bowes Mailing equipment
TransAct IKON Photocopy equipment
Magnetec OCE' - BRUNING Office equipment
</TABLE>
<PAGE> 17
SCHEDULE 5.12
to
AMENDED CREDIT AGREEMENT
Dated May 7, 1999
HAZARDOUS MATERIALS
-------------------
Oily Solids
One of the Borrower's subsidiaries regularly uses two types of
lubricants in performing certain machining processes. As a result of these
processes, the lubricant combines with metal shavings and eventually produces
liquid sludge and "oily solids". The liquid sludge and oily solids are contained
in clearly marked drums which are periodically transported off-site by General
Chemical, a Framingham, Massachusetts hazardous waste disposal company.
<PAGE> 18
SCHEDULE 7.3
to
AMENDED CREDIT AGREEMENT
Dated May 7, 1999
LIENS
-----
1. UCC-1 Financing Statement filed 12/9/94 with the Connecticut Secretary
of State, File No. 1591536, Debtor = Magnetec, Secured Party = State
of Connecticut Department of Economic Development
2. UCC-1 Financing Statement filed 6/19/95 with the Connecticut Secretary
of State, File No. 1627702, Debtor = Magnetec, Secured Party = NTFC
Capital Corporation
3. UCC-1 Financing Statement filed 7/11/96 with the Wallingford Town
Clerk, File No. 7547, Debtor = Magnetec, Secured Party = OCE' BRUNING
4. UCC-1 Financing Statement filed 9/12/96 with the Connecticut Secretary
of State, File No. 1724018, Debtor = Magnetec, Secured Party = State
of Connecticut Department of Economic and Community Development.
5. UCC-1 Financing Statement filed 7/27/94 with the New York Secretary of
State, File No. 153581, Debtor = Ithaca Peripherals Incorporated,
Secured Party = Citicorp Dealer Finance (assigned by Mullen Industrial
Handling)
6. UCC-1 Financing Statement filed with the Connecticut Secretary of
State, File No. 1829351, Debtor = TransAct Technologies, Secured Party
= Fleet National Bank
7. UCC-1 Financing Statement filed with the Connecticut Secretary of
State, File No. 1829349, Debtor = Magnetec Corporation, Secured Party
= Fleet National Bank
8. See also the additional filings naming Fleet National Bank as Secured
Party set forth on the attached UCC Search Report
<PAGE> 19
SCHEDULE 7.9
to
AMENDED CREDIT AGREEMENT
Dated as of May 7, 1999
TRANSACTIONS WITH AFFILIATES OUTSIDE THE
----------------------------------------
ORDINARY COURSE OF BUSINESS
---------------------------
None.
<PAGE> 1
EXHIBIT 10.36
ASSET TRANSFER AGREEMENT
------------------------
THIS ASSET TRANSFER AGREEMENT (the "Agreement") is entered into by and
between MAGNETEC CORPORATION, a Connecticut corporation ("Magnetec"), and TRIDEX
CORPORATION, a Connecticut corporation ("Tridex").
WHEREAS, Tridex desires to transfer to Magnetec and Magnetec desires to
acquire from Tridex all of the assets owned and used by Tridex in its ribbon
business (the "Ribbon Business").
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Transfer of Assets. (a) Tridex hereby agrees to transfer to Magnetec,
at the Closing (as defined in Section 7.1), all of Tridex's right, title and
interest in and to all of the equipment, inventory (whether components, work-in
progress or finished goods), technical drawings and associated intellectual
property, unfilled customer purchase orders, accounts receivable, packaging,
sales literature and other supplies used by Tridex exclusively in the conduct of
the Ribbon Business (the "Assets"). A preliminary estimate of the composition of
the assets as of the Closing is set forth on Schedule 1 hereto.
(b) Except as set forth in Section 4, the Assets are being transferred
to Magnetec "as is" and "where is" without any warranties of quality or fitness
except as hereinafter set forth.
