<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 28, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
NOTE EXCHANGE OFFER
ON
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AXIOHM TRANSACTION SOLUTIONS, INC.
AND OTHER REGISTRANTS
(SEE TABLE OF OTHER REGISTRANTS BELOW)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 3577 94-2917470
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
15070 AVENUE OF SCIENCE
SAN DIEGO, CA 92128
(619) 451-3485
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
--------------------------
WILLIAM H. GIBBS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AXIOHM TRANSACTION SOLUTIONS, INC.
15070 AVENUE OF SCIENCE
SAN DIEGO, CA 92128
(619) 451-3485
(Name, address, including zip code, and telephone number, including area code,
of agent for service for all Registrants)
--------------------------
COPIES TO:
HENRY P. MASSEY, JR., ESQ.
STEVEN L. BERSON, ESQ.
ANDREW J. HIRSCH, ESQ.
ERIC JOHN FINSETH, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF CLASS OF AMOUNT MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER UNIT (1) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
New 9 3/4% Senior Subordinated Notes
due 2007.......................... $120,000,000 100.75% $120,900,000 $36,636.36
New Subsidiary Guarantees of New
9 3/4% Senior Subordinated Notes
due 2007.......................... $120,000,000 None (3) None (3) None (3)
</TABLE>
(1) Based on average of bid price of $100.50 and ask price of $101.00 per
$100.00 principal amount of the Existing Notes at close of business on
Friday, November 21, 1997.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933 as the
market value of the securities to be cancelled in the exchange.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the New Subsidiary Guarantees.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF OTHER REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION
OF I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT INCORPORATION OR IDENTIFICATION
AS SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER
- ------------------------------------- --------------------------- --------------------
<S> <C> <C>
Axiohm Investissements S.A.R.L. France Not Applicable
Axiohm IPB, Inc. Delaware 06-1413894
Cognitive L.L.C. Delaware 33-0778729
Cognitive Solutions, Inc. California 77-0132482
Dardel Technologies E.U.R.L. France Not Applicable
Stadia Colorado Corp. Colorado 84-0599240
</TABLE>
<PAGE>
CROSS REFERENCE SHEET PURSUANT
TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Cover of Registration Statement; Outside Front
Cover Page of Prospectus; Cross Reference Sheet.
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Covers of
Prospectus; Available Information; Documents
Incorporated by Reference.
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Prospectus Summary; Risk Factors; Selected
Historical Consolidated Financial and Other
Data; Unaudited Pro Forma Combined Financial
Information.
4. Terms of the Transaction.......................... Prospectus Summary; Risk Factors; The Exchange
Offer; Description of Notes; Certain Federal
Income Tax Considerations.
5. Pro Forma Financial Information................... Prospectus Summary; Selected Historical
Consolidated Pro Forma Financial and Other
Information; Unaudited Pro Forma Combined
Financial Information.
6. Material Contacts with the Company Being
Acquired........................................ Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters... Not Applicable
8. Interests of Named Experts and Counsel............ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANTS
10. Information with Respect to S-3 Registrants....... Not Applicable
11. Incorporation of Certain Information by
Reference....................................... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants.......................... Available Information; Documents Incorporated by
Reference; Prospectus Summary; Business;
Selected Historical Consolidated Financial and
Other Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Unaudited Pro Forma Combined
Financial Information; Consolidated Financial
Statements.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies......... Not Applicable
16. Information with Respect to S-2 or S-3
Companies....................................... Not Applicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................. Not Applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange
Offer........................................... The Exchange Offer; Management
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. NEITHER THIS PROSPECTUS NOR THE LETTER OF TRANSMITTAL SHALL
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 28, 1997.
PROSPECTUS
$120,000,000
[LOGO]
OFFER TO EXCHANGE
NEW 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 AND
NEW SUBSIDIARY GUARANTEES OF NEW 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 AND
SUBSIDIARY GUARANTEES OF 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED.
------------------------
THE NOTES ARE GUARANTEED BY:
AXIOHM INVESTISSEMENTS S.A.R.L.
AXIOHM IPB, INC.
COGNITIVE L.L.C.
COGNITIVE SOLUTIONS, INC.
DARDEL TECHNOLOGIES E.U.R.L.
STADIA COLORADO CORP.
------------------------
Axiohm Transaction Solutions, Inc., a California corporation formerly named
DH Technology, Inc. (herein the "Company" refers to such corporation both prior
and subsequent to the name change, while "DH" refers to such corporation prior
to the name change), and Axiohm Investissements S.A.R.L., Axiohm IPB, Inc.,
Cognitive L.L.C., Cognitive Solutions, Inc., Dardel Technologies E.U.R.L. and
Stadia Colorado Corp. (collectively the "Guarantors") hereby offer upon the
terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal") (the offering pursuant to the Prospectus together with the Letter
of Transmittal herein the "Exchange Offer") to exchange up to an aggregate
principal amount of $120,000,000 of its New 9 3/4% Senior Subordinated Notes due
2007 (the "New Notes") and new Subsidiary Guarantees (as defined) (herein the
"New Subsidiary Guarantees") by the Guarantors of such New Notes for up to an
aggregate principal amount of $120,000,000 of the Company's outstanding 9 3/4%
Senior Subordinated Notes due 2007 (the "Existing Notes") and the existing
Subsidiary Guarantees (the "Existing Subsidiary Guarantees") by the Guarantors
of such Existing Notes. The terms of the New Notes and New Subsidiary Guarantees
are substantially identical in all material respects to those of the Existing
Notes and Existing Subsidiary Guarantees, respectively, except that the New
Notes (i) will have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and therefore will not be subject to certain
restrictions on transfer applicable to the Existing Notes and (ii) will not be
entitled
CONTINUED ON FOLLOWING PAGE
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED
TO EXISTING HOLDERS ON OR ABOUT , 1997.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH EXISTING HOLDERS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE LETTER OF TRANSMITTAL. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
, 1997
<PAGE>
(CONTINUATION OF COVER PAGE)
to registration or other rights under the Registration Rights Agreement (as
defined) including the provision in the Registration Rights Agreement for
payment of Liquidated Damages (as defined) upon failure by the Company to
consummate the Exchange Offer or the occurrence of certain other events. See
"Description of the Existing Notes." The New Notes and New Subsidiary Guarantees
will be issued pursuant to, and the Holders thereof (the "New Holders") will be
entitled to the benefit of, the Indenture (as defined below) governing the
Existing Notes and Existing Subsidiary Guarantees. In the event that the
Exchange Offer is consummated, any Existing Notes which remain outstanding after
consummation of the Exchange Offer and the New Notes issued in the Exchange
Offer will vote together as a single class for purposes of determining whether
Holders of the requisite percentage in outstanding principal amount of Notes (as
defined below) have taken certain actions or exercised certain rights under the
Indenture. See "Description of New Notes", "The Exchange Offer." Holders of
Existing Notes are referred to herein as "Existing Holders", and Existing
Holders together with New Holders are referred to herein collectively as
"Holders". The New Notes together with the Existing Notes are referred to herein
collectively as the "Notes", and the New Subsidiary Guarantees and the Existing
Subsidiary Guarantees are referred to herein collectively as the "Subsidiary
Guarantees". The Indenture, dated as of October 2, 1997 and as amended and
supplemented to date, among the Company, the Guarantors and the Bank of New
York, as Trustee (the "Trustee"), is hereinafter referred to as the "Indenture".
Capitalized terms followed by the parenthetical remark "(as defined)" and not
defined herein shall have the meanings given them in the Indenture.
The Existing Notes were offered (the "Existing Notes Offering"), and the New
Notes are being offered in connection with the business combination of Axiohm
S.A. and the Company and related transactions (collectively, the "Transactions"
as defined below).
Interest on the Notes will be payable semi-annually on April 1 and October 1
of each year, commencing April 1, 1998.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after October 1, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption. In addition, at any time prior to October 1,
2000, the Company may, in its discretion, redeem up to 35% of the original
aggregate principal amount of the Notes at a redemption price equal to 109.75%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption, with the net proceeds of one
or more Public Equity Offerings (as defined); PROVIDED that at least 65% of the
original aggregate principal amount of the Notes remains outstanding immediately
after each such redemption.
Upon the occurrence of a Change of Control (as defined), the Holders of the
Notes will have the right to require the Company to repurchase their Notes, in
whole or in part, at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of repurchase. See "Description of Notes."
The Notes will be general unsecured obligations of the Company subordinate
in right of payment to all existing and future Senior Debt (as defined) of the
Company. The Notes will be jointly and severally guaranteed on a senior
subordinated basis by the Guarantors. As of September 30, 1997, after giving pro
forma effect to the Transactions, the issuance of the Existing Notes and the
Exchange Offer, the Company and its Subsidiaries (as defined) would have had
$50.0 million of Senior Debt outstanding (exclusive of $35.0 million available
under the New Credit Facility (as defined), which would also be Senior Debt).
See "Capitalization" and "Description of Notes--Subordination".
On October 2, 1997, the Company issued $120.0 million aggregate principal
amount of Existing Notes. The Existing Notes were issued pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. The New Notes are being
offered hereunder in order to satisfy certain obligations of the Company under
the Registration
i
<PAGE>
(CONTINUATION OF COVER PAGE)
Rights Agreement by and among the Company, certain of the Guarantors and Lehman
Brothers Inc. as the initial purchaser (the "Initial Purchaser"). The Exchange
Offer is intended to satisfy the Company's obligations under the Registration
Rights Agreement. Once the Exchange Offer is consummated, the Company generally
will have no further obligations to register any of the Existing Notes not
tendered by Existing Holders for exchange. See "Risk Factors--Consequences to
Non-Tendering Holders of Existing Notes."
The New Notes generally will be issued in the form of Global Notes (as
defined) which will be deposited with, or on behalf of, the Depositary (as
defined) and registered in its name or in the name of a nominee of the
Depositary. Beneficial interests in the Global Notes representing the New Notes
will be shown on, and transfers thereof will be effected through, records
maintained by DTC and its participants. See "Book-Entry; Delivery and Form".
The Company will accept for exchange any and all Existing Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997 (20 business days after effectiveness of the registration
statement on Form S-4 of which this Prospectus is a part (the "Exchange Offer
Registration Statement", which term shall encompass all amendments, exhibits,
annexes and schedules thereto)), unless extended by the Company in its sole
discretion (the "Expiration Date"). The Expiration Date will not in any event be
extended to a date later than , 1997 (30 business days after
effectiveness of the Exchange Offer Registration Statement). Tenders of Existing
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Existing Notes with respect to the Exchange
Offer, the Company will promptly return the Existing Notes to the Holders
thereof. The Exchange Offer is not conditioned upon any minimum principal amount
of Existing Notes being tendered for exchange, but is subject to certain events
and conditions that may be waived by the Company and to the terms and provisions
of the Registration Rights Agreement. The Existing Notes may be tendered in
whole or in part solely in integral multiples of $1,000.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance (the "Staff") of the Securities and
Exchange Commission (the "Commission") as set forth in the Staff's EXXON CAPITAL
HOLDINGS CORPORATION no-action letter (available May 13, 1988) (the "Exxon
Capital No-Action Letter"), MORGAN STANLEY & CO. INCORPORATED no-action letter
(available June 5, 1991) (the "Morgan Stanley No-Action Letter"), SHEARMAN &
STERLING no-action letter (available July 2, 1993) (the "Shearman & Sterling
No-Action Letter"), and other interpretive letters addressed to third parties in
other transactions. However, the Company has not sought its own interpretive
letter addressing such matters and there can be no assurance that the Staff
would make a similar determination with respect to the Exchange Offer as it has
in such interpretive letters to third parties. Based on these interpretations by
the Staff, and subject to the two immediately following sentences, the Company
believes that New Notes issued pursuant to this Exchange Offer in exchange for
Existing Notes may be offered for resale, resold and otherwise transferred by a
Holder thereof (other than a Holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Notes. However, any
Holder of Existing Notes who (i) is an "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act), (ii) does not acquire such New
Notes in the ordinary course of its business, (iii) intends to participate in
the Exchange Offer for the purpose of distributing New Notes, or (iv) is a
broker-dealer who purchased such Existing Notes directly from the Company, (a)
will not be able to rely on the interpretations of the Staff set forth in the
above-mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Existing Notes in the Exchange Offer and (c) must comply with the
registration and
ii
<PAGE>
(CONTINUATION OF COVER PAGE)
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Existing Notes unless such sale is made pursuant
to an exemption from such requirements. In addition, as described below, if any
broker-dealer holds Existing Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Existing Notes for
New Notes (a "Participating Broker-Dealer"), then such Participating
Broker-Dealer may be deemed a statutory "underwriter" within the meaning of the
Securities Act and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes.
Each Holder of Existing Notes who wishes to exchange Existing Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, and (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Existing Notes for its own account as a result
of market-making activities or other trading activities (and not directly from
the Company) and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, such a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the Staff in the interpretive letters referred to
above, the Company believes that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Notes received upon
exchange of such Existing Notes with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect to
the resale of such New Notes. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Notes
for a period of one year following effectiveness of the Exchange Offer
Registration Statement. See "Plan of Distribution." Any Participating
Broker-Dealer who is an affiliate of the Company may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Existing
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend the
sale of New Notes pursuant to this Prospectus until the Company has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be.
The New Notes will be a new issue of securities for which there currently is
no market. Although the Initial Purchaser has informed the Company that it
currently intends to make a market in the New Notes,
iii
<PAGE>
(CONTINUATION OF COVER PAGE)
it is not obligated to do so, and any such market making may be discontinued at
any time without notice. As the Existing Notes were issued and the New Notes are
being issued to a limited number of institutions who typically hold similar
securities for investment, the Company does not expect that an active public
market for the New Notes will develop. Accordingly, there can be no assurance as
to the development, liquidity or maintenance of any market for the New Notes.
The Company does not currently intend to apply for listing of the New Notes on
any securities exchange or for quotation through the Nasdaq Stock Market.
Any Existing Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Indenture (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the Holders of Existing Notes will
continue to be subject to the existing restrictions upon transfer thereof and
the Company will have no further obligation to such Existing Holders (except for
limited instances involving the Initial Purchaser and Existing Holders that are
not eligible to participate in the Exchange Offer) to provide for registration
under the Securities Act of the Existing Notes held by them. To the extent that
Existing Notes are tendered and accepted in the Exchange Prospectus Offer, an
Existing Holder's ability to sell untendered Existing Notes could be adversely
affected. See "Summary--Certain Consequences of a Failure to Exchange Existing
Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF EXISTING NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER.
The Company has agreed to pay all expenses of the Exchange Offer. See "The
Exchange Offer--Fees and Expenses." Each New Note will bear interest from the
most recent date to which interest has been paid or duly provided for on the
Existing Note surrendered in exchange for such New Note or, if no such interest
has been paid or duly provided for on such Existing Note, from October 2, 1997.
Holders of the Existing Notes whose Existing Notes are accepted for exchange
will not receive accrued interest on such Existing Notes for any period from and
after the last Interest Payment Date to which interest has been paid or duly
provided for on such Existing Notes prior to the original issue date of the New
Notes or, if no such interest has been paid or duly provided for, will not
receive any accrued interest on such Existing Notes, and will be deemed to have
waived the right to receive any interest on such Existing Notes accrued from and
after such Interest Payment Date or, if no such interest has been paid or duly
provided for, from and after October 2, 1997.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with this
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTORS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NEW NOTES AND NEW SUBSIDIARY GUARANTEES OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY OF THE NEW NOTES OR NEW SUBSIDIARY GUARANTEES TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER
iv
<PAGE>
(CONTINUATION OF COVER PAGE)
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION WITH
SUCH TRANSACTION.
v
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission the Exchange Offer Registration
Statement on Form S-4 pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, covering the New Notes and New Subsidiary
Guarantees being offered hereby. This Prospectus does not contain all the
information set forth in the Exchange Offer Registration Statement. For further
information with respect to the Company and the Exchange Offer, reference is
made to the Exchange Offer Registration Statement. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are necessarily incomplete. With respect to each such contract,
agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Though the Guarantors are not currently subject to the informational
requirements of the Exchange Act, as a result of the offering of the New
Subsidiary Guarantees they will become subject thereto. The Company will fulfill
the Guarantors' obligations with respect to such requirements by including
information regarding the Guarantors in the periodic reports of the Company.
Periodic reports and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission's principal office
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and the regional offices of the Commission at Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661. Copies of such material can be obtained from the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a website (http://www.sec.gov) that also contains certain
reports and other information filed by the Company. The Common Stock of the
Company is traded on the Nasdaq National Market. Reports, proxy statements and
other information concerning the Company may also be inspected at the offices of
the Nasdaq National Market, Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the Holders and, to the extent permitted
by applicable law or regulation, file with the Commission (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K (if the Company was required to file
such Forms), including in each a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's independent certified public
accountants and (ii) all reports that would be required to be filed on Form 8-K
(if the Company was required to file such reports). In addition, for so long as
any of the Notes remain outstanding, the Company has agreed to make available to
any prospective purchaser of the Notes or beneficial owner of the Notes, in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
ENFORCEMENT OF CIVIL LIABILITIES
Two of the Guarantors, namely Axiohm Investissements S.A.R.L. ("Axiohm
Investissements"), a SOCIETE A RESPONSABILITE LIMITEE, and Dardel Technologies
E.U.R.L. ("Dardel"), an ENTREPRISE UNIPERSONELLE A RESPONSABILITE LIMITEE (all
of which are limited liability entities), are organized under the laws of the
Republic of France. All of the directors (GERANTS) and officers of Axiohm
Investissements and Dardel are non-residents of the U.S., and a substantial
portion of the assets of Axiohm Investissements, Dardel and such persons is
located outside the U.S. As a result, it may not be possible for Holders to
effect services of process within the U.S. upon such individuals or to enforce
against them or against Axiohm Investissements or Dardel judgments of courts of
the U.S. predicated upon the civil liability provisions of the federal
vi
<PAGE>
securities laws of the U.S. If an original action is brought in the Republic of
France, predicated solely upon the U.S. federal securities laws, French courts
may not have the requisite jurisdiction to grant the remedies sought and actions
for enforcement of judgments of U.S. courts rendered against the French persons
referred to above would require such French persons to waive their right under
Article 15 of the French Civil Code to be sued solely in the Republic of France.
The Company believes that no such French persons have waived such right. In
addition, actions in the U.S. under the U.S. federal securities laws or
otherwise could be affected under certain circumstances by the French Law of
July 16, 1980, which may preclude or restrict the obtaining of evidence in the
Republic of France or from French persons in connection with such actions.
vii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNTIL OCTOBER 2, 1997, THE COMPANY OPERATED UNDER
THE NAME DH TECHNOLOGY, INC. ON THAT DATE A SERIES OF TRANSACTIONS WAS COMPLETED
WITH AXIOHM S.A., A FRENCH COMPANY, AND THE SHAREHOLDERS THEREOF IN WHICH AXIOHM
S.A. BECAME A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY, THE SHAREHOLDERS OF AXIOHM
S.A. BECAME THE OWNERS OF APPROXIMATELY 88% OF THE OUTSTANDING COMMON STOCK OF
THE COMPANY, AND THE COMPANY CHANGED ITS NAME TO AXIOHM TRANSACTION SOLUTIONS,
INC. SEE "--THE TRANSACTIONS". UNLESS THE CONTEXT OTHERWISE REQUIRES, AS USED IN
THIS PROSPECTUS THE TERMS "AXIOHM S.A." AND "DH" REFER TO AXIOHM S.A. AND ITS
SUBSIDIARIES, AND TO DH TECHNOLOGY, INC. AND ITS SUBSIDIARIES, RESPECTIVELY, AS
THEY EXISTED PRIOR TO THE TRANSACTIONS, AND THE TERM THE "COMPANY" REFERS TO
AXIOHM TRANSACTION SOLUTIONS, INC. AND ITS SUBSIDIARIES FOLLOWING CONSUMMATION
OF THE TRANSACTIONS.
THE COMPANY
OVERVIEW
The Company believes it is one of the largest non-captive designers,
manufacturers and marketers of transaction printers in the world. The Company
believes it has one of the broadest product lines in the transaction printer
industry and is the only transaction printer manufacturer currently
manufacturing its own thermal and impact printheads. The Company's transaction
printer products are used in retail, financial and commercial transactions to
provide transaction records such as receipts, tickets, register journals, checks
and other documents. In addition to transaction printers, the Company also
designs, manufactures and markets: (i) magnetic stripe and computer chip card
readers (collectively, "card readers") which, similar to transaction printers,
are an integral part of transaction activity; and (ii) bar code printers and
related consumable supplies, which are used for automatic identification and
data collection systems. The Company has sales offices in eight countries,
distributor relationships in 32 countries and manufacturing facilities in four
countries. For the nine months ended September 30, 1997, approximately 79% of
pro forma net sales were derived from North America, 15% from Europe and 6% from
Asia and other markets. For the nine months ended September 30, 1997, the
Company had pro forma net sales of $158.3 million.
The Company sells its products to original equipment manufacturers ("OEMs"),
value added resellers ("VARs"), distributors and end-users. For the nine months
ended September 30, 1997, approximately 70% of the Company's pro forma net sales
were application-specific or customizable products designed for and sold to
OEMs. The Company works closely with its OEM customers during the design stage,
providing engineering and manufacturing expertise to meet its customers'
specific needs. As a result of being a preferred supplier of these
application-specific and customizable products, the Company believes it has
developed strong OEM relationships and has a large installed base of products.
Transaction products are used in numerous applications in three primary
vertical markets: (i) the point-of-sale ("POS") market, which includes
retailers, supermarkets, gas stations, convenience stores and fast food
retailers; (ii) the financial services market, for applications such as
automatic teller machines and cash dispensers (collectively, "ATMs"), money
order machines and bank teller systems; and (iii) the specialty applications
market, for uses in products such as lottery machines, transportation ticketing
machines, pari-mutuel betting machines and information kiosks. The transaction
printer industry is comprised of non-captive manufacturers, such as the Company,
and the internal manufacturing operations of certain OEMs. The Company estimates
that the non-captive market for transaction printers is currently about $1.0
billion. The non-captive transaction printer market is highly fragmented, and
includes many small competitors that have limited product lines. The Company
believes that only a few non-captive manufacturers, such as the Company, have
the design and manufacturing expertise to produce application-specific and
customizable transaction printer products for OEMs. The Company also believes
that larger
<PAGE>
competitors, such as the Company, benefit from a greater diversification of
end-use applications and markets, customers, technology and geography, which
reduces the impact of industry or regional cyclicality.
The Company was created through the combination of the businesses of Axiohm
S.A., a French corporation, and DH, a California corporation, and their
subsidiaries. See "--The Transactions". The Company's principal executive
offices are located at 15070 Avenue of Science, San Diego, California 92128, and
its telephone number is (619) 451-3485.
THE TRANSACTIONS
THE BUSINESS COMBINATION. On August 21, 1997, AX Acquisition Corporation
("AX"), a California corporation and an indirect wholly-owned subsidiary of
Axiohm S.A., completed a tender offer to purchase 7.0 million shares (or
approximately 88% of the outstanding shares) of DH (the "Tender Offer"). The
Tender Offer was made pursuant to the Agreement and Plan of Merger, dated as of
July 14, 1997 (the "Merger Agreement"), among DH, Axiohm S.A. and AX.
THE TENDER FINANCING. The Tender Offer was financed on August 21, 1997,
through the incurrence by AX of $166.2 million of senior indebtedness under a
secured credit facility (the "Tender Credit Facility") and the issuance by
Axiohm IPB, Inc. ("Axiohm IPB"), a Delaware corporation and a wholly-owned
subsidiary of Axiohm S.A., of $24.0 million in liquidation preference of interim
preferred stock (the "Interim Preferred Stock" and, together with the Tender
Credit Facility, the "Tender Financing").
THE EXCHANGE, THE ACQUISITION OF AX AND THE MERGER. On October 2, 1997, AX
acquired all of the outstanding shares of Axiohm S.A. in exchange for 5,518,524
shares of DH Common Stock and $12.2 million in cash (the "Exchange").
Simultaneously with the closing of the Exchange, DH purchased from Axiohm IPB
all of the outstanding shares of capital stock of AX in exchange for the
assumption by DH of certain obligations incurred by AX or AX's shareholders in
connection with the Tender Offer and the Exchange (the "Acquisition of AX").
Immediately after the Exchange and the Acquisition of AX, AX was merged with and
into DH (the "Merger"). As a result of the Exchange, the Acquisition of AX, the
Merger and the Merger Financing (as defined below) (collectively, the
"Transactions"), immediately after the Merger, approximately 85% of DH's
outstanding Common Stock was held by former Axiohm S.A. shareholders and
approximately 15% was held by former public shareholders of DH. Although DH was
the surviving corporation for legal purposes, the Merger was treated as a
purchase of DH by Axiohm S.A. for accounting purposes. The effective date of the
Merger for legal purposes was October 2, 1997. The effective date of the
acquisition of DH for accounting purposes was August 31, 1997. Concurrently with
the Merger, DH changed its name to Axiohm Transaction Solutions, Inc. As a
result of the Transactions, Axiohm Transaction Solutions, Inc. (formerly DH) is
the parent corporation and Axiohm S.A. and its subsidiaries, including Axiohm
IPB, are direct and indirect subsidiaries of Axiohm Transaction Solutions, Inc.
THE MERGER FINANCING. The Company used the proceeds from the Existing Notes
Offering, together with its existing cash of approximately $31.3 million and
borrowings of approximately $57.0 million under a new $85.0 million credit
facility that provides for term loans in the aggregate principal amount of $50.0
million (the "Term Loan Facility"), and revolving loans and letters of credit in
an aggregate available amount of $35.0 million (the "Revolving Credit Facility"
and, together with the Term Loan Facility, the "New Credit Facility"), to: (i)
repay principal and accrued interest under the Tender Credit Facility and redeem
the Interim Preferred Stock at an aggregate redemption price equal to the
liquidation preference of such Interim Preferred Stock plus accrued and unpaid
dividends; (ii) finance the Exchange; and (iii) pay certain fees and expenses
incurred in connection with the Transactions (the application of the proceeds of
the New Credit Facility and the Existing Notes Offering in accordance with the
foregoing and the replacement and termination of the Tender Credit Facility with
the New Credit Facility are hereinafter referred to collectively as the "Merger
Financing"). See "Use of Proceeds."
2
<PAGE>
The following table illustrates the sources and uses of funds in connection
with the closing of the Merger Financing on October 2, 1997:
<TABLE>
<CAPTION>
AMOUNT
---------------------
<S> <C>
(DOLLARS IN
THOUSANDS)
<CAPTION>
SOURCES OF FUNDS
<S> <C>
Existing cash........................................................ $ 31,250
Revolving Credit Facility (1)........................................ 7,000
Term Loan Facility................................................... 50,000
9 3/4% Senior Subordinated Notes due 2007............................ 120,000
--------
Total Sources of Funds......................................... $ 208,250
--------
--------
<CAPTION>
USES OF FUNDS
<S> <C>
Repayment of Tender Credit Facility.................................. $ 166,200
Redemption of Interim Preferred Stock................................ 24,000
Purchase of shares in the Exchange................................... 12,200
Transaction fees and expenses (2).................................... 5,850
--------
Total Uses of Funds............................................ $ 208,250
--------
--------
</TABLE>
- ------------------------
(1) Represents borrowings under the available $35.0 million Revolving Credit
Facility.
(2) Includes accrued interest and dividends on the Tender Financing and the
fees and expenses of the Merger Financing.
3
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
SECURITIES OFFERED ......................... $120,000,000 aggregate principal amount of New
9 3/4% Senior Subordinated Notes due 2007 and
New Subsidiary Guarantees of New 9 3/4% Senior
Subordinated Notes due 2007.
THE EXCHANGE OFFER ......................... $1,000 principal amount of the New Notes (and
New Subsidiary Guarantees of such amount) in
exchange for each $1,000 principal amount of
Existing Notes (and Existing Subsidiary
Guarantees of such amount). As of the date
hereof, $120,000,000 aggregate principal
amount of Existing Notes are outstanding. The
Company will issue the New Notes to New
Holders on or promptly after the Expiration
Date.
Based on an interpretation by the Staff set
forth in no-action letters issued to third
parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in
exchange for Existing Notes may be offered for
resale, resold and otherwise transferred by
any Holder thereof (other than any such Holder
which is an affiliate of the Company or is a
broker-dealer which acquired such Existing
Notes directly from the Company) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such New Notes
are acquired in the ordinary course of such
Holder's business and that such Holder does
not intend to participate and has no
arrangement or understanding with any person
to participate in the distribution of such New
Notes. Each Participating Broker-Dealer that
acquired such Existing Notes as a result of
market making or other trading activity and
that receives New Notes for its own account
pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes. See "Plan of Distribution."
Any Existing Holder who (i) is an affiliate of
the Company, (ii) does not acquire such New
Notes in the ordinary course of its business,
(iii) tenders in the Exchange Offer with the
intention to participate, or for the purpose
of participating, in a distribution of the New
Notes, or (iv) is a broker-dealer which
acquired such Existing Notes directly from the
Company, could not rely on the position of the
Staff enunciated in the Exxon Capital
No-Action Letter, the Morgan Stanley No-Action
Letter or similar no-action letters and, in
the absence of an exemption
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
therefrom, must comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with the resale
of the New Notes. Failure to comply with such
requirements in such instance may result in
such Holder incurring liability under the
Securities Act for which the Holder is not
indemnified by the Company.
No federal or state regulatory requirements
must be complied with or approval obtained in
connection with the Exchange Offer, other than
registration requirements under the Securities
Act.
EXPIRATION DATE ............................ 5:00 p.m., New York City time, on ,
1997 (20 business days after effectiveness of
the Exchange Offer Registration Statement),
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case
the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
INTEREST ON THE NEW NOTES AND THE EXISTING
NOTES .................................... Each New Note will bear interest from the most
recent date to which interest has been paid or
duly provided for on the Existing Note
surrendered in exchange for such New Note or,
if no such interest has been paid or duly
provided for on such Existing Note, from
October 2, 1997. Holders of the Existing Notes
whose Existing Notes are accepted for exchange
will not receive accrued interest on such
Existing Notes for any period from and after
the last Interest Payment Date to which
interest has been paid or duly provided for on
such Existing Notes prior to the original
issue date of the New Notes or, if no such
interest has been paid or duly provided for,
will not receive any accrued interest on such
Existing Notes, and will be deemed to have
waived the right to receive any interest on
such Existing Notes accrued from and after
such Interest Payment Date or, if no such
interest has been paid or duly provided for,
from and after October 2, 1997.
CONDITIONS TO THE EXCHANGE OFFER ........... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange
Offer--Conditions."
PROCEDURES FOR TENDERING EXISTING NOTES .... Each Existing Holder wishing to accept the
Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver the Letter of
Transmittal, or such facsimile, together with
the Existing Notes and any other
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
required documentation to the Exchange Agent
(as defined) at the address set forth in the
Letter of Transmittal. Persons holding
Existing Notes through the Depositary
(initially the Depository Trust Company
("DTC")) and wishing to accept the Exchange
Offer must do so pursuant to DTC's Automated
Tender Offer Program ("ATOP"), by which each
tendering participant will agree to be bound
by the Letter of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each Existing Holder will
represent to the Company that, among other
things, the Existing Holder or the person
receiving such New Notes, whether or not such
person is the Existing Holder, is acquiring
the New Notes in the ordinary course of
business and that neither the Existing Holder
nor any such other person has any arrangement
or understanding with any person to
participate in the distribution of such New
Notes within the meaning of the Securities
Act.
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS ... Any beneficial owner whose Existing Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered Holder promptly and
instruct such registered Holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Existing Notes,
either make appropriate arrangements to
register ownership of the Existing Notes in
such owner's name or obtain a properly
completed bond power from the registered
Holder. The transfer of registered ownership
may take considerable time.
GUARANTEED DELIVERY PROCEDURES ............. Existing Holders who wish to tender their
Existing Notes and whose Existing Notes are
not immediately available or who cannot
deliver their Existing Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration
Date must tender their Existing Notes
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS .......................... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date pursuant to the procedures
described under "The Exchange
Offer--Withdrawals of Tenders."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
ACCEPTANCE OF EXISTING NOTES AND DELIVERY OF
NEW NOTES ................................ The Company will accept for exchange any and
all Existing Notes that are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .... The exchange of the New Notes for the Existing
Notes pursuant to the Exchange Offer should
not be taxable to the Holders thereof for
federal income tax purposes. See "Certain
Federal Income Tax Consequences."
EFFECT ON HOLDERS OF EXISTING NOTES ........ As a result of the making of this Exchange
Offer, the Company will have fulfilled certain
of its obligations under the Registration
Rights Agreement, and Existing Holders who do
not tender their Existing Notes, except for
limited instances involving the Initial
Purchaser and Existing Holders that are not
eligible to participate in the Exchange Offer,
will not have any further registration rights
under the Registration Rights Agreement or
otherwise. See "The Exchange Offer--Purposes
and Effect of Exchange Offer." Such Existing
Holders will continue to hold the untendered
Existing Notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Indenture, except
to the extent such rights or limitations, by
their terms, terminate or cease to have
further effectiveness as a result of the
Exchange Offer. All untendered Existing Notes
will continue to be subject to certain
restrictions on transfer. Accordingly, if any
Existing Notes are tendered and accepted in
the Exchange Offer, the trading market for the
untendered Existing Notes could be adversely
affected.
EXCHANGE AGENT ............................. The Bank of New York.
</TABLE>
7
<PAGE>
SUMMARY OF TERMS OF NEW NOTES
The form and terms of the New Notes are the same as the form and terms of
the Existing Notes (which they replace) except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (ii) the Holders of New Notes, except for
limited instances involving the Initial Purchaser and certain Holders that are
not eligible to participate in the Exchange Offer, will not be entitled to
further registration rights under the Registration Rights Agreement, which
rights will be satisfied when the Exchange Offer is consummated, and will not be
entitled to any payments of Liquidated Damages for failure to satisfy such
rights. The New Notes will evidence the same debt as the Existing Notes and will
be entitled to the benefits of the Indenture. See "Description of Notes."
<TABLE>
<S> <C>
SECURITIES OFFERED: ........................ $120,000,000 aggregate principal amount of New
9 3/4% Senior Subordinated Notes due 2007 and
New Subsidiary Guarantees thereof.
INTEREST PAYMENT DATES: .................... April 1 and October 1 of each year, commencing
April 1, 1998, or if any such day is not a
Business Day (as defined), on the next
succeeding Business Day (each an "Interest
Payment Date").
MATURITY DATE: ............................. October 1, 2007.
MANDATORY REDEMPTION: ...................... The Company is not required to make mandatory
redemption or sinking fund payments with
respect to the Notes.
OPTIONAL REDEMPTION: ....................... The Notes are redeemable at the option of the
Company, in whole or in part, at any time on
or after October 1, 2002 at the redemption
prices set forth herein plus accrued and
unpaid interest and Liquidated Damages, if
any, thereon to the date of redemption. In
addition, at any time prior to October 1,
2000, the Company may, in its discretion,
redeem up to 35% of the original aggregate
principal amount of Notes at a redemption
price of 109.75% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
date of redemption, with the net proceeds of
one or more Public Equity Offerings; PROVIDED
that at least 65% of the original aggregate
principal amount of the Notes remains
outstanding immediately after each such
redemption. See "Description of
Notes--Optional Redemption."
CHANGE OF CONTROL: ......................... Upon the occurrence of a Change of Control,
the holders of the Notes will have the right
to require the Company to repurchase their
Notes, in whole or in part, at a price equal
to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
date of repurchase. See "Description of
Notes-- Optional Redemption" and "Description
of Notes-- Repurchase at the Option of
Holders--Change of Control."
RANKING: ................................... The Notes are general unsecured obligations of
the Company subordinate in right of payment to
all
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
existing and future Senior Debt of the
Company. At September 30, 1997, after giving
pro forma effect to the Transactions, the
Existing Notes Offering and the Exchange
Offer, the Company and its Subsidiaries would
have had $46.2 million of Senior Debt
outstanding (exclusive of $35.0 million
available under the New Credit Facility which
would also be Senior Debt). See
"Capitalization" and "Description of
Notes--Subordination."
SUBSIDIARY GUARANTEES: ..................... The Company's payment obligations under the
New Notes will be, and the Existing Notes
remaining outstanding after the Exchange Offer
will continue to be, jointly and severally
guaranteed on a senior subordinated basis by
the Guarantors. The Subsidiary Guarantees are
subordinated in right of payment to all
existing and future Senior Debt of the
Guarantors, including the Guarantors'
guarantees of the Company's obligations under
the New Credit Facility. See "Description of
Notes--Subsidiary Guarantees."
CERTAIN COVENANTS: ......................... The Indenture pursuant to which the New Notes
will be, and the Existing Notes were, issued
contains certain covenants that, among other
things, limit the ability of the Company and
its Restricted Subsidiaries (as defined) to:
(i) incur additional Indebtedness (as defined)
and issue preferred stock; (ii) pay dividends
or make certain other restricted payments;
(iii) enter into transactions with affiliates;
(iv) make certain asset dispositions; (v)
merge or consolidate with, or transfer
substantially all of its assets to another
Person (as defined); (vi) encumber assets
under certain circumstances; (vii) restrict
dividends and other payments from Restricted
Subsidiaries; (viii) issue Capital Stock (as
defined) of wholly-owned subsidiaries; or (ix)
engage in certain business activities. See
"Description of Notes-- Certain Covenants." In
addition, under certain circumstances, the
Company will be required to offer to
repurchase the Notes at a price equal to 100%
of the aggregate principal amount thereof,
plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
date of repurchase, with the proceeds of
certain Asset Sales (as defined). See
"Description of Notes--Repurchase at the
Option of Holders-- Asset Sales."
TRANSFER RESTRICTIONS: ..................... For restrictions on transfer of the New Notes,
see "The Exchange Offer--Resale of New Notes".
</TABLE>
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH A DECISION TO EXCHANGE EXISTING NOTES FOR NEW NOTES, SEE "RISK FACTORS."
9
<PAGE>
UNAUDITED SUMMARY PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The Unaudited Summary Pro Forma Condensed Combined Financial Data set forth
below should be read in conjunction with the Unaudited Pro Forma Combined
Financial Information included elsewhere herein, and is based on the historical
financial statements of Axiohm Transaction Solutions, Inc. and DH after giving
effect to the purchase method of accounting and other adjustments relating to
the Transactions (exclusive of the effect of the Tender Financing) and after
giving effect to the Exchange Offer. The unaudited summary pro forma statement
of operations data give effect to the Transactions (exclusive of the effect of
the Tender Financing) and to the Exchange Offer as if each had been consummated
on January 1, 1996 for the fiscal year ended December 31, 1996 and on January 1,
1997 for the nine months ended September 30, 1997. The Unaudited Pro Forma
Combined Statement of Operations for the nine months ended September 30, 1997
are based on the historical financial statements of Axiohm Transaction
Solutions, Inc. for the nine months ended September 30, 1997 and the historical
financial statements of DH for the period from January 1, 1997 through August
31, 1997 (the effective date of the Transactions for accounting purposes). The
unaudited summary pro forma balance sheet data gives effect to the Transactions
(exclusive of the effect of the Tender Financing) and to the Exchange Offer as
if each had been consummated on September 30, 1997. See "--The Transactions."
The Unaudited Summary Pro Forma Condensed Combined Financial Data is
intended for informational purposes only and is not necessarily indicative of
the future financial position or results of operations of the Company had the
Transactions and the Exchange Offer described above occurred on the indicated
dates or been in effect for the periods presented. The Unaudited Summary Pro
Forma Condensed Combined Financial Data should be read in conjunction with, and
is qualified in its entirety by, the Unaudited Pro Forma Combined Financial
Information and the historical consolidated financial statements of Axiohm
Transaction Solutions, Inc. and DH, including in each case, the related notes
thereto, included elsewhere herein, and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AXIOHM TRANSACTION SOLUTIONS, INC.
------------------------------------
FISCAL YEAR
ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
---------------- ------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales............................................................... $ 211,086 $ 158,289
Cost of goods sold...................................................... 141,237 106,451
-------- --------
Gross profit............................................................ 69,849 51,838
Selling, general and administrative expenses............................ 26,220 23,437
Research and development expenses....................................... 12,453 10,126
Amortization of goodwill................................................ 28,205 21,014
In-process technology, acquisition and other charges.................... -- 62,121
-------- --------
Income (loss) from operations........................................... $ 2,971 $ (64,860)
-------- --------
-------- --------
OTHER DATA:
Ratio of earnings to fixed charges (1).................................. -- --
</TABLE>
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<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1997
----------------
<S> <C>
BALANCE SHEET DATA:
Total assets.................................................................................... $ 191,906
Total debt (2).................................................................................. 172,452
Shareholders' equity (deficit).................................................................. (24,573)
</TABLE>
- ------------------------
(1) For purposes of this computation, earnings consist of income (loss) before
taxes plus fixed charges. Income before taxes is stated after expensing
amortization of goodwill, depreciation and other non-cash charges. Fixed
charges consist of interest on indebtedness plus that portion of lease
rental expense representative of the interest factor. For the fiscal year
ended December 31, 1996 and the nine months ended September 30, 1997,
earnings before fixed charges were insufficient to cover fixed charges by
approximately $13.3 million and $78.9 million, respectively.
(2) Total debt includes capital lease obligations.
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RISK FACTORS
HOLDERS OF EXISTING NOTES SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET
FORTH BELOW, AS WELL AS THE OTHER INFORMATION APPEARING IN THIS PROSPECTUS,
BEFORE TENDERING ANY EXISTING NOTES FOR EXCHANGE INTO NEW NOTES. CERTAIN MATTERS
SET FORTH BELOW ALSO APPLY TO THE EXISTING NOTES AND WILL CONTINUE TO APPLY TO
ANY EXISTING NOTES REMAINING OUTSTANDING AFTER THE EXCHANGE OFFER.
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT,
INCLUDING, WITHOUT LIMITATION, STATEMENTS THAT INCLUDE THE WORDS "BELIEVES,"
"EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS AND STATEMENTS RELATING TO
ANTICIPATED COST SAVINGS FOLLOWING THE MERGER, THE COMPANY'S STRATEGIC PLANS,
CAPITAL EXPENDITURES, INDUSTRY TRENDS AND PROSPECTS AND THE COMPANY'S FINANCIAL
POSITION. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT ITS
PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS
ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH PLANS, INTENTIONS OR
EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ARE SET FORTH BELOW AND
ELSEWHERE IN THE PROSPECTUS INCLUDING, WITHOUT LIMITATION, UNDER THE CAPTIONS
"PROSPECTUS SUMMARY," "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS."
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company is, and will continue to be, highly leveraged. On September 30,
1997, after giving pro forma effect to the Transactions, the Company's total
debt would have been $172.5 million and the Company would have had a
stockholders' deficit of $24.6 million. See "Capitalization" and "Selected
Historical Consolidated Financial and Other Data" and "Unaudited Summary Pro
Forma Condensed Combined Financial Data." The Company would also have had
borrowing availability under the New Credit Facility of $35.0 million, subject
to the borrowing conditions contained therein. For the year ended December 31,
1996 and the nine months ended September 30, 1997, after giving pro forma effect
to the Transactions as if they had occurred on January 1, 1996 and 1997,
respectively, income (loss) before income taxes and fixed charges would have
been insufficient to cover fixed charges by $14.5 million and $78.9 million,
respectively.
The Company's ability to make scheduled payments of principal of, or to pay
the premium, if any, interest or Liquidated Damages, if any, thereon, or to
refinance its indebtedness (including the Notes), or to fund planned capital
expenditures, will depend upon its future performance, which, in turn, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond its control. There can be no assurance that the
Company's business will generate cash flow at or above anticipated levels or
that the Company will be able to borrow funds under the New Credit Facility in
an amount sufficient to enable the Company to service its indebtedness,
including the Notes, or make anticipated capital expenditures. If the Company is
unable to generate sufficient cash flow from operations or to borrow sufficient
funds in the future to service its debt, it may be required to sell assets,
reduce capital expenditures, refinance all or a portion of its existing
indebtedness (including the Notes) or obtain additional financing. There can be
no assurance that any such refinancing would be available on commercially
reasonable terms, or at all, or that any additional financing could be obtained,
particularly in view of the Company's high level of indebtedness, the
restrictions on the Company's ability to incur additional indebtedness under the
New Credit Facility and the Indenture, and the fact that substantially all of
the Company's and its Subsidiaries' assets have been pledged to secure
obligations under the New Credit Facility.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including but not limited to: (i) making
it more difficult for the Company to satisfy its obligations
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with respect to the Notes; (ii) increasing the Company's vulnerability to
general adverse economic and industry conditions; (iii) limiting the Company's
ability to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements; (iv) requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital, capital
expenditures or other general corporate requirements; (v) limiting the Company's
flexibility in planning for, or reacting to, changes in its business and the
industry in which it competes; and (vi) placing the Company at a competitive
disadvantage vis-a-vis less leveraged or better capitalized competitors. In
addition, the Indenture and the New Credit Facility contain financial and other
restrictive covenants that limit, among other things, the ability of the Company
to borrow additional funds. Failure by the Company to comply with such covenants
could result in events of default under the Indenture and the New Credit
Facility which, if not cured or waived, could permit the indebtedness thereunder
to be accelerated which would have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the degree
to which the Company is leveraged could prevent it from repurchasing all of the
Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Certain Indebtedness--New Credit Facility" and "Description of
Notes--Repurchase at the Option of Holders--Change of Control."
SUBORDINATION AND RANKING OF THE NOTES
The Notes are general unsecured obligations of the Company subordinate in
right of payment to all existing and future Senior Debt of the Company,
including all indebtedness under the New Credit Facility and effectively
subordinate to all secured indebtedness of the Company and its Subsidiaries. The
New Credit Facility is secured by a first priority Lien (as defined) upon all of
the capital stock of the Company's Subsidiaries (provided that no lien has been
granted on the assets of Foreign Subsidiaries (as defined) and no capital stock
of Foreign Subsidiaries has been pledged to the extent that the granting of such
lien or the making of such pledge would result in adverse United States federal
income tax consequences to the Company or would violate applicable law). In
addition, the Notes have been guaranteed by the Subsidiary Guarantees which are
subordinated in right of payment to all existing and future Senior Debt of the
Guarantors, including the Guarantors' obligations under their respective
guarantees of the New Credit Facility. By reason of such subordination, in the
event of an insolvency, liquidation, reorganization, dissolution or other
winding-up of the Company, the Senior Debt must be paid in full before the
principal of, and premium, if any, interest and Liquidated Damages, if any, on
the Notes may be paid. In the event of a bankruptcy, liquidation or
reorganization of the Company, holders of the Notes will participate ratably
with all holders of subordinated indebtedness of the Company that is deemed to
be of the same class as the Notes, based upon respective amounts owed to each
holder or creditor, in the remaining assets of the Company. If any of the
foregoing events should occur, there can be no assurance that there would be
sufficient assets to pay amounts due on the Notes. In addition, the Indenture
provides that no payment with respect to the Notes may be made in the event of a
payment default with respect to Senior Debt under certain circumstances and the
holders of Designated Senior Debt (as defined) will be entitled to block
payments with respect to the Notes in the event of a nonpayment default on
Designated Senior Debt. At September 30, 1997, on a pro forma basis after giving
effect to the Transactions, the Company and its Subsidiaries would have had
approximately $46.2 million of Senior Debt outstanding (exclusive of an unused
availability of up to $35.0 million under the New Credit Facility that would
also constitute Senior Debt). The Indenture under which the Notes were issued
permits the Company to incur additional indebtedness if certain conditions are
met. See "Capitalization," "Description of Certain Indebtedness-- New Credit
Facility" and "Description of Notes--Certain Covenants."
RESTRICTIVE LOAN COVENANTS
The Indenture contains covenants that restrict, among other things, the
ability of the Company to incur additional indebtedness, pay dividends or make
certain other Restricted Payments (as defined), enter
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<PAGE>
into transactions with affiliates, allow its Subsidiaries to make certain
payments, make certain asset dispositions, merge or consolidate with, or
transfer substantially all of its assets to another Person, encumber assets
under certain circumstances, restrict dividends and other payments from
Subsidiaries, issue Capital Stock of wholly-owned Subsidiaries, engage in
certain business activities, or engage in certain change of control
transactions. In addition, the Credit Agreement (as defined) evidencing the New
Credit Facility contains other and more restrictive covenants and prohibits the
Company from prepaying certain of its indebtedness, including the Notes. Under
the Credit Agreement, the Company is also required to maintain specified
financial covenants, including maximum capital expenditure limits, minimum
EBITDA, a minimum fixed charge coverage ratio and a maximum leverage ratio (each
as defined). The failure by the Company to maintain such financial covenants or
to comply with the restrictions contained in the Credit Agreement or the
Indenture could result in a default thereunder, which in turn could cause such
indebtedness (and by reason of cross-default provisions, other indebtedness) to
become immediately due and payable. No assurance can be given that the Company's
future operating results will be sufficient to enable compliance with such
covenants, or in the event of a default, to remedy such default. See
"Description of Certain Indebtedness--New Credit Facility" and "Description of
Notes--Certain Covenants."
DEPENDENCE ON PRINCIPAL CUSTOMER
In 1994, Axiohm S.A. acquired the transaction printer business of NCR
Corporation ("NCR") and placed the business in Axiohm IPB. At the time of the
acquisition, Axiohm IPB entered into a three-year contract (the "Initial NCR
Contract") with NCR that required NCR to purchase at least 75% of its needs for
transaction printers of the type manufactured by Axiohm IPB at such time (the
"Initial Covered Products"). Since the acquisition, the Company believes that
NCR has purchased over 90% of its requirements for Initial Covered Products from
Axiohm IPB pursuant to the Initial NCR Contract and has also purchased a
substantial number of other products from Axiohm S.A. Total sales to NCR by
Axiohm S.A. represented 52% and 64% of Axiohm S.A.'s revenues for fiscal years
1996 and 1995, respectively. On a pro forma basis for the nine months ended
September 30, 1997, the Company's sales to NCR would have represented 26% of the
Company's total revenue. On September 2, 1997, Axiohm IPB entered into a new
three-year contract with NCR (the "New NCR Contract"). The New NCR Contract does
not obligate NCR to purchase any of its requirements for transaction printers of
the type manufactured by Axiohm IPB, but does provide that NCR and Axiohm IPB
intend and expect that NCR will purchase from Axiohm IPB substantially all of
its requirements for transaction printers of the type manufactured by Axiohm IPB
(the "New Covered Products"). In case there is reason to believe that NCR is
purchasing less than 75% of its requirements for New Covered Products from
Axiohm IPB at any time during the term of the agreement, there is an obligation
for both parties to work together in good faith to eliminate such deficiency.
Similar to the Initial NCR Contract, the New NCR Contract provides that NCR's
purchase commitment is subject to Axiohm IPB's ability to meet NCR's
specifications and requirements for price, performance, quality, service and
delivery with respect to such New Covered Products. Any failure by NCR to
continue purchasing products from the Company at historical levels or the
termination of the New NCR Contract would have a material adverse effect on the
Company's business, financial condition and operating results.
INTEGRATION OF OPERATIONS
The integration of the administrative, finance and manufacturing operations
of Axiohm S.A. and DH, the coordination of their respective sales and marketing
staffs and the implementation of appropriate operational, financial and
management systems and controls will require significant financial resources and
substantial attention from management. The Company has identified certain
potential cost savings related to the business combination effected by the
Transactions. The Company expects to incur significant integration costs through
1999 related to the Merger and the aforementioned potential cost savings. Any
inability of the Company to integrate these companies successfully in a timely
and efficient manner could
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<PAGE>
have a material adverse effect on the Company's business, financial condition
and results of operations and would adversely affect its ability to realize its
planned cost savings or would require additional expenditures to realize such
cost savings. In addition, even if the businesses of Axiohm S.A. and DH are
successfully integrated, no assurance can be given that future expenses can be
reduced by the expected cost savings. The Company's prospects should be
considered in light of the numerous risks commonly encountered in business
combinations. In addition, the historical financial statements and pro forma
financial statements presented in this Prospectus may not necessarily be
indicative of the results that would have been attained had the Company actually
operated on a combined basis.
MANAGEMENT OF FUTURE ACQUISITIONS
Historically, the Company has achieved a portion of its growth through
acquisitions of other businesses, and the Company intends to pursue additional
acquisitions as part of its growth strategy. There are a number of risks
associated with any acquisition, including the substantial time and attention
required from management of the Company in connection with such transactions,
the difficulty of predicting whether the operations will perform as expected and
other problems inherent with any transition of one business organization into
another. There can be no assurance that the Company will be able to consummate
any beneficial acquisitions in the future or that the anticipated benefits of
any acquisition will be realized. If any such acquisitions are consummated, a
failure by the Company to manage any such acquisitions successfully could have a
material adverse effect on the Company's business, financial condition and
results of operations. Additionally, there may be future acquisitions that could
result in potentially dilutive issuances of equity securities, the incurrence of
debt and contingent liabilities and amortization expenses related to goodwill
and other intangible assets associated with the acquisitions of other
businesses, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The Company has a number of significant domestic and foreign competitors for
its transaction printer, bar code printer and card reader products. Many of the
Company's competitors have significantly greater financial, technical and
marketing resources than does the Company. To remain competitive, the Company
believes that it will be required to maintain a high level of technological
expertise and deliver reliable cost-effective products on a timely basis. There
can be no assurance that the Company will have sufficient resources to continue
to make the investments necessary to maintain its competitive position or that
other competitors with substantially greater financial resources, including
other manufacturers of non-transaction printers, will not attempt to enter the
market. A failure to remain competitive would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business-- Competition."
FLUCTUATING OPERATING RESULTS; DEPENDENCE ON OEM SALES
The Company's net sales and operating results may fluctuate in the future as
a result of a number of factors, including: (i) the timing of customer orders;
(ii) the timing of completion of existing customer contracts; (iii) variations
in the Company's sales channels or the mix of products it sells; (iv) changes in
pricing policies by the Company's suppliers; (v) fluctuations in manufacturing
yields; (vi) market acceptance of new and enhanced versions of the Company's
products; (vii) the success or failure of the sales and marketing efforts of the
Company's OEM customers to end-users; (viii) costs associated with integration
of the businesses of Axiohm S.A. and DH, the timing of acquisitions of other
businesses, products and technologies and any associated charges to earnings and
(ix) seasonal factors relating to the Company's business. In particular, the
Company's customers encounter uncertain and changing demand for their products.
If demand falls below customers' forecasts, or if customers do not control their
inventories effectively, they may cancel or reschedule shipments previously
ordered from the Company. The Company
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<PAGE>
has in the past experienced, and the Company may at any time and with minimal
notice in the future experience, cancellations and postponements of orders. Any
such cancellations or postponements of orders could have a material adverse
effect on the Company's business, financial condition and results of operations.
After giving pro forma effect to the Transactions, for the nine months ended
September 30, 1997, approximately 70% of the Company's pro forma net sales were
application-specific or customizable products designed for and sold to OEMs. The
Company's sales volume for any one particular OEM application-specific product
is necessarily tied to the ability of the OEM to successfully market its final
product to the end-user. The successful marketing of the OEM's final products to
end-users is generally outside of the control of the Company and is usually not
dependent on the successful performance of the Company's products. Although the
Company attempts to diversify its OEM sales across a broad spectrum of OEMs and
OEM product lines to mitigate these risks, the timing of large orders for
particular OEM products may have a material adverse effect on the Company's
results of operations for the periods in which such orders are filled. In
addition, if sales by an OEM of products to end-users decline or fall short of
expectations, orders to the Company related to such products may decline or
cease. For example, DH's results of operations in 1996 were favorably impacted
by $15.6 million in sales to a single OEM for a new product. However, the
Company expects sales to this OEM for this product during 1997 to be less than
$1.0 million. The Company's results of operations in the future may be similarly
affected by large OEM orders for new products or by rapid declines in sales of
the OEM's products.
SEASONALITY
Axiohm S.A. has historically experienced, and the Company expects to
experience, lower levels of sales of transaction printers during the period from
mid-November to the end of December. The Company believes that this seasonality
has been caused by the fact that some of its POS customers do not install new
systems in their facilities between Thanksgiving and Christmas, so as not to
disturb their sales flow during this heavy selling period.
TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS
The markets for some of the Company's products are characterized by frequent
refinement and enhancement of existing products and new product introductions
and by declining average selling prices over product life cycles. The Company's
future prospects are highly dependent upon the timely completion and
introduction of new products at competitive price and performance levels and the
acceptance by new markets of the Company's products. The Company also must
respond to current competitors which may choose to increase their presence in
the Company's markets, and to new competitors, which may choose to enter those
markets. In addition, while the Company is not aware of any new fundamental
technologies for transaction printers that are likely to be a significant factor
in the near future, no assurance can be given that the Company's competitors
will not introduce new technologies or technological improvements that will
place the Company at a competitive disadvantage. The failure by the Company to
make timely introduction of new products or respond to competitive threats could
have a material adverse effect on its business, financial condition and results
of operations.
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS
Federal, state, local and foreign regulations impose various controls on the
storage, handling, discharge and disposal of substances used in the Company's
manufacturing processes and on the Company's facilities. The Company believes
that its activities conform to present governmental regulations applicable to
its operations and its current facilities, including those related to
environmental, land use, public utility utilization and fire code matters. There
can be no assurance that such governmental regulations will not in the future
impose the need for additional capital equipment or other process requirements
upon the Company or restrict the Company's ability to expand its operations. The
adoption
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of such measures or any failure by the Company to comply with applicable
environmental and land use regulations or to restrict the discharge of hazardous
substances could subject the Company to future liability or could cause its
manufacturing operations to be curtailed or suspended.
INTERNATIONAL SALES AND OPERATIONS
After giving pro forma effect to the Transactions, for the fiscal year ended
December 31, 1996 and for the nine months ended September 30, 1997,
approximately 23% and 21%, respectively, of the Company's pro forma net sales
were derived from sales to customers outside of the United States. The Company
expects that international sales will continue to represent a significant
portion of its net sales. Although the Company's net sales are denominated in
U.S. dollars, its international business may be affected by changes in demand
resulting from fluctuations in exchange rates as well as by risks such as tariff
regulations and difficulties in obtaining export licenses. In addition,
historically the French operations of Axiohm S.A. have incurred a majority of
Axiohm S.A.'s expenses in French francs, while a substantial majority of Axiohm
S.A.'s revenues have been in U.S. dollars. Any material appreciation in the
French franc relative to the U.S. dollar would, absent any effects associated
with hedging or currency trading transactions, detrimentally affect the
financial performance of the Company's French operations. The Company attempts
to limit its exposure to French franc currency fluctuation compared to the U.S.
dollar by entering into various financial instruments, including forward
exchange contracts, to offset its French franc denominated expenses with
associated U.S. dollar denominated revenue, if, in the opinion of the Company,
to do so would mitigate foreign exchange losses. The forward exchange contracts
the Company has entered into are marked to market, with any exchange gains or
losses and associated costs recognized in the income statement. The Company
cannot predict the effect of exchange rate fluctuations upon future operating
results.
LABOR RELATIONS
As of September 30, 1997, 213 of the Company's employees at its Ithaca, New
York manufacturing facility were represented by a collective bargaining
agreement with the International Association of Machinists and Aerospace
Workers, which expires in July 1999. Although the Company considers its employee
relations generally to be good, a prolonged work stoppage or strike at any
facility could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that upon the expiration of the existing collective bargaining
agreement, a new agreement will be reached without union action or that any such
new agreement will be on terms satisfactory to the Company. See
"Business--Employees."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of senior management, certain of whom would be difficult to
replace. There can be no assurance that the services of such personnel will
continue to be available to the Company. See "Business--Management." The Company
is also dependent upon the continued services of its engineering, research and
development, sales and marketing and manufacturing and service personnel and on
its ability to attract, train and retain highly skilled personnel in each of
these areas. The Company does not have employment agreements with many of its
employees, and there is no assurance that the Company will be able to retain its
key employees. The failure of the Company to hire and retain such key management
and other personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Employees."
VOTING CONTROL OF THE COMPANY
As of the date of this Prospectus, the Company's executive officers and
directors as a group beneficially own approximately 59% of the Company's
outstanding Common Stock and Patrick Dupuy and
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Gilles Gibier, principal shareholders and Co-Chairmen of the Company's Board of
Directors, beneficially own approximately 54% of the Company's outstanding
Common Stock. Accordingly, Mr. Dupuy and Mr. Gibier have the ability to elect a
majority of the Board of Directors of the Company and to determine the outcome
of any other matter submitted to the shareholders for approval, including the
power to determine the outcome of all corporate transactions, such as mergers,
consolidations and the sale of all or substantially all of the assets of the
Company. See "Ownership of Capital Stock."
INTELLECTUAL PROPERTY RIGHTS
The Company holds various U.S. and foreign patents on impact printheads,
transaction printers, magnetic card readers and bar code products and has
applied for additional domestic and foreign patents. The basic technology for
many of the Company's products is based upon these patents and on manufacturing
expertise. There can be no assurance that any issued patents will provide the
Company with competitive advantages or will not be challenged by third parties,
or that the patents of others will not have a material adverse effect on the
Company's ability to do business, or that others will not independently develop
similar products, duplicate the Company's products, or design around the patents
issued to the Company.
The Company has in the past been, and may in the future be, notified that it
may be infringing intellectual property rights possessed by third parties. In
addition, the Company has in the past commenced, and may in the future, commence
litigation against third parties for infringement of the Company's intellectual
property rights. See "Business--Legal Proceedings." Any such litigation
initiated by the Company or by others is, at a minimum, costly, and can divert
the efforts and attention of the Company's management and technical personnel,
which can have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, there can be no assurance that
other infringement claims by third parties or other claims for indemnification
by customers or end-users of the Company's products resulting from infringement
claims will not be asserted in the future or that such assertions, if proven to
be true, will not have a material adverse effect on the Company's business,
financial condition and results of operations. If any such claims are asserted
against the Company, the Company may seek to obtain a license under the third
party's intellectual property rights. There can be no assurance, however, that a
license will be available on commercially reasonable terms, if at all. The
Company could decide, in the alternative, to resort to litigation to challenge
such claims or to design around the patented technology. Such actions could be
costly and would divert the efforts and attention of the Company's management
and technical personnel, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Guarantor, at the time it incurred the indebtedness evidenced by the
Notes or its Subsidiary Guarantee, as the case may be, (i)(a) was or is
insolvent or was rendered insolvent by reason of such occurrence or (b) was or
is engaged in a business or transaction for which the assets remaining with the
Company or such Guarantor constituted unreasonably small capital or (c) intended
or intends to incur, or believed or believes that it would incur, debts beyond
its ability to pay such debts as they mature and (ii) the Company or such
Guarantor received or receives less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, then the Notes and the
Subsidiary Guarantees, could be voided, or claims in respect of the Notes or the
Subsidiary Guarantees could be subordinated to all other debts of the Company or
such Guarantor, as the case may be. In addition, the payment of interest and
principal by the Company pursuant to the Notes or the payment of amounts by a
Guarantor pursuant to a Subsidiary Guarantee could be voided and required to be
returned to the person making such payment, or to a fund for the credit of the
creditors of the Company or such Guarantor, as the case may be.
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The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liabilities on its existing debts,
including contingent liabilities, as they become absolute and mature or (ii) it
could not pay its debts as they become due.
The proceeds of the Merger Financing, including the Existing Notes Offering,
were used, in part, to refinance the Tender Financing and the Exchange, the
effect of which was to reduce the Company's equity and replaced such equity with
indebtedness. However, on the basis of historical financial information, recent
operating history as discussed in "Unaudited Pro Forma Combined Financial
Information," "Selected Historical Consolidated Financial and Other Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other factors, the Company and each Guarantor believes that,
after giving effect to the indebtedness incurred in connection with the Merger
Financing, it did not become insolvent, did not have unreasonably small capital
for the business in which it is engaged and did not incur debts beyond its
ability to pay such debts as they mature. There can be no assurance, however, as
to what standard a court would apply in making such determinations or that a
court would agree with the Company's or such Guarantor's conclusions.
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control, the
Company will be required to make an offer to repurchase all of the Notes issued
and then outstanding under the Indenture at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of repurchase. See "Description of
Notes--Repurchase at the Option of Holders--Change of Control." Any Change of
Control under the Indenture would constitute a default under the New Credit
Facility. Therefore, upon the occurrence of a Change of Control, the lenders
under the New Credit Facility would have the right to accelerate their loans and
the holders of the Notes would have the right to require the Company to
repurchase their Notes. Upon such event, such lenders would be entitled to
receive payment of all outstanding obligations under the New Credit Facility
before the Company may repurchase any of the Notes tendered pursuant to such an
offer. See "Description of Certain Indebtedness--New Credit Facility." If a
Change of Control were to occur, it is unlikely that the Company would be able
to repay all of its obligations under the New Credit Facility and the Notes
unless it could obtain alternate financing. There can be no assurance that the
Company would be able to obtain any such financing on commercially reasonable
terms, or at all, and consequently no assurance can be given that the Company
would be able to repurchase any of the Notes tendered pursuant to such an offer.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Existing Notes are currently owned by a relatively small number of
beneficial owners. The Existing Notes have not been registered under the
Securities Act or any state securities laws and, unless so registered and to the
extent not exchanged for the New Notes, may not be offered or sold except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. Any Existing Notes tendered and exchanged in the Exchange Offer will
reduce the aggregate principal amount of Existing Notes outstanding. Following
the consummation of the Exchange Offer, Existing Holders who did not tender
their Existing Notes generally will not have any further registration rights
under the Registration Rights Agreement, and such Existing Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for such Existing Notes could be adversely affected. The Existing
Notes are currently eligible for sale pursuant to Rule 144A through The Portal
Market of the National Association of Securities Dealers, Inc. ("Portal").
Because the
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Company anticipates that most Existing Holders will elect to exchange such
Existing Notes for New Notes due to the absence of restrictions on the resale of
New Notes under the Securities Act, the Company anticipates that the liquidity
of the market for any Existing Notes remaining after the consummation of the
Exchange Offer may be substantially limited.
The New Notes will constitute a new issue of securities for which there is
currently no active trading market. If the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors including general economic conditions and the
current financial condition, results of operations and business prospects of the
Company. Although the New Notes will generally be permitted to be resold or
otherwise transferred by non-affiliates of the Company without compliance with
the registration and prospectus delivery requirements of the Securities Act, the
Company does not intend to apply for a listing or quotation of the New Notes on
any securities exchange or stock market. The Initial Purchaser has informed the
Company that it currently intends to make a market in the New Notes. However,
the Initial Purchaser is not obligated to do so, and any such market-making may
be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed under the Exchange Act.
Accordingly, there can be no assurance as to the development, liquidity or
maintenance of any market for the New Notes, or, in the case of non-tendering
Existing Holders, the trading market for the Existing Notes following the
Exchange Offer. If no trading market develops or is maintained, New Holders may
experience difficulty in reselling New Notes or may be unable to sell them.
The liquidity of, and trading market for, the Existing Notes or the New
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects for,
the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
Existing Holders who do not exchange their Existing Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Existing Notes as set forth in the legend thereon as a
consequence of the issuance of the Existing Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Existing
Notes may not be offered or sold, unless (i) to a person who the seller
reasonably believes is a qualified institutional buyer in a transaction meeting
the requirements of Rule 144A, in a transaction meeting the requirements of Rule
144A under the Securities Act, (ii) in a transaction occurring outside the
United States to a foreign person, which transaction meets the requirements of
Rule 904 under the Securities Act, (iii) in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (iv) to the Company or (v)
pursuant to an effective registration statement, and, in each case, in
accordance with any applicable securities laws of any State of the United States
or any other applicable jurisdiction. The Company does not currently anticipate
that it will register the Existing Notes under the Securities Act. Based on
interpretations by the Staff, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Existing Notes may be offered for resale, resold or
otherwise transferred by Holders thereof (other than any such Holder which is an
affiliate of the Company or is a broker-dealer which acquired such Existing
Notes directly from the Company) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement with any person to participate in the distribution of
such New Notes. However, the Commission has not considered the Exchange Offer in
the context of a no-action letter addressing such matters and there can be no
assurance that the Staff would make a similar determination with respect to the
Exchange Offer.
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. In
consideration for issuing the New Notes in exchange for Existing Notes as
described in this Prospectus, the Company will receive Existing Notes in like
principal amount. The Existing Notes surrendered in exchange for the New Notes
will be retired and canceled.
The net proceeds from the Existing Notes Offering were used, together with
the Company's then existing cash of approximately $31.3 million and borrowings
of approximately $57.0 million under the New Credit Facility to: (i) repay
principal and accrued interest under the Tender Credit Facility and redeem the
Interim Preferred Stock at an aggregate redemption price equal to the
liquidation value of such Interim Preferred Stock plus accrued and unpaid
dividends; (ii) finance the Exchange; and (iii) pay certain fees and expenses
incurred in connection with the Transactions. See "Prospectus Summary--The
Transactions," "Capitalization," "Unaudited Proforma Combined Financial
Information" and "Description of Certain Indebtedness--New Credit Facility." The
Tender Credit Facility indebtedness which was repaid was incurred, and the
Interim Preferred Stock which was redeemed was issued, to finance the Tender
Offer.
THE EXCHANGE OFFER
The following discussion sets forth or summarizes the material terms of the
Exchange Offer, including those set forth in the Letter of Transmittal
distributed with this Prospectus. This summary is qualified in its entirety by
reference to the full text of the documents underlying the Exchange Offer
(including the Indenture and the Registration Rights Agreement), which are
exhibits to the Exchange Offer Registration Statement.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Existing Notes were sold by the Company to the Initial Purchaser on
October 2, 1997, and were subsequently resold (i) to qualified institutional
buyers pursuant to Rule 144A under the Securities Act, (ii) to institutional
investors that are accredited investors in a manner exempt from registration
under the Securities Act, and (iii) pursuant to offers and sales that occurred
outside the United States within the meaning of Regulation S under the
Securities Act. In connection with the offering of the Existing Notes, the
Company entered into the Registration Rights Agreement, which requires, among
other things, that the Company and the Guarantors (i) file with the Commission a
registration statement under the Securities Act with respect to an issue of new
notes of the Company identical in all material respects (other than transfer
restrictions, registration rights and the requirement, under certain
circumstances, to pay Liquidated Damages) to the Existing Notes (which
obligation has been satisfied by the filing of the Exchange Offer Registration
Statement), (ii) use their best efforts to cause such registration statement to
become effective under the Securities Act and (iii) upon the effectiveness of
that registration statement, offer to the Holders of the Existing Notes the
opportunity to exchange their Existing Notes for a like principal amount of New
Notes, which would be issued without a restrictive legend and may generally be
reoffered and resold by the Holder without restrictions or limitations under the
Securities Act, subject to the terms and conditions of the Exxon Capital, Morgan
Stanley and Shearson & Sterling No-Action Letters. See the discussion set forth
on the cover page of this Prospectus and the information under the captions
"Prospectus Summary--The Exchange Offer" and "--Resale of New Notes."
