<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995, 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: 0-13459
DH TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2917470
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15070 AVENUE OF SCIENCE, SAN DIEGO, CALIFORNIA 92128
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 451-3485
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 XXX NO
--- ---
AS OF MARCH 31, 1995, THERE WERE 5,171,982 SHARES OF THE REGISTRANT'S
COMMON STOCK OUTSTANDING.
<PAGE> 2
DH TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Condensed Consolidated Balance Sheets 1
March 31, 1995, and December 31, 1994
Condensed Consolidated Statements of Income 2
Three months ended March 31, 1995, and March 31, 1994
Condensed Consolidated Statements of Cash Flows 3
Three months ended March 31, 1995, and March 31, 1994
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of 5
Financial Conditions and Results of Operations
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 8
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
EXHIBITS INDEX 11
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $21,942 $19,587
Short-term investment securities held to maturity $4,300 $4,300
Accounts receivable, net 13,505 12,435
Inventories 11,396 11,386
Prepaid expenses and other current assets 1,699 1,721
------- -------
Total current assets 52,842 49,429
------- -------
Fixed assets 17,165 16,779
Less accumulated depreciation and
amortization 10,304 10,008
------- -------
6,861 6,771
Intangibles 14,211 14,549
Other assets 344 557
------- -------
Total assets $74,258 $71,306
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,020 $ 4,557
Current portion of long-term debt 1,337 1,363
Accrued payroll 1,958 2,148
Accrued expenses 1,954 1,928
Income taxes payable 2,227 1,356
Deferred revenue 647 886
------- -------
Total current liabilities 13,143 12,238
------- -------
Non-current portion of long-term debt 2,502 2,992
Deferred tax liability 228 228
------- -------
Total liabilities 15,873 15,458
------- -------
Shareholders' equity:
Preferred shares, no par value
Authorized: 1,000,000 shares, none issued -- --
Common shares:
Common stock, authorized: 19,000,000
shares; issued and outstanding:
5,171,982 shares in 1995 and
5,154,107 shares in 1994 10,953 10,740
Foreign currency translation adjustment (296) (255)
Retained earnings 47,728 45,363
------- -------
Total shareholders' equity 58,385 55,848
------- -------
Total liabilities and shareholders' equity $74,258 $71,306
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
PAGE 1
<PAGE> 4
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(March 31, 1995 and 1994)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
(Unaudited)
--------------------
1995 1994
--------------------
<S> <C> <C>
Net sales $23,255 $15,650
Cost of net sales 14,760 9,702
------- -------
Gross margin 8,495 5,948
Operating expenses:
Selling, general and administrative 3,934 2,477
Research and development 1,112 1,069
------- -------
Total operating expenses 5,046 3,546
Income from operations 3,449 2,402
Interest income 276 203
Interest expense 74 21
------- -------
Income before income taxes 3,651 2,584
Income taxes 1,286 778
------- -------
Net income $ 2,365 $ 1,806
======= =======
Net income per share $.43 $.34
======= =======
Weighted average number of shares outstanding
Per share (primary and fully diluted): 5,461 5,324
</TABLE>
PAGE 2
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DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
(Unaudited)
----------------------
1995 1994
----------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
Operating activities:
Net income $ 2,365 $ 1,806
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 902 501
Provision for loss on accounts receivable 116 39
Undepreciated value of asset disposals 11 4
Changes in assets and liabilities excluding effect of acquisitions (244) (1,293)
---------------------
Net cash provided by operating activities 3,150 1,057
Investing activities:
Net decrease in short-term investment securities held to maturity -- 3,220
Payment for acquisition, net of cash acquired -- (5,188)
Capital expenditures (407) (558)
Proceeds from sale of fixed assets -- 26
---------------------
Net cash used in investing activities (407) (2,500)
Financing activities:
Principal repayments on long-term debt (516) (334)
Exercise of stock options 213 263
---------------------
Net cash used in financing activities (303) (71)
Effect of exchange rate changes on cash (85) 56
Net increase (decrease) in cash and cash equivalents 2,355 (1,458)
Cash and cash equivalents at beginning of period 19,587 23,161
---------------------
Cash and cash equivalents at end of period $21,942 $21,703
=====================
Interest paid on debt $ 15 $21
Income taxes paid $ 385 $307
Supplementary disclosure of noncash investing activity:
Fair market value of assets acquired -- $ 6,374
Cash paid -- $ 5,457
---------------------
Long-term debt incurred -- $ 917
=====================
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
PAGE 3
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DH TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(MARCH 31, 1995 - UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with S.E.C. requirements for interim financial
statements. Therefore, they do not include all disclosures that would be
presented in the Company's Annual Report on Form 10-K. The financial
statements should be read in conjunction with the financial statements
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
The information furnished reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of financial position, results of operations, and changes in
cash position for the interim period. The results of operations for the
periods presented are not necessarily indicative of results to be expected for
the full year.
NOTE 2: INVENTORIES
The composition of inventories at March 31, 1995, and December 31, 1994, were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw Materials $5,297,000 $ 5,712,000
Work in Process 1,665,000 1,528,000
Finished Goods 4,434,000 4,146,000
----------- -----------
Totals $11,396,000 $11,386,000
=========== ===========
</TABLE>
NOTE 3: OPERATIONS SUBJECT TO PURCHASE AND SALE AGREEMENTS
On February 28, 1994, DH Technology, Inc. acquired all of the outstanding stock
of Stadia Colorado Corp. (Stadia) pursuant to a stock purchase agreement for
$6.5 million in cash ($5.5 million paid at closing, $500,000 paid on March 1,
1995, and an additional payment of $500,000 due in 1996). This business is
being operated as a subsidiary of DH Technology, Inc. under the name Stadia
Colorado Corp. Stadia, located in Golden, Colorado, supplies labeling and
marking solutions to a variety of customers in ten western states.
On August 31, 1994, DH Technology, Inc. acquired all of the outstanding stock
of Cognitive Solutions, Inc. (Cognitive) and certain technology rights pursuant
to a stock purchase agreement for $10 million in cash ($7.2 million paid at
closing, $248,000 paid 70 days after close, and additional payments of $500,000
each due in 1995 through 1999). Also, the Company is required to make
additional payments, not to exceed an aggregate of $3 million, to the former
shareholder of Cognitive based upon post acquisition net sales of a specified
Cognitive product line. This business is being operated as a subsidiary of DH
Technology, Inc. under the name Cognitive Solutions, Inc. and is located in
Paso Robles, California.