2. Assumption of Liabilities. Magnetec hereby agrees to assume (a) all
liabilities and obligations of Tridex under the purchase orders which relate to
the Ribbon Business and remain unperformed or unfilled at the time of the
Closing, (b) all trade accounts payable with respect to the Ribbon Business, and
(c) all accrued but unpaid sales commissions due with respect to sales of Ribbon
Business products. A preliminary estimate of the purchase orders, trade accounts
payable and accrued but unpaid sales commissions which relate to the Ribbon
Business and remain unperformed, unfilled or unpaid at the time of the Closing
is set forth on Schedule 2 hereto.
1
<PAGE> 2
3. Consideration for Transfer of Assets.
(a) Tridex and Magnetec agree that Magnetec shall pay Tridex by wire
transfer, in consideration for the transfer of the Assets, a total purchase
price (the "Purchase Price") equal to (i) $180,000 at the time of Closing plus
(ii) after the Closing, an amount equal to the Book Value of the Assets at the
date of the Closing. For purposes of this Agreement, the term "Book Value" of
the Assets means the value of (i) inventories, (ii) accounts receivable and
(iii) fixed assets, minus the balance of (A) trade accounts payable and (B)
accrued but unpaid sales commissions. Tridex and Magnetec acknowledge that such
Book Value was approximately $120,000 at April 30, 1998
(b) Not later than June 4, 1999, Magnetec will prepare and deliver to
Tridex revised copies of Schedules 1 and 2 hereto, together with revised
versions of the Exhibits to the Assignment and Assumption Agreement and the
Instrument of Transfer, reflecting Magnetec's revised determination of (i) the
Assets as of the Closing and (ii) the unperformed and unfilled Ribbon Business
purchase orders, the trade accounts payable and accrued but unpaid sales
commissions as of the Closing. Magnetec shall also deliver to Tridex Magnetec's
calculation of the Book Value of the Assets at the date of the Closing. If
Tridex does not deliver to Magnetec by June 11, 1999, a written notice objecting
to Magnetec's calculations, such calculations shall be deemed final and binding
on the parties. If Tridex delivers such a notice of objection to Magnetec by
June 11, 1999, and the parties are unable to resolve their disagreement by June
18, 1999, then the parties hereto may refer the dispute to a mutually acceptable
independent accounting firm which shall render a final and binding ruling in the
matter not later than July 19, 1999. The parties shall share the costs and
expenses of such accounting firm on an equal basis. Upon the earlier of (A) the
close of business on June 11, 1999 in the event Tridex does not deliver to
Magnetec by June 11, 1999, a written notice objecting to Magnetec's
calculations, (B) the date on which the parties hereto resolve any dispute as to
such calculations, or (C) the date on which the independent accounting firm
renders its final ruling as to any such dispute, Updike, Kelly & Spellecy shall,
in accordance with the terms of the Escrow Letter referred to in Section 6.1,
deliver the Termination Statement to Magnetec (or its designee) and Magnetec
shall pay to Tridex by wire transfer an amount equal to the Book Value of the
Assets.
2
<PAGE> 3
4. Representations and Warranties of Tridex. Tridex represents and
warrants to Magnetec as follows:
(a) Corporate Status. Tridex is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut.
(b) Due Authorization. The entry by Tridex into this Agreement and
the transfer of the Assets to Magnetec hereunder have been duly authorized by
all requisite corporate action.
(c) Title to Assets. Tridex has good and marketable title to the
Assets free and clear of all liens and encumbrances (except for a lien on the
Assets held by Fleet National Bank, pursuant to an Amended and Restated Credit
Agreement dated as of April 17, 1998 and last amended on March 26, 1999.
(d) Condition of Assets. The inventory included in the Assets is of a
quality useable and saleable in the ordinary course of business. All other
tangible personal property, including manufacturing equipment, transferred
hereunder is in reasonably good operating condition and repair, subject to
normal wear.