Any Existing Notes tendered and exchanged in the Exchange Offer will reduce
the aggregate principal amount of Existing Notes outstanding. Following the
consummation of the Exchange Offer, Existing Holders who did not tender their
Existing Notes generally will not have any further registration rights under the
Registration Rights Agreement, and such Existing Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for such Existing Notes could be adversely affected. The Existing Notes
are currently eligible for sale pursuant to Rule 144A through Portal. Because
the Company anticipates that most Existing Holders will elect to exchange such
Existing Notes for New
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Notes due to the absence of restrictions on the resale of New Notes under the
Securities Act, the Company anticipates that the liquidity of the market for any
Existing Notes remaining after the consummation of the Exchange Offer may be
substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Existing
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time
on the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Existing Notes
accepted in the Exchange Offer. Existing Holders may tender some or all of their
Existing Notes pursuant to the Exchange Offer. However, Existing Notes may be
tendered only in integral multiples of $1,000. The form and terms of the New
Notes are the same as the form and terms of the Existing Notes except that (i)
the New Notes have been registered under the Securities Act and hence will not
bear legends restricting the transfer thereof and (ii) New Holders generally
will not be entitled to certain rights under the Registration Rights Agreement
or Liquidated Damages, which rights generally will terminate upon consummation
of the Exchange Offer. The New Notes will evidence the same debt as the Existing
Notes and will be entitled to the benefits of the Indenture.
Existing Holders do not have any appraisal or dissenters' rights under the
California General Corporation Law or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, including Rule 14e-1.
The Company shall be deemed to have accepted validly tendered Existing Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Existing
Holders for the purpose of receiving the New Notes from the Company.
If any tendered Existing Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Existing Notes will be
returned, without expense, to the tendering Existing Holder thereof as promptly
as practicable after the Expiration Date.
Existing Holders who tender Existing Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Existing Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997 (20 business days after the effective date of the Exchange
Offer Registration Statement), unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. In no event will the Expiration
Date be extended to a date more than 30 business days after effectiveness of the
Exchange Offer Registration Statement.
The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Existing Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension
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or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof.
INTEREST ON NEW NOTES
Each New Note will bear interest from the most recent date to which interest
has been paid or duly provided for on the Existing Note surrendered in exchange
for such New Note or, if no such interest has been paid or duly provided for on
such Existing Note, from October 2, 1997. Holders of the Existing Notes whose
Existing Notes are accepted for exchange will not receive accrued interest on
such Existing Notes for any period from and after the last Interest Payment Date
to which interest has been paid or duly provided for on such Existing Notes
prior to the original issue date of the New Notes or, if no such interest has
been paid or duly provided for, will not receive any accrued interest on such
Existing Notes, and will be deemed to have waived the right to receive any
interest on such Existing Notes accrued from and after such Interest Payment
Date or, if no such interest has been paid or duly provided for, from and after
October 2, 1997. Interest on the New Notes will be payable semi-annually on each
April 1 and October 1, commencing on April 1, 1998.
PROCEDURES FOR TENDERING
Only a Holder of Existing Notes may tender such Existing Notes in the
Exchange Offer. To tender in the Exchange Offer, an Existing Holder must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile, together
with the Existing Notes and any other required documents, to the Exchange Agent
so as to be received by the Exchange Agent at the address set forth below prior
to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the
Existing Notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the Company
the representation set forth below in the second paragraph under the heading
"--Resale of New Notes."
The tender by an Existing Holder and the acceptance thereof by the Company
will constitute an agreement between such Existing Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Existing Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Existing Holder promptly and instruct
such registered Existing Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Existing Notes tendered pursuant thereto (i) are signed by the
registered Existing Holder, unless such Existing Holder has completed the box
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entitled "Special Exchange Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) are tendered for the account of an Eligible
Institution. In the event that signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Existing Notes listed therein, such Existing Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered Existing Holder as such registered Existing Holder's name appears on
such Existing Notes, with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Existing Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Existing Notes and withdrawal of tendered
Existing Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Existing Notes not properly tendered or any Existing Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Existing Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Existing Holders
of defects or irregularities with respect to tenders of Existing Notes, none of
the Company, the Exchange Agent or any other person shall incur any liability
for failure to give such notification. Tenders of Existing Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Existing Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Existing Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
TENDER OF EXISTING NOTES HELD THROUGH DTC
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for ATOP, the DTC Automated Tender Offer Program. Accordingly, DTC
participants may, in lieu of physically completing and signing the applicable
Letter of Transmittal and delivering it to the Exchange Agent, electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer
Existing Notes to the Exchange Agent in accordance with DTC's ATOP procedures
for transfer. DTC will then send an Agent's Message (as defined below) to the
Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an expressed acknowledgment from a participant in DTC that
is tendering Existing Notes which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the applicable Letter of Transmittal (or, in the case of an Agent's
Message relating to guaranteed delivery, that such participant has received and
agrees to be bound by the applicable Notice of Guaranteed Delivery), and that
the Company may enforce such agreement against such participant.
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BOOK-ENTRY DELIVERY PROCEDURES
Within two business days after the date hereof, the Exchange Agent will
establish accounts with respect to the Existing Notes at DTC, the Midwest
Securities Transfer Company ("MSTC") and the Philadelphia Depositary Trust
Company ("Philadep") (each a "Book-Entry Transfer Facility" and, collectively,
the "Book-Entry Transfer Facilities") for purposes of the Exchange Offer. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities systems may make book-entry delivery of the Existing Notes by causing
DTC, MSTC or Philadep to transfer such Existing Notes into the Exchange Agent's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. Timely book-entry delivery of
Existing Notes pursuant to the Exchange Offer, however, requires receipt of a
Book-Entry Confirmation prior to the Expiration Date. In addition, although
delivery of Existing Notes may be effected through book-entry transfer into the
Exchange Agent's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a manually signed facsimile thereof), together with any required
signature guarantees and any other required documents, or an Agent's Message in
connection with a book-entry transfer, must, in any case, be delivered or
transmitted to and received by the Exchange Agent at its address set forth on
the back cover page of this Prospectus prior to the Expiration Date to receive
New Notes for tendered Existing Notes, or the guaranteed delivery procedure
described below must be complied with. Tender will not be deemed made until such
documents are received by the Exchange Agent. Delivery of documents to a
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Existing Holders who wish to tender their Existing Notes and (i) whose
Existing Notes are not immediately available, (ii) who cannot deliver their
Existing Notes, the Letter of Transmittal or any other required documents to the
Exchange Agent or (iii) who cannot complete the procedures for book-entry
transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Existing Holder, the certificate
number(s) of such Existing Notes and the principal amount of Existing Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Existing Notes (or a confirmation of
book-entry transfer of such Existing Notes into the Exchange Agent's account
at DTC) and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at DTC)
and all other documents required by the Letter of Transmittal, are received
by the Exchange Agent within three New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Existing Holders who wish to tender their Existing Notes according to
the guaranteed delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
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To withdraw a tender of Existing Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at the address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number(s) and principal amount of such Existing Notes, or, in the
case of Existing Notes transferred by book-entry transfer, the name and number
of the account at DTC to be credited), (iii) be signed by the Existing Holder in
the same manner as the original signature on the Letter of Transmittal by which
such Existing Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee
register the transfer of such Existing Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Existing
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time or receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Existing Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Existing Notes so withdrawn
are validly retendered. Any Existing Notes which have been tendered but which
are not accepted for exchange will be returned to the Holder thereof without
cost to such Existing Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Existing
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or to exchange New Notes for any Existing
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Existing Notes, if:
(a) in the opinion of counsel to the Company or the Guarantors, the
Exchange Offer or any part thereof contemplated herein violates any
applicable law or interpretation of the Staff;
(b) any action or proceeding shall have been instituted or threatened in
any court or by any governmental agency which might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development shall have occurred in any existing action or proceeding
with respect to either the Company or the Guarantors;
(c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer as
contemplated hereby;
(d) any cessation of trading on the Nasdaq Stock Market or any exchange,
or any banking moratorium, shall have occurred, as a result of which the
Company is unable to proceed with the Exchange Offer; or
(e) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Exchange Offer
Registration Statement or proceedings shall have been initiated or, to the
knowledge of the Company, threatened for that purpose.
If the Company determines in its reasonable judgment that any of the
foregoing conditions are not satisfied, the Company may (i) refuse to accept any
Existing Notes and return all tendered Existing Notes to the tendering Existing
Holders, (ii) extend the Exchange Offer and retain all Existing Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of Existing Holders to withdraw such Existing Notes (see "--Withdrawals of
Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Existing Notes which have not
been withdrawn.
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EXCHANGE AGENT
The Bank of New York will act as Exchange Agent for the Exchange Offer with
respect to the Existing Notes.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Existing Notes and
requests for copies of the Notice of Guaranteed Delivery should be directed to
the Exchange Agent, addressed as follows:
<TABLE>
<S> <C>
By Hand, Overnight The Bank of New York
Courier 101 Barclay Street, Floor
or Mail: 21W
New York, New York 10286
Attention:Thomas E. Tabor,
TreasurerAssistant
By Facsimile: (212) 815-5915
Confirm by Telephone: (212) 815-5381
</TABLE>
FEES AND EXPENSES
The expenses of soliciting Existing Notes for exchange will be borne by the
Company. The principal solicitation is being made by mail by the Exchange Agent.
However, additional solicitation may be made by telephone, facsimile or in
person by officers and regular employees of the Company and its affiliates and
by persons so engaged by the Exchange Agent.
The Company will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the Trustee (as defined), filing fees, blue sky fees and printing
and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Existing Notes pursuant to the Exchange Offer. If, however, certificates
representing the New Notes or the Existing Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered Holder of the Existing Notes
tendered, or if tendered Existing Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Existing Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Existing Holder or any other person) will be payable by the
tendering Existing Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Existing
Notes, which is the aggregate principal amount of the Existing Notes, as
reflected in the Company's accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized in
connection with the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
RESALE OF NEW NOTES
The Company is making the Exchange Offer in reliance on the position of the
Staff as set forth in the Exxon Capital No-Action Letter, the Morgan Stanley
No-Action Letter and the Shearman & Sterling No-Action Letter, and other
interpretive letters addressed to third parties in other transactions. However,
the Company has not sought its own interpretive letter addressing such matters
and there can be no assurance that the Staff would make a similar determination
with respect to the Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the Staff, and subject to the
two
27
<PAGE>
immediately following sentences, the Company believes that New Notes issued
pursuant to this Exchange Offer in exchange for Existing Notes may be offered
for resale, resold and otherwise transferred by a Holder thereof (other than a
Holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such Holder's business and that
such Holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any Holder of Existing Notes who (i)
is an "affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act), (ii) does not acquire such New Notes in the ordinary course of
its business, (iii) intends to participate in the Exchange Offer for the purpose
of distributing New Notes, or (iv) is a broker-dealer who purchased such
Existing Notes directly from the Company, (a) will not be able to rely on the
interpretations of the Staff set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender such Existing Notes in
the Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or other
transfer of such Existing Notes unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, if any
broker-dealer holds Existing Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Existing Notes for
New Notes (a "Participating Broker-Dealer"), then such Participating
Broker-Dealer may be deemed a statutory "underwriter" within the meaning of the
Securities Act and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes.
Each Holder of Existing Notes who wishes to exchange Existing Notes for New
Notes in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, and (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Existing Notes for its own account as a result
of market-making activities or other trading activities (and not directly from
the Company) and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, such a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the Staff in the interpretive letters referred to
above, the Company believes that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Notes received upon
exchange of such Existing Notes with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect to
the resale of such New Notes. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Notes
for a period of one year following effectiveness of the Exchange Offer
Registration Statement. See "Plan of Distribution." Any Participating
Broker-Dealer who is an affiliate of the Company may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Existing
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material
28
<PAGE>
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Company and certain of
the Guarantors will have fulfilled certain of their obligations under the
Registration Rights Agreement, and Holders of Existing Notes who do not tender
their Notes, except for certain instances involving the Initial Purchaser or
Existing Holders who are not eligible to participate in the Exchange Offer, will
not have any further registration rights under the Registration Rights Agreement
or otherwise or rights to receive Liquidated Damages for failure to register.
Accordingly, any Holder of Existing Notes that does not exchange that Holder's
Existing Notes for New Notes will continue to hold the untendered Existing Notes
and will be entitled to all the rights and subject to all the limitations
applicable thereto under the Indenture, except to the extent that such rights or
limitations, by their terms, terminate or cease to have further effectiveness as
a result of the Exchange Offer.
The Existing Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Existing
Notes may be resold only (i) to a person who the seller reasonably believes is a
qualified institutional buyer in a transaction meeting the requirements of Rule
144A, in a transaction meeting the requirements of Rule 144A under the
Securities Act, (ii) in a transaction occurring outside the United States to a
foreign person, which transaction meets the requirements of Rule 904 under the
Securities Act, (iii) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Company so requests), (iv) to the Company or (v) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction.
OTHER
Participation in the Exchange Offer is voluntary and Existing Holders should
carefully consider whether to accept. Holders of the Existing Notes are urged to
consult their financial and tax advisors in making their own decision on what
action to take.
The Company may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plans to acquire any Existing
Notes that are not tendered in the Exchange Offer or to file a registration
statement to permit resales of any untendered Existing Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following sets forth a summary of the material anticipated federal
income tax consequences expected to result to Holders from the Exchange Offer
and from the purchase, ownership and disposition of the New Notes. The tax
consequences of these transactions are uncertain. The discussion of the federal
income tax consequences set forth below is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), and judicial decisions and administrative
interpretations thereunder, as of the date hereof, and such authorities may be
repealed, revoked, modified or otherwise interpreted or applied so as to result
in federal income tax consequences different from those discussed below. There
can be no assurance that
29
<PAGE>
the Internal Revenue Service (the "IRS") will not challenge one or more of the
tax consequences described herein, and the Company has not obtained, nor does it
intend to obtain, a ruling from the IRS or an opinion of counsel with respect to
the U.S. federal income tax consequences of acquiring or holding New Notes. The
discussion below pertains only to U.S. Holders, except as described below under
the caption "Non-U.S. Holders." As used herein, U.S. Holders means (i) citizens
or residents (within the meaning of Section 7701(b) of the Code) of the United
States, (ii) corporations, partnerships or other entities created in or under
the laws of the United States or any political subdivision thereof, (iii)
estates, the income of which is subject to United States federal income taxation
regardless of its source, and (iv) in general, trusts subject to the primary
supervision of a court within the United States and the control of a United
States person as described in Section 7701(a)(30) of the Code.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that may be relevant to a particular Holder in light of the
Holder's circumstances (for example, persons subject to the alternative minimum
tax provisions of the Code). Also, it is not intended to be wholly applicable to
all categories of investors, some of which (such as dealers in securities,
banks, insurance companies, tax-exempt organizations, and persons holding New
Notes as part of a hedging or conversion transaction or straddle or persons
deemed to sell New Notes under the constructive sale provisions of the Code) may
be subject to special rules. The discussion below is premised upon the
assumption that the New Notes and Existing Notes constitute indebtedness for
U.S. federal income tax purposes, and that the Existing Notes and New Notes are
held (or would be held if acquired) as capital assets within the meaning of
Section 1221 of the Code. This summary does not discuss the tax considerations
applicable to subsequent purchasers. The discussion also does not discuss any
aspect of state, local or foreign law, nor federal estate and gift tax law.
EACH PROSPECTIVE HOLDER AND, SUBSEQUENT TO THE EXCHANGE OFFER, EACH HOLDER,
OF NEW NOTES IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR INCLUDING WITH
RESPECT TO ITS PARTICULAR TAX SITUATION THE TAX EFFECTS OF ANY STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.
EXCHANGE OF NOTES
The exchange of Existing Notes for New Notes pursuant to the Exchange Offer
should not be a taxable exchange for U.S. federal income tax purposes.
Accordingly, a Holder should have the same adjusted issue price, adjusted basis
and holding period in the New Notes as it had in the Existing Notes immediately
before the exchange.
STATED INTEREST
The New Notes will be issued without original issue discount. Stated
interest on the Existing Notes and New Notes will be includable in the Holder's
income under such Holder's method of accounting.
BOND PREMIUM
Generally, if the New Notes are purchased, or if the Existing Notes were
purchased, for an amount in excess of the amount payable at the maturity date
(or a call date, if appropriate) of the New Notes, such excess will constitute
amortizable bond premium that the Holder may elect to amortize under the
constant interest method over the period from the date of acquisition to the
date of maturity (or until an earlier call date). If bond premium is amortized,
the amount required to be included in the Holder's income each year with respect
to interest on the Note will be reduced by the amount of amortizable bond
premium allocable to such year. An election to amortize bond premium is
available only if the New Notes are held as capital assets. This election is
revocable only with the consent of the IRS and applies to all obligations owned
or
30
<PAGE>
subsequently acquired by the Holder. To the extent the excess is deducted as
amortizable bond premium, the Holder's adjusted tax basis in the New Notes will
be reduced.
MARKET DISCOUNT ON THE NEW NOTES
To the extent a Holder had market discount with respect to an Existing Note,
the Holder generally will have market discount with respect to a New Note. Any
principal payment or gain realized by a Holder on disposition or retirement of a
New Note will be treated as ordinary income to the extent that there is accrued
market discount on the New Note. Unless a Holder elects to accrue under a
constant-interest method, accrued market discount is the total market discount
multiplied by a fraction, the numerator of which is the number of days the
Holder has held the obligation and the denominator of which is the number of
days from the date the Holder acquired the obligation under its maturity. A
Holder may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry a New Note purchased with market discount. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includable in income. If the Holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by the Holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
SALE, EXCHANGE OR RETIREMENT OF THE NEW NOTES
Upon the sale, exchange or retirement of a New Note, the Holder generally
will recognize gain or loss equal to the difference between the amount realized
on the sale, exchange or retirement (which does not include any amount
attributable to accrued but unpaid interest) and the Holder's adjusted tax basis
in the New Note. A Holder's adjusted tax basis in a New Note will generally
equal the Holder's adjusted basis for the Existing Note exchanged therefor
increased by any original issue discount or market discount previously included
in income by such Holder with respect to such New Note and decreased by any
payments received thereon that are not qualified stated interest and the amount
of any amortizable bond premium applied to reduce interest on the New Note.
Gain or loss realized on the sale, exchange or retirement of a New Note will
be capital (subject to the market discount rules, discussed above), and will be
long-term if at the time of sale, exchange or retirement the New Note has been
held or deemed held for more than one year. On August 5, 1997, legislation was
enacted which, among other things, reduces to 20% the maximum rate of tax on
long-term capital gains on most capital assets held by an individual for more
than 18 months, and under which gain on most capital assets held by an
individual more than one year and up to 18 months is subject to tax at a maximum
rate of 28%. Holders are urged to consult their tax advisor with respects to the
effects of the legislation. The deductibility of capital losses is subject to
limitations.
NON-U.S. HOLDERS
The following sets forth a summary of certain U.S. federal income and estate
tax considerations of the ownership and disposition of New Notes by Non-U.S.
Holders. As used herein, a Non-U.S. Holder means any Holder other than a U.S.
Holder.
INTEREST
Interest paid by the Company to a Non-U.S. Holder generally will not be
subject to United States federal income or withholding tax if such interest
is not effectively connected with the conduct of a trade or business within
the United States by such Non-U.S. Holder and pursuant to the "portfolio
interest exception" such Non-U.S. Holder: (i) does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company; (ii) is not a controlled foreign
31
<PAGE>
corporation with respect to which the Company is a "related person" within
the meaning of the code; and (iii) certifies, under penalties of perjury,
that such Holder is not a United States person and provides such Holder's
name and address.
GAIN ON DISPOSITION
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale, redemption or other disposition of
a New Note unless: (i) the gain is effectively connected with the conduct of
a trade or business within the United States by the Non-U.S. Holder; or (ii)
in the case of a Non-U.S. Holder who is a nonresident alien individual and
holds the Note as a capital asset, such Holder is present in the United
States for 183 or more days in the taxable year and certain other
requirements are met.
FEDERAL ESTATE TAXES
If interest on the New Notes is exempt from withholding of United States
federal income tax under the portfolio interest exception described above,
the New Notes will generally not be included in the estate of a deceased
Non-U.S. Holder for United States federal estate tax purposes.
BACKUP WITHHOLDING
A Holder of the New Notes may be subject to backup withholding at a rate
of 31% with respect to interest paid or accrued on, and gross proceeds of a
sale of, the New Notes unless (i) such Holder is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact or (ii) provides a correct taxpayer identification number, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A Holder of the New
Notes who does not provide the Company with such Holder's correct taxpayer
identification number may be subject to penalties imposed by the IRS.
In general, payment of the proceeds from the sale of Notes to or through
a United States office of a broker is subject to both United States backup
withholding and information reporting unless the Holder or beneficial owner
certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption. United States information reporting and
backup withholding generally will not apply to a payment made outside the
United States of the proceeds of a sale of Notes through an office outside
the United States of a non-United States broker. However, United States
information reporting requirements (but not backup withholding) will apply
to a payment made outside the United States of the proceeds of a sale of
Notes through an office outside the United States of a broker that is a
United States person, that derives 50% or more of its gross income for a
specified three-year period from the conduct of a trade or business in the
United States, or that is a "controlled foreign corporation" as to the
United States, unless the broker has documentary evidence in its files that
the Holder or beneficial owner is a non-United States person or the Holder
or beneficial owner otherwise establishes an exemption.
Amounts withheld under the backup withholding rules may be credited
against a Holder's tax liability, and a Holder may obtain a refund of any
excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS.
The Company will report to the Holders of the New Notes and to the IRS
the amount of any "reportable payments" and any amount withheld with respect
to the Existing Notes and New Notes during the calendar year.
32
<PAGE>
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF THE
EXISTING NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE NEW NOTES INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
33
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1997, and as adjusted on a pro forma basis to give effect to
(i) the Merger Financing (which was completed on October 2, 1997) and (ii) the
anticipated pay down from available cash of $7 million under the Revolving
Credit Facility and $3.8 million under the Term Loan Facility. This table should
be read in conjunction with the financial statements, and the related notes
thereto, included elsewhere herein. See "Prospectus Summary," "Use of Proceeds"
and "Unaudited Pro Forma Combined Financial Information."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt (including current maturities):
Revolving Credit Facility (1)......................................................... $ -- $ --
Term Loan Facility.................................................................... -- 46,152
9 3/4% Senior Subordinated Notes due 2007............................................. -- 120,000
Senior subordinated debt(2)........................................................... 190,200 --
Other................................................................................. 6,300 6,300
----------- -----------
Total debt........................................................................ 196,500 172,452
----------- -----------
Total shareholders' equity (deficit).................................................. (12,373) (24,573)
----------- -----------
Total capitalization.................................................................... $ 184,127 $ 147,879
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) The Revolving Credit Facility provides for revolving loans in an aggregate
principal amount of up to $35.0 million.
(2) The senior subordinated debt consisted of $166.2 of senior indebtedness and
$24.0 million of Interim Preferred Stock incurred in connection with the
Tender Offer, of which $2.4 million was classified as current in the
Company's Condensed Consolidated Balance Sheet at September 30, 1997.
34
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information set forth below is
based on the historical financial statements of Axiohm Transaction Solutions,
Inc. and DH after giving effect to the purchase method of accounting and other
adjustments relating to the Transactions (exclusive of the effect of the Tender
Financing) and after giving effect to the Exchange Offer for the periods ended
and as of the dates indicated. The Unaudited Pro Forma Combined Balance Sheet
gives effect to the Transactions (exclusive of the effect of the Tender
Financing) and to the Exchange Offer as of September 30, 1997. The Unaudited Pro
Forma Combined Statements of Operations are presented to give effect to the
Transactions (exclusive of the effect of the Tender Financing) and to the
Exchange Offer as if each had been consummated on January 1, 1996 for the fiscal
year ended December 31, 1996 and on January 1, 1997 for the nine months ended
September 30, 1997. The Unaudited Pro Forma Combined Statement of Operations for
the nine months ended September 30, 1997 are based on the historical financial
statements of Axiohm Transaction Solutions, Inc. for the nine months ended
September 30, 1997 and the historical financial statements of DH for the period
for the period from January 1, 1997 through August 31, 1997 (the effective date
of the Transactions for accounting purposes).
The Unaudited Pro Forma Combined Financial Information set forth below
reflects pro forma adjustments that are based upon available information and
certain assumptions that the Company believes are reasonable. In preparing the
Unaudited Pro Forma Combined Financial Information, the Company believes it has
utilized reasonable methods to conform the basis of the presentation. The
Unaudited Pro Forma Combined Financial Information is intended for informational
purposes only and is not necessarily indicative of the future financial position
or results of operations of the Company had the Transactions and the Exchange
Offer described above occurred on the indicated dates or been in effect for the
periods presented.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of Axiohm Transaction Solutions, Inc. and DH,
including in each case, the related notes thereto, included elsewhere herein,
and with other financial information pertaining to the Company including "Use of
Proceeds," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
35
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AXIOHM
HISTORICAL TRANSACTION
AXIOHM SOLUTIONS,
TRANSACTION INC.
SOLUTIONS, PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including short-term investment
securities held to maturity).................................. $ 36,248 $ (36,248) (1) $ --
Restricted cash................................................. 8,594 -- 8,594
Accounts receivable, net........................................ 32,295 -- 32,295
Inventories..................................................... 28,523 -- 28,523
Other........................................................... 9,487 -- 9,487
------------- ----------- -------------
Total current assets.......................................... 115,147 (36,248) 78,899
Fixed assets, net................................................. 20,928 -- 20,928
Intangible assets................................................. 86,839 -- 86,839
Other assets...................................................... 5,240 -- 5,240
------------- ----------- -------------
Total assets.................................................. $ 228,154 $ (36,248) $ 191,906
------------- ----------- -------------
------------- ----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................ 15,082 -- 15,082
Accrued payroll, payroll taxes and benefits..................... 4,877 -- 4,877
Current portion of long-term debt and other long-term
obligations................................................... 4,060 -- 4,060
Accrued expenses and other current liabilities.................. 7,529 -- 7,529
Income taxes payable............................................ 3,140 -- 3,140
Deferred revenue................................................ 493 -- 493
------------- ----------- -------------
Total current liabilities..................................... 35,181 -- 35,181
Senior Subordinated debt.......................................... 187,800 (24,048) (1) 163,752
Other long-term debt and long-term liabilities.................... 15,919 -- 15,919
Deferred tax liability............................................ 1,627 -- 1,627
------------- ----------- -------------
Total liabilities............................................. 240,527 (24,048) 216,479
------------- ----------- -------------
Shareholders' equity (deficit):
Common Stock.................................................... 23,851 -- 23,851
Retained earnings (accumulated deficit)......................... (36,117) (12,200) (1) (48,317)
Foreign currency translation adjustment......................... (107) -- (107)
------------- ----------- -------------
Total shareholders' equity (deficit).......................... (12,373) (12,200) (1) (24,573)
------------- ----------- -------------
Total liabilities and shareholders' equity (deficit).......... $ 228,154 $ (36,248) $ 191,906
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
36
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL AXIOHM TRANSACTION
------------------------------ SOLUTIONS, INC.
AXIOHM TRANSACTION PRO FORMA PRO FORMA
SOLUTIONS, INC. DH ADJUSTMENTS COMBINED(2)
------------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 95,302 $ 115,784 $ -- $ 211,086
Costs and expenses:
Cost of net sales........................ 66,390 74,847 -- 141,237
Selling, general and administrative...... 11,013 15,207 -- 26,220
Research and development................. 6,648 5,805 -- 12,453
Amortization of goodwill................. 200 790 27,215(3) 28,205
------- ---------- ------------ --------
Total costs and expenses................... 84,251 96,649 27,215 208,115
------- ---------- ------------ --------
Income (loss) from operations.............. 11,051 19,135 (27,215) 2,971
Other income............................... 1,033 -- -- 1,033
Interest income............................ 158 1,491 (1,649) (4) --
Interest expense........................... (1,032) (149) (16,132) (5) (17,313)
------- ---------- ------------ --------
Income (loss) before income taxes.......... 11,210 20,477 (44,996) (13,309)
Income taxes (benefit)..................... 4,406 7,450 (7,468) (6) 4,388
------- ---------- ------------ --------
Net income (loss).......................... $ 6,804 $ 13,027 $ (37,528) $ (17,697)
------- ---------- ------------ --------
------- ---------- ------------ --------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
37
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL AXIOHM TRANSACTION
----------------------------- SOLUTIONS, INC.
AXIOHM TRANSACTION PRO FORMA PRO FORMA
SOLUTIONS, INC. DH ADJUSTMENTS COMBINED(2)
------------------ --------- ----------- ------------------
<S> <C> <C> <C> <C>
Net sales....................................... $ 99,558 $ 58,731 $ -- $ 158,289
Costs and expenses:
Cost of net sales............................. 66,978 39,473 -- 106,451
Selling, general and administrative........... 11,428 12,009 -- 23,437
Research and development...................... 6,198 3,928 -- 10,126
Amortization of goodwill...................... 2,450 420 18,144(3) 21,014
In-process technology, acquisition and other
charges..................................... 50,831 11,290 -- 62,121
-------- --------- ----------- --------
Total costs and expenses........................ 137,885 67,120 18,144 223,149
-------- --------- ----------- --------
Loss from operations............................ (38,327) (8,389) (18,144) (64,860)
Interest and other income....................... 390 1,138 (1,528) (4) --
Interest and other expense...................... (3,077) (117) (10,797) (5) (13,991)
-------- --------- ----------- --------
Loss before income taxes........................ (41,014) (7,368) (30,469) (78,851)
Income taxes (benefit).......................... 5,484 (1,151) (5,177) (6) (844)
-------- --------- ----------- --------
Net loss........................................ $ (46,498) $ (6,217) $ (25,292) $ (78,007)
-------- --------- ----------- --------
-------- --------- ----------- --------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
38
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The Unaudited Pro Forma Combined Financial Statements have been prepared
using the following facts and assumptions:
(1) Existing cash at September 30, 1997 was used to retire $24.0 million of the
Tender Financing and fund the $12.2 million payment made to Axiohm S.A.
shareholders in conjunction with Transactions on October 2, 1997.
(2) The Unaudited Pro Forma Combined Statements of Operations for the year
ended December 31, 1996 do not reflect the write-off of the anticipated
$50.8 million of in-process technology that was recorded in the financial
statements of Axiohm Transaction Solutions, Inc. on August 31, 1997 in
conjunction with the Transactions. The Unaudited Pro Forma Combined
Financial Statements for the year ended December 31, 1996 do not reflect
the $2.3 million anticipated charge related to the settlement of common
stock options of Axiohm S.A. outstanding immediately prior to the Merger,
which will be incurred ratably over a five-year period commencing at the
Merger date. The Unaudited Pro Forma Combined Statement of Operations for
the nine months ended September 30, 1997 includes $0.5 million of the
anticipated charge.
(3) Amortization of goodwill calculated on a straight line basis over three
years.
(4) Since a portion of the acquisition was funded by existing cash, a pro forma
adjustment is required to adjust for the interest income lost. Interest
income not earned as a result of the use of cash to partially fund the
transaction was approximately $1.6 million and $1.5 million for the year
ended December 31, 1996 and the nine months ended September 30, 1997,
respectively.
(5) Adjustment to interest expense:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
For the Year Ended December 31, 1996:
Interest expense on historical Axiohm S.A. debt repaid in the Merger............. $ (450)
Interest on New Credit Facility and Senior Subordinated Notes (at an assumed
weighted average interest rate of 9.4%)........................................ 15,618
Amortization of deferred debt issuance costs..................................... 964
-----------
Pro forma total adjustment....................................................... $ 16,132
-----------
-----------
For the Nine Months Ended September 30, 1997:
Interest expense on historical Axiohm S.A. debt repaid in the Merger............. $ (338)
Interest on New Credit Facility and Senior Subordinated Notes (at an assumed
weighted average interest rate of 9.4%)........................................ 10,412
Amortization of deferred debt issuance costs..................................... 723
-----------
Pro forma total adjustment....................................................... 10,797
-----------
-----------
</TABLE>
A 0.125% increase or decrease in the assumed weighted average interest rate
would change annual pro forma interest expense by $200,000. The pro forma
net losses would change by $116,000.
(6) Income tax effects of pro forma adjustments. Income taxes have been
provided for all applicable adjustments at an assumed rate of 42% assuming
that the amortization of goodwill is not deductible for tax purposes.
39
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The Consolidated Statement of Income Data set forth below with respect to
fiscal years 1994, 1995 and 1996, and the Consolidated Balance Sheet Data at
December 31, 1995 and 1996, are derived from, and should be read in conjunction
with, the audited Consolidated Financial Statements and Notes thereto of Axiohm
S.A. included elsewhere in this Prospectus. The Consolidated Balance Sheet Data
at December 31, 1994 and September 30, 1996 set forth below are derived from
unaudited financial statements of Axiohm S.A. that are not included in this
Prospectus. The Consolidated Statement of Income Data for the nine months ended
September 30, 1996 and 1997 and the Consolidated Balance Sheet Data set forth
below at September 30, 1997 are derived from the unaudited financial statements
of Axiohm Transaction Solutions, Inc. included in this Prospectus. The unaudited
financial statements of Axiohm Transaction Solutions, Inc. have been prepared on
the same basis as the audited financial statements of Axiohm S.A. (the
predecessor of Axiohm Transaction Solutions, Inc. for accounting purposes) and,
in the opinion of management, contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position, results of operations and cash flows for such periods. The
Consolidated Statement of Income Data for the nine months ended September 30,
1997 and the Consolidated Balance Sheet Data at September 30, 1997 include the
results of operations of Axiohm S.A. for the full period and the results of
operations for DH for the month of September 1997. Results for interim periods
are not necessarily indicative of results for any later period or for the entire
year.
The data set forth in the following table should be read in conjunction
with, and are qualified in their entirety by, "Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Axiohm S.A.," Axiohm
S.A.'s Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
YEARS ENDED DECEMBER 31, 30,
------------------------------- ---------
<S> <C> <C> <C> <C>
1994 1995 1996 1996
--------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue.......................................................................... $ 24,810 $ 72,155 $ 95,302 $ 71,965
Costs and expenses:
Cost of products sold.......................................................... 15,095 52,202 66,390 49,792
Selling, general and administrative............................................ 4,506 9,200 11,013 6,003
Research and development....................................................... 3,310 5,836 6,648 4,702
Goodwill amortization.......................................................... -- 161 200 2,300
In process technology.......................................................... -- -- -- --
--------- --------- --------- ---------
Total costs and expenses..................................................... 22,911 67,399 84,251 62,797
--------- --------- --------- ---------
Income (loss) from operations.................................................... 1,899 4,756 11,051 9,168
Interest income.................................................................. 90 158 158 36
Interest expense................................................................. (244) (1,889) (1,032) (946)
Other income..................................................................... 167 -- 1,033 1,193
--------- --------- --------- ---------
Income (loss) before income taxes................................................ 1,912 3,025 11,210 9,451
Provision for income taxes....................................................... 482 1,095 4,406 3,657
--------- --------- --------- ---------
Net income (loss).............................................................. $ 1,430 $ 1,930 $ 6,804 $ 5,794
--------- --------- --------- ---------
--------- --------- --------- ---------
OTHER DATA:
Depreciation and amortization.................................................... 1,070 2,696 2,921 2,008
Capital expenditures............................................................. 2,190 2,955 3,056 2,532
Ratio of earnings to fixed charges (1)........................................... 8.8x 2.6x 11.9x 11.0x
CASH FLOWS PROVIDED BY (USED IN):
Operations....................................................................... $ 2,161 $ 1,007 $ 11,737 $ 9,593
Investing activities............................................................. (18,037) (3,025) (2,997) (2,532)
Financing activities............................................................. 16,011 942 (7,663) (5,967)
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END):
Working capital.................................................................. $ 10,875 $ 14,781 $ 14,555 $ 11,681
Total assets..................................................................... 34,753 40,184 43,978 43,023
Long-term debt (2)............................................................... 19,415 19,508 10,532 10,491
Shareholders' equity (deficit)................................................... 4,302 5,977 16,433 15,240
<CAPTION>
<S> <C>
1997
---------
<S> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue.......................................................................... $ 99,558
Costs and expenses:
Cost of products sold.......................................................... 66,978
Selling, general and administrative............................................ 11,008
Research and development....................................................... 6,198
Goodwill amortization.......................................................... 2,870
In process technology.......................................................... 50,831
---------
Total costs and expenses..................................................... 137,885
---------
Income (loss) from operations.................................................... (38,327)
Interest income.................................................................. 390
Interest expense................................................................. (3,077)
Other income..................................................................... --
---------
Income (loss) before income taxes................................................ (41,014)
Provision for income taxes....................................................... 5,484
---------
Net income (loss).............................................................. $ (46,498)
---------
---------
OTHER DATA:
Depreciation and amortization.................................................... 5,369
Capital expenditures............................................................. 3,670
Ratio of earnings to fixed charges (1)........................................... --
CASH FLOWS PROVIDED BY (USED IN):
Operations....................................................................... $ 8,701
Investing activities............................................................. (151,744)
Financing activities............................................................. 178,074
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END):
Working capital.................................................................. $ 43,718
Total assets..................................................................... 191,906
Long-term debt (2)............................................................... 173,452
Shareholders' equity (deficit)................................................... (24,573)
</TABLE>
40
<PAGE>
- ------------------------
(1) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Income before taxes is stated after
expensing amortization of goodwill, depreciation and other non-cash charges.
Fixed charges consist of interest on indebtedness plus that portion of lease
rental expense representative of the interest factor. For the nine months
ended September 30, 1997, earnings before fixed charges were insufficient to
cover fixed charges by approximately $41.0 million.
(2) Long-term debt includes bank borrowing obligations, credit facilities,
capital lease and government grant obligations.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE
ACT, INCLUDING, WITHOUT LIMITATION, STATEMENTS THAT INCLUDE THE WORDS
"BELIEVES," "EXPECTS," "ANTICIPATES" AND SIMILAR EXPRESSIONS RELATING TO:
ANTICIPATED COST SAVINGS FOLLOWING THE MERGER; EXPECTED TRENDS IN INTERNATIONAL
SALES AND SALES ACTIVITY BASED ON SEASONAL FACTORS; ESTIMATED LEVELS OF SELLING,
GENERAL AND ADMINISTRATIVE EXPENSE AFTER NON-CASH CHARGES RELATED TO THE
TRANSACTIONS; EXPECTED TRENDS IN RESEARCH AND DEVELOPMENT EXPENSES AND INTEREST
INCOME; AND PLANS TO MEET REQUIREMENTS FOR WORKING CAPITAL, CAPITAL EXPENDITURES
AND DEBT SERVICE. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT ITS PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH
PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATION ARE SET
FORTH BELOW UNDER THE CAPTION "RISK FACTORS."
GENERAL
The Company believes it is one of the two largest non-captive designers,
manufacturers and marketers of transaction printers in the world. The Company's
transaction printer products are used in retail, financial and commercial
transactions to provide transaction records such as receipts, tickets, register
journals, checks and other documents.
The Company sells its products to OEMs, VARs, distributors and end-users.
For the nine months ended September 30, 1997, approximately 70% of the Company's
pro forma net sales of transaction products were application-specific or
customizable products designed for and sold to OEMs. The Company's printer and
card reader products are frequently integrated by OEMs with component products
from other manufacturers to form a final product. Due to the wide variety of
end-users and applications for the Company's transaction printer and card reader
products, the Company believes that it is effective to sell through VARs and
multiple distributors with defined market niche expertise and presence as well
as directly to OEMs and end-users. Sales to OEMs fluctuate based on the ability
of an OEM to successfully market its products to its customers and on the life
cycle of the OEM's product. Accordingly, a substantial increase or decrease in
orders from an OEM for a particular product may have a material impact on
results of operations. Also, new product introductions by OEMs could result in
large initial orders to fill OEM inventory and establish a product base, but
orders for some OEM products in subsequent periods may not be at the same
levels. For example, DH had transaction printer sales to First Data Corporation
("FDC") of approximately $2.7 million and $15.6 million in 1995 and 1996,
respectively, while sales to FDC declined to approximately $700,000 for the nine
months ended September 30, 1997. The Company does not anticipate having any
material sales to FDC in the last quarter of 1997. See "Risk Factors--
Fluctuating Operating Results; Dependence on OEM Sales."
The Company has increased its presence in the non-OEM direct sales channels
(including VARs, distributors and end-users) for non-application-specific
products by leveraging its expertise in design and manufacturing. This provides
the Company with the means of selling to customers it was not previously
servicing and to provide diversification from sales to OEMs and sales from any
single OEM product line. Furthermore, variations of products and product
features designed for OEMs can be developed for non-OEM applications with much
shorter lead times.
The Company historically has derived a substantial portion of its net sales
from international customers and this trend is expected to continue. Although
the Company's net sales are denominated in U.S. dollars, its international
business may be affected by changes in demand resulting from fluctuations in
exchange rates and related risks. In addition, historically the French
operations of Axiohm S.A. have
42
<PAGE>
incurred a majority of Axiohm S.A.'s expenses in French francs, while a
substantial majority of Axiohm S.A.'s revenues have been in U.S. dollars. Any
material appreciation in the French franc relative to the U.S. dollar would,
absent any effects associated with hedging or currency trading transactions,
detrimentally affect the financial performance of the Company's French
operations. The Company attempts to limit its exposure to French franc currency
fluctuation compared to the U.S. dollar by entering into various financial
instruments, including forward exchange contracts, to offset its French franc
denominated expenses with associated U.S. dollar denominated revenue, if, in the
opinion of the Company, to do so would mitigate foreign exchange losses. The
forward exchange contracts the Company has entered into are marked to market,
with any exchange gains or losses and associated costs recognized in the income
statement. The Company cannot predict the effect of exchange rate fluctuations
upon future operating results. See "Risk Factors--International Sales and
Operations."
EFFECTS OF ACQUISITIONS
The Company was formed from the combination of Axiohm S.A. and DH. See
"Prospectus Summary--The Transactions." Historically, Axiohm S.A. and DH have
achieved a portion of their growth through the acquisition of other businesses
and the Company intends to pursue additional acquisitions as a part of its
growth strategy. See "Risk Factors--Management of Future Acquisitions", Note 6
of the Notes to the Consolidated Financial Statements of Axiohm S.A., and Note 5
of the Notes to the Consolidated Financial Statements of DH.
In December 1994, Axiohm S.A. acquired the transaction printer business of
NCR, now known as Axiohm IPB, for up to $30.6 million, of which $15.6 million
was paid at closing, $552,000 has been paid to date in earn-out payments and a
final payment of up to $5.0 million may be paid in additional earn-out payments
based upon 1997 sales. The Company estimates such payment will be less than
approximately $1.5 million and is anticipated to be paid in 1998. Axiohm S.A.
recorded approximately $3.0 million of goodwill in connection with this
acquisition, which was accounted for using the purchase method of accounting.
On August 21, 1997, AX, a wholly-owned indirect subsidiary of Axiohm S.A.,
completed a tender offer to acquire 7 million (or approximately 88%) of the
outstanding shares of DH, which resulted in a change of control of DH. On
October 2, 1997, AX (i) acquired all of the outstanding shares of Axiohm S.A. in
exchange for 5,518,524 shares of DH Common Stock and $12.2 million in cash and
then (ii) was merged into DH. Although DH was the surviving corporation for
legal purposes, the Merger was treated as a purchase of DH for accounting
purposes. The effective date of the Merger was October 2, 1997 for legal
purposes while the effective date of the acquisition of DH was August 31, 1997
for accounting purposes. For the nine month period ended September 30, 1996, the
following discussion includes the results of operations of Axiohm S.A. only. For
the nine month period ended September 30, 1997, the following discussion
includes the results of operations of Axiohm S.A. for the full period plus the
results of operations of DH for the month of September 1997.
The DH acquisition has been accounted for using the purchase method of
accounting. The aggregate purchase price of $208.6 million consisted of cash for
DH shares and DH stock options, transaction costs and the fair value of DH
shares not tendered. The Tender Offer was financed through the incurrence of
$166.2 million of senior indebtedness under the Tender Credit Facility and $24
million of Interim Preferred Stock, both of which were retired with the proceeds
of the $120 million Existing Notes Offering and borrowings under the $85 million
New Credit Facility.
In connection with the DH acquisition, the Company (i) incurred a non-cash
charge of $50.8 million due to the write-off of acquired in-process technology
that had not reached technical feasibility and had no future alternative use and
(ii) expects to amortize approximately $81.6 million of goodwill and other
intangibles over the next three years. Of the approximately $12.2 million paid
for the DH stock options,
43
<PAGE>
approximately $8.6 million was funded to a Rabbi trust and is reflected on the
Company's balance sheet as restricted cash.
The following discussion and analysis is based upon and should be read in
conjunction with the Axiohm Transaction Solutions, Inc. financial statements and
related notes and the DH financial statements and related notes and the other
financial information included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
NET SALES. Net sales of $99.6 million for the nine months ended September
30, 1997 increased 38.3% from net sales of $72.0 million for the same period in
the prior year. This increase was attributable to the addition of DH net sales
of $10.3 million and an increase in net sales of $27.6 million. The increase in
net sales reflects increased unit volumes of transaction printers and printer
mechanisms partially offset by a decline in average selling prices and a unit
decline in thermal mechanisms.
Historically, the Company has experienced lower levels of sales of
transaction printers during the period from mid-November to the end of December
which it believes has been caused by the fact that some of its POS customers do
not install new systems in their facilities between Thanksgiving and Christmas.
COST OF NET SALES. Cost of net sales of $67.0 million increased $17.2 or
34.5%, from $49.8 million in the 1996 period. Cost of net sales as a percentage
of revenues decreased from 69.2% in the 1996 period to 67.3% in the 1997 period.
The decline was due to a favorable impact of the exchange rate between the U.S.
dollar and the French franc for products manufactured in France and sold in the
U.S., lower purchase prices of components and parts, continuing technology
improvements and higher absorption of relatively fixed overhead costs partially
offset by a decrease in average selling prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses of $13.9 million for the 1997 period increased $5.6
million or 67.1% from $8.3 million in the 1996 period. Selling, general and
administrative expenses as a percentage of revenues increased from 11.5% in the
1996 period to 13.9% in the 1997 period. This increase was largely the result of
non-cash goodwill amortization expense of $2.5 million, the inclusion of
expenses attributable to DH of $1.6 million, $0.5 million in a one-time charge
for stock options and an increase of $0.8 million in base expenses. The increase
in base expenses was primarily a result of higher staffing levels and expenses
needed to support higher sales, offset, in part, by the favorable impact of the
fluctuations in the U.S. dollar compared to the French franc. The Company
anticipates that, on a quarterly basis through the third quarter of 2000,
selling, general and administrative expenses will include approximately $8
million to $9 million in non-cash acquisition related charges.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses of
$6.2 million in the 1997 period increased $1.5 million or 31.8% from $4.7 in the
1996 period. Research and development expenses as a percentage of revenues
decreased slightly from 6.5% in the 1996 period to 6.2% in the 1997 period. The
Company believes that the timely development of new products and enhancements to
its existing products are essential to maintaining its competitive position.
Accordingly, the Company anticipates that such expenses will continue to
increase in absolute dollar terms for the foreseeable future.
IN-PROCESS TECHNOLOGY. In conjunction with the acquisition of DH, the
Company incurred a non-cash charge of $50.8 million due to the write-off of
acquired in-process technology (projects that had not reached technological
feasibility and had no future alternative use).
LOSS FROM OPERATIONS. Loss from operations for the 1997 period was $38.3
million, compared to net income of $9.2 million in the same period for 1996. The
net loss in the third quarter of 1997 was largely due to the in-process
technology charge discussed above.
44
<PAGE>
INTEREST AND OTHER INCOME. Interest income and other income of $0.4 million
in the 1997 period decreased $0.8 million from $1.2 million in the 1996 period.
In the 1996 period, Axiohm S.A. received insurance proceeds of $1.0 million as
compensation for the loss of revenue and commercial damage caused by water
damage in its clean room facility located in Puiseaux, France. The Company does
not anticipate that it will obtain significant interest income for at least the
next twelve months because substantially all of the Company's cash was used to
complete the Merger or became restricted following the Merger.
INTEREST AND OTHER EXPENSE. Interest expense increased to $3.1 million for
the 1997 period from $.09 million in the 1996 period due to the incurrence of
the Tender Financing.
PROVISION FOR INCOME TAXES. Provision for income taxes of $5.5 million in
1997 increased $1.8 million from $3.7 million in 1996. Income taxes as a
percentage of income before taxes, excluding the effect of acquisition related
charges, was approximately 41.8% compared to 38.3% due to the increase from
36.7% to 41.3%, in the French statutory tax rate. Income tax expense as a
percentage of loss before income taxes including the effect of acquisition
related charges, was 13.4% in the 1997 period primarily due to the in-process
technology charge being non-deductible for income tax purposes.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUE. Revenues of $95.3 million for 1996 increased $23.1 million, or
32.1% from $72.2 million in 1995. The revenue increase in 1996 principally
represents increased unit volume from two transaction printer products which
were introduced in 1995 as well as higher transaction mechanism volume.
COST OF PRODUCTS SOLD. Cost of products sold of $66.4 million in 1996
increased $14.2 million, or 27.2%, from $52.2 million in 1995. Cost of products
sold as a percentage of revenues decreased to 69.7% in 1996 from 72.3% in 1995.
In 1995, cost of products sold included a provision for inventory obsolescence
of approximately $1.0 million related to the 1995 write-off of components and
products dedicated to a customer who filed for bankruptcy protection. If this
provision were excluded, cost of products sold as a percentage of revenues would
have been 71.0% in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses of $11.0 million in 1996 increased $1.8 million, or
19.7%, from $9.2 million in 1995 primarily as a result of higher sales activity
and the reinforcement of Axiohm IPB's sales force after the acquisition of the
transaction printer business from NCR (now known as Axiohm IPB) in December
1994. In addition, Axiohm S.A. incurred charges of $265,000 in 1996 and $610,000
in 1995 in connection with the transfer of its existing French manufacturing
facility to a new facility in Puiseaux, France. Selling, general and
administrative expenses as a percentage of revenues decreased to 11.6% in 1996
from 12.8% in 1995.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses of
$6.6 million in 1996 increased $812,000, or 13.9%, from $5.8 million in 1995.
Research and development expenses as a percentage of revenues decreased to 7.0%
in 1996 from 8.1% in 1995.
INCOME FROM OPERATIONS. As a result of the foregoing, income from
operations of $11.1 million in 1996 increased $6.3 million, or 132.4%, from $4.8
million in 1995. Income from operations as a percentage of revenues increased to
11.6% in 1996 from 6.6% in the 1996 period.
INTEREST EXPENSE. Interest expense of $1.0 million in 1996 decreased
$857,000, or 45.4%, from $1.9 million in 1995 as a result of lower average debt
levels and interest rates in 1996 compared to 1995.
OTHER INCOME. Other income was $1.0 million in 1996 as a result of
insurance proceeds of $1.0 million received in 1996 as compensation for the loss
of revenue and commercial damage caused by water damage in the Company's clean
room facility in Puiseaux, France.
45
<PAGE>
PROVISION FOR INCOME TAXES. Provision for income taxes of $4.4 million in
1996 increased $3.3 million, or 302.4%, from $1.1 million in 1995. Provision for
income taxes as a percentage of income before taxes was 39.3% in 1996 compared
to 36.2% in 1995, principally due to the reduced benefits from the French
research and development tax credit, partially offset by the impact of
non-utilized loss carryforwards in overseas subsidiaries.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUE. Revenues of $72.2 million for fiscal 1995 increased $47.4 million,
or 190.8% from $24.8 million for fiscal 1994. The increase in 1996 principally
reflects the acquisition of the transaction printer business of NCR (now known
as Axiohm IPB) in December 1994 and increased unit shipments of thermal print
mechanisms in the United States. Axiohm S.A. recorded other income of $858,000
in 1994 in respect of liquidated damages from non-fulfillment of contractual
obligations.
COST OF PRODUCTS SOLD. Cost of products sold of $52.2 million in 1995
increased $37.1 million, or 245.8% from $15.1 million in 1994. As a percentage
of revenues, cost of products sold increased to 72.3% in 1995 from 60.8% in
1994. The increase was primarily due to the inclusion of Axiohm IPB which
operates at a gross margin below the historical average of Axiohm S.A., a
non-recurring provision for inventory obsolescence of approximately $1.0 million
related to the 1995 write-off of components and products dedicated to a customer
who filed for bankruptcy protection and an unfavorable impact of the exchange
rate between the U.S. dollar and the French franc for products manufactured in
France and sold in the U.S. Excluding the impact of the liquidated damages
explained above, cost of products sold as a percentage of revenues would have
been 63.2% in 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses of $9.2 million in 1995 or 12.8% of revenues increased
$4.7 million, or 104.2%, from $4.5 million in 1994. The increase was due to the
inclusion of selling, general and administrative expenses of Axiohm IPB in 1995,
relocation costs of $610,000 resulting from the transfer of a manufacturing
facility to a new location in Puiseaux, France and the unfavorable impact of the
exchange rate between the U.S. dollar and the French franc on administrative
expenses for Axiohm S.A.'s French operations.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses of
$5.8 million in 1995 increased $2.5 million, or 76.3%, from $3.3 million in
1994, primarily as a result of the additional research and development expenses
incurred by Axiohm IPB. As a percentage of revenues, research and development
expenses decreased to 8.1% in 1995 from 13.3% in 1994 due to revenues increasing
at a faster rate than research and development expenses.
INCOME FROM OPERATIONS. Income from operations of $4.8 million in 1995
increased $2.9 million, or 150.4%, from $1.9 million in 1994. Income from
operations as a percentage of revenue decreased to 6.6% in 1995 from 7.7% in
1994 as a result of the factors discussed above.
INTEREST EXPENSE. Interest expense was $1.9 million in 1995 compared to
$244,000 in 1994. The increase reflected higher average debt levels used to
finance the acquisition of Axiohm IPB and the interest charges on the
indebtedness to finance the new operating facility in Puiseaux, France.
PROVISION FOR INCOME TAXES. Provision for income taxes of $1.1 million in
1995 increased $613,000, or 127.2%, from $482,000 in 1994. The effective income
tax rate increased from 25.2% in 1994 to 36.2% in 1995 due to the higher
research and development tax credit and the increase in the statutory income tax
rate in France.
46
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital are cash flow from operations and
borrowings under the New Credit Facility. The Company's primary capital
requirements include debt service, capital expenditures and working capital. The
Company's ability to make scheduled payments of principal of, or to pay the
premium, if any, interest or Liquidated Damages, if any, thereon or to
refinance, its indebtedness (including the Notes), or to fund planned capital
expenditures, will depend upon its future performance, which, in turn, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond its control. Based upon current levels of
operations and anticipated growth in revenues and cost savings, the Company
believes that the Company's cash flow from operations and amounts available
under the New Credit Facility will be adequate to meet its anticipated future
requirements for working capital, capital expenditures, and scheduled payments
of principal and interest on its indebtedness, including the Notes. There can be
no assurance, however, that the Company's business will generate cash flow at or
above anticipated levels or that the Company will be able to borrow funds under
the New Credit Facility in an amount sufficient to enable the Company to service
its indebtedness, including the Notes, or make anticipated capital expenditures.
In particular, there can be no assurance that anticipated revenue growth will be
achieved at the levels currently anticipated or at all. If the Company is unable
to generate sufficient cash flow from operations or to borrow sufficient funds
in the future to service its debt, it may be required to sell assets, reduce
capital expenditures, refinance all or a portion of its existing indebtedness,
including the Notes, or obtain additional financing. There can be no assurance
that any such refinancing would be available on commercially reasonable terms,
or at all, or that any additional financing could be obtained, particularly in
view of the Company's high level of debt, the restrictions under the New Credit
Facility and the Indenture on the Company's ability to incur additional debt,
and the fact that substantially all of the Company's assets will be pledged to
secure obligations under the New Credit Facility.
At September 30, 1997, after giving pro forma effect to the Transactions,
the Company's total debt would have been $172.5 million. The Company would also
have had borrowing availability under the New Credit Facility of an additional
$35.0 million for working capital and capital expenditure requirements, subject
to the borrowing conditions contained therein. See "Risk Factors--Substantial
Leverage and Debt Service."
The New Credit Facility and the Notes will, and other debt instruments of
the Company may, pose various restrictions and covenants on the Company which
could potentially limit the Company's ability to respond to market conditions,
to provide for unanticipated capital investments, to raise additional debt or
equity capital, or to take advantage of business opportunities. See "Description
of Certain Indebtedness-- New Credit Facility" and "Description of Notes."
RESTRICTIONS ON DISTRIBUTIONS BY GUARANTORS TO THE COMPANY
There are no contractual restrictions, under the New Credit Facility or
otherwise, upon the ability of the Guarantors to make distributions or pay
dividends to their respective equityholders. Directly or indirectly, the Company
is the sole equityholder of all of the Guarantors.
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BUSINESS
OVERVIEW
The Company believes it is one of the largest non-captive designers,
manufacturers and marketers of transaction printers in the world. The Company
believes it has one of the broadest product lines in the transaction printer
industry and is the only transaction printer manufacturer currently
manufacturing its own thermal and impact printheads. The Company's transaction
printer products are used in retail, financial and commercial transactions to
provide transaction records such as receipts, tickets, register journals, checks
and other documents. In addition to transaction printers, the Company also
designs, manufactures and markets: (i) card readers which, similar to
transaction printers, are an integral part of transaction activity; and (ii) bar
code printers and related consumable supplies, which are used for automatic
identification and data collection systems. The Company has sales offices in
eight countries, distributor relationships in 32 countries and manufacturing
facilities in four countries. For the nine months ended September 30, 1997,
approximately 79% of pro forma net sales were derived from North America, 15%
from Europe and 6% from Asia and other markets.
The Company sells its products to OEMs, VARs, distributors and end-users.
For the nine months ended September 30, 1997, approximately 70% of the Company's
pro forma net sales were application-specific or customizable products designed
for and sold to OEMs. The Company works closely with its OEM customers during
the design stage, providing engineering and manufacturing expertise to meet its
customers' specific needs. As a result of being a preferred supplier of these
application-specific and customizable products, the Company believes it has
developed strong OEM relationships and has a large installed base of products.
INDUSTRY
Transaction products are used in numerous applications in three primary
vertical markets: (i) the POS market, which includes retailers, supermarkets,
gas stations, convenience stores and fast food retailers; (ii) the financial
services market, for applications such as ATMs, money order machines and bank
teller systems; and (iii) the specialty applications market, for uses in
products such as lottery machines, transportation ticketing machines,
pari-mutuel betting machines and information kiosks. The transaction printer
industry is comprised of non-captive manufacturers, such as the Company, and the
internal manufacturing operations of certain OEMs. The Company estimates that
the non-captive market for transaction printers is currently about $1.0 billion.
This market has experienced strong and stable growth over the past decade, and
the Company expects this trend to continue primarily as a result of: (i) an
increase in the retail, financial and commercial transaction activity in
developed and developing countries; (ii) an increase in non-cash transaction
activity that requires multiple receipts; and (iii) the continued trend of OEMs
to outsource the design and production of non-core components such as
transaction printers and card readers. The non-captive transaction printer
market is highly fragmented, and includes many small competitors that have
limited product lines. Furthermore, the Company believes that only a few non-
captive manufacturers, such as the Company, have the design and manufacturing
expertise to produce application-specific and customizable transaction printer
products for OEMs. The Company also believes that larger competitors, such as
the Company, benefit from a greater diversification of end-use applications and
markets, customers, technology and geography, which reduces the impact of
industry or regional cyclicality.
Transaction printers utilize both impact and thermal printing technologies.
Impact printers create an image by striking an ink ribbon, transferring ink to
paper as the printhead passes over the paper. There are two types of thermal
printers -- direct thermal and thermal transfer. Direct thermal printers create
an image by passing a heated element over specially treated paper as the paper
passes by the printhead, causing the heated section of the paper to change
color. Thermal transfer printers create an image by melting ink from a ribbon
onto paper as the paper passes by the printhead.
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Customers select printer technology based on cost, application requirements
and cost of consumables such as paper and ribbons. Impact printers generally
have lower paper costs, can print multiple copies of records and can print on
checks, tickets and forms. Thermal printers are generally faster, print higher
quality images, are quieter, have fewer moving parts and therefore lower
maintenance costs, last longer and operate in a greater range of environments.
As a result of these factors, impact printers for POS applications generally
represent the lower to middle price range of the transaction printer market,
thermal transaction printers for POS applications generally represent the middle
price range of the transaction printer market and hybrid printers (incorporating
both thermal and impact printing technologies) represent the high end price
range of the transaction printer market. In developing countries and for certain
specialty applications in developed countries, impact printing continues to be
popular because of its lower printer and paper cost and the need to maintain
duplicate paper records. However, for higher end applications in the U.S. and
Europe, thermal printing represents a greater proportion of new transaction
printer and printer mechanism sales than impact printing.
THE COMPANIES
The Company was created through the combination of the businesses of Axiohm
S.A., a French corporation, and DH, a California corporation, and their
subsidiaries on October 2, 1997. See "Prospectus Summary--The Transactions". The
businesses of Axiohm S.A. and DH prior to the combination may be summarized as
follows:
AXIOHM S.A. Axiohm S.A., headquartered in Montrouge, France, is a leading
designer, manufacturer, and marketer of thermal transaction printing mechanisms
and thermal and impact transaction printers for both standard and
application-specific uses. The Company believes that Axiohm S.A. is the only
transaction printer manufacturer with a fully integrated thermal printhead
manufacturing facility, which provides Axiohm S.A. with a consistent supply of
high quality thermal printheads. Axiohm S.A. was created in 1988 through a
management buyout of the thermal printhead business from Schlumberger Limited
("Schlumberger"). At that time, Axiohm S.A. had annual sales of approximately
$3.0 million. In 1994, Axiohm S.A. purchased from NCR the assets and operations
of NCR's transaction printer business and placed the business in a wholly-owned
U.S. subsidiary, Axiohm IPB.
DH. DH, headquartered in San Diego, California, is a leading designer,
manufacturer and marketer of impact transaction printing mechanisms, impact and
thermal transaction printers, impact printheads and thermal bar code products.
DH has recently broadened its role in transaction products with strategic
acquisitions of a manufacturer of magnetic heads and a manufacturer of card
readers.
COMPETITIVE STRENGTHS
The Company believes that the following factors contribute to the Company's
position as a market leader and are the foundation for the Company's business
strategy:
STRONG OEM RELATIONSHIPS. Through the collaborative development of
application-specific and customizable products for its OEM customers, the
Company has developed numerous strong OEM relationships and a large installed
base of products. These strong relationships and the large installed base of
products provide the Company with a significant level of recurring equipment and
parts sales and service revenue and competitively position the Company to design
and produce improvements or replacement products for its OEM customers. The
Company works closely with its OEM customers during the design stage of each
OEM's product, providing engineering and manufacturing expertise to meet each
OEM's specific needs. The Company's application-specific products are designed
to adhere to OEM specifications, including providing electronic and information
interfaces with the other systems of the OEM's final product, conforming to the
space cavity provided in the OEM's final product and meeting or exceeding
performance, quality and reliability standards.
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LEADING POSITIONS IN GROWING MARKETS. The Company believes it has a strong
position in markets that are experiencing rapid growth. The Company believes it
is a leading manufacturer of application-specific transaction printer mechanisms
and printers for ATMs, gasoline pumps, bank teller stations and POS systems.
BROAD PRODUCT LINE. The Company has one of the broadest product lines in
the transaction printer industry, complemented by its growing presence in bar
code printers and card readers. The Company believes that its strength in the
fundamental transaction printer technologies of impact and thermal printing
combined with its innovative design and manufacturing expertise and technology
provides it with a significant competitive advantage. The Company has developed
and continues to develop many important product enhancements to improve speed,
performance and ease of use and lower the overall cost of its transaction
printers. The Company believes it is the only transaction printer manufacturer
that produces both thermal and impact printheads. Given its broad product line,
the Company believes it is well positioned as one of the few companies in its
industry to offer a comprehensive range of application-specific, customizable
and standard products to meet the needs of its customers by: (i) providing a
single source of supply for transaction products including transaction printers,
mechanisms and card readers; and (ii) enabling its customers to reduce their
development costs and time to market for new products by leveraging the
Company's design and manufacturing expertise and technology.
PROVEN MANAGEMENT TEAM. The Company benefits from a strong and experienced
management team at both the corporate and operating levels. The Company's
Co-Chairmen, Patrick Dupuy and Gilles Gibier, and its Chief Executive Officer,
William H. Gibbs, each have more than 10 years of industry experience. Prior to
the Merger, both Axiohm S.A.'s and DH's senior and operating managers had
successfully increased the net sales of their respective companies through the
integration of new businesses, the introduction of new products, the expansion
of distribution channels and the implementation of various operating
efficiencies. Upon the closing of the Merger, the Company's executive officers
and directors owned approximately 59% of the Company's outstanding shares.
BUSINESS STRATEGY
The Company's strategic objective is to become a global leader in the
design, manufacture and sale of a full array of products to facilitate retail,
financial and commercial transactions. To achieve this objective, the Company
intends to capitalize on its competitive strengths and to pursue the following
strategies:
INTEGRATE AND CROSS-SELL PRODUCT LINES. The Company believes that the
combination of Axiohm S.A.'s and DH's respective product lines will be highly
complementary as each company's primary focus has historically been on different
applications and customers. The Company's broad range of application-specific,
customizable and standard transaction products gives it the opportunity to
increase net sales by cross-selling products. Examples of potential
cross-selling opportunities include: (i) sales of DH POS card readers to Axiohm
S.A. transaction printer customers; and (ii) sales of Axiohm S.A. transaction
printers to DH bar code and card reader customers.
BUILD ON SUCCESSFUL OEM STRATEGY AND RELATIONSHIPS. The Company plans to
expand its OEM business by combining Axiohm S.A.'s and DH's competitive
strengths and innovative products. OEMs are increasingly outsourcing the
manufacture of non-core components such as transaction printers and card readers
to save on development costs, accelerate their time to market for new products
and take advantage of supplier expertise and technology. The Company believes it
is well positioned to capitalize on this trend based on its established OEM
relationships, broad product line, strong design and development capabilities
for application-specific and customizable products and reputation for high
quality products. Axiohm S.A. and DH have each historically benefitted from this
OEM outsourcing trend. In 1994, NCR sold its POS and ATM transaction printer
business to Axiohm S.A. and in 1996 Siemens Nixdorf outsourced its thermal
transaction printer requirements to Axiohm S.A. Hewlett-Packard and Texas
Instruments outsourced the manufacture of their impact printhead needs to DH in
1992 and 1994, respectively.
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INCREASE PENETRATION INTO NON-OEM DISTRIBUTION CHANNELS. The Company plans
to increase its sales and presence in non-OEM sales channels (VARs, distributors
and end-users) by leveraging its expertise in OEM design and manufacturing.
These distribution channels are attractive to the Company for a number of
reasons. For example, the Company can leverage its OEM design and manufacturing
expertise to enhance its standard products. Product features that have been
developed for state-of-the-art application-specific transaction printers for
OEMs can often be developed into standardized stand-alone products for multiple
systems and end-markets. These derivative products can be developed with much
shorter lead times and exhibit lower sales volatility than OEM
application-specific products, which typically are rolled out in larger orders.
The Company believes that its broad product line will also make it attractive to
VARs and distributors who are seeking to limit their suppliers to a core group
of manufacturers with broad product offerings.
EXPAND PRESENCE IN RELATED PRODUCT OFFERINGS. The Company plans to expand
its presence and sales in the growing markets for card readers and bar code
printers.
EXPAND CARD READER BUSINESS. The Company is focused on leveraging its
OEM, VAR, distributor and end-user relationships to establish a significant
presence in the card reader market. Consumers are increasingly using
non-cash alternatives, including credit and debit cards, checks and smart
cards, to make payments in retail, financial and commercial transactions.
These non-cash alternatives require the use of a card reader or scanner to
capture data from the customer. Although DH and Axiohm S.A. have
historically focused on developing transaction printing products (which can
be described as the "output" or "back-end" of a retail, financial or
commercial transaction), DH recently made strategic acquisitions of a
manufacturer of magnetic heads and a manufacturer of card readers in order
to establish a presence in the "input" or "front-end" market. The Company
plans to cross-sell these "front-end" products to the same customers and
end-markets that its sales forces have historically serviced. The Company
believes that the market for its "input" or "front-end" products may have a
greater growth potential than the market for its "output" or "back-end"
products.
EXPAND BAR CODE BUSINESS. The Company believes its bar code product line
is well positioned to benefit from the expanding acceptance and utilization
of bar code products across a variety of industries. The increased use of
bar coding for inventory management, electronic article tracking and
information retrieval has been a major catalyst in the rapid expansion of
the market for bar code products. The Company believes the continuing focus
on efficiency and quality control in various industries, including
industrial manufacturing, consumer products, professional services and
retailing, will continue to increase the total market demand for the bar
code products. To address this expanding market, the Company has recently
introduced new bar code products and is planning to introduce additional bar
code products in 1997 and 1998.
EXPAND GLOBAL PRESENCE. The Company believes it is well positioned to
benefit from the potential increased demand for transaction products in
developing markets based on the Company's strong relationships with global OEMs,
competitive strengths and existing international presence and experience. The
Company believes the markets with the highest growth opportunities for
transaction products in the near future will be in developing regions in
Southeast Asia, Latin America and Eastern Europe. The Company is presently
working with many of its global OEM customers to address the growth potential of
these developing markets. For example, through one of the Company's OEM
customers, the Company recently received an order to provide more than 5,000
application-specific transaction printers for POS systems in Peru. The Company
plans to address these global growth opportunities through its sales force and
its distributors. The Company currently has sales offices in eight countries and
distributor relationships in 32 countries, including several sales offices and
distributor relationships in developing regions.
ACHIEVE SIGNIFICANT OPERATING EFFICIENCIES. The Company believes it can
achieve significant operating efficiencies, cost savings and improved cash flow
by: (i) consolidating raw material purchases to increase purchasing economies of
scale; (ii) eliminating duplicative selling, general and administrative
expenses;
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(iii) redirecting duplicative research and development efforts and eliminating
redundant tooling costs; and (iv) consolidating certain manufacturing and
distribution operations, although there can be no assurances in this regard.
PRODUCTS
The Company's products consist of transaction products, bar code products
and related consumable supplies and services. The Company has historically
received the majority of its revenues from the sales of transaction printers and
printer mechanisms. The Company now offers one of the broadest product lines in
the transaction printer industry and expects to continue to derive a significant
portion of its revenues from sales of transaction printers and printer
mechanisms. The Company has an increasing sales presence in two growing products
markets: (i) magnetic stripe and computer chip card readers which, similar to
transaction printers, are an integral part of transaction activity; and (ii) bar
code printers and related consumable supplies, which are used for automatic
identification and data collection systems.
TRANSACTION PRODUCTS
The Company designs, manufactures and sells the following transaction
products: (i) thermal and impact transaction printers and printer mechanisms as
well as a hybrid thermal/impact transaction printer; (ii) impact printheads; and
(iii) magnetic heads as well as magnetic stripe and computer chip card readers
and card reader modules. Printheads are the part of the printer that actually
creates the image on the paper. Printer mechanisms are application-specific
printers that are designed to be integrated into an OEM final product. Magnetic
heads retrieve from and store data on a magnetic stripe on a credit or debit
card, a check or an airline ticket or boarding pass. Computer chip card readers
retrieve from and store data on integrated circuits ("chips") imbedded on a
card. Card reader modules are card readers that are designed to be integrated
into an OEM final product. While both magnetic stripe and chip cards can be used
for stored value, credit, debit and personal identification applications, a chip
card can store substantially more data and information than a magnetic stripe
card.