PAGE 4
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Cognitive designs, manufactures, and markets thermal bar code printers and
complementary label media for use in automatic data collection systems.
The Stadia and Cognitive acquisitions were accounted for using the purchase
method; accordingly, the assets and liabilities of the acquired companies have
been recorded at their estimated fair values at the dates of acquisition. In
conjunction with the acquisitions of Stadia and Cognitive, the excess of
purchase price over the estimated fair values of the net assets acquired has
been recorded as goodwill of $4,062,000 and $5,590,000, respectively, which is
being amortized over 25 years using the straight-line method. The consolidated
statements of income include the operations of Stadia from February 28, 1994,
and Cognitive from August 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with DH
Technology, Inc.'s condensed consolidated financial statements and the notes
related thereto included herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995, COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Net sales of $23.3 million for the quarter ended March 31, 1995, increased
48.6% over net sales of $15.7 million for the same period last year. This
increase was primarily attributable to the inclusion of Cognitive's results for
the 1995 quarter and a full quarter's results in 1995 for Stadia and increased
shipments of the Company's products.
Cost of net sales increased to 63.5% of net sales for the first quarter of 1995
compared to 62% of net sales for the first quarter of 1994. This increase was
primarily due to changes in the product mix toward printer components with
higher material content as well as the inclusion of results for Cognitive for
the entire current quarter. Cognitive's product lines have slightly lower
margins than the historical average for the Company.
Selling, general, and administrative expenses increased to 16.9% of net sales
in the first quarter of 1995 compared to 15.8% in the same period in 1994.
These expenses increased in absolute dollars to $3.9 million in the first
quarter of 1995 from $2.5 million in the first quarter of 1994. This increase
was primarily attributable to the inclusion of results for Cognitive and Stadia
for the entire first quarter of 1995.
Research and development expenses decreased to 4.8% of net sales in the first
quarter of 1995 compared to 6.8% in the same period last year due to
consolidated revenues increasing at a faster rate than consolidated research
and development expenses. Total dollars expended for research and development
of $1.1 million in the first quarter of 1995 were virtually unchanged compared
to the same period last year.
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The Company believes that the continued timely development of new products and
enhancements to its existing products are essential to maintaining the
Company's competitive position. Accordingly, the Company anticipates that such
expenses will increase in absolute dollars.
Income from operations as a percentage of net sales decreased to 14.8% for the
quarter ended March 31, 1995, from 15.3% for the same period in 1994. This
decrease was primarily attributable to product shipments with higher cost of
net sales and increased selling, general, and administrative expenses as a
percentage of net sales.
Interest income increased to $276,000 in the first quarter of 1995 compared to
$203,000 in the first quarter of 1994 primarily as a result of higher interest
rates, which more than offset lower cash balances in the first quarter of 1995.
Interest expense increased to $74,000 for the quarter ended March 31, 1995,
from $21,000 for the same period in 1994 due to interest expense associated
with debt incurred as a result of the Cognitive and Stadia acquisitions.
Income taxes as a percentage of income before income taxes increased to 35.2%
for the first quarter of 1995 from 30.1% for the same 1994 period, primarily
due to nondeductible goodwill amortization resulting from the Stadia and
Cognitive acquisitions. Additionally, tax-free interest income contributed a
smaller percentage of income before income taxes in the first quarter of 1995
compared to the same period in 1994.
The Company's results of operations may be affected in the future by a variety
of factors including changes in product mix, competitive pressures on prices,
fluctuations in manufacturing yields, product cost increases, acquisitions of
new businesses with different cost and expense structures, the timing of
product introductions and market demand for new products, operating expenses,
and the cancellation or rescheduling of orders by the Company's customers. In
addition, the Company's results could be affected by general economic
conditions and technology changes in the markets in which it competes.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The Company's primary source of liquidity has been cash flow generated from
operations. Cash, cash equivalents, and short-term investment securities held
to maturity totaled approximately $26.2 million on March 31, 1995, compared to
$23.9 million on December 31, 1994.
OPERATING ACTIVITIES
For the three-month period ended March 31, 1995, the Company generated
approximately $3.2 million in net cash from operating activities primarily as a
result of approximately $2.4 million in net income and $.9 million in
depreciation and amortization, offset by an increase in net operating assets
and liabilities of $244,000.
PAGE 6
<PAGE> 9
Since December 31, 1994, accounts receivable increased $1.1 million due
primarily to increased unit shipments and due to a delay in the collection of a
significant receivable from a single customer. The Company is working with the
customer, which is experiencing cash flow problems but currently believes the
receivable will be paid. In addition, long-term debt decreased approximately
$.5 million due primarily to principal repayments on long-term debt associated
with the Stadia acquisition.
INVESTING ACTIVITIES
Excluding short-term investment securities held to maturity, the Company's
principal investing activities to date have been the purchase of property and
equipment for product development and production. As of March 31, 1995, the
Company had no material commitments for capital expenditures; however, the
Company will continue to invest in property and equipment as needed.
Additionally, on February 28, 1994, the Company acquired Stadia Colorado Corp.
in exchange for $6.5 million cash ($5.5 million paid at closing, $500,000 paid
on March 1, 1995, and an additional payment of $500,000 due in 1996).
Likewise, on August 31, 1994, the Company acquired 100% of the outstanding
stock of Cognitive and certain technology rights in exchange for $10 million in
cash ($7.2 million paid at closing, $248,000 paid 70 days after close, and
additional payments of $500,000 each due in 1995 through 1999). Also, the
Company is required to make additional payments, not to exceed an aggregate of
$3 million, to the former shareholder of Cognitive based upon post acquisition
net sales of a specified Cognitive product line. (See Note 3 of notes to
consolidated financial statements included herein).
The Company continues to evaluate potential acquisitions of businesses that
would complement the Company's existing businesses and product lines, and any
such acquisitions could require the use of the Company's cash resources and/or
additional borrowings.