(e) Sufficiency of Assets. The Assets transferred by Tridex to
Magnetec pursuant to this Agreement constitute all of the assets used by Tridex
exclusively in the conduct of the Ribbon Business and, in combination with the
services previously provided by Magnetec to Tridex pursuant to the Amended and
Restated Manufacturing Support Services Agreement, dated as of June 1, 1998 (the
"Manufacturing Agreement"), are sufficient to conduct the Ribbon Business as
presently conducted by Tridex.
5. Representations and Warranties of Magnetec.
(a) Corporate Status. Magnetec is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut.
(b) Due Authorization. The entry by Magnetec into this Agreement and
the transfer of the Assets from Tridex to Magnetec hereunder has been duly
authorized by all requisite corporate action.
3
<PAGE> 4
6. Conditions Precedent to Closing.
6.1 Conditions Precedent to Magnetec's Closing.
The obligations of Magnetec under this Agreement are subject to the
satisfaction, at or before the Closing, of the conditions set out below.
(a) Accuracy of Representations. All representations and warranties
made by Tridex in this Agreement will be true as of the Closing as though made
at that time.
(b) Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or its consummation, will have been instituted or
threatened as of the Closing.
(c) Bank Consent. Fleet National Bank shall have consented in writing
(the "Fleet Consent") to the transactions contemplated by this Agreement and
shall have (i) agreed in writing to release any liens on the Assets and (ii)
delivered signed UCC-3 termination statements for filing to terminate such
liens, (the "Termination Statements") to be held by Updike, Kelly & Spellecy
pursuant to the terms of an escrow letter ("Escrow Letter") addressed to the
parties hereto.
6.2 Conditions Precedent to Tridex's Closing.
The obligations of Tridex under this Agreement are subject to the
satisfaction, at or before the Closing, of the conditions set out below.
(a) Accuracy of Representations. All representations and warranties
made by Magnetec in this Agreement will be true as of the Closing as though made
at that time.
(b) Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or its consummation, will have been instituted or
threatened as of the Closing.
4
<PAGE> 5
(c) Bank Consent. Fleet National Bank shall have delivered the Fleet
Consent.
7. Closing.
7.1 Time and Place.
The transfer of the Assets by Tridex to Magnetec (the "Closing") shall
be effective on May 28, 1999 at the offices of Magnetec in Wallingford,
Connecticut. Tridex and Magnetec shall exchange executed copies of all closing
documents and take all necessary steps to complete the Closing.
7.2 Tridex's Obligations at Closing.
Prior to the Closing, Tridex will deliver to Magnetec the following
documents:
(a) An Assignment and Assumption Agreement, in substantially the form
attached hereto as Exhibit 7.2(a) (the "Assignment and Assumption Agreement"),
duly executed by Tridex, assigning and transferring to Magnetec all of Tridex's
right, title and interest in and to the customer purchase orders which remain
unfilled or unperformed as of the date of the Closing.
(b) An Instrument of Transfer, in substantially the form attached
hereto as Exhibit 7.2(b), transferring the Assets from Tridex to Magnetec.
(c) The Fleet Consent.
(d) Termination Statements signed by Fleet National Bank relating to
its lien on the Assets, to be held by Updike, Kelly & Spellecy pursuant to the
terms of the Escrow Letter.
(e) Written termination of the Manufacturing Agreement.
7.3 Magnetec's Obligation at Closing.
At the Closing, Magnetec will deliver to Tridex the following:
5
<PAGE> 6
(a) The Assignment and Assumption Agreement, duly executed by
Magnetec.
(b) The wire transfer of $180,000.
(c) Written termination of the Manufacturing Agreement.
7.4 Post-Closing Obligations.
(a) The parties will comply with their respective obligations under
Section 3(b) hereof.
(b) Tridex and Magnetec will execute and deliver such additional
documents and take such additional actions as may be necessary to carry out the
transactions contemplated by this Agreement.