TRANSACTION PRINTERS AND PRINTER MECHANISMS. The Company's transaction
printers are largely used in retail, financial and commercial applications. The
Company has a broad offering of transaction printers ranging from basic single
receipt printers, to receipt, slip and journal printers and highly complex
transaction printers incorporating such features as magnetic ink character
recognition ("MICR") check reading. These products are either designed for OEMs
for integration in their final products and systems or as standard products
produced by the Company for non-OEM sales to VARs, distributors and end-users.
The Company has focused on being a solution provider to OEMs for
application-specific transaction printer mechanisms. The Company offers its OEM
customers highly developed, customized mechanisms that are designed into the
OEM's final products and are, consequently, difficult to replace with products
from an alternate supplier. The Company's application-specific products are
designed to adhere to OEM specifications, including providing electronic and
information interface with the other systems of the OEM's final product,
conforming to the space cavity provided in the OEM's final product and meeting
or exceeding performance quality and reliability standards. The Company recently
became the sole global supplier to NCR of thermal printing mechanisms for its
ATM requirements.
IMPACT PRINTHEADS. The Company believes it is the world's largest
non-captive designer, manufacturer and marketer of impact printheads. The
Company's impact printhead products range from 7 to 42 wires per head and 200 to
1200 characters per second in print speeds. Impact printheads are used in a
multitude of transaction printing applications, such as POS receipts, bank
transaction printing, lottery tickets, entertainment tickets and airline
tickets. In addition, the Company's impact printheads are used in a variety of
non-transaction printing applications, including office automation and data
processing.
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Technological advances by the Company and others now enable impact
printheads to print text at speeds up to 1200 characters per second and print
multiple text sizes and fonts in draft quality or letter quality under software
control. The Company's strategy has been to convince large OEM impact printhead
manufacturers to outsource their development and manufacturing of impact
printheads to the Company as impact transaction printheads become less of a
product focus for these OEMs, thus allowing the Company to expand its impact
printhead business even though the market for impact printheads in higher-end
applications is declining. The Company believes it is the preferred alternative
supplier for impact printheads in the industry for three primary reasons: (i)
the Company is a low cost provider of impact printheads; (ii) the Company's
impact printheads are highly reliable and benefit from a reputation for quality;
and (iii) the Company is a technology leader in impact printheads with respect
to speed and print density.
The Company also sells replacement printheads and utilizes its expertise in
printhead design and manufacturing to support its printhead repair and
replacement operations.
MAGNETIC HEADS AND CARD READERS. The Company manufactures magnetic heads,
as well as magnetic stripe and computer chip card readers and card reader
modules, all of which are utilized in the "input" or "front-end" of transaction
activity. The Company's card reader products read either magnetic stripe cards
or computer chip cards, and in some cases both magnetic stripe and computer chip
cards. The Company entered the magnetic head and the card reader markets through
two strategic acquisitions in late 1995 and early 1997. The Company believes
that these "input" or "front-end" transaction products complement the Company's
expertise and leading position in the "output" or "back-end" printing segment of
transaction activity.
BAR CODE PRODUCTS
The Company's bar code products are primarily utilized in commercial, retail
and service environments to print labels and bar codes to automate the
collection of information. Typical applications include product identification,
inventory control, work order tracking and shipping and receiving in retail,
hospital and pharmaceutical, industrial, materials handling, and car and
equipment rental industries. The Company's bar code printer products incorporate
direct thermal and thermal transfer technology into a wide range of products,
including compact desktop printers designed for medium volume printing
requirements, portable printers for on-demand printing, industrial printers
designed for high volume printing and/or harsh environment printing,
continuous-feed printers and print and apply products for wholesale and
industrial applications that automatically apply bar code labels in high speed
packaging environments. In addition, the Company supplies a full range of
related supplies including stock and custom bar code labels as well as other
custom label products and software.
PRODUCT DEVELOPMENT
The Company believes it is a leader in the development of both impact and
thermal transaction printers. The Company's product development activities are
targeted at both existing and new applications. A variety of engineering skills
are required in the development of the Company's products, and the Company
maintains expertise in mechanical, electrical, firmware and software engineering
disciplines. As of September 30, 1997, the Company had 164 employees dedicated
to research and development and spent $10.8 million and $12.5 million,
respectively, in 1995 and 1996 for research and development.
Most of the product and product feature innovations developed by the Company
arise out of creative mechanical and electrical engineering approaches and close
cooperation between the sales and marketing and engineering divisions. Customers
generally inform the Company of their transaction printing requirements, but
generally depend upon the Company to design a product that is suitable for the
desired application. For its OEM customers, the Company's engineers work closely
with each OEM's design and engineering department to provide a comprehensive,
application-specific transaction printer solution. For
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its standardized and customizable products, the Company uses industry knowledge
gained from its work with OEM customers to develop new product applications in
consultation with potential customers.
The Company has developed many technologies and improvements in the field of
transaction printing and processing to improve speed, performance and ease of
use and to reduce the overall cost of its transaction printers. Such
improvements include innovations in the areas of paper loading, paper cutters,
print speeds, check processing incorporating MICR and proprietary software
drivers that are compatible with various hardware platforms and the Windows 95,
Windows NT and OLE for Point-of-Sale Operating Systems. In 1996 and 1997, the
Company's new product introductions included low-cost thermal and impact
printers, a liner-less bar code label printer, a lower-cost general purpose bar
code printer, an Ethernet bar code printer, an easy-load, multi-station POS
impact printer, a high speed thermal printer and the first clamshell shuttle
printer. In addition, the Company plans to launch the following new products in
1998: a new paper transport for gasoline pumps, ATMs and kiosk applications; the
next generation POS multi-station printer; and the smallest clamshell (easy
loading) printer mechanism in the POS market. The Company is also actively
developing inkjet printhead technology for the next generation of its
transaction printers.
The Company holds various U.S. and foreign patents on impact and thermal
printheads, transaction printers and printing mechanisms and has various U.S.
and foreign patent applications pending.
SALES AND MARKETING
The Company sells its products to OEMs, VARs, distributors and end-users.
For each of the year ended December 31, 1996 and the nine months ended September
30, 1996, approximately 70% of its pro forma net sales were derived from OEMs,
with the remaining sales largely split equally among VARs and distributors and
direct sales to end-users. Due to the wide variety of end-users and applications
for the Company's transaction and bar code printers and card reader products,
the Company believes that it is effective to sell through multiple VARs and
distributors with defined market niche expertise and presence as well as to OEMs
and end-users. OEMs and VARs provide customers with a variety of POS components
(including printers), accessories, application software and systems integration
expertise. Some OEMs, such as NCR, resell the Company's products under their own
brand names.
The Company maintains sales offices in the United States, France, Germany,
the United Kingdom, Australia, Taiwan, China and Japan and also sells through
distributors in 32 countries in order to reach its worldwide customer base. The
Company employs a collaborative approach to sales and marketing, focusing the
efforts of its sales, engineering and manufacturing resources to present its
products and capabilities to its customers.
The Company develops application-specific, customizable and standardized
products. Application-specific products are typically developed for one OEM or
end-user customer. The process to develop and produce application-specific
products typically takes 12 to 18 months. Depending on the product, life cycles
are approximately four to eight years. In the case of the development of a
printer mechanism, the Company has historically been insulated from competition
for approximately five years since it is expensive and time-consuming for OEMs
to change suppliers. The OEM would be required to reconfigure its cabinetry
tools, electronic hardware and software to the specifications of a particular
printer mechanism. In addition, the product produced by the new supplier would
have to undergo extensive product testing for reliability. The Company's OEM
application-specific products also establish an opportunity for recurring
equipment and parts sales as well as service revenue following the introduction
of application-specific products.
The Company develops standard products for a variety of applications that
are sold to VARs, distributors and end-users. In some cases, the Company
develops standard products as derivatives of application-specific products or
product features previously developed for OEMs. The process to develop and
produce standard products is typically shorter than application-specific
products. The unit volumes for
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standard products tend to be smaller but the number of customers is much greater
than that of application-specific products and therefore the Company sells many
of its standard products through distributors.
In addition to specific direct customer marketing efforts, the Company
exhibits at major international trade shows. These trade shows are used to
introduce new products, develop customer leads and help expand the Company's
sales to VARs and distributors. The Company also advertises in major trade
publications.
As of September 30, 1997, the Company had 126 employees in its sales and
marketing organization.
CUSTOMERS
TRANSACTION PRINTERS AND PRINTER MECHANISMS. The Company sells its
transaction printers to OEMs, VARs, distributors and end-users and its printer
mechanisms to OEMs. The Company's largest customers for transaction printers and
printer mechanisms in 1996 were NCR, FDC, Dresser Industries, Schlumberger and
IBM. Application-specific printer mechanisms are typically developed for and
sold to one OEM customer for integration into the OEM's final products. Some
OEMs, such as NCR, resell the Company's transaction printers under their own
brand names.
IMPACT PRINTHEADS. The Company sells impact printheads to OEMs for various
transaction and non-transaction applications and has benefitted from the trend
among OEMs of outsourcing the production of non-core components. The Company's
largest impact printhead customers in 1996 were IBM, VeriFone, Texas Instruments
and Siemens-Nixdorf.
CARD READERS. The Company sells its magnetic stripe and computer chip card
reader products to OEMs, VARs, distributors and end-users. The Company's largest
card reader customers in 1996 were Northern Telecom and Bank of America.
BAR CODE PRODUCTS. The Company sells its bar code products to VARs,
distributors and end-users. The Company's VAR and distributor customers enhance
the value of the Company's bar code products by adding software and service. The
Company's largest bar code customers in 1996 were Nordstrom, General Motors and
Home Depot.
Sales to NCR, the Company's largest customer, represented 23% and 26%,
respectively, of pro forma net sales for the year ended December 31, 1996 and
the nine months ended September 30, 1997. No other customer accounted for more
than 10% of pro forma net sales for the year ended December 31, 1996 or the nine
months ended September 30, 1997.
COMPETITION
The markets in which the Company competes are extremely competitive and the
Company expects that competition will increase. The Company believes the
principal competitive factors in its business are product features, price,
product reliability, ability to meet customer delivery schedules, customer
service and support, reputation and distribution. The Company believes that it
competes favorably with respect to each of these factors. The Company competes
with other manufacturers of transaction products and bar code products,
including in some cases the captive suppliers of some of its OEM customers. Many
of the Company's competitors have significantly greater financial and other
resources than the Company and may have greater access to distribution channels.
The Company's future prospects will be highly dependent upon the successful
development and introduction of new products that are responsive to market
needs. There can be no assurance that the Company will be successful in
developing or marketing such products. To remain competitive, the Company
believes that it will be required to maintain a high level of technological
expertise and deliver reliable, cost-effective products on a timely basis. There
can be no assurance that the Company will have sufficient resources to continue
to make the investments necessary to maintain its competitive position. A
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failure to remain competitive would have a material adverse effect on the
Company's business, financial condition and results of operations.
MATERIALS
The Company's materials purchases are primarily comprised of custom-designed
component parts used in the assembly of the Company's products, most of which
use tooling designed and owned by the Company. The Company's principal
custom-designed component parts include printed circuit boards, plastic
injection molded parts, power supplies, metal stampings and motors, among other
items. The Company purchases its component parts from a variety of suppliers,
and believes alternate sources of supply are readily available.
MANUFACTURING
The Company manufactures its thermal printheads in Puiseaux, France and its
impact printheads and magnetic heads in Tijuana, Mexico. Transaction printers
and mechanisms are manufactured in Puiseaux; Ithaca, New York; Riverton,
Wyoming; and Manchester, England. Bar code printers are manufactured in Paso
Robles, California; and bar code printing labels and supplies in are produced in
Denver, Colorado. Magnetic stripe and computer chip card readers are
manufactured in Carson, California.
The Company manufactures its products to exacting quality standards.
Accordingly, the Company maintains an extensive quality assurance program,
including precision computerized final testing of all printheads and extensive
burn-in testing for transaction printers and mechanisms and its bar code
products.
The Company's San Diego, Tijuana, Ithaca and Riverton facilities are
certified ISO 9001, and the Manchester and Puiseaux facilities are certified ISO
9002.
The Company began manufacturing impact printheads in Mexico in 1986 to
benefit from a more cost-effective location. Currently, the Company manufactures
all of its impact printheads in Mexico. The Company is in the process of moving
its magnetic stripe and computer chip card reader manufacturing operations from
Carson to Tijuana to benefit from lower labor and occupancy costs. The Company
has taken a $1.2 million one-time charge for severance, relocation and other
integration costs associated with the move of its card reader manufacturing
operations.
The Company has made a significant historical capital investment in its
clean room operations in Puiseaux, France for the manufacture of thermal
printheads. This facility is the world's only integrated thermal printhead
manufacturing facility owned and operated by a transaction printer manufacturer.
56
<PAGE>
FACILITIES
The following table sets forth the Company's existing manufacturing and
other facilities:
<TABLE>
<CAPTION>
LEASE
LOCATION PURPOSE EXPIRATION DATE SQUARE FEET
- ----------------------------------------- ----------------------------------------- --------------- -----------
<S> <C> <C> <C>
San Diego, California.................... Executive offices, marketing, engineering 2000/2001 22,500
Sevres, France........................... Executive offices 2006 3,500
Montrouge, France........................ Marketing and research and development 2006 25,000
Riverton, Wyoming........................ Manufacturing, marketing, research and 2002 40,000
development
Paso Robles, California.................. Manufacturing, marketing, research and 1998 45,000
development
Carson, California....................... Manufacturing, research and development 1998 30,000
Denver, Colorado......................... Manufacturing, marketing, research and 2004 25,000
development
Tijuana, Mexico.......................... Manufacturing --(1) 27,000
10,500
Ithaca, New York......................... Manufacturing, marketing, research and Owned 270,000
development, administration
Puiseaux, France......................... Manufacturing 2010 75,000
Manchester, England...................... Manufacturing Owned 12,000
Sydney, Australia........................ Marketing, technical support 2003 7,180
</TABLE>
- ------------------------
(1) The Company leases its Tijuana facilities on a month-to-month basis.
The Company does not own any facilities other than the Manchester and Ithaca
facilities. The term of the Montrouge facility lease expires in June 2006;
however, under French law, the Company has the option to terminate the lease in
June of 2000 or 2003, without penalty. The Puiseaux facility is occupied under a
capitalized lease that commenced in 1995 and terminates in 2010. Pursuant to the
terms of the Puiseaux lease, the Company is committed to make payments through
the end of the term, but will be able to purchase the facility at the end of the
term for the sum of one French franc.
The Company believes that its existing facilities are generally suitable and
adequate for its businesses and has generally been able to renew its
manufacturing and office facilities leases as they expire at then-current market
rates. The Company believes that renewal of existing leases at market rates will
not have a material adverse effect on operating expenses or cash flow.
ENVIRONMENTAL MATTERS
Federal, state, local and foreign regulations impose various controls on the
storage, handling, discharge and disposal of substances used in the Company's
manufacturing processes and on the Company's facilities. The Company believes
that its activities conform to present governmental regulations applicable to
its operations and its current facilities, including those related to
environmental, land use, public utility utilization and fire code matters. There
can be no assurance that such governmental regulations will not in the future
impose the need for additional capital equipment or other process requirements
upon the Company or restrict the Company's ability to expand its operations. The
adoption
57
<PAGE>
of such measures or any failure by the Company to comply with applicable
environmental and land use regulations or to restrict the discharge of hazardous
substances could have a material adverse effect on the Company's business,
financial condition and results of operations.
LEGAL PROCEEDINGS
In August 1992, DH filed a complaint in the Northern District of California
alleging infringement of DH's U.S. Patent No. 5,115,493 by Synergystex and
seeking injunctive relief and unspecified damages. Synergystex subsequently
asserted a counterclaim against DH alleging that U.S. Patent No. 5,115,493 is
invalid, unenforceable and not infringed. In August 1996, the District Court
granted a Motion for Summary Judgment, finding on its own motion that DH's
patent was invalid for improper payment of a small entity fee and entered a
judgment dismissing DH's complaint. In November 1996, DH appealed the District
Court's judgment to the Federal Circuit Court of Appeals. After DH filed its
opening brief on appeal, the Federal Circuit Court of Appeals stayed the appeal
pending a collateral ruling from the district court. That ruling was recently
issued, and the Federal Circuit has reactivated the appeal. There can be no
assurance that the Company will prevail in this litigation or that it will not
incur significant legal fees and expenses to further pursue this litigation.
On June 17, 1997, Axiohm S.A. filed a complaint in the Central District of
California alleging infringement of Axiohm S.A.'s U.S. Patent No. 5,579,043 by
Seiko Epson and Epson America. By a letter dated June 27, 1997, Seiko Epson
suggested that the parties meet to discuss the patent at issue as well as two
Seiko Epson patents. On August 7, 1997, settlement discussions took place and in
that context Seiko Epson alleged validity defenses to the complaint and
potential counterclaims based on its own patents. Settlement discussions are
continuing. Although the Company believes its claims are meritorious, if the
Company were to pursue litigation against Seiko Epson or Epson America, such
litigation could be costly and time-consuming and could result in infringement
and other claims being made against the Company. In the event of an adverse
result in such litigation, the Company could be required to pay substantial
damages; indemnify its customers; cease the manufacture, use and sale of any
infringing products; expend significant resources to develop non-infringing
technology; discontinue the use of certain technology or obtain licenses to any
infringing technology; any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will ultimately prevail in any litigation with
Seiko Epson or Epson America.
From time to time the Company is involved in legal proceedings arising in
the ordinary course of its business. The Company does not believe that the
outcome of any such legal proceedings will have a material adverse effect on its
business, financial condition or results of operations.
EMPLOYEES
As of September 30, 1997, the Company had 1,683 full-time employees.
Approximately 126 of these employees were involved in sales and marketing, 164
in research and development, 1,108 in manufacturing and 285 in administration.
Other than the 213 hourly production and manufacturing employees (as of
September 30, 1997) at the Ithaca, New York manufacturing facility, no United
States employees of the Company are represented by a labor union. The Company's
Ithaca employees are members of the International Association of Machinists and
Aerospace Workers. There is a collective bargaining agreement in place with this
union until July 1999. To date, the Company has not experienced any work
stoppages or significant employee-related problems at its Ithaca, New York
manufacturing facility. The Company considers its relationship with the union
and its other employees to be satisfactory.
58
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company following the
Transactions, and their respective ages, are as set forth in the table below.
<TABLE>
<CAPTION>
NAME AGE TITLE
- -------------------------------------------------- --- --------------------------------------------------------
<S> <C> <C>
Patrick Dupuy..................................... 44 Co-Chairman of the Board of Directors
Gilles Gibier..................................... 43 Co-Chairman of the Board of Directors
William H. Gibbs.................................. 53 President, Chief Executive Officer and Director
Walter S. Sobon................................... 48 Chief Financial Officer
David T. Ledwell.................................. 50 Vice President of Indentification and Component Products
Malcolm Unsworth.................................. 47 Vice President of Operations
Bernard Patry..................................... 45 Vice President of Sales and Marketing of Transaction
Products
William J. Bowers................................. 68 Director
Nicolas Dourassof................................. 42 Director
Bruce G. Klaas.................................... 64 Director
Donald M. Lyle.................................... 57 Director
</TABLE>
MR. DUPUY has served as a director and Co-Chairman of the Company since
August 1997. Mr. Dupuy has been Chairman of Axiohm S.A. since its purchase from
Schlumberger by Axiohm S.A. management in 1988. Mr. Dupuy joined Schlumberger in
1984 as Marketing and Sales Manager for several Schlumberger divisions,
including printer products and low voltage equipment. Prior to joining
Schlumberger, Mr. Dupuy was employed as head of export sales for IER S.A., a
world leader in airline ticket printers.
MR. GIBIER has served as a director and Co-Chairman of the Company since
August 1997. Mr. Gibier has been a director of Axiohm S.A. since its purchase
from Schlumberger by Axiohm S.A. management in 1988. Mr. Gibier joined
Schlumberger in 1983. Mr. Gibier held various positions at Schlumberger,
including Divisional General Manager in France, where he was responsible for
divesting certain non-strategic operations, Manager of Internal Business Audit
in the U.S., and Plant Manager of an energy meter plant in the United Kingdom.
MR. GIBBS has served as the President and Chief Executive Officer of the
Company since November 1985 and served as Chairman of the Board of Directors of
the Company from February 1987 through August 1997. From August 1983 until
November 1985, Mr. Gibbs served as President and Chief Operating Officer of
Information Magnetics Corporation. From 1977 to 1983, Mr. Gibbs served as
Divisional Vice President and General Manager of Datapoint Corporation. From
1967 to 1977, Mr. Gibbs held numerous management positions with General
Electric.
MR. SOBON has served as the Chief Financial Officer of the Company since
March 1997. From November 1995 to March 1997 Mr. Sobon was an independent
management consultant. From October 1989 to November 1995, Mr. Sobon served as
the Senior Vice President, Chief Financial Officer and Corporate Secretary of
VWR Scientific Products Corporation, a laboratory products company. Mr. Sobon is
a certified public accountant.
MR. LEDWELL has served as Vice President of Identification and Component
Products for the Company since September 1997. He was Executive Vice President
of Transaction Products for DH from March 1997 to September 1997. Prior to
joining DH in 1986, Mr. Ledwell was General Manager of Mexico Operations at
Information Magnetics Corporation and previously held various management
positions at Datapoint Corporation.
59
<PAGE>
MR. UNSWORTH has served as Vice President of Operations for the Company
since September 1997. He was the Vice President and General Manager of Axiohm
IPB from April 1995 to September 1997. Prior to joining Axiohm IPB, Mr. Unsworth
worked for Schlumberger for 17 years in various North American General Manager
positions including the Retail Petroleum Systems Division, the Transducer
Division, the Electricity Measurement Division and the Defense Systems Group. In
two of these positions, Mr. Unsworth was the immediate General Manager following
the acquisition of the businesses by Schlumberger and led the consolidation and
rationalization activity of numerous businesses within each group.
MR. PATRY has served as a director of Axiohm S.A. since 1988. Mr. Patry has
served as Vice President of Sales and Marketing of Transaction Products for the
Company since September 1997. He was the Vice President of Sales for Axiohm
S.A., from 1996 to September 1997. From 1991 to 1995, Mr. Patry was the Chief
Executive Officer of Axiohm S.A. and from 1995 to 1996, he was Vice President of
Marketing and Business Development of Axiohm S.A.
MR. BOWERS has served as a director of the Company since 1988. Mr. Bowers
was Chief Executive Officer and Chairman of MSI Data Corporation, a data
collection company, for more than five years prior to 1988. He retired from that
position in 1988 and is now a private investor. Mr. Bowers is also a director of
Quality Systems, Inc.
MR. DOURASSOF has served as a director of the Company since October 1997,
and as a director of Axiohm S.A. since 1996. Mr. Dourassof is currently a
Managing Director of ABN AMRO Investissement, the investment subsidiary of ABN
AMRO (a Dutch bank), a position he has held since 1996. Prior to joining ABN
AMRO Investissement, Mr. Dourassof had served since 1995 as the Director of the
Acquisition Financing Department of Banque De Neuflize, Schlumberger Mallet, a
subsidiary of ABN AMRO.
MR. KLAAS has been a director of the Company since 1983, and is a private
investor and a patent lawyer. He has been of counsel to the law firm of Klaas,
Law, O'Meara and Malkin, P.C., Denver, Colorado, one of the Company's patent
counsels, since December 1990, when he retired from the active practice of law.
MR. LYLE has been a director of the Company since 1992. Since 1983, Mr. Lyle
has been an independent consultant to a number of technology-based companies in
the United States, Europe and Japan. From 1984 through 1987, Mr. Lyle was
President and Chief Executive Officer of Data Electronics, Inc. Mr. Lyle is also
a director of Emulex Network Systems.
All non-employee directors receive a $6,000 annual retainer plus $1,250 for
each Board of Directors meeting attended and for each committee meeting which
did not occur on a regularly scheduled date.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLES
The following table shows the total compensation of (i) the Chief Executive
Officer and (ii) all other executive officers of DH who earned over $100,000 in
salary and bonus in 1996 (together the "DH Named Executive Officers"), as well
as the total compensation paid to each such individual for the Company's two
previous fiscal years:
60
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
--------------------------------------------------- RESTRICTED SECURITIES ---------
OTHER ANNUAL STOCK UNDERLYING LTIP
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS
POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------------------------- --------- ----------- ----------- -------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William H. Gibbs..................... 1996 $ 285,000 $ 44,599 -- -- -- --
Chief Executive Officer 1995 274,998 155,000 -- -- 150,000 --
1994 257,986 138,000 -- -- 150,000 --
David T. Ledwell..................... 1996 $ 132,981 $ 35,000 -- -- -- 22,500 --
Executive Vice President, 1995 121,831 42,500 -- -- 7,500 --
Transaction Products 1994 115,283 31,000 -- -- --
Janet W. Shanks...................... 1996 $ 85,488 $ 20,000 -- -- -- --
Corporate Controller 1995 67,575 20,500 -- -- 15,000 --
1994 69,087 11,000 -- -- 7,500 --
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($) (1)
- ------------------------------------- --------------
<S> <C>
William H. Gibbs..................... 1$,784 1,510
Chief Executive Officer 1,357
David T. Ledwell..................... $ 959
Executive Vice President, 820
Transaction Products 982
Janet W. Shanks...................... $ 568
Corporate Controller 474
576
</TABLE>
- ------------------------
(1) Represents payments of insurance premiums on behalf of the DH Named
Executive Officers.
The foregoing table does not reflect the compensation paid to the executive
officers of Axiohm S.A. during the past two fiscal years. During this period,
only one executive officer of Axiohm S.A. earned more than $150,000 per year.
The following table sets forth certain information for the DH Named
Executive Officers with respect to exercises in 1996 of options to purchase
Common Stock of DH. The information in the table does not reflect the cash-out
of all vested options by the Company upon the closing of the Tender Offer. See
"Certain Transactions--Transactions in Connection with the Tender Offer, the
Merger and the Exchange--Treatment of DH Stock Options and Director Warrants."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS
UNDERLYING UNEXERCISED AT FISCAL
OPTIONS AT FISCAL YEAR END YEAR END (1)
SHARES VALUE (#) ($)
ACQUIRED ON REALIZED -------------------------- -------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ----------------------------------------- ----------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
William H. Gibbs......................... -- -- 542,807 154,693 $ 8,278,844
David T. Ledwell......................... -- -- 33,750 22,500 484,687
Janet W. Shanks.......................... -- -- 12,000 16,125 141,622
<CAPTION>
NAME UNEXERCISABLE
- ----------------------------------------- -------------
<S> <C>
William H. Gibbs......................... $ 1,227,381
David T. Ledwell......................... 168,436
Janet W. Shanks.......................... 126,308
</TABLE>
- ------------------------
(1) Market value of underlying securities at year-end minus the exercise price
multiplied by the number of shares.
The foregoing table does not reflect stock options exercised during 1996 or
the value of stock options held by the executive officers of Axiohm S.A. at
December 31, 1996. There were no stock options exercised by any executive
officers of Axiohm S.A. during 1996. At December 31, 1996, the only stock option
outstanding was an option to purchase 1,583 shares of Axiohm S.A. common stock
held by Mr. Unsworth. Upon the closing of the Exchange, this option was replaced
by an option to purchase 231,118 shares of the Company's Common Stock at an
exercise price of $7.15 per share. See "Certain Transactions--Transactions in
Connection with the Tender Offer, the Merger and the Exchange--Treatment of
Axiohm S.A. Options." The Merger Agreement contemplates that the Compensation
Committee will grant stock options to purchase up to an aggregate of 350,000
shares of the Company's Common Stock at fair market
61
<PAGE>
value on the date of grant during the first six months following the Merger. See
"Certain Transactions-- Transactions in Connection with the Tender Offer, the
Merger and the Exchange--Grant of Additional Stock Options."
EMPLOYMENT AGREEMENTS
In connection with the Transactions, the Company entered into employment
agreements with Messrs. Gibbs, Sobon and Ledwell and Ms. Shanks.
The Employment Agreement with Mr. Gibbs (the "Gibbs Agreement") provides for
Mr. Gibbs to be employed as the Company's Chief Executive Officer at a base
salary of no less than $225,000. Mr. Gibbs is also eligible to receive a minimum
target bonus equal to 50% of his base salary to be awarded based on the
Company's financial performance and is entitled to a car allowance and to
participate in other employee benefit plans and programs available to the
Company's other employees. The Gibbs Agreement does not specify any term of
employment. The Gibbs Agreement also contemplates that he will be granted an
option to purchase a number of shares of the Company's Common Stock as
determined by the Compensation Committee of the Board of Directors at an
exercise price which shall be equal to the then fair market value of the
Company's Common Stock. The option shall vest as to 50% of the shares 24 months
following the grant date and as to an additional 1/48th of the shares each month
thereafter. In the event Mr. Gibbs' employment with the Company terminates in an
Involuntary Termination (as defined in the Gibbs Agreement), Mr. Gibbs shall
receive a lump sum severance payment equal to two years' compensation if
terminated in the first 12 months, 18-months' compensation if terminated in the
second 12 months and 12-months' compensation if terminated thereafter. In
addition, in the event Mr. Gibbs' employment is terminated as a result of an
Involuntary Termination, disability or death, the vesting and exercisability of
all outstanding stock options that were granted to Mr. Gibbs prior to August 21,
1997 (the closing date of the Tender Offer) shall accelerate in full. The Gibbs
Agreement supersedes a prior Employment Agreement between DH and Mr. Gibbs dated
December 31, 1985.
The Employment Agreement with Mr. Sobon (the "Sobon Agreement") provides for
Mr. Sobon to be employed as the Company's Chief Financial Officer at a base
salary of no less than $160,000. Mr. Sobon is also eligible to receive a minimum
target bonus of $50,000, to be awarded based on the Company's financial
performance and is entitled to a car allowance and to participate in other
employee benefit plans and programs available to the Company's other employees.
The Sobon Agreement also contemplates that he will be granted an option to
purchase a number of shares of the Company's Common Stock as determined by the
Compensation Committee of the Board of Directors at an exercise price which
shall be equal to the then fair market value of the Company's Common Stock. The
option shall vest as to 50% of the shares 24 months following the grant date and
as to an additional 25% of the shares each year thereafter. In the event Mr.
Sobon's employment with the Company terminates in an Involuntary Termination (as
defined in the Sobon Agreement), Mr. Sobon shall receive a lump sum severance
payment equal to 12-months' compensation, except that (i) in the event that Mr.
Gibbs' employment is terminated in the first 12 months following August 21, 1997
(the closing date of the Tender Offer) and Mr. Sobon is terminated in the same
12-month period, Mr. Sobon shall receive a lump sum severance payment equal to
18-months' compensation and (ii) in the event that Mr. Gibbs' employment is
terminated in the second 12 months following August 21, 1997 (the closing date
of the Tender Offer) and Mr. Sobon is terminated in the same 12-month period,
Mr. Sobon shall receive a lump sum severance payment equal to 15-months'
compensation. In addition, in the event Mr. Sobon's employment is terminated as
a result of an Involuntary Termination, disability or death, the vesting and
exercisability of all outstanding stock options that were granted to Mr. Sobon
prior to August 21, 1997 (the closing date of the Tender Offer) shall accelerate
in full. The Sobon Agreement supersedes the employment arrangement between the
Company and Mr. Sobon as set forth in a letter from the Company to Mr. Sobon
dated September 20, 1996 and amended September 30, 1996.
The Employment Agreement with Mr. Ledwell (the "Ledwell Agreement") provides
for Mr. Ledwell to be employed at a base salary of no less than $160,000. Mr.
Ledwell will also be eligible to receive a
62
<PAGE>
minimum target bonus equal to $40,000, to be awarded based on the Company's
financial performance and will be entitled to participate in other employee
benefit plans and programs available to the Company's other employees. The
Ledwell Agreement also provides that, in the event that Mr. Ledwell's employment
with the Company terminates in an Involuntary Termination (as defined in the
Ledwell Agreement), Mr. Ledwell shall receive a lump sum severance payment equal
to two years' compensation, if terminated in the first 24 months and 12-months'
salary if terminated thereafter. The Ledwell Agreement provides that Mr. Ledwell
will be granted an option to purchase a number of shares of the Company's Common
Stock as determined by the Compensation Committee of the Board of Directors at
an exercise price equal to the then fair market value of the Company's Common
Stock. The option shall vest as to 50% of the shares 24 months following the
grant date and as to an additional 25% of the shares each year thereafter. In
addition, the Ledwell Agreement provides that, in the event Mr. Ledwell's
employment is terminated as a result of an Involuntary Termination, disability
or death, the vesting and exercisability of all outstanding stock options that
Mr. Ledwell received prior to August 21, 1997 (the closing date of the Tender
Offer) shall accelerate in full.
The Employment Agreement with Ms. Shanks (the "Shanks Agreement") provides
for Ms. Shanks to be employed at a base salary of no less than $90,000. Ms.
Shanks will also be eligible to receive a minimum target bonus equal to 50% of
her base salary, to be awarded based on the Company's financial performance, and
will be entitled to participate in other employee benefit plans and programs
available to the Company's other employees. The Shanks Agreement also provides
that, in the event that Ms. Shanks' employment with the Company terminates in an
Involuntary Termination (as defined in the Shanks Agreement), Ms. Shanks shall
receive a lump sum severance payment equal to one year's compensation if
terminated in the first 24 months and 6-months' salary if terminated thereafter.
The Shanks Agreement provides that Ms. Shanks will be granted an option to
purchase a number of shares of the Company's Common Stock as determined by the
Compensation Committee of the Board of Directors at an exercise price equal to
the then fair market value of the Company's Comon Stock. The option shall vest
as to 50% of the shares 24 months following the grant date and as to an
additional 25% of the shares each year thereafter. In addition, the Shanks
Agreement provides that, in the event Ms. Shanks' employment is terminated as a
result of an Involuntary Termination, disability or death, the vesting and
exercisability of all outstanding stock options that Ms. Shanks received prior
to August 21, 1997 (the closing date of the Tender Offer) shall accelerate in
full.
ADDITIONAL AGREEMENTS, ARRANGEMENTS AND UNDERSTANDINGS
The Company's Restated Articles of Incorporation contain provisions that
eliminate the personal liability of its directors for monetary damages arising
from a breach of their fiduciary duties in certain circumstances to the fullest
extent permitted by law and authorize the Company to indemnify its directors and
officers to the fullest extent permitted by law. Such limitation of liability
does not affect the availability of equitable remedies such as injunctive relief
or rescission.
The Company's By-laws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law. The Company has entered into indemnification agreements with its
officers and directors containing provisions which are in some respects broader
than the specific indemnification provisions contained in the California
Corporations Code, including advancement of expenses to the indemnitee, the
indemnitee's right to select counsel and continuation of indemnification after
indemnitee's separation from the Company. The indemnification agreements may
require the Company, among other things, to indemnify such officers and
directors against certain liabilities arising from willful misconduct of a
culpable nature and advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
63
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS IN CONNECTION WITH THE TENDER OFFER, THE MERGER AND THE EXCHANGE
TREATMENT OF DH STOCK OPTIONS AND DIRECTOR WARRANTS
Pursuant to the Merger Agreement, upon payment of the purchase price of $25
per share (the "Offer Price") for the 7,000,000 shares of DH Common Stock (the
"Tendered Shares") acquired by Purchaser pursuant to the Tender Offer on August
21, 1997 (the "Tender Offer Closing Date"), all Vested DH Options (as
hereinafter defined), other than DH Options held by Mr. Gibbs, Mr. Sobon and Mr.
Ledwell (the "Designated Optionees"), were canceled and each holder thereof was
paid an amount in cash by DH equal to the product of (i) the number of shares of
DH Common Stock subject to Vested DH Options held by such holder and (ii) the
Offer Price minus the exercise price applicable to such Vested DH Options (the
"Option Spread"), less applicable taxes. The Designated Optionees had the option
to elect, before the Tender Offer Closing Date, to be covered under the
preceding sentence as to all or any portion of their Vested DH Options or to
receive the Option Spread on a deferred basis over a period not to exceed seven
years following the time of closing of the Merger (the "Merger Effective Time"),
subject to earlier distribution upon termination of such individual's employment
for any reason. Pursuant to the Merger Agreement, DH also agreed to pay a tax
subsidy payment on the Option Spread consisting of (i) a payment to reflect the
federal and state tax rate differential between long-term capital gains and
ordinary income and (ii) a payment to reimburse each optionee for taxes due as a
result of the rate differential payment, provided that such tax subsidy payment
is limited so as to avoid triggering the golden parachute excise tax under
Sections 280G and 4999 of the Internal Revenue Code. For purposes of the
foregoing, "Vested DH Options" means: (i) all stock options to purchase shares
of Common Stock of DH ("DH Options") that were exercisable as of the Tender
Offer Closing Date or that would have become exercisable through September 6,
1997; (ii) one-half of all DH Options granted to Mr. Sobon as of the date of the
Merger Agreement; and (iii) all warrants outstanding under DH's Director Warrant
Plan (the "Director Warrants").
Pursuant to the foregoing arrangements, on the Tender Offer Closing Date, DH
purchased Vested DH Options exercisable for 877,000 shares of DH Common Stock
for an aggregate purchase price of $12.2 million. Of this total, DH acquired
624,578 Vested DH Options from Mr. Gibbs for a total purchase price of
$9,667,241; 40,000 Vested DH Options from Mr. Sobon for a total purchase price
of $380,000; and 43,125 Vested DH Options from Mr. Ledwell for a total purchase
price of $612,189. In addition, on the Tender Offer Closing Date, DH purchased a
total of 56,250 Director Warrants for an aggregate purchase price of $1,016,626.
Of this total, DH acquired 14,250 Director Warrants from Mr. Bowers for a total
purchase price of $88,406; 15,750 Director Warrants from Mr. Klaas for a total
purchase price of $105,656; 5,250 Director Warrants from Mr. Lyle for a total
purchase price of $8,531; and 21,000 Director Warrants from Mr. Ryan for a total
purchase price of $187,031.
Pursuant to the Merger Agreement, all DH Options other than Vested DH
Options ("Unvested DH Options") remained outstanding and subject to the terms
and conditions of the applicable DH option plan and option agreement, but were
modified to provide for full vesting acceleration in the event the employee's
employment is terminated (i) by DH other than for cause, or (ii) as the result
of the employee's death or disability. Unvested DH Options held by Mr. Gibbs,
Mr. Sobon and Mr. Ledwell were also modified to provide for acceleration upon a
constructive termination of employment. See "Management-- Employment
Agreements." In the event DH engages in a transaction prior to April 1, 2001, as
a result of which DH's Common Stock is no longer registered under the Exchange
Act, each holder of Unvested DH Options shall be entitled to receive from DH a
cash payment equal to the product of (i) the number of shares subject to
Unvested DH Options held by such holder and (ii) the Offer Price minus the
exercise price applicable to such Unvested DH Options, less applicable taxes.
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<PAGE>
EXCHANGE OFFER WITH AXIOHM S.A. SHAREHOLDERS
Pursuant to the Merger Agreement, AX entered into stock purchase agreements
with each of the shareholders of Axiohm S.A. (the "Axiohm S.A. Holders")
pursuant to which AX acquired on October 2, 1997 all of the outstanding shares
of capital stock of Axiohm S.A. for an aggregate purchase price of (i) 5,518,524
shares (the "Exchange Shares") of DH Common Stock (out of the total of 7,000,000
shares of DH Common Stock acquired by AX in the Tender Offer) and (ii) $12.2
million in cash. Upon the closing of the Exchange, the following directors and
executive officers of Axiohm S.A. received Exchange Shares and cash in the
following amounts: Mr. Dupuy, 1,753,144 shares and $3,875,075 in cash (includes
1,632,284 shares and $3,607,925 in cash received by BV Instrumentenfabriek HM
Smitt, an entity wholly owned by Mr. Dupuy, and 120,726 shares and $266,850 in
cash received by Marie Dupuy, Mr. Dupuy's wife); Mr. Gibier, 1,740,133 shares
and $3,846,300 in cash (includes 1,639,528 shares and $3,623,925 in cash
received by Van der Hoorn & Wouda BV, an entity wholly owned by Mr. Gibier); Mr.
Unsworth, 134 shares and $300 in cash (does not include an option to purchase
231,118 shares of the Company's Common Stock which Mr. Unsworth received in
exchange for an option to purchase shares of Axiohm S.A.); Mr. Patry, 317,509
shares and $701,825 in cash (includes 115,092 shares and $254,400 in cash
received by Marie-Pierre Patry, Mr. Patry's wife); and Mr. Jentoft, 198,259
shares and $438,225 in cash. The Merger Agreement provides that, as soon as
practicable following the closing of the Exchange, the Company (i) shall file a
registration statement on Form S-3 with the Commission covering the resale of
the Exchange Shares by the Axiohm S.A. Holders; (ii) shall cause such
registration statement to be declared effective by the Commission as soon as
possible thereafter; and (iii) shall keep such registration statement effective
for a period of not less than two years. The closing of the Exchange occurred
simultaneously with the closing of the Existing Notes Offering.
TREATMENT OF AXIOHM S.A. STOCK OPTIONS
Pursuant to the Merger Agreement, upon the closing of the Exchange, the
Company caused the stock options to purchase 1,583 shares of the Common Stock of
Axiohm S.A. held by Mr. Unsworth to be replaced with an option to purchase
231,118 shares of the Company's Common Stock at an exercise price of $7.15 per
share (the "Replacement Option"). The Replacement Option granted to Mr. Unsworth
contains such general provisions as are typically contained in DH Options and
becomes exercisable as follows: 20% upon the closing date of the Exchange, and
20% on each of January 1, 1998, 1999, 2000 and 2001. The Company is obligated to
register the shares of the Company's Common Stock issuable upon the exercise of
the Replacement Option under the Securities Act.
GRANT OF ADDITIONAL STOCK OPTIONS
The Merger Agreement contemplates that on a date within the first six months
following consummation of the Merger, the Compensation Committee of the Board of
Directors of the Company will grant stock options (the "New Options") to
management and employees to purchase up to an aggregate of 350,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant. The New Options shall have a
term of eight years and shall vest cumulatively as to 50% of the shares subject
to the options on the second anniversary of the date of grant, 25% on the third
anniversary and 25% on the fourth anniversary.
OTHER TRANSACTIONS
Dardel Technologies E.U.R.L. (formerly Dardel Technologies, S.A.) ("Dardel
Technologies") is a French corporation, formerly wholly-owned by Mr. Dupuy and
Mr. Gibier and now wholly owned by the Company as a result of the Transactions,
that historically provided insurance services, legal services, management
services (including the services of Mr. Dupuy and Mr. Gibier) and
telecommunications services to its only two former subsidiaries, Axiohm S.A. and
Dardel Industries S.A. ("Dardel Industries"). In 1995 and 1996, Axiohm S.A. paid
fees to Dardel Technologies in the amount of $995,000 and $991,000,
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<PAGE>
respectively, for services rendered to Axiohm S.A. In anticipation of the
Exchange, Dardel Technologies sold Dardel Industries to Mr. Dupuy and Mr. Gibier
and Dardel Technologies transferred all of its employees, assets and contracts
to either Axiohm S.A. or Dardel Industries, depending on which company had
historically received the benefit of such employees, assets or contracts. As a
result, immediately following the Exchange, the sole assets of Dardel
Technologies consisted of 48% of the voting stock of Axiohm S.A. and cash to pay
taxes.
Pursuant to the Exchange, Dardel Technologies became wholly-owned by the
Company and the only transactions between the Company and Dardel Industries
(wholly-owned by Mr. Dupuy and Mr. Gibier) that are expected to continue will be
as follows: (i) Axiohm S.A. will continue to sublease a portion of its 3,500
square feet of office space in Sevres to Dardel Industries on substantially the
same terms and conditions that Axiohm S.A. pays to the independent third party
landlord, pro rated based on the amount of space used by Dardel Industries; (ii)
Dardel Industries will continue to render legal services to Axiohm S.A. at
hourly rates that are equal to or less than those of outside counsel; and (iii)
certain employees of the Company, namely Mr. Dupuy, Mr. Gibier and Mr. Andy
Shih, will continue to serve as consultants to Dardel Industries. Mr. Dupuy and
Mr. Gibier are paid salaries of $80,000 per annum by the Company and will
continue to render management and other services to Dardel Industries. Mr. Shih,
a shareholder of Axiohm S.A. and the sole employee of Axiohm Taiwan (a
subsidiary of Axiohm S.A.), negotiates product sales and manufacturing
arrangements for Axiohm Taiwan and Dardel Industries in Taiwan, Hong Kong and
the People's Republic of China. In 1995 and 1996, Axiohm Taiwan incurred
operating expenses (consisting of office space, traveling expenses and similar
costs) of approximately $120,000 per year and paid Mr. Shih a salary of
approximately $75,000 per year. Pursuant to an arrangement between Axiohm S.A.
and Dardel Industries, Axiohm S.A. has historically billed Dardel Industries an
amount equal to half of the costs of operating Axiohm Taiwan and half of Mr.
Shih's salary. Mr. Shih will continue to serve as an employee of the Company and
the Company will continue to bill Dardel Industries for half of the overhead of
Axiohm Taiwan and half of Mr. Shih's salary. The Company does not believe that
the continuing arrangements between Mr. Dupuy, Mr. Gibier, Mr. Shih, Axiohm
Taiwan and Dardel Industries will have an adverse effect on the ability of Mr.
Dupuy, Mr. Gibier or Mr. Shih to serve in their respective capacities with the
Company.
Axiohm S.A. believes that the terms of the transactions entered into between
Axiohm S.A. and Dardel Technologies or Axiohm S.A. and Dardel Industries prior
to the Exchange were on terms that were comparable to or better than could have
been obtained from unrelated third parties and that the terms of the
transactions that have been or are to be entered between Axiohm S.A. and Dardel
Industries after the Exchange are or will be on terms comparable to or better
than could be obtained from unrelated third parties. There are no contractual
agreements between Axiohm S.A. and Dardel Industries that require either party
to use the services of the other.
SNC La Noire, which is owned by Mr. Dupuy, Mr. Gibier and Jean-Georges
Huglin, the Chief Financial Officer of Axiohm S.A., has historically provided
and is expected to continue to provide real estate and office management
services to Axiohm S.A. SNC La Noire owns the Montrouge facility and, prior to
July 1997, Dardel Technologies was the primary tenant. Pursuant to this
arrangement, Dardel Technologies subleased a portion of this space to Axiohm
S.A. and Dardel Industries. In July 1997, SNC La Noire terminated the existing
lease with Dardel Technologies and entered into separate leases with Axiohm S.A.
and Dardel Industries. Following renovations that are scheduled to be completed
in October 1997, Axiohm S.A. will lease approximately 26,000 square feet of
space from SNC La Noire at the Montrouge facility at a cost of approximately $15
per square foot. Based on independent appraisals, Axiohm S.A. believes that the
terms of the Montrouge lease is comparable to what Axiohm S.A. could have
obtained from unrelated third parties.
SNC La Noire also provides Axiohm S.A. with management services for the
space leased at the Montrouge facility. In 1995 and 1996, Axiohm S.A. paid SNC
La Noire $288,000 and $263,000, respectively, for such services. Axiohm S.A.
believes that the terms of these transactions between Axiohm S.A.
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and SNC La Noire historically have been, and will continue to be, on terms that
are comparable to or better than could have been obtained from unrelated third
parties. The real estate management services agreements between Axiohm S.A. and
SNC La Noire are negotiated annually and can be terminated by either party upon
three months' written notice.
In 1996, Axiohm S.A. participated in cash pooling arrangement with Dardel
Technologies that allowed each company to borrow or loan cash as considered
necessary. At December 31, 1996, Axiohm S.A. had an outstanding loan to Dardel
Technologies amounting to $1.8 million and bearing interest at 6.42%. This loan
was repaid by Dardel Technologies in April 1997 and the cash pooling arrangement
has since been terminated.
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OWNERSHIP OF CAPITAL STOCK
The following table sets forth certain information regarding ownership of
the Common Stock as of October 2, 1997 (except as otherwise specified) by: (i)
each person who is known by the Company to own beneficially more than five
percent of the Company's Common Stock; (ii) each of the Company's directors;
(iii) DH Named Executive Officers (as defined in "Executive Compensation Tables"
under "Management--Executive Compensation") who are executive officers of the
Company; and (iv) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below have sole investment and voting power
with respect to such shares, subject to community property laws.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) OWNERSHIP
- --------------------------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
Patrick Dupuy (2)................................................................ 1,753,141(3) 26.9%
Gilles Gibier (2)................................................................ 1,740,133(4) 26.7
Jean-Georges Huglin (5).......................................................... 373,177 5.7
William H. Gibbs................................................................. 25,571(6) *
William J. Bowers................................................................ 343 *
Nicolas Dourassof................................................................ 16,768(7) *
Bruce G. Klaas................................................................... 690 *
Donald M. Lyle................................................................... 858 *
David T. Ledwell................................................................. 430 *
All executive officers and directors as a group (12 persons) (8)................. 3,901,911 59.9%
</TABLE>
- ------------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days are deemed to be beneficially
owned by the person holding such option or warrant for computing the
percentage ownership of such person, but are not treated as outstanding for
computing the percentage of any other person.
(2) Mr. Dupuy's and Mr. Gibier's business address is Axiohm S.A.R.L., 20 rue
Troyon, 92310 Sevres, France.
(3) Includes: 30,317 shares held directly; 1,632,284 shares held in the name of
Ysatis BV; and 90,540 shares held by Mr. Dupuy's children.
(4) Includes 100,605 shares held directly and 1,639,528 shares held by Cargyl
BV.
(5) Mr. Huglin's business address is Axiohm S.A.R.L., 1 rue d'Arcueil, 92120
Montrouge, France.
(6) Includes options to purchase 24,999 shares exercisable as of November 29,
1997.
(7) Held by Sonafin SPRL, an entity wholly owned by Mr. Dourassof.
(8) Includes shares noted in footnotes 3, 4, 6 and 7 above, and also includes
Bernard Patry (317,510 shares, including 114,958 shares held in the name of
Mrs. Marie-Pierre Patry, Mr. Patry's wife, 5,232 shares held by Mr. Patry's
children, and 82,362 shares held by BP Investissements S.A.), Malcolm
Unsworth (46,357 shares, including options to purchase 46,223 shares
exercisable within 60 days of September 30, 1997), and Janet Shanks (111
shares).
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company
outstanding following the consummation of the Transactions. To the extent such
summary contains descriptions of the terms of such indebtedness, such
descriptions do not purport to be complete and are qualified in their entirety
by reference to the Credit Agreement described below or the other credit
documents entered into in connection with the New Credit Facility, which are
available upon request from the Company.
NEW CREDIT FACILITY
In connection with the Transactions, the Company entered into the credit
agreement (the "Credit Agreement") with a syndicate of financial institutions
(the "Lenders") for which Lehman Brothers Inc. acted as arranger and Lehman
Commercial Paper Inc. acted as syndication agent. The following is a summary of
the material terms and conditions of the New Credit Facility and is subject to
the detailed provisions of the Credit Agreement and the various related
documents entered into in connection therewith.
GENERAL. The New Credit Facility provides up to a maximum aggregate
principal amount of $85.0 million, consisting of a $50.0 million in aggregate
principal amount Term Loan Facility and a $35.0 million available principal
amount Revolving Credit Facility. The Revolving Credit Facility includes a $7.5
million letter of credit subfacility. The Term Loan Facility consists of Tranche
A term loans in an aggregate principal amount of $35.0 million (the "Tranche A
Loans") which have a maturity of five years and Tranche B term loans in an
aggregate principal amount of $15.0 million (the "Tranche B Loans") which have a
maturity of six years. A maximum of $10.0 million under the New Credit Facility
may be borrowed by Axiohm S.A.
INTEREST RATES; FEES. Interest will accrue on the Tranche A Loans at a
floating rate per annum initially equal to, at the Company's option, either: (i)
the base rate (the "Base Rate") plus 1.5%, or (ii) the eurodollar rate (the
"Eurodollar Rate") plus 2.5%. Interest will accrue on the Tranche B Loans at a
floating rate per annum initially equal to, at the Company's option, either: (i)
the Base Rate plus 2.0%; or (ii) the Eurodollar Rate plus 3.0%. Interest will be
computed on the outstanding daily balance of the Revolving Credit Facility at a
floating rate per annum initially equal to, at the Company's option, either: (i)
the Base Rate plus 1.5%; or (ii) the Eurodollar Rate plus 2.5%. The applicable
margin over the index used to determine the interest rates is adjustable from
time to time based upon the Company's ratio of debt to EBITDA. The Base Rate is
defined as, on any date, the greatest of: (i) the Federal Funds Rate, as
published from time to time by the Federal Reserve Bank of New York, plus 0.5%;
(ii) the secondary market rate for certificates of deposit adjusted for reserves
and assessments, plus 1.0%; and (iii) the prime commercial lending rate of
Citibank, N.A. The Eurodollar Rate is defined as the rate displayed for
eurodollar deposits for one, two, three or six months on page 3750 of the
Telerate Screen two days prior to the first day of the applicable interest
period, or, if such rate is not available, the rate at which such deposits are
offered to the administrative agent under the New Credit Facility in the
interbank eurodollar market.
The Company will be charged a fee of 0.375% per annum on the average daily
balance of the unused portion of the available Revolving Credit Facility,
payable quarterly in arrears. The Company will also pay a fronting fee of 0.25%
on the face amount of each letter of credit and a fee, calculated daily and
payable quarterly, in addition to any customary bank fees incurred, in an amount
determined by multiplying the applicable margin then in effect in respect of the
Eurodollar Rate for the Revolving Credit Facility (expressed as a percentage) by
the aggregate undrawn face amount of all letters of credit issued or guaranteed
from time to time under the Revolving Credit Facility.
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<PAGE>
REPAYMENT. The principal amounts of the Tranche A Loans and the Tranche B
Loans are repayable in quarterly installments during their respective terms in
the following approximate aggregate annual amounts:
<TABLE>
<CAPTION>
TRANCHE A LOANS
- -------------------------------------------------
<S> <C>
YEAR AMOUNT
- ---------------------------------- -------------
1................................. $ 2,700,000
2................................. 7,350,000
3................................. 7,350,000
4................................. 8,800,000
5................................. 8,800,000
TRANCHE B LOANS
- -------------------------------------------------
<CAPTION>
YEAR AMOUNT
- ---------------------------------- -------------
<S> <C>
1................................. $ 500,000
2................................. 500,000
3................................. 500,000
4................................. 500,000
5................................. 500,000
6................................. 12,500,000
</TABLE>
Revolving loans may be borrowed, repaid and reborrowed from time to time
until five years after the closing of the Credit Agreement, subject to certain
customary conditions on the date of any such borrowing.
SECURITY. The obligations under the New Credit Facility and the related
documents are secured by a first priority lien upon substantially all of the
real and personal property of the Company and its Subsidiaries and a pledge of
all of the capital stock of the Company's Subsidiaries (provided that no lien
was granted on the assets of Foreign Subsidiaries and no capital stock of
Foreign Subsidiaries was pledged to the extent that the granting of such lien or
the making of such pledge would result in materially adverse United States
federal income tax consequences to the Company or would violate applicable law).
GUARANTEES. The Obligations of the Company under the New Credit Facility
are guaranteed by the Company's Subsidiaries (provided that no guarantee by a
Foreign Subsidiary was made if such guarantee would result in materially adverse
United States federal income tax consequences to the Company or would violate
applicable law).
PREPAYMENTS. The Company is required to make prepayments, with customary
exceptions, on loans under the New Credit Facility in an amount equal to 100% of
the net proceeds of the incurrence of certain indebtedness, 75% of the net
proceeds of the sale of equity securities, 100% of the net proceeds received by
the Company and/or its Subsidiaries (other than certain net proceeds reinvested
in the business of the Company or its Subsidiaries) from the disposition of any
assets, including proceeds from the sale of stock of any of the Company's
Subsidiaries and 75% of excess cash flow if the ratio of total debt to EBITDA is
greater than or equal to 3.00 to 1.00 or 50% of excess cash flow if such ratio
is less than 3.00 to 1.00.
CONDITIONS AND COVENANTS. The obligations of the Lenders under the New
Credit Facility are subject to the satisfaction of certain conditions precedent
customary in similar credit facilities or otherwise appropriate under the
circumstances. The Company and each of its Subsidiaries will be subject to
certain negative covenants contained in the Credit Agreement, including without
limitation covenants that restrict, subject to specified exceptions: (i) the
incurrence of additional indebtedness and other obligations and the granting of
additional liens; (ii) mergers, acquisitions, investments and acquisitions and
dispositions of assets; (iii) the incurrence of capitalized lease obligations;
(iv) investments, loans and advances; (v) dividends, stock repurchases and
redemptions; (vi) prepayment or repurchase of other indebtedness and amendments
to certain agreements governing indebtedness, including the Indenture and the
Notes, (vii) engaging in transactions with affiliates and formation of
subsidiaries; (viii) capital expenditures; (ix) payment of management fees; (x)
the use of proceeds of loans; and (xi) changes of lines of business. The Credit
Agreement also contains customary affirmative covenants, including compliance
with ERISA and environmental and other laws, payment of taxes, maintenance of
corporate existence and rights, maintenance of insurance and interest rate
protection and financial reporting. In addition, the Credit
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<PAGE>
Agreement requires the Company to maintain compliance with certain specified
financial covenants including maximum capital expenditures, a maximum ratio of
debt to EBITDA, a minimum interest coverage ratio and a minimum fixed charge
coverage ratio. Certain of these financial, negative and affirmative covenants
are more restrictive than those set forth in the Indenture.
EVENTS OF DEFAULT. The Credit Agreement includes events of default that are
typical for senior credit facilities and appropriate in the context of the
Transactions, including, without limitation, non-payment of principal, interest
or fees, violation of covenants, inaccuracy of representations and warranties in
any material respect, cross default to certain other indebtedness and
agreements, bankruptcy and insolvency events, material judgments and
liabilities, defaults or judgments under ERISA and change of control. The
occurrence of any of such events of default could result in acceleration of the
Company's obligations under the Credit Agreement and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the Notes.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Existing Notes were issued and the New will be issued pursuant to an
Indenture (the "Indenture") among the Company, the Guarantors and The Bank of
New York, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes
are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture and Registration Rights Agreement are available as
set forth below under "--Additional Information." The definitions of certain
terms used in the following summary are set forth below under "--Certain
Definitions." For purposes of this summary, the term "Company" refers only to
Axiohm Transaction Solutions, Inc. and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all current and future Senior Debt,
including borrowings under the Credit Agreement. Borrowings under the Credit
Agreement are secured by substantially all of the Company's assets, including a
pledge of 100% of the Capital Stock of the Company's existing and future
Subsidiaries (other than Foreign Subsidiaries which are not treated as
partnerships or branches of the Company or a Domestic Subsidiary for United
States federal income tax purposes, as to which only 65% of the Capital Stock
has been pledged), and are guaranteed by all existing and future Domestic
Subsidiaries and those Foreign Subsidiaries which are treated as partnerships or
branches of the Company or a Domestic Subsidiary for United States federal
income tax purposes (each, a "Foreign Guarantor"), which guarantees are secured
by all of such Domestic Subsidiaries' assets. The Existing Notes are and the New
Notes will be guaranteed on a senior subordinated basis by all of the Company's
existing and future Domestic Subsidiaries and Foreign Guarantors. See
"--Additional Subsidiary Guarantors." The Notes will rank PARI PASSU or senior
in right of payment with all other subordinated Indebtedness of the Company
issued in the future, if any. As of September 30, 1997, on a pro forma basis
giving effect to the Transactions, the Company and its Subsidiaries would have
had Senior Debt of approximately $46.2 million (exclusive of the revolving loan
commitment of $35.0 million under the Credit Agreement).
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $120.0 million
and will mature on October 1, 2007. Interest on the Notes will accrue at the
rate of 9 3/4% per annum and will be payable semi-annually in arrears on April 1
and October 1, commencing on April 1, 1998, to Holders of record on the
immediately preceding March 15 and September 15. Each New Note will bear
interest from the most recent date to which interest has been paid or duly
provided for on the Existing Note surrendered in exchange for such New Note or,
if no such interest has been paid or duly provided for on such Existing Note,
from October 2, 1997. Holders of the Existing Notes whose Existing Notes are
accepted for exchange will not receive accrued interest on such Existing Notes
for any period from and after the last Interest Payment Date to which interest
has been paid or duly provided for on such Existing Notes prior to the original
issue date of the New Notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such Existing Notes, and
will be deemed to have waived the right to receive any interest on such Existing
Notes accrued from and after such Interest Payment Date or, if no such interest
has been paid or duly provided for, from and after October 2, 1997. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal, premium, if any, interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of the
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Notes at their respective addresses set forth in the register of Holders of
Notes; PROVIDED THAT all payments of principal, premium, if any, interest and
Liquidated Damages, if any, with respect to Notes the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the prior
payment, in full, in cash, of all Senior Debt, whether outstanding on the date
of the Indenture or thereafter incurred, assumed or guaranteed.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities: (1) the holders of Senior Debt will be entitled to
receive payment in full in cash of all Obligations due in respect of such Senior
Debt (including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Debt, whether or not an allowable claim)
before the Holders of Notes will be entitled to receive any payment with respect
to the Notes (provided that Holders may receive Permitted Proceeds) and (2)
until all Obligations with respect to Senior Debt are paid in full, in cash, any
distribution to which the Holders of Notes would be entitled but for the
subordination provisions of the Indenture (other than Permitted Proceeds as
provided in clause (1) above) shall be made to the holders of Senior Debt.
The Company also may not make any payment or distribution to the Trustee or
any Holder of Notes or in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any securities for cash or
property (other than Permitted Proceeds) until all principal and other
Obligations with respect to the Senior Debt have been paid in full if (i) a
default in the payment of the principal of, premium, if any, or interest on
Designated Senior Debt occurs or any other default on Designated Senior Debt
occurs and the maturity of such Designated Senior Debt is accelerated in
accordance with its terms; or (ii) a default other than a payment default with
respect to Designated Senior Debt occurs and is continuing that then permits
holders of the Designated Senior Debt to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the
Representative of the holders of such Designated Senior Debt. Not more than one
Payment Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to such Designated Senior
Debt during such period; PROVIDED,that in no event may the total number of days
during which any payment blockage period or periods is in effect exceed 179 days
in the aggregate during any 360 consecutive day period. If the Trustee receives
any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of the subordination provisions of the Indenture unless
and until all scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full, in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice. The Company will resume payments on and distributions
in respect of the Notes and may acquire them upon the earliest of: (a) the date
upon which the default is cured or waived by written notice to the Trustee and
the Company from the Person or Persons who gave such Payment Blockage Notice and
in the case of Designated Senior Debt that has been accelerated, such
acceleration has been rescinded, (b) in the case of a default referred to in
clause (ii) above, 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior Debt
has been accelerated and such acceleration has not been rescinded, and (c) the
payment in full of such Designated Senior Debt, if
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the Indenture otherwise permits the payment, distribution or acquisition at the
time of such payment or acquisition.
The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Transactions, the Company and its Subsidiaries would
have had Senior Debt outstanding at September 30, 1997 of $46.2 million. The
Indenture will limit, subject to certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Restricted Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Existing Notes are, and under
the New Notes will be, jointly and severally, unconditionally guaranteed (the
"Subsidiary Guarantees") by: Axiohm Investissements S.A.R.L., likewise a SOCIETE
A RESPONSABILITE LIMITEE; Axiohm IPB, Inc.; Cognitive L.L.C.; Cognitive
Solutions, Inc.; Dardel Technologies E.U.R.L., an ENTREPRISE UNIPERSONNELLE A
RESPONSABILITE LIMITEE; and Stadia Colorado Corp. If, at any time, a Foreign
Guarantor ceases to be treated as a partnership or branch of the Company or a
Domestic Subsidiary for United States federal income tax purposes and is no
longer a guarantor of any Indebtedness under the New Credit Facility, its status
as a Guarantor will terminate. The Subsidiary Guarantee of each Guarantor will
be subordinated to the prior payment in full of all Senior Debt of such
Guarantor, which would include the Guarantor's guarantees of the Company's
Indebtedness under the New Credit Facility and the amounts for which the
Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, "Risk Factors--Fraudulent Conveyance
Considerations."
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity (except the Company or another Guarantor) or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to another corporation, Person or entity unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture, in form and
substance reasonably satisfactory to the Trustee, under the Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) (a) the Company would be permitted by
virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after
giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness (other than Permitted Debt) pursuant to the first paragraph under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock" or (b) would have a pro forma Fixed Charge Coverage Ratio that
is equal to or greater than the actual Fixed Charge Coverage Ratio for the same
four-quarter period.
Notwithstanding the foregoing paragraph, (i) any Guarantor may consolidate
with, merge into or transfer all or a part of its properties and assets to the
Company or any other Guarantor, (ii) any Guarantor may merge with an Affiliate
that has no significant assets or liabilities and was incorporated solely for
purpose of reincorporating such Guarantor in another State of the United States;
PROVIDED THAT such merged entity continues to be a Guarantor; and (iii) any
Foreign Guarantor may reorganize or otherwise change its legal status or form
even if it would not remain a Guarantor after such reorganization or other
change of legal status or form.
The Indenture will provide that in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital
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stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED THAT the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to October 1,
2002. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon, to the applicable redemption date, if redeemed during the
twelve-month period beginning on October 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 104.875%
2003.............................................................................. 103.250
2004.............................................................................. 101.625
2005 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to October 1, 2000, the Company may
redeem on any one or more occasions up to 35% of the original aggregate
principal amount of the Notes initially issued at a redemption price of 109.75%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
any Public Equity Offering of common stock of the Company; PROVIDED THAT at
least 65% of the aggregate principal amount of the Notes originally issued under
the Indenture remain outstanding immediately after the occurrence of each such
redemption; and PROVIDED, FURTHER, THAT each such redemption shall occur within
60 days of the date of the closing of such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
THAT no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with a paying agent (the
"Paying Agent") an amount equal to the Change of Control Payment in respect of
all Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED THAT each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture will provide that, prior to complying with the provisions
of this covenant, but in any event within 90 days following a Change of Control,
the Company will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of Notes required by this covenant. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility prohibits the Company from purchasing any Notes and
also provides that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to purchase the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the New Credit
Facility. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of Notes. See "Description of
Certain Indebtedness."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance
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with the requirements set forth in the Indenture applicable to a Change of
Control Offer made by the Company and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale or issue Equity
Interests in any of its Restricted Subsidiaries or sell Equity Interests in any
of its Restricted Subsidiaries, unless (i) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (which, in the case of any Asset
Sale involving shares or assets having a fair market value in excess of $2.0
million, shall be evidenced by a resolution of the Board of Directors set forth
in an Officer's Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; PROVIDED THAT the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets such that the
Company or such Restricted Subsidiary has no further liability shall be deemed
to be cash for purposes of this provision, (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision and (z) the licensing of intellectual
property which does not constitute the transfer of substantially all of the
economic value of such property and does not limit the Company's use of such
intellectual property for Permitted Businesses shall be deemed to comply with
clause (ii) above if the payments thereon are in cash over time.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay term
Indebtedness under the New Credit Facility or other Senior Debt, (b) to repay
and permanently reduce the availability of revolving credit Indebtedness under
the New Credit Facility or (c) to the acquisition of a controlling interest in
another business or of all or substantially all of the assets of another
business, or to the making of a capital expenditure or the acquisition of other
long-term assets, in each case in Permitted Businesses. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving Indebtedness or otherwise invest such Net Proceeds in any manner that
is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds". When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company will be required to make an offer to
all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased
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on a PRO RATA basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire
or retire for value (including without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company; (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated in right of payment to the Notes,
except a payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Company and its Restricted Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by clauses
(ii), (iii) and (vi) (to the extent such distribution is paid to the Company or
a Restricted Subsidiary) of the next succeeding paragraph), is less than the sum
of (i) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale since the date of the Indenture of Equity Interests of the Company (other
than Disqualified Stock), or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent that any Restricted Investment that was made after the date of the
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment.