FINANCING ACTIVITIES
The Company's major financing activities to date have been the principal
repayments on long-term debt. As of March 31, 1995, the Company had $3.8
million in debt outstanding of which the current portion was approximately $1.3
million. This long-term debt includes approximately $500,000 payable to the
former owners of Stadia in one installment due in 1996 and $2.5 million payable
to the former owner of Cognitive in annual installments of $500,000 each due in
1995 through 1999.
The Company expects that current cash balances and cash generated internally
will adequately fund the Company's anticipated cash needs in 1995. In
addition, on August 15, 1994, the Company entered into a $6.5 million line of
credit agreement which includes a subfeature to issue standby and/or commercial
letters of credit not to exceed $1.5 million. The outstanding principal
balance of the line of credit shall bear interest at a rate per annum equal to
the prime rate in effect from time to time. As of March 31, 1995 no draws had
been made against this line of credit.
PAGE 7
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PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1995 Annual Meeting of the Shareholders of DH Technology,
Inc. was held at the Sheraton Grand Hotel on Harbor Island,
San Diego, California, 92101, on April 19, 1995, at 10:00 a.m.
(the "Annual Meeting").
(b) At the Annual Meeting, the following five persons were elected
to the Company's Board of Directors, constituting all members
of the Board of Directors:
<TABLE>
<CAPTION>
No. of Votes
-----------------------------------
Withheld
or Broker
Nominee Cast For Against Non-Votes
---------------------- -------- ------- ---------
<S> <C> <C> <C>
William J. Bowers 4,337,912 248,905 0
William H. Gibbs 4,338,412 248,405 0
Bruce G. Klaas 4,338,412 248,405 0
Don M. Lyle 4,338,412 248,405 0
George M. Ryan 4,338,412 248,405 0
</TABLE>
(c) Additional proposals considered at the Annual Meeting are set
forth below, each of which was approved according to the
respective vote of the shareholders:
(1) Ratification and approval of an increase of 250,000
shares of Common Stock issuable under the 1992 Stock
Plan for a total of 982,313 shares.
<TABLE>
<CAPTION>
Cast For Against Abstentions or Broker Non-Votes
-------- ------- -------------------------------
<S> <C> <C>
2,835,571 1,517,056 234,190
</TABLE>
(2) Ratification and approval of the appointment of KPMG
Peat Marwick LLP as the Company's independent
accountants for the current fiscal year.
<TABLE>
<CAPTION>
Cast For Against Abstentions or Broker Non-Votes
-------- ------- -------------------------------
<S> <C> <C>
4,576,327 7,030 3,460
</TABLE>
PAGE 8
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10 Line of Credit Agreement dated August 15,
1994, by and between DH Technology, Inc. and
Wells Fargo Bank.
Exhibit 11 Computation of Net Income Per Share.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the current period.
PAGE 9
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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.
MAY 12, 1994 /s/ Janet W. Shanks
- - - - ------------ -------------------------------------
DATE JANET W. SHANKS, CORPORATE CONTROLLER
(ACTING CHIEF FINANCIAL OFFICER)
PAGE 10
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DH TECHNOLOGY, INC.
EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- - - - ------- -----------
<S> <C>
10.10 LINE OF CREDIT AGREEMENT DATED AUGUST 15,
1994 BY AND BETWEEN DH TECHNOLOGY, INC.
AND WELLS FARGO BANK.
11 COMPUTATION OF NET INCOME PER SHARE
27 FINANCIAL DATA SCHEDULE
</TABLE>
PAGE 11
<PAGE> 1
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of the August 15, 1994, by and
between D H TECHNOLOGY, INC., a California Corporation ("Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described
below (collectively the "Credits"), and Bank has agreed to provide the Credits
to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 15, 1995, not to exceed at any time the aggregate
principal amount of SIX MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($6,500,000.00) ("Line of Credit"), the proceeds of which shall be used for
working capital or to finance the acquisition of the assets or stock of target
companies. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of
<PAGE> 2
Credit Note"), all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to time
during the term of the Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
(c) Letter of Credit Subfeature. As a subfeature under the Line
of Credit, Bank agrees from time to time up to and including August 15, 1995,
to issue standby and/or commercial letters of credit for the account of
Borrower and in favor of C Y Tech or other suppliers to finance Borrower's
importation of inventory (each, a "Letter of Credit" and collectively, "Letters
of Credit"); provided however, that the form and substance of each Letter of
Credit shall be subject to approval by Bank, in its sole discretion; and
provided further, that the aggregate undrawn amount of all outstanding Letters
of Credit shall not at any time exceed ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000.00). Each Letter of Credit shall be issued for a term not
to exceed three hundred sixty-five (365) days, as designated by Borrower;
provided however, that no Letter of Credit shall have an expiration date
subsequent to August 15, 1995. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
advances thereunder.
-2-
<PAGE> 3
Each Letter of Credit shall be subject to the additional terms and conditions
of the Letter of Credit Agreement and related documents, if any, required by
Bank in connection with the issuance thereof (each, a "Letter of Credit
Agreement" and collectively, "Letter of Credit Agreements"). Each draft paid
by Bank under a Letter of Credit shall be deemed an advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however,
that if the Line of Credit is not available, for any reason whatsoever, at the
time any draft is paid by Bank, or if advances are not available under the Line
of Credit at such time due to any limitation on borrowings set forth herein,
then the full amount of such draft shall be immediately due and payable,
together with interest thereon, from the date such amount is paid by Bank to
the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit. In such event, Borrower
agrees that Bank, at Bank's sole discretion, may debit Borrower's deposit
account with Bank for the amount of any such draft.
SECTION 1.2. FOREIGN EXCHANGE FACILITY.
(a) Foreign Exchange Facility. Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make available to Borrower
a facility (the "Foreign Exchange Facility") under which Bank, from time to
time up to and including August 15, 1995, will enter into foreign exchange
contracts for the account of Borrower for the purchase and/or sale by Borrower
in United States dollars of foreign currencies
-3-
<PAGE> 4
designated by Borrower; provided however, that the maximum outstanding
principal balance of all such foreign exchange contracts shall not exceed at
any time an aggregate of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100
UNITED STATES DOLLARS (US$3,750,000.00). No foreign exchange contract shall be
executed for a term in excess of six (6) months or for a term which extends
beyond August 15, 1995. Borrower shall have a "Delivery Limit" under the
Foreign Exchange Facility not to exceed at any time the aggregate principal
amount of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 UNITED STATES DOLLARS
(US$750,000.00), which Delivery Limit reflects the maximum principal amount of
Borrower's foreign exchange contracts which may mature during any two (2) day
period. All foreign exchange transactions shall be subject to the additional
terms of a Foreign Exchange Agreement between Borrower and Bank, substantially
in the form of Exhibit B attached hereto ("Foreign Exchange Agreement"), all
terms of which are incorporated herein by this reference.