(c) For a period of three years after the Closing, Magnetec will
provide Tridex with reasonable access during normal business hours to its books
and records related to the operation of the Ribbon Business through the date of
the Closing, to enable Tridex to comply with accounting, tax and other
obligations.
7.5 Titles. The title of this Agreement and the titles of sections
and subsections, and of exhibits, are for convenience of reference only and will
not be considered in the construction or interpretation hereof.
7.6 Survival. All representations, warranties and agreements
contained in this Agreement will survive for six (6) months from the date of the
Closing.
7.7 Entire Agreement. This Agreement, the schedules hereto, the
Instrument of Transfer and the Assignment and Assumption Agreement constitute
the entire agreement and understanding between the parties in respect of the
subject matter hereof and supersede any prior or contemporaneous agreement or
understanding between the parties, written or oral, which relates to the subject
matter hereof.
7.8 Successors and Assigns. References in this Agreement to the
parties hereto will be deemed to include their successors and permitted assigns
and
6
<PAGE> 7
this Agreement will be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns.
7.9 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Connecticut.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
7.11 Amendments. This Agreement may be amended or modified only by a
written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
28th day of May, 1999.
TRIDEX CORPORATION
By: /s/ George T. Crandall
George T. Crandall
Title: Vice President and Treasurer
MAGNETEC CORPORATION
By: /s/ Richard L. Cote
Richard L. Cote
Title: Vice President
7
<PAGE> 8
SCHEDULE 1
LIST OF ASSETS
<TABLE>
<CAPTION>
May 28,
1999
-----------------
<S> <C>
Accounts Receivable, Less Than
60 days old $80,694.48
Inventory 37,974.36
Fixed Assets, Net 8,661.85
</TABLE>
8
<PAGE> 9
SCHEDULE 2
UNFILLED AND UNPERFORMED PURCHASE ORDERS,
AND TRADE ACCOUNTS PAYABLE
AND
ACCRUED BUT UNPAID SALES COMMISSIONS
<TABLE>
<CAPTION>
May 28,
1999
-----------------
<S> <C>
Open Purchase Orders $99,676.16
Accounts Payable (including accrued but unmatched invoices of
$2,288.16) 11,834.23
Accrued Sales Commissions 703.07
</TABLE>
9
<PAGE> 1
EXHIBIT 11.1
TRANSACT TECHNOLOGIES INCORPORATED
Exhibit 11.1
Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 26, June 27, JUNE 26, June 27,
(In thousands, except per share data) 1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $ 146 $ 231 $ (133) $ 865
======= ======= ======= =======
Shares:
Basic - Weighted average common shares
outstanding 5,559 6,239 5,568 6,347
Dilutive effect of outstanding options and
warrants as determined by the treasury
stock method 17 25 2 47
------- ------- ------- -------
Dilutive - Weighted average common and
common equivalent shares outstanding 5,576 6,264 5,570 6,394
======= ======= ======= =======
Net income (loss) per common and common equivalent share:
Basic $ 0.03 $ 0.04 $ (0.02) $ 0.14
======= ======= ======= =======
Diluted 0.03 0.04 (0.02) 0.14
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRANSACT
TECHNOLOGIES INCORPORATED QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 26, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-26-1999
<CASH> 486
<SECURITIES> 0
<RECEIVABLES> 6,202
<ALLOWANCES> 154
<INVENTORY> 7,746
<CURRENT-ASSETS> 15,697
<PP&E> 14,420
<DEPRECIATION> 8,566
<TOTAL-ASSETS> 23,686
<CURRENT-LIABILITIES> 6,671
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 11,540
<TOTAL-LIABILITY-AND-EQUITY> 23,686
<SALES> 21,725
<TOTAL-REVENUES> 21,725
<CGS> 16,059
<TOTAL-COSTS> 21,711
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185
<INCOME-PRETAX> (145)
<INCOME-TAX> (12)
<INCOME-CONTINUING> (133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (133)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