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The foregoing provisions will not prohibit (i) the payment of any dividend
or the making of any payment or distribution within 60 days after the date of
declaration thereof, if at said date of declaration such payment or distribution
would have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement, defeasance or other acquisition of any Indebtedness
subordinated in right of payment to the Notes or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); PROVIDED THAT the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of Indebtedness subordinated in right of payment to the Notes
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness; (iv) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Restricted Subsidiary
held by any employee or director of the Company (or any of its Subsidiaries),
other than a Principal, or any former employee or director of the Company (or
any of its Subsidiaries) issued pursuant to any management equity plan or stock
option plan or any other management or employee benefit plan or agreement;
PROVIDED, HOWEVER, that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests pursuant to this clause (iv)
shall not exceed $1.0 million in any twelve-month period and shall not exceed
$3.0 million in the aggregate; (v) repurchases of Equity Interests deemed to
occur upon the cashless exercise of stock options; (vi) the payment of any
dividend by a Subsidiary of the Company to the holders of its Equity Interests
on a pro rata basis to all holders of Equity Interests, including the Company or
any Restricted Subsidiary of the Company; and (vii) payments in accordance with
the terms of the Merger Agreement; PROVIDED THAT with respect to clauses (ii),
(iii), (iv) and (v) above, no Default or Event of Default shall have occurred
and be continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company or any
Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.00 to 1.00, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
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(i) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
(ii) the incurrence by the Company of term Indebtedness under the New Credit
Facility and related Guarantees under the New Credit Facility; PROVIDED that the
aggregate principal amount of all term Indebtedness outstanding under the New
Credit Facility after giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (ii) does not exceed an amount
equal to $50.0 million less the aggregate amount of all repayments, optional or
mandatory (other than repayments in connection with the incurrence of Permitted
Refinancing Indebtedness), of the principal of any term Indebtedness under the
New Credit Facility that have been made since the date of the Indenture;
(iii) the incurrence by the Company of revolving credit Indebtedness under
the New Credit Facility, letters of credit (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries thereunder) and related Guarantees under
the New Credit Facility; PROVIDED that the aggregate principal amount of all
revolving Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) outstanding under the New Credit Facility
after giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (iii), does not exceed $35.0 million, less the
amount outstanding under clause (xiv) below and the aggregate amount of Asset
Sale proceeds applied to repay and permanently reduce the availability of
revolving credit Indebtedness under the New Credit Facility pursuant to the
provisions described under the caption "--Certain Covenants-- Asset Sales;"
(iv) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred in the normal course of business for the
purpose of fixing or hedging currency, commodity or interest rate risk
(including with respect to any floating rate Indebtedness that is permitted by
the terms of the Indenture to be outstanding) in connection with the conduct of
their respective businesses and not for speculative purposes;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between the Company and a Restricted Subsidiary or
between one Restricted Subsidiary and another; PROVIDED, HOWEVER, that (a) if
the Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated in liquidation to the prior payment in full in cash of all
Obligations with respect to the Notes and the Indenture; (b) if a Restricted
Subsidiary, that is not a Guarantor, is the obligor on such Indebtedness, such
Indebtedness owning to the Company or any Guarantor, together with all
intercompany Indebtedness owing from all Restricted Subsidiaries that are not
Guarantors to the Company or a Guarantor, does not exceed $5.0 million in
aggregate principal amount at any time outstanding; and (c) (A) any subsequent
event or issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Guarantor shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vi);
(vii) the Guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant; PROVIDED, that the Guarantee
of any Indebtedness of a Restricted Subsidiary that is not or is no longer a
Guarantor shall be deemed a Restricted Investment at the time of such Guarantee
or at the time such Restricted Subsidiary's Guarantor status terminates in an
amount equal to the maximum principal amount so guaranteed, for so long as, and
to the extent that, such Guarantee remains outstanding;
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(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in respect of bid, performance, or advance payment bonds and
appeal and surety bonds;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund or replace Indebtedness that was permitted by the Indenture
to be incurred;
(x) the incurrence by the Company or any of the Guarantors of additional
Indebtedness in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant this clause (x), not to exceed the difference of (a) $15.0 million less
(b) the outstanding aggregate principal amount incurred pursuant to clause (xi)
below;
(xi) the incurrence by Restricted Subsidiaries that are not Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xi) not to exceed $5.0 million;
(xii) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace Indebtedness
incurred pursuant to this clause (xii), not to exceed $5.0 million at any time
outstanding; PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries
may incur any amount of additional Indebtedness of the type specified above in
this clause (xii) so long as the sole recourse of the obligee with respect to
such Indebtedness is to the property financed and any accessions and additions
thereto, replacements and substitutions therefor and the proceeds (including
insurance proceeds thereof);
(xiii) the issuance by a Restricted Subsidiary that is a Guarantor of
preferred stock to the Company or to any of its Restricted Subsidiaries that are
Guarantors; PROVIDED, HOWEVER, that any subsequent event or issuance or transfer
of any Equity Interests that results in the owner of such preferred stock
ceasing to be the Company or any of its Restricted Subsidiaries that are
Guarantors or any subsequent transfer of such preferred stock to a Person, other
than the Company or one of its Restricted Subsidiaries that are Guarantors,
shall be deemed to be an issuance of preferred stock by such Subsidiary that was
not permitted by this clause (xiii);
(xiv) the incurrence by Foreign Subsidiaries that are not holding companies
or by Axiohm S.A. of Indebtedness under the New Credit Facility or any Permitted
Refinancing Indebtedness; PROVIDED, HOWEVER, that the aggregate principal amount
of outstanding Indebtedness incurred pursuant to this clause (xiv) does not
exceed $15.0 million at any time; and PROVIDED, FURTHER, that out of the total
Indebtedness permitted pursuant to this clause (xiv), no more than $5.0 million
of Indebtedness can be incurred by any such Foreign Subsidiary that is not
Axiohm S.A.; and
(xv) the incurrence by a Restricted Subsidiary that is a Foreign Subsidiary
and is not a Guarantor of Indebtedness in an amount not to exceed the Borrowing
Base of such Restricted Subsidiary; PROVIDED, that none of the Company or any
other such Restricted Subsidiary shall be obligated, directly or indirectly, to
pay principal, premium, interest or other amounts thereon or in respect thereof
(including by way of net worth requirements, equity keepwells etc.).
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xv) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment
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of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
Any designation of an Unrestricted Subsidiary by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the terms of the Indenture governing the designation of
Unrestricted Subsidiaries and was permitted by the covenant described above
under the caption "--Restricted Payments." If, at any time, any Unrestricted
Subsidiary fails to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED THAT such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation.
LIENS
The Indenture will provide that the Company will not and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness or trade payables (other than Permitted Liens) upon any of
their respective property or assets, now owned or hereafter acquired, unless all
payments due under the Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of the Indenture,
(b) the New Credit Facility as in effect as of the date of the Indenture, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED THAT such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Facility as in effect on the date of the Indenture, (c) the Indenture and the
Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than
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the Person or such Person's Subsidiaries, or the property or assets of the
Person or such Person's Subsidiaries, so acquired, PROVIDED THAT, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) by reason of customary non-assignment, subletting and
restriction on transfer provisions or restrictions on cash or other deposits or
net worth under leases, licenses or other contracts entered into in the ordinary
course of business, PROVIDED THAT such restrictions are limited to the property
or assets that are the subject of such lease, license or contract and not in
connection with a financing transaction, (g) any restriction on cash deposits by
reason of customary security deposits entered into in the ordinary course of
business, (h) any restriction with respect to a Subsidiary imposed pursuant to
an agreement entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary pending the closing of
such sale or disposition, (i) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of the nature
described in clause (iii) above on the property so acquired, together with any
accessions and additions thereto, replacements and substitutions therefor and
the proceeds (including insurance proceeds thereof), (j) Indebtedness of
Guarantors, PROVIDED THAT such Indebtedness was permitted to be incurred
pursuant to the Indenture, or (k) Permitted Refinancing Indebtedness, PROVIDED
THAT the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock."
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture will provide that if the Company or any of its Domestic
Subsidiaries shall acquire or create another Domestic Subsidiary after the date
of the Indenture, then such newly acquired or created Domestic Subsidiary shall
(i) execute a supplemental indenture in form and substance satisfactory to the
Trustee providing that such Domestic Subsidiary shall become a Guarantor under
the Indenture and (ii) deliver an opinion of counsel to the effect INTER ALIA,
that such supplemental indenture has been duly authorized and executed by such
Domestic Subsidiary, PROVIDED, HOWEVER, this covenant shall not apply to any
Domestic Subsidiary that has been properly designated as an Unrestricted
Subsidiary in accordance with the Indenture for so long as it continues to
constitute an Unrestricted Subsidiary.
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In addition, if an election is made to treat any Foreign Subsidiary as a
partnership or a branch for United States federal income tax purposes, within
five (5) days after the election is made, such Foreign Subsidiary shall (i)
execute a supplemental indenture in form and substance satisfactory to the
Trustee providing that such Foreign Subsidiary shall become a Guarantor under
the Indenture, (ii) execute any other necessary documentation to be executed by
a Guarantor and (iii) deliver an opinion of counsel to the effect INTER ALIA,
that such supplemental indenture has been duly authorized and executed by such
Foreign Subsidiary, PROVIDED, HOWEVER, that if Dardel, Axiohm S.A. or any other
Foreign Subsidiary shall cease to be treated as a partnership or a branch of the
Company and Dardel, Axiohm S.A. or any other Foreign Subsidiary, as the case may
be, is no longer a guarantor of any Indebtedness under the New Credit Facility,
then, as of the date such status as a partnership or a branch and as a guarantor
under the New Credit Facility terminates, such Subsidiary's status as a
Guarantor under the Indenture shall also terminate.
A Foreign Guarantor may not cease to be a Guarantor and remain a Restricted
Subsidiary of the Company, unless (a) all Investments made in such Foreign
Guarantor by the Company or any Restricted Subsidiary from the date it became a
Guarantor and which remain then outstanding shall be deemed to be Restricted
Investments made at the time the Foreign Guarantor ceased to be a Guarantor; (b)
any transaction that would have been an Asset Sale if the Foreign Guarantor had
not been a Guarantor at the time of such transaction would comply with the
covenant under "Asset Sales" at the time the Foreign Guarantor ceased to be a
Guarantor; (c) all Indebtedness incurred by such Foreign Guarantor and that is
then outstanding shall be deemed to be Indebtedness incurred by a Restricted
Subsidiary that is not a Guarantor at the time the Foreign Guarantor ceases to
be a Guarantor; (d) after giving effect to such deemed Restricted Investments,
deemed Asset Sales and deemed incurrences of Indebtedness, there would not have
occurred and be continuing any Default or Event of Default; and (e) such Foreign
Guarantor concurrent with its ceasing to be a Guarantor of the Notes ceases to
be a guarantor of The New Credit Facility.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of their respective properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or Guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $2.5
million, a resolution of its Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an investment banking firm (or, if an investment banking firm is
generally not qualified to give such an opinion, by an appraisal firm) of
national standing; PROVIDED THAT none of the following shall be deemed to be
Affiliate Transactions: (1) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business that
has been approved by a majority of the disinterested members of the Board of
Directors; PROVIDED that any such employment agreement providing for aggregate
remuneration of under $200,000 shall not require any such Board of Directors
approval; (2) transactions between or among the Company and/or its Restricted
Subsidiaries that are on fair and reasonable terms; (3) Restricted Payments that
are permitted by the provisions of the Indenture described above under the
caption "--Restricted Payments"; (4) fees and compensation paid to members of
the Board of Directors of the Company and of its Subsidiaries in their capacity
as such, to the extent such fees
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and compensation are reasonable and customary; (5) advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business and consistent with past
practices; (6) maintenance in the ordinary course of business of customary
benefit programs or arrangements for employees, officers or directors, including
vacation plans, health and life insurance plans, deferred compensation plans and
retirement or savings plans and similar plans; (7) fees and compensation paid
to, and indemnity provided on behalf of, officers, directors or employees of the
Company or any of its Restricted Subsidiaries, to the extent such fees and
compensation are reasonable and customary as determined by the Board of
Directors of the Company or of any such Restricted Subsidiary; and (8) payments
in accordance with the terms of the Merger Agreement.
ANTI-LAYERING
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes and (ii) no Guarantor will incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is subordinate or junior in right of payment to its Senior Debt and senior
in any respect in right of payment to its Subsidiary Guarantee.
BUSINESS ACTIVITIES
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to engage in any business other than Permitted Businesses,
except to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations;" that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition the Company has agreed that, for so long as any Notes
remain outstanding, it will furnish to the Holders and to
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securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company to comply with the provisions described under the caption
"--Certain Covenants--Merger, Consolidation or Sale of Assets"; (iv) failure by
the Company or any of its Subsidiaries for 30 days to comply with the provisions
described under the captions "--Certain Covenants--Restricted Payments,"
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," "--Repurchase at the Option of Holders Asset Sales" or "--Repurchase at
the Option of Holders--Change of Control"; (v) failure by the Company for 60
days after notice to comply with any of its other agreements in the Indenture or
the Notes; (vi) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries),
whether such Indebtedness or guarantee was created before or after the date of
the Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness by the expiration of the
applicable grace period, if any, provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity, and, in the case of each of clauses
(a) and (b) above, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
without duplication $5.0 million or more; (vii) failure by the Company or any of
its Subsidiaries to pay final judgments aggregating in excess of $5.0 million,
which judgments are not paid, discharged or stayed, for a period of 60
consecutive days; (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person authorized to act on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (ix)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any Significant Subsidiary, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture, and the Trustee shall be under no obligation to
exercise any of its rights and powers under this Indenture at the request of any
Holders, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
October 1, 2002 by reason of any willful action (or inaction) taken (or not
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taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to October 1, 2002, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or the Guarantors, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Subsidiary Guarantees or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on such Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, interest and Liquidated Damages, if
any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize
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income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that, subject to customary assumptions and
exclusions, after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that, subject to customary assumptions and exclusions,
there has been compliance with all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, interest or
Liquidated Damages, if any,
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on the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium, if
any, interest or Liquidated Damages, if any, on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders") or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendment to the provisions of Article 10 or
Article 12 of the Indenture (which relate to subordination) will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes) if such amendment would adversely affect the
rights of Holders of Notes. In addition, without the consent of at least 66 2/3%
in principal amount of the Notes then outstanding (including consents obtained
in connection with a tender offer or exchange offer for Notes), no waiver or
amendment to the Indenture may make any change in the provisions described above
under the caption "--Repurchase at the Option of Holders-- Change of Control"
that adversely affect the rights of any Holder of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Subsidiary Guarantees to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to allow any
Guarantor to guarantee the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to Axiohm
Transaction Solutions, Inc., 15070 Avenue of Science, San Diego, California
92128, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Notes held by Qualified Institutional Buyers and institutional
accredited investors initially are in the form of one or more registered global
notes without interest coupons (collectively, the "U.S. Global
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Notes"). The U.S. Global Notes have been deposited with the Trustee, as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to the
accounts of DTC's Direct and Indirect Participants (as defined below). The Notes
issued in offshore transactions in reliance on Regulation S, if any, initially
are in the form of one or more registered, global book-entry notes without
interest coupons (the "Regulation S Global Notes"). The Regulation S Global
Notes have been deposited with the Trustee, as custodian for DTC, in New York,
New York, and registered in the name of a nominee of DTC (a "Nominee") for
credit to the accounts of Indirect Participants at the Euroclear System
("Euroclear") and Cedel Bank, societe anonyme ("CEDEL"). All registered global
notes are referred to herein collectively as "Global Notes."
Beneficial interests in all Global Existing Notes and all Certificated
Existing Notes (as defined below), if any, will be subject to certain
restrictions on transfer and will bear a restrictive legend as described under
"Notice to Investors." In addition, transfer of beneficial interests in any
Global Notes will be subject to the applicable rules and procedures of DTC and
its Direct or Indirect Participants (including, if applicable, those of
Euroclear and CEDEL), which may change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be exchanged
for Notes in certificated form in certain limited circumstances. See "--Transfer
of Interests in Global Notes for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Direct Participants. The Direct Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations,
including Euroclear and CEDEL. Access to DTC's system is also available to other
entities that clear through or maintain a direct or indirect, custodial
relationship with a Direct Participant (collectively, the "Indirect
Participants"). DTC may hold securities beneficially owned by other persons only
though the Direct Participants or Indirect Participants and such other persons'
ownership interest and transfer of ownership interest will be recorded only on
the records of the Direct Participant and/or Indirect Participant, and not on
the records maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i) DTC
has credited the accounts of the Direct Participants designated by the Initial
Purchaser with portions of the principal amount of Global Notes allocated by the
Initial Purchaser to such Direct Participants, and (ii) DTC will maintain
records of the ownership interests of such Direct Participants in the Global
Notes and the transfer of ownership interests by and between Direct
Participants. DTC will not maintain records of the ownership interests of, or
the transfer of ownership interests by and between, Indirect Participants or
other owners of beneficial interests in the Global Notes. Direct Participants
and Indirect Participants must maintain their own records of the ownership
interests of, and the transfer of ownership interests by and between, Indirect
Participants and other owners of beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. Investors in the Regulation S
Global Notes may hold their interests therein directly though Euroclear or CEDEL
or indirectly through organizations that are participants in Euroclear or CEDEL.
Investors may also hold interests in the Regulation S Global Notes through
organizations other than Euroclear and CEDEL that are Direct Participants in the
DTC system. Morgan Guaranty Trust Company of New York,
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Brussels office is the operator and depository of Euroclear and Citibank, N.A.
is the operator and depository of CEDEL (each a "Nominee" of Euroclear and
CEDEL, respectively). Therefore, they will each be recorded on DTC's records as
the holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL will maintain on their records the
ownership interests, and transfers of ownership interests by and between, their
own customer's securities accounts. DTC will not maintain records of the
ownership interests of, or the transfer of ownership interests by and between,
customers of Euroclear or CEDEL. All ownership interests in any Global Notes,
including those of customers' securities accounts held though Euroclear or
CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Note to such
persons. Because DTC can act only on behalf of Direct Participants, which in
turn act on behalf of Indirect Participants and others, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to persons
or entities that are not Direct Participants in DTC, or to otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests. For certain other restrictions on the
transferability of the Notes see "--Transfers of Interests in Global Notes for
Certificated Notes."
EXCEPT AS DESCRIBED IN "--TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Company, the Guarantors and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, if any, interest and Liquidated
Damages, if any, on Global Notes registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee as the registered holder
under the Indenture. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any Global Note or (ii) any other matter relating to the actions and practices
of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Company or the Guarantors. Neither the Company, the Guarantors nor
the Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the Notes through Euroclear or CEDEL) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but
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generally will settle in immediately available funds. Transfers between and
among Indirect Participants who hold interests in the Notes through Euroclear
and CEDEL will be effected in the ordinary way in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between Direct Participants in DTC, on
the one hand, and Indirect Participants who hold interests in the Notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear or CEDEL's
respective Nominee through DTC in accordance with DTC's rules on behalf of
Euroclear or CEDEL; HOWEVER, delivery of instructions relating to cross-market
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines (Brussels time for Euroclear and UK
time for CEDEL). Indirect Participants who hold interests in the Notes through
Euroclear and CEDEL may not deliver instructions directly to Euroclear's or
CEDEL's Nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Note in DTC, and make or receive payment in accordance with normal
procedures for same-day funds settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL, during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a
Regulation S Global Note to a DTC Participant until the European business day
for Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default on the Notes, DTC reserves
the right to exchange Global Notes (without the direction or one or more of its
Direct Participants) for Notes in certificated form, of which any Existing Notes
shall bear restrictive legends, and to distribute such certificated forms of
Notes to its Direct Participants. See "--Transfers of Interests in Global Notes
for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Global Notes and in the
U.S. Global Notes among Direct Participants, Euroclear and CEDEL, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Guarantors,
the Initial Purchaser or the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective Direct and Indirect
Participants of their respective, obligations under the rules and procedures
governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL
NOTE
An Indirect Participant who holds an interest in the Regulation S Global
Existing Notes will be permitted to transfer its interest to a U.S. Person who
takes delivery in the form of an interest in U.S. Global Existing Notes only
upon receipt by the Trustee of a written certification from the transferor to
the, effect that such transfer is being made in accordance with the restrictions
on transfer set forth under
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"Notice to Investors" in the Offering Memorandum delivered to investors in
connection with the Existing Notes Offering and set forth in the legend printed
on the Regulation S Global Existing Notes.
A Direct or Indirect Participant who holds an interest in U.S. Global
Existing Notes may transfer its interest to a person who takes delivery in the
form of an interest in Regulation S Global Existing Notes only upon receipt by
the Trustee of a written certification from the transferor to the effect that
such transfer is being made in accordance with Rule 903 or 904 of Regulation S.
Transfers involving an exchange of a beneficial interest in Regulation S
Global Notes for a beneficial interest in U.S. Global Notes or vice versa will
be effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection with
such transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the one Global Note and a corresponding increase in the
principal amount of the other Global Note, as applicable. Any beneficial
interest in the one Global Note that is transferred to a person who takes
delivery in the form of the other Global Note will, upon transfer, cease to be
an interest in such first Global Note and become an interest in such other
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC (x)
notifies the Company that it is unwilling or unable to continue as depositary
for the Global Notes and the Company thereupon fails to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Certificated Notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the Notes. In any such case, the Company will notify the Trustee
in writing that, upon surrender by the Direct and Indirect Participants of their
interest in such Global Note, Certificated Notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC by such
Direct Participants (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interests in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
In all cases described herein, such Certificated Existing Notes will bear
the restrictive legend referred to in "Notice to Investors" in the Offering
Memorandum delivered to investors in connection with the Existing Notes Offering
unless the Company determines otherwise in compliance with applicable law.
Neither the Company, the Guarantors nor the Trustee will be liable for any
delay by the holder of the Global Notes or DTC in identifying the beneficial
owners of Notes, and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global Note
or DTC for all purposes.
TRANSFERS OF CERTIFICATED EXISTING NOTES FOR INTERESTS IN GLOBAL EXISTING
NOTES
Certificated Existing Notes may only be transferred if the transferor first
delivers to the Trustee a written certificate (and in certain circumstances, an
opinion of counsel) confirming that, in connection with such transfer, it has
complied with the restrictions on transfer described under "Notice to Investors"
in the Offering Memorandum delivered to investors in connection with the
Existing Notes Offering.
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SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to DTC
or its nominee as the registered holder of such Global Note. With respect to
Certificated Notes, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated Notes
will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchaser entered into the
Registration Rights Agreement on the Closing Date of the Existing Notes
Offering, October 2, 1997. Pursuant to the Registration Rights Agreement, the
Company agreed to file with the Commission the Exchange Offer Registration
Statement of which this Prospectus is a part on the appropriate form under the
Securities Act with respect to the New Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. If (i) the Company is not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company prior to the 20th day following consummation of the Exchange Offer
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) it may not resell the New Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (C) it is a broker-dealer and owns Existing Notes
acquired directly from the Company or an affiliate of the Company, the Company
will file with the Commission a Shelf Registration Statement to cover resales of
the Existing Notes by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Existing Note until (i) the date on which such Existing
Note has been exchanged by a person other than a broker-dealer for a New Note in
the Exchange Offer, (ii) following the exchange by a broker-dealer in the
Exchange Offer of an Existing Note for a New Note, the date on which such New
Note is sold to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Existing Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such Existing
Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Closing Date, (ii)
unless the Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will commence the Exchange Offer and use its best efforts to
issue on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, New Notes in
exchange for all Existing Notes tendered prior thereto in the Exchange Offer and
(iii) if obligated to file the Shelf Registration Statement, the Company will
use its best efforts to file the Shelf Registration Statement with the
Commission on or prior to 30 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 90 days after such obligation arises. If (a) the Company fails to file
the Shelf Registration Statement required by the Registration Rights Agreement
on or before the date specified for such filing, (b) any of
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such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) the Company fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement, or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or use of the prospectus is suspended in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement and is not succeeded within 30 days by another
effective Registration Statement or use of the prospectus (as supplemented, if
necessary) is again permitted; PROVIDED THAT the Shelf Registration Statement
shall not cease to be effective and the prospectus shall not cease to be usable
in connection with resales of Transfer Restricted Securities for more than 30
days in any calendar year (each such event referred to in clauses (a) through
(d) above a "Registration Default"), then the Company will pay Liquidated
Damages to each Holder of Notes, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to $.05 per week per $1,000 principal amount of Notes held by such
Holder. The amount of the Liquidated Damages will increase by an additional $.05
per week per $1,000 principal amount of Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.35 per week per $1,000 principal amount of
Notes. All accrued Liquidated Damages will be paid by the Company on each
Damages Payment Date to the Global Note Holder by wire transfer of immediately
available funds or by federal funds check and to Holders of Certificated
Securities by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Holders of Existing Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Existing Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control "
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED THAT
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) (PROVIDED THAT the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a
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whole will be governed by the provisions of the Indenture described above under
the caption "--Repurchase at the Option of Holders--Change of Control" and/or
the provisions described above under the caption "--Certain Covenants--Merger,
Consolidation, or Sale of Assets" and not by the provisions of the Indenture
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for Net Proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Guarantor or by a Guarantor to the Company or another Guarantor or by a
non-Guarantor Foreign Subsidiary to another non-Guarantor Foreign Subsidiary,
(ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary, (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments," (iv) a transfer of Capital Stock of a Foreign
Subsidiary for cash and/or Indebtedness permitted by clause (xv) of the covenant
described above under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" and (v) a disposition of inventory
or Cash Equivalents in the ordinary course of business, will, in each case, not
be deemed to be Asset Sales.
"BORROWING BASE" means, with respect to any Restricted Subsidiary that is a
Foreign Subsidiary and is not a Guarantor, the sum of (x) 75% of the net book
value of the non-Affiliate accounts receivable of such Restricted Foreign
Subsidiary in accordance with GAAP and (y) 40% of the net book value of the
inventory of such Restricted Foreign Subsidiary in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL MARKET TRANSACTION" means (i) any direct or indirect public
offering or private placement of subordinated debt or equity securities of the
Company or any of its Subsidiaries or (ii) the incurrence of any other
Indebtedness by the Company or any of its Subsidiaries, or any direct or
indirect parent holding company of the Company (other than Permitted Debt);
PROVIDED, that, in each case, either such transaction does not violate the New
Credit Facility or the Indebtedness under the New Credit Facility has been paid
in full and all commitments thereunder have been terminated.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit, time deposits
and eurodollar time deposits with maturities of not more than one year from the
date of acquisition, bankers' acceptances with maturities of not more than one
year from the date of acquisition and overnight bank deposits, in each case with
any lender party to the New Credit Facility or any Permitted Refinancing
Indebtedness or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than thirty days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper rated at least P-2 by Moody's Investors
Service, Inc. or at least A-2 by Standard & Poor's Ratings Services with
maturities of not more than 270 days from the date of acquisition, (vi) readily
marketable direct obligations issued by any State of the United States of
America or any political subdivision thereof
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having maturities of not more than one year from the date of acquisition and
rated at least A by Moody's Investors Service, Inc. or A by Standard & Poor's
Corporation, and (vii) investment funds investing 95% of their assets in
securities of the types described in clauses (i)-(vi) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) (other than persons who are, or groups of persons who are,
made up entirely of Principals and/or their Related Parties); (ii) the adoption
of a plan relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than one or more Principals or their respective Related Parties, becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition), directly or indirectly, of more than 35% of the
total of the Voting Stock of the Company (measured by voting power rather than
number of shares), PROVIDED, that no Principal and his Related Parties
beneficially own (as so defined), directly or indirectly, in the aggregate a
greater percentage of the total voting power of the Voting Stock of the Company
than such other person or have the right or ability by voting power, contract or
otherwise, to elect or designate for election a majority of the Board of
Directors of the Company (for purposes of this clause (iii), such other person
shall be deemed to beneficially own any Voting Stock of a person held by another
person (a "parent corporation"), if such other person "beneficially owns" (as so
defined), directly or indirectly, more than 50% of the voting power of the
Voting Stock of such parent corporation and the Principals and the Related
Parties "beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock of
such parent corporation than such other person and do not have the right or
ability by voting power, contract or otherwise, to elect or designate for
election a majority of the Board of Directors of such parent corporation), (iv)
the first day on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors; or (v) the Company consolidates with,
or merges with or into, any Person, or any Person consolidates with, or merges
with or into, the Company, in any such event pursuant to a transaction in which
any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such conversion or
exchange).
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future
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period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income (or loss) of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the Company or one of its Subsidiaries.
"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election, or (iii) was elected to such Board of Directors with the
approval of the holders of 80% or more of the voting securities held by the
Principals and their Related Parties.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of the date of the
Indenture, among the Company, Lehman Brothers Inc., as arranger, Lehman
Commercial Paper Inc., as syndication agent and administrative agent, and the
lenders from time to time party thereto, as such agreement may be amended,
restated, modified, renewed, refunded, replaced or refinanced from time to time
thereafter, including any appendices, exhibits or schedules to any of the
foregoing, as the same may be in effect from time to time, in each case, as such
agreements may be amended, modified, supplemented, renewed, refunded, replaced,
refinanced, extended or restated from time to time (whether with the original
agents and lenders or other agents and lenders or otherwise, and whether
provided under the original credit agreement or other credit agreements or
otherwise), including any appendices, exhibits or schedules to any of the
foregoing.
"DARDEL" means Dardel Technologies S.A., a French corporation.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice (or both) would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) any other Senior Debt permitted under the Indenture,
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which at the date of creation thereof or determination,
the holders thereof are committed to lend, at least $25.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Debt as "Designated Senior Debt" for purposes of the Indenture.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or
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otherwise, or redeemable at the option of the Holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature, except to the extent that such Capital Stock is solely redeemable with,
or solely exchangeable for, any Capital Stock of such Person that is not
Disqualified Stock.
"DOMESTIC SUBSIDIARY" means a Subsidiary that is formed under the laws of
the United States of America or of a state or territory thereof.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, (iii) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of the Company,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions and including
the Merger as an acquisition by the Company, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will
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not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"FOREIGN SUBSIDIARY" means any Subsidiary that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTORS" means each of (i) Axiohm IPB, Inc., Stadia Colorado Corp. and
Cognitive Solutions Inc. and (ii) any other subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the net payment
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements in the ordinary course of business designed to
protect such Person against fluctuations in commodity prices, interest rates or
currency exchange rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness (of the
types described above) of others secured by a Lien on any asset of such Person
(whether or not such Indebtedness is assumed by such Person) and, to the extent
not otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof in the case of any Indebtedness that does not
require current payments of interest and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness), advances or capital
contributions (excluding commission, travel and entertainment, relocation, and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a direct or indirect Restricted Subsidiary of the
Company, the Company or such Restricted Subsidiary, as the case may be, shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
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"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
any asset and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of July
14, 1997 among DH Technology, Inc., Axiohm S.A. and AX Acquisition Corporation,
as in effect on the date of the Indenture.
"NET CASH PROCEEDS" means the aggregate cash proceeds received from any
Capital Market Transaction, in each case net of (i) all commissions (including
any underwriter's discounts); (ii) other ordinary and reasonable fees and
expenses (including legal fees and expenses) incurred as a consequence of such
Capital Market Transaction and (iii) in the case of a Capital Market Transaction
of the nature described in clause (ii) of the definition thereof, any required
repayment of Senior Debt that is actually made with such proceeds.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting,
investment banking and brokers fees and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"NEW CREDIT FACILITY" means the Credit Agreement, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that Indebtedness that would
otherwise be Non-Recourse Debt but for the reason that the Company or a
Restricted Subsidiary may be directly or indirectly liable as a guarantor, such
Indebtedness will be considered Non-Recourse Debt if the guarantee of such
Indebtedness was permitted at the time of its incurrence by the covenants
described under the captions "--Certain Covenants--
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Restricted Payments" and "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
"OBLIGATIONS" means any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or its Subsidiaries whether or not a
claim for post-filing interest is allowed in such proceeding), penalties, fees,
charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages), guarantees and other liabilities or amounts
payable under the documentation governing any Indebtedness or in respect
thereof.
"PERMITTED BUSINESS" means (i) the lines of business conducted by the
Company and its Subsidiaries on the date hereof or to which the Company's or its
Subsidiaries' technology is applicable; (ii) the design, manufacture and sale of
input or output devices (including printers) or other devices related to,
involved with or used in the processing of commercial, retail, point-of-sale,
industrial or financial transactions or to bar coding or item identification;
and (iii) any business reasonably related or incidental thereto or which is an
extension thereof, including, without limitation, the design and sale of
ancillary software, electronic components, the sale of consumable products, or
the provision of related services.
"PERMITTED INVESTMENTS" means (i) any Investment in the Company or in a
Guarantor; (ii) any Investment in Cash Equivalents or deposit accounts
maintained in the ordinary course of business; (iii) any Investment by the
Company or any Restricted Subsidiary of the Company, if as a result of such
Investment (a) such Person becomes a Guarantor or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Guarantor; (iv)
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales;" (v) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (vi) any
Investment received involuntarily; (vii) any Investment received in connection
with or as a result of a bankruptcy, workout or reorganization of any Person;
(viii) advances and extensions of credit in the nature of accounts receivable
arising from the sale or lease of goods or services or the licensing of property
in the ordinary course of business; (ix) other Investments by the Company or any
Restricted Subsidiary in any Person having an aggregate fair market value
(measured as of the date each such Investment is made and without giving effect
to subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (ix) that are at the time outstanding (net of
returns of capital, dividends paid on Investments and repurchases of
Investments), not to exceed $5.0 million; (x) Investments in the form of
intercompany Indebtedness or Guarantees of Indebtedness permitted under clauses
(vi), (vii) and (xi) of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock;" (xi)
Investments arising in connection with Hedging Obligations that are incurred in
the ordinary course of business for the purpose of fixing or hedging currency,
commodity or interest rate risk (including with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be outstanding)
in connection with the conduct of the business of the Company and its
Subsidiaries and not for speculative purposes; and (xii) any Investment existing
on the date of the Indenture and any amendment, modification, restatement,
supplement, extension, renewal, refunding, replacement, refinancing, in whole or
in part, thereof.
"PERMITTED LIENS" means (i) Liens securing Senior Debt of the Company or its
Restricted Subsidiaries; (ii) Liens securing Indebtedness that is pari passu in
right of payment with the Notes, provided that the Notes are equally and ratably
secured; (iii) Liens existing on the date of the Indenture; (iv) Liens on
property of a Person existing at the time such Person or such Person's parent
corporation becomes a Subsidiary of the Company or any Subsidiary of the
Company; PROVIDED THAT such Liens were in existence prior to the contemplation
of such transaction and do not extend to any assets other than those of such
Person; (v) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary
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of the Company, PROVIDED THAT such Liens were in existence prior to the
contemplation of such acquisition and extend only to the property so acquired
and the proceeds thereof; (vi) Liens to secure any Permitted Refinancing
Indebtedness incurred to refinance any Indebtedness secured by any Lien referred
to in the foregoing clauses (i) through (v), PROVIDED, HOWEVER, that such new
Lien shall be limited to all or part of the same property that secured the
original Lien (PROVIDED THAT such Liens may extend to after-acquired property,
including any assets or Capital Stock of any subsequently formed or acquired
Subsidiary, if such original Lien included such property or assets as
collateral) and the Indebtedness secured by such Lien at such time is not
increased to any amount greater than permitted under clauses (ii), (iii) and
(xiv) of the covenant described above under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock", or, in
the case of other Senior Debt, or, in the case of other Indebtedness, the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (i) through (v), as the case may be, at the
time the original Lien became a Permitted Lien; (vii) Liens in favor of the
Company or any Guarantor; (viii) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary with respect to obligations
that do not exceed $5.0 million in the aggregate at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary; (ix) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds,
deposits to secure the performance of bids, trade contracts, government
contracts, leases or licenses or other obligations of a like nature incurred in
the ordinary course of business (including, without limitation, landlord Liens
on leased properties); (x) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently prosecuted,
PROVIDED THAT any reserve or other appropriate provision as shall be required to
conform with GAAP shall have been made therefor; (xi) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (xii) of
the second paragraph of the covenant described above under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness, together with
any additions and accessions thereto and replacements, substitutions and
proceeds (including insurance proceeds) thereof; (xii) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business in respect of obligations not
overdue for a period in excess of 60 days or which are being contested in good
faith by appropriate proceedings promptly instituted and diligently prosecuted;
PROVIDED, that any reserve or other appropriate provision as shall be required
to conform with GAAP shall have been made therefor; (xiii) easements,
rights-of-way, zoning and similar restrictions and other similar encumbrances or
title defects incurred, or leases or subleases granted to others, in the
ordinary course of business, which do not in any case materially detract from
the value of the property subject thereto or do not interfere with or adversely
affect in any material respect the ordinary conduct of the business of the
Company and its Restricted Subsidiaries taken as a whole; (xiv) Liens in favor
of customs and revenue authorities to secure payment of customs duties in
connection with the importation of goods in the ordinary course of business and
other similar Liens arising in the ordinary course of business; (xv) leases or
subleases granted to third Persons not interfering with the ordinary course of
business of the Company or its Restricted Subsidiaries; (xvi) Liens (other than
any Lien imposed by ERISA or any rule or regulation promulgated thereunder)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance, and other types of social
security; (xvii) deposits made in the ordinary course of business to secure
liability to insurance carriers, and Liens on the proceeds of insurance granted
to insurance carriers solely to secure the payment of financed premiums; (xviii)
any attachment or judgment Lien not constituting an Event of Default under
clause (i) of the first paragraph of the section described above under the
caption "--Events of Default and Remedies"; (xix) any interest or title of a
lessor or sublessor under any operating lease; (xx) Liens arising by virtue of
any common law, statutory or contractual provision relating to bankers' liens,
rights of set-off or similar rights and remedies as to deposit or securities
accounts maintained in the ordinary course of
103
<PAGE>
business; (xxi) Liens in favor of a trustee under any indenture securing amounts
due to the trustee in connection with its services under such indenture; and
(xxii) Liens under licensing agreements for use of intellectual property entered
into in the ordinary course of business.
"PERMITTED PROCEEDS" means (i) any Net Cash Proceeds from a Capital Market
Transaction and (ii) the proceeds from any trust created as described under
"--Legal Defeasance and Covenant Defeasance" PROVIDED THAT such trust at the
time of its creation does not violate the New Credit Facility.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED THAT: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued and unpaid interest on, any
other Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith, including any premiums on principal) except in the case of revolving
indebtedness under clause (iii) of the second paragraph set forth under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock" may be refinanced up to the limitations described in such
clause (iii); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to any other
Indebtedness, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of the Indebtedness extended, refinanced,
renewed, replaced, defeased or refunded, and is subordinated in right of payment
to, or is ranked in right of payment with respect to, the Notes on terms at
least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or a Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PRINCIPAL" means each of Patrick Dupuy, Gilles Gibier or William Gibbs.
"PUBLIC EQUITY OFFERING" means any underwritten primary public offering of
the Common Stock or other Voting Stock of the Company, pursuant to an effective
registration statement (other than a registration statement on Form S-4, Form
S-8, or any successor or similar form) under the Securities Act.
"RELATED PARTY" means, with respect to any Principal, (i) any spouse or
immediate family member (in the case of an individual) of such Principal or (ii)
a Person, the beneficiaries, stockholders, partners, owners, members or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to in the immediately
preceding clause (i).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary; provided that, on the Effective
Date of the Indenture, all Subsidiaries of the Company shall be Restricted
Subsidiaries of the Company.
"SENIOR DEBT" means (i) all Indebtedness outstanding under the New Credit
Facility permitted under the covenant described above under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," (ii) any other Indebtedness permitted to be incurred by the Company
under
104
<PAGE>
the terms of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes, and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables, or (z) any
Indebtedness of the type described in clause (ii), or any Obligations with
respect thereto, that is incurred in violation of the Indenture; PROVIDED, THAT
this clause (z) shall not be read to negate the requirement in clause (i) in the
preceding sentence that Indebtedness outstanding under the New Credit Facility
be permitted under the convenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" to
qualify as Senior Debt.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by a
resolution of the Board of Directors as an Unrestricted Subsidiary; but only to
the extent that such Subsidiary: (i) has no Indebtedness other than Non-Recourse
Debt; (ii) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (iii) is a
Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and (iv) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries;
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
105
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus, as it may be amended or supplemented from time to time, may
be used by Participating Broker-Dealers in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
as a result of market-making activities or other trading activities. Each
Participating Broker-Dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Company has agreed that under
certain circumstances, for a period of up to one year after the Expiration Date,
it will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale.
The Company and the Guarantors will not receive any proceeds from any sale
of New Notes by broker-dealers. New Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any Participating
Broker-Dealer that acquired Existing Notes as a result of market making
activities or other trading activities and who resells New Notes that were
received by it pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the New Notes offered hereby will be
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The financial statements of DH Technology, Inc. as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated balance sheets as of December 31, 1995 and 1996 and the
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996 of Axiohm S.A. and
subsidiaries included in this Prospectus have been audited by Price Waterhouse,
independent accountants, as stated in their report appearing herein.
106
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AXIOHM S.A.
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheet as of December 31, 1996 and December 31, 1995.................................. F-3
Consolidated Statement of Income for the Years Ended December 31, 1996, 1995 and 1994..................... F-4
Consolidated Statement of Cash Flows for the Years Ended December 31, 1996, 1995
and 1994................................................................................................ F-5
Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994....... F-6
Notes to the Consolidated Financial Statements............................................................ F-7
AXIOHM TRANSACTION SOLUTIONS, INC.
Unaudited Condensed Consolidated Balance Sheet as of September 30, 1997................................... F-23
Unaudited Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 1997 and
1996.................................................................................................... F-24
Unaudited Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1997 and
1996.................................................................................................... F-25
Notes to the Unaudited Condensed Consolidated Financial Statements........................................ F-26
<CAPTION>
DH TECHNOLOGY, INC.
<S> <C>
Independent Auditors' Report.............................................................................. F-31
Consolidated Balance Sheets as of December 31, 1995 and December 31, 1996................................. F-32
Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and 1996.................... F-33
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1994, 1995 and 1996...... F-34
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996................ F-35
Notes to the Consolidated Financial Statements............................................................ F-36
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Axiohm S.A.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Axiohm S.A.
and its subsidiaries at December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with United States generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with United States generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Paris,
September 12, 1997
F-2
<PAGE>
AXIOHM S.A.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
NOTE 1995 1996
----- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 636 $ 1,839
Accounts receivable, net........................................................... 3 9,700 10,552
Inventories, net................................................................... 4 13,506 13,900
Loan to related party.............................................................. 17 -- 1,832
Other current assets............................................................... 2,435 1,454
--------- ---------
Total current assets............................................................. 26,277 29,577
Property, plant and equipment, net................................................... 5 11,002 11,235
Goodwill............................................................................. 6 2,254 2,606
Other assets......................................................................... 651 560
--------- ---------
Total assets..................................................................... $ 40,184 $ 43,978
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 6,675 $ 7,480
Bank overdraft..................................................................... 545 --
Current portion of long-term debt.................................................. 8 1,748 1,267
Current portion of capital lease and financing obligations......................... 9 84 139
Current portion of government grant obligations.................................... 11 327 916
Other current liabilities.......................................................... 7 4,185 5,703
--------- ---------
Total current liabilities........................................................ 13,564 15,505
Long-term debt....................................................................... 8 13,087 4,821
Capital lease and financing obligations.............................................. 9 1,662 1,543
Government grant obligations......................................................... 11 2,600 1,846
Deferred income taxes................................................................ 13 1,482 1,557
Other long-term liabilities.......................................................... 14 1,812 2,273
--------- ---------
Total liabilities................................................................ $ 34,207 $ 27,545
--------- ---------
Commitments and contingencies........................................................ 10 -- --
Shareholders' equity:
Common stock, ordinary shares "A" par value FF 100 at December 31, 1995 and FF 500
at December 31, 1996; 38,000 shares authorized and outstanding at December 31,
1995; 38,405 shares authorized and outstanding at December 31, 1996.............. 15 $ 616 $ 3,579
Common stock, ordinary shares "B" par value FF 500, 2,735 shares authorized and
outstanding at December 31, 1996................................................. -- 262
Capital in excess of par value..................................................... 66 326
Retained earnings.................................................................. 5,434 12,149
Foreign currency translation adjustment............................................ (139) 117
--------- ---------
Total shareholders' equity....................................................... 5,977 16,433
--------- ---------
Total liabilities and shareholders' equity....................................... $ 40,184 $ 43,978
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
NOTE 1994 1995 1996
----- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Net sales........................................................ 3 $ 23,952 $ 72,155 $ 95,302
Other income..................................................... 12 858 -- --
---------- ---------- ----------
24,810 72,155 95,302
Costs and expenses:
Costs of products sold........................................... (15,095) (52,202) (66,390)
Selling, general and administrative.............................. (4,506) (9,200) (11,013)
Research and development......................................... (3,310) (5,836) (6,648)
Goodwill amortization............................................ 6 -- (161) (200)
---------- ---------- ----------
Total costs and expenses........................................... (22,911) (67,399) (84,251)
---------- ---------- ----------
Income from operations............................................. 1,899 4,756 11,051
Interest income.................................................... 90 158 158
Interest expense................................................... (244) (1,889) (1,032)
Other income....................................................... 12 167 -- 1,033
---------- ---------- ----------
Income before income taxes......................................... 1,912 3,025 11,210
Provision for income taxes......................................... 13 (482) (1,095) (4,406)
---------- ---------- ----------
Net income......................................................... $ 1,430 $ 1,930 $ 6,804
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
<S> <C> <C> <C>
1994 1995 1996
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 1,430 $ 1,930 $ 6,804
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 1,070 2,696 2,921
Deferred income taxes....................................................... 756 (155) 458
Provision for inventory obsolescence........................................ 57 1,040 87
Provision for long-term liabilities......................................... 94 184 461
Other....................................................................... -- 36 213
Effect on cash of changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable.................................. 580 (4,659) (2,215)
Increase in inventories..................................................... (1,411) (1,896) (823)
Increase in other current assets............................................ (220) (248) (517)
(Decrease)/increase in accounts payable..................................... (437) 160 2,700
Increase in other current liabilities....................................... 720 1,371 1,137
(Decrease)/increase in income tax payable................................... (420) 678 618
Decrease in deferred revenue................................................ (58) (130) (107)
---------- --------- ---------
Net cash provided by operating activities....................................... $ 2,161 $ 1,007 $ 11,737
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
IPB acquisition, net of cash acquired (Note 2)................................ $ (15,644) $ -- $ --
Capital expenditures.......................................................... (2,190) (2,955) (3,056)
Proceeds from disposition of property, plant and equipment.................... -- 53 71
Other......................................................................... (203) (123) (12)
---------- --------- ---------
Net cash used in investing activities........................................... $ (18,037) $ (3,025) $ (2,997)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft................................................................ $ (540) $ 409 $ (545)
Net borrowings under lines of credit.......................................... 645 953 (128)
Proceeds from long-term debt.................................................. 15,301 1,000 --
Principal repayments under long-term debt..................................... (371) (4,992) (8,446)
Proceeds from government grants............................................... 716 2,204 338
Proceeds from financing arrangements (Note 9)................................. -- 1,600 --
Repayment of government grants................................................ -- (196) (308)
Principal repayments under financing obligations.............................. -- (36) (119)
Payment of dividends.......................................................... (342) -- (411)
Proceeds from stock issuance, net of issuance costs (Note 15)................. -- -- 3,807
Net loans/repayments to related parties....................................... 602 -- (1,851)
---------- --------- ---------
Net cash provided by/(used in) financing activities............................. $ 16,011 $ 942 $ (7,663)
---------- --------- ---------
Effect of foreign exchange rate changes on cash and cash equivalents............ $ 399 $ 216 $ 126
---------- --------- ---------
Change in cash and cash equivalents............................................. $ 534 $ (860) $ 1,203
Cash and cash equivalents at beginning of year.................................. 962 1,496 636
---------- --------- ---------
Cash and cash equivalents at end of year........................................ $ 1,496 $ 636 $ 1,839
---------- --------- ---------
---------- --------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest...................................................................... $ 157 $ 1,649 $ 845
Income taxes, net of refunds.................................................. 140 604 3,245
NON-CASH TRANSACTIONS:
Capital lease obligations..................................................... -- $ 1,750 $ 163
Accrual for contingent purchase price consideration (Note 10)................. -- -- 552
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES COMMON STOCK
-------------------- -------------------- CAPITAL
IN FOREIGN
CLASS CLASS EXCESS CURRENCY
-------------------- -------------------- OF PAR RETAINED TRANSLATION
A B A B VALUE EARNINGS ADJUSTMENT
--------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993................ 38,000 -- $ 616 $ -- $ 66 $ 2,416 $ (225)
Net income.................................. -- -- -- -- -- 1,430 --
Dividends................................... -- -- -- -- -- (342) --
Currency translation adjustment............. -- -- -- -- -- -- 341
--------- --------- --------- --------- --------- --------- -----
BALANCE AT DECEMBER 31, 1994................ 38,000 -- $ 616 $ -- $ 66 $ 3,504 $ 116
Net income.................................. -- -- -- -- -- 1,930 --
Currency translation adjustment............. -- -- -- -- -- -- (255)
--------- --------- --------- --------- --------- --------- -----
BALANCE AT DECEMBER 31, 1995................ 38,000 -- $ 616 $ -- $ 66 $ 5,434 $ (139)
Issuance of Common Stock "A"................ 405 -- 8 -- 489 -- --
Issuance of Common Stock "B"................ -- 2,735 -- 52 3,297 -- --
Stock issuance costs........................ -- -- -- -- (39) -- --
Increases in nominal value of each share
from FF 100 to FF 500..................... -- -- 2,955 210 (3,165) -- --
Allocation to restricted reserves........... -- -- -- -- (322) 322 --
Dividends................................... -- -- -- -- -- (411) --
Net income.................................. -- -- -- -- -- 6,804 --
Currency translation adjustment............. -- -- -- -- -- -- 256
--------- --------- --------- --------- --------- --------- -----
BALANCE AT DECEMBER 31, 1996................ 38,405 2,735 $ 3,579 $ 262 $ 326 $ 12,149 $ 117
--------- --------- --------- --------- --------- --------- -----
--------- --------- --------- --------- --------- --------- -----
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE AT DECEMBER 31, 1993................ $ 2,873
Net income.................................. 1,430
Dividends................................... (342)
Currency translation adjustment............. 341
---------
BALANCE AT DECEMBER 31, 1994................ $ 4,302
Net income.................................. 1,930
Currency translation adjustment............. (255)
---------
BALANCE AT DECEMBER 31, 1995................ $ 5,977
Issuance of Common Stock "A"................ 497
Issuance of Common Stock "B"................ 3,349
Stock issuance costs........................ (39)
Increases in nominal value of each share
from FF 100 to FF 500..................... --
Allocation to restricted reserves........... --
Dividends................................... (411)
Net income.................................. 6,804
Currency translation adjustment............. 256
---------
BALANCE AT DECEMBER 31, 1996................ $ 16,433
---------
---------
</TABLE>
The accompanying notes are integral part of the consolidated financial
statements.
F-6
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Axiohm Transaction Solutions, Inc. ("Axiohm") designs, develops, manufactures
and services printers, printer components and printing systems utilizing thermal
and impact technologies. Axiohm's customers include major point-of-sale
providers, gasoline pump manufacturers, banking systems suppliers and other
manufacturers of equipment printing slips, tickets or receipts. Axiohm operates
on a worldwide basis with significant activities in North America and Europe.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The financial statements of Axiohm include the accounts of its wholly owned
subsidiaries in the United States, Hong Kong and Japan. All intercompany
accounts and transactions have been eliminated.
These accompanying financial statements have been presented in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP").
B. USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities as
of the date of the consolidated financial statements and the reported amount of
revenue and expenses during the reporting period. Actual results could differ
from estimates.
C. GOODWILL
Axiohm amortizes costs in excess of the fair value of net assets acquired using
the straight-line method over an estimated useful life of fifteen years.
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives of the related
assets:
<TABLE>
<S> <C>
Buildings....................................... 20 to 40
years
Machinery and equipment......................... 3 to 5 years
Molds and tooling............................... 3 to 5 years
Furniture and fixtures.......................... 3 to 7 years
Computer software............................... 1 to 3 years
</TABLE>
E. INVENTORIES
Inventories are valued at the lower of cost or market, cost being determined
using the first-in, first-out ("FIFO") method.
F-7
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. CASH AND CASH EQUIVALENTS
Cash equivalents consist principally of short-term highly liquid money market
funds with original maturities of less than three months.
G. REVENUE
Revenue from product sales is recognized at the time of shipment. Service
revenue is recognized upon completion of the service activity and the shipment
of the repaired product to the customer.
H. RESEARCH & DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Certain government
research grants, which are repayable in the event that the related research
project proves to be successful, are recognized as a deduction to expenses when
the research project has been determined to be unsuccessful and all other
conditions of the grant have been satisfied.
I. TRANSLATION OF FINANCIAL STATEMENTS
Axiohm's financial results have been reported in U.S. dollars. The functional
currencies of Axiohm's subsidiaries are the local currencies where the
subsidiaries operate. When translating local currency based financial statements
into U.S. dollars, assets and liabilities are translated at the year end rate
unless hedged by forward foreign exchange contracts, in which case the rates
specified in such forward contracts are used, while income and expenses are
translated using the average rate for the year. Translation differences are
presented as a component of shareholders' equity.
J. FOREIGN CURRENCY HEDGES
Axiohm uses forward foreign exchange contracts and options in its management of
currency risks and Axiohm does not hold or issue financial instruments for
trading purposes. Unrealized gains and losses on forward contracts to hedge
specific future currency transactions are deferred and recognized against the
matching losses and gains on the specific transactions.
K. CONCENTRATION OF CREDIT RISK
Axiohm sells products to various customers across several industries throughout
the world. Axiohm performs on-going credit evaluations of its customers and
maintains reserves for potential credit losses. Such losses have been within
management's expectations. Axiohm generally requires no collateral from its
customers.
L. INCOME TAXES
Axiohm follows Statement of Financial Accounting Standard No. 109 ("SFAS 109"),
ACCOUNTING FOR INCOME TAXES. Under SFAS 109, the tax provision is determined
under the liability method. Under this method deferred tax assets and
liabilities are recognized based on the differences between the financial
reporting and the tax bases of assets and liabilities using presently enacted
tax rates. Valuation allowances are
F-8
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
established on deferred tax assets when management estimates that it is more
likely than not that some or all of deferred tax benefits will not be realized.
M. GOVERNMENT GRANTS AND SUBSIDIES
Grants received from government agencies for the acquisition of property and
equipment are netted against the related capital expenditure. Grants for
investments in foreign countries are deferred and recognized as a deduction to
expenses if and when the conditions for the grant have been satisfied. Subsidies
received for employee training are recognized as a deduction to expenses during
the period in which the related costs are incurred.
N. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1994, 1995 and 1996, the carrying amount of Axiohm's financial
instruments, including cash and cash equivalents, trade receivables, trade
payables and other accrued liabilities, approximates their fair value due to
their short-term maturities. Based on quoted market prices and rates of interest
available to Axiohm, the carrying amount of its debt instruments and other
long-term liabilities at December 31, 1994, 1995 and 1996 also approximates fair
value.
O. PROFIT SHARING AND RETIREMENT INDEMNITY PLANS
Substantially all Axiohm employees participate in statutory profit sharing and
retirement indemnity plans. Amounts owed under the profit sharing plan are based
on a formula prescribed by French law. Benefit obligations under the retirement
indemnity plan are determined based on length of service, annual remuneration
and job grade. These obligations and the related compensation expense are
recorded in the financial statements of the period during which the related
benefits are earned.
P. POST-RETIREMENT MEDICAL PLAN
Certain Axiohm employees participate in a defined benefit post-retirement
medical plan. Axiohm's projected benefit obligation relating to such benefits is
calculated and recorded in accordance with Statement of Financial Accounting
Standards No. 106 ("SFAS 106"), ACCOUNTING FOR POST-RETIREMENT BENEFITS.
Q. NEW ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF was issued. This statement requires that long-lived assets held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. This statement was implemented for the year ended December 31,
1996. The adoption of this accounting standard had no significant impact on the
financial position or results of operations of Axiohm. Axiohm will continually
assess impairment of long-lived assets and certain identifiable intangibles
whenever changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
F-9
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Effective January 1, 1996, Axiohm adopted Statement of Accounting Standards No.
123 ("SFAS 123"), ACCOUNTING FOR STOCK-BASED COMPENSATION. This statement
defines a fair value based method of accounting for employee options or similar
equity instruments and encourages all entities to adopt that method of
accounting. However, it also allows an entity to continue to measure
compensation costs using the intrinsic value based method of accounting
prescribed by Accounting Principle Board Opinion No. 25 ("APB 25"), ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES. Axiohm has elected to account for its employee
stock compensation plan under the provisions of APB 25.
2. IPB ACQUISITION
On December 29, 1994, Axiohm acquired the net assets of the printer division of
NCR ("the Seller") (formerly AT&T Global Information Solutions Company). The
acquisition was accounted for using the purchase method and the results of the
division have been included since that date.
The aggregate purchase price of the net assets acquired was $15.6 million
including acquisition costs and was financed through 12 year term loans
subscribed for a total amount of approximately $15.0 million and credit line
facilities of approximately $0.6 million. The agreement also provides for
additional contingent consideration for up to $5.0 million for each of the three
years ending December 31, 1995, 1996 and 1997 to be paid to the Seller to the
extent that sales made by Axiohm to the Seller exceed certain minimums specified
in the purchase agreement. Any additional cosideration is allocated to goodwill.
In the year ended December 31, 1996, sales of products to the Seller did exceed
such minimums and an adjustment of $552 was made to goodwill (See Note 10).
The purchase price has been allocated to the assets acquired and liabilities
assumed based upon fair market values at the date of acquisition. The fair value
of assets acquired and liabilities assumed is as follows:
<TABLE>
<CAPTION>
Current assets.................................................... $ 8,032
<S> <C>
Property, plant and equipment..................................... 8,664
Other assets...................................................... 298
Goodwill.......................................................... 2,415
Current liabilities............................................... (2,568)
Long-term liabilities............................................. (1,197)
---------
$ 15,644
---------
---------
</TABLE>
The following unaudited statement of revenue, gross margin, income from
operations and net income for the year ended December 31, 1994 is presented as
if the acquisition had been made at the beginning of the period. The financial
information utilized for the division in computing the following pro forma has
been derived from unaudited financial records carved out from the Seller's own
accounts and presented by the Seller to Axiohm at the time of acquisition. These
records include actual results for the nine-month period ended September 30,
1994 and an estimate of the results for the three-month period ended December
31, 1994 as provided by the Seller.
F-10
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
2. IPB ACQUISITION (CONTINUED)
The unaudited pro forma information is not necessarily indicative of the
revenue, gross margin, income from operations or net income that would have
occurred had the purchase been made at the beginning of the period.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
PRO FORMA (UNAUDITED)
---------------------
<S> <C>
Revenue.................................................................................... $ 66,218
Gross margin............................................................................... 18,923
Income from operations..................................................................... 4,142
Net income................................................................................. 3,032
</TABLE>
In connection with this acquisition, Axiohm and the Seller entered into a three
year OEM purchase agreement under which the Seller undertakes to purchase at
least 75% of its requirements for certain products from Axiohm at prices
specified in the agreement. On September 2, 1997, Axiohm entered into a new
three-year contract with NCR. The New NCR contract does not obligate NCR to
purchase a minimum of 75% of its requirements for transaction printers of the
type manufactured by Axiohm, but does provide that NCR and Axiohm intend and
expect that NCR will purchase from Axiohm substantially all of its requirements
for transaction printers.
3. ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Trade accounts receivable.................................................................... $ 9,838 $ 10,690
Less: allowance for doubtful accounts........................................................ (138) (138)
--------- ---------
Accounts receivable, net..................................................................... $ 9,700 $ 10,552
--------- ---------
--------- ---------
</TABLE>
For the years ended December 31, 1994, 1995 and 1996, revenue in the amount of
$2,063, $46,278 and $49,502, respectively, came from sales to NCR representing
approximately 9%, 64% and 52%, respectively, of Axiohm's total net sales. At
December 31, 1995 and 1996, accounts receivable from this customer were $4,239
and $2,860, respectively. All amounts are due within one year.
F-11
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
4. INVENTORIES, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Raw materials and components............................................ $ 11,992 $ 13,345
Work in process......................................................... 2,152 949
Semi-finished and finished goods........................................ 1,555 1,793
--------- ---------
15,699 16,087
Less: allowance for obsolescence........................................ (2,193) (2,187)
--------- ---------
Inventories, net........................................................ $ 13,506 $ 13,900
--------- ---------
--------- ---------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Land.................................................................... $ 803 $ 755
Buildings............................................................... 5,085 5,355
Machinery and equipment................................................. 1,763 1,797
Molds and tooling....................................................... 5,788 6,471
Furniture, fixtures and fittings........................................ 3,845 4,704
--------- ---------
17,284 19,082
Less: accumulated depreciation.......................................... (6,282) (7,847)
--------- ---------
Property, plant and equipment, net...................................... $ 11,002 $ 11,235
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996 was
$1,044, $2,421 and $2,721, respectively.
6. GOODWILL
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Goodwill................................................................ $ 2,415 $ 2,967
Less: accumulated amortization.......................................... (161) (361)
--------- ---------
Goodwill, net........................................................... $ 2,254 $ 2,606
--------- ---------
--------- ---------
</TABLE>
Amortization expense for the years ended December 31, 1994, 1995 and 1996 was
$0, $161 and $200, respectively.
F-12
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
7. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Accrued salaries and benefits............................................ $ 2,172 $ 2,501
Customer advances........................................................ 654 989
Accrued warranty expenses................................................ 485 718
Income taxes............................................................. 371 500
Other taxes.............................................................. 224 381
NCR earnout.............................................................. -- 552
Relocation accrual....................................................... 262 --
Other.................................................................... 17 62
--------- ---------
Total other current liabilities.......................................... $ 4,185 $ 5,703
--------- ---------
--------- ---------
</TABLE>
8. LONG-TERM DEBT
Axiohm has entered into borrowing arrangements with various banks for loans
denominated in French Francs ("FF"), U.S. Dollars ("USD") and Japanese Yen
("JPY").
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Revolving credit line up to $8,000, the first $3,000 at lender's prime rate
plus three quarters (9.75% at December 31, 1995 and 9.5% at December 31,
1996), the next $5,000 at lender's prime plus one quarter (9.25% at
December 31, 1995 and 9.00% at December 31, 1996), payable in full January
1, 1998, secured by inventory, accounts receivable, contract rights,
equipment and general intangibles.......................................... $ 1,302 $ 1,174
Revolving credit line in FF, USD or JPY up to an equivalent
amount of FF 4.5 million at the quarterly weighted average interest rate on
the Interbank Money Market plus 1.0% or lender's prime rate plus 1.0%
(5.75% at December 31, 1995 and 4.31% at December 31, 1996),
payable in full January 1, 1998, secured by Axiohm's accounts receivable... 301 --
Business loan at 10% collateralized by various assets; balance paid
in full in July 1996....................................................... 3,045 --
Bank mortgage loan at lender's prime rate plus three quarters (9.75% at
December 31, 1995 and 9.5% at December 31, 1996), payable in monthly
installments of $44 (including interest) through 1997, amortized on
twelve-year schedule beginning in 1998, with balloon for full outstanding
balance due January 1, 2000; payment collateralized by building, machinery
and equipment.............................................................. 4,019 3,868
Three bank loans in FF at rates between 4.6% and 7.25%, payable
from 1997 to 2002, secured by Axiohm's equipment........................... 1,328 1,046
Bank loan in FF to acquire IPB assets at PIBOR one year rate plus
1.2% payable in seven yearly installments through 2001, secured by
IPB shares; balance paid in full in 1996................................... 4,373 --
Five business loans in FF at rates between 5.75% and 8.75%, secured
by Axiohm's equipment; balance paid in full in 1996........................ 467 --
--------- ---------
$ 14,835 $ 6,088
Less current portion......................................................... (1,748) (1,267)
--------- ---------
Total long-term debt......................................................... $ 13,087 $ 4,821
--------- ---------
--------- ---------
</TABLE>
Commitment fees on the total amount of the revolving credit line in USD are
payable annually at an annual rate of 0.25%.
F-13
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
8. LONG-TERM DEBT (CONTINUED)
At December 31, 1996, annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------------
<S> <C>
1997..................................................................................... $ 1,267
1998..................................................................................... 391
1999..................................................................................... 750
2000..................................................................................... 3,427
2001..................................................................................... 165
2002 and thereafter...................................................................... 88
---------
Total................................................................................ $ 6,088
---------
---------
</TABLE>
9. CAPITAL LEASE AND FINANCING OBLIGATIONS
a. CAPITAL LEASES
Axiohm and its subsidiaries lease office equipment and vehicles under various
capital lease contracts with terms extending through December 31, 2000.
b. FINANCING ARRANGEMENT
In 1994, Axiohm negotiated a FF 8.0 million ($1.6 million) grant from various
agencies of the government of France to subsidize the purchase and improvement
of certain properties in France. The agreement is structured as a sale/leaseback
transaction in which title to the purchased property was sold to a government
agency in exchange for a cash payment of FF 16 million ($3.2 million) and
subsequently leased back for a fifteen year period. The terms of the agreement
provide for a bargain purchase option at the conclusion of the lease term, hence
the sale/leaseback transaction has been accounted for as financing arrangement
in which the related assets and a corresponding obligation are recorded in
Axiohm's financial statements. A financing obligation representing the proceeds
for the sale/leaseback component of the transaction has been netted against the
underlying capital expenditure. At December 31, 1996, Axiohm has a contingent
liability to repay, in whole or in part, grants received of approximately FF 8.0
million ($1.6 million), in the event Axiohm does not meet the requirements of
the grant including minimum employment levels through 1997, minimum capital
expenditures and continued use of the building throughout the lease term.
F-14
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
9. CAPITAL LEASE AND FINANCING OBLIGATIONS (CONTINUED)
Future minimum lease commitments under capital leases and the financing
arrangement at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDING DECEMBER 31, LEASES FINANCING TOTAL
- --------------------------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
1997........................................................... $ 102 $ 189 $ 291
1998........................................................... 102 189 291
1999........................................................... 47 189 236
2000........................................................... 19 189 208
2001........................................................... -- 189 189
2002 and thereafter............................................ -- 1,600 1,600
----- ----------- ---------
Total minimum lease payments................................... $ 270 $ 2,545 $ 2,815
----- -----------
----- -----------
Less: amounts representing interest............................ (1,133)
---------
Present value of minimum lease payments........................ 1,682
Current portion................................................ (139)
---------
Long-term portion of capital lease obligations................. $ 1,543
---------
---------
</TABLE>
Included in property, plant and equipment in the accompanying consolidated
balance sheets are the following assets under capital leases and the financing
arrangement:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Building at cost......................................................... $ 1,634 $ 1,527
Equipment at cost........................................................ 150 310
--------- ---------
1,784 1,837
Less: accumulated depreciation........................................... (64) (210)
--------- ---------
Assets under capital leases and financing arrangement, net............... $ 1,720 $ 1,627
--------- ---------
--------- ---------
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
In connection with the 1994 acquisition of what is now its Axiohm IPB
subsidiary, Axiohm is contingently liable to the Seller for up to $5.0 million
for each of the three years ending December 31, 1995, 1996 and 1997, for
additional purchase consideration (See Note 2). As of December 31, 1996, Axiohm
had accrued $552 for contingent payments resulting from 1996 sales performance.
F-15
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
11. GOVERNMENT GRANT OBLIGATIONS
French government agencies provide various long-term grants to promote
fundamental research programs and to encourage commercial implementation
overseas. The reimbursement of such grants is contingent upon the success of the
related program.
These grants are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Fundamental research....................................................... $ 1,709 $ 1,488
Commercial implementation in Asia.......................................... 1,218 1,274
--------- ---------
2,927 2,762
Less: current portion...................................................... (327) (916)
--------- ---------
Long-term portion.......................................................... $ 2,600 $ 1,846
--------- ---------
--------- ---------
</TABLE>
12. SUPPLEMENTARY INCOME STATEMENT DISCLOSURES
A. REVENUE
In 1994, Axiohm received revenue in respect of liquidation damages from
three customers for a total amount of $ 0.9 million. This amount represents
indemnities to Axiohm for the non-fulfillment of contractual terms by these
customers.
B. OTHER INCOME
At the end of 1995 and into 1996, Axiohm received insurance proceeds of
$ 1.0 million in compensation for the loss of revenue and commercial damage
caused by water in the thermal head clean room of the Puiseaux facility. The
insurance proceeds have been included in other income.
13. INCOME TAXES
Axiohm operates internationally and tax rates are subject to applicable tax
legislation in the country in which it operates. The domestic and foreign
components of pre-tax income are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Domestic (France) pre-tax income/(loss)...................... $ 1,979 $ (1,011) $ 4,780
Foreign pre-tax (loss)/income................................ (67) 4,036 6,430
--------- --------- ---------
Total........................................................ $ 1,912 $ 3,025 $ 11,210
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
13. INCOME TAXES (CONTINUED)
The provision for income tax consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
CURRENT INCOME TAX EXPENSE/(CREDIT)
Domestic....................................................... $ (283) $ (359) $ 1,159
Foreign........................................................ 9 1,609 2,789
--------- --------- ---------
Total............................................................ $ (274) $ 1,250 $ 3,948
--------- --------- ---------
--------- --------- ---------
DEFERRED INCOME TAX EXPENSE/(CREDIT)
Domestic....................................................... $ 661 $ (280) $ 577
Foreign........................................................ 95 125 (119)
--------- --------- ---------
Total............................................................ $ 756 $ (155) $ 458
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the differences between income tax expense computed at
the French statutory rate and Axiohm's reported income tax provision is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Statutory rate..................................................... 33.3% 36.7% 36.7%
Tax research credit.............................................. (14.8) (11.9) --
Non utilized foreign entities losses............................. 5.9 6.8 1.7
Effect of tax rate differences in foreign jurisdictions.......... 0.8 1.7 1.1
Effect of change in tax rate on domestic deferred taxes.......... -- 2.8 --
Other............................................................ -- 0.1 (0.2)
--------- --------- ---
Effective Tax Rate................................................. 25.2% 36.2% 39.3%
--------- --------- ---
--------- --------- ---
</TABLE>
A tax research credit of approximately $285 and $359 was recorded at December
31, 1994 and 1995, respectively. The tax research credit was based on an
increase in research and development expenditure. Additionally, certain tax
losses in foreign jurisdictions were unavailable for offset against taxable
income.
F-17
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
13. INCOME TAXES (CONTINUED)
The components of deferred tax assets/(liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Deferred tax assets:
Post-retirement benefit obligation..................................... $ 643 $ 677
Investment grants...................................................... 578 504
Operating loss carry forwards.......................................... 815 388
Other.................................................................. 403 720
--------- ---------
Total deferred tax assets................................................ 2,439 2,289
Less: valuation allowance.............................................. (260) (388)
--------- ---------
Net deferred tax assets.................................................. $ 2,179 $ 1,901
--------- ---------
--------- ---------
Deferred tax liabilities:
Long-term tax reserve.................................................. $ (1,756) $ (1,603)
Plant and equipment.................................................... (576) (639)
Goodwill............................................................... (436) (407)
Provisions............................................................. -- (304)
Other.................................................................. (27) (22)
--------- ---------
Total deferred tax/liabilities........................................... $ (2,795) $ (2,975)
--------- ---------
--------- ---------
</TABLE>
Axiohm recorded a valuation allowance of $260 and $388 at December 31, 1995
and 1996, respectively, for net operating loss carry forwards in certain tax
jurisdictions since realization of these future benefits cannot be reasonably
assured. These net operating loss carry forwards expire at varying dates through
2001.
14. OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Provision for post-retirement benefit...................................... 1,341 1,436
Other...................................................................... 471 837
--------- ---------
Total...................................................................... 1,812 2,273
--------- ---------
--------- ---------
</TABLE>
Axiohm is currently obligated to provide certain post-retirement medical and
life insurance benefits to approximately 100 employees who have met certain
requirements as to age (generally 55) and length of service (generally 10 years,
which includes a minimum of 5 years after January 1, 1995). Axiohm accounts for
the cost of these benefits in accordance with SFAS 106. Axiohm funds these costs
on a pay-as-you-go basis. The post-retirement benefit expense for the years
ended December 31, 1994, 1995 and 1996 amounts to $0 to $144 and $96,
respectively.
F-18
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
14. OTHER LONG-TERM LIABILITIES (CONTINUED)
The total obligation recognized in the balance sheet at December 31, 1995
and 1996 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Accumulated post-retirement benefit obligation:
Active--not fully eligible............................................... $ 1,471 $ 374
Retired.................................................................. -- 66
--------- ---------
Total................................................................ 1,471 440
Unrecognized prior service cost............................................ -- 1,690
Unrecognized net loss...................................................... (130) (694)
--------- ---------
Accrued post-retirement benefit obligation................................. $ 1,341 $ 1,436
--------- ---------
--------- ---------
</TABLE>
Significant assumptions employed in this valuation include a discount rate
of 7.25% at December 31, 1995, and 7.50% at December 31, 1996. The pre-Medicare
eligible healthcare cost trend rate is 8.0% for 1996 (6.0% for post-Medicare)
declining by one percent each year through the year 2000 (1998 for post-
Medicare), after which a rate of 5.0% is utilized for each year.
The annual costs of post-retirement benefits are based on assumed discount
rates set to reflect market conditions. If the healthcare cost trend rate was
increased by one percentage point, the net post-retirement benefit expense for
the year ended December 31, 1994, 1995 and 1996 and the accumulated post-
retirement benefit obligation, as of December 31, 1995 and 1996 would not
increase by a material amount.
Axiohm sponsors an employee savings plan for certain U.S. employees which
conforms to the provisions of Section 401(k) of the Internal Revenue Code.
Axiohm also provides certain defined pension benefits (based on years of
service) to certain categories of employees.
Axiohm's obligations under these plans for 1994, 1995 and 1996 were not
material.