(b) Settlement. Each foreign exchange contract entered into by
Bank under the Foreign Exchange Facility shall be settled on its maturity date
by Bank's debit to any demand deposit account maintained by Borrower with Bank.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of
Credit shall bear interest at a rate per annum equal to the Prime Rate in effect
from time to time.
The term "Prime Rate" shall mean at any time the rate of
-4-
<PAGE> 5
interest most recently announced within the Bank at its principal office in San
Francisco as its Prime Rate, with the understanding that the Bank's Prime Rate
is one of its base rates and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto, and is
evidenced by the recording thereof in such internal publication or publications
as the Bank may designate. Each change in the rate of interest shall become
effective on the date each Prime Rate change is announced within the Bank.
(b) Computation and Payment. Interest shall be computed on the
basis of a 360-day year, actual days elapsed. Interest shall be payable at the
times and place set forth in the Line of Credit (the "Note").
(c) Letter of Credit Fees. Borrower shall pay to Bank fees upon
the issuance or amendment of each Letter of Credit and upon the payment by Bank
of each draft under any Letter of Credit determined in accordance with Bank's
standard fees and charges in effect at the time any Letter of Credit is issued
or amended or any draft is paid.
SECTION 1.4. PAYMENT OF INTEREST/FEES. Bank shall, and Borrower
hereby authorizes Bank to, debit any demand deposit account of Borrower with
Bank for all payments of interest and fees as they become due on the Line of
Credit. Should, for any reason whatsoever, the funds in any such demand
deposit account be insufficient to pay all interest and/or fees when due,
Borrower shall immediately upon demand remit to Bank the full amount of any
such deficiency.
-5-
<PAGE> 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation duly
organized and existing and in good standing under the laws of the State of
California, and is qualified or licensed to do business, and is in good
standing as a foreign corporation, if applicable, in all jurisdictions in which
such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the
Notes, and each other document, contract and instrument required by or at any
time delivered to Bank in connection with this Agreement (with all of the
foregoing referred to herein collectively as the "Loan Documents") have been
duly authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not
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violate any provision of any law or regulation, or contravene any provision of
Articles of Incorporation or By-Laws of Borrower, or result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings before any governmental authority, arbitrator, court or
administrative agency which may adversely affect the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated December 31, 1993, heretofore delivered by Borrower
to Bank is complete and correct and presents fairly the financial condition of
Borrower; discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting principles,
whether liquidated or unliquidated, fixed or contingent; and has been prepared
in accordance with generally accepted accounting principles consistently
applied. Since the date of such financial statement there has been no material
adverse change in the financial condition of Borrower, nor has Borrower
mortgaged, pledged or granted a security interest or encumbered any of its
assets or properties except as disclosed by Borrower to Bank in writing prior
to the date hereof or as permitted by this Agreement.
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SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
material pending assessments or adjustments of its income tax payable with
respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. To the best of Borrower's
knowledge Borrower possesses, and will hereafter possess, all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade names, trade name rights, patents, patent rights and fictitious
name rights necessary to enable it to conduct the business in which it is now
engaged without conflict with the rights of others.
SECTION 2.9. ERISA. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended from time to time (ERISA); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the
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<PAGE> 9
Plan documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by
Borrower to Bank in writing prior to the date hereof, Borrower is in compliance
in all material respects with all applicable environmental, hazardous waste,
health and safety statutes and regulations governing its operations and/or
properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the Superfund
Amendments and Reauthorization Act of 1986 (SARA), the Federal Resource
Conservation and Recovery Act of 1976, the Federal Toxic Substances Control Act
and the California Health and Safety Code. None of the operations of Borrower
is the subject of any federal or state investigation evaluating whether any
remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
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<PAGE> 10
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The
obligation of Bank to grant any of the Credits is subject to the fulfillment to
Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to counsel of Bank.
(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Corporate Borrowing Resolution (N-28).
(iii) Certificate of Incumbency (C-001).
(iv) Foreign Exchange Agreement (C-140).
(v) Authorization For Foreign Exchange Transactions (C-004).
(c) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, covering risks, in amounts,
issued by companies and in form and substance satisfactory to Bank.
(d) Financial Condition. There shall have been no material
adverse change, as determined by Bank, in the financial condition or business
of Borrower, nor any material decline, as determined by Bank, in the market
value of any collateral required hereunder or a substantial or material portion
of the assets of Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by
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<PAGE> 11
Borrower hereunder shall be subject to the fulfillment to Bank's satisfaction of
each of the following conditions:
(a) Compliance. The representations and warranties contained
herein shall be true on and as of the date of the signing of this Agreement
and on the date of each extension of credit by Bank pursuant hereto, with the
same effect as though such representations and warranties had been made on and
as of each such date, and on each such date, no Event of Default as defined
herein, and no condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of Default, shall have
occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional
documents which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as any of the Credits remain available
or any liabilities (whether direct or contingent, liquidated or unliquidated)
of Borrower to Bank under any of the Loan Documents remain outstanding, and
until payment in full of all obligations of Borrower subject hereto, Borrower
shall:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay the interest and
principal on each of the Loan Documents requiring any such payments at the
times and place and in the manner specified therein, and any fees or other
liabilities due under
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any of the Loan Documents at the times and place and in the manner specified
therein, and immediately upon demand by Bank, the amount by which the
outstanding principal balance of any of the Credits is at any time in excess of
any limitation on borrowings hereunder.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and
records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
coordinated time, to inspect, audit and examine such books and records, to make
copies of the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 150 days after and as of the end of each fiscal
year, an annual audited financial statement of Borrower, prepared by a big six
certified public accountant, to include a balance sheet, income statement,
statement of cash flows, and 10K statement;
(b) not later than 60 days after and as of the end of each quarter,
a financial statement of Borrower, prepared by Borrower, to include a balance
sheet, income statement, statement of cash flows and 10Q statement;
(c) from time to time such other information as Bank may
reasonably request.
SECTION 4.4. COMPLIANCE. Maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; conduct its business
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in an orderly and regular manner; and comply with the provisions of all
documents pursuant to which Borrower is organized and/or which govern
Borrower's continued existence and with the requirements of all laws, rules,
regulations and orders of any governmental authority applicable to Borrower or
its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance
including but not limited to fire, extended coverage, public liability,
property damage and workers' compensation, carried with companies and in
amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's
request schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all Borrower's properties useful or
necessary to Borrower's business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that
Borrower's properties shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when
due any and all indebtedness, obligations, assessments and taxes, both real or
personal and including federal and state income taxes, except such as Borrower
may in good faith contest or as to which a bona fide dispute may arise,
provided provision is made for eventual payment thereof in the event that it is
found that the same is an obligation of Borrower.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank
of any litigation pending or threatened against Borrower in excess of
$500,000.00.
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<PAGE> 14
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices, except to the
extent modified by the following definitions:
(a) Tangible Net Worth (defined as the aggregate of total
stockholders' equity plus subordinated debt less the aggregate of any treasury
stock, any intangible assets and any obligations due from stockholders,
employees and/or affiliates) not at any time less than $35,000,000.00.
(b) Ratio of Total Debt to Tangible Net Worth (defined as the
aggregate of current liabilities and non-current liabilities less subordinated
debt divided by Tangible Net Worth) not at any time greater than 1.0 to 1.0.
(c) Profitable operations on an annual basis, determined as of
fiscal year end.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than
fifteen (15) days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: (a) the occurrence of any Event
of Default, or any condition, event or act which with the giving of notice or
the passage of time or both would constitute such an Event of Default; (b) any
material change in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance
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<PAGE> 15
policy which Borrower is required to maintain, or any uninsured or partially
uninsured loss through liability or property damage, or through fire, theft or
any other cause affecting Borrower's property in excess of an aggregate of
$500,000.00.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as any of the Credits remains
available or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not without the prior written consent of Bank which will
not be unreasonably withheld:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit
to exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except the liabilities of Borrower to Bank and
any other liabilities of Borrower existing as of, and disclosed to Bank prior
to, the date hereof.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge
into or consolidate with any corporation or other entity; make any substantial
change in the nature of Borrower's business;
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<PAGE> 16
nor sell, lease, transfer or otherwise dispose of all or a substantial or
material part of its assets except in the ordinary course of business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security
for, any liabilities or obligations of any other person or entity.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or
advances to or investments in any person or entity.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend
or distribution either in cash, stock or any other property on Borrower's stock
now or hereafter outstanding; nor redeem, retire, repurchase or otherwise
acquire any shares of any class of Borrower's stock now or hereafter
outstanding.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with this Agreement or any representation or warranty made by
Borrower hereunder shall prove to be false,
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<PAGE> 17
incorrect or incomplete in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein (other than those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation,
or any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has incurred
any debt or other liability to any person or entity, including Bank.
(e) Any default in the payment or performance of any obligation,
or any defined event of default, under any of the Loan Documents other than
this Agreement.
(f) The filing of a notice of judgment lien against Borrower; or
the recording of any abstract of judgment against Borrower in any county in
which Borrower has an interest in real property; or the service of a notice of
levy and/or of a writ of attachment or execution, or other like process,
against the assets of Borrower; or the entry of a judgment against Borrower.
(g) Borrower shall become insolvent, or shall suffer or consent to
or apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
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Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time ("Bankruptcy Code"), or
under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to said
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, or Borrower shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition; or
Borrower shall be adjudicated a bankrupt, or an order for relief shall be
entered by any court of competent jurisdiction under said Bankruptcy Code or
any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(h) There shall exist or occur any event or condition which Bank
in good faith believes impairs, or is substantially likely to impair, the
prospect of payment or performance by Borrower of its obligations under any of
the Loan Documents.
(i) The dissolution or liquidation of Borrower; or Borrower, or
any of its directors, stockholders or members, shall take action seeking to
effect the dissolution or liquidation of Borrower.
SECTION 6.2. REMEDIES. If an Event of Default shall occur, (a)
any indebtedness of Borrower under any of the Loan
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Documents, any term thereof to the contrary notwithstanding, shall at Bank's
option and without notice become immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are hereby
expressly waived by Borrower; (b) the obligation, if any, of Bank to permit
further borrowings hereunder shall immediately cease and terminate; and (c)
Bank shall have all rights, powers and remedies available under each of the
Loan Documents, or accorded by law, including without limitation the right to
resort to any or all security for any of the Credits and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law.
All rights, powers and remedies of Bank in connection with each of the Loan
Documents may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of
Bank in exercising any right, power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof or the exercise
of any other right, power or remedy. Any waiver, permit, consent or approval
of any kind by Bank of any breach of
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or default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:
BORROWER: D H TECHNOLOGY, INC.
15070 Avenue of Science
San Diego, CA 92128-3494
Chief Financial Officer
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
San Diego Regional Commercial Banking Office
101 West Broadway, Suite 300
San Diego, CA 92101
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit
in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall
pay to Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel), incurred by Bank in connection
with (a) the enforcement of Bank's rights and/or the collection of any amounts
which become due to Bank under any of the Loan Documents, and (b) the
prosecution or defense of any action in any way
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<PAGE> 21
related to any of the Loan Documents, including without limitation any action
for declaratory relief.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be
binding on and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interest hereunder without the
prior written consent of Bank. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan Documents. In
connection therewith, Bank may disclose all documents and information which Bank
now has or may hereafter acquire relating to any of the Credits, Borrower or its
business, any Guarantor or the business of any Guarantor, or any collateral
required hereunder.
SECTION 7.5. ENTIRE AGREEMENT, AMENDMENT. This
Agreement and each other of the Loan Documents constitute the entire agreement
between Borrower and Bank with respect to the Credits and supersede all prior
negotiations, communications, discussions and correspondence concerning the
subject matter hereof. This Agreement may be amended or modified only by a
written instrument executed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is
made and entered into for the sole protection and benefit of the parties hereto
and their respective permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any direct or indirect
cause of action or
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claim in connection with, this Agreement or any other of the Loan Documents to
which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, except to
the extent that Bank has greater rights or remedies under Federal law, whether
as a national bank or otherwise, in which case such choice of California law
shall not be deemed to deprive Bank of such rights and remedies as may be
available under Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first written above.