15. SHAREHOLDERS' EQUITY
A. SHARE CAPITAL
On June 24, 1996, Axiohm completed a private offering of 405 Common
Shares "A," and 2,735 Common Shares "B" to an employee of Axiohm and two
institutional investors, respectively, from which it received total proceeds
of $3,807, net of offering costs of $39.
Common Shares "B" have substantially the same terms as Common Shares "A"
except for their economic rights (represented by CERTIFICATS
D'INVESTISSEMENTS) and their voting rights (represented by CERTIFICATS DE
DROIT DE VOTE) which can be separated and sold individually.
On the same date, Axiohm increased the par value of its Common Shares
from FF 100 to FF 500.
F-19
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
15. SHAREHOLDERS' EQUITY (CONTINUED)
B. RETAINED EARNINGS
At December 31, 1996, Axiohm's distributable retained earnings amounted
to $11,025 and would be subject to $2,851 of additional withholding tax,
"PRECOMPTE," in case of distribution. The withholding tax would be recorded
in equity as part of the dividend paid to shareholders and shareholders
receiving the dividend would be entitled to a tax credit "AVOIR FISCAL" at
least equal to the withholding tax paid, under conditions provided for in
relevant tax treaties under French law.
C. STOCK OPTIONS
On December 15, 1995, the shareholders of Axiohm implemented a stock
option plan authorizing the Board of Directors to issue stock options for
the subscription of a maximum of 1,583 shares of Axiohm's Common Stock.
On February 19, 1996, the Board of Directors granted all 1,583 options
(to acquire one share of Common Stock each) to an officer of Axiohm at an
exercise price of FF 6,050 which approximated the fair value of the
underlying shares on the date of grant.
The options are valid for ten years (until December 31, 2005) and become
exercisable ratably over five years. Non-vested options become void upon
termination of employment. The plan also allows for accelerated vesting upon
certain conditions and events including a public offering of Axiohm's stock
and specified changes in the existing ownership of Axiohm.
As of December 31, 1996, all 1,583 options (none of which are
exercisable) remained outstanding.
Had compensation costs for Axiohm's stock option plan been determined
consistent with the fair value approach set forth in SFAS No. 123, Axiohm's
net income for the year ended December 31, 1996 would have been reduced to
$6,726. The fair value of the options granted is estimated on the date of
grant using the minimum value method with the following assumptions: 3.9%
dividend yield, a risk free interest rate of 6.35%, an expected option life
of 10 years and no forfeitures.
16. FOREIGN CURRENCY HEDGES
At December 31, 1996, Axiohm's portfolio consisted of five foreign exchange
contracts to sell $4.5 million at an average rate of $1 = FF 5.17 and one option
to sell $3.0 million at August 29, 1997 at the rate of FF 5.15 for $1. The
option was acquired at a cost of $76.
17. RELATED PARTY TRANSACTIONS
Axiohm purchased from Dardel Technologies, a significant shareholder (44%
ownership) of Axiohm, services including insurance coverage, telecommunications
and legal and management assistance. These services amounted to $1,029, $995 and
$991 in fiscal years 1994, 1995 and 1996, respectively. In addition, Dardel
Technologies sub-leases to Axiohm S.A. office space that it leases from a
company owned by three directors of Axiohm S.A. These sub-lease payments to
Dardel Technologies amounted to $130, $291 and $279 in 1994, 1995 and 1996,
respectively. This same company also provided office management services to
Axiohm S.A. for an amount of $202, $288 and $263 in 1994, 1995 and 1996,
respectively. The terms of such transactions approximate those of an arm's
length transaction with an unrelated party.
F-20
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
17. RELATED PARTY TRANSACTIONS (CONTINUED)
Axiohm provided selling and commercial services to Enerdis S.A., a
subsidiary of Dardel Technologies for an amount of $0, $93 and $132 in the years
ended December 31, 1994, 1995 and 1996, respectively. The terms of such
transactions approximate those of an arm's length transaction with an unrelated
party.
In 1994, 1995 and 1996, Axiohm participated in a cash pooling agreement with
Dardel Technologies allowing it to borrow or loan cash as considered necessary.
At December 31, 1996, Axiohm S.A. had an outstanding loan with Dardel
Technologies amounting to $1,832 and bearing interest at 6.42% which was
recorded in other current assets. This loan was reimbursed in April 1997 and the
cash pooling agreement has been subsequently terminated. The terms of such
transactions approximate those of an arm's length transaction with an unrelated
party.
18. GEOGRAPHICAL INFORMATION
Axiohm operates predominantly in a single industry as a manufacturer and
service provider of thermal and impact printing equipment. Axiohm has operations
in France, the United States, Hong Kong and Japan. Transfers between geographic
areas primarily represent intercompany export sales of approximately $3.7
million, $8.7 million and $17.3 million in 1994, 1995 and 1996, respectively.
These produced goods are accounted for based on established sales prices between
the related companies. In computing income from operations for foreign
subsidiaries, no allocations of general corporate expenses, interest or income
taxes have been made.
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 20,613 $ 3,339 $ -- $ -- $ 23,952
Other revenues........................................ 858 -- -- -- 858
Transfer between geographic areas..................... 3,188 507 21 (3,716) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 24,659 $ 3,846 $ 21 $ (3,716) $ 24,810
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 1,889 $ 342 $ (332) $ -- $ 1,899
Net income/(loss)..................................... $ 1,499 $ 268 $ (337) $ -- $ 1,430
Total assets at December 31, 1994..................... $ 22,578 $ 21,327 $ 103 $ (9,255) $ 34,753
</TABLE>
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 17,317 $ 54,099 $ 739 $ -- $ 72,155
Transfer between geographic areas..................... 8,716 -- -- (8,716) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 26,033 $ 54,099 $ 739 $ (8,716) $ 72,155
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 68 $ 5,540 $ (528) $ (324) $ 4,756
Net income/(loss)..................................... $ (177) $ 2,862 $ (561) $ (194) $ 1,930
Total assets at December 31, 1995..................... $ 24,089 $ 26,184 $ 318 $ (10,407) $ 40,184
</TABLE>
F-21
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
18. GEOGRAPHICAL INFORMATION (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 20,367 $ 73,625 $ 1,310 $ -- $ 95,302
Transfer between geographic areas..................... 17,335 -- -- (17,335) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 37,702 $ 73,625 $ 1,310 $ (17,335) $ 95,302
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 4,075 $ 7,613 $ (445) $ (192) $ 11,051
Net income/(loss)..................................... $ 3,100 $ 4,265 $ (504) $ (57) $ 6,804
Total assets at December 31, 1996..................... $ 25,732 $ 28,640 $ 599 $ (10,993) $ 43,978
</TABLE>
19. SUBSEQUENT EVENTS: MERGER WITH DH TO COMBINE OPERATIONS
On August 12, 1997, Axiohm closed a tender offer to acquire approximately
7,000,000 shares of DH Technology Inc. ("DH"). The tender offer was made
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") dated July
14, 1997 between both companies. The Merger Agreement provides for a subsequent
merger of Axiohm into DH which will result in Axiohm becoming a wholly-owned
subsidiary of DH; however, as a result of the tender offer and related
transactions, the former shareholders of Axiohm will own approximately 85% of
the merged entities and, therefore, for financial purposes, the transaction will
be accounted for in a manner similar to a reverse acquisition whereby Axiohm
will be the acquiror and DH will be the acquired entity.
The Tender Offer was financed through the incurrence of $166.2 million of
senior indebtedness (the "Tender Credit Facility") and the issuance of $24.0
million of preferred stock of Axiohm IPB, a wholly owned subsidiary of Axiohm
(collectively the "Tender Financing"). The Tender Credit Facility is repayable
on the earlier of (i) the effective time of the Merger or (ii) October 3, 1997.
The Preferred Stock is mandatorily redeemable on the earlier of (i) February 17,
1998 and (ii) the closing date of the merger. In the event the Merger does not
close and if the Preferred Stock is not redeemed by February 17, 1998, Axiohm is
committed to take actions which would have a material adverse effect on Axiohm's
existing security holders and Axiohm's financial condition, results of
operations and liquidity. Management expects to refinance the Tender Financing
through the issuance of $100.0 million of senior subordinated notes and the
incurrence of debt under a new credit facility. In the event Axiohm does not
issue the senior subordinated notes, management expects to refinance the Tender
Financing through the incurrence of debt under alternative financing facilities.
F-22
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------- SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 1,839 $ 36,248
Restricted cash................................................................... -- 8,594
Accounts receivable, net.......................................................... 10,552 32,295
Inventories....................................................................... 13,900 28,523
Prepaid expenses and other current assets......................................... 3,286 9,487
------------- -------------
Total current assets............................................................ 29,577 115,147
Fixed assets, net of accumulated depreciation..................................... 11,235 20,928
Intangible assets................................................................. 2,606 86,839
Other assets...................................................................... 560 5,240
------------- -------------
Total assets.................................................................... $ 43,978 $ 228,154
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................................. $ 7,480 $ 15,082
Current portion of long-term debt................................................. 2,322 4,060
Accrued payroll, payroll taxes and benefits....................................... -- 4,877
Accrued expenses and other current liabilities.................................... 5,703 7,529
Income taxes payable.............................................................. -- 3,140
Deferred revenue.................................................................. -- 493
------------- -------------
Total current liabilities....................................................... 15,505 35,181
Non-current liabilities:
Senior subordinated debt.......................................................... -- 187,800
Other long-term debt and long-term liabilities.................................... 10,483 15,919
Deferred tax liability............................................................ 1,557 1,627
------------- -------------
Total liabilities............................................................... 27,545 240,527
------------- -------------
Shareholders' equity (deficit):
Preferred shares, no par value
Authorized: 1,000,000 shares, none issued....................................... -- --
Common shares:
Common stock, authorized: 28,500,000 shares; issued and outstanding: 6,512,926
shares in 1996 and 1997....................................................... 4,167 23,851
Foreign currency translation adjustment........................................... 117 (107)
Retained earnings (accumluated deficit)........................................... 12,149 (36,117)
------------- -------------
Total shareholders' equity (deficit)............................................ 16,433 (12,373)
------------- -------------
Total liabilities and shareholders' equity...................................... $ 43,978 $ 228,154
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-23
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1997
--------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales.................................................................................. $ 71,965 $ 99,558
Cost of net sales.......................................................................... 49,792 66,978
--------- ----------
Gross margin............................................................................... 22,173 32,580
Operating expenses:
Selling, general and administrative...................................................... 8,303 13,878
Research and development................................................................. 4,702 6,198
In-process technology.................................................................... -- 50,831
--------- ----------
Total operating expenses................................................................... 13,005 70,907
Income (loss) from operations.............................................................. 9,168 (38,327)
Interest and other income.................................................................. 1,229 390
Interest and other expense................................................................. 946 3,077
--------- ----------
Income (loss) before income taxes.......................................................... 9,451 (41,014)
Income taxes............................................................................... 3,657 5,484
--------- ----------
Net income (loss).......................................................................... $ 5,794 $ (46,498)
--------- ----------
--------- ----------
Net income (loss) per share................................................................ $ 0.93 $ (7.14)
Weighted average number of shares outstanding
Per share (primary and fully diluted):..................................................... 6,243 6,513
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-24
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1997
--------- ----------
(UNAUDITED)
<S> <C> <C>
CASHFLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................................... $ 5,794 $ (46,498)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Write off of acquired in-process technology............................................. -- 50,831
Depreciation and amortization........................................................... 2,008 5,369
Other non-cash charges.................................................................. 939 450
Changes in assets and liabilities, net of effects of acquisition of business:
Accounts receivable..................................................................... (4,851) (8,909)
Inventory............................................................................... 1,738 (1,323)
Prepaid expenses and other assets....................................................... (501) 4,819
Accounts payable and accrued expenses................................................... 4,466 3,962
--------- ----------
Net cash provided by operating activities................................................... 9,593 8,701
CASHFLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of business, net of cash acquired................................. -- (148,074)
Capital expenditures...................................................................... (2,532) (3,670)
--------- ----------
Net cash used in investing activities....................................................... (2,532) (151,744)
CASHFLOWS FROM FINANCING ACTIVITIES:
Proceeds from tender financing............................................................ -- 186,979
Net repayment under line of credit........................................................ (759) (1,051)
Principal repayments on long term debt.................................................... (8,216) (5,000)
Dividends................................................................................. (411) (1,768)
Proceeds from stock issuance, net of issuance costs....................................... 3,807 --
Debt issuance costs....................................................................... -- (2,799)
Loans to related parties.................................................................. (388) 1,713
--------- ----------
Net cash provided by (used in) financing activities......................................... (5,967) 178,074
Effect of exchange rate changes on cash..................................................... 12 (622)
Net increase in cash and cash equivalents................................................... 1,106 34,409
Cash and cash equivalents at beginning of period............................................ 636 1,839
--------- ----------
Cash and cash equivalents at end of period.................................................. $ 1,742 $ 36,248
--------- ----------
--------- ----------
SUPPLEMENTAL CASHFLOW DISCLOSURES:
Interest paid............................................................................. $ 848 $ 488
Income taxes paid net of refunds.......................................................... $ 2,224 $ 4,723
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of business:
Fair value of assets acquired, net of cash acquired..................................... -- $ 134,480
In process technology................................................................... -- $ 50,831
Liabilities assumed..................................................................... -- $ (17,995)
Fair value of non-tendered stock........................................................ -- $ (19,242)
--------- ----------
Cash paid, net of cash acquired......................................................... -- $ 148,074
During 1996, the Company financed certain capital expenditures totaling $163,000 through
the incurrence of capital lease obligations.
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-25
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 1: UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period ended September
30, 1997 are not necessarily indicative of the results which may be expected for
the year ended December 31, 1997 or any other period. Reference is made to the
Consolidated Financial Statements and Notes thereto included in the AX
Acquisition Corporation's Schedule 14D-1 filing dated July 16,1997, for further
information.
NOTE 2: BASIS OF PRESENTATION
On August 21, 1997, pursuant to an Agreement and Plan of Merger dated as of
July 14, 1997 (the "Agreement of Merger"), AX Acquisition Corporation ("AX"), a
wholly-owned subsidiary of Axiohm S.A., acquired approximately 88%, or 7,000,000
shares, of the outstanding Common Stock of DH Technology, Inc. ("DH Technology")
through a public tender offer to the shareholders of DH Technology at a price of
$25 per share (the "Tender Offer").
On October 2, 1997, pursuant to the Agreement of Merger, AX acquired 100% of
the outstanding Common Stock of Axiohm S.A. in exchange for 5,518,524 shares of
DH Technology Common Stock and $12.2 million in cash (the "Share Exchange
Offer"). Simultaneous with the Share Exchange Offer, DH Technology purchased all
of the outstanding shares of AX in exchange for the assumption of approximately
$190 million of debt (the "Acquisition Financing") incurred by AX to finance the
Tender Offer. Immediately after the Share Exchange Offer, AX was merged with and
into DH Technology (the "Merger"), the surviving legal entity, and the company
changed its name from "DH Technology, Inc." to "Axiohm Transaction Solutions,
Inc". Immediately after the Merger, approximately 85% of DH Technology's
outstanding Common Stock was held by the former shareholders of Axiohm S.A. and
15% was held by the former public shareholders of DH Technology, Inc. Axiohm
S.A. and its subsidiaries and DH Technology and its subsidiaries are hereinafter
referred to collectively as the "Company".
The Tender Offer, the Share Exchange Offer and the Merger (collectively the
"Acquisition") have been accounted for as a reverse acquisition, in which Axiohm
S.A. was treated as the acquiror for accounting purposes. Accordingly, the
historical financial information for periods prior to August 31, 1997 are those
of Axiohm S.A. The effective date of the Acquisition and Merger of DH Technology
for accounting purposes was August 31, 1997, and, accordingly, the capital
structure of the Company has been retroactively restated to reflect the number
of shares outstanding as a result of the Acquisition. The results of operations
for the nine month periods ended September 30, 1997 include the operations of DH
Technology for the month of September 1997.
NOTE 3: ACQUISITION
The Acquisition of DH Technology has been accounted for using the purchase
method of accounting. The aggregate purchase price of $208.6 million consisted
of cash paid for DH Technology shares, DH Technology stock options, transaction
costs, and the fair value of DH Technology non-tendered shares and was allocated
based on the fair values of tangible and intangible assets acquired. The Company
expects
F-26
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 3: ACQUISITION (CONTINUED)
that the final purchase price allocation will be known by December 31, 1997 and
could differ from the preliminary allocation. A summary of the preliminary
purchase price allocation is as follows:
<TABLE>
<S> <C>
Net tangible assets acquired.................................. $76,152,000
In-process research and development........................... 50,831,000
Goodwill and other intangibles................................ 81,646,000
-----------
Total......................................................... $208,629,000
-----------
-----------
</TABLE>
The purchased in-process research and development had not reached
technological feasibility, had no probable tentative future uses, and was
charged to operations upon acquisition. Goodwill and other intangibles are being
amortized over three years using the straight line method.
Of the cash paid for the DH Technology stock options, $8.6 million was
funded to a Rabbi trust and is reflected on the balance sheet as restricted
cash.
The Acquisition Financing consisted of $166.2 million of senior indebtedness
under a credit facility with an institutional lender and $24 million of interim
preferred stock financing. Both of these amounts were fully repaid on October 2,
1997 with the proceeds from a private placement of $120 million of 9 3/4% Senior
Subordinated Notes due 2007 and borrowings under an $85 million Credit
Agreement. See Note 5 of the Notes to Condensed Consolidated Financial
Statements.
The following unaudited pro forma information has been prepared assuming
that the Acquisition and the Acquisition Financing had occurred at the beginning
of the periods presented. Pro forma adjustments included increased amortization
for the purchase price in excess of assets acquired; in-process research and
development expense; increased interest expense from the Acquisition Financing;
and related income tax effects. The pro forma information does not reflect any
potential cost savings from combining the operations of DH Technology and Axiohm
S.A.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Net sales............................................. $ 159,222,000 $ 158,289,000
Net loss.............................................. $ 67,156,000 $ 69,239,000
Net loss per share.................................... $ 10.76 $ 10.63
Weighted average number of shares outstanding......... 6,242,926 6,512,926
</TABLE>
The pro forma information is provided for information purposes only and does
not purport to be indicative of the Company's results of operations that would
actually have been achieved had the Acquisition and the Acquisition Financing
been completed at the beginning of the periods presented, or results that may be
obtained for the year ended December 31, 1997 or for any other period. See Note
5 of the Notes to Condensed Consolidated Financial Statements.
F-27
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 4: INVENTORIES
The composition of inventories at December 31, 1996 and September 30, 1997
was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Raw materials.......................................... $ 13,345,000 $ 32,612,000
Work in process........................................ 949,000 512,000
Finished goods......................................... 1,793,000 3,015,000
----------------- ------------------
Totals................................................. $ 16,087,000 $ 36,139,000
----------------- ------------------
----------------- ------------------
</TABLE>
NOTE 5: SUBSEQUENT EVENTS
SENIOR SUBORDINATED NOTES
On October 2, 1997, the Company completed a private placement (the "Initial
Notes Offering") of $120 million of its 9 3/4% Senior Subordinated Notes due
2007 (the "Initial Notes"). The Initial Notes were placed with Lehman Brothers
Inc. as initial purchaser (the "Initial Purchaser") and were subsequently resold
by the Initial Purchaser in the United States to "qualified institutional
buyers" in reliance on Rule 144A under the Securities Act of 1933, as amended,
(the "Securities Act") and outside of the United States in offshore transactions
to foreign investors in reliance on Regulation S under the Securities Act. The
underwriting discount to the Initial Purchaser was 2.75% of the principal amount
of the Initial Notes purchased (or an aggregate of $3.3 million).
Interest on the Initial Notes is payable semi-annually on April 1 and
October 1, commencing on April 1, 1998, until maturity on October 1, 2007. The
Initial Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after October 1, 2002 at various premiums to original face
value. The Company's payment obligation under the Initial Notes is jointly and
severally guaranteed on a senior subordinated basis by each of the Company's
U.S. subsidiaries ("the Guarantors"). The proceeds from the sale of the Initial
Notes, together with borrowings under the $85 million Credit Agreement (see
below) and existing cash were used to repay principal and accrued interest under
the Acquisition Financing.
Pursuant to a Registration Rights Agreement dated October 2, 1997 (the
"Registration Rights Agreement") among the Company, certain of the Company's
U.S. subsidiaries, as Guarantors, and the Initial Purchaser, the Company and the
Guarantors have agreed to use their best efforts to file a registration
statement no later than 60 days after the closing of the Initial Notes Offering,
with respect to an offer to exchange the Initial Notes for new senior
subordinated notes of the Company (the "New Notes") registered under the
Securities Act, with terms identical to those of the Initial Notes, and to cause
such registration statement to become effective no later than 120 days after the
closing of the Initial Notes Offering. The Initial Notes and the New Notes are
hereinafter referred to collectively as the "Notes". The holders of the Notes
are entitled to certain penalty payments from the Company under certain
circumstances if the Company and the Guarantors are not in compliance with their
obligations under the Registration Rights Agreement.
F-28
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
SENIOR BANK CREDIT AGREEMENT
On October 2, 1997, the Company entered into a Credit Agreement (the "Credit
Agreement") with a syndicate of banks (the "Banks"), led by Union Bank and
Lehman Brothers which acted as agent. Pursuant to the Credit Agreement, the
Banks have extended the Company a two tranche amortizing term loan in the
original principal amount of $50 million (the "Term Loan") and established a $35
million revolving line of credit (the "Revolver") available through October 2,
2002. The Term Loan consists of a Tranche A term loan in an aggregate principal
amount of $35 million, which has a maturity of five years, and a Tranche B term
loan in an aggregate principal amount of $15 million, which has a maturity of
six years. The Term Loan and Revolver are secured by a lien on substantially all
of the real and personal property of the Company and certain of its subsidiaries
and a pledge of capital stock of certain of its subsidiaries (provided that no
lien was or will be granted on the assets of Foreign Subsidiaries (as defined)
and no capital stock of Foreign Subsidiaries will be pledged to the extent that
the granting of such lien or the making of such pledge would result in
materially adverse United States federal income tax consequences to the Company
or would violate applicable law). The proceeds of the Term Loan and the initial
advance under the Revolver were used by the Company to repay principal and
accrued interest under the Acquisition Financing. Both the Term Loan and the
Revolver have interest rate options including an interest rate based on the
Eurodollar Rate plus a margin of between 2.5% to 3%. Such margins will vary
depending upon the relationship between the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") and the then aggregate total
debt outstanding. The Company is required to pay a fee of 0.375% per annum on
the unused portion of the Revolver. Under the Credit Agreement, the Company is
required to enter into arrangements to provide interest protection for $20
million of this floating rate debt for two years.
NOTE 6: SHAREHOLDERS' EQUITY
On June 24, 1996, Axiohm received net proceeds of $3.8 million from a
private placement of 421,200 shares of Common Stock to an employee of Axiohm and
two institutional investors.
On June 24, 1996, Axiohm declared a cash dividend of $0.4 million on Common
Stock which was paid to shareholders of record on June 24, 1996.
On May 14, 1997, Axiohm declared a cash dividend of $1.8 million on Common
Stock which was paid to shareholders of record on May 14, 1997.
NOTE 7: COMMITMENTS AND CONTINGENCIES
In connection with the August 1994 acquisition by DH Technology of all of
the outstanding stock of Cognitive Solutions, Inc. ("Cognitive"), a designer,
manufacturer and marketer of thermal bar code printers and complementary label
media for use in automatic data collection systems, the Company is obligated to
pay $0.5 million on August 15 in each of 1998 and 1999. The Company also may be
required to make additional payments, not to exceed $3.0 million, to the former
shareholder of Cognitive, based upon net sales of a specified Cognitive product
line.
In connection with the December 1994 acquisition by Axiohm S.A. of the
transaction printer business of NCR Corporation ("NCR"), now known as Axiohm
IPB, for up to $30.6 million, of which $15.6 million was paid at closing, $0.5
million has been paid to date in earn-out payments and a final payment of up to
F-29
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 7: COMMITMENTS AND CONTINGENCIES (CONTINUED)
$5.0 million may be paid in additional earn-out payments based upon 1997 sales.
The Company estimates that the final payment will be less than approximately
$1.5 million and is anticipated to be paid in 1998. Axiohm S.A. recorded
approximately $3.0 million of goodwill in connection with this acquisition,
which was accounted for using the purchase method of accounting.
In connection with the March 1997 acquisition by DH Technology of certain
assets and liabilities of American Magnetics Corporation ("AMC"), a designer,
manufacturer, and marketer of card reader modules and stand-alone card readers,
and a wholly-owned subsidiary of Group 4 Securitas Holdings, a Netherlands
company, for $5.7 million, of which $4.85 million was paid at closing, an
additional $0.8 million will become payable in the years of 2000 and 2001. Based
upon attainment of specified net sales, an additional $1.6 million may also
become payable.
In connection with the purchase and improvement of manufacturing facilities
in France, Axiohm S.A. negotiated in 1994 a $1.6 million grant (the "Grant")
from various agencies of the French government. The Company is contingently
liable to those agencies for the repayment, in whole or in part, of the Grant in
the event that the Company does not meet the requirements of the Grant, which
include minimum employment levels through 1997, minimum capital expenditures and
continued use of the building throughout the lease term.
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
DH Technology, Inc.:
We have audited the accompanying consolidated balance sheets of DH
Technology, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DH
Technology, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Diego, California
February 12, 1997
F-31
<PAGE>
DH TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 28,971,000 $ 30,943,000
Short-term investment securities held to maturity (Note 2)....................... 2,750,000 13,835,000
Accounts receivable, net of allowance for doubtful accounts of $1,067 in 1995 and
$1,197 in 1996................................................................. 15,785,000 16,006,000
Inventories (Note 3)............................................................. 14,382,000 11,582,000
Deferred tax asset (Note 12)..................................................... 1,744,000 2,089,000
Prepaid expenses and other current assets........................................ 573,000 792,000
------------- -------------
Total current assets......................................................... 64,205,000 75,247,000
Fixed assets, net (Notes 4 and 6).................................................. 6,290,000 8,250,000
Intangible assets, net (Note 5).................................................... 13,312,000 12,464,000
Deferred tax asset (Note 12)....................................................... -- 206,000
Other assets....................................................................... 1,478,000 938,000
------------- -------------
Total assets................................................................. $ 85,285,000 $ 97,105,000
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. $ 6,383,000 $ 4,587,000
Current portion of long-term debt (Note 6)....................................... 980,000 577,000
Accrued payroll, payroll taxes, and benefits..................................... 2,579,000 2,630,000
Accrued expenses................................................................. 2,045,000 1,963,000
Income taxes payable (Note 12)................................................... 2,128,000 2,406,000
Accrued warranty................................................................. 479,000 478,000
Deferred revenue................................................................. 947,000 577,000
------------- -------------
Total current liabilities.................................................... 15,541,000 13,218,000
Long-term debt (Note 6)............................................................ 2,115,000 1,635,000
Deferred tax liability (Note 12)................................................... 149,000 --
------------- -------------
Total liabilities............................................................ 17,805,000 14,853,000
------------- -------------
Shareholders' equity (Note 8):
Preferred shares, no par value; authorized: 1,000,000 shares,
none issued.................................................................... -- --
Common shares:
Common stock, no par value, authorized:
28,500,000 shares; issued and outstanding:
7,890,090 shares in 1995 and 7,974,277 in 1996............................... 12,335,000 13,168,000
Foreign currency translation adjustment........................................ (519,000) 393,000
Retained earnings.............................................................. 55,664,000 68,691,000
------------- -------------
Total shareholders' equity................................................... 67,480,000 82,252,000
Commitments (Notes 6, 7, 8, 10 and 11).........................................
------------- -------------
Total liabilities and shareholders' equity................................... $ 85,285,000 $ 97,105,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE>
DH TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
Net sales.......................................................... $ 77,918,000 $ 98,855,000 $ 115,784,000
Costs and expenses:
Cost of net sales................................................ 48,972,000 63,267,000 74,847,000
Selling, general, and administrative............................. 12,769,000 15,383,000 15,997,000
Research and development......................................... 4,685,000 5,007,000 5,805,000
------------- ------------- --------------
Total costs and expenses........................................... 66,426,000 83,657,000 96,649,000
------------- ------------- --------------
Income from operations............................................. 11,492,000 15,198,000 19,135,000
------------- ------------- --------------
Interest income.................................................... 854,000 1,231,000 1,491,000
Interest expense................................................... (210,000) (276,000) (149,000)
------------- ------------- --------------
Net interest income................................................ 644,000 955,000 1,342,000
------------- ------------- --------------
Income before income taxes......................................... 12,136,000 16,153,000 20,477,000
Income taxes (Note 12)............................................. 4,078,000 5,852,000 7,450,000
------------- ------------- --------------
Net income......................................................... $ 8,058,000 $ 10,301,000 $ 13,027,000
------------- ------------- --------------
------------- ------------- --------------
Net income per share............................................... $ 1.00 $ 1.24 $ 1.56
------------- ------------- --------------
------------- ------------- --------------
Shares used in per share calculation............................... 8,076,000 8,337,000 8,351,000
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
DH TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CURRENCY TOTAL
------------------------- TRANSLATION RETAINED SHAREHOLDERS'
SHARES AMOUNT ADJUSTMENT EARNINGS EQUITY
---------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993.............. 7,624,384 $ 10,133,000 $ (706,000) $ 37,305,000 $ 46,732,000
Exercise of options and warrants.......... 106,777 511,000 -- -- 511,000
Tax benefit of stock option exercise...... -- 96,000 -- -- 96,000
Foreign currency translation adjustment... -- -- 451,000 -- 451,000
Net income................................ -- -- -- 8,058,000 8,058,000
---------- ------------- ----------- ------------- -------------
BALANCE AT DECEMBER 31, 1994.............. 7,731,161 10,740,000 (255,000) 45,363,000 55,848,000
Exercise of options and warrants.......... 158,929 1,235,000 -- -- 1,235,000
Tax benefit of stock option exercise...... -- 360,000 -- -- 360,000
Foreign currency translation adjustment... -- -- (264,000) -- (264,000)
Net income................................ -- -- -- 10,301,000 10,301,000
---------- ------------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1995................ 7,890,090 12,335,000 (519,000) 55,664,000 67,480,000
Exercise of options and warrants.......... 84,187 694,000 -- -- 694,000
Tax benefit of stock option exercise...... -- 139,000 -- -- 139,000
Foreign currency translation adjustment... -- -- 912,000 -- 912,000
Net income................................ -- -- -- 13,027,000 13,027,000
---------- ------------- ----------- ------------- -------------
BALANCE AT DECEMBER 31, 1996.............. 7,974,277 $ 13,168,000 $ 393,000 $ 68,691,000 $ 82,252,000
---------- ------------- ----------- ------------- -------------
---------- ------------- ----------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
DH TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C>
1994 1995 1996
-------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 8,058,000 $ 10,301,000 $ 13,027,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................ 2,391,000 3,640,000 3,830,000
Provision for loss on accounts receivable.................... 105,000 65,000 87,000
Undepreciated value of asset disposals....................... 6,000 65,000 42,000
Provision for deferred income taxes, excluding effect of
acquisitions............................................... (429,000) (658,000) (700,000)
Changes in assets and liabilities, excluding effect of
acquisitions:
Accounts receivable.......................................... (1,997,000) (3,219,000) (308,000)
Inventories.................................................. (1,651,000) (2,814,000) 2,800,000
Prepaid expenses and other assets............................ 170,000 (17,000) 321,000
Accounts payable and accrued expenses........................ (891,000) 2,264,000 (1,878,000)
Accrued payroll, payroll taxes, and benefits................. 513,000 431,000 51,000
Income taxes payable......................................... (343,000) 772,000 278,000
Accrued warranty............................................. (20,000) 96,000 (1,000)
Deferred revenue............................................. 696,000 61,000 (370,000)
-------------- ------------- -------------
Net cash provided by operating activities.................... 6,608,000 10,987,000 17,179,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in short-term investment securities held
to maturity.................................................... 5,420,000 1,550,000 (11,085,000)
Payment for acquisition purchases, net of cash acquired.......... (12,825,000) (753,000) --
Capital expenditures............................................. (2,293,000) (2,469,000) (4,869,000)
Proceeds from sale of assets..................................... 26,000 -- --
-------------- ------------- -------------
Net cash used in investing activities........................ (9,672,000) (1,672,000) (15,954,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of long-term debt........................... (1,482,000) (1,260,000) (883,000)
Exercise of stock options........................................ 511,000 1,235,000 694,000
Tax benefit of stock option exercise............................. 96,000 360,000 139,000
-------------- ------------- -------------
Net cash provided by (used in) financing activities.......... (875,000) 335,000 (50,000)
Effect of exchange rate changes on cash............................ 365,000 (266,000) 797,000
-------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents............... (3,574,000) 9,384,000 1,972,000
Cash and cash equivalents at beginning of year..................... 23,161,000 19,587,000 28,971,000
-------------- ------------- -------------
Cash and cash equivalents at end of year........................... $ 19,587,000 $ 28,971,000 $ 30,943,000
-------------- ------------- -------------
-------------- ------------- -------------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid on debt............................................ $ 106,000 $ 93,000 $ 140,000
-------------- ------------- -------------
Income taxes paid................................................ $ 3,539,000 $ 5,738,000 $ 6,413,000
-------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY:
Fair market value of assets acquired............................. $ 15,865,000 $ 815,000 $ --
Cash paid........................................................ $ (12,952,000) $ (753,000) $ --
-------------- ------------- -------------
Liabilities assumed.............................................. $ 2,913,000 $ 62,000 $ --
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--DH Technology, Inc. and subsidiaries' (the
"Company") principal business activity involves the design, manufacture, and
distribution of transaction printers and mechanisms, impact printheads, bar code
printers, and related services and supplies, such as labels and ribbons. The
Company's core technologies include thermal, impact and laser. Products are
marketed worldwide by a direct sales force, sales representatives, value-added
resellers and distributors. The Company maintains offices in the United States,
Mexico, England and Australia.
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of DH Technology, Inc. and its wholly-owned subsidiaries, Stadia
Colorado Corp.; Cognitive Solutions, Inc.; DH Tecnologia de Mexico, S.A. de
C.V.; DH Technology plc; and DH Technology pty. Results of operations subsequent
to February 28, 1994, reflect the added results of Stadia, and results for
Cognitive are included after August 31, 1994 (Note 10). All significant
intercompany accounts and transactions have been eliminated.
NET INCOME PER SHARE--Net income per share for the years ended December 31,
1994, 1995, and 1996 is computed based on the weighted-average number of common
and common equivalent shares outstanding during each year. Stock options and
warrants that have a dilutive effect are considered common stock equivalents for
purposes of this calculation. Fully diluted net income per share is not
materially different from primary net income per share.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments with a maturity of three months or less at the time of purchase to
be cash equivalents.
CONCENTRATION OF CREDIT RISK--Cash in excess of daily requirements is
invested in short-term investment securities consisting of money market funds,
municipal bonds, and short-term commercial investments of companies with strong
credit ratings. These investments typically mature within one year, and
therefore, bear minimal risk. To date, the Company has not incurred losses
related to these investments.
SHORT-TERM INVESTMENT SECURITIES HELD TO MATURITY--Investment securities at
December 31, 1996 consist primarily of U.S. Municipal Bonds and are classified
as held to maturity. Management determines the appropriate classification of
securities at the time of purchase. If management has the intent at the time of
purchase and the Company has the ability to hold securities until maturity, they
are classified as held to maturity. Investment securities held to maturity are
stated at cost, adjusted for amortization of premiums and accretion of discounts
over the period to maturity of the related security.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out) or market.
FOREIGN CURRENCY TRANSLATION--The accounts of foreign subsidiaries and
affiliates are measured using local currency as the functional currency. For
these operations, assets and liabilities are translated into U.S. dollars at
period-end exchange rates, and income and expense accounts are translated at
average monthly exchange rates. Net exchange gains or losses resulting from such
translation are excluded from net income and accumulated in a separate component
of shareholders' equity. Financial results of non-U.S. subsidiaries and
affiliates in countries with highly inflationary economies are translated using
a combination of current and historical exchange rates and any translation
adjustments are included in net earnings, along with all transaction gains and
losses for the period. Gains and losses from foreign currency transactions are
not significant and are included in selling, general, and administrative
expenses in the accompanying consolidated statements of income.
F-36
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FIXED ASSETS, DEPRECIATION, AND AMORTIZATION--Fixed assets are recorded at
cost. Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the related assets or over the terms of the
related leases, whichever is shorter (three to ten years). Capital lease
amortization is included in depreciation and amortization expense. Renewals and
replacements which extend the useful life of the fixed asset are capitalized.
INTANGIBLE ASSETS--Intangible assets are recorded at cost. The Company has
classified as goodwill the cost in excess of fair value of the net assets of the
companies acquired in purchase transactions. Intangible assets, excluding
goodwill, are amortized using the straight-line method over periods ranging from
five to 15 years. Goodwill is amortized over periods ranging from 20 to 25
years.
SOFTWARE DEVELOPMENT COSTS--The Company capitalizes certain software
development costs in accordance with Statement of Financial Accounting Standards
No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR
OTHERWISE MARKETED (SFAS 86). Capitalization of software development costs
begins upon the establishment of technological feasibility as defined in SFAS
86. The establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs require considerable
judgment by management with respect to certain external factors including, but
not limited to, technological feasibility, anticipated future gross revenues,
estimated economic life, and changes in software and hardware technologies.
Capitalized software costs are amortized using the straight-line method over
the estimated revenue or economic life of the related product. The Company
amortized $200,000 of such costs in 1994. In 1995, the Company determined the
software development costs had no future value, and accordingly, wrote-off the
remaining costs of $568,000.
Research and development expenditures are charged to research and
development expense in the period incurred.
WARRANTY RESERVE--The Company generally provides customers with limited
90-day to one-year warranties. The liability for future warranty claims reflects
the estimated future cost of warranty repairs on products previously sold. The
Company recognizes the estimated cost of warranty obligations at the time the
related products are sold and periodically evaluates and adjusts the warranty
reserve to the extent actual warranty experience varies from original estimates.
STOCK OPTIONS--Prior to January 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, which permits entities to recognize as expense
over the vesting period, the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying
amount of cash and cash equivalents, accounts receivable, accounts payable, and
accrued expenses, approximate fair values because
F-37
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the short maturity of these instruments. The carrying amounts of long-term
debt approximate fair values because the applicable interest rates approximate
current market rates.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF--The
Company adopted the provisions of SFAS 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, on January 1,
1996. This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.
USE OF ESTIMATES--Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Actual results could differ from those estimates.
INCOME TAXES--Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1995 and
1994 financial statements to conform with the 1996 presentation.
F-38
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SHORT-TERM INVESTMENTS
The book value, gross unrealized gains and losses, and fair value of
short-term investment securities held to maturity as of December 31, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
<S> <C> <C>
1995 1996
------------ -------------
Municipal bonds:
Amortized cost................................................. $ 2,750,000 $ 13,835,000
Unrealized gains............................................... 39,000 202,000
Unrealized losses.............................................. -- --
------------ -------------
Fair value..................................................... $ 2,789,000 $ 14,037,000
------------ -------------
------------ -------------
</TABLE>
All of the above investment securities will generally mature in 1997.
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
Raw materials.................................................. $ 8,221,000 $ 6,810,000
Work in process................................................ 940,000 934,000
Finished goods................................................. 5,221,000 3,838,000
------------- -------------
$ 14,382,000 $ 11,582,000
------------- -------------
------------- -------------
</TABLE>
4. FIXED ASSETS
Fixed assets are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
Land............................................................ $ 264,000 $ 286,000
Building........................................................ 948,000 1,026,000
Leasehold improvements.......................................... 1,043,000 1,100,000
Machinery and equipment......................................... 12,820,000 14,606,000
Furniture, fixtures, and equipment.............................. 2,838,000 5,190,000
Automobiles..................................................... 172,000 316,000
------------- -------------
18,085,000 22,524,000
Accumulated depreciation and amortization....................... (11,795,000) (14,274,000)
------------- -------------
$ 6,290,000 $ 8,250,000
------------- -------------
------------- -------------
</TABLE>
Included above are assets under capital leases amounting to $144,000 and
$154,000, net of accumulated amortization of $54,000 and $49,000 at December 31,
1995 and 1996, respectively.
F-39
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS, NET
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
Goodwill................................................................. $ 11,055,000 $ 11,082,000
Patents and technology rights............................................ 2,758,000 2,687,000
Covenants not to compete................................................. 1,375,000 1,175,000
------------- -------------
15,188,000 14,944,000
Accumulated amortization................................................. (1,876,000) (2,480,000)
------------- -------------
$ 13,312,000 $ 12,464,000
------------- -------------
------------- -------------
</TABLE>
6. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
7.5% note payable in monthly installments of $9,000, including interest,
with final payment due September 1998; secured by equipment............... $ 257,000 $ 163,000
First mortgage note payable in monthly installments of L2,000 ($3,600 at
December 31, 1996), interest due quarterly at the UK base rate plus 1.75%
(7.75% at December 31, 1996), due April 2014.............................. 593,000 606,000
Note payable from Stadia acquisition, two annual installments of $500,000
(discounted using 6% discount rate) due to former owner, final installment
paid in March 1996........................................................ 445,000 --
Note payable from Cognitive acquisition, five annual installments of
$500,000 (discounted using 8% discount rate) due to former owner, final
installment due August 1999............................................... 1,656,000 1,289,000
Capital lease obligations for equipment, interest rates ranging from 7.3% to
10.6% per annum, secured by equipment..................................... 144,000 154,000
------------ ------------
3,095,000 2,212,000
Less current portion........................................................ (980,000) (577,000)
------------ ------------
$ 2,115,000 $ 1,635,000
------------ ------------
------------ ------------
</TABLE>
F-40
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
CAPITAL TOTAL LONG-
DEBT LEASES TERM DEBT
------------ ---------- ------------
<S> <C> <C> <C>
1997................................................ $ 520,000 $ 75,000 $ 595,000
1998................................................ 538,000 23,000 561,000
1999................................................ 498,000 21,000 519,000
2000................................................ 35,000 56,000 91,000
2001................................................ 35,000 -- 35,000
Thereafter............................................ 432,000 -- 432,000
------------ ---------- ------------
2,058,000 175,000 2,233,000
Less imputed interest................................. -- (21,000) (21,000)
------------ ---------- ------------
2,058,000 154,000 2,212,000
Less current portion.................................. (521,000) (56,000) (577,000)
------------ ---------- ------------
$ 1,537,000 $ 98,000 $ 1,635,000
------------ ---------- ------------
------------ ---------- ------------
</TABLE>
On August 15, 1996, the Company renewed a $6.5 million line of credit
agreement originally signed on August 15, 1994. The line of credit 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. No draws were made against this line of credit in 1995 or 1996.
7. OPERATING LEASES
Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred. The
Company leases manufacturing and office facilities at various locations under
operating leases which expire at various dates through 2004. Management expects
that in the normal course of business, leases that expire will be renewed or
replaced with comparable leases.
Future minimum lease payments under noncancelable operating leases (with
initial lease terms in excess of one year) as of December 31, 1996, are as
follows:
<TABLE>
<S> <C>
Years Ending December 31,
1997.......................................................... $ 654,000
1998.......................................................... 442,000
1999.......................................................... 365,000
2000.......................................................... 361,000
2001.......................................................... 275,000
Thereafter...................................................... 412,000
---------
$2,509,000
---------
---------
</TABLE>
Total rent expense for operating leases was $974,000, $1,202,000, and
$1,181,000 for 1994, 1995, and 1996, respectively.
F-41
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK AND STOCK OPTIONS PLANS
The Company has authorized 1,000,000 shares of no par preferred stock and
28,500,000 shares of no par common stock. The terms and conditions of the
preferred stock, of which no shares have been issued, are set by the Board of
Directors of the Company.
On September 12, 1995, the Board of Directors declared a three-for-two
common stock split distributable on October 2, 1995 to shareholders of record at
the close of business on September 22, 1995. All per share amounts and numbers
of shares in the accompanying consolidated financial statements have been
restated to reflect the stock split.
In 1993 DH Technology, Inc. adopted the 1992 Stock Plan (the "1992 Plan") to
replace the 1983 Stock Option Plan which had expired. Under the 1992 Plan, the
Board of Directors may grant incentive stock options to purchase common stock at
prices which are not less than fair market value at the date of grant and
non-qualified stock options at prices which are to be determined by the
Compensation Committee of the Board of Directors. In April 1994, the plan was
amended to place a 1,050,000 share limit on the number of options and stock
appreciation rights ("SARs") that may be granted under the plan to an employee
in any fiscal year. The total number of shares authorized for grant is
1,473,470.
Stock options generally become exercisable in four equal annual installments
commencing one year from the date of grant and expire within either five or
eight years from the date of grant. As of December 31, 1996, options to purchase
a total of 992,400 shares of common stock were outstanding, and options to
purchase 641,242 shares of common stock were exercisable.
The Company has a Director Warrant Plan under which each of the outside
directors, upon first becoming a director, is granted an initial warrant to
purchase 15,000 shares of the Company's common stock. In addition, each director
automatically receives an additional warrant to purchase 5,250 shares each year
beginning in the fifth year after the grant of the initial warrant. The exercise
price of the warrants granted is equal to the fair market value of the Company's
common stock at the date of grant. Each initial warrant vests as to 1/48th of
the shares subject thereto for each full calendar month after the date of grant
that the holder of such initial warrant remains a member of the Board. Each
annual warrant vests one year after the date of grant, subject to the holder of
such annual warrant remaining a member of the Board during such one-year period.
A total of 225,000 common shares is reserved for issuance under the Director
Warrant Plan. As of December 31, 1996, warrants to purchase 136,000 shares have
been granted, of which 64,500 have been exercised and 15,000 have been purchased
by the Company and subsequently terminated. As of December 31, 1996, warrants to
purchase a total of 72,750 shares are outstanding, of which 51,750 are
exercisable.
F-42
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK AND STOCK OPTIONS PLANS (CONTINUED)
Information with respect to activity under the plans is set forth below:
<TABLE>
<CAPTION>
WEIGHTED-
# OF SHARES # OF OPTIONS/ AVG.
AVAIL. FOR WARRANTS PRICE EXERCISE AGGREGATE
GRANT OUTSTANDING PER SHARE PRICE PRICE
-------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 31, 1994.............. 685,790 1,014,863 $ 4.42-13.50 $ 8.38 $ 8,506,000
Shares reserved......................... 375,000 -- -- -- --
Options/warrants granted................ (332,700) 332,700 14.00-18.67 17.69 5,884,000
Options/warrants canceled............... 94,031 (97,781) 4.42-11.17 7.77 (917,000)
Options/warrants exercised.............. -- (158,945) 4.42-11.17 9.38 (1,235,000)
BALANCE--DECEMBER 31, 1995.............. 822,121 1,090,837 4.42-18.67 11.28 12,238,000
Options/warrants granted................ (55,500) 55,500 23.38-23.75 23.03 1,346,000
Options/warrants canceled............... 750 (750) 18.67-18.67 8.18 (657,000)
Options/warrants exercised.............. -- (80,437) 4.42-11.17 18.67 (14,000)
-------------- ------------- ------------- ----------- -------------
BALANCE--DECEMBER 31, 1996.............. 767,371 1,065,150 $ 4.42-23.75 $ 12.12 $ 12,913,000
-------------- ------------- ------------- ----------- -------------
-------------- ------------- ------------- ----------- -------------
</TABLE>
Information with respect to options outstanding and exercisable by exercise
price range at December 31, 1996 is set forth below:
<TABLE>
<CAPTION>
OUTSTANDING
------------------------------------------- EXERCISABLE
WEIGHTED- --------------------------
NUMBER OF AVERAGE WEIGHTED- NUMBER OF WEIGHTED-
OPTIONS/ REMAINING AVERAGE OPTIONS/ AVERAGE
WARRANTS CONTRACTUAL EXERCISE WARRANTS EXERCISE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------------------------- ----------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 4.42--$ 4.42............................. 60,000 1.8 $ 4.42 60,000 $ 4.42
$ 6.64--$ 9.95............................. 406,950 3.3 $ 7.48 397,760 $ 7.48
$ 9.96--$14.92............................. 264,750 5.6 $ 11.92 143,809 $ 11.71
$14.93--$22.38............................. 280,950 6.4 $ 18.54 91,423 $ 18.48
$22.39--$23.75............................. 52,500 6.4 $ 23.54 -- --
</TABLE>
At December 31, 1995 and 1996, the number of options and warrants
exercisable was 566,501 and 692,992, and the weighted-average exercise price of
those options and warrants was $7.99 and $9.54, respectively.
The per share weighted-average fair value of stock options and warrants
granted during 1995 and 1996 was $10.44 and $13.62, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1995-expected dividend yield of 0.0%, stock
volatility rate of 48.50%, risk-free interest rates of 6.15% and 6.40%, and
expected lives of five and eight years; 1996-expected dividend yield of 0.0%,
stock volatility rate of 48.50%, risk-free interest rates of 6.15% and 6.40%,
and expected lives of five and eight years.
The Company applies APB Opinion No. 25 in accounting for its Plan, and
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
F-43
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK AND STOCK OPTIONS PLANS (CONTINUED)
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated in the following table:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Net income
As reported.................................................. $ 10,301,000 $ 13,027,000
Pro forma.................................................... $ 9,868,000 $ 12,203,000
Net income per share
As reported.................................................. $ 1.24 $ 1.56
Pro forma.................................................... $ 1.18 $ 1.46
</TABLE>
Pro forma net income reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above as compensation cost is reflected over the options' vesting
period of four years and compensation cost for options granted prior to January
1, 1995 is not considered.
9. GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION
The Company operates in one industry segment: the design, manufacture, and
distribution of transaction printers and mechanisms, impact printheads, bar code
printers, and related services and supplies, such as labels and ribbons.
Export revenue amounted to $8,719,000, $10,234,000, and $10,617,000, in
1994, 1995, and 1996, respectively, or 11% of total revenue in 1994, 10% of
total revenue in 1995, and 9% of total revenue in 1996.
In 1996, one customer accounted for 13% of total revenue, or $15,042,000;
and no customer accounted for more than 10% of total revenue in 1994 or 1995.
Information about the Company's operations by geographic location is shown
below:
<TABLE>
<CAPTION>
REVENUE FROM
UNAFFILIATED OPERATING IDENTIFIABLE
CUSTOMERS PROFITS ASSETS
-------------- ------------- -------------
<S> <C> <C> <C>
1996
United States................................ $ 91,544,000 $ 15,361,000 $ 84,754,000
Europe....................................... 13,294,000 1,829,000 6,957,000
Australia.................................... 10,946,000 1,945,000 5,394,000
-------------- ------------- -------------
Total...................................... $ 115,784,000 $ 19,135,000 $ 97,105,000
-------------- ------------- -------------
-------------- ------------- -------------
1995
United States................................ $ 77,817,000 $ 12,157,000 $ 72,417,000
Europe....................................... 11,671,000 2,005,000 6,708,000
Australia.................................... 9,367,000 1,036,000 6,160,000
-------------- ------------- -------------
Total...................................... $ 98,855,000 $ 15,198,000 $ 85,285,000
-------------- ------------- -------------
-------------- ------------- -------------
1994
United States................................ $ 62,631,000 $ 9,691,000 $ 61,518,000
Europe....................................... 10,607,000 1,370,000 6,764,000
Australia.................................... 4,680,000 431,000 3,024,000
-------------- ------------- -------------
Total...................................... $ 77,918,000 $ 11,492,000 $ 71,306,000
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
F-44
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. ACQUISITIONS
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 and additional payments
of $500,000 paid in 1995 and 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 across the United 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 ($8.5 million
paid through 1996, and additional payments of $500,000 each due in 1997 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
net sales of a specified Cognitive product line. These additional payments, if
any, will be recorded as additional goodwill and represent the increased value
of Cognitive that was purchased. As of December 31, 1996, no additional payments
have been made. 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. 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 (Note 5). The
accompanying consolidated statements of income include the operations of Stadia
from February 28, 1994, and Cognitive from August 31, 1994.
On October 30, 1995, the Company acquired certain assets and liabilities of
Mos Magnetics, a privately held company in San Diego, California, for $752,000
in cash. Mos Magnetics designs, manufactures, and markets magnetic read and
write heads and modules for credit card and debit card readers, check readers,
and airline ticket readers. This acquisition was accounted for using the
purchase method. In conjunction with this acquisition, the Company has recorded
goodwill of $239,000, which is being amortized over 25 years using the
straight-line method.
11. EMPLOYEE BENEFIT PLANS
In 1989, the Company adopted a contributory profit-sharing plan for
employees meeting certain service requirements. The plan qualifies under Section
401(k) of the Internal Revenue Code and allows eligible employees to contribute
up to 15% of their compensation. The Company provides a guaranteed contribution
of $240 per eligible employee per year, and based on profitability, matches the
employee's contribution up to a maximum of six percent of the employee's
compensation. The guaranteed payments made by the Company were $74,000, $96,000
and $109,000, and the Company's matching contributions were $56,000, $72,000 and
$108,000, during 1994, 1995, and 1996, respectively. Total expenses paid by the
Company in 1994, 1995, and 1996 for the administration of the plan were $16,000,
$18,000, and $15,000, respectively.
F-45
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES
Components of income before income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
United States....................................................... $ 10,297,000 $ 13,004,000 $ 16,288,000
Foreign............................................................. 1,839,000 3,149,000 4,189,000
------------- ------------- -------------
$ 12,136,000 $ 16,153,000 $ 20,477,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The Company's income taxes consist of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Current income taxes:
Federal........................................................... $ 3,386,000 $ 4,685,000 $ 5,989,000
State............................................................. 412,000 663,000 698,000
Foreign........................................................... 709,000 1,162,000 1,463,000
Deferred income taxes............................................... (429,000) (658,000) (700,000)
------------- ------------- -------------
Total income taxes.................................................. $ 4,078,000 $ 5,852,000 $ 7,450,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The following table summarizes the difference between the U.S. federal
statutory effective income tax rate and the Company's effective income tax rate:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
U.S. federal statutory income tax rate............................................. 34.0% 34.2% 34.6%
State taxes, net of federal tax benefit............................................ 2.2 2.7 2.2
Nontaxable dividends and interest income........................................... (2.0) (1.9) (2.0)
Nondeductible goodwill amortization................................................ 1.2 0.9 0.7
Research and development credits................................................... (1.8) (1.1) (0.5)
Difference between U.S. statutory and foreign effective tax rates.................. 0.4 0.5 0.1
Change in valuation allowance...................................................... -- (2.1) (1.5)
Other, net......................................................................... (0.4) 3.0 2.8
--- --- ---
Effective income tax rate.......................................................... 33.6% 36.2% 36.4%
--- --- ---
--- --- ---
</TABLE>
F-46
<PAGE>
DH TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
The tax effects of significant temporary differences which comprise deferred
tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts..................................................... $ 334,000 $ 363,000
Inventory........................................................................... 943,000 788,000
Depreciation and amortization....................................................... -- 206,000
Self insurance...................................................................... 222,000 271,000
Accrued warranty.................................................................... 166,000 162,000
Accrued payroll..................................................................... 178,000 233,000
Other............................................................................... 201,000 272,000
------------ ------------
Gross deferred tax assets......................................................... 2,044,000 2,295,000
Deferred tax assets valuation allowance........................................... (300,000) --
------------ ------------
1,744,000 2,295,000
Deferred tax liabilities:
Depreciation and amortization....................................................... 149,000 --
------------ ------------
Gross deferred tax liabilities...................................................... 149,000 --
------------ ------------
Net deferred tax asset................................................................ $ 1,595,000 $ 2,295,000
------------ ------------
------------ ------------
Reflected on the accompanying consolidated balance sheets as:
Current deferred tax asset, net................................................... $ 1,744,000 $ 2,089,000
Noncurrent deferred tax asset (liability)......................................... (149,000) 206,000
------------ ------------
Net deferred tax asset................................................................ $ 1,595,000 $ 2,295,000
------------ ------------
------------ ------------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1995 and
1996 was $641,000 and $300,000, respectively. The net change in the total
valuation allowance for the years ended December 31, 1995 and 1996 was a
decrease of $341,000 and $300,000, respectively. In assessing the realizability
of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences.
F-47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE OF EXISTING NOTES FOR NEW NOTES
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 12
Use of Proceeds................................ 21
The Exchange Offer............................. 21
Capitalization................................. 34
Unaudited Pro Forma Combined Financial
Information.................................. 35
Selected Historical Consolidated Financial and
Other Data................................... 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 42
Business....................................... 48
Management..................................... 59
Certain Transactions........................... 64
Ownership of Capital Stock..................... 68
Description of Certain Indebtedness............ 69
Description of Notes........................... 72
Plan of Distribution........................... 106
Legal Matters.................................. 106
Experts........................................ 106
Index to Financial Statements.................. F-1
</TABLE>
$120,000,000
[LOGO]
EXCHANGE OFFER
WITH RESPECT TO
9 3/4% SENIOR SUBORDINATED
NOTES DUE 2007
---------------------
PROSPECTUS
, 1997
------------------------
EXCHANGE AGENT:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Thomas E. Tabor
Tel: (212) 815-5915; Fax: (212) 815-5381
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers who are parties or are threatened to be made parties to any
proceeding (with certain exceptions) by reason of the fact that the person is or
was an agent of the corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with the
proceeding if that person acted in good faith and in a manner the person
reasonably believed to be in the best interests of the corporation. This
limitation on liability has no effect on a director's liability (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders or that
involve the absence of good faith on the part of the director, (iii) relating to
any transaction from which a director derived an improper personal benefit, (iv)
for acts or omissions that show a reckless disregard for the director's duty to
the corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of a serious injury to the corporation or its
shareholders, (v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, (vi) under Section 310 of the California
General Corporation Law (concerning contracts or transactions between the
corporation and a director) or (vii) under Section 316 of the California General
Corporation Law (directors' liability for improper dividends, loans and
guarantees). The provision does not extend to acts or omissions of a director in
his or her capacity as an officer. Further, the provision has no effect on
claims arising under federal or state securities laws and does not affect the
availability of injunctions and other equitable remedies available to the
Company's shareholders for any violation of a director's fiduciary duty to the
Company or its shareholders. Although the validity and scope of the legislation
underlying the provision have not yet been interpreted to any significant extent
by the California courts, the provision may relieve directors of monetary
liability to the Company for grossly negligent conduct, including conduct in
situations involving attempted takeovers of the Company.
In accordance with Section 317, the Restated Articles of Incorporation, as
amended (the "Articles"), of the Company limit the liability of a director to
the Company or its shareholders for monetary damages to the fullest extent
permissible under California law, and authorize the Company to provide
indemnification to its agents (including officers and directors), subject to the
limitations set forth above. The Company's By-Laws further provide for
indemnification of corporate agents to the maximum extent permitted by the
California General Corporation Law.
Pursuant to the authority provided in the Articles, the Company has entered
into indemnification agreements with each of its officers and directors,
indemnifying them against certain potential liabilities that may arise as a
result of their service to the Company, and providing for certain other
protection.
The Company also maintains insurance policies which insure its officers and
directors against certain liabilities.
The foregoing summaries are necessarily subject to the complete text of the
statute, the Articles, the By-Laws and the agreements referred to above and are
qualified in their entirety by reference thereto.
II-1
<PAGE>
ITEM 21. EXHIBITS
A list of exhibits included as part of the Registration Statement is set
forth below:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 14, 1997, among DH
Technology, Inc., Axiohm S.A. and AX Acquisition Corporation
(incorporated by reference to Exhibit (c)(1) to DH Technology, Inc.'s
Schedule 14D-9 filed July 16, 1997).
2.2 Purchase and Assumption Agreement, dated October 2, 1997, among Axiohm
IPB, Inc., AX Acquisition Corporation and DH Technology, Inc.
(incorporated by reference to Exhibit 2.2 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
3.1 Restated Articles of Incorporation of DH Technology, Inc., as amended.
(incorporated by reference to Exhibit 3.1 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988 filed March 30,
1989).
3.2 Certificate of Amendment of Restated Articles of Incorporation of DH
Technology, Inc., dated September 22, 1995. (incorporated by reference
to Exhibit 3.1(b) of the Company's Annual Report on Form 10-K for fiscal
year ended December 31, 1995 filed April 1, 1996).
3.3 Certificate of Ownership of DH Technology, Inc. filed with the California
Secretary of State on October 2, 1997 (incorporated by reference to
Exhibit 3.1 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
3.4 Amended and Restated Bylaws of Axiohm Transaction Solutions, Inc.
(incorporated by reference to Exhibit 3.2 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
3.5 English Summary of Charter Document (STATUTS) of Axiohm S.A.R.L.
3.6 English Summary of Charter Document (STATUTS) of Axiohm Investissements
S.A.R.L.
3.7 Certificate of Incorporation of Axiohm IPB, Inc.
3.8 Bylaws of Axiohm IPB, Inc.
3.9 Certificate of Limited Liability Company of Cognitive L.L.C.
3.10 Operating Agreement of Cognitive L.L.C.
3.11 Articles of Incorporation of Cognitive Solutions, Inc.
3.12 Bylaws of Cognitive Solutions, Inc.
3.13 English Summary of Charter Document (STATUTS) of Dardel Technologies
E.U.R.L.
3.14 Articles of Incorporation of Stadia Colorado Corp.
3.15 Bylaws of Stadia Colorado Corp.
4.1 Indenture dated as of October 2, 1997 among Axiohm Transaction Solutions,
Inc., the Guarantors named therein and The Bank of New York, as trustee
(the "Indenture") (incorporated by reference to Exhibit 4.1 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.2 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Axiohm Investissements S.A.R.L., as a supplemental guarantor,
and The Bank of New York, as trustee.
4.3 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Cognitive L.L.C., as a supplemental guarantor, and The Bank of
New York, as trustee.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
4.4 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Dardel Technologies E.U.R.L., as a supplemental guarantor, and
The Bank of New York, as trustee.
4.5 $117,300,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary
Guarantee (incorporated by reference to Exhibit 4.2 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.6 $2,350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary
Guarantee (incorporated by reference to Exhibit 4.3 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.7 $350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee
(incorporated by reference to Exhibit 4.4 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
4.8 Form of New 9 3/4% Senior Subordinated Note due 2007 and New Subsidiary
Guarantee.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati regarding legality of New
Notes being registered.+
10.1 Registration Rights Agreement, dated as of October 2, 1997 among Axiohm
Transaction Solutions, Inc., Axiohm S.A., Axiohm IPB, Inc., Dardel
Technologies E.U.R.L., Stadia Colorado Corp., Cognitive Solutions, Inc.
and Lehman Brothers Inc. (incorporated by reference to Exhibit 10.1 to
Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K filed
October 17, 1997).
10.2 Purchase Agreement, dated September 25, 1997, among Axiohm Transaction
Solutions, Inc., Axiohm IPB, Inc., Cognitive Solutions, Inc., Stadia
Colorado Corp. and Lehman Brothers Inc. (incorporated by reference to
Exhibit 10.2 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
10.3* Employment Agreement between Axiohm Transaction Solutions, Inc. and
William H. Gibbs dated as of July 14, 1997 (incorporated by reference to
Exhibit 10.3 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
10.4* Employment Agreement between Axiohm Transaction Solutions, Inc. and Walter
Sobon dated as of July 14, 1997 (incorporated by reference to Exhibit
10.4 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.5* Employment Agreement between Axiohm Transaction Solutions, Inc. and Janet
Shanks dated as of July 14, 1997 (incorporated by reference to Exhibit
10.5 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.6* Employment Agreement between Axiohm Transaction Solutions, Inc. and David
Ledwell dated as of July 14, 1997 (incorporated by reference to Exhibit
10.6 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.7 Global Amendment and Assignment and Acceptance, dated October 20, 1997,
among Axiohm Transaction Solutions, Inc., the Lenders named therein,
Union Bank of California, N.A., as successor administrative agent,
Lehman Brothers Inc., as arranger, and Lehman Commercial Paper, Inc., as
resigning administrative agent and as Syndication Agent and as a Lender,
with the Amended and Restated Credit Agreement as Exhibit A.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
10.8 Guarantee and Collateral Agreement, dated as of October 2, 1997, between
Axiohm Transaction Solutions, Inc., Lehman Brothers Inc., Lehman
Commercial Paper Inc. and certain of Axiohm Transaction Solutions,
Inc.'s subsidiaries (incorporated by reference to Exhibit 10.8 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
10.9* Axiohm Transaction Solutions, Inc.'s 1985 Director Warrant Plan and Forms
of Warrant issued under the Plan, as amended. (incorporated by reference
to Exhibit 10.3 of Axiohm Transaction Solutions, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31, 1991 filed March 28,
1992).
10.10* Axiohm Transaction Solutions, Inc.'s 1983 Incentive Stock Option Plan and
Forms of Incentive Stock Option Agreement and Nonstatutory Stock Option
Agreement, as amended. (incorporated by reference to Exhibit 10.4 of
Axiohm Transaction Solutions, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 filed March 28, 1991).
10.11* Axiohm Transaction Solutions, Inc.'s 1992 Stock Plan and Form of Incentive
Stock Option Agreement, as amended. (incorporated by reference to
Exhibit 10.6 of Axiohm Transaction Solutions, Inc.'s Form 10-K for the
fiscal year ended December 31, 1994 filed March 15, 1995).
10.12 Lease Agreement dated April 20, 1990, between Axiohm Transaction
Solutions, Inc.'s and Coast Income Properties, Inc., as amended.
(incorporated by reference to Exhibit 10.5 of Axiohm Transaction
Solutions, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 filed March 29, 1993).
10.13 Lease Agreement dated July 1, 1990, between DH Tecnologia de Mexico S.A.
de C. V. and Alberto Lutteroth. (incorporated by reference to Exhibit
10.6 of Axiohm Transaction Solutions, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1990 filed March 28, 1991).
10.14 Lease Agreement dated April 1, 1994, by and between Axiohm Transaction
Solutions, Inc. and Wind River Development Co., a Wyoming corporation.
(incorporated by reference to Exhibit 10.6 of Axiohm Transaction
Solutions, Inc.'s Form 10-K for the fiscal year ended December 31, 1994
filed March 15, 1995).
10.15 Lease Agreement dated February 28, 1994, between Chardan, Ltd., and Stadia
Colorado Corp. (incorporated by reference to Exhibit 2.2 of Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed March 14,
1994).
10.16 Sublease Agreement dated September 30, 1992, by and between Medical
Engineering Corporation and Cognitive Solutions, Inc. (incorporated by
reference to Exhibit 10.6 of Axiohm Transaction Solutions, Inc.'s Form
10-K for the fiscal year ended December 31, 1994 filed March 15, 1995).
10.17 Line of Credit Agreement dated August 15, 1994 by and between DH
Technology, Inc. and Wells Fargo Bank. (Incorporated by reference to
Exhibit 10.10 of Axiohm Transaction Solutions, Inc.'s Form 10-Q for the
Quarter Ended March 31, 1995 filed May 15, 1995).
10.18* Stock Option Agreement dated October 2, 1997 between Axiohm Transaction
Solutions, Inc. and Malcolm Unsworth.
21.1 List of Subsidiaries of Axiohm Transaction Solutions, Inc.
23.1 Consent of KPMG Peat Marwick LLP, dated November 26, 1997.
23.2 Consent of Price Waterhouse, dated November 26, 1997.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
23.3 Consent of Wilson, Sonsini, Goodrich & Rosati (included in Exhibit 5.1).
24.1 Power of Attorney (See pages II-6, II-8, II-9, II-10, II-12, II-13,
II-14).
25.1 Statement of Eligibility on Form T-1 for The Bank of New York to act as
Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* This item is a compensatory plan or management contract.
+ To be supplied by amendment.
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake:
1. To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request.
2. To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
3. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of each Issuer pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
an action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Diego,
State of California on the 26th day of November, 1997.
<TABLE>
<S> <C>
AXIOHM TRANSACTION SOLUTIONS, INC.
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ PATRICK DUPUY
- ------------------------------ Co-Chairman of the Board November 26, 1997
Patrick Dupuy
/s/ GILLES GIBIER
- ------------------------------ Co-Chairman of the Board November 26, 1997
Gilles Gibier
President and Chief
/s/ WILLIAM H. GIBBS Executive Officer
- ------------------------------ (Principal Executive November 26, 1997
William H. Gibbs Officer)
/s/ WALTER S. SOBON Chief Financial Officer
- ------------------------------ (Principal Financial November 26, 1997
Walter S. Sobon Officer)
/s/ JANET W. SHANKS
- ------------------------------ Corporate Controller November 26, 1997
Janet W. Shanks
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM J. BOWERS
- ------------------------------ Director November 26, 1997
William J. Bowers
/s/ NICOLAS DOURASSOF
- ------------------------------ Director November 26, 1997
Nicolas Dourassof
/s/ BRUCE G. KLAAS
- ------------------------------ Director November 26, 1997
Bruce G. Klaas
/s/ DONALD M. LYLE
- ------------------------------ Director November 26, 1997
Donald M. Lyle
</TABLE>
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Paris,
Republic of France on the 26th day of November, 1997.
<TABLE>
<S> <C>
AXIOHM INVESTISSEMENTS S.A.R.L.
/s/ PATRICK DUPUY
------------------------------------------
Patrick Dupuy,
CO-MANAGER (GERANT) AND CO-CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has also duly caused this Registration Statement to be signed by the undersigned
representative of the Registrant in the United States, thereunto duly
authorized, in the City of San Diego, State of California on the 26th day of
November, 1997.
<TABLE>
<S> <C>
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
AUTHORIZED REPRESENTATIVE
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Director (GERANT) and
/s/ PATRICK DUPUY Co-Chief Executive
- ------------------------------ Officer November 26, 1997
Patrick Dupuy (Co-Principal Executive
Officer)
Director (GERANT) and
/s/ GILLES GIBIER Co-Chief Executive
- ------------------------------ Officer November 26, 1997
Gilles Gibier (Co-Principal Executive
Officer)
/s/ JEAN-GEORGES HUGLIN
- ------------------------------ Principal Financial November 26, 1997
Jean-Georges Huglin Officer
/s/ YVES HAGEGE
- ------------------------------ Principal Accounting November 26, 1997
Yves Hagege Officer
</TABLE>
II-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ithaca,
State of New York on the 26th day of November, 1997.
<TABLE>
<S> <C>
AXIOHM IPB, INC.
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President and Chief
/s/ WILLIAM H. GIBBS Executive Officer
- ------------------------------ (Principal Executive November 26, 1997
William H. Gibbs Officer)
/s/ WALTER S. SOBON Chief Financial Officer
- ------------------------------ (Principal Financial November 26, 1997
Walter S. Sobon Officer)
/s/ JANET W. SHANKS
- ------------------------------ Chief Accounting Officer November 26, 1997
Janet W. Shanks
/s/ PATRICK DUPUY
- ------------------------------ Director November 26, 1997
Patrick Dupuy
/s/ GILLES GIBIER
- ------------------------------ Director November 26, 1997
Gilles Gibier
</TABLE>
II-9
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on the 26th day of November, 1997.
<TABLE>
<S> <C> <C>
COGNITIVE L.L.C.