WELLS FARGO BANK,
D H TECHNOLOGY, INC. NATIONAL ASSOCIATION
By: /s/ William H. Gibbs By: /s/ Larry S. McDonald
---------------------------- -----------------------
William H. Gibbs Larry S. McDonald
CEO/President Vice President
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<PAGE> 23
WELLS FARGO BANK PROMISSORY NOTE
- - - - -------------------------------------------------------------------------------
$6,500,000.00 San Diego, California
August 15, 1994
FOR VALUE RECEIVED, the undersigned DH TECHNOLOGY, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") at its office at San Diego RCBO, 101 West Broadway, Suite 300, San
Diego, CA 92101, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available
funds, the principal sum of $6,500,000.00, or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement at a rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to the Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that Bank from time to time
establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Each change
in the rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within Bank. The unpaid principal balance of this
obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of any principal payments made hereon by or for
any Borrower, which balance may be endorsed hereon from time to time by the
holder.
Interest accrued on this Note shall be payable on the 15th day of each
month, commencing September 15, 1994. The outstanding principal balance of this
Note shall be due and payable in full on August 15, 1995. Each payment made on
this Note shall be credited first, to any interest then due and second, to the
outstanding principal balance hereof.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
Borrower may from time to time during the term of this Note borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions of this Note and of that certain
Credit Agreement between Borrower and Bank defined below; provided however,
that the total outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above.
Advances hereunder, to the total amount of the principal sum available
hereunder, may be made by the holder at the oral or written request of (i)
WILLIAM GIBBS or JANET SHANKS, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of August 15, 1994, as amended from time to time. Upon the occurrence of any
Event of Default as defined in said Credit Agreement, the holder of this Note,
at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall pay
to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower, the
obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights
or remedies under Federal law, whether as a national bank or otherwise, in
which case such choice of California law shall not be deemed to deprive Bank of
any such rights and remedies as may be available under Federal law.
<PAGE> 24
[WELLS FARGO BANK LETTERHEAD]
Exhibit B page 1 of 3
San Diego Regional
Commercial Banking Office
101 W. Broadway, Suite 300
San Diego, CA 92101
November 15, 1991
Mr. M. Dean Gilliam
DH Technology, Inc.
15070 Avenue of Science
San Diego, California 92128
Dear Dean:
It is anticipated that from time to time your company (the "Customer")
and Wells Fargo Bank, National Association ("Bank"), at the request of
Customer, may enter into foreign exchange contracts for either spot or future
delivery of foreign currencies and/or for options to purchase or sell (i.e.,
trade) foreign currencies. This agreement sets forth the terms and conditions
governing such transactions as follows:
1. Confirmations. Bank will send Customer a confirmation of each
transaction duly requested by Customer and agreed to by Bank. Upon Customer's
receipt of each such confirmation, Customer shall promptly sign and return a
copy of such confirmation to Bank; provided however, that Customer's failure
either to sign or to return any confirmation shall not release Customer from
any of its obligations or liabilities hereunder or with respect to the foreign
exchange transaction described therein.
2. Performance. Should Customer fail fully to perform its obligations
under any foreign exchange contract entered into by Bank with or for the
benefit of Customer as set forth herein on the due date thereof, or to perform
any of Customer's obligations under this agreement, or should Customer breach
any representation or warranty made by Customer to Bank herein, without
limiting Bank's rights and remedies under applicable law: (a) Bank may, in its
sole discretion, cancel any foreign exchange contracts then existing for the
benefit of Customer; (b) Customer shall indemnify Bank for and defend and hold
Bank harmless from and against any and all damages, costs, expenses and losses
that may arise from any such failure or breach, and/or from the exercise of
Bank's rights as aforesaid, including without limitation, all losses resulting
from the liquidation of Bank's positions in the relevant currencies, and all
reasonable legal fees incurred by Bank in pursuance of its rights hereunder;
and (c) Bank may set off and apply against Customer's liability to Bank any
deposits or any other liability
Printed on Recycled Paper
<PAGE> 25
Mr. M. Dean Gilliam
DH Technology, Inc.
November 15, 1991
Page 2
to Customer, irrespective of the due date or nature thereof, and
notwithstanding that such set off may give rise to penalties for early
withdrawal of funds.
3. Cancellation. Bank shall evaluate any request for a trade
hereunder individually, and may at its sole discretion refuse to enter into or
perform any proposed foreign exchange contract, without prejudice to entering
into or performing any other foreign exchange contract with or for the benefit
of Customer. In the event that (a) Customer shall request that Bank cancel or
extend the term of a foreign exchange contract, and (b) Bank, in its sole
discretion, shall agree to such request, Customer shall forthwith reimburse
Bank for any and all damages, costs, expenses and losses that may arise as a
result thereof, including without limitation, all losses resulting from the
liquidation of Bank's position in the relevant currency.
4. Warranties. Each request by Customer that Bank enter into a
foreign exchange contract with or for the benefit of Customer shall be deemed a
representation and warranty by Customer that such transaction is in conformity
with all applicable laws and regulations. Bank is not an investment advisor,
and hereby disclaims all investment advice with respect to any transaction
ordered by Customer pursuant hereto. Customer agrees to take the sole risk of
any and all market fluctuations in any currency traded pursuant to the terms
hereof.
5. Liability. Bank shall not be liable for any losses or damages in
consequence of any present or future laws, regulations or other directives of
any government or of any other event or circumstances beyond its control, or
due to any other actions performed by Bank pursuant to the terms hereof, all
such risks being expressly assumed by Customer, except for the gross negligence
or willful misconduct of Bank. In no event shall Bank be responsible or liable
for any consequential damages resulting from its actions pursuant to this
agreement. The provisions of this paragraph 5 shall survive any termination of
this agreement.
6. Term. This agreement may be terminated in writing by either party,
at which point the obligations of the parties hereto shall end, except for
closing out existing foreign exchange contracts and except as otherwise set
forth herein.
7. Successors and Assigns. This agreement shall be binding on and
inure to the benefit of the respective legal
<PAGE> 26
Mr. M. Dean Gilliam
DH Technology, Inc.
November 15, 1991
Page 3
representatives, successors and assigns of Bank and Customer; provided however,
that Customer may not assign or otherwise transfer any of its rights or
obligations under this agreement or any foreign exchange contract subject
hereto without the prior written consent of Bank.
8. Governing Law. This agreement and all foreign exchange contracts
subject hereto shall be governed by and construed in accordance with the laws
of the State of California applicable to contracts made and to be performed
therein.
Please indicate your acceptance of the terms and conditions contained
herein by signing and dating the enclosed copy and returning it to Bank at the
above address.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Kimberly D. Kramer
--------------------------
Kimberly D. Kramer
Title: Vice President and
Loan Team Leader
Agreed and accepted as of 12/19/91 1991:
-------------------------
DH TECHNOLOGY, INC.
By: /s/ M D Gilliam
--------------------------
Title: CFO
C-140 (Revised 08/90)
<PAGE> 27
WELLS FARGO BANK PROMISSORY NOTE
- - - - -------------------------------------------------------------------------------
Exhibit A
$6,500,000.00 San Diego, California
August 15, 1994
FOR VALUE RECEIVED, the undersigned DH TECHNOLOGY, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") at its office at San Diego RCBO, 101 West Broadway, Suite 300, San
Diego, CA 92101, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available
funds, the principal sum of $6,500,000.00, or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement at a rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to the Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that Bank from time to time
establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Each change
in the rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within Bank. The unpaid principal balance of this
obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of any principal payments made hereon by or for
any Borrower, which balance may be endorsed hereon from time to time by the
holder.
Interest accrued on this Note shall be payable on the 15th day of each
month, commencing September 15, 1994. The outstanding principal balance of this
Note shall be due and payable in full on August 15, 1995. Each payment made on
this Note shall be credited first, to any interest then due and second, to the
outstanding principal balance hereof.
From and after the maturity date of this Note, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, the outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on the basis of a
360-day year, actual days elapsed) equal to 4% above the rate of interest from
time to time applicable to this Note.
Borrower may from time to time during the term of this Note borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions of this Note and of that certain
Credit Agreement between Borrower and Bank defined below; provided however,
that the total outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above.
Advances hereunder, to the total amount of the principal sum available
hereunder, may be made by the holder at the oral or written request of (i)
WILLIAM GIBBS or JANET SHANKS, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of August 15, 1994, as amended from time to time. Upon the occurrence of any
Event of Default as defined in said Credit Agreement, the holder of this Note,
at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall pay
to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
Should more than one person or entity sign this Note as a Borrower, the
obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the
laws of the State of California, except to the extent Bank has greater rights
or remedies under Federal law, whether as a national bank or otherwise, in
which case such choice of California law shall not be deemed to deprive Bank of
any such rights and remedies as may be available under Federal law.
<PAGE> 28
WELLS FARGO BANK LOAN DISBURSEMENT ORDER
- - - - -------------------------------------------------------------------------------
DATE: August 15, 1994
OFFICE: San Diego RCBO, 101 West Broadway Suite 300, San Diego, CA 92101
Wells Fargo Bank, National Association, is hereby authorized to pay the
proceeds of the credit accommodation to the undersigned granted in the
principal amount of $6,500,000.00 to the order of:
_______________________________________________________________________________
NAME AMOUNT
_______________________________________________________________________________
As Requested $
_______________________________________________________________________________
$
_______________________________________________________________________________
$
_______________________________________________________________________________
$
_______________________________________________________________________________
$
_______________________________________________________________________________
$
_______________________________________________________________________________
D H TECHNOLOGY, Inc.
By: /s/ William H. Gibbs
------------------------------
WILLIAM H. GIBBS
CEO/PRESIDENT
<PAGE> 29
WELLS FARGO BANK CORPORATE RESOLUTION: BORROWING
- - - - -------------------------------------------------------------------------------
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
RESOLVED: That this corporation, D H TECHNOLOGY, INC., proposes to
obtain credit from time to time, or has obtained credit from Wells Fargo Bank,
National Association ("Bank").
BE IT FURTHER RESOLVED, that any one of the following officers:
CHIEF EXECUTIVE OFFICER/PRESIDENT OR ACTING CFO/SECRETARY
together with any one of the following officers:
of this corporation be and they are hereby authorized and empowered for and on
behalf of and in the name of this corporation and as its corporate act and
deed:
(a) To borrow money from Bank and to assume any liabilities of any
other person or entity to Bank, in such form and on such terms and conditions
as shall be agreed upon by those authorized above and Bank, and to sign and
deliver such promissory notes and other evidences of indebtedness for money
borrowed or advanced and/or for indebtedness assumed as Bank shall require;
such promissory notes or other evidences of indebtedness may provide that
advances be requested by telephone communication and by any officer, employee
or agent of this corporation so long as the advances are deposited into any
deposit account of this corporation with Bank; this corporation shall be bound
to Bank by, and Bank may rely upon, any communication or act, including
telephone communications, purporting to be done by any officer, employee or
agent of this corporation provided that Bank believes, in good faith, that the
same is done by such person.
(b) To contract for the issuance by Bank of letters of credit, to
discount with Bank notes, acceptances and evidences of indebtedness payable to
or due this corporation, to endorse the same and execute such contracts and
instruments for repayment thereof to Bank as Bank shall require, and to enter
into foreign exchange transactions with or through Bank.
(c) To mortgage, encumber, pledge, convey, grant, assign or otherwise
transfer all or any part of this corporation's real or personal property for
the purpose of securing the payment of any of the promissory notes, contracts,
instruments and other evidences of indebtedness authorized hereby, and to
execute and deliver to Bank such deeds of trust, mortgages, pledge agreements
and/or other security agreements as Bank shall require.
(d) To perform all acts and to execute and deliver all documents
described above and all other contracts and instruments which Bank deems
necessary or convenient to accomplish the purposes of this resolution and/or to
perform or continue the rights, remedies and security interests to be given to
Bank hereunder, including without limitation, any modifications, renewals
and/or extensions of any of this corporation's obligations to Bank, however
evidenced; provided that the aggregate principal amount of all sums borrowed and
credits established pursuant to this resolution shall not at any time exceed
the sum of $7,250,000.00 outstanding and unpaid.
Loans made pursuant to a special resolution and loans made by offices of
Bank other than the office to which this resolution is delivered shall be in
addition to foregoing limitation.