By: AXIOHM TRANSACTION SOLUTIONS, INC.,
Sole Member
By: /s/ WILLIAM H. GIBBS
-----------------------------------------------
William H. Gibbs,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
AXIOHM TRANSACTION SOLUTIONS,
INC. ("ATS") Sole Member
By:
/s/ PATRICK DUPUY
- ------------------------------ Co-Chairman of the Board November 26, 1997
Patrick Dupuy of ATS
/s/ GILLES GIBIER
- ------------------------------ Co-Chairman of the Board November 26, 1997
Gilles Gibier of ATS
President and Chief
/s/ WILLIAM H. GIBBS Executive Officer of ATS
- ------------------------------ (Principal Executive November 26, 1997
William H. Gibbs Officer of ATS)
Chief Financial Officer of
/s/ WALTER S. SOBON ATS
- ------------------------------ (Principal Financial November 26, 1997
Walter S. Sobon Officer of ATS)
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JANET W. SHANKS
- ------------------------------ Corporate Controller of November 26, 1997
Janet W. Shanks ATS
/s/ WILLIAM J. BOWERS
- ------------------------------ Director of ATS November 26, 1997
William J. Bowers
/s/ NICOLAS DOURASSOF
- ------------------------------ Director of ATS November 26, 1997
Nicolas Dourassof
/s/ BRUCE G. KLAAS
- ------------------------------ Director of ATS November 26, 1997
Bruce G. Klaas
/s/ DONALD M. LYLE
- ------------------------------ Director of ATS November 26, 1997
Donald M. Lyle
</TABLE>
II-11
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on the 26th day of November, 1997.
<TABLE>
<S> <C>
COGNITIVE SOLUTIONS, INC.
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President and Sole
/s/ WILLIAM H. GIBBS Director
- ------------------------------ (Principal Executive November 26, 1997
William H. Gibbs Officer)
Vice President and Chief
/s/ WALTER S. SOBON Financial Officer
- ------------------------------ (Principal Financial November 26, 1997
Walter S. Sobon Officer and Principal
Accounting Officer)
</TABLE>
II-12
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Paris,
Republic of France on the 26th day of November, 1997.
<TABLE>
<S> <C>
DARDEL TECHNOLOGIES E.U.R.L.
/s/ PATRICK DUPUY
------------------------------------------
Patrick Dupuy,
CO-MANAGER (GERANT) AND CO-CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has also duly caused this Registration Statement to be signed by the undersigned
representative of the Registrant in the United States, thereunto duly
authorized, in the City of San Diego, State of California on the 26th day of
November, 1997.
<TABLE>
<S> <C>
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
AUTHORIZED REPRESENTATIVE
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Director (GERANT) and
/s/ PATRICK DUPUY Co-Chief Executive
- ------------------------------ Officer November 26, 1997
Patrick Dupuy (Co-Principal Executive
Officer)
Director (GERANT) and
/s/ GILLES GIBIER Co-Chief Executive
- ------------------------------ Officer November 26, 1997
Gilles Gibier (Co-Principal Executive
Officer)
/s/ JEAN-GEORGES HUGLIN
- ------------------------------ Principal Financial November 26, 1997
Jean-Georges Huglin Officer
/s/ YVES HAGEGE
- ------------------------------ Principal Accounting November 26, 1997
Yves Hagege Officer
</TABLE>
II-13
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the following
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver,
State of Colorado on the 26th day of November, 1997.
<TABLE>
<S> <C>
STADIA COLORADO CORP.
/s/ WILLIAM H. GIBBS
------------------------------------------
William H. Gibbs,
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints William H. Gibbs and Walter S. Sobon and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem appropriate or
necessary.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President and Sole
/s/ WILLIAM H. GIBBS Director
- ------------------------------ (Principal Executive November 26, 1997
William H. Gibbs Officer)
Vice President and Chief
/s/ WALTER S. SOBON Financial Officer
- ------------------------------ (Principal Financial November 26, 1997
Walter S. Sobon Officer and Principal
Accounting Officer)
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 14, 1997, among DH
Technology, Inc., Axiohm S.A. and AX Acquisition Corporation
(incorporated by reference to Exhibit (c)(1) to DH Technology, Inc.'s
Schedule 14D-9 filed July 16, 1997).
2.2 Purchase and Assumption Agreement, dated October 2, 1997, among Axiohm
IPB, Inc., AX Acquisition Corporation and DH Technology, Inc.
(incorporated by reference to Exhibit 2.2 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
3.1 Restated Articles of Incorporation of DH Technology, Inc., as amended.
(incorporated by reference to Exhibit 3.1 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988 filed March 30,
1989).
3.2 Certificate of Amendment of Restated Articles of Incorporation of DH
Technology, Inc., dated September 22, 1995. (incorporated by reference
to Exhibit 3.1(b) of the Company's Annual Report on Form 10-K for fiscal
year ended December 31, 1995 filed April 1, 1996).
3.3 Certificate of Ownership of DH Technology, Inc. filed with the California
Secretary of State on October 2, 1997 (incorporated by reference to
Exhibit 3.1 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
3.4 Amended and Restated Bylaws of Axiohm Transaction Solutions, Inc.
(incorporated by reference to Exhibit 3.2 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
3.5 English Summary of Charter Document (STATUTS) of Axiohm S.A.R.L.
3.6 English Summary of Charter Document (STATUTS) of Axiohm Investissements
S.A.R.L.
3.7 Certificate of Incorporation of Axiohm IPB, Inc.
3.8 Bylaws of Axiohm IPB, Inc.
3.9 Certificate of Limited Liability Company of Cognitive L.L.C.
3.10 Operating Agreement of Cognitive L.L.C.
3.11 Articles of Incorporation of Cognitive Solutions, Inc.
3.12 Bylaws of Cognitive Solutions, Inc.
3.13 English Summary of Charter Document (STATUTS) of Dardel Technologies
E.U.R.L.
3.14 Articles of Incorporation of Stadia Colorado Corp.
3.15 Bylaws of Stadia Colorado Corp.
4.1 Indenture dated as of October 2, 1997 among Axiohm Transaction Solutions,
Inc., the Guarantors named therein and The Bank of New York, as trustee
(the "Indenture") (incorporated by reference to Exhibit 4.1 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.2 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Axiohm Investissements S.A.R.L., as a supplemental guarantor,
and The Bank of New York, as trustee.
4.3 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Cognitive L.L.C., as a supplemental guarantor, and The Bank of
New York, as trustee.
4.4 Supplemental Indenture to the Indenture, dated as of November 26, 1997
between Dardel Technologies E.U.R.L., as a supplemental guarantor, and
The Bank of New York, as trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
4.5 $117,300,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary
Guarantee (incorporated by reference to Exhibit 4.2 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.6 $2,350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary
Guarantee (incorporated by reference to Exhibit 4.3 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
4.7 $350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee
(incorporated by reference to Exhibit 4.4 to Axiohm Transaction
Solutions, Inc.'s Current Report on Form 8-K filed October 17, 1997).
4.8 Form of New 9 3/4% Senior Subordinated Note due 2007 and New Subsidiary
Guarantee.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati regarding legality of New
Notes being registered.+
10.1 Registration Rights Agreement, dated as of October 2, 1997 among Axiohm
Transaction Solutions, Inc., Axiohm S.A., Axiohm IPB, Inc., Dardel
Technologies E.U.R.L., Stadia Colorado Corp., Cognitive Solutions, Inc.
and Lehman Brothers Inc. (incorporated by reference to Exhibit 10.1 to
Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K filed
October 17, 1997).
10.2 Purchase Agreement, dated September 25, 1997, among Axiohm Transaction
Solutions, Inc., Axiohm IPB, Inc., Cognitive Solutions, Inc., Stadia
Colorado Corp. and Lehman Brothers Inc. (incorporated by reference to
Exhibit 10.2 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
10.3* Employment Agreement between Axiohm Transaction Solutions, Inc. and
William H. Gibbs dated as of July 14, 1997 (incorporated by reference to
Exhibit 10.3 to Axiohm Transaction Solutions, Inc.'s Current Report on
Form 8-K filed October 17, 1997).
10.4* Employment Agreement between Axiohm Transaction Solutions, Inc. and Walter
Sobon dated as of July 14, 1997 (incorporated by reference to Exhibit
10.4 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.5* Employment Agreement between Axiohm Transaction Solutions, Inc. and Janet
Shanks dated as of July 14, 1997 (incorporated by reference to Exhibit
10.5 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.6* Employment Agreement between Axiohm Transaction Solutions, Inc. and David
Ledwell dated as of July 14, 1997 (incorporated by reference to Exhibit
10.6 to Axiohm Transaction Solutions, Inc.'s Current Report on Form 8-K
filed October 17, 1997).
10.7 Global Amendment and Assignment and Acceptance, dated October 20, 1997,
among Axiohm Transaction Solutions, Inc., the Lenders named therein,
Union Bank of California, N.A., as successor administrative agent,
Lehman Brothers Inc., as arranger, and Lehman Commercial Paper, Inc., as
resigning administrative agent and as Syndication Agent and as a Lender,
with the Amended and Restated Credit Agreement as Exhibit A.
10.8 Guarantee and Collateral Agreement, dated as of October 2, 1997, between
Axiohm Transaction Solutions, Inc., Lehman Brothers Inc., Lehman
Commercial Paper Inc. and certain of Axiohm Transaction Solutions,
Inc.'s subsidiaries (incorporated by reference to Exhibit 10.8 to Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed October
17, 1997).
10.9* Axiohm Transaction Solutions, Inc.'s 1985 Director Warrant Plan and Forms
of Warrant issued under the Plan, as amended. (incorporated by reference
to Exhibit 10.3 of Axiohm Transaction Solutions, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31, 1991 filed March 28,
1992).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
10.10* Axiohm Transaction Solutions, Inc.'s 1983 Incentive Stock Option Plan and
Forms of Incentive Stock Option Agreement and Nonstatutory Stock Option
Agreement, as amended. (incorporated by reference to Exhibit 10.4 of
Axiohm Transaction Solutions, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 filed March 28, 1991).
10.11* Axiohm Transaction Solutions, Inc.'s 1992 Stock Plan and Form of Incentive
Stock Option Agreement, as amended. (incorporated by reference to
Exhibit 10.6 of Axiohm Transaction Solutions, Inc.'s Form 10-K for the
fiscal year ended December 31, 1994 filed March 15, 1995).
10.12 Lease Agreement dated April 20, 1990, between Axiohm Transaction
Solutions, Inc.'s and Coast Income Properties, Inc., as amended.
(incorporated by reference to Exhibit 10.5 of Axiohm Transaction
Solutions, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 filed March 29, 1993).
10.13 Lease Agreement dated July 1, 1990, between DH Tecnologia de Mexico S.A.
de C. V. and Alberto Lutteroth. (incorporated by reference to Exhibit
10.6 of Axiohm Transaction Solutions, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1990 filed March 28, 1991).
10.14 Lease Agreement dated April 1, 1994, by and between Axiohm Transaction
Solutions, Inc. and Wind River Development Co., a Wyoming corporation.
(incorporated by reference to Exhibit 10.6 of Axiohm Transaction
Solutions, Inc.'s Form 10-K for the fiscal year ended December 31, 1994
filed March 15, 1995).
10.15 Lease Agreement dated February 28, 1994, between Chardan, Ltd., and Stadia
Colorado Corp. (incorporated by reference to Exhibit 2.2 of Axiohm
Transaction Solutions, Inc.'s Current Report on Form 8-K filed March 14,
1994).
10.16 Sublease Agreement dated September 30, 1992, by and between Medical
Engineering Corporation and Cognitive Solutions, Inc. (incorporated by
reference to Exhibit 10.6 of Axiohm Transaction Solutions, Inc.'s Form
10-K for the fiscal year ended December 31, 1994 filed March 15, 1995).
10.17 Line of Credit Agreement dated August 15, 1994 by and between DH
Technology, Inc. and Wells Fargo Bank. (Incorporated by reference to
Exhibit 10.10 of Axiohm Transaction Solutions, Inc.'s Form 10-Q for the
Quarter Ended March 31, 1995 filed May 15, 1995).
10.18* Stock Option Agreement dated October 2, 1997 between Axiohm Transaction
Solutions, Inc. and Malcolm Unsworth.
21.1 List of Subsidiaries of Axiohm Transaction Solutions, Inc.
23.1 Consent of KPMG Peat Marwick LLP, dated November 26, 1997.
23.2 Consent of Price Waterhouse, dated November 26, 1997.
23.3 Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
24.1 Power of Attorney (See pages II-6, II-8, II-9, II-10, II-12, II-13,
II-14).
25.1 Statement of Eligibility on Form T-1 for The Bank of New York to act as
Trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* This item is a compensatory plan or management contract.
+ To be supplied by amendment.
<PAGE>
EXHIBIT 3.5
SUMMARY
OF
ARTICLES OF INCORPORATION AND BY-LAWS
Name Of Entity: Axiohm.
Form Of Entity: Private limited company (transformed from a public
limited company on October 31, 1997).
Registered Office: 1 to 9 rue d'Arcueil, 92120 Montrouge, France.
Registration Number: 344.380.480.RCS Nanterre.
Purposes: Purchase, sale, importation, exportation, rental,
development, manufacture of all electrical, electronic, computer,
telecommunications, telematic material, including all printing, printer,
hybrid circuit systems as well as all expendables.
Duration: 99 years from the initial registration of the company
unless extended or dissolved.
Capital: 20,570,000 French Francs divided into 41,140 shares of 500
French Francs each.
Shareholders: Axiohm Investments S.A.R.L., 41,139 shares and Dardel
Technologies, S.A.R.L. one share.
Shares: Shares may not be represented by negotiable instruments.
Their ownership is evidenced by the present Articles, subsequent increases in
capital and assignments or allotments properly completed.
Assignment of shares must be in writing. To be valid as against the
company they must be notified to it by a bailiff or alternatively an original
of the assignment is delivered to the company against a receipt from
management certifying the delivery. To be valid against third parties the
assignment must be filed with the Registry of Commerce and Companies.
Shares are freely transferable by the sole shareholder or between
shareholders when there are more than one. They are also freely transferable
between spouses, ascendants, and descendants and through inheritance to the
spouse or direct heirs. The transfer of the rights of a shareholder are not
subject to approval when they are part of the transfer of the entirety of the
shareholders assets to a third party. All other transfers require the
approval of the majority of the shareholders representing at least three
quarters of the shares;
<PAGE>
Management: The company is managed by one or more General Managers,
who are appointed or removed by a vote of at least a majority of the shares.
The following decisions require shareholder approval:
- guaranties, sureties, and securities
- acquisition, sale or rental of a business enterprise
- creation, acquisition, dissolution, or transfer of a subsidiary
or a participation.
- merger, partial merger, or spin-off
- modification of the capital
- proposition concerning the allocation of the net income.
Interested Person Transactions: Agreements, other than in the ordinary
course of business on normal terms and conditions, between the company and a
General Manager or a shareholder are subject to a special approval procedure.
A General Manager or shareholder may not borrow money from the company or
have the company guarantee its obligations.
Shareholders Decisions: The decisions are made either at a
shareholders meeting, by written consultation, or by unanimous written
consent. However the approval of the annual accounts must be made at a
shareholders meeting.
Fiscal Year: The fiscal year begins on January 1, and ends on
December 31.
Shareholder Equity Below One-Half Of Stated Capital: When losses
evidenced in the accounting documents bring shareholders equity below
one-half of stated capital the General Manager shall, within four months of
the shareholder approval of said loss, consult the shareholders to determine
if an anticipatory dissolution of the company is desirable. If dissolution
is not decided the company must reconstitute its capital in the time and
manner provided for by law.
-2-
<PAGE>
EXHIBIT 3.6
SUMMARY
OF
ARTICLES OF INCORPORATION AND BY-LAWS
Name Of Entity: Axiohm Investissements.
Form Of Entity: Private limited company initially having one shareholder,
Dardel Technologie, created on September 10, 1997.
Registered Office: 1 to 9 rue d'Arcueil, 92120 Montrouge, France.
Registration Number: 413.762.469.RCS Nanterre.
Purposes: The obtaining of participations, the sale, the management of shares,
of securities, by all means and in all forms in any French or foreign
enterprise, whether newly created for these purposes or already existing, in all
areas of activity.
Duration: 99 years from the initial registration of the company unless extended
or dissolved.
Capital: 322,456,300 French Francs divided into 3,224,563 shares of 100 French
Francs each.
Shareholders: Dardel Technologies S.A.R.L., 3,224,562 shares and Cognitive LLC
one share.
Shares: Shares may not be represented by negotiable instruments. Their
ownership is evidenced by the present Articles, subsequent increases in capital
and assignments or allotments properly completed.
Assignment of shares must be in writing. To be valid as against the company
they must be notified to it by a bailiff or alternatively an original of the
assignment is delivered to the company against a receipt from management
certifying the delivery. To be valid against third parties the assignment must
be filed with the Registry of Commerce and Companies.
Shares are freely transferable by the sole shareholder or between shareholders
when there are more than one. They are also freely transferable between
spouses, ascendants, and descendants and through inheritance to the spouse or
direct heirs. The transfer of the rights of a shareholder are not subject to
approval when they are part of the transfer of the entirety of the shareholders
assets to a third party. All other transfers require the approval of the
majority of the shareholders representing at least three quarters of the shares;
Management: The company is managed by one or more General Managers, who are
appointed or removed by a vote of at least a majority of the shares. The
following decisions require shareholder approval:
- guaranties, sureties, and securities
<PAGE>
- acquisition, sale or rental of a business enterprise
- creation, acquisition, dissolution, or transfer of a subsidiary or a
participation
- merger, partial merger, or spin-off
- modification of the capital
- proposition concerning the allocation of the net income.
Interested Person Transactions: Agreements, other than in the ordinary course
of business on normal terms and conditions, between the company and a General
Manager or a shareholder are subject to a special approval procedure. A General
Manager or shareholder may not borrow money from the company or have the company
guarantee its obligations.
Shareholders Decisions: The decisions are made either at a shareholders
meeting, by written consultation, or by unanimous written consent. However the
approval of the annual accounts must be made at a shareholders meeting.
Fiscal Year: The fiscal year begins on January 1 and ends on December 31.
Shareholder Equity Below One-Half Of Stated Capital: When losses evidenced in
the accounting documents bring shareholders equity below one-half of stated
capital the General Manager shall, within four months of the shareholder
approval of said loss, consult the shareholders to determine if an anticipatory
dissolution of the company is desirable. If dissolution is not decided the
company must reconstitute its capital in the time and manner provided for by
law.
-2-
<PAGE>
EXHIBIT 3.7
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
AXIOHM IPB, INC.
The undersigned being the President of and on behalf of Axiohm IPB, Inc.,
a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY:
1. The name of the corporation (the "Company") is Axiohm IPB, Inc.
2. The Certificate of Incorporation of the Company is hereby amended such
that Article FOURTH shall read, in its entirety, as follows:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 4,000 shares,
all with a par value of One Cent ($.01) per share, of which 3,000
shares shall be designated as Common Stock and 1,000 shares shall be
designated as Preferred Stock. Insofar as not inconsistent with the
provisions of this Certificate of Incorporation or the General
Corporation Law of Delaware:
a. The Preferred Stock may be issued from time to time in one
or more series. All shares of Preferred Stock shall be identical and
of equal rank except in respect to the particulars that may be fixed
by the Board of Directors as provided herein, and all shares of each
series of Preferred Stock shall be identical and of equal rank except
as to the time from which cumulative dividends, if any, thereof shall
be cumulative.
b. Subject to the limitations set forth herein and any
limitations prescribed by law, the Board of Directors is expressly
authorized, prior to issuance of any series of Preferred Stock, to fix
by resolution or resolutions providing for the issue of any series the
number of shares included in such series and the designation, relative
powers, preferences and rights, and the qualifications, limitations or
restrictions of such series. Pursuant to the foregoing general
authority vested in the Board of Directors, but not in limitation of
the powers conferred on the Board of Directors thereby and by the
General Corporation Law of Delaware, the Board of Directors is
expressly authorized to determine with respect to each series of
Preferred Stock:
(i) the designation or designations of such series and the
number of shares (which number from time to time may be decreased
by the Board of Directors, but not below the number of such
shares then outstanding, or may be increased by the Board of
Directors, but not above any number or limit specified in such
series) constituting such series;
<PAGE>
(ii) the rate or amount and times at which, and the
preferences and conditions under which, dividends shall be
payable on shares of such series, the status of such dividends as
cumulative or noncumulative, the date or dates from which
dividends, if cumulative, shall accumulate, and the status of
such shares as participating or nonparticipating after the
payment of dividends as to which such shares are entitled to any
preference;
(iii) the rights and preferences, if any, of the holders of
shares of such series upon the liquidation, dissolution or
winding up of the affairs of, or upon any distribution of the
assets of, the Corporation, which amount may vary depending upon
whether such liquidation, dissolution or winding up is voluntary
or involuntary and, if voluntary, may vary at different dates,
and the status of the shares of such series as participating or
nonparticipating after the satisfaction of any such rights and
preferences;
(iv) the full or limited voting rights, if any, to be
provided for shares of such series, in addition to the voting
rights provided by law;
(v) the times, terms and conditions, if any, upon which
shares of such series shall be subject to redemption, including
the amount the holders of shares of such series shall be entitled
to receive upon redemption (which amount may vary under different
conditions or at different redemption dates);
(vi) the amount, terms, conditions and manner of operation
of any purchase, retirement or sinking fund to be provided for
the shares of such series;
(vii) the rights, if any, of holders of shares of such
series to convert such shares into, or to exchange such share
for, shares of any other series of the same class, the prices or
rates of conversion or exchange, the adjustments thereto, and any
other terms and conditions applicable to such conversion or
exchange;
(viii) the limitations, if any, applicable while such
series is outstanding on the payment of dividends or making or
distributions on, or the acquisition or redemption of any class
of shares ranking junior as to dividends or upon liquidation, to
the shares of such series;
(ix) the conditions or restrictions, if any, upon the
issuance of any additional shares (including additional shares of
such series or any other series or of any other class) ranking on
a parity with or prior to the shares of such series either as to
dividends or upon liquidation; and
-2-
<PAGE>
(x) any other relative powers, preferences, participation
rights, options or other special rights, and the qualifications,
limitations or restrictions thereof, of shares of such series."
3. The amendment of the Certificate of Incorporation of the Company, as
described in this Certificate, was duly adopted in accordance with Section
242 of the Delaware General Corporation Law, by the board of directors and
sole stockholder of the Company.
-3-
<PAGE>
EXHIBIT 3.8
BY-LAWS
OF
AXIOHM IPB, INC
ARTICLE I
OFFICES
Section 1.1 REGISTERED OFFICE. The registered office of the
corporation shall be maintained in the City of Wilmington, State of Delaware,
and the registered agent in charge thereof is The Corporation Trust Company.
Section 1.2 OTHER OFFICES. The corporation may also have an office in
the City of Ithaca, State of New York and also offices at such other places
as the Board of Directors may from time to time determine or the business of
the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 2.1 PLACE OF MEETINGS. All meetings of the stockholders,
whether annual or special, shall be held at the offices of the corporation in
Ithaca, New York, or at such other place as may be fixed from time to time by
the Board of Directors.
Section 2.2 ANNUAL MEETINGS. An annual meeting of the stockholders,
commencing with the year 1995, shall be held on the second Tuesday in may in
each year, but if a legal holiday then on the next secular day following, at
10:00 A.M., at which they shall elect a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 2.3 NOTICE OF MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting, shall be given not less than
ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 2.4 STOCKHOLDERS' LIST. At least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at said meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder, shall be prepared by the Secretary. Such list shall be open to
the examination of any
<PAGE>
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.5 SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be
called by the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning at least
75% of the number of shares of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 2.6 NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting, stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, notice is given when deposited
in the United States mail, postage prepaid, directed to the stockholder at
his address as it appears on the records of the corporation.
Section 2.7 QUORUM. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as
otherwise provided by statute, by the Certificate of Incorporation or by
these By-Laws. If, however, such quorum shall not be present or represented
at any meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, of the place, date and hour of the adjourned meeting, until a
quorum shall again be present or represented by proxy. At the adjourned
meeting at which a quorum shall be present or represented by proxy, the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if
after the adjournment, a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.8 VOTING. When a quorum is present at any meeting, and
subject to the provisions of the General Corporation Law of the State of
Delaware, the Certificate of Incorporation or by these By-Laws in respect of
the vote that shall be required for a specified action, the vote of the
holders of a majority of the shares having voting power, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes
or of the Certificate of Incorporation or of these By-Laws, a different vote
is required in which case such express provision shall govern and control the
decision of such question. Each stockholder shall have one vote for each
share of stock having voting power registered in his name on the books of the
corporation, except as otherwise provided in the Certificate of Incorporation.
-2-
<PAGE>
Section 2.9 PROXIES. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
A stockholder may execute a writing authorizing another person or persons
to act for him as proxy by transmitting or authorizing the transmission of a
telegram, cablegram, or other means of electronic transmission, provided that
the telegram, cablegram or other means of electronic transmission either sets
forth or is submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was authorized by
the stockholder.
Section 2.10 MAJORITY CONSENT. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection
with any corporate action by any provisions of the statutes or of the
Certificate of Incorporation or these By-Laws, the meeting, notice of the
meeting, and vote of stockholders may be dispensed with if stockholders
owning stock having not less than the minimum number of votes which, by
statute, the Certificate of Incorporation or these By-Laws, is required to
authorize such action at a meeting at which all shares entitled to vote
thereon were present and voted shall consent in writing to such corporate
action being taken; provided that prompt notice of the taking of such action
must be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the corporation and do all
such acts and things as are not by the General Corporation Law of the State
of Delaware nor by the Certificate of Incorporation nor by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 3.2 NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole Board shall be two. The directors shall be elected at
the annual meeting of the stockholders, and each director shall hold office
until his successor is elected and qualified or until his earlier resignation
or removal.
Section 3.3 VACANCIES. If the office of any director or directors
becomes vacant by reason of death, resignation, retirement, disqualification,
removal from office, or otherwise, or a new directorship is created, the
holders of a plurality of shares issued and outstanding and entitled to vote
in elections of directors, shall choose a successor or successors, or a
director to fill the newly created directorship, who shall hold office for
the unexpired term or until the next election of directors.
-3-
<PAGE>
Section 3.4 PLACE OF MEETINGS. The Board of Directors may hold its
meetings outside of the State of Delaware, at the office of the corporation
or at such other places as they may from time to time determine, or as shall
be fixed in the respective notices or waivers of notice of such meetings.
Section 3.5 COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one or more of the
directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to
the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power of authority in
reference to amending the Certificate of Incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or
a revocation of a dissolution, or amendment to the By-Laws, of the
corporation; and, unless the resolution, By-Laws, or Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. The
committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
Section 3.6 COMPENSATION OF DIRECTORS. Directors, as such, may
receive such stated salary for their services and/or such fixed sums and
expenses of attendance for attendance at each regular or special meeting of
the Board of Directors as may be established by resolution of the Board;
provided that nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 3.7 ANNUAL MEETING. The annual meeting of the Board of
Directors shall be held within ten days after the annual meeting of the
stockholders in each year. Notice of such meeting, unless waived, shall be
given by mail or telegram to each director elected at such annual meeting, at
his address as the same may appear on the records of the corporation, or in
the absence of such address, at his residence or usual place of business, at
least three days before the day on which such meeting is to be held. Said
meeting may be held at such place as the Board may fix from time to time or
as may be specified or fixed in such notice or waiver thereof.
Section 3.8 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time on the call of the President or at the
request in writing of any one director. Notice of any such meeting, unless
waived, shall be given by mail or telegram to each director at his address as
the same appears on the records of the corporation not less than one day
prior to the day on
-4-
<PAGE>
which such meeting is to be held if such notice is by telegram, and not less
than two days prior to the day on which the meeting is to be held if such
notice is by mail. If the Secretary shall fail or refuse to give such
notice, then the notice may be given by the officer or any one of the
directors making the call. Any such meeting may be held at such place as the
Board may fix from time to time or as may be specified or fixed in such
notice or waiver thereof. Any meeting of the Board of Directors shall be a
legal meeting without any notice thereof having been given, if all the
directors shall be present thereat, and no notice of a meeting shall be
required to be given to any director who shall attend such meeting.
Section 3.9 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if a written consent to such action is signed
by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
Section 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided
in these By-Laws, a majority of the total number of directors as at the time
specified by the By-Laws shall constitute a quorum at any regular or special
meeting of the Board of Directors. Except as otherwise provided by statute,
by the Certificate of Incorporation or by these By-Laws, the vote of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. in the absence of a quorum, a
majority of the directors present may adjourn the meeting from time to time
until a quorum shall be present. Notice of any adjourned meeting need not be
given, except that notice shall be given to all directors if the adjournment
is for more than thirty days or if after the adjournment a new record date is
fixed for the adjourned meeting.
ARTICLE IV
OFFICER
Section 4.1 EXECUTIVE OFFICERS. The executive officers of the
corporation shall be a President, such number of Vice Presidents, if any, as
the Board of Directors may determine, a Secretary and a Treasurer. One
person may hold any number of said offices.
Section 4.2 ELECTION, TERM OF OFFICE AND ELIGIBILITY. The executive
officers of the corporation shall be elected annually by the Board of
Directors at its annual meeting or at a special meeting held in lieu thereof.
Each officer, except such officers as may be appointed in accordance with
the provisions of Section 4.3, shall hold office until his successor shall
have been duly chosen
-5-
<PAGE>
and qualified or until his death, resignation or removal. None of the
officers need be members of the Board.
Section 4.3 SUBORDINATE OFFICERS. The Board of Directors may appoint
such Assistant Secretaries, Assistant Treasurers, Controller and other
officers, and such agents as the Board may determine, to hold office for such
period and with such authority and to perform such duties as the Board may
from time to time determine. The Board may, by specific resolution, empower
the chief executive officer of the corporation or the Executive Committee to
appoint any such subordinate officers or agents.
Section 4.4 REMOVAL. The President, any Vice President, the Secretary
and/or the Treasurer may be removed at any time, either with or without
cause, but only by the affirmative vote of the majority of the total number
of directors as at the time specified by the By-Laws. Any subordinate
officer appointed pursuant to Section 4.3 may be removed at any time, either
with or without cause, by the majority vote of the directors present at any
meeting of the Board or by any committee or officer empowered to appoint such
subordinate officers.
Section 4.5 THE PRESIDENT. The President shall be the chief executive
officer of the corporation. He shall have executive authority to see that
all orders and resolutions of the Board of Directors are carried into effect
and, subject to the control vested in the Board of Directors by statute, by
the Certificate of Incorporation, or by these By-Laws, shall administer and
be responsible for the management of the business and affairs of the
corporation. He shall preside at all meetings of the stockholders and the
Board of Directors; and in general shall perform all duties incident to the
office of the President and such other duties as from time to time may be
assigned to him by the Board of Directors.
Section 4.6 THE VICE PRESIDENTS. In the event of the absence or
disability of the President, each Vice President, in the order designated, or
in the absence of any designation, then in the order of their election, shall
perform the duties of the President. The Vice Presidents shall also perform
such other duties as from time to time may be assigned to them by the Board
of Directors or by the chief executive officer of the corporation.
Section 4.7 THE SECRETARY. The Secretary shall:
(a) Keep the minutes of the meetings of the stockholders and of the
Board of Directors;
(b) See that all notices are duly given in accordance with the
provisions of these By-Laws or as required by law;
(c) Be custodian of the records and of the seal of the corporation
and see that the seal or a facsimile or equivalent thereof is affixed to or
reproduced on all documents, the execution of which on behalf of the
corporation under its seal is duly authorized;
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(d) Have charge of the stock record books of the corporation;
(e) In general, perform all duties incident to the office of
Secretary, and such other duties as are provided by these By-Laws and as from
time to time are assigned to him by the Board of Directors or by the chief
executive officer of the corporation.
Section 4.8 THE ASSISTANT SECRETARIES. If one or more Assistant
Secretaries shall be appointed pursuant to the provisions of Section 4.3
respecting subordinate officers, then, at the request of the Secretary, or in
his absence or disability, the Assistant Secretary designated by the
Secretary (or in the absence of such designations, then any one of such
Assistant Secretaries) shall perform the duties of the Secretary and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the Secretary.
Section 4.9 THE TREASURER. The Treasurer shall:
(a) Receive and be responsible for all funds of and securities
owned or held by the corporation and, in connection therewith, among other
things: keep or cause to be kept full and accurate records and accounts for
the corporation; deposit or cause to be deposited to the credit of the
corporation all moneys, funds and securities so received in such bank or
other depository as the Board of Directors or an officer designated by the
Board may from time to time establish; and disburse or supervise the
disbursement of the funds of the corporation as may be properly authorized;
(b) Render to the Board of Directors at any meeting thereof, or
from time to time when ever the Board of Directors or the chief executive
officer of the corporation may require, financial and other appropriate
reports on the condition of the corporation;
(c) In general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors or by the chief executive officer of the
corporation.
Section 4.10 THE ASSISTANT TREASURERS. If one or more Assistant
Treasurers shall be appointed pursuant to the provisions of Section 4.3
respecting subordinate officers, then, at the request of the Treasurer, or in
his absence or disability, the Assistant Treasurer designated by the
Treasurer (or in the absence of such designation, then any one of such
Assistant Treasurers) shall perform all the duties of the Treasurer and when
so acting shall have all the powers of and be subject to all the restrictions
upon, the Treasurer.
Section 4.11 SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
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Section 4.12 BONDS. If the Board of Directors or the chief executive
officer shall so require, any officer or agent of the corporation shall give
bond to the corporation in such amount and with such surety as the Board of
Directors or the chief executive officer, as the case may be, may deem
sufficient, conditioned upon the faithful performance of their respective
duties and offices.
Section 4.13 DELEGATION OF DUTIES. In case of the absence of any
officer of the corporation or for any other reason which may seem sufficient
to the Board of Directors, the Board of Directors may, for the time being,
delegate his powers and duties, or any of them, to any other officer or to
any director.
ARTICLE V
SHARES OF STOCK
Section 5.1 REGULATION. Subject to the terms of any contract of the
corporation, the Board of Directors may make such rules and regulations as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the stock of the corporation, including the issue
of new certificates for lost, stolen or destroyed certificates, and including
the appointment of transfer agents and registrars.
Section 5.2 STOCK CERTIFICATES. Certificates for shares of the stock
of the corporation shall be respectively numbered serially for each class of
stock, or series thereof, as they are issued, shall be impressed with the
corporate seal or a facsimile thereof, and shall be signed by the President
or a Vice President, and by the Secretary or Treasurer, or an Assistant
Secretary or an Assistant Treasurer, provided that such signatures may be
facsimiles on any certificate countersigned by a transfer agent other than
the corporation or its employee. Each certificate shall exhibit the name of
the corporation, the class (or series of any class) and number of shares
represented thereby, and the name of the holder. Each certificate shall be
otherwise in such form as may be prescribed by the Board of Directors.
Section 5.3 RESTRICTION ON TRANSFER OF SECURITIES. A restriction on
the transfer or registration of transfer of securities of the corporation may
be imposed either by the Certificate of Incorporation or by these By-Laws or
by an agreement among any number of security holders or among such holders
and the corporation. No restriction so imposed shall be binding with respect
to securities issued prior to the adoption of the restriction unless the
holders of the securities are parties to an agreement or voted in favor of
the restriction.
A restriction on the transfer of securities of the corporation is
permitted by this Section if it:
(a) Obligates the holder of the restricted securities to offer to
the corporation or to any other holders of securities of the corporation or
to any other person or to any combination of the foregoing a prior
opportunity, to be exercised within a reasonable time, to acquire the
restricted securities; or
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(b) Obligates the corporation or any holder of securities of the
corporation or any other person or any combination of the foregoing to
purchase the securities which are the subject of an agreement respecting the
purchase and sale of the restricted securities; or
(c) Requires the corporation or the holders of any class of
securities of the corporation to consent to any proposed transfer of the
restricted securities or to approve the proposed transferee of the restricted
securities; or
(d) Prohibits the transfer of the restricted securities to
designated persons or classes of persons; and such designation is not
manifestly unreasonable; or
(e) Restricts transfer or registration of transfer in any other
lawful manner.
Unless noted conspicuously on the security, a restriction, even
though permitted by this Section, is ineffective except against a person with
actual knowledge of the restriction.
Section 5.4 TRANSFER OF SHARES. Subject to the restrictions permitted
by Section 5.3, shares of the capital stock of the corporation shall be
transferable on the books of the corporation by the holder thereof in person
or by his duly authorized attorney, upon the surrender or cancellation of a
certificate or certificates for a like number of shares. As against the
corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation shall
be entitled to treat the registered holder of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Delaware.
Section 5.5 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such
meeting. If no record is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
providing, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is
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adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by the General Corporation Law
of the state of Delaware, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered
to the corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings by
stockholders are recorded. Delivery made to a corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by the General Corporation
Law of the State of Delaware, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts
the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 5.6 LOST CERTIFICATE. Any stockholder claiming that a
certificate representing shares of stock has been lost, stolen or destroyed
may make an affidavit or affirmation of the fact and, if the Board of
Directors so requires, advertise the same in a manner designated by the
Board, and give the corporation a bond of indemnity in form and with security
for an amount satisfactory to the Board (or an officer or officers designated
by the Board), whereupon a new certificate may be issued of the same tenor
and representing the same number, class and/or series of shares as were
represented by the certificate alleged to have been lost, stolen or destroyed.
ARTICLE VI
BOOKS AND RECORDS
Section 6.1 LOCATION. The books, accounts and records of the
corporation may be kept at such place or places within or without the State
of Delaware as the Board of Directors may from time to time determine.
Section 6.2 INSPECTION. The books, accounts, and records of the
corporation shall be open to inspection by any member of the Board of
Directors at all times; and open to inspection by the stockholders at such
times, and subject to such regulations as the Board of Directors may
prescribe, except as otherwise provided by statute.
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Section 6.3 CORPORATE SEAL. The corporate seal shall contain two
concentric circles between which shall be the name of the corporation and the
word "Delaware" and in the center shall be inscribed the words "Corporate
Seal."
ARTICLE VII
DIVIDENDS AND RESERVES
Section 7.1 DIVIDENDS. The Board of Directors of the corporation,
subject to any restrictions contained in the Certificate of Incorporation and
other lawful commitments of the corporation, may declare and pay dividends
upon the shares of its capital stock either out of the surplus of the
corporation, as defined in and computed in accordance with the General
Corporation Law of the State of Delaware, or in case there shall be no such
surplus, out of the net profits of the corporation for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. If the
capital of the corporation, computed in accordance with the General
Corporation Law of the State of Delaware, shall have been diminished by
depreciation in the value of its property, or by losses, or otherwise, to an
amount less than the aggregate amount of the capital represented by the
issued and outstanding stock of all classes having a preference upon the
distribution of assets, the Board of Directors of the corporation shall not
declare and pay out of such net profits any dividends upon any shares of any
classes of its capital stock until the deficiency in the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets shall have been repaired.
Section 7.2 RESERVES. The Board of Directors of the corporation may
set apart, out of any of the funds of the corporation available for
dividends, a reserve or reserves for any proper purpose and may abolish any
such reserve.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 FISCAL YEAR. The fiscal year of the corporation shall end
on the 31st day of December of each year.
Section 8.2 DEPOSITORIES. The Board of Directors or an officer
designated by the Board shall appoint banks, trust companies, or other
depositories in which shall be deposited from time to time the money or
securities of the corporation.
Section 8.3 CHECKS, DRAFTS AND NOTES. All checks, drafts, or other
orders for the payment of money and all notes or other evidences of
indebtedness issued in the name of the corporation shall be signed by such
officer or officers or agent or agents as shall from time to time be
designated by resolution of the Board of Directors or by an officer appointed
by the Board.
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Section 8.4 CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors
may authorize any officer, agent or agents to enter into any contract or
execute and deliver any instrument in the name and on behalf of the
corporation and such authority may be general or confined to specific
instances.
Section 8.5 NOTICES. Whenever under the provisions of the statutes or
of the Certificate of Incorporation or of these By-Laws notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, by
depositing the same in a post office or letter box, in a postpaid sealed
wrapper, or by delivery to a telegraph company, addressed to such director or
stockholder at such address as appears on the records of the corporation, or,
in default of other address, to such director or stockholder at the General
Post Office in the city of Dover, Delaware, and such notice shall be deemed
to be given at the time when the same shall be thus mailed or delivered to a
telegraph company.
Section 8.6 WAIVERS OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws, a waiver thereof in writing signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
Section 8.7 STOCK IN OTHER CORPORATIONS. Any shares of stock in any
other corporation which may from time to time be held by this corporation may
be represented and voted at any meeting of shareholders of such corporation
by the President or a Vice President, or by any other person or persons
thereunto authorized by the Board of Directors, or by any proxy designated by
written instrument of appointment executed in the name of this corporation by
its President or a Vice President. Shares of stock belonging to the
corporation need not stand in the name of the corporation, but may be held
for the benefit of the corporation in the individual name of the Treasurer or
of any other nominee designated for the purpose by the Board of Directors.
Certificates for shares so held for the benefit of the corporation shall be
endorsed in blank or have proper stock powers attached so that said
certificates are at all times in due form for transfer, and shall be held for
safekeeping in such manner as shall be determined from time to time by the
Board of Directors.
Section 8.8 INDEMNIFICATION.
(a) Each person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he, or a person of whom he is the legal
representative, is or was a director or officer of the corporation or is or
was a director or officer of the corporation who is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise,
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including service with respect to employee benefit plans, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the laws of Delaware as the same now or may hereafter exist
(but, in the case of any change, only to the extent that such change
authorizes the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such change) against
all costs, charges, expenses, liabilities and losses (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of
his heirs, executors and administrators. The right to indemnification
conferred in this Section shall be a contract right and shall include the
right to be paid by the corporation the expenses incurred in defending any
such proceeding in advance of its final disposition upon receipt by the
corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that
the director or officer is not entitled to be indemnified under this Section
or otherwise. The corporation may, by action of its Board of Directors,
provide indemnification to employees and agents of the corporation with the
same scope and effect as the foregoing indemnification of directors and
officers.
(b) If a claim under subsection (a) of this Section is not paid in
full by the corporation within thirty days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall also be entitled to be
paid the expense of prosecuting such claim. It shall be a defense to any
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant
has failed to meet a standard of conduct which makes it permissible under
Delaware law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is permissible in the circumstances because he has met such standard of
conduct, nor an actual determination by the corporation (including its Board
of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such standard of conduct, nor the termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall be a defense to the action or create a
presumption that the claimant has failed to meet the required standard of
conduct.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other right which any
person may have or hereafter, acquire under any statute, provision of the
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
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(d) The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expense, liability or loss under Delaware law.
(e) To the extent that any director, officer, employee or agent of
the corporation is by reason of such position, or a position with another
entity at the request of the corporation, a witness in any proceeding, he
shall be indemnified against all costs and expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
(f) Any amendment, repeal or modification of any provision of this
Section by the stockholders or the directors of the corporation shall not
adversely affect any right or protection of a director or officer of the
corporation existing at the time of such amendment, repeal or modification.
Section 8.9 AMENDMENT OF BY-LAWS. The stockholders, by the
affirmative vote of the holders of a majority of the stock issued and
outstanding and having voting power may, at any annual or special meeting if
notice of such alteration or amendment of the By-Laws is contained in the
notice of such meeting, adopt, amend, or repeal these By-Laws, and
alterations or amendments of By-Laws made by the stockholders shall not be
altered or amended by the Board of Directors.
The Board of Directors, by the affirmative vote of a majority of the
whole Board, may adopt, amend, or repeal these By-Laws at any meeting, except
as provided in the above paragraph. By-Laws made by the Board of Directors
may be altered or repealed by the stockholders.
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EXHIBIT 3.9
CERTIFICATE OF FORMATION
OF
COGNITIVE L.L.C.
1. THE NAME OF THE LIMITED LIABILITY COMPANY IS COGNITIVE L.L.C.
2. THE ADDRESS OF ITS REGISTERED OFFICE IN THE STATE OF DELAWARE IS
CORPORATION TRUST CENTER, 1209 ORANGE STREET, IN THE CITY OF WILMINGTON,
COUNTY OF NEW CASTLE. THE NAME OF ITS REGISTERED AGENT AT SUCH ADDRESS IS
THE CORPORATION TRUST COMPANY.
IN WITNESS WHEREOF, THE UNDERSIGNED HAVE EXECUTED THIS CERTIFICATE OF
FORMATION OF COGNITIVE L.L.C. THIS TWENTY-FOURTH DAY OF OCTOBER, 1997.
/s/ B.A. Stuewe
---------------------------------------
B.A. Stuewe, Organizer
<PAGE>
EXHIBIT 3.10
OPERATING AGREEMENT
OF
COGNITIVE, L.L.C.
This Limited Liability Company Operating Agreement (this "Agreement") for
Cognitive, L.L.C., a Delaware limited liability company (the "Company"), is
adopted as of the 24th day of October, 1997, by Axiohm Transactional Solutions,
Inc. (the "Member").
AGREEMENT
1. FORMATION OF COMPANY
The Member has formed a limited liability company pursuant to the Delaware
Limited Liability Company Act (the "Act") by filing a Certificate of Formation
with the Delaware Secretary of State in accordance with the Act and the rights
and liabilities of the Member as provided in the Act, except as herein otherwise
provided.
2. NAME
The Company shall be conducted under the name Cognitive, L.L.C. or such other
name as the Member may select.
3. PRINCIPAL PLACE OF BUSINESS
The office of the Company shall be at 15070 Avenue of Science, San Diego,
California 92128. The business of the Company also may be conducted at such
other or additional place or places as may be designated by the Member.
4. PURPOSES AND POWERS OF THE COMPANY
The purpose of the Company shall be (a) to hold interest in Axiohm
Investissements Sarl; and (b) to transact any or all other lawful business
for which limited liability companies may be organized under the Act. The
Company shall have all powers necessary or desirable to accomplish the
aforesaid purposes.
5. QUALIFICATION AND REGISTRATION
<PAGE>
The Company and its Member shall, as soon as practicable, take all action
necessary to qualify the Company to do business and to execute all
certificates or other documents, and perform all filings and recordings, as
are required by the laws of the State of Delaware and the other jurisdictions
in which the Company does business.
6. CAPITALIZATION OF THE COMPANY
6.1 INITIAL CONTRIBUTIONS. The initial capital contribution of the Member
shall be $100.
6.2 INITIAL PERCENTAGE INTERESTS. The initial percentage interests
("Percentage Interests") of each Member shall be as follows:
PERCENTAGE INTEREST
-------------------
Axiohm Transactional Solutions, Inc. 100%
6.3 ADDITIONAL CAPITAL CONTRIBUTIONS. The Member is not obligated to make
additional capital contributions to the Company beyond the contributions
agreed to in Section 6.1.
7. DISTRIBUTIONS AND ALLOCATIONS
7.1 ALLOCATIONS. All of the Company's taxable income and loss shall be
allocated for each fiscal year or other relevant period to the Member.
7.2 DISTRIBUTIONS. Distributions of cash or other assets shall be made in
the amounts and at the times determined by the Member.
8. ACCOUNTING AND TAX MATTERS
8.1 BOOKS OF ACCOUNT. The Company shall maintain or cause to be maintained
at all times true and proper books, records, reports and accounts in
accordance with generally accepted accounting principles consistently
applied, in which shall be entered fully and accurately all transactions of
the Company and the Member shall have access thereto at all reasonable times.
The Company shall keep vouchers, statements, receipted bills and invoices
and all other records in connection with the Company's business.
8.2 ACCOUNTING AND REPORTS. The books of account shall be closed promptly
after the end of each fiscal year and an audit shall be performed at the
expense of the Company, if requested by the Member, by an independent public
accounting firm. Promptly thereafter, the Company shall make a
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written report to the Member, which shall include a balance sheet of the
Company as of the end of such year, a statement of income and expenses for
such year, a statement of the Member's capital account as of the end of such
year, and such other statements with respect to the status of the Company and
distribution of the profits and losses therefrom as are considered necessary
by the Member to advise the Member properly about its investment in the
Company for Federal and state income tax reporting purposes. Not later than
30 days prior to the date on which the Company intends to file its tax
return, the Company shall submit to the Member for review and approval a copy
of all such tax returns as proposed to be submitted.
8.3 FISCAL YEAR. The fiscal year of the Company shall end on the 31st Day
of December in each year.
8.4 BANKING. An account or accounts in the name of the Company shall be
maintained in such bank or banks as the Member may from time to time select.
All monies and funds of the Company, and all instruments for the payment of
money to the Company, shall, when received, be deposited in said bank account
or accounts, or prudently invested in marketable securities or other
negotiable instruments. All checks, drafts and orders upon said account or
accounts shall be signed in the Company name by such persons in such manner
as the Member may from time to time determine.
9. MANAGEMENT; CERTAIN OBLIGATIONS
9.1 MANAGEMENT BY MEMBER. The Member shall have full, exclusive and complete
discretion in the management and control of the business and affairs of the
Company for the purpose herein stated, and shall make all decisions affecting
the Company's business and affairs, except as otherwise expressly limited
herein. The Member shall have full authority to bind the Company by
execution of documents, instruments, agreements, contracts or otherwise to
any obligation not inconsistent with the provisions of this Agreement.
9.2 EXPENDITURES BY COMPANY. The Company shall, upon the direction of the
Member, pay compensation for accounting, administrative, legal, technical and
management services rendered to the Company. The Member shall be entitled to
reimbursement by the Company for any expenditures necessarily and reasonably
incurred by them on behalf of the Company, which shall be made out of the
funds of the Company.
9.3 ADVANCES AND LOANS BY MEMBER. The Member may lend money to and
transact other business with the Company and such Member shall have the same
rights and obligations with respect thereto as a person who is not a Member.
Loans by the Member to the Company, or guarantees by any Member of Company
indebtedness shall not be considered capital contributions to the Company.
Any such advance shall be treated as a debt owing from the Company, payable
at such times and with such rate of interest as shall be agreed upon by the
Company and the Member making such advance or loan. Undistributed earnings
and profits of the Company shall not be considered an advance of money to the
Company.
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9.4 POTENTIAL CONFLICTS. The Member may engage in business ventures of any
nature and description independently or with others and the Company shall not
have any rights in and to such independent ventures or the income or profits
derived therefrom.
9.5 RIGHTS AND OBLIGATIONS OF THE MEMBER. The Member shall not be
personally liable for any of the debts of the Company or any of the losses
thereof beyond the amounts contributed by them to the capital of the Company.
The Member shall not be entitled to the return of their capital contribution
except to the extent provided for in this Agreement.
9.6 LIABILITY OF MEMBER. The Member shall not be liable, responsible or
accountable in damages or otherwise to the Company for any good faith act or
omission on behalf of the Company within the scope of the authority conferred
on the Member(s) by this Agreement or by law unless such action or omission
was performed or omitted in bad faith or constituted gross negligence or
willful misconduct.
10. CHANGES IN MEMBERSHIP OR INTERESTS
10.1 TRANSFER OF INTERESTS. The Member shall be able to sell, transfer,
assign, give, pledge, or otherwise dispose of or encumber any part or all of
his interest in the Company now owned or hereafter acquired, whether
voluntarily, by operation of law, or otherwise.
10.2 ADMISSION OF NEW MEMBERS. New members may not be admitted to the
Company without the prior written consent of and upon terms approved by the
Member, among which shall be all amendments to this Agreement which are
required or desirable in connection with such admission.
10.3 RESIGNATION OF MEMBER. The Member may resign from the Company at any
time.
11. DISSOLUTION OF THE COMPANY
11.1 EVENTS RESULTING IN DISSOLUTION. The Company shall be dissolved upon the
first to occur of the following:
(a) Upon the written consent of the member;
(b) The entry of a decree of judicial dissolution under Section 18-802
of the Delaware Limited Liability Company Act.
The death, resignation, dissolution, expulsion, retirement or bankruptcy of a
Member or a court declaration of incompetence with respect to the Member or
the occurrence of any other event which terminates the continued membership
of the Member in the Company shall not cause dissolution of
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the Company and unless either Section 11.1(a) or 11.1(b) applies, the Company
shall have a perpetual existence.
11.2 LIQUIDATION AND DISTRIBUTION OF LIQUIDATION PROCEEDS. In the event of
the dissolution of the Company for any reason, the Member shall commence to
wind up the affairs of the Company and to liquidate its assets. The Member
shall select a liquidating trustee who shall have full power to sell, assign
and encumber Company assets. The Member shall continue to share profits and
losses during the period of liquidation. Any property distributed in kind in
liquidation shall be valued and treated as though the property were sold and
the cash proceeds were distributed. Upon liquidation, the assets of the
Company shall be used and distributed in the following order: (a) to pay or
provide for the payment of all debts and liabilities of the Company to
creditors, including the Member, to the extent permitted by law, in
satisfaction of liabilities of the Company other than liabilities for
distributions to the Member; (b) to the Member.
11.3 TERMINATION. Upon the completion of liquidation of the Company and the
distribution of all Company assets, the Company shall terminate.
12. AMENDMENTS TO AGREEMENT
This Agreement may be altered, amended or repealed at any time and from time
to time with the approval of the Member.
13. INDEMNIFICATION
The Company shall have the power to indemnify any person who was or is a
manager, employee, or agent of the Company, or who is or was serving at the
request of the Company as a director, manager, employee, or agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise and to purchase and maintain insurance for those persons as,
and to the extent permitted by the Act.
14. MISCELLANEOUS
14.1 NOTICES. All notices, offers or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as properly given or made, if mailed, five business days
after mailing from within the United States by first class United States
mail, postage prepaid, return receipt requested, or by personal delivery to
the address of the principal place of business set forth in Section 3. The
Member may change its address. Commencing on the tenth day after the giving
of such notice, such newly designated address shall be such Member's address
for purposes of all notices or other communications required or permitted to
be given pursuant to this Agreement.
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14.2 COMPANY PROPERTY. All property, whether real, personal or mixed,
tangible or intangible, and wherever located, contributed by the Member(s) to
the Company or acquired by the Company shall be the property of the Company.
All files, documents, and records shall be the property of the Company and
shall remain in the possession of the Company.
14.3 SUCCESSORS. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of the Member and their
respective legal representatives, heirs, successors and assigns, except as
expressly herein otherwise provided.
14.4 GOVERNING LAW. This Agreement shall be governed, construed and
enforced in conformity with the laws of the State of Delaware.
14.5 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one and the
same instrument.
14.6 ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the Member and supersedes any prior understandings and/or written or oral
agreements among them respecting the within subject matter. There are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein.
IN WITNESS WHEREOF, the Member(s) have adopted this Agreement as of the day and
year first above written.
AXIOHM TRANSACTION SOLUTIONS, INC.
By: /s/ Walter S. Sobon
------------------------------------------
Name: Walter S. Sobon
Title: Chief Financial Officer
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EXHIBIT 3.11
ARTICLES OF INCORPORATION
OF
COGNITIVE SOLUTIONS, INC.
I
The name of this corporation is COGNITIVE SOLUTIONS, INC.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business of the
practice of a professional permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this Corporation's initial
agent for service of process is:
JOHN FRANCIS BERGQUIST, 7850 CARMELITE, ATASCADERO, CA 93422
IV
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which the corporation is authorized to issue is
100,000 shares of common stock.
Dated: 10/13/86 /S/ Timothy J. Beresky
------------------------------ ----------------------------------
Timothy J. Beresky
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which is my act and deed.
/S/ Timothy J. Beresky
----------------------------------
Timothy J. Beresky
<PAGE>
EXHIBIT 3.12
BY-LAWS
OF
COGNITIVE SOLUTIONS, INC.
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction of
business of the corporation is hereby fixed and located at 7850 Carmelita City
of Atascadero, County of San Luis Obispo, State of California. The location may
be changed by approval of a majority of the authorized Directors, and additional
offices may be established and maintained at such other place or places, either
within or without California, as the Board of Directors may from time to time
designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time
be established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the General Corporation Law and to any limitations in the Articles
of Incorporation of the corporation relating to action required to be approved
by the Shareholders, as that term is defined in Section 153 of the California
Corporations Code, or by the outstanding shares, as that term is defined in
Section 152 of the Code, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors. The Board may delegate the management of the day-to-day
operation of the business of the corporation to a management company or other
person, provided that the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised under the ultimate direction
of the Board.
Section 2. STANDARD OF CARE. Each Director shall perform the duties of a
Director, including the duties as a member of any committee of the Board upon
which the Director may serve, in good faith, in a manner such Director believes
to be in the best interests of the corporation, and with such care, including
reasonable inquiry, as an ordinary prudent person in a like position would use
under similar circumstances. (Sec. 309)
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Section 3. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the
provisions of Section 1, in the event that this corporation shall elect to
become a close corporation as defined in Sec. 158, its Shareholders may enter
into a Shareholders' Agreement as defined in Sec. 186. Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the Shareholders, provided, however, such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each Shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Sec. 300 (d) ; and the Directors shall be
relieved to that extent from such liability.
Section 4. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of Directors shall be ONE (1) until changed by a duly adopted amendment to the
Articles of Incorporation or by an amendment to this by-law adopted by the vote
or written consent of holders of a majority of the outstanding shares entitled
to vote, as provided in Sec. 212.
Section 5. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the Shareholders to hold office until the next
annual meeting. Each Director, including a Director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
Section 6. VACANCIES. Vacancies in the Board of Directors may be filled
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, except that a vacancy created by the removal of a
Director by the vote or written consent of the Shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of a majority of the outstanding shares entitled to
vote. Each Director so elected shall hold office until the next annual meeting
of the Shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in the event of the death, resignation, or removal of any Director, or if the
Board of Directors by resolution declares vacant the office of a Director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of Directors is increased, or if the shareholders
fail, at any meeting of shareholders at which any Director or Directors are
elected, to elect the number of Directors to be voted for at that meeting.
The Shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any Director may resign effective on giving written notice to the Chairman
of the Board, the President, the Secretary, or the Board of Directors, unless
the notice specifies a later time for that
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resignation to become effective. If the resignation of a Director is
effective at a future time, the Board of Directors may elect a successor to
take office when the resignation becomes effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director before that Director's term of office expires.
Section 7. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual Director may be removed from office as provided by Secs. 302, 303 and
304 of the Corporations Code of the State of California. In such case, the
remaining Board members may elect a successor Director to fill such vacancy for
the remaining unexpired term of the Director so removed.
Section 8. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the Board of
Directors may be called by the Chairman of the Board, or the President, or any
Vice President, or the Secretary, or any two (2) Directors and shall be held at
the principal executive office of the corporation, unless some other place is
designated in the notice of the meeting. Members of the Board may participate
in a meeting through use of a conference telephone or similar communications
equipment so long as all members participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board or any committee thereof,
shall be maintained as required by Sec. 1500 of the Code by the Secretary or
other officer designated for that purpose.
Section 9. ORGANIZATION MEETINGS. The organization meetings of the Board
of Directors shall be held immediately following the adjournment of the annual
meetings of the Shareholders.
Section 10. OTHER REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at the corporate offices, or such other place as may be
designated by the Board of Directors, as follows:
Time of Regular Meeting: 5:00 P.M.
Date of Regular Meeting: First Monday in December of each year
If said day shall fall upon a holiday, such meetings shall be held on the
next succeeding business day thereafter. No notice need be given of such
regular meetings.
Section 11. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of the
Board may be called at any time by any of the aforesaid officers, i.e. by the
Chairman of the Board or the President or any Vice President or the Secretary or
any (2) Directors.
At least forty-eight (48) hours notice of the time and place of special
meetings shall be delivered personally to the Directors or personally
communicated to them by a corporate Officer by telephone or telegraph. If
the notice is sent to a Director by letter, it shall be addressed to him or
her at his or her address as it is shown upon the records of the corporation,
or if it is not so shown on such records or is not readily ascertainable, at
the place in which the meetings of the Directors are
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regularly held. In case such notice is mailed, it shall be deposited in the
United States mail, postage prepaid, in the place in which the principal
executive office of the corporation is located at least four (4) days prior
to the time of the holding of the meeting. Such mailing, telegraphing,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director.
When all of the Directors are present at any Directors' meeting, however
called or noticed, and either (i) sign a written consent thereto on the
records of such meeting, or, (ii) if a majority of the Directors are present
and if those not present sign a waiver of notice of such meeting or a consent
to holding the meeting or an approval of the minutes thereof, whether prior
to or after the holding of such meeting, which said waiver, consent or
approval shall be filed with the Secretary of the corporation, or, (iii) if a
Director attends a meeting without notice but without protesting, prior
thereto or at its commencement, the lack of notice, then the transactions
thereof are as valid as if had at a meeting regularly called and noticed.
Section 12. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION OR
BY-LAWS. In the event only one (1) Director is required by the By-laws or
Articles of Incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the Directors
shall be deemed to refer to such notice, waiver, etc., by such sole Director,
who shall have all the rights and duties and shall be entitled to exercise
all of the powers and shall assume all the responsibilities otherwise herein
described as given to a Board of Directors.
Section 13. DIRECTORS ACTION BY UNANIMOUS WRITTEN CONSENT. Any action
required or permitted to be taken by the Board of Directors may be taken
without a meeting and with the same force and effect as if taken by a
unanimous vote of Directors, if authorized by a writing signed individually
or collectively by all members of the Board. Such consent shall be filed
with the regular minutes of the Board.
Section 14. QUORUM. A majority of the number of Directors as fixed by
the Articles of Incorporation or By-Laws shall be necessary to constitute a
quorum for the transaction of business, and the action of a majority of the
Directors present at any meeting at which there is a quorum, when duly
assembled, is valid as a corporate act; provided that a minority of the
Directors, in the absence of a quorum, may adjourn from time to time, but may
not transact any business. A meeting at which a quorum is initially present
may continue to transact business, notwithstanding the withdrawal of
Directors, if any action taken is approved by a majority of the required
quorum for such meeting.
Section 15. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the
time and place be fixed at the meeting adjourned and held within twenty-four
(24) hours, but if adjourned more than twenty-four (24) hours, notice shall
be given to all Directors not present at the time of the adjournment.
Section 16. COMPENSATION OF DIRECTORS. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the Board
a fixed sum and expense of attendance,
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if any, may be allowed for attendance at each regular and special meeting of
the Board; provided that nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 17. COMMITTEES. Committees of the Board may be appointed by
resolution passed by a majority of the whole Board. Committees shall be
composed of two (2) or more members of the Board, and shall have such powers
of the Board as may be expressly delegated to it by resolution of the Board
of Directors except those powers expressly made non-delegable by Sec. 311.
Section 18. ADVISORY DIRECTORS. The Board of Directors from time to time
may elect one or more persons to be Advisory Directors who shall not by such
appointment be members of the Board of Directors. Advisory Directors shall be
available from time to time to perform special assignments specified by the
President, to attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board. The period during which the title shall be
held may be prescribed by the Board of Directors. If no period is prescribed,
the title shall be held at the pleasure of the Board.
Section 19. RESIGNATIONS. Any Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board of Directors of the corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The Officers of the corporation shall be a
President, a Secretary, and a Chief Financial Officer. The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other Officers as may be appointed in
accordance with the provisions of Section 3 of this Article III. Any number
of offices may be held by the same person.
Section 2. ELECTION. The Officers of the corporation, except such
Officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article, shall be chosen annually by the Board of
Directors, and each shall hold office until he or she shall resign or shall
be removed or otherwise disqualified to serve, or a successor shall be
elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint such other Officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the By-Laws or as the Board of
Directors may from time to time determine.
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Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an Officer under any contract of employment, any Officer may be
removed, either with or without cause, by the Board of Directors, at any
regular or special meeting of the Board, or, except in case of an officer
chosen by the Board Of Directors, by any Officer upon whom such power of
removal may be conferred by the Board of Directors.
Any Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
Officer is a party.
Section 5. VACANCIES. A vacancy in any off ice because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in the By-Laws for regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may be
from time to time assigned by the Board of Directors or prescribed by the
By-Laws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article III.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board, if there
be such an Officer, the President shall be the Chief Executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and Officers of
the corporation. He or she shall preside at all meetings of the Shareholders
and in the absence of the Chairman of the Board, or if there be none, at all
meetings of the Board of Directors. The President shall be ex officio a
member of all the standing committees, including the Executive Committee, if
any and shall have the general powers and duties of management usually vested
in the office of President of a corporation, and shall have such other powers
and duties as may be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by
the Board of Directors, or if not ranked, the Vice President designated by
the Board of Directors, shall perform all the duties of the President, and
when so acting shall have all the powers of, and be subject to, all the
restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the Board of
Directors may order, of all meetings of
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Directors and Shareholders., with the time and place of holding, whether
regular or special, and if special, how authorized, the notice thereof given,
the names of those present at Directors' meetings, the number of shares
present or represented at Shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses; the number and classes of shares held by each; the number and date
of certificates issued for the same; and the number and date of cancellation
of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board of Directors required by the
By-Laws or by law to be given. He or she shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by the
By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
earnings (or surplus) and shares. The books of account shall at all reasonable
times be open to inspection by any Director.
This Officer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He or she shall disburse the funds of the corporation
as may be ordered by the Board of Directors, shall render to the President and
Directors, whenever they request it, an account of all of his or her
transactions and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall be
held at the principal executive office of the corporation unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board of Directors.
Section 2. ANNUAL MEETINGS. The annual meetings of the Shareholders shall
be held, each year, at the time and on the day following:
Time of Meeting: 5:30 P.M.
Date of Meeting: First Monday of December of each year
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If this day shall be a legal holiday, then the meeting shall be held on
the next succeeding business day, at the same hour. At the annual meeting,
the Shareholders shall elect a Board of Directors, consider reports of the
affairs of the corporation and transact such other business as may be
properly brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
President, a Vice President, the Secretary, or by one or more Shareholders
holding not less than one-tenth (1/10) of the voting power of the corporation.
Except as next provided, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman, President,
Vice President, or Secretary, mailed or delivered personally to such Officer
by any person (other than the Board) entitled to call a special meeting of
Shareholders, such Officer shall cause notice to be given, to the
Shareholders entitled to vote, that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after the receipt of such
request. If such notice is not given within twenty (20) days after receipt
of such request, the persons calling the meeting may give notice thereof in
the manner provided by these By-Laws or apply to the Superior Court as
provided in Sec. 305 (c).
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual or
special, shall be given in writing not less than ten (10) nor more than
sixty (60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the Secretary or the Assistant
Secretary, or if there be no such Officer, or in the case of his or her neglect
or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail or other
means of written communication as provided in Sec. 601 of the Code and shall be
sent to the Shareholder's address appearing on the books of the corporation, or
supplied by him or her to the corporation for the purpose of notice, and in the
absence thereof, as provided in Sec. 601 of the Code.
Notice of any meeting of Shareholders shall specify the place, the day and
the hour of meeting, and (1) in case of a special meeting, the general nature of
the business to be transacted and no other business may be transacted, or (2) in
the case of an annual meeting, those matters which the Board at date of mailing,
intends to present for action by the Shareholders. At any meetings where
Directors are to be elected, notice shall include the names of the nominees, if
any, intended at date of notice to be presented by management for election.
If a Shareholder supplies no address, notice shall be deemed to have been
given if mailed to the place where the principal executive office of the
corporation, in California, is situated, or published at least once in some
newspaper of general circulation in the County of said principal office.
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Notice shall be deemed given at the time it is delivered personally or
deposited in the mail or sent by other means of written communication. The
Officer giving such notice or report shall prepare and file an affidavit or
declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the
adjourned meeting shall be given as in case of an original meeting. Save, as
aforesaid, it shall not be necessary to give any notice of adjournment or of the
business to be transacted at an adjourned meeting other than by announcement at
the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of Shareholders, however called and noticed, shall
be valid as though had at a meeting duly held after regular call and notice, if
a quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the Shareholders entitled to vote, not present in person or
by proxy, sign a written waiver of notice, or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance shall constitute a waiver of notice, unless
objection shall be made as provided in Sec. 601 (e).
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING - DIRECTORS. Any action
which may be taken at a meeting of the Shareholders, may be taken without a
meeting or notice. of meeting if authorized by a writing signed by all of the
Shareholders entitled to vote at a meeting for such purpose, and filed with the
Secretary of the corporation, provided, further, that while ordinarily Directors
can only be elected by unanimous written consent under Sec. 603 (d) , if the
Directors fail to fill a vacancy, then a Director to fill that vacancy may be
elected by the written consent of persons holding a majority of shares entitled
to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise provided in
the GCL or the Articles, any action which may be taken at any annual or special
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Unless the consents of all Shareholders entitled to vote have been
solicited in writing,
(1) Notice of any Shareholder approval pursuant to Secs. 310, 317,
1201 or 2007 without a meeting by less than unanimous written consent shall be
given at least ten (10) days before the consummation of the action authorized by
such approval, and
(2) Prompt notice shall be given of the taking of any other corporate
action approved by Shareholders without a meeting by less than unanimous written
consent, to each of those Shareholders entitled to vote who have not consented
in writing.
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Any Shareholder giving a written consent, or the Shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
Shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.
Section 8. QUORUM. The holders of a majority of the shares entitled to
vote thereat, present in person, or represented by proxy, shall constitute a
quorum at all meetings of the Shareholders for the transaction of business
except as otherwise provided by law, by the Articles of Incorporation, or by
these By-Laws. If, however, such majority shall not be present or represented
at any meeting of the Shareholders, the Shareholders entitled to vote thereat,
present in person, or by proxy, shall have the power to adjourn the meeting from
time to time, until the requisite amount of voting shares shall be present. At
such adjourned meeting at which the requisite amount of voting shares shall be
represented, any business may be transacted which might have been transacted at
a meeting as originally notified.
If a quorum be initially present, the Shareholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken is approved by a
majority of the Shareholders required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to vote
stand on the stock records of the corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board of Directors for the
determination of Shareholders of record, and then on such other day, shall be
entitled to vote at such meeting.
Provided the candidate's name has been placed in nomination prior to the
voting and one or more Shareholder has given notice at the meeting prior to the
voting of the Shareholder's intent to cumulate the Shareholder's votes, every
Shareholder entitled to vote at any election for Directors of any corporation
for profit may cumulate their votes and give one candidate a number of votes
equal to the number of Directors to be elected multiplied by the number of votes
to which his or her shares are entitled, or distribute his or her votes on the
same principle among as many candidates as he or she thinks fit.
The candidates receiving the highest number of votes up to the number of
Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding
thirty (30) days preceding the date of any meeting of Shareholders or the date
fixed for the payment of any dividend or distribution, or for the allotment of
rights, or when any change or conversion or exchange of shares shall go into
effect, as a record date for the determination of the Shareholders entitled to
notice of and to vote at any such meeting, or entitled to receive any such
dividend or distribution, or any
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allotment of rights, or to exercise the rights in respect to any such change,
conversion or exchange of shares. In such case only Shareholders of record
on the date so fixed shall be entitled to notice of and to vote at such
meeting, or to receive such dividends, distribution or allotment of rights,
or to exercise such rights, as the case may be notwithstanding any transfer
of any share on the books of the corporation after any record date fixed as
aforesaid. The Board of Directors may close the books of the corporation
against transfers of shares during the whole or any part of such period.
Section 10. PROXIES. Every Shareholder entitled to vote, or to execute
consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Secs. 604 and 705 of the Code and filed
with the Secretary of the corporation.