BE IT FURTHER RESOLVED, that the authority hereby conferred is in
addition to that conferred by any other resolution heretofore or hereafter
delivered to Bank and shall continue in full force and effect until Bank shall
have received notice in writing, certified by the Secretary of this
corporation, of the revocation hereof by a resolution duly adopted by the
Board of Directors of this corporation. Any such revocation shall be effective
only as to credit which is extended or committed by Bank, or actions which are
taken by this corporation pursuant to the resolutions contained herein,
subsequent to Bank's receipt of such notice. The authority hereby conferred
shall be deemed retroactive, and any and all acts authorized herein which were
performed prior to the passage of this resolution are hereby approved and
ratified.
SEE REVERSE OF FORM FOR CERTIFICATION
<PAGE> 30
WELLS FARGO BANK CERTIFICATE OF INCUMBENCY
- - - - ------------------------------------------------------------------------------
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
The undersigned, JANET SHANKS, Secretary of D H TECHNOLOGY, INC., a
corporation created and existing under the laws of the State of California,
hereby certifies to Wells Fargo Bank, National Association ("Bank") that the
following named persons are those duly elected officers of this corporation
specified in the Corporate Resolution attached hereto and that the signatures
opposite their names are their true signatures:
<TABLE>
<CAPTION>
Title Name Signature
<S> <C> <C>
CEO/President William H. Gibbs /s/ William H. Gibbs
- - - - -------------------- -------------------- -----------------------
Acting CFO/Secretary Janet W. Shanks /s/ Janet W. Shanks
- - - - -------------------- -------------------- -----------------------
- - - - -------------------- -------------------- -----------------------
- - - - -------------------- -------------------- -----------------------
- - - - -------------------- -------------------- -----------------------
- - - - -------------------- -------------------- -----------------------
</TABLE>
The undersigned further certifies that should any of the above-named
officers change, or should the signature requirements of said Corporate
Resolution change, this corporation shall provide Bank immediately with a new
Certificate of Incumbency. Bank is hereby authorized to rely on this
Certificate until a new Certificate certified by the Secretary of this
corporation is received by Bank.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said corporation as of , 19 .
/s/ Janet W. Shanks
----------------------------------
JANET SHANKS, Secretary
(SEAL)
<PAGE> 31
AUTHORIZATION FOR
FOREIGN EXCHANGE TRANSACTIONS
TO: WELLS FARGO BANK
NATIONAL ASSOCIATION
Effective as of August 15, 1994, Wells Fargo Bank, National Association
("Bank") is authorized to act on the telephone orders for foreign exchange
transactions initiated by, and to accept confirmations for foreign exchange
transactions from, the following individuals on behalf of D H Technology, Inc.
(the "Company").
A. Individuals authorized to execute foreign exchange transactions:
Name (print or type) Signature
1. Teri Weathers /s/ Teri L. Weathers
--------------------------------- ---------------------------------
2. Barbara Sepich /s/ Barbara A. Sepich
--------------------------------- ---------------------------------
3. Janet Shanks /s/ Janet Shanks
--------------------------------- ---------------------------------
4. Bill Gibbs /s/ William Gibbs
--------------------------------- ---------------------------------
B. Individuals authorized to sign foreign exchange confirmations:
Name (print or type) Signature
1. Janet Shanks /s/ Janet Shanks
--------------------------------- ---------------------------------
2. Bill Gibbs /s/ William Gibbs
--------------------------------- ---------------------------------
3. David Ledwell /s/ David Ledwell
--------------------------------- ---------------------------------
4.
--------------------------------- ---------------------------------
Should any designation set forth above change, the Company shall
provide Bank immediately with a new Authorization. Bank is hereby authorized to
rely on the designations set forth in this Authorization until a new
Authorization from the Company, duly executed, is received by Bank.
D H Technology, Inc.
By: /s/ William H. Gibbs
-----------------------------------
William H. Gibbs
CEO/President
<PAGE> 32
WELLS FARGO BANK AUTOMATIC TRANSFER AUTHORIZATION
- - - - ------------------------------------------------------------------------------
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
You are hereby authorized to charge the undersigned's
deposit account number 4771-478559 the following payments and/or fees
as they become due on all commercial loans you have granted, or may
hereafter grant, to the undersigned:
-----
Interest Only XXXXX
-----
-----
Principal Only
-----
-----
Principal and Interest
-----
-----
Fees
-----
This authorization shall remain in full force and effect until
written revocation from the undersigned has been received by Wells
Fargo Bank, National Association at its San Diego RCBO, 101 West
Broadway, Suite 300, San Diego, CA 92121.
Date: August 15, 1994
D H Technology, Inc.
--------------------
By: /s/ William H. Gibbs
---------------------
William H. Gibbs
CEO/President
<PAGE> 1
EXHIBIT 11
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Computation of Net Income Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1994
------ ------
<S> <C> <C>
Primary and fully diluted:*
Average shares outstanding ........................... 5,162 5,122
Net effect of dilutive stock
options and warrants based on
the treasury stock method using
average market price ................................ 299 202
------ ------
Average common and common
equivalent shares outstanding ....................... 5,461 5,324
Net income ........................................... $2,365 $1,806
Per share (primary and fully diluted)
Net income per share ................................. $ .43 $ .34
====== ======
</TABLE>
* There is no significant difference between primary and fully diluted earnings
per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDAGTED STATEMENTS
OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 21,942
<SECURITIES> 4,300
<RECEIVABLES> 14,638
<ALLOWANCES> (1,133)
<INVENTORY> 11,396
<CURRENT-ASSETS> 52,842
<PP&E> 17,165
<DEPRECIATION> (10,304)
<TOTAL-ASSETS> 74,258
<CURRENT-LIABILITIES> 13,143
<BONDS> 2,502
<COMMON> 10,953
0
0
<OTHER-SE> 47,432
<TOTAL-LIABILITY-AND-EQUITY> 74,258
<SALES> 23,255
<TOTAL-REVENUES> 23,255
<CGS> 14,760
<TOTAL-COSTS> 14,760
<OTHER-EXPENSES> 5,046
<LOSS-PROVISION> 116
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> 3,651
<INCOME-TAX> 1,286
<INCOME-CONTINUING> 2,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,365
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