Section 11. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the
President and all of the Vice Presidents, Shareholders shall appoint a
chairman for such meeting. The Secretary of the corporation shall act as
Secretary of all meetings of the Shareholders, but in the absence of the
Secretary at any meeting of the Shareholders, the presiding Officer may
appoint any person to act as Secretary of the meeting.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board of Directors may, if they so elect, appoint inspectors of
election to act at such meeting or any adjournment thereof. If inspectors of
election be not so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairman of any such meeting may, and on the request of any
Shareholder or his or her proxy shall, make such appointment at the meeting in
which case the number of inspectors shall be either one (1) or three (3) as
determined by a majority of the Shareholders represented at the meeting.
Section 13. (A) SHAREHOLDERS' AGREEMENTS. Notwithstanding the above
provisions, in the event this corporation elects to become a close corporation,
an agreement between two (2) or more Shareholders thereof, if in writing and
signed by the parties thereof, may provide that in exercising any voting rights
the shares held by them shall be voted as provided therein or in Sec. 706, and
may otherwise modify these provisions as to Shareholders' meetings and actions.
(B) EFFECT OF SHAREHOLDERS' AGREEMENTS. Any Shareholders'
Agreement authorized by Sec. 300 (b), shall only be effective to modify the
terms of these By-Laws if this corporation elects to become a close
corporation with appropriate filing of or amendment to its Articles as
required by Sec. 202 and shall terminate when this corporation ceases to be a
close corporation. Such an agreement cannot waive or alter Secs. 158,
(defining close corporations), 202 (requirements of Articles of
Incorporation) 500 and 501 relative to distributions, 111 (merger), 1201 (e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), l8 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived
thereby, but to the extent they are not so altered or waived, these By-Laws
shall be applicable.
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ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of
such form and device as the Board of Directors may designate and shall state the
name of the record holder of the shares represented thereby; its number; date of
issuance; the number of shares for which it is issued; a statement of the
rights, privileges, preferences and restrictions, if any; a statement as to the
redemption or conversion, if any; a statement of liens or restrictions upon
transfer or voting, if any; if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts.
All certificates shall be signed in the name of the corporation by the
Chairman of the Board or Vice Chairman of the Board or the President or Vice
President and by the Chief Financial Officer or an Assistant Treasurer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the Shareholder.
Any or all of the signatures on the certificate may be facsimile. In case
any Officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that Officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an Officer,
transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give the
corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock represented
by said certificate, whereupon a new certificate may be issued in the same tenor
and for the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint one or more transfer agents or transfer clerks, and one or more
registrars, which shall be an incorporated bank or trust company, either
domestic or foreign, who shall be appointed at such times and places as the
requirements of the corporation may necessitate and the Board of Directors may
designate.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In order that
the corporation may determine the Shareholders entitled to notice of any
meeting or to vote or entitled to
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receive payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action.
If no record date is fixed; the record date for determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be at the
close of business on the business day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the business
day next preceding the day on which the meeting is held. The record date for
determining Shareholders entitled to give consent to corporate action in
writing without a meeting, when no prior action by the Board is necessary,
shall be the day on which the first written consent is given.
The record date for determining Shareholders for any other purpose shall
be at the close of business on the day on which the Board adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
Section 6. LEGEND CONDITION. In the event any shares of this
corporation are issued pursuant to a permit or exemption therefrom requiring
the imposition of a legend condition, the person or persons issuing or
transferring said shares shall make sure said legend appears on the
certificate and shall not required to transfer any shares free of such legend
unless an amendment to such permit or a new permit be first issued so
authorizing such a deletion.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates
representing shares of this corporation, in the event it shall elect to
become a close corporation, shall contain the legend required by Sec. 418 (c).
Section 8. PROVISION RESTRICTING TRANSFER OF SHARES. Before there can
be a valid sale or transfer of any of the shares of this corporation by the
holders thereof, the holder of the shares to be sold or transferred shall
first give notice in writing to the Secretary of this corporation of his or
her intention to sell or transfer such shares. Said notice shall specify the
number of shares to be sold or transferred, the price per share and the terms
upon which such holder intends to make such sale or transfer. The Secretary
shall within five (5) days thereafter, mail or deliver a copy of said notice
to each of the other Shareholders of record of this corporation. Such notice
may be delivered to such Shareholders personally or may be mailed to the last
known addresses of such Shareholders, as the same may appear on the books of
this corporation. Within 10 days after the mailing or delivery of said
notices to such Shareholders, any such Shareholder or Shareholders desiring
to acquire any part or all of the shares referred to in said notice shall
deliver by mail or otherwise to the Secretary of this corporation a written
offer or offers to purchase a specified number or numbers of such shares at
the price and upon the terms stated in said notice.
If the total number of shares specified in such offers exceeds the number
of shares referred to in said notice, each offering Shareholder shall be
entitled to purchase such proportion of the shares referred to in said notice
to the Secretary, as the number of shares of this corporation, which he or
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she holds, bears to the total number of shares held by all Shareholders
desiring to purchase the shares referred to in said notice to the Secretary.
If all of the shares referred to in said notice to the Secretary are not
disposed of under such apportionment, each Shareholder desiring to purchase
shares in a number in excess of his or her proportionate share, as provided
above, shall be entitled to purchase such proportion of those shares which
remain thus undisposed of, as the total number of shares which he or she holds
bears to the total number of shares held by all of the Shareholders desiring to
purchase shares in excess of those to which they are entitled under such
apportionment.
The aforesaid right to purchase the shares referred to in the aforesaid
notice to the Secretary shall apply only if all of the shares referred to in
said notice are purchased. Unless all of the shares referred to in said notice
to the Secretary are purchased, as aforesaid, in accordance with offers made
within said 10 days, the Shareholder desiring to sell or transfer may dispose of
all shares of stock referred to in said notice to the Secretary to any person or
persons whomsoever; provided however, that he or she shall not sell or transfer
such shares at a lower price or on terms more favorable to the purchaser or
transferee than those specified in said notice to Secretary.
Any sale or transfer, or purported sale or transfer, of the shares of said
corporation shall be null and void unless the terms, conditions and provisions
of this section are strictly observed and followed.
Section 9. PLEDGED OR HYPOTHECATED SHARES. Any Shareholder desiring to
borrow money on or hypothecate any or all of the shares of stock held by such
Shareholder shall first mail notice in writing to the Secretary of this
corporation of his or her intention to do so. Said notice shall specify the
number of shares to be pledged or hypothecated, the amount to be borrowed per
share, the terms, rate of interest, and other provisions upon which each
Shareholder intends to make such loan or hypothecation. The Secretary shall,
within five (5) days thereafter, mail or deliver a copy of said notice to each
of the other Shareholders of record of this corporation. Such notice may be
delivered to such Shareholder personally, or may be mailed to the last known
addresses of such Shareholders as the same may appear an the books of this
corporation. Within fifteen (15) days after the mailing or delivering of said
notice to said Shareholders, any such shareholder or Shareholders desiring to
lend any part or all of the amount sought to be borrowed, as set forth in said
notice, at the terms therein specified, shall deliver by mail, or otherwise, to
the Secretary of this corporation a written offer or offers to lend a certain
amount of money for the term, at the rate of interest, and upon the other
provisions specified in said notice.
If the total amount of money subscribed in such offers exceeds the amount
sought to be borrowed, specified for said notice, each offering Shareholder
shall be entitled to lend such proportion of the amount sought to be borrowed,
as set forth in said notice, as the number of shares which he or she holds bears
to the total number of shares held by all such Shareholders desiring to lend all
or part of the amount specified in said notice.
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If the entire amount of monies sought to be borrowed, as specified in
said notice, is not subscribed as set forth in the preceding paragraphs, each
Shareholder desiring to lend an amount in excess of his or her proportionate
share, as specified in the preceding paragraph, shall be entitled to lend
such proportion of the subscribed amount as the total number of shares which
he or she holds bears to the total number of shares held by all of the
Shareholders desiring to lend an amount in excess of that to which they are
entitled under such apportionment. If there be but one Shareholder so
desiring to lend, such Shareholder shall be entitled to lend up to the full
amount sought to be borrowed.
If none, or only a part of the amount sought to be borrowed, as specified
in said notice, is subscribed as aforesaid, in accordance with offers made
within said fifteen (15) day period, the Shareholder desiring to borrow may
borrow from any person or persons he or she may so desire as to any or all
shares of stock held by him or her which have not been covered by lending
Shareholders; provided, however, that said Shareholders shall not borrow any
lesser amount, or any amount on terms less favorable to the borrower, than
those specified in said notice to the Secretary.
Any pledge or hypothecation, or other purported transfer as security for
a loan of the shares of this corporation, shall be null and void unless the
terms, conditions and provisions of these By-Laws are strictly observed and
followed.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. The corporation shall maintain, in accordance with
generally accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such books, records
and accounts shall be kept at its principal executive office in the State of
California, as fixed by the Board of Directors from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Sec. 1500 shall be open to inspection of the Directors and
Shareholders from time to time and in the manner provided in said Sec.
1600-1602.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original or a
copy of these By-Laws, as amended or otherwise altered to date, certified by
the Secretary, shall be kept at the corporation's principal executive office
and shall be open to inspection by the Shareholders of the corporation at all
reasonable times during office hours, as provided in Sec. 213 of the
Corporations Code.
Section 4. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation,
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shall be signed or endorsed by such person or persons and in such manner as
shall be determined from time to time by resolution of the Board of Directors.
Section 5. CONTRACTS, ETC. -- HOW EXECUTED The Board of Directors, except
as in the By-Laws otherwise provided, may authorize any Officer or Officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board of Directors,
no Officer, agent or employee shall have any power or authority to bind the
corporation by any contract or agreement, or to pledge its credit, or to render
it liable for any purpose or to any amount, except as provided in Sec. 313 of
the Corporations Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. REPORT TO SHAREHOLDERS, DUE DATE. The Board of Directors shall
cause an annual report to be sent to the Shareholders not later than one hundred
twenty (120) days after the close of the fiscal or calendar year adopted by the
corporation. This report shall be sent at least fifteen (15) days before the
annual meeting of Shareholders to be held during the next fiscal year and in the
manner specified in Section 4 of Article IV of these By-Laws for giving notice
to Shareholders of the corporation. The annual report shall contain a balance
sheet as of the end of the fiscal year and an income statement and statement of
changes in financial position for the fiscal year, accompanied by any report of
independent accountants or, if there is no such report, the certificate of an
authorized Officer of the corporation that the statements were prepared without
audit from the books and records of the corporation.
Section 2. WAIVER. The annual report to Shareholders referred to in
Section 1501 of the California General Corporation Law is expressly dispensed
with so long as this corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board of Directors from issuing annual or other periodic reports to the
Shareholders of the corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be adopted or these
By-Laws may be amended or repealed by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided, however, that
if the Articles of Incorporation of the corporation set forth the number of
authorized Directors of the corporation, the authorized number of Directors may
be changed only by an amendment of the Articles of Incorporation.
Section 2. POWERS OF DIRECTORS. Subject to the right of the Shareholders
to adopt, amend or repeal By-Laws, as provided in Section 1 of this
Article VIII, and the limitations of
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Sec. 204 (a) (5) and Sec. 212, the Board of Directors may adopt, amend or
repeal any of these By-Laws other than a By-Law or amendment thereof changing
the authorized number of Directors.
Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is
adopted, it shall be copied in the book of By-Laws with the original By-Laws, in
the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
ARTICLE IX
CORPORATE - SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the corporation, the date of its incorporation, and the word
"California".
ARTICLE X
MISCELLANEOUS
Section 1. REFERENCES TO CODE SECTIONS. "Sec." references herein refer to
the equivalent Sections of the General Corporation Law effective January 1,
1977, as amended.
Section 2. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President
and the Secretary or an Assistant Secretary.
Section 3. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. For the purpose of this
Section, a subsidiary of this corporation is defined as another corporation of
which shares thereof possessing more than 25% of the voting power are owned
directly or indirectly through one or more other corporations of which this
corporation owns, directly or indirectly, more than 50% of the voting power.
Sec. 189 (b).
Section 4. INDEMNITY. The corporation may indemnify any Director,
Officer, agent or employee as to those liabilities and on those terms and
conditions as are specified in Sec. 317 of the Code. In any event, the
corporation shall have the right to purchase and maintain insurance on behalf
of any such persons whether or not the corporation would have the power to
indemnify such person against the liability insured against.
Section 5. ACCOUNTING YEAR. The accounting year of the corporation shall
be fixed by resolution of the Board of Directors.
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CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR (S) OR FIRST DIRECTOR (S).
The undersigned person (s) named in the Articles of Incorporation as the
Incorporator(s) or First Director(s) of the above named corporation hereby adopt
the same a the By-Laws of said corporation.
Executed this day of 11/13/ , 1986
/S/ John Bergquist
-----------------------------------------------
Name
CERTIFICATE BY SECRETARY
I DO HEREBY CERTIFY AS FOLLOWS:
That I am the duly elected, qualified and acting Secretary of the above
named corporation, that the foregoing By-Laws were adopted as the By-Laws of
said corporation on the date set forth above by the person (s) named in the
Articles of Incorporation as the Incorporator(s) or First Director(s) of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal this day of 11/13/ , 1986
/S/ John Berquist
-------------------------------------------------
Secretary
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE.
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of the above
named corporation and that the above and foregoing Code of By-Laws was
submitted to the Shareholders at their first meeting and recorded in the
minutes thereof, was ratified by the vote of Shareholders entitled to
exercise the majority of the voting power of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this day of 11/13/ , 1986
/S/ John Berquist
--------------------------------------------------
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Secretary
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EXHIBIT 3.13
SUMMARY
OF
ARTICLES OF INCORPORATION AND BY-LAWS
Name Of Entity: Dardel Technologies.
Form Of Entity: Private limited company (transformed from a public limited
company on October 9, 1997).
Registered Office: 1 to 9 rue d'Arcueil, 92120 Montrouge, France.
Registration Number: 343.636.585.RCS Nanterre.
Purposes: Purchase, sale, importation, exportation, rental, development,
manufacture of all electrical, electronic, computer, telecommunications
material.
Duration: 99 years from the initial registration of the company unless
extended or dissolved.
Capital: 4,000,000 French Francs divided into 40,000 shares of 100 French
Francs each.
Shareholders: Axiohm Inc., 40,000 shares.
Shares: Shares may not be represented by negotiable instruments. Their
ownership is evidenced by the present Articles, subsequent increases in
capital and assignments or allotments properly completed.
Assignment of shares must be in writing. To be valid as against the
company they must be notified to it by a bailiff or alternatively an original
of the assignment is delivered to the company against a receipt from
management certifying the delivery. To be valid against third parties the
assignment must be filed with the Registry of Commerce and Companies.
Shares are freely transferable by the sole shareholder or between
shareholders when there are more than one. They are also freely transferable
between spouses, ascendants, and descendants and through inheritance to the
spouse or direct heirs. The transfer of the rights of a shareholder are not
subject to approval when they are part of the transfer of the entirety of the
shareholders assets to a third party. All other transfers require the
approval of the majority of the shareholders representing at least three
quarters of the shares;
Management: The company is managed by one or more General Managers, who
are appointed or removed by a vote of at least a majority of the shares. The
following decisions require shareholder approval:
- guaranties, sureties, and securities
- acquisition, sale or rental of a business enterprise
<PAGE>
- creation, acquisition, dissolution, or transfer of a subsidiary or a
participation.
- merger, partial merger, or spin-off
- modification of the capital
- proposition concerning the allocation of the net income.
Interested Person Transactions: Agreements, other than in the ordinary
course of business on normal terms and conditions, between the company and a
General Manager or a shareholder are subject to a special approval procedure. A
General Manager or shareholder may not borrow money from the company or have the
company guarantee its obligations.
Shareholders Decisions: The decisions are made either at a shareholders
meeting, by written consultation, or by unanimous written consent. However the
approval of the annual accounts must be made at a shareholders meeting.
Fiscal Year: no fiscal year begins on January 1 and ends on December 31.
Shareholder Equity Below One-Half Of Stated Capital: When losses evidenced
in the accounting documents bring shareholders equity below one-half of stated
capital the General Manager shall, within four months of the shareholder
approval of said loss, consult the shareholders to determine if an anticipatory
dissolution of the company is desirable. If dissolution is not decided the
company must reconstitute its capital in the time and manner provided for by
law.
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EXHIBIT 3.14
ARTICLES OF INCORPORATION
OF
STADIA COLORADO CORP.
We, Robert Osborn, Charles Osborn and Charles W. Johnson, the undersigned
natural persons of the age of twenty-one years or more, acting as
incorporators of a corporation under the provisions of the Colorado
Corporation Act, adopt the following Articles of Incorporation:
ARTICLE I
The name of this corporation is Stadia Colorado Corp.
ARTICLE II
The period of duration of this corporation is perpetual.
ARTICLE III
PURPOSES AND POWERS
Section I: Purposes. The purposes for which the corporation is organized are
as follows:
a) To engage in the general business of wholesale marketing,
selling, distributing, shipping or otherwise disposing of packaging material
and to operate a storage warehouse and office facility to aid in the conduct
of the principal business.
b) To do everything necessary, proper, advisable or convenient for
the accomplishment of the purposes hereinabove set forth and to do all other
things incidental thereto.
Section II: Powers. The powers of the corporation are as follows:
a) All those powers specified in the Colorado Corporation
Act (31-2-1 CRS 1963).
b) Any further powers necessary to carry out the purposes
hereinabove in any place to the extent that such purposes are not forbidden
by the law of such place.
<PAGE>
ARTICLE IV
Section I: The aggregate number of shares which the corporation shall have
authority to issue is 1,000 shares of common stock, all of which shares shall be
of the same class and without par value. All shares when issued shall be fully
paid and non-assessable.
Section II: Dividends: Holders of common stock, actually issued, fully paid
for and non-assessable, shall be entitled to receive dividends from funds legal
for the payment thereof when and as directed by the board of directors.
Section III: Distribution of Assets: In the event of liquidation or
dissolution of the corporation, the holders of common stock, actually issued,
fully paid for and non-assessable, shall receive after payment to creditors, the
remaining assets in proportion to the number of shares of stocks held by each.
Section IV: Voting Rights: Every holder of common stock, actually issued,
fully paid for and non-assessable, shall be entitled to one vote for each share
of stock held by him as shown by the books of the corporation.
Section V: Cumulative voting is forbidden in regard to election of directors.
Section VI: Pre-emptive rights: Holders of common stock of the corporation
shall have the pre-emptive right to purchase, at such prices and on such terms
as the board of directors shall fix, such of the shares of common stock as may
in the future be authorized or as may be held in the Treasury of the
corporation. Such pre-emptive right shall be exercisable in proportion to the
number of shares of stock held.
ARTICLE V
REGULATION OF INTERNAL AFFAIRS
Section I: The general management of the affairs of the corporation shall be
exercised by a Board of Directors.
Section II: The Board of Directors shall have the power to make, alter, amend
or repeal the by-laws by majority vote at any regular or special meeting.
ARTICLE VI
REGISTERED OFFICE AND AGENT
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The address of the registered office of the corporation is 65 Sheridan,
Lakewood, Colorado. The name of the registered agent at such address is Charles
Osborn. Original stock books and ledgers shall be kept for inspection at the
registered office. (______ 80226)
ARTICLE VII
DIRECTORS
The initial board of directors shall consist of three members and the names
and addresses of the persons who are to serve until their successors be elected
and qualify are:
Henry Marling Graves Lane Evendale
Cincinnati, Ohio
Robert Osborn 345 North 50th Street
Milwaukee, Wisconsin 53209
Charles J. Osborn 65 Sheridan
Lakewood, Colorado (80226)
ARTICLE VIII
INCORPORATORS
The names and addresses of the incorporators of the corporation are:
Shirley Osborn 65 Sheridan
Lakewood, Colorado
Charles J. Osborn 65 Sheridan
Lakewood, Colorado
Charles W. Johnson 490 Continental National
Bank Building
Englewood, Colorado 80110
Dated May 5, 1970.
INCORPORATORS:
/s/ Shirley Osborn
--------------------------------------------
Shirley Osborn
-3-
<PAGE>
/s/ Charles J. Osborn
---------------------------------------------
Charles J. Osborn
/s/ Charles W. Johnson
---------------------------------------------
Charles W. Johnson
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
I, _____________________, a notary public, hereby certify that on the 6th
day of May, 1970, personally appeared before me Shirley Osborn, Charles J.
Osborn, and Charles W. Johnson, who being by me first duly sworn, severally
declared that they are the persons who signed the foregoing document as
incorporators, and that the statements therein contained are true.
IN WITNESS WHEREOF I have hereunto set my hand and seal this 6th day of
May, 1970.
My commission expires Oct 4, 1973.
/s/ ---L. Curry
---------------------------------------------
Notary Public
-4-
<PAGE>
EXHIBIT 3.15
BY-LAWS
OF
STADIA COLORADO CORP.
I. IDENTIFICATION
1. NAME. The name of the Corporation is STADIA COLORADO CORP.
(hereinafter referred to as the "Corporation").
2. PRINCIPAL OFFICE AND RESIDENT AGENT. The post office address of
the principal office of the Corporation is 65 Sheridan Boulevard, Lakewood,
Colorado 80215; and the name and post office address of its Resident Agent in
charge of such office is Charles J. Osborn, Box 19176, Denver, Colorado 80219.
3. SEAL. The seal of the Corporation shall be circular in form and
mounted upon a metal die, suitable for impressing the same upon paper. About
the upper periphery of the seal shall appear the words "Stadia Colorado Corp."
and about the lower periphery thereof the word "Colorado". In the center of the
seal shall appear the words "Corporate Seal".
4. FISCAL YEAR. The fiscal year of the Corporation shall begin on the
1st day of April in each year and end on the 31st day of March next succeeding.
II. CAPITAL STOCK
1. CONSIDERATION FOR SHARES. The Board of Directors shall cause the
Corporation to issue the capital stock of the Corporation for such consideration
as has been fixed by the Board pursuant to the provisions of the Articles of
Incorporation.
2. PAYMENT FOR SHARES. Subject to the provisions of the Articles of
Incorporation, the consideration for the issuance of shares of the Capital
Stock of the Corporation may be paid, in whole or in part, in money, in other
property, tangible or intangible, or in labor actually performed for, or
services actually rendered to, the Corporation; provided, however, that the
part of the surplus of a corporation which is transferred to capital upon the
issuance of shares as a share dividend shall be deemed to be the
consideration for the issuance of such shares. When payment of the
consideration for which a share was authorized to be issued shall have been
received by the Corporation, or when surplus shall have been transferred to
capital upon the issuance of a share dividend, such share shall be declared
and taken to be fully paid and not liable to any further call or assessment,
and the holder thereof shall not be liable for any further payments thereon.
In the absence of actual fraud in the transaction, the judgment of the Board
of Directors upon the corporate assets in the event of a share dividend shall
be conclusive. Promissory notes, uncertified checks, or future services
shall not be accepted in payment or part payment of any of the Capital Stock
of the Corporation.
<PAGE>
3. CERTIFICATES FOR SHARES. Each holder of Capital Stock of the
Corporation shall be entitled to a certificate, signed by the President and
the Secretary of the Corporation, with the seal of the Corporation thereunto
affixed, certifying the number of shares owned by him in the Corporation.
4. TRANSFER OF STOCK. Subject to the restrictions contained the
Articles of Incorporation and these By-Laws, the Capital stock of the
Corporation shall be transferable on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney, such
endorsement or endorsements to be witnessed by one witness. The requirement
for such witnessing may be waived in writing upon the form of endorsement by
the President or Secretary of the Corporation.
5. RESTRICTIONS ON TRANSFER. If any shareholder, his heirs, assigns,
administrators, executors or successors in interest desires to sell or
otherwise transfer all or any part of his stock in the Corporation to one
other than an existing shareholder, the Corporation shall have the first
right to purchase the same. Such shareholder, his heirs, assigns,
administrators, executors or successors in interest shall give the Secretary
of the Corporation and all members of the Board of Directors notice in
writing of his intention to transfer his stock, the price at which the
proposed sale is to be made and the name of the prospective transferee. The
Corporation shall then have 30 days after receipt of said notice within which
to acquire said stock on the same terms and conditions as are set out in said
notice.
III. MEETINGS OF SHAREHOLDERS
1. PLACE OF MEETINGS. All meetings of Shareholders of the Corporation
shall be held at such place, within or without the State of Colorado, as may be
specified in the respective notices or waivers of notice thereof, or proxies to
represent shareholders thereat.
2. ANNUAL MEETING. The annual meeting of the Shareholders for the
election of Directors, and for the transaction of such other business as may
properly come before the meeting, shall be held the first ___________ in
__________ of each year, if such day is not a legal holiday, and if a holiday
then on the first following day that is not a legal holiday. If for any
reason the annual meeting of the shareholders shall not be held at the time
and place herein provided, the same may be held at any time thereafter, or
the business to be transacted at such annual meeting may be transacted at any
special meeting called for that purpose.
3. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called by the President, by the Board of Directors, or by the shareholders
holding not less than one-fourth of all the shares of Capital Stock
outstanding.
4. NOTICE OF MEETINGS. A written or printed notice, stating the
place, day and hour of the meeting, and in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary or by the officers or persons calling the
-2-
<PAGE>
meeting, to each holder of the Capital Stock of the Corporation, at the time
entitled to vote, at such address as appears upon the records of the
Corporation, at least ten days before the date of the meeting. Notice of any
such meeting may be waived in writing by any shareholder if the waiver sets
forth in reasonable detail the purpose or purposes for which the meeting is
called, and the time and place thereof. Attendance at any meeting, in person
or by proxy, shall constitute a waiver of notice of such meeting.
5. VOTING RIGHTS. Except as otherwise provided by law or by the
provisions of the Articles of Incorporation, every holder of the Capital
Stock of the Corporation shall have the right at all meetings of the
Shareholders of the Corporation to one vote for each share of stock standing
in his name on the books of the Corporation.
6. PROXIES. A shareholder may vote, either in person or by proxy
executed in writing by the shareholder or a duly authorized attorney-in-fact.
No proxy shall be valid after eleven (11) months from the date of its
execution, unless a longer time is expressly provided therein.
7. QUORUM. Unless otherwise provided by the Articles of
Incorporation, at any meeting of Shareholders, a majority of the shares of
the Capital Stock outstanding and entitled to vote, represented in person or
by proxy, shall constitute a quorum.
IV. THE BOARD OF DIRECTORS
1. MANAGEMENT. The business and affairs of the Corporation shall be
managed by a Board of three Directors. Each shall hold office until the next
annual meeting of shareholders.
2. ANNUAL MEETING. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, at the place where
such meeting of the shareholders has been held, for the purpose of
organization, election of officers, and consideration of any other business
that may be brought before the meeting. No notice shall be necessary for the
holding of this annual meeting. If such meeting is not held as above
provided, the election of officers may be had at any subsequent meeting of
the Board specifically called in the manner provided in Section 3 of this
Article.
3. OTHER MEETINGS. Other meetings of the Board of Directors may be
held upon the call of the President, or of two or more members of the Board
of Directors, at any place within or without the State of Colorado, upon five
(5) days' notice, specifying the time, place, and general purposes of the
meeting, given to each Director, either personally, by mailing or by
telegram. At any meeting at which all Directors are present, notice of the
time, place, and purpose thereof shall be deemed waived; and similar notice
may likewise be waived by absent Directors, either by written instrument or
by telegram.
-3-
<PAGE>
4. QUORUM. At any meeting of the Board of Directors, the presence of
a majority of the members of the Board of Directors then qualified and acting
shall constitute a quorum for the transaction of any business except the
filling of vacancies in the Board of Directors.
5. ACTION WITHOUT MEETING. Any action that maybe taken by the Board
maybe taken without a meeting if a consent in writing shall be signed by all
Directors.
6. COMPENSATION. By Resolution of the Board of Directors each
Director maybe paid his expenses, if any, of attendance at each meeting of
the Board and maybe paid a stated salary as Director or a fixed sum for
attendance or both. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefore.
V. THE OFFICERS OF THE CORPORATION
1. OFFICERS. The officers of the Corporation shall consist of a
President, a Vice-President, and a Secretary-Treasurer. The Board of
Directors by resolution, may create and define duties of other officers of
the Corporation and may elect or appoint persons to fill such offices.
2. VACANCIES. Whenever any vacancies shall occur in any office by
death, resignation, increase in the number of officers of the Corporation, or
otherwise, the same shall be filled by the Board of Directors, and the
officer so elected shall hold office until his successor is chosen and
qualified.
3. THE PRESIDENT. The President shall preside at all meetings of the
Shareholders, discharge all the duties which devolve upon a presiding
officer, and perform such other duties as these By-Laws provide or the Board
of Directors may prescribe.
The President shall preside at all meetings of the Board of Directors
if present.
The President shall have full authority to execute proxies in behalf of
the Corporation, to vote stock owned by it in any other corporation, and to
execute, with the Secretary, powers of attorney appointing other
corporations, partnerships, or individuals the agent of the Corporation, all
subject to the provisions of the Colorado Corporation Code, CRS 1963, Chapter
31, as amended, the Articles of Incorporation and these By-Laws.
4. THE VICE-PRESIDENT. The Vice-President shall perform all duties
incumbent upon the President during the absence or disability of the
President, and perform such other duties as these By-Laws may require or the
Board of Directors may prescribe.
5. THE SECRETARY-TREASURER. The Secretary shall have the custody and
care of the corporate seal, records, minutes, and stock books of the
Corporation. He shall attend all meetings of the Shareholders and of the
Board of Directors, and shall keep or cause to be kept in a book provided for
the purpose, a true and complete record of the proceedings of such meetings.
He
-4-
<PAGE>
shall attend to the giving and serving of all notices of the Corporation, shall
file and take charge of all papers and documents belonging to the Corporation
and shall perform such other duties as these By-Laws may require or the Board of
Directors may prescribe.
The Treasurer shall keep correct and complete records of accounting
showing accurately at all times the financial condition of the Corporation.
He shall be the legal custodian of all moneys, notes, securities and other
valuables which may from time to time come into the possession of the
Corporation. He shall immediately deposit all funds of the Corporation
coming into his hands in some reliable bank or other depositary to be
designated by the Board of Directors, and shall keep such bank accounts in
the name of the Corporation. He shall furnish at meetings of the Board of
Directors, or whenever requested, a statement of the financial condition of
the Corporation, and shall perform such other duties as these By-Laws may
require or the Board of Directors may prescribe. The Treasurer may be
required to furnish bond in such amount as shall be determined by the Board
of Directors.
6. DELEGATION OF AUTHORITY. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate the powers or duties of such
officer to any other officer or to any Director, for the time being, provided
a majority of the entire Board of Directors concurs therein.
7. SALARIES. Salaries of officers maybe fixed by resolution of the
Board of Directors and maybe changed by further resolution at any time.
VI. CORPORATE BOOKS
1. PLACE OF KEEPING, IN GENERAL. Except as otherwise provided by the
laws of the State of Colorado, by the Articles of Incorporation of the
Corporation or by these By-Laws, the books and records of the Corporation may
be kept at such place or places, within or without the State of Colorado, as
the Board of Directors may from time to time by resolution determine.
2. STOCK REGISTER OR TRANSFER BOOK. The original or duplicate stock
register or transfer book shall be kept at the principal office of the
Corporation in the State of Colorado.
VII. CONTRACTS, CHECKS, NOTES, ETC.
1. IN GENERAL. All contracts and agreements authorized by the Board
of Directors, and all checks, drafts, notes, bonds, bills of exchange, and
orders for the payment of money, shall, unless otherwise directed by the
Board of Directors, or unless otherwise required by law, be signed by any one
of the following officers, President or Secretary.
2. LOANS. Loans shall be contracted on behalf of the Corporation
only if authorized by a resolution of the Board of Directors.
-5-
<PAGE>
3. BANK DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited to the credit of the Corporation in such bank or
other depository as is authorized by resolution of the Board of Directors.
VIII. AMENDMENTS
1. IN GENERAL. The power to make, alter, amend or repeal these
By-Laws is vested in the Board of Directors, but such action shall be taken
only at a meeting of the Board of Directors specifically called for such
purpose.
-6-
<PAGE>
EXHIBIT 4.2
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November ____, 1997, is made by and between Axiohm Investissements S.A.R.L. (the
"New Guarantor"), a direct or indirect subsidiary of Axiohm Transaction
Solutions, Inc., a California corporation (the "Company"), and The Bank of New
York, as trustee under the indenture referred to below (the "Trustee").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Indenture (as defined below).
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of October 2, 1997, providing for the
issuance of an aggregate principal amount of $120,000,000 of 9 3/4% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, Sections 11.03 and 11.05 of the Indenture provide that under
certain circumstances the Company shall cause certain of its subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such subsidiaries shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
Obligations under the Notes and the Indenture on the terms and subject to the
conditions set forth in Article 11 and Article 12 of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations
<PAGE>
or their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York without regard to conflicts shall govern and be used to construe this
Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Guarantor.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: AXIOHM INVESTISSEMENTS S.A.R.L.
--------------------
By:
--------------------------------------
Name: Patrick Dupuy
Title: Director/Manager (GERANT)
Dated: THE BANK OF NEW YORK
-------------------- as Trustee
By:
--------------------------------------
Name: Thomas Tabor
Title: Assistant Treasurer
-3-
<PAGE>
EXHIBIT 4.3
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November ____, 1997, is made by and between Cognitive L.L.C. (the "New
Guarantor"), a direct or indirect subsidiary of Axiohm Transaction Solutions,
Inc., a California corporation (the "Company"), and The Bank of New York, as
trustee under the indenture referred to below (the "Trustee"). Capitalized
terms used herein and not defined herein shall have the meanings ascribed to
them in the Indenture (as defined below).
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of October 2, 1997, providing for the
issuance of an aggregate principal amount of $120,000,000 of 9 3/4% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, Sections 11.03 and 11.05 of the Indenture provide that under
certain circumstances the Company shall cause certain of its subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such subsidiaries shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
Obligations under the Notes and the Indenture on the terms and subject to the
conditions set forth in Article 11 and Article 12 of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations
<PAGE>
or their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York without regard to conflicts shall govern and be used to construe this
Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Guarantor.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: COGNITIVE L.L.C.
--------------------
By: AXIOHM TRANSACTION SOLUTIONS, INC.,
Sole Member
By:
-----------------------------------
Name: William H. Gibbs
Title: President and CEO
Dated: THE BANK OF NEW YORK
-------------------- as Trustee
By:
----------------------------------------
Name: Thomas Tabor
Title: Assistant Treasurer
-3-
<PAGE>
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November ____, 1997, is made by and between Dardel Technologies E.U.R.L. (the
"New Guarantor"), a direct or indirect subsidiary of Axiohm Transaction
Solutions, Inc., a California corporation (the "Company"), and The Bank of New
York, as trustee under the indenture referred to below (the "Trustee").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Indenture (as defined below).
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of October 2, 1997, providing for the
issuance of an aggregate principal amount of $120,000,000 of 9 3/4% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, Sections 11.03 and 11.05 of the Indenture provide that under
certain circumstances the Company shall cause certain of its subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such subsidiaries shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
Obligations under the Notes and the Indenture on the terms and subject to the
conditions set forth in Article 11 and Article 12 of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations
<PAGE>
or their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York without regard to conflicts shall govern and be used to construe this
Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Guarantor.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: DARDEL TECHNOLOGIES E.U.R.L.
--------------------
By:
----------------------------------
Name: Patrick Dupuy
Title: Director/Manager (GERANT)
Dated: THE BANK OF NEW YORK
-------------------- as Trustee
By:
----------------------------------
Name: Thomas Tabor
Title: Assistant Treasurer
-3-
<PAGE>
EXHIBIT 4.8
CUSIP _____________
CINS _____________
New 9 3/4% Senior Subordinated Notes due 2007
No. 1. $_____________
AXIOHM TRANSACTION SOLUTIONS, INC.
promises to pay to Cede & Co.
or registered assigns,
the principal sum of _____________________________________________
Dollars on October 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated: ______________, 1997
AXIOHM TRANSACTION SOLUTIONS, INC.
By:
----------------------------------------
Name:
-----------------
Title:
-----------------
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------
Name: Thomas E. Tabor
Title: Assistant Treasurer
<PAGE>
(Back of Note)
New 9 3/4% Senior Subordinated Notes due 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF AXIOHM
TRANSACTION SOLUTIONS, INC.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Axiom Transaction Solutions, Inc., a California
corporation (the "Company"), promises to pay interest on the principal amount
of this New Senior Subordinated Note at 9 3/4% per annum from the most recent
date to which interest has been paid or duly provided for on the Senior
Subordinated Notes surrendered exchange for this New Senior Subordinated Note
or, if no such interest has been paid or duly provided for on such Senior
Subordinated Notes, from October 2, 1997 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semiannually in arrears on April 1 and October 1
of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the
Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from October 2, 1997; PROVIDED that if
there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest
Payment Date shall be April 1, 1998. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue principal and premium, if any, from time to time on demand at a
rate that is 1% per annum in excess of the interest rate on the Notes then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the March 15 or
September 15 next preceding the Interest Payment Date, even if such
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<PAGE>
Notes are canceled after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Notes will be payable as to principal, premium, if any,
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal of premium, interest,
Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
October 2, 1997 ("Indenture") between the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are general unsecured obligations of the Company.
5. OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section, the Company
shall not have the option to redeem the Notes pursuant to Section 4.07 of the
Indenture prior to October 1, 2002. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 1 of the years
indicated below:
YEAR PERCENTAGE
---- ----------
2002 . . . . . . . . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . . . . . . . . 103.250%
2004 . . . . . . . . . . . . . . . . . . . . 101.625%
2005 and thereafter. . . . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section,
prior to October 1, 2000, the Company may redeem on any one or more occasions up
to 35% of the original aggregate
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<PAGE>
principal amount of the Notes initially issued at a redemption price of 109.750%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
any Public Equity Offering of common stock of the Company; PROVIDED THAT at
least 65% of the aggregate principal amount of the Notes originally issued under
this Indenture remain outstanding immediately after the occurrence of each such
redemption; and PROVIDED, FURTHER, THAT each such redemption shall occur within
60 days of the date of the closing of such Public Equity Offering.
6. MANDATORY REDEMPTION
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) such each Holder's Notes (the "Change
of Control Offer") at a price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company shall send by first class mail a notice to
each Holder setting forth the procedures governing the Change of Control Offer
as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5 million, the Company shall commence an offer to all Holders of Notes
(as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase
the maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
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<PAGE>
9. DENOMINATIONS, TRANSFERS, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or sale of assets, to make any change that
would provide any additional rights or benefits to the Holders of the Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act or to
allow any Guarantor to guarantee the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company to comply with Section 5.01 of the Indenture, (iv) failure by the
Company to comply with the provisions of Sections 4.07, 4.09, 4.10 or 4.15 of
the Indenture which failure remains uncured for 30 days; (v) failure by the
Company for 60 days after notice to the Company by the Trustee or the Holders of
at least 25% in principal amount of the Notes then outstanding to comply with
certain other agreements in the Indenture, or the Notes; (vi) default under
certain other agreements relating to Indebtedness of the Company which default
results in the acceleration of such Indebtedness prior to its express maturity;
(vii) certain final judgments for the payment of money that remain undischarged
for a period of 60 days; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture.
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<PAGE>
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or the Guarantors, as such, shall
not have any liability for any obligations of the Company under the Notes, the
Subsidiary Guarantees or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of October 2, 1997, between the Company and the parties named on the
signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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<PAGE>
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
AXIOHM TRANSACTION SOLUTIONS, INC.
15070 AVENUE OF SCIENCE
SAN DIEGO, CALIFORNIA 92128
ATTENTION: CHIEF FINANCIAL OFFICER
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<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
_____________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
--------------------
Your Signature:
--------------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE COMPANY PURSUANT TO
SECTION 4.10 OR 4.15 OF THE INDENTURE, CHECK THE BOX BELOW:
/ / SECTION 4.10 / / SECTION 4.15
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THE NOTE PURCHASED BY THE COMPANY
PURSUANT TO SECTION 4.10 OR SECTION 4.15 OF THE INDENTURE, STATE THE AMOUNT YOU
ELECT TO HAVE PURCHASED:
$________________
Date: Your Signature:
--------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
------------------------
Signature Guarantee.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE (1)
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
AMOUNT OF AMOUNT OF
DECREASE IN INCREASE IN PRINCIPAL AMOUNT SIGNATURE OF
PRINCIPAL PRINCIPAL OF THIS GLOBAL AUTHORIZED
AMOUNT OF AMOUNT OF NOTE FOLLOWING SIGNATORY OF
DATE OF THIS GLOBAL THIS GLOBAL SUCH DECREASE TRUSTEE OR NOTE
EXCHANGE NOTE NOTE (OR INCREASE) CUSTODIAN
--------- ------------ ------------ ---------------- ----------------
- ------------------------
(1) This should be included only if the Note issued in global form.
<PAGE>
SUBSIDIARY GUARANTEE
Subject to Section 11.06 of the Indenture, each Guarantor hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and made available for delivery by the Trustee and to the Trustee
and its successors and assigns, irrespective of the validity and enforceability
of the Indenture, the Notes and the Obligations of the Company under the Notes
or under the Indenture, that: (a) the principal of, premium, if any, interest
and Liquidated Damages, if any, on the Notes will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on overdue principal,
premium, if any, (to the extent permitted by law) interest on any interest, if
any, and Liquidated Damages, if any, on the Notes and all other payment
Obligations of the Company to the Holders or the Trustee under the Indenture or
under the Notes will be promptly paid in full and performed, all in accordance
with the terms thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other payment Obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration, redemption or otherwise. Failing payment when so due
of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately.
The obligations of the Guarantors to the Holders and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 and Article 12 of the Indenture, and reference is hereby made to
such Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Articles 11 and 12 of the Indenture are incorporated herein by reference. This
Subsidiary Guarantee is subject to release as and to the extent provided in
Section 11.04 of the Indenture. The obligations of the Guarantors to the
Holders and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly subordinated to the extent set forth in Article 12 of
the Indenture and reference is hereby made to such Indenture for the precise
terms of such subordination.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its respective successors
and assigns to the extent set forth in the Indenture until full and final
payment of all of the Company's Obligations under the Notes and the Indenture
and shall inure to the benefit of the successors and assigns of the Trustee and
the Holders and, in the event of any transfer or assignment of rights by any
Holder or the Trustee, the rights and privileges herein conferred upon that
party shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. This is a guarantee
of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized signatories.
For purposes hereof, each Guarantor's liability shall be limited to
the lesser of (i) the aggregate amount of the Obligations of the Company under
the Notes and the Indenture and (ii) the
<PAGE>
amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as
such term is defined in the United States Bankruptcy Code and in the Debtor and
Creditor Law of the State of New York) or (B) left such Guarantor with
unreasonably small capital at the time its Subsidiary Guarantee of the Notes was
entered into; PROVIDED that, it will be a presumption in any lawsuit or other
proceeding in which a Guarantor is a party that the amount guaranteed pursuant
to the Subsidiary Guarantee is the amount set forth in clause (i) above unless
any creditor, or representative of creditors of such Guarantor, or debtor in
possession or trustee in bankruptcy of such Guarantor, otherwise proves in such
a lawsuit that the aggregate liability of the Guarantor is limited to the amount
set forth in clause (ii) above. The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
AXIOHM S.A.R.L.
By:
--------------------------------------
Name:
Title:
AXIOHM INVESTISSEMENTS E.U.R.L.
By:
--------------------------------------
Name:
Title:
AXIOHM IPB, INC.
By:
--------------------------------------
Name:
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<PAGE>
Title:
COGNITIVE L.L.C.
By:
--------------------------------------
Name:
Title:
COGNITIVE SOLUTIONS, INC.
By:
--------------------------------------
Name:
Title:
DARDEL TECHNOLOGIES E.U.R.L.
By:
--------------------------------------
Name:
Title:
STADIA COLORADO CORP.
By:
--------------------------------------
Name:
Title:
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<PAGE>
The Unaudited Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1997 are based on the historical financial statements of
Axiohm Transaction Solutions, Inc. for the nine months ended September 30,
1997 and the historical financial statements of DH for the period for the
period from January 1, 1997 through August 31, 1997 (the effective date of the
Transactions for accounting purposes).
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<PAGE>
EXHIBIT 10.7
GLOBAL AMENDMENT and ASSIGNMENT AND ACCEPTANCE, dated as of October 20,
1997 (this "GLOBAL AMENDMENT"), among: (i) AXIOHM TRANSACTION SOLUTIONS, INC., a
California corporation (the "BORROWER"); (ii) the several lenders and other
financial institutions listed on the signature pages of this Global Amendment
(individually, a "LENDER", and collectively, the "LENDERS"); (iii) UNION BANK OF
CALIFORNIA, N.A., as successor administrative agent (the "ADMINISTRATIVE
AGENT"); (iv) LEHMAN BROTHERS INC., as Arranger, and (v) LEHMAN COMMERCIAL PAPER
INC., as resigning administrative agent and as Syndication Agent and as a Lender
("LCPI").
WITNESSETH:
WHEREAS, the Borrower and LCPI are parties to the Credit Agreement (as
amended, supplemented or otherwise modified prior to the date hereof, the
"CREDIT AGREEMENT") and the other Loan Documents thereunder, each dated as of
October 2, 1997; and
WHEREAS, the parties wish to amend the Credit Agreement and the other Loan
Documents to, among other things, add the Lenders as parties to the Credit
Agreement, replace LCPI, as administrative agent, with the Administrative Agent
and to effectuate certain other changes requested by the Lenders, all as set
forth in this Global Amendment;
NOW THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. Unless otherwise defined herein and except as set
forth in this Global Amendment, terms defined in the Credit Agreement are used
herein as therein defined.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT.
2.1 AMENDMENTS. As of the Effective Date (as defined in Section 5 below)
the Credit Agreement is hereby amended to read in its entirety as set forth in
Exhibit A hereto.
SECTION 3. REPLACEMENT OF ADMINISTRATIVE AGENT.
3.1 RESIGNATION AND APPOINTMENT. LCPI hereby resigns as administrative
agent under the Credit Agreement and the other Loan Documents and the Lenders
hereby appoint Union Bank of California, N.A., as Administrative Agent under the
Credit Agreement and the other Loan Documents and Union Bank of California,
N.A., hereby accepts such appointment. The Borrower hereby consents to such
resignation and appointment. Each of the Loan Documents is hereby amended to
reflect such resignation and appointment, and Union Bank of California, N.A.
shall be treated as the Administrative Agent under the Credit Agreement and the
other Loan Documents. As provided in Section 9.9 of the Credit Agreement, the
provisions of Section 9 of the Credit Agreement inure to the benefit of LCPI as
to any actions taken or omitted to be taken by it while it was Administrative
<PAGE>
Agent. The Borrower and the Lenders waive the provisions of Section 9.9 to the
extent they may be contrary to the provisions of this paragraph 3.1.
3.2 ASSIGNMENT OF SECURITY INTERESTS. LCPI, as resigning administrative
agent, hereby assigns to Union Bank of California, N.A., as successor
Administrative Agent, the security interests created in its favor pursuant to
the Loan Documents, and all UCC Financing Statements filed to perfect such
security interests. LCPI agrees that it will execute and deliver to Union Bank
of California, N.A., as Administrative Agent, UCC-3 Assignments assigning to
Union Bank of California, N.A., as Administrative Agent, all UCC Financing
Statements heretofore filed in favor of LCPI in connection with (i) the Credit
Agreement and (ii) the Credit Agreement, dated as of August 19, 1997, among
Axiohm S.A., Axiohm IPB, Inc., AX Acquisition Corporation, the several lenders
from time to time parties thereto and Lehman Commercial Paper Inc., as arranger,
syndication agent and administrative agent. Such UCC Assignments will be
prepared, executed and delivered to Union Bank of California, N.A. as promptly
as practicable after the returning to LCPI of the original UCC Financing
Statements from the filing offices. LCPI also agrees to deliver to Union Bank
of California, N.A., as successor Administrative Agent, all stock certificates
and instruments delivered to it as collateral under the Loan Documents.
SECTION 4. ADDITION OF LENDERS.
4.1 ASSIGNMENT. By its signature below each of the Lenders (other than
LCPI which is already a Lender) (each such other Lender, an "ASSIGNEE") shall
become a Lender party to the Credit Agreement and the other Loan Documents with
all rights, powers and obligations of a Lender thereunder and with Commitments
as set forth on Schedule I attached hereto. LCPI hereby irrevocably sells and
assigns to each Assignee without recourse to LCPI, and each Assignee hereby
irrevocably purchases and assumes from LCPI without recourse to LCPI, as of the
Effective Date, the Commitments set forth opposite such Assignee's name on
Schedule I and any Loans outstanding under such Commitments, effective upon
receipt by LCPI in immediately available funds of the outstanding principal
amount of such Loans.
4.2 REPRESENTATIONS AND WARRANTIES OF LCPI. LCPI (a) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or with respect to the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any other instrument or document furnished pursuant
thereto, other than that LCPI has not created any adverse claim upon the
interest being assigned by it hereunder and that such interest is free and clear
of any such adverse claim; and (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, any of its Subsidiaries or any other obligor or the performance or
observance by the Borrower, any of its Subsidiaries or any other obligor of any
of their respective obligations under the Credit Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto.
4.3 REPRESENTATIONS AND WARRANTIES OF ASSIGNEES. Each Assignee (a)
represents and warrants that it is legally authorized to enter into this Global
Amendment; (b) confirms that it has
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<PAGE>
received a copy of the Credit Agreement, together with copies of the
financial statements referred to in Section 4.1 or delivered pursuant to
Section 6.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Global Amendment; (c) agrees that it will, independently and without reliance
upon LCPI, the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the
Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other
Loan Documents or any other instrument or document furnished pursuant hereto
or thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it
will be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender including, if
it is organized under the laws of a jurisdiction outside the United States,
its obligation pursuant to Section 2.18(d) of the Credit Agreement.
4.4 PAYMENTS. From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Loans and Commitments assigned
hereunder (including payments of principal, interest, fees and other amounts) to
each Assignee whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. LCPI and each Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
4.5 CERTAIN RIGHTS. From and after the Effective Date, (a) each Assignee
shall be a party to the Credit Agreement and, to the extent provided in this
Global Amendment, have the rights and obligations of a Lender thereunder and
under the other Loan Documents and shall be bound by the provisions thereof and
(b) LCPI shall, to the extent provided in this Global Amendment, relinquish its
rights and be released from its obligations under the Credit Agreement.
SECTION 5. MISCELLANEOUS.
5.1 EFFECTIVENESS. This Global Amendment shall become effective as of
October 20, 1997 (the "EFFECTIVE DATE") when the Administrative Agent shall have
received counterparts of this Global Amendment, duly executed and delivered by
the Borrower, LCPI, the Administrative Agent and each Lender which signs a
counterpart hereof.
5.2 REPRESENTATIONS AND WARRANTIES. After giving effect to the amendments
contained herein, on the Effective Date, the Borrower hereby (i) confirms,
reaffirms and restates the representations and warranties set forth in Section 4
of the Credit Agreement; PROVIDED that each reference in such Section 4 to "this
Agreement" shall be deemed to be a reference both to this Global Amendment and
to the Credit Agreement as amended by this Global Amendment and (ii) confirms
that no Default or Event of Default shall have occurred and be continuing.
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<PAGE>
5.3 CONTINUING, EFFECT; NO OTHER AMENDMENTS. Except as expressly amended
or waived hereby, all of the terms and provisions of the Credit Agreement and
the other Loan Documents are and shall remain in full force and effect. The
amendments contained herein shall not constitute an amendment or waiver of any
other provision of the Credit Agreement or the other Loan Documents or for any
purpose except as expressly set forth herein.
5.4 COUNTERPARTS. This Global Amendment may be executed in any number of
counterparts by the parties hereto, each of which counterparts when so executed
shall be an original, but all the counterparts shall together constitute one and
the same instrument.
5.5 GOVERNING LAW. THIS GLOBAL AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Global Amendment to
be executed and delivered by their respective duly authorized officers as of the
date first above written.
AXIOHM TRANSACTION SOLUTIONS, INC.
By:
--------------------------------
Title:
-----------------------------
UNION BANK OF CALIFORNIA, N.A., as
successor Administrative Agent and as a Lender
By:
--------------------------------
Title:
-----------------------------
LEHMAN COMMERCIAL PAPER INC., as
resigning administrative agent and as Syndication
Agent and as a Lender
By:
--------------------------------
Title:
-----------------------------
-4-
<PAGE>
SOUTHERN PACIFIC BANK
By:
--------------------------------
Title:
-----------------------------
BHF-BANK AKTIENGESELLSCHAFT
By:
--------------------------------
Title:
-----------------------------
By:
--------------------------------
Title:
-----------------------------
BSB BANK & TRUST COMPANY
By:
--------------------------------
Title:
-----------------------------
IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
By:
--------------------------------
Title:
-----------------------------
-5-
<PAGE>
MELLON BANK, N.A.
By:
--------------------------------
Title:
-----------------------------
SOCIETE GENERALE
By:
--------------------------------
Title:
-----------------------------
BANQUE NATIONALE DE PARIS
By:
--------------------------------
Title:
-----------------------------
-6-
<PAGE>
SCHEDULE 1
LENDERS, NOTICE INFORMATION AND COMMITMENTS
REVOLVING TRANCHE A TRANCHE B
ADDRESS FOR CREDIT TERM LOAN TERM LOAN
NOTICES COMMITMENT COMMITMENT COMMITMENT
- ----------------------------- ---------- ----------- ------------
Union Bank of California, N.A. $4,500,000 $4,500,000
530 B Street, 4th Floor
San Diego, California 92101
Attention: Bruce Breslau
Telecopy: (619) 230-3766
Lehman Commercial Paper Inc. $5,000,000 $9,500,000 $15,000,000
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Telecopy: (212) 528-0819
Southern Pacific Bank $2,500,000 $2,500,000
12300 Wilshire Boulevard
Los Angeles, California 90071
Attention: Chris Kelleher
Telecopy: (310) 442-3351
BHF-BANK Aktiengesellschaft $4,500,000
590 Madison Avenue
New York, New York 10022-2504
Attention: Renate Boston
Telecopy: (212) 756-5536
BSB Bank & Trust Company $2,500,000 $2,500,000
58-68 Exchange Street
Binghamton, New York 13901
Attention: John B. Westcott
Telecopy: (607) 772-6287
<PAGE>
REVOLVING TRANCHE A TRANCHE B
ADDRESS FOR CREDIT TERM LOAN TERM LOAN
NOTICES COMMITMENT COMMITMENT COMMITMENT
- ----------------------------- ---------- ----------- ------------
Imperial Bank, A California 2,500,000 2,500,000
Banking Corporation
9920 S. La Cienega Boulevard,
14th Floor
Inglewood, California 90301
Attention: Jamie Harney
Telecopy: (310) 417-5997
Mellon Bank, N.A. 4,500,000 4,500,000
400 South Hope Street,
5th Floor
Los Angeles, California 90071
Attention: Everett Orrick
Telecopy: (213) 629-0484
Societe Generale 4,500,000 4,500,000
1221 Avenue of the Americas,
11th Floor
New York, New York 10020
Attention: Nathalie Thullez
Paolo Salvi
Telecopy: (212) 278-7463
Banque Nationale de Paris 4,500,000 4,500,000
725 S. Figueroa Street
Suite 2090
Los Angeles, California
Attention: Tjalling Terpstra
Telecopy: (213) 488-9602
TOTAL 35,000,000 $35,000,000 15,000,000
-2-
<PAGE>
EXECUTION COPY
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$85,000,000
CREDIT AGREEMENT
AMONG
AXIOHM TRANSACTION SOLUTIONS, INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
LEHMAN BROTHERS INC.,
AS ARRANGER
LEHMAN COMMERCIAL PAPER INC.,
AS SYNDICATION AGENT
AND
LEHMAN COMMERCIAL PAPER INC.,
AS ADMINISTRATIVE AGENT
DATED AS OF OCTOBER 2, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 25
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS. . . . . . . . . . . . . . . . . 26
2.1 Term Loan Commitments. . . . . . . . . . . . . . . . . . . . . . . 26
2.2 Procedure for Term Loan Borrowing. . . . . . . . . . . . . . . . . 26
2.3 Repayment of Term Loans. . . . . . . . . . . . . . . . . . . . . . 26
2.4 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . 28
2.5 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . 28
2.6 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . 29
2.7 Commitment Fees, etc. . . . . . . . . . . . . . . . . . . . . . . 29
2.8 Termination or Reduction of Revolving Credit Commitments . . . . . 30
2.9 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . 30
2.10 Mandatory Prepayments and Commitment Reductions. . . . . . . . . . 30
2.11 Conversion and Continuation Options. . . . . . . . . . . . . . . . 31
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches. . . . . 32
2.13 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . 32
2.14 Computation of Interest and Fees . . . . . . . . . . . . . . . . . 33
2.15 Inability to Determine Interest Rate . . . . . . . . . . . . . . . 33
2.16 Pro Rata Treatment and Payments. . . . . . . . . . . . . . . . . . 34
2.17 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . 36
2.18 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.19 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.20 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . 39
2.21 Replacement of Lenders . . . . . . . . . . . . . . . . . . . . . . 40
2.22 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . 40
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.2 Procedure for Issuance of Letter of Credit . . . . . . . . . . . . 41
3.3 Commissions, Fees and Other Charges. . . . . . . . . . . . . . . . 41
3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . 42
3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . 43
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . 43
3.7 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . . . 43
3.8 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 44
4.1 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . 44
4.2 No Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . 45
4.4 Corporate Power; Authorization; Enforceable Obligations. . . . . . 45
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . 46
-i-
<PAGE>
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4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . 46
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 46
4.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.11 Federal Regulations. . . . . . . . . . . . . . . . . . . . . . . . 47
4.12 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.14 Investment Company Act; Other Regulations. . . . . . . . . . . . . 48
4.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.16 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 48
4.18 Accuracy of Information, etc . . . . . . . . . . . . . . . . . . . 49
4.19 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . 50
4.20 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.21 Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 51
4.22 Regulation H . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 51
5.1 Conditions to Initial Extension of Credit. . . . . . . . . . . . . 51
5.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . 56
SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 56
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 56
6.2 Certificates; Other Information. . . . . . . . . . . . . . . . . . 57
6.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 58
6.4 Conduct of Business and Maintenance of Existence, etc. . . . . . . 58
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . 58
6.6 Inspection of Property; Books and Records; Discussions . . . . . . 59
6.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 59
6.9 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . 61
6.10 Additional Collateral, etc . . . . . . . . . . . . . . . . . . . . 61
6.11 Limitation on Designated Senior Debt . . . . . . . . . . . . . . . 63
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 63
7.1 Financial Condition Covenants. . . . . . . . . . . . . . . . . . . 63
7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . 65
7.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . 66
7.4 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . 68
7.5 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . 68
7.6 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . 69
7.7 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . 70
7.8 Limitation on Investments, Loans and Advances. . . . . . . . . . . 70
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments or Merger Agreement, etc . . . . . . . . . . . . . . . 71
7.10 Limitation on Transactions with Affiliates . . . . . . . . . . . . 71
7.11 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . 71
7.12 Limitation on Changes in Fiscal Periods. . . . . . . . . . . . . . 72
7.13 Limitation on Negative Pledge Clauses. . . . . . . . . . . . . . . 72
7.14 Limitation on Restrictions on Subsidiary Distributions . . . . . . 72
7.15 Limitation on Lines of Business. . . . . . . . . . . . . . . . . . 72
-ii-
<PAGE>
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----
7.16 Limitation on Activities of the Dardel and Axiohm-Inv. . . . . . . 72
SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9. THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . 76
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . 77
9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . 77
9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . 77
9.6 Non-Reliance on Agents and Other Lenders . . . . . . . . . . . . . 78
9.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 78
9.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . 79
9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . 79
9.10 Authorization to Release Liens . . . . . . . . . . . . . . . . . . 79
9.11 Arranger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 80
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . 81
10.4 Survival of Representations and Warranties. . . . . . . . . . . . 81
10.5 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . 81
10.6 Successors and Assigns; Participations and Assignments. . . . . . 82
10.7 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . . 85
10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . 86
10.13 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . 87
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . 87
10.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.16 Post Closing Restructuring Transactions . . . . . . . . . . . . . 87
-iii-
<PAGE>
ANNEXES:
A Pricing Grid
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of McDermott, Will & Emery
F-2 Form of Legal Opinion of Wilson, Sonsini, Goodrich & Rosati
F-3 Form of Legal Opinion of Slaughter and May
F-4 Form of Legal Opinion of Gide Loyrette Nouel
F-5 Form of Legal Opinion of Adrian Holmes, Esq.
F-6 Form of Legal Opinion of Allen & Overy
F-7 Form of Legal Opinion of Sparks Dix, P.C.
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
H Form of Prepayment Option Notice
I Form of Exemption Certificate
J Form of Nantissement de Fonds de Commerce
K-1 Form of Australian Pledge Agreement
K-2 Form of U.K. Pledge Agreement
K-3 Form of French Pledge Agreements
L-1 Form of Notice of Borrowing (Drawings)
L-2 Form of Notice of Borrowing (Conversions)
L-3 Form of Notice of Borrowing (Continuations)
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of October 2, 1997, among AXIOHM
TRANSACTION SOLUTIONS, INC. (f/k/a DH Technology, Inc.), a California
corporation (the "BORROWER"), the several banks and other financial institutions
or entities from time to time parties to this Agreement (the "LENDERS"), LEHMAN
BROTHERS INC., as arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent
(in such capacities, the "SYNDICATION AGENT"), and LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, AX Acquisition Corporation ("ACQUISITION CO."), a wholly
owned subsidiary of Axiohm IPB, Inc. ("AXIOHM-IPB"), which is a wholly owned
subsidiary of Axiohm S.A. ("AXIOHM S.A."), made an offer (the "TENDER OFFER") to
purchase up to 7,000,000 (but not fewer than 6,500,000) of the outstanding
shares (the "SHARES") of common stock (which represented approximately 88.0% of
the Shares outstanding as of July 11, 1997), without par value, of the Borrower,
pursuant to an Offer to Purchase dated July 16, 1997 (as amended, supplemented
or otherwise modified from time to time, the "OFFER TO PURCHASE") at a price of
$25.00 per Share;
WHEREAS, the Offer to Purchase was made pursuant to an Agreement and
Plan of Merger dated as of July 14, 1997 (including the schedules thereto, the
"MERGER AGREEMENT") among Axiohm S.A., Acquisition Co. and the Borrower, which
provides that (i) immediately prior to the Merger (as defined below),
Acquisition Co. will offer in an exchange offer made pursuant to an exemption
under the Securities Act of 1933, as amended (the "EXCHANGE OFFER") to (x) the
shareholders of Axiohm S.A. and (y) the shareholders of Dardel Technologies,
S.A., a French corporation ("DARDEL") and a shareholder of Axiohm S.A., the
right to exchange their stock of Axiohm S.A. (or Dardel, as the case may be),
with Acquisition Co. for an aggregate of approximately 5,518,524 of the Shares
acquired by Acquisition Co. in the Tender Offer and an aggregate of
approximately $12,197,900 in cash, (ii) simultaneously with the consummation of
the Exchange Offer, Axiohm-IPB will sell to the Borrower, and the Borrower will
purchase from Axiohm-IPB, all of the outstanding shares of capital stock of
Acquisition Co. in exchange for the assumption by the Borrower, on a joint and
several basis with Acquisition Co. and Axiohm-IPB, of all obligations of Axiohm-
IPB or Acquisition Co. in respect of the $175,000,000 Credit Agreement, dated as
of August 19, 1997, among Axiohm S.A., Axiohm-IPB, Acquisition Co., the lenders
party thereto and Lehman Commercial Paper Inc., as arranger, syndication agent
and administrative agent (the "TENDER FACILITY") and in respect of the Interim
Preferred Stock described below, and (iii) immediately following the events
described in the foregoing clauses (i) and (ii) (collectively, the "PRE-MERGER
TRANSACTIONS"), Acquisition Co. will be merged (the "MERGER") with and into the
Borrower, with the Borrower being the surviving corporation of the Merger;
WHEREAS, (i) to provide a portion of the financing for the Tender
Offer and certain related expenses, (A) Acquisition Co. required the Tender
Facility and (B) Acquisition
<PAGE>
2
Co. received $24,000,000 as cash equity constituting proceeds of $24,000,000
in liquidation value of preferred stock (the "INTERIM PREFERRED STOCK")
issued by Axiohm-IPB and (ii) to provide a portion of the financing for the
Merger and certain related expenses, the refinancing of certain indebtedness
of the Borrower, the repayment of amounts owing under the Tender Facility and
to provide financing for future working capital and other general corporate
purposes, the Borrower will require at the time of the Merger financing
comprised of senior credit facilities made available pursuant to this
Agreement equal to $85,000,000, comprised of term loan facilities aggregating
$50,000,000 and a $35,000,000 revolving credit facility and $120,000,000 in
proceeds of unsecured senior subordinated notes (as more fully defined
herein, the "SENIOR SUBORDINATED NOTES") issued by the Borrower;
WHEREAS, after giving effect to the Pre-Merger Transactions and the
Merger, (i) the Borrower will succeed to all rights and obligations of
Acquisition Co., (ii) Dardel will be a wholly owned Subsidiary of the Borrower,
(iii) 100% of the stock of Axiohm S.A. will be owned either directly by the
Borrower or indirectly by the Borrower through its ownership of Dardel and (iv)
Axiohm-IPB will continue as a wholly owned Subsidiary of Axiohm S.A.; and
WHEREAS, the Lenders are willing to make the senior credit facilities
referred to above available at the time of the Merger upon and subject to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ADJUSTMENT DATE": as defined in the Pricing Grid.
"ADMINISTRATIVE AGENT": as defined in the preamble hereto.
"AFFILIATE": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
(or persons performing similar functions) of such Person or (b) direct or
cause the direction of the management and policies of such Person, whether
by contract or otherwise.
"AGENTS": the collective reference to the Syndication Agent and the
Administrative Agent.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
<PAGE>
3
"APPLICABLE MARGIN": for each Type of Loan, the rate per annum set
forth under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
--------- ----------
Revolving Credit Loans 1.50% 2.50%
Tranche A Term Loans 1.50% 2.50%
Tranche B Term Loans 2.00% 3.00%
; PROVIDED, that on and after the first Adjustment Date occurring at least
one year after the Merger, the Applicable Margin with respect to Revolving
Credit Loans and Tranche A Term Loans will be determined pursuant to the
Pricing Grid.
"APPLICATION": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"ASSET SALE": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (a), (b), (c), (d), (e) or (f) of Section 7.5) which yields gross
proceeds to the Borrower or any of its Subsidiaries (valued at the initial
principal amount thereof in the case of non-cash proceeds consisting of
notes or other debt securities and valued at fair market value in the case
of other non-cash proceeds) in excess of $100,000.
"ASSIGNEE": as defined in Section 10.6(c).
"ASSIGNMENT AND ACCEPTANCE": as defined in Section 10.6(c).
"ASSIGNOR": as defined in Section 10.6(c).
"AUSTRALIAN PLEDGE AGREEMENT": the Pledge Agreement to be executed
and delivered by the Borrower in favor of the Administrative Agent,
substantially in the form of Exhibit K-1, as the same may be amended,
supplemented or otherwise modified from time to time.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment OVER (b) such Lender's Revolving
Extensions of Credit.
"AXIOHM-IPB": as defined in the recitals hereto.
"AXIOHM-INV": Axiohm Investissements, a Subsidiary of the Borrower
organized in France.
"BASE RATE": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the
<PAGE>
4
Base CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "PRIME RATE" shall mean the rate of interest per annum publicly
announced from time to time by Citibank, N.A. as its prime rate in
effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by the
Administrative Agent in connection with extensions of credit to
debtors); "BASE CD RATE" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the C/D Reserve
Percentage and (b) the C/D Assessment Rate; and "THREE-MONTH SECONDARY
CD RATE" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line
of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or,
if such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City time, on
such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it. Any change in the Base Rate due to a change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"BASE RATE LOANS": Loans the rate of interest applicable to which is
based upon the Base Rate.
"BENEFITTED LENDER": as defined in Section 10.7(a).
"BOARD": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"BORROWER": as defined in the preamble hereto.
"BORROWING DATE": any Business Day specified by the Borrower as a
date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"BUSINESS": as defined in Section 4.17(b).
"BUSINESS DAY": (i) for all purposes other than as covered by clause
(ii) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in Dollar deposits in the interbank eurodollar
market.
<PAGE>
5
"CAPITAL EXPENDITURES": for any period, with respect to any Person,
the aggregate of all expenditures by such Person and its Subsidiaries for
the acquisition or leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) which should be
capitalized under GAAP on a consolidated balance sheet of such Person and
its Subsidiaries.
"CAPITAL LEASE OBLIGATIONS": as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of
the foregoing.
"CASH EQUIVALENTS": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of one year or less from the date
of acquisition issued by any Lender or by any commercial bank organized
under the laws of the United States or any state thereof having combined
capital and surplus of not less than $500,000,000; (c) commercial paper of
an issuer rated at least A-2 by Standard & Poor's Ratings Services ("S&P")
or P-2 by Moody's Investors Service, Inc. ("MOODY'S"), or carrying an
equivalent rating by a nationally recognized rating agency, if both of the
two named rating agencies cease publishing ratings of commercial paper
issuers generally, and maturing within nine months from the date of
acquisition; (d) repurchase obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a
term of not more than 30 days with respect to securities issued or fully
guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by
any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of one year or less
from the date of acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the requirements of clause (b)
of this definition; or (g) shares of money market mutual or similar funds
which invest at least 95% of their assets in assets satisfying the
requirements of clauses (a) through (f) of this definition.
<PAGE>
6
"C/D ASSESSMENT RATE": for any day as applied to any Base Rate Loan,
the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation (the "FDIC") classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.4 (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any Base Rate
Loan, that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of the
Board as in effect from time to time) in respect of new non-personal time
deposits in Dollars having a maturity of 30 days or more.
"CLOSING DATE": the date on which the conditions precedent set forth
in Section 5.1 shall have been satisfied, which date shall not occur later
than October 16, 1997.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"COMMITMENT": as to any Lender, the sum of the Tranche A Term Loan
Commitment, the Tranche B Term Loan Commitment and the Revolving Credit
Commitment of such Lender.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"COMPLIANCE CERTIFICATE": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"CONFIDENTIAL INFORMATION MEMORANDUM": the Confidential Information
Memorandum dated September 1997 and furnished to the Lenders.
"CONSOLIDATED CURRENT ASSETS": at any date, all amounts (other than
cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on
a consolidated balance sheet of the Borrower and its Subsidiaries at such
date.
"CONSOLIDATED CURRENT LIABILITIES": at any date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet
of the Borrower and its Subsidiaries at such date, but excluding (a) the
current portion of any Funded Debt of the Borrower and its
<PAGE>
7
Subsidiaries and (b) without duplication of clause (a) above, all
Indebtedness consisting of Revolving Credit Loans to the extent
otherwise included therein.
"CONSOLIDATED EBITDA": for any period, Consolidated Net Income for
such period PLUS, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) total income tax expense, (b) interest expense, amortization
or writeoff of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness
(including the Loans), (c) depreciation and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary or non-recurring expenses or
losses (including, whether or not otherwise includable as a separate item
in the statement of such Consolidated Net Income for such period, losses on
sales of assets outside of the ordinary course of business), (f) any other
non-cash charges (other than non-cash charges in connection with the
Borrower's use of the LIFO method of inventory accounting) and (g) for the
period from the Closing Date through the end of the 1998 fiscal year, up to
$3 million in the aggregate of transaction expenses and restructuring
charges, and MINUS, to the extent included in the statement of such
Consolidated Net Income for such period, the sum of (a) interest income,
(b) any extraordinary or non-recurring income or gains (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets
outside of the ordinary course of business) and (c) any other non-cash
income, all as determined on a consolidated basis.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO": for any period, the ratio
of (a) Consolidated EBITDA for such period less the aggregate amount
actually paid by the Borrower and its Subsidiaries in cash during such
period on account of Capital Expenditures (excluding the principal amount
of Indebtedness incurred in connection with such expenditures) or taxes to
(b) Consolidated Fixed Charges for such period.
"CONSOLIDATED FIXED CHARGES": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
provision for cash income taxes made by the Borrower or any of its
Subsidiaries on a consolidated basis in respect of such period and (c)
scheduled payments made during such period on account of principal of
Indebtedness (other than Indebtedness of the types described in clauses
(f), (g) and (k) of the definition thereof) of the Borrower or any of its
Subsidiaries (including scheduled principal payments in respect of the Term
Loans).
"CONSOLIDATED INTEREST COVERAGE RATIO": for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"CONSOLIDATED INTEREST EXPENSE": for any period, total cash interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing
<PAGE>
8
and net costs under Interest Rate Protection Agreements to the extent such
net costs are allocable to such period in accordance with GAAP).
"CONSOLIDATED LEVERAGE RATIO": as at the last day of any period of
four consecutive fiscal quarters, the ratio of (a) Consolidated Total Debt
on such day to (b) Consolidated EBITDA for such period; PROVIDED that for
purposes of calculating Consolidated EBITDA of the Borrower and its
Subsidiaries for any period, the Consolidated EBITDA of any Person acquired
by the Borrower or its Subsidiaries during such period shall be included on
a PRO FORMA basis for such period (assuming the consummation of each such
acquisition and the incurrence or assumption of any Indebtedness in
connection therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the period preceding the acquisition of such
Person and the related consolidated statements of income and stockholders'
equity and of cash flows for the period in respect of which Consolidated
EBITDA is to be calculated (i) have been previously provided to the
Administrative Agent and the Lenders and (ii) either (A) have been reported
on without a qualification arising out of the scope of the audit (other
than a "going concern" or like qualification or exception) by independent
certified public accountants of nationally recognized standing or (B) have
been found acceptable by the Administrative Agent.
"CONSOLIDATED NET INCOME": for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries, (b) the income
(or deficit) of any Person (other than a Subsidiary of the Borrower) in
which the Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by
the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"CONSOLIDATED TOTAL DEBT": at any date, the sum of, without
duplication, (a) the aggregate principal amount of all Funded Debt of the
Borrower and its Subsidiaries at such date, determined on a consolidated
basis in accordance with GAAP PLUS (b) all indebtedness of such Person for
borrowed money MINUS (c) the amount of cash held by the Borrower and the
Subsidiary Guarantors in an aggregate amount not to exceed $5,000,000 to
the extent such cash is not subject to a Lien (except in favor of the
Lenders).
"CONSOLIDATED WORKING CAPITAL": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
<PAGE>
9
"CONTINUING DIRECTOR": (i) any director of the board of directors of
the Borrower on the Closing Date, (ii) a director whose nomination for
election to the board of directors of the Borrower is recommended by at
least 50% of the then Continuing Directors or (iii) a director elected to
the board of directors of the Borrower with the approval of the holders of
at least 80% of the common stock of the Borrower having voting power for
the election of directors held by the Permitted Investors.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"DARDEL": as defined in the recitals hereto.
"DEFAULT": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"DISCLOSURE LETTER": the Disclosure Letter dated as of the date
hereof between the Syndication Agent, the Lenders and the Borrower, as
amended, supplemented or otherwise modified from time to time.
"DISPOSITION": with respect to any Property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition
thereof; and the terms "DISPOSE" and "DISPOSED OF" shall have correlative
meanings.
"DOLLARS" and "$": dollars in lawful currency of the United States.
"DOMESTIC SUBSIDIARY": any Subsidiary of any Loan Party organized
under the laws of any jurisdiction within the United States.
"ECF PERCENTAGE": 75%; PROVIDED, that, with respect to each fiscal
year of the Borrower ending on or after December 31, 1997, the ECF
Percentage shall be reduced to 50% if the Consolidated Leverage Ratio as of
the last day of such fiscal year is less than 3.00 to 1.00.
"ENVIRONMENTAL CONSULTANT": as defined in Section 6.8(d).
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
"ENVIRONMENTAL PERMITS": any and all permits, licenses,
registrations, approvals, notifications, exemptions and any other
authorization required under any Environmental Law.
<PAGE>
10
"ENVIRONMENTAL PROFESSIONAL": as defined in Section 6.8(c).
"ENVIRONMENTAL PROGRAM": as defined in Section 6.8(c).
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on
the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period
appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London
time, two Business Days prior to the beginning of such Interest Period. In
the event that such rate does not appear on Page 3750 of the Telerate
Service (or otherwise on such service), the "EURODOLLAR BASE RATE" for
purposes of this definition shall be determined by reference to such other
comparable publicly quoted service for displaying eurodollar rates as may
be reasonably selected by the Administrative Agent or, in the absence of
such availability, by reference to the rate at which the Administrative
Agent is offered Dollar deposits at or about 11:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency
and exchange operations are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
-----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
<PAGE>
11
"EVENT OF DEFAULT": any of the events specified in Section 8,
PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.
"EXCESS CASH FLOW": for any fiscal year of the Borrower, the excess,
if any, of (a) the sum, without duplication, of (i) Consolidated Net Income
for such fiscal year, (ii) an amount equal to the amount of all non-cash
charges (including depreciation and amortization) deducted in arriving at
such Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the aggregate net
non-cash loss on the Disposition of Property by the Borrower and its
Subsidiaries during such fiscal year (other than sales of inventory in the
ordinary course of business), to the extent deducted in arriving at such
Consolidated Net Income and (v) the net increase during such fiscal year
(if any) in deferred tax accounts of the Borrower OVER (b) the sum, without
duplication, of (i) an amount equal to the amount of all non-cash credits
included in arriving at such Consolidated Net Income, (ii) the aggregate
amount actually paid by the Borrower and its Subsidiaries in cash during
such fiscal year on account of Capital Expenditures (excluding the
principal amount of Indebtedness incurred in connection with such
expenditures and any such expenditures financed with the proceeds of any
Reinvestment Deferred Amount), (iii) the aggregate amount of all
prepayments of Revolving Credit Loans during such fiscal year to the extent
accompanying permanent optional reductions of the Revolving Credit
Commitments and all optional prepayments of the Term Loans during such
fiscal year, (iv) the aggregate amount of all regularly scheduled principal
payments of Funded Debt (including, without limitation, the Term Loans) of
the Borrower and its Subsidiaries made during such fiscal year (other than
in respect of any revolving credit facility to the extent there is not an
equivalent permanent reduction in commitments thereunder), (v) increases in
Consolidated Working Capital for such fiscal year, (vi) an amount equal to
the aggregate net non-cash gain on the Disposition of Property by the
Borrower and its Subsidiaries during such fiscal year (other than sales of
inventory in the ordinary course of business), to the extent included in
arriving at such Consolidated Net Income, and (vii) the net decrease during
such fiscal year (if any) in deferred tax accounts of the Borrower.
"EXCESS CASH FLOW APPLICATION DATE": as defined in Section 2.10(c).
"EXCHANGE OFFER": as defined in the recitals hereto.
"EXCLUDED FOREIGN SUBSIDIARIES": any Foreign Subsidiary the pledge of
all or any part of whose Capital Stock as Collateral would, in the good
faith judgment of the Borrower, result in material adverse tax consequences
to the Borrower, PROVIDED that the term "Foreign Subsidiary" shall not
include any Subsidiary (a) which is properly treated as a partnership or
branch of the Borrower or a Domestic Subsidiary for United States federal
income tax purposes and (b) the pledge of all or any part of whose Capital
Stock as Collateral would not result in material adverse tax consequences
to the Borrower.
"FACILITY": each of (a) the Tranche A Term Loan Commitments and the
Tranche A Term Loans made thereunder (the "TRANCHE A TERM LOAN FACILITY"),
(b) the Tranche B Term Loan Commitments and the Tranche B Term Loans made
thereunder (the "TRANCHE
<PAGE>
12
B TERM LOAN FACILITY") and (c) the Revolving Credit Commitments and the
extensions of credit made thereunder (the "REVOLVING CREDIT FACILITY").
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"FRENCH PLEDGE AGREEMENTS": the Pledge Agreements creating a charge
over the stock capital of Axiohm S.A., Dardel and Axiohm Investissements to
be executed and delivered by the Borrower and Dardel in favor of the
Administrative Agent, substantially in the form of Exhibit K-3, as the same
may be amended, supplemented or otherwise modified from time to time.
"FRENCH SECURITY DOCUMENT": the Nantissement de Fonds de Commerce to
be executed and delivered by Axiohm S.A., substantially in the form of
Exhibit J, as the same may be amended, supplemented or otherwise modified
from time to time.
"FOREIGN SUBSIDIARY": any Subsidiary of any Loan Party that is not a
Domestic Subsidiary.
"FUNDED DEBT": as to any Person, all Indebtedness of such Person that
matures more than one year from the date of its creation or matures within
one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders
to extend credit during a period of more than one year from such date,
including, without limitation, all current maturities and current sinking
fund payments in respect of such Indebtedness whether or not required to be
paid within one year from the date of its creation and, in the case of the
Borrower, Indebtedness in respect of the Loans.
"FUNDING OFFICE": the office specified from time to time by the
Administrative Agent as its funding office by notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States
as in effect from time to time set forth in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of Certified
Public Accountants and the statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances of the Borrower as of
the date of determination, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the December
31, 1996 audited financial statements of
<PAGE>
13
the Borrower delivered pursuant to Section 4.1(c). In the event that
any "Accounting Change" (as defined below) shall occur and such change
results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrower and the
Administrative Agent agree to enter into negotiations in order to amend
such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for
evaluating the Borrower's financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and
delivered by the Borrower, the Administrative Agent and the Required
Lenders, all financial covenants, standards and terms in this Agreement
shall continue to be calculated or construed as if such Accounting
Changes had not occurred. "Accounting Changes" refers to changes in
accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including, without limitation, the National
Association of Insurance Commissioners).
"GUARANTEE AND COLLATERAL AGREEMENT": the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any Property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person
<PAGE>
14
may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum
amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good faith.
"H-S-R ACT": the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended.
"INCUR": as defined in Section 7.2.
"INDEBTEDNESS": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of Property or services (other
than current trade payables and accrued current obligations incurred in the
ordinary course of such Person's business), (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to Property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such Property), (e) all Capital Lease Obligations of such Person, (f) all
obligations of such Person, contingent or otherwise, as an account party
under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase, redeem,
retire or otherwise acquire for value any Capital Stock (other than common
stock) of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g)
above; (i) all obligations of the kind referred to in clauses (a) through
(h) above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on
Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become
liable for the payment of such obligation, (j) for the purposes of Section
8(e) only, all obligations of such Person in respect of Interest Rate
Protection Agreements and (k) the liquidation value of any preferred
Capital Stock of such Person or of its Subsidiaries held by any Person
other than such Person and its Wholly Owned Subsidiaries. It is understood
and agreed that the amount of any Indebtedness described in clause (i) for
which recourse is limited to certain property of such Person shall be the
lower of (x) the amount of the obligation and (y) the fair market value of
the property of such Person securing such obligation to the extent of
recourse to such property.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
<PAGE>
15
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds
and damages therefrom.
"INTEREST PAYMENT DATE": (a) as to any Base Rate Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the last
day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Loan (other than
any Revolving Credit Loan that is a Base Rate Loan), the date of any
repayment or prepayment made in respect thereof.
"INTEREST PERIOD": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Borrower in its Notice of Borrowing
with respect thereto; and (b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six months thereafter, as
selected by the Borrower by irrevocable notice to the Administrative Agent
not less than three Business Days prior to the last day of the then current
Interest Period with respect thereto; PROVIDED that, all of the foregoing
provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Revolving Credit Termination Date or beyond the date final payment is
due on the Tranche A Term Loans or the Tranche B Term Loans, as the
case may be, shall end on the Revolving Credit Termination Date or
such due date, as applicable;
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month ending
one, two, three or six months thereafter, as the case may be, as
designated in the relevant Notice of Borrowing; and
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16
(iv) the Borrower shall use reasonable efforts to select Interest
Periods so as not to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Loan.
"INTEREST RATE PROTECTION AGREEMENT": any interest rate protection
agreement, interest rate futures contract, interest rate option, interest
rate cap or other interest rate hedge arrangement, to or under which the
Borrower or any of its Subsidiaries is a party or a beneficiary on the date
hereof or becomes a party or a beneficiary after the date hereof.
"ISSUING LENDER": one or more Lenders to be selected by the
Syndication Agent and the Borrower (with the consent of such Lender) after
the Syndication Date, in its capacity as issuer of any Letter of Credit.
"L/C COMMITMENT": $7,500,000.
"L/C FEE PAYMENT DATE": the last day of each March, June, September
and December and the last day of the Revolving Credit Commitment Period.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to Section 3.5.
"L/C PARTICIPANTS": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"LENDERS": as defined in the preamble hereto.
"LETTERS OF CREDIT": as defined in Section 3.1(a).
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever, whether or
not filed, recorded or otherwise perfected under applicable law (including,
without limitation, any conditional sale or other title retention agreement
and any capital lease having substantially the same economic effect as any
of the foregoing and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"LOAN": as defined in Section 2.1.
"LOAN DOCUMENTS": this Agreement, the Security Documents, the
Syndication Letter Agreement, the Applications and the Notes.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
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17
"MAJORITY FACILITY LENDERS": with respect to any Facility, the
holders of more than 50% of the aggregate unpaid principal amount of the
Term Loans or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Credit
Facility, prior to any termination of the Revolving Credit Commitments, the
holders of more than 50% of the Total Revolving Credit Commitments).
"MAJORITY REVOLVING CREDIT FACILITY LENDERS": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
consummation of the Merger, (b) the business, assets, property or condition
(financial or otherwise) of the Borrower, Axiohm S.A. and their
Subsidiaries taken as a whole or (c) the validity or enforceability of this
Agreement or any of the other Loan Documents or the rights or remedies of
the Agents or the Lenders hereunder or thereunder.
"MATERIAL ENVIRONMENTAL AMOUNT": an amount payable by the Borrower
and/or its Subsidiaries in excess of $1,000,000 per fiscal year for
remedial costs, compliance costs, compensatory damages, punitive damages,
fines, penalties or any combination thereof, in any case pursuant to any
Environmental Law or with respect to any Materials of Environmental
Concern.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MERGER": as defined in the recitals hereto.
"MERGER AGREEMENT": as defined in the recitals hereto.
"MORTGAGED PROPERTIES": the real properties listed on Schedule 1.1B
to the Disclosure Letter, as to which the Administrative Agent for the
benefit of the Lenders shall be granted a Lien pursuant to the Mortgages.
"MORTGAGES": each of the mortgages and deeds of trust made by any
Loan Party in favor of, or for the benefit of, the Administrative Agent for
the benefit of the Lenders, substantially in the form of Exhibit D (with
such changes thereto as shall be advisable under the law of the
jurisdiction in which such mortgage or deed of trust is to be recorded), as
the same may be amended, supplemented or otherwise modified from time to
time.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
<PAGE>
18
"NET CASH PROCEEDS": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees and other professional fees,
amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset which is the subject of
such Asset Sale or Recovery Event (other than any Lien pursuant to a
Security Document), the amount of such net cash proceeds which are
attributable to (and payable to) minority interests, the amount of any
reserve reasonably maintained by the Borrower and its Subsidiaries with
respect to indemnification obligations owing pursuant to the definitive
documentation pursuant to which the Asset Sale is consummated (with any
unused portion of such reserve to constitute Net Cash Proceeds on the date
upon which the indemnification obligations terminate) and other reasonable
fees and expenses actually incurred in connection therewith and net of
taxes paid or reasonably estimated to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax
sharing arrangements) and (b) in connection with any issuance or sale of
equity securities or debt securities or instruments or the incurrence of
loans, the cash proceeds received from such issuance or incurrence, net of
attorneys' fees, investment banking fees, accountants' fees and other
professional fees, underwriting discounts and commissions and other
reasonable fees and expenses actually incurred in connection therewith.
"NON-EXCLUDED TAXES": as defined in Section 2.18(a).
"NON-U.S. LENDER": as defined in Section 2.18(d).
"NOTES": the collective reference to any promissory note evidencing
Loans.
"NOTICE OF BORROWING": (i) with respect to (a) any borrowing of
Loans, a Notice of Borrowing (Drawings), substantially in the form of
Exhibit L-1, (b) any conversion of Loans, a Notice of Borrowing
(Conversions), substantially in the form of Exhibit L-2 and (c) any
continuation of Eurodollar Loans, a Notice of Borrowing (Continuations),
substantially in the form of Exhibit L-3 or (ii) telephonic notice of any
such borrowing, conversion or continuation promptly confirmed in writing
(in a form reasonably acceptable to the Administrative Agent).
"OBLIGATIONS": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in the case of
Interest Rate Protection Agreements, any affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise
<PAGE>
19
under, out of, or in connection with, this Agreement, any other Loan
Document, the Letters of Credit, any Interest Rate Protection Agreement
entered into with any Lender or any affiliate of any Lender or any other
document made, delivered or given in connection herewith or therewith,
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses (including, without limitation, all
fees, charges and disbursements of counsel to the Administrative Agent
or to any Lender that are required to be paid by the Borrower pursuant
hereto) or otherwise.
"OFFER TO PURCHASE": as defined in the recitals hereto.
"OTHER TAXES": any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
arising from any payment made hereunder or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement.
"PARTICIPANT": as defined in Section 10.6(b).
"PAYMENT OFFICE": the office specified from time to time by the
Administrative Agent as its payment office by notice to the Borrower and
the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"PERMITTED INVESTORS": collectively, Dardel, Messrs. Patrick Dupuy,
Gilles Gibier and William Gibbs, and Persons under their control (PROVIDED
that for purposes of this definition, "control" of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise).
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PRE-MERGER TRANSACTIONS": as defined in the recitals hereto.
"PRICING GRID": the pricing grid attached hereto as Annex A.
"PRO FORMA BALANCE SHEET": as defined in Section 4.1(a).
"PROJECTIONS": as defined in Section 6.2(c).
<PAGE>
20
"PROPERTIES": as defined in Section 4.17(a).
"PROPERTY": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"RECOVERY EVENT": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding
relating to any asset (other than inventory) of the Borrower or any of its
Subsidiaries.
"REGISTER": as defined in Section 10.6(d).
"REGULATION G": Regulation G of the Board as in effect from time to
time.
"REGULATION U": Regulation U of the Board as in effect from time to
time.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"REINVESTMENT DEFERRED AMOUNT": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Borrower or any of
its Subsidiaries in connection therewith which are not applied to prepay
the Term Loans or reduce the Revolving Credit Commitments pursuant to
Section 2.10(b) as a result of the delivery of a Reinvestment Notice.
"REINVESTMENT EVENT": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"REINVESTMENT NOTICE": a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing and
that the Borrower (directly or indirectly through a Subsidiary) intends and
expects to use all or a specified portion of the Net Cash Proceeds of an
Asset Sale or Recovery Event to acquire assets useful in its business.
"REINVESTMENT PREPAYMENT AMOUNT": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire
assets useful in the Borrower's business.
"REINVESTMENT PREPAYMENT DATE": with respect to any Reinvestment
Event, the earlier of (a) the date occurring twelve months after such
Reinvestment Event and (b) the date on which the Borrower shall have
determined not to, or shall have otherwise ceased to, acquire assets useful
in the Borrower's business with all or any portion of the relevant
Reinvestment Deferred Amount.
<PAGE>
21
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section
2615.
"REQUIRED LENDERS": the holders of more than 50% of (a) until the
Closing Date, the Commitments and (b) thereafter, the sum of (i) the
aggregate unpaid principal amount of the Term Loans and (ii) the Total
Revolving Credit Commitments or, if the Revolving Credit Commitments have
been terminated, the Total Revolving Extensions of Credit.
"REQUIRED PREPAYMENT LENDERS": the Majority Facility Lenders in
respect of each Facility.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case,
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of
such Lender, if any, to make Revolving Credit Loans and Letters of Credit,
in an aggregate principal and/or face amount not to exceed the amount set
forth under the heading "Revolving Credit Commitment" opposite such
Lender's name on Schedule 1.1A to the Disclosure Letter or in the
Assignment and Acceptance pursuant to which such Lender became a party
hereto, as the same may be changed from time to time pursuant to the terms
hereof. The original amount of the Total Revolving Credit Commitments is
$35,000,000.
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the Closing Date to the Revolving Credit Termination Date.
"REVOLVING CREDIT LENDER": each Lender which has a Revolving Credit
Commitment or which has made Revolving Credit Loans.
"REVOLVING CREDIT LOANS": as defined in Section 2.4.
"REVOLVING CREDIT NOTE": as defined in Section 2.6(e).
"REVOLVING CREDIT PERCENTAGE": as to any Revolving Credit Lender at
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the
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22
Total Revolving Credit Commitments (or, at any time after the Revolving
Credit Commitments shall have expired or terminated, the percentage
which the aggregate principal amount of such Lender's Revolving Credit
Loans then outstanding constitutes of the aggregate principal amount of
the Revolving Credit Loans then outstanding).
"REVOLVING CREDIT TERMINATION DATE": the earlier of (a) the Scheduled
Revolving Credit Termination Date and (b) the date on which all the Term
Loans shall mature or be paid in full.
"REVOLVING EXTENSIONS OF CREDIT": as to any Revolving Credit Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding
and (b) such Lender's Revolving Credit Percentage of the L/C Obligations
then outstanding.
"SCHEDULED REVOLVING CREDIT TERMINATION DATE": October 2, 2002.
"SEC": the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
"SECURITY DOCUMENTS": the collective reference to the Guarantee and
Collateral Agreement, the Mortgages, the Australian Pledge Agreement, the
French Pledge Agreements and the U.K. Pledge Agreement, the French Security
Document and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any Property of any Person to
secure the obligations and liabilities of any Loan Party under any Loan
Document.
"SENIOR SUBORDINATED NOTE INDENTURE": the Indenture entered into by
the Borrower and certain of its Subsidiaries in connection with the
issuance of the Senior Subordinated Notes, together with all instruments
and other agreements entered into by the Borrower and certain of its
Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 7.9.
"SENIOR SUBORDINATED NOTES": the unsecured senior subordinated notes
of the Borrower issued on the Closing Date pursuant to the Senior
Subordinated Note Indenture, and unsecured senior subordinated notes of the
Borrower registered under the Securities Act of 1933, as amended, with
terms identical in all material respects to those issued on the Closing
Date.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SOLVENT": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent or otherwise", as of
such date, as such value is established and such liabilities
<PAGE>
23
are evaluated in accordance with Section 101(32) of the federal
Bankruptcy Code and the state laws governing determinations of the
insolvency of debtors of New York and each state where such Person is
doing business or has its principal place of business, (b) the present
fair saleable value of the tangible and intangible assets of such Person
will, as of such date, be greater than the amount that will be required
to pay the liability of such Person on its debts as such debts become
absolute and matured, (c) such Person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its business,
and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) "debt" means liability on a "claim" and
(ii) "claim" means any (x) right to payment, whether or not such a right
is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (y) right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured.
"SUBSIDIARY": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"SUBSIDIARY GUARANTOR": each Subsidiary of the Borrower (other than
any Excluded Foreign Subsidiary) that guarantees the Obligations pursuant
to the Guarantee and Collateral Agreement.
"SYNDICATION DATE": the date on which the Syndication Agent completes
the syndication of the Facilities and the entities selected in such
syndication process become parties to this Agreement, which date shall be
no later than October 31, 1997.
"SYNDICATION LETTER AGREEMENT": the letter agreement, dated as of the
date hereof, between the Borrower and the Syndication Agent relating to the
syndication of the Facilities.
"TENDER FACILITY": as defined in the recitals hereto.
"TENDER OFFER": as defined in the recitals hereto.
"TERM LOAN LENDERS": the collective reference to the Tranche A Term
Loan Lenders and the Tranche B Term Loan Lenders.
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24
"TERM LOANS": the collective reference to the Tranche A Term Loans
and Tranche B Term Loans.
"TERM NOTE": as defined in Section 2.6(e).
"TOTAL REVOLVING CREDIT COMMITMENTS": at any time, the aggregate
amount of the Revolving Credit Commitments at such time.
"TOTAL REVOLVING EXTENSIONS OF CREDIT": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit
Lenders at such time.
"TRANCHE A TERM LOAN": as defined in Section 2.1.
"TRANCHE A TERM LOAN COMMITMENT": as to any Lender, the obligation of
such Lender, if any, to make a Tranche A Term Loan to the Borrower
hereunder in a principal amount not to exceed the amount set forth under
the heading "Tranche A Term Loan Commitment" opposite such Lender's name on
Schedule 1.1A to the Disclosure Letter or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto. The original
aggregate amount of the Tranche A Term Loan Commitments is $35,000,000.
"TRANCHE A TERM LOAN LENDER": each Lender which has a Tranche A Term
Loan Commitment or which has made a Tranche A Term Loan.
"TRANCHE A TERM LOAN PERCENTAGE": as to Tranche A Term Loan Lender at
any time, the percentage which such Lender's Tranche A Term Loan Commitment
then constitutes of the aggregate Tranche A Term Loan Commitments (or, at
any time after the Closing Date, the percentage which the aggregate
principal amount of such Lender's Tranche A Term Loans then outstanding
constitutes of the aggregate principal amount of the Tranche A Term Loans
then outstanding).
"TRANCHE B TERM LOAN": as defined in Section 2.1.
"TRANCHE B TERM LOAN COMMITMENT": as to Tranche B Term Loan Lender,
the obligation of such Lender, if any, to make a Tranche B Term Loan to the
Borrower hereunder in a principal amount not to exceed the amount set forth
under the heading "Tranche B Term Loan Commitment" opposite such Lender's
name on Schedule 1.1A or in the Assignment and Acceptance pursuant to which
such Lender became a party hereto. The original aggregate amount of the
Tranche B Term Loan Commitments is $15,000,000.
"TRANCHE B TERM LOAN LENDER": each Lender which has a Tranche B Term
Loan Commitment or which has made a Tranche B Term Loan.
"TRANCHE B TERM LOAN PERCENTAGE": as to any Lender at any time, the
percentage which such Lender's Tranche B Term Loan Commitment then
constitutes of the aggregate
<PAGE>
25
Tranche B Term Loan Commitments (or, at any time after the Closing Date,
the percentage which the aggregate principal amount of such Lender's
Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
"TRANSACTION DOCUMENTATION": collectively, the Merger Agreement, the
Offer to Purchase (including all documents and materials filed with the SEC
in connection therewith), the Senior Subordinated Note Indenture and all
documentation executed in connection with the Exchange Offer and the other
transactions contemplated hereby, in each case, including all schedules,
exhibits, certificates, documents and agreements entered into, executed or
delivered in connection therewith, and as each such agreement, filing,
schedule, exhibit, certificate or document may be amended, supplemented or
otherwise modified from time to time in accordance with Section 7.9.
"TRANSFEREE": as defined in Section 10.15.
"TYPE": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"U.K. PLEDGE AGREEMENT": the Pledge Agreement to be executed and
delivered by the Borrower in favor of the Administrative Agent,
substantially in the form of Exhibit K-2, as the same may be amended,
supplemented or otherwise modified from time to time.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500, as the same may be amended from time to time.
"UNITED STATES": the United States of America.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, Section and Exhibit
references are to this Agreement unless otherwise specified, and Schedule
references are to the Disclosure Letter unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 TERM LOAN COMMITMENTS. Subject to the terms and conditions
hereof, (a) each Tranche A Term Loan Lender severally agrees to make a term loan
(a "TRANCHE A TERM LOAN") to the Borrower on the Closing Date in an amount not
to exceed the amount of the Tranche A Term Loan Commitment of such Lender and
(b) each Tranche B Term Loan Lender severally agrees to make a term loan (a
"TRANCHE B TERM LOAN") to the Borrower on the Closing Date in an amount not to
exceed the amount of the Tranche B Term Loan Commitment of such Lender. The
Term Loans may from time to time be Eurodollar Loans or Base Rate Loans, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.13.
2.2 PROCEDURE FOR TERM LOAN BORROWING. The Borrower shall give the
Administrative Agent irrevocable Notice of Borrowing (which notice must be
received by the Administrative Agent prior to 10:00 A.M., New York City time,
one Business Day prior to the anticipated Closing Date) requesting that the Term
Loan Lenders make the Term Loans on the Closing Date and specifying the amount
to be borrowed. The Term Loans made on the Closing Date shall initially be Base
Rate Loans or Eurodollar Loans (if prior to the time the Borrower gives the
Administrative Agent notice in accordance with this Section 2.2, the Borrower
shall have executed an indemnity agreement in form and substance satisfactory to
the Syndication Agent) and no Term Loan may be converted into or continued as a
Eurodollar Loan having an Interest Period in excess of one month prior to the
Syndication Date; PROVIDED that the Eurodollar Rate shall be redetermined as of
the Syndication Date (based on the Interest Period selected by the Borrower and
communicated to the Administrative Agent in accordance with the terms hereof)
and such redetermined Eurodollar Rate shall apply to all Eurodollar Loans
outstanding as of the Syndication Date. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Loan Lender thereof. Not
later than 12:00 Noon, New York City time, on the Closing Date each Term Loan
Lender shall make available to the Administrative Agent at the Funding Office an
amount in immediately available funds equal to the Term Loan or Term Loans to be
made by such Lender. The Administrative Agent shall make available to the
Borrower with the aggregate of the amounts made available to the Administrative
Agent by the Term Loan Lenders in immediately available funds.
2.3 REPAYMENT OF TERM LOANS. (a) The Tranche A Term Loan of each
Tranche A Lender shall mature in 20 consecutive quarterly installments,
commencing on March 31, 1998, each of which shall be in an amount equal to such
Lender's Tranche A Term Loan Percentage multiplied by the amount set forth below
opposite such installment:
Installment Principal Amount
March 31, 1998 $700,000
June 30, 1998 700,000
September 30, 1998 700,000
December 31, 1998 700,000
March 31, 1999 1,850,000
June 30, 1999 1,850,000
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September 30, 1999 1,850,000
December 31, 1999 1,850,000
March 31, 2000 1,850,000
June 30, 2000 1,850,000
September 30, 2000 1,850,000
December 31, 2000 1,850,000
March 31, 2001 2,175,000
June 30, 2001 2,175,000
September 30, 2001 2,175,000
December 31, 2001 2,175,000
March 31, 2002 2,175,000
June 30, 2002 2,175,000
September 30, 2002 2,175,000
December 31, 2002 2,175,000
(b) The Tranche B Term Loan of each Tranche B Lender shall mature in
24 consecutive quarterly installments, commencing on March 31, 1998, each of
which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount
March 31, 1998 $100,000
June 30, 1998 100,000
September 30, 1998 100,000
December 31, 1998 100,000
March 31, 1999 100,000
June 30, 1999 100,000
September 30, 1999 100,000
December 31, 1999 100,000
March 31, 2000 100,000
June 30, 2000 100,000
September 30, 2000 100,000
December 31, 2000 100,000
March 31, 2001 100,000
June 30, 2001 100,000
September 30, 2001 100,000
December 31, 2001 100,000
March 31, 2002 100,000
June 30, 2002 100,000
September 30, 2002 100,000
December 31, 2002 100,000
March 31, 2003 3,250,000
June 30, 2003 3,250,000
September 30, 2003 3,250,000
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December 31, 2003 3,250,000
2.4 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("REVOLVING CREDIT LOANS") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the sum of the L/C Obligations then outstanding, does not
exceed the amount of such Lender's Revolving Credit Commitment. During the
Revolving Credit Commitment Period the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
The Revolving Credit Loans may from time to time be Eurodollar Loans or Base
Rate Loans, as determined by the Borrower and notified to the Administrative
Agent in accordance with Sections 2.5 and 2.11, PROVIDED that no Revolving
Credit Loan shall be made as a Eurodollar Loan after the day that is one month
prior to the Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans
on the Revolving Credit Termination Date.
2.5 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, PROVIDED that the Borrower shall give
the Administrative Agent irrevocable Notice of Borrowing (which notice must
be received by the Administrative Agent prior to 12:00 Noon, New York City
time, (a) three Business Days prior to the requested Borrowing Date, in the
case of Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount
and Type of Revolving Credit Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Period therefor. Any Revolving Credit Loans made on the Closing
Date shall initially be Base Rate Loans and no Revolving Credit Loan may be
made as, converted into or continued as a Eurodollar Loan having an Interest
Period in excess of one month prior to the Syndication Date; PROVIDED that
the Eurodollar Rate shall be redetermined as of the Syndication Date (based
on the Interest Period selected by the Borrower and communicated to the
Administrative Agent in accordance with the terms hereof) and such
redetermined Eurodollar Rate shall apply to all Eurodollar Loans outstanding
as of the Syndication Date. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of Base Rate
Loans, $500,000 or a whole multiple thereof (or, if the then aggregate
Available Revolving Credit Commitments are less than $500,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $500,000 or a whole multiple
thereof. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender
thereof. Each Revolving Credit Lender will make the amount of its PRO rata
share of each borrowing available to the Administrative Agent for the account
of the Borrower at the Funding Office prior to 12:00 Noon, New York City
time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent crediting the account
of the
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Borrower on the books of the Funding Office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent.
2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Revolving Credit Lender or Term Loan Lender, as
the case may be, (i) the then unpaid principal amount of each Revolving
Credit Loan of such Revolving Credit Lender on the Revolving Credit
Termination Date (or such earlier date on which the Loans become due and
payable pursuant to Section 8) and (ii) the principal amount of each Term
Loan of such Term Loan Lender in installments according to the amortization
schedule set forth in Section 2.3 (or on such earlier date on which the Loans
become due and payable pursuant to Section 8). The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Loans from time
to time outstanding from the date hereof until payment in full thereof at the
rates per annum, and on the dates, set forth in Section 2.13.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to
such Lender resulting from each Loan of such Lender from time to time,
including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 10.6(e), and a subaccount therein
for each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 2.6(b) shall, to the extent permitted
by applicable law, be PRIMA FACIE evidence of the existence and amounts of
the obligations of the Borrower therein recorded; PROVIDED that the failure
of any Lender or the Administrative Agent to maintain the Register or any
such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made
to such Borrower by such Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, promptly following the request to
the Administrative Agent by any Lender, the Borrower will execute and deliver
to such Lender (i) a promissory note of the Borrower evidencing any Term
Loans (a "TERM NOTE") or Revolving Credit Loans (a "REVOLVING CREDIT NOTE"),
as the case may be, of such Lender, substantially in the forms of Exhibit G-1
or G-2, respectively, with appropriate insertions as to date and principal
amount.
2.7 COMMITMENT FEES, ETC. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from
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and including the Closing Date to the last day of the Revolving Credit
Commitment Period, computed at the rate per annum of .375% on the average
daily amount of the Available Revolving Credit Commitment of such Lender
during the period for which payment is made, payable quarterly in arrears on
the last day of each March, June, September and December and on the Revolving
Credit Termination Date, commencing on the first of such dates to occur after
the date hereof.
(b) The Borrower agrees to pay to the Arranger and the Syndication
Agent the fees in the amounts and on the dates from time to time agreed to in
writing by the Borrower and the Syndication Agent.
(c) The Borrower agrees to pay to the Administrative Agent the
fees in the amounts and on the dates from time to time agreed to in writing
by the Borrower and the Administrative Agent.
2.8 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Borrower shall have the right, upon not less than two Business Days' notice
to the Administrative Agent, to terminate the Revolving Credit Commitments
or, from time to time, to reduce the amount of the Revolving Credit
Commitments; PROVIDED that no such termination or reduction of Revolving
Credit Commitments shall be permitted to the extent that, after giving effect
thereto and to any prepayments of the Revolving Credit Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Credit Commitments. Any such reduction shall be in an
amount equal to $500,000, or a whole multiple thereof, and shall reduce
permanently the Revolving Credit Commitments then in effect.
2.9 OPTIONAL PREPAYMENTS. The Borrower may at any time and from
time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice delivered to the Administrative Agent at
least three Business Days prior thereto in the case of Eurodollar Loans and
at least one Business Day prior thereto in the case of Base Rate Loans, which
notice shall specify the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans or Base Rate Loans; PROVIDED that if a
Eurodollar Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.19. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date specified therein, together with (except in the case of Revolving Credit
Loans which are Base Rate Loans) accrued interest to such date on the amount
prepaid. Partial prepayments of Term Loans and Revolving Credit Loans shall
be in an aggregate principal amount of $500,000 or a whole multiple thereof.
2.10 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS. (a) Unless
the Required Prepayment Lenders shall otherwise agree, if any Capital Stock or
Indebtedness shall be issued or Incurred by the Borrower or any of its
Subsidiaries (excluding any Indebtedness Incurred in accordance with Section 7.2
or Capital Stock issued in accordance with Section 7.9), an amount equal to 100%
of the Net Cash Proceeds of any Indebtedness Incurred and 75% of the Net Cash
Proceeds of any Capital Stock issued shall be applied on the date of such
issuance or
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Incurrence toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.10(d).
(b) Unless the Required Prepayment Lenders shall otherwise agree,
if on any date the Borrower or any of its Subsidiaries shall receive Net Cash
Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied on such date toward the prepayment of the Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section
2.10(d); PROVIDED that notwithstanding the foregoing, (i) the aggregate Net
Cash Proceeds of Asset Sales and Recovery Events that may be excluded from
the foregoing requirement pursuant to a Reinvestment Notice shall not exceed
$2,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be applied toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.10(d).
(c) Unless the Required Prepayment Lenders shall otherwise agree,
if, for any fiscal year of the Borrower commencing with the fiscal year
ending December 31, 1997, there shall be Excess Cash Flow, the Borrower
shall, on the relevant Excess Cash Flow Application Date, apply the ECF
Percentage of such Excess Cash Flow toward the prepayment of the Term Loans
and the reduction of the Revolving Credit Commitments as set forth in Section
2.10(d). Except as set forth in Section 2.16(d), each such prepayment and
commitment reduction shall be made on a date (an "EXCESS CASH FLOW
APPLICATION DATE") no later than five days after the earlier of (i) the date
on which the financial statements of the Borrower referred to in Section
6.1(a), for the fiscal year with respect to which such prepayment is made,
are required to be delivered to the Lenders and (ii) the date such financial
statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to this Section 2.10 shall be applied,
FIRST, to the prepayment of the Term Loans and, SECOND, to reduce permanently
the Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of the Revolving Credit Loans
to the extent, if any, that the Total Revolving Extensions of Credit exceed
the amount of the Total Revolving Credit Commitments as so reduced, PROVIDED
that if the aggregate principal amount of Revolving Credit Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Borrower shall, to the extent of the
balance of such excess, replace outstanding Letters of Credit and/or deposit
an amount in cash in a cash collateral account established with the
Administrative Agent for the benefit of the Lenders on terms and conditions
satisfactory to the Administrative Agent. The application of any prepayment
pursuant to this Section 2.10 shall be made, FIRST, to Base Rate Loans and,
SECOND, to Eurodollar Loans. Each prepayment of the Loans under this Section
2.10 (except in the case of Revolving Credit Loans that are Base Rate Loans)
shall be accompanied by accrued interest to the date of such prepayment on
the amount prepaid.
2.11 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable Notice of
Borrowing of such election, PROVIDED that any such conversion of Eurodollar
Loans may only be made on the last day of an Interest Period
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with respect thereto. The Borrower may elect from time to time to convert
Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days' prior irrevocable Notice of Borrowing of such
election (which notice shall specify the length of the initial Interest
Period therefor), PROVIDED that no Base Rate Loan under a particular Facility
may be converted into a Eurodollar Loan (i) when any Event of Default has
occurred and is continuing and the Administrative Agent or the Majority
Facility Lenders in respect of such Facility have determined in its or their
sole discretion not to permit such conversions or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable Notice of Borrowing to the Administrative Agent,
in accordance with the applicable provisions of the term "Interest Period"
set forth in Section 1.1, of the length of the next Interest Period to be
applicable to such Loans, PROVIDED that no Eurodollar Loan under a particular
Facility may be continued as such (i) when any Event of Default has occurred
and is continuing and the Administrative Agent has or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such continuations or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility, and PROVIDED, FURTHER, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation
is not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof.
2.12 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF EURODOLLAR TRANCHES.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, (a) after giving
effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $500,000 or a whole
multiple thereof and (b) no more than eight Eurodollar Tranches shall be
outstanding at any one time.
2.13 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.13
PLUS 2%
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or (y) in the case of Reimbursement Obligations, the rate applicable to Base
Rate Loans under the Revolving Credit Facility PLUS 2%, and (ii) if all or a
portion of any interest payable on any Loan or Reimbursement Obligation or
any commitment fee or other amount payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum equal to the rate
applicable to Base Rate Loans under the relevant Facility PLUS 2% (or, in the
case of any such other amounts that do not relate directly to the Loans, the
Base Rate PLUS 4%), in each case, with respect to clauses (i) and (ii) above,
from the date of such non-payment until such amount is paid in full (as well
after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
Section 2.13 shall be payable from time to time on demand.
2.14 COMPUTATION OF INTEREST AND FEES. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base
Rate Loans the rate of interest on which is calculated on the basis of the
Prime Rate, the interest thereon shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of each determination of a Eurodollar Rate. Any change in
the interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error.
The Administrative Agent shall, at the request of the Borrower, promptly
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to Section
2.13(a).
2.15 INABILITY TO DETERMINE INTEREST RATE. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
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the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made
as Base Rate Loans, (y) any Loans under the relevant Facility that were to
have been converted on the first day of such Interest Period to Eurodollar
Loans shall be continued as Base Rate Loans and (z) any outstanding
Eurodollar Loans under the relevant Facility shall be converted, on the last
day of the then current Interest Period, to Base Rate Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans under the relevant Facility shall be made or continued as such, nor
shall the Borrower have the right to convert Loans under the relevant
Facility to Eurodollar Loans.
2.16 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee and any reduction of the Commitments of the Lenders
shall be made PRO RATA according to the respective Tranche A Term Loan
Percentages, Tranche B Term Loan Percentages or Revolving Credit Percentages,
as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans shall be made PRO RATA
according to the respective outstanding principal amounts of the Term Loans
then held by the Term Loan Lenders (except as otherwise provided in Section
2.16(d). The amount of each principal prepayment of the Term Loans shall be
applied to reduce the then remaining installments of the Tranche A Term Loans
and Tranche B Term Loans, as the case may be, PRO RATA based upon the then
remaining principal amount thereof. Amounts prepaid on account of the Term
Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Credit Loans shall be
made PRO RATA according to the respective outstanding principal amounts of
the Revolving Credit Loans then held by the Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Sections 2.9, 2.10 or
2.16, so long as any Tranche A Term Loans are outstanding, each Tranche B Term
Loan Lender may, at its option, decline up to 50% of the portion of any optional
prepayment or mandatory prepayment applicable to the Tranche B Term Loans of
such Lender; accordingly, with respect to the amount of any optional prepayment
described in Section 2.9 or mandatory prepayment described in Section 2.10 that
is allocated to Tranche B Term Loans (such amount, the "TRANCHE B PREPAYMENT
AMOUNT"), at any time when Tranche A Term Loans remain outstanding, the Borrower
will, (i) in the case of any optional prepayment which the Borrower wishes to
make, not later than ten Business Days prior to the date on which the Borrower
wishes to make such optional prepayment, and (ii) in the case of any mandatory
prepayment required to be made pursuant to Section 2.10, in lieu of applying
such amount to the prepayment of Tranche B Term Loans, as provided in paragraph
Section 2.10(d), on the date specified in Section 2.10 for such prepayment, give
the Administrative Agent telephonic notice (promptly confirmed in writing)
requesting that the Administrative Agent prepare and provide to each Tranche B
Term Loan Lender a notice (each, a "PREPAYMENT OPTION NOTICE") as described
below. As promptly as practicable after receiving such notice from the
Borrower, the Administrative Agent will send to
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each Tranche B Term Loan Lender a Prepayment Option Notice, which shall be in
the form of Exhibit H, and shall include an offer by the Borrower to prepay
on the date (each a "PREPAYMENT DATE") that is five Business Days after the
date of the Prepayment Option Notice, the relevant Term Loans of such Lender
by an amount equal to the portion of the Prepayment Amount indicated in such
Lender's Prepayment Option Notice as being applicable to such Lender's
Tranche B Term Loans. On the Prepayment Date, (i) the Borrower shall pay to
the Administrative Agent the aggregate amount necessary to prepay that
portion of the outstanding relevant Term Loans in respect of which Tranche B
Term Loan Lenders have accepted prepayment as described above (such Lenders,
the "ACCEPTING LENDERS"), and such amount shall be applied to reduce the
Tranche B Prepayment Amounts with respect to each Accepting Lender, (ii) the
Borrower shall pay to the Administrative Agent an amount equal to 50% of the
portion of the Tranche B Prepayment Amount not accepted by the Accepting
Lenders, and such amount shall be applied to the prepayment of the Tranche A
Term Loans, and (C) the Borrower shall be entitled to retain the remaining
50% of the portion of the Tranche B Prepayment Amount not accepted by the
Accepting Lenders. Each Term Loan Lender other than an Accepting Lender
shall receive its portion of any optional prepayment or mandatory prepayment
as set forth in Sections 2.9, 2.10 and 2.16.
(e) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Payment Office,
in Dollars and in immediately available funds. The Administrative Agent
shall distribute such payments to the Lenders promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. If any
payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension
of any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(f) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section 2.16(f) shall
be conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the
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36
Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to Base Rate Loans under
the relevant Facility, on demand, from the Borrower.
(g) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective PRO RATA
shares of a corresponding amount. If such payment is not made to the
Administrative Agent by the Borrower within three Business Days of such
required date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available
pursuant to the preceding sentence, such amount with interest thereon at the
rate per annum equal to the daily average Federal Funds Effective Rate.
Nothing herein shall be deemed to limit the rights of the Administrative
Agent or any Lender against the Borrower.
2.17 REQUIREMENTS OF LAW. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit, any Application or any
Eurodollar Loan made by it, or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.18 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or issuing or
participating in Letters of Credit, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary
to compensate such Lender for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.17, it shall promptly notify the Borrower (with a
copy to the Administrative Agent) of the event by reason of which it has
become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or
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37
compliance by such Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on such Lender's
or such corporation's capital as a consequence of its obligations hereunder
or under or in respect of any Letter of Credit to a level below that which
such Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed
by such Lender to be material, then from time to time, after submission by
such Lender to the Borrower (with a copy to the Administrative Agent) of a
written request therefor, the Borrower shall promptly pay to such Lender such
additional amount or amounts as will compensate such Lender for such
reduction.
(c) A certificate (providing reasonable support as to the amounts
requested) as to any additional amounts payable pursuant to this Section 2.17
submitted by any Lender to the Borrower (with a copy to the Administrative
Agent) shall be conclusive in the absence of manifest error. The obligations
of the Borrower pursuant to this Section 2.17 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.18 TAXES. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or
any Lender as a result of a present or former connection between such Agent
or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from such Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("NON-EXCLUDED TAXES") or Other Taxes are required to be
withheld from any amounts payable to any Agent or any Lender hereunder, the
amounts so payable to such Agent or such Lender shall be increased to the
extent necessary to yield to such Agent or such Lender (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement,
PROVIDED, HOWEVER, that the Borrower shall not be required to increase any
such amounts payable to any Lender with respect to any Non-Excluded Taxes (i)
that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this subsection or (ii) that are
United States withholding taxes imposed on amounts payable to such Lender at
the time the Lender becomes a party to this Agreement, except to the extent
that such Lender's assignor (if any) was entitled, at the time of assignment,
to receive additional amounts from the Borrower with respect to such
Non-Excluded Taxes pursuant to Section 2.18(a).
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
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38
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by
the Borrower, as promptly as possible thereafter the Borrower shall send to
the Administrative Agent for the account of the relevant Agent or Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Agents the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by any Agent or any Lender as a result of
any such failure. The agreements in this Section 2.18 shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States (or any jurisdiction
thereof), or any estate or trust that is subject to federal income taxation
regardless of the source of its income (a "NON-U.S. LENDER") shall deliver to
the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest" a statement substantially in the form of
Exhibit I and a Form W-8, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax
on all payments by the Borrower under this Agreement and the other Loan
Documents. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered
by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the
Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other
form of certification adopted by the U.S. taxing authorities for such
purpose). Notwithstanding any other provision of this Section 2.18(b), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.18(d) that such Non-U.S. Lender is not legally able to deliver.
(e) Without limiting the requirements of Section 2.18(d), a Lender
that is entitled to an exemption from or reduction of non-U.S. withholding
tax under the law of the jurisdiction in which the Borrower is located, or
any treaty to which such jurisdiction is a party, with respect to payments
under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, PROVIDED that such Lender is
legally entitled to complete, execute and deliver such documentation and in
such Lender's reasonable judgment such completion, execution or submission
would not materially prejudice the legal position of such Lender.
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39
(f) If the Administrative Agent or any Lender receives a refund in
respect of Non-Excluded Taxes paid by the Borrower, which in the good faith
judgment of such Lender is allocable to such payment, it shall promptly pay
such refund, together with any other amounts paid by the Borrower in
connection with such refunded Non-Excluded Taxes, to the Borrower, net of all
out-of-pocket expenses of such Lender incurred in obtaining such refund,
PROVIDED, that the Borrower agrees to promptly return such refund to the
Administrative Agent or the applicable Lender, as the case may be, if it
receives notice from the Administrative Agent or applicable Lender that such
Administrative Agent or Lender is required to repay such refund.
2.19 INDEMNITY. The Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with
the provisions of this Agreement or (c) the making of a prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period
with respect thereto. Such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert
or continue to the last day of such Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) OVER (ii) the amount of interest
(as reasonably determined by such Lender) which would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market. A certificate
(providing reasonable support as to any amounts due) as to any amounts
payable pursuant to this Section 2.19 submitted to the Borrower by any Lender
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
2.20 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.17, 2.18(a)
or 2.22 with respect to such Lender, it will, if requested by the Borrower,
use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another lending office for any Loans affected by such
event with the object of avoiding the consequences of such event; PROVIDED,
that such designation is made on terms that, in the sole judgment of such
Lender, cause such Lender and its lending office(s) to suffer no economic,
legal or regulatory disadvantage, and PROVIDED, FURTHER, that nothing in this
Section 2.20 shall affect or postpone any of the obligations of any Borrower
or the rights of any Lender pursuant to Section 2.17, 2.18(a) or 2.22.
2.21 REPLACEMENT OF LENDERS. If, at any time, so long as no Default
or Event of Default shall have occurred and be continuing (a) the Borrower
becomes obligated to pay additional amounts described in Sections 2.17 or 2.18
as a result of any conditions described in such Sections, (b) any of the events
described in Section 2.22 shall occur and any Lender is thereby prohibited from
making or maintaining Eurodollar Loans as contemplated by this
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40
Agreement or (c) any Lender becomes insolvent and its assets become subject
to a receiver, liquidator, trustee, custodian or other Person having similar
powers, then the Borrower may, on ten Business Days prior written notice to
the Administrative Agent and such Lender, replace such Lender by causing such
Lender to (and such Lender shall) assign pursuant to Section 10.6(c) all of
its rights and obligations under this Agreement to a Lender or other entity
selected by the Borrower and reasonably acceptable to the Administrative
Agent (which consent shall not be unreasonably withheld or delayed) for a
purchase price equal to the outstanding principal amount of such Lender's
Loans and all accrued interest and fees and, as shall be paid by either the
Borrower or the assignee (as they may agree), other amounts accrued and
unpaid hereunder; PROVIDED that (i) the Borrower shall have no right to
replace the Administrative Agent (but may replace such Person as a Lender),
(ii) neither the Administrative Agent nor any Lender shall have any
obligation to the Borrower to find a replacement Lender or other such entity
and (iii) in the event of replacement of a Lender to which the Borrower
becomes obligated to pay additional amounts referred to in this Section, in
order for the Borrower to be entitled to replace such a Lender, such
replacement must take place no later than 180 days after the Lender shall
have demanded payment of additional amounts under one of the Sections
described in this Section. In the case of a replacement of a Lender to which
the Borrower becomes obligated to pay additional amounts referred to in this
Section, the Borrower shall pay such additional amounts to such Lender prior
to such Lender being replaced and the payment of such additional amounts
shall be a condition to the replacement of such Lender.
2.22 ILLEGALITY. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Agreement, (a)
the commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans
shall forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect
to such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of
the then current Interest Period with respect thereto, the Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to Section
2.19.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) After the Syndication Date, subject to the
terms and conditions hereof, the Issuing Lender, in reliance on the agreements
of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to
issue letters of credit ("LETTERS OF CREDIT") for the account of the Borrower on
any Business Day during the Revolving Credit Commitment Period in such form as
may be approved from time to time by the Issuing Lender; PROVIDED that the
Issuing Lender shall have no obligation to issue any Letter of Credit if, after
giving effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the aggregate amount of the Available Revolving Credit
Commitments would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the earlier of (x) the
first anniversary of its date of issuance and (y) the date which is five
Business Days prior to the Scheduled Revolving Credit Termination Date, PROVIDED
that any Letter of Credit with a one-year
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41
term may provide for the renewal thereof for additional one-year periods
(which shall in no event extend beyond the date referred to in clause (y)
above).
(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTER OF CREDIT. The Borrower may
from time to time after the Syndication Date request that the Issuing Lender
issue a Letter of Credit by delivering to the Issuing Lender at its address
for notices specified herein an Application therefor, completed to the
satisfaction of the Issuing Lender, and such other certificates, documents
and other papers and information as the Issuing Lender may reasonably
request. Upon receipt of any Application, the Issuing Lender will process
such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed to
by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a
copy of such Letter of Credit to the Borrower promptly following the issuance
thereof. The Issuing Lender shall promptly furnish to the Administrative
Agent, which shall in turn promptly furnish to the Lenders, notice of the
issuance of each Letter of Credit (including the amount thereof). The letter
of credit identified on Schedule 3.2 to the Disclosure Letter shall at all
times on and after the Syndication Date (PROVIDED that on such date Union
Bank of California, N.A. shall be a Lender party hereto) be deemed to be a
"Letter of Credit" for all purposes of this Agreement and the other Loan
Documents, and, Union Bank of California, N.A. shall be the "Issuing Lender"
in respect thereof.
3.3 COMMISSIONS, FEES AND OTHER CHARGES. (a) The Borrower will
pay a commission on all outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with respect to Eurodollar
Loans under the Revolving Credit Facility MINUS the fronting fee referred to
below, shared ratably among the Revolving Credit Lenders and payable
quarterly in arrears on each L/C Fee Payment Date after the issuance date.
In addition, the Borrower shall pay to the Issuing Lender for its own account
a fronting fee of 1/4 of 1% per annum, payable quarterly in arrears on each
L/C Fee Payment Date after the Issuance Date.
(b) In addition to the foregoing fees and commissions, to the
extent agreed to by the Borrower and the Issuing Lender, the Borrower shall
pay or reimburse the Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C PARTICIPATIONS. (a) The Issuing Lender irrevocably agrees
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit
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42
hereunder, each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and
risk an undivided interest equal to such L/C Participant's Revolving Credit
Percentage in the Issuing Lender's obligations and rights under each Letter
of Credit issued hereunder and the amount of each draft paid by the Issuing
Lender thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Lender that, if a draft is paid under any Letter of
Credit for which the Issuing Lender is not reimbursed in full by the Borrower
in accordance with the terms of this Agreement, such L/C Participant shall
pay to the Issuing Lender upon demand at the Issuing Lender's address for
notices specified herein an amount equal to such L/C Participant's Revolving
Credit Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to
the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit
is paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on
demand an amount equal to the product of (i) such amount, times (ii) the
daily average Federal Funds Effective Rate during the period from and
including the date such payment is required to the date on which such payment
is immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by
any L/C Participant pursuant to Section 3.4(a) is not made available to the
Issuing Lender by such L/C Participant within three Business Days after the
date such payment is due, the Issuing Lender shall be entitled to recover
from such L/C Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum applicable to Base Rate
Loans under the Revolving Credit Facility. A certificate of the Issuing
Lender submitted to any L/C Participant with respect to any amounts owing
under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant
its PRO rata share of such payment in accordance with Section 3.4(a), the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise, including proceeds of collateral
applied thereto by the Issuing Lender), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its PRO
RATA share thereof; PROVIDED, HOWEVER, that in the event that any such
payment received by the Issuing Lender shall be required to be returned by
the Issuing Lender, such L/C Participant shall return to the Issuing Lender
the portion thereof previously distributed by the Issuing Lender to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER. The Borrower agrees
to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (a) such
draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by the Issuing Lender in connection with such payment. Each such
payment shall be made to the Issuing Lender at its address for notices
specified herein in lawful money of the United States and in immediately
available funds. Interest shall be payable on any and all
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43
amounts remaining unpaid by the Borrower under this Section from the date
such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in Section 2.13(c).
Each drawing under any Letter of Credit shall (unless an event of the type
described in clause (i) or (ii) of Section 8(f) shall have occurred and be
continuing with respect to the Borrower, in which case the procedures
specified in Section 3.4 for funding by L/C Participants shall apply)
constitute a request by the Borrower to the Administrative Agent for a
borrowing pursuant to Section 2.5 of Base Rate Loans in the amount of such
drawing. The Borrowing Date with respect to such borrowing shall be the date
of such drawing.
3.6 OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender, any beneficiary of
a Letter of Credit or any other Person. The Borrower also agrees with the
Issuing Lender that the Issuing Lender shall not be responsible for, and the
Borrower's Reimbursement Obligations under Section 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower
and any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or any claims whatsoever of the Borrower
against any beneficiary of such Letter of Credit or any such transferee. The
Issuing Lender shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of the Issuing Lender. The Borrower agrees that any action taken or omitted
by the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards or care specified in
the Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender to the
Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender shall promptly
notify the Borrower of the date and amount thereof. The responsibility of
the Issuing Lender to the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment
obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are substantially in
conformity with such Letter of Credit.
3.8 APPLICATIONS. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the
provisions of this Section 3, the provisions of this Section 3 shall apply.
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44
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit, the
Borrower hereby represents and warrants to each Agent and each Lender that:
4.1 FINANCIAL CONDITION. (a) The unaudited PRO FORMA
consolidated balance sheet of the Borrower and its consolidated Subsidiaries
as at the Closing Date (including the notes thereto) (the "PRO FORMA BALANCE
SHEET"), copies of which have heretofore been furnished to each Lender, has
been prepared giving effect (as if such events had occurred on such date) to
(i) the consummation of the Merger, (ii) the Loans to be made and the Senior
Subordinated Notes to be issued on the Closing Date and the use of proceeds
thereof, (iii) the other transactions contemplated hereby and (iv) the
payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to
the Borrower as of the date of delivery thereof, and presents fairly on a PRO
FORMA basis the estimated financial position of Borrower and its consolidated
Subsidiaries as at the Closing Date, assuming that the events specified in
the preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of Axiohm S.A. as at
December 31, 1995 and December 31, 1996, and the related consolidated
statements of income and of cash flows for the fiscal years ended on such
dates, reported on by and accompanied by an unqualified report from Price
Waterhouse, present fairly the consolidated financial condition of Axiohm
S.A. as at such dates, and the consolidated results of its operations and its
consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of Axiohm S.A. as at June 30, 1997, and
the related unaudited consolidated statements of income and cash flows for
the six-month period ended on such date, present fairly the consolidated
financial condition of Axiohm S.A. as at such date, and the consolidated
results of its operations and its consolidated cash flows for the six-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of
accountants and disclosed therein. Axiohm S.A. and its Subsidiaries do not
have any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or
long-term commitments, including, without limitation, any interest rate or
foreign currency swap or exchange transaction or other obligation in respect
of derivatives, which are not reflected in the most recent financial
statements referred to in this paragraph (b). During the period from
December 31, 1996 to and including the date hereof, there has been no
Disposition by Axiohm S.A. or its Subsidiaries of any material part of its
business or Property or, except as a part of the Pre-Merger Transactions, any
transfer of Capital Stock to any Person other than Axiohm S.A. or a
Subsidiary Guarantor that is a Domestic Subsidiary.
(c) The audited consolidated balance sheets of the Borrower as at
December 31, 1994, December 31, 1995 and December 31, 1996, and the related
consolidated statements of income and of cash flows for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report
from KPMG Peat Marwick LLP, present fairly the consolidated financial
condition of the Borrower as at such dates, and the consolidated results of
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45
its operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of the Borrower
as at June 30, 1997, and the related unaudited consolidated statements of
income and cash flows for the six-month period ended on such date, present
fairly the consolidated financial condition of the Borrower as at such date,
and the consolidated results of its operations and its consolidated cash
flows for the six-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). The Borrower and
its Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, including, without limitation, any interest
rate or foreign currency swap or exchange transaction or other obligation in
respect of derivatives, which are not reflected in the most recent financial
statements referred to in this paragraph (c). During the period from
December 31, 1996 to and including the date hereof there has been no
Disposition by the Borrower or its Subsidiaries of any material part of its
business or Property.
4.2 NO CHANGE. Since December 31, 1996 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate
its Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law, except, in the case of clauses (c) and (d), to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in
the case of the Borrower, to borrow hereunder. Each Loan Party has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and, in the case of
the Borrower, to authorize the borrowings on the terms and conditions of this
Agreement. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the Merger and the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of this
Agreement or any of the Loan Documents, except (i) consents, authorizations,
filings and notices have been obtained or made and are in full force and
effect and (ii) the filings referred to in Section 4.19(b). Each Loan
Document has been duly executed and delivered on behalf of each Loan Party
party thereto. This Agreement constitutes, and each other Loan Document upon
execution will constitute, a legal, valid and binding obligation of each Loan
Party party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability
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46
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought
by proceedings in equity or at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the Borrower or any
of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
4.6 NO MATERIAL LITIGATION. Except as provided in Schedule 4.6 to
the Disclosure Letter, no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of
its Subsidiaries or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected to
have a Material Adverse Effect.
4.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries
is in default under or with respect to any of its Contractual Obligations in
any respect which could reasonably be expected to have a Material Adverse
Effect. No Default or Event of Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Except as set forth in Schedule
4.9 to the Disclosure Letter (which exceptions could not reasonably be
expected to have a Material Adverse Effect), each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in,
all its real property, and good title to, or a valid leasehold interest in,
all its other material Property, except for any defects in title that do not
interfere in any material respect with its ability to conduct its business as
currently conducted or to utilize such properties and assets for their
intended purposes, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
4.9 INTELLECTUAL PROPERTY. Except as set forth in Schedule 4.9 to
the Disclosure Letter (which exceptions could not reasonably be expected to
have a Material Adverse Effect); (i) the Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
for the conduct of its business as currently conducted; (ii) no material
claim has been asserted and is pending by any Person challenging or
questioning the use of any Intellectual Property or the validity or
effectiveness of any Intellectual Property, nor does the Borrower know of any
valid basis for any such claim; and (iii) the use of Intellectual Property by
the Borrower and its Subsidiaries does not infringe on the rights of any
Person in any material respect.
4.10 TAXES. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all Federal, state and other material tax returns
which are required to be filed and has
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47
paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes, fees
or other charges imposed on it or any of its Property by any Governmental
Authority (other than any the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
Borrower or its Subsidiaries, as the case may be); no tax Lien has been
filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
4.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G or
Regulation U as now and from time to time hereafter in effect in violation of
the provisions of the Regulations of the Board. If requested by any Lender
or the Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity with
the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation G or
Regulation U, as the case may be.
4.12 LABOR MATTERS. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge
of the Borrower, threatened that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. Hours worked by
and payment made to employees of the Borrower and its Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Requirement of Law dealing with such matters that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect.
All payments due from the Borrower or any of its Subsidiaries on account of
employee health and welfare insurance that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect if not paid
have been paid or accrued as a liability on the books of the Borrower or the
relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan,
and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan
has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by a material amount. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan which has resulted or could reasonably
be expected to result in a material liability under ERISA, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
material liability under ERISA if the Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as
of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
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48
4.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Loan Party is
an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended. No Loan Party is subject to regulation under any Requirement of Law
(other than Regulation X of the Board) which limits its ability to incur
Indebtedness.
4.15 SUBSIDIARIES. The Subsidiaries listed on Schedule 4.15 to
the Disclosure Letter constitute as of the Closing Date all the Subsidiaries
of the Borrower at the date hereof.
4.16 USE OF PROCEEDS. (a) The proceeds of the Term Loans will be
used (i) to refinance the borrowings of Acquisition Co. under the Tender
Facility, (ii) to finance the redemption of the Interim Preferred Stock
issued by Axiohm-IPB in connection with the Tender Offer, (iii) to refinance
certain indebtedness of the Borrower outstanding after the Merger, (iv) to
finance the payment to be made to shareholders of Axiohm S.A. in connection
with the Exchange Offer and (v) the payment of the fees and expenses of the
Merger and the Tender Offer and the transactions contemplated thereby.
(b) The proceeds of the Revolving Credit Loans shall be used for
working capital purposes and other general corporate purposes of the Borrower
and its Subsidiaries; PROVIDED that up to $2,400,000 of the proceeds of
Revolving Credit Loans may be used for the purposes set forth in Section
4.16(a). Letters of Credit shall be used to provide credit support for
insurance and other general corporate requirements of the Borrower and its
Subsidiaries.
4.17 ENVIRONMENTAL MATTERS. Except as in the aggregate could not
reasonably be expected to result in the payment of a Material Environmental
Amount:
(a) The facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "PROPERTIES") do not contain, and,
to the best knowledge of the Borrower, have not previously contained, any
Materials of Environmental Concern in amounts or concentrations or under
circumstances which (i) constitute or constituted a violation of, or (ii)
could give rise to liability under, any Environmental Law.
(b) The Properties and all operations at the Properties are in
material compliance, and have, to the best knowledge of the Borrower, in the
last five years been in material compliance, with all applicable
Environmental Laws, and there is, to the best knowledge of the Borrower, no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by
the Borrower or any of its Subsidiaries (the "BUSINESS"). Neither the
Borrower nor any of its Subsidiaries has assumed or retained any liability of
any other Person under Environmental Laws.
(c) Neither the Borrower nor any of its Subsidiaries has received
or is aware of any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or
the Business, nor does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened.
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49
(d) To the best knowledge of the Borrower, Materials of
Environmental Concern have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could give
rise to liability under, any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of at, on
or under any of the Properties in violation of, or in a manner that could
give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named
as a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law with respect to the Properties or the Business.
(f) To the best knowledge of the Borrower, there has been no
release or threat of release of Materials of Environmental Concern at or from
the Properties, or arising from or related to the operations of the Borrower
or any Subsidiary in connection with the Properties or otherwise in
connection with the Business, in violation of or in amounts or in a manner
that could give rise to liability under Environmental Laws.
For purposes of Section 8(b) of this Agreement, each of the
foregoing representations and warranties contained in this Section 4.17 that
are qualified by the knowledge or best knowledge of the Borrower shall be
deemed not to be so qualified.
4.18 ACCURACY OF INFORMATION, ETC. No statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement
(including the financial statements of Axiohm S.A. as at and for the period
ended December 31, 1994) furnished to the Administrative Agent or the Lenders
or any of them, by or on behalf of any Loan Party for use in connection with
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished (or, in the case of the Confidential Information Memorandum,
as of the date of this Agreement), any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
contained herein or therein, taken as a whole, not misleading. The
projections and PRO FORMA financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed
by management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. As of the date
hereof, the representations and warranties contained in the Merger Agreement
are true and correct in all material respects. There is no fact known to any
Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other
documents, certificates and statements furnished to the Administrative Agent
and the Lenders for use in connection with the transactions contemplated
hereby and by the other Loan Documents.
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50
4.19 SECURITY DOCUMENTS. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for
the benefit of the Lenders, a legal, valid and enforceable security interest
in the Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the
Administrative Agent, and in the case of the other Collateral described in
the Guarantee and Collateral Agreement, when financing statements in
appropriate form are filed in the offices specified on Schedule 4.19(a) to
the Disclosure Letter and such other filings as are specified on Schedule 3
to the Guarantee and Collateral Agreement, the Guarantee and Collateral
Agreement shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Collateral and
the proceeds thereof, as security for the Obligations (as defined in the
Guarantee and Collateral Agreement), in each case prior and superior in right
to any other Person (except, in the case of Collateral other than Pledged
Stock, Liens permitted by Section 7.3).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on
Schedule 4.19(b) to the Disclosure Letter, each such Mortgage shall
constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in the Mortgaged Properties and the
proceeds thereof, as security for the Obligations (as defined in the relevant
Mortgage), in each case prior and superior in right to any other Person.
(c) The French Security Document is effective to create in favor
of the Administrative Agent, for the benefit of the Lenders, a legal, valid
and enforceable security interest in the collateral described therein and
proceeds thereof. In the case of the collateral described in the French
Security Document, the French Security Document shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the collateral and the proceeds thereof, as security for
the Secured Liabilities (as defined in the French Security Document), in each
case prior and superior in right to any other Person (except Liens permitted
by Section 7.3).
(d) The Australian Pledge Agreement is effective to create in
favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable security interest in the Pledged Stock described
therein. When stock certificates representing such Pledged Stock are
delivered to the Administrative Agent, the Australian Pledge Agreement shall
constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Pledge Stock, as security for
the Secured Moneys (as defined in the Australian Pledge Agreement), prior and
superior in right to any other Person.
(e) The U.K. Pledge Agreement is effective to create in favor of
the Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Pledged Stock described therein. When
stock certificates representing such Pledged Stock are delivered to the
Administrative Agent, the U.K. Pledge Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Pledge Stock, as security for the Secured
Liabilities (as defined in the U.K. Pledge Agreement), prior and superior in
right to any other Person.
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51
(f) The French Pledge Agreements are effective to create in favor
of the Administrative Agent, for the benefit of the Lenders, a legal, valid
and enforceable security interest in the Pledged Stock described therein.
When the formalities of perfection set forth in Article 2.1 or 12 (as
applicable) of the French Pledge Agreements have been consummated, the French
Pledge Agreements shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such Pledge
Stock, as security for the Secured Liabilities (as defined in the French
Pledge Agreements), prior and superior in right to any other Person.
4.20 SOLVENCY. With due consideration given to Section 2.1 of the
Guarantee and Collateral Agreement, each Loan Party is, and after giving
effect to the Merger and Exchange Offer and the incurrence of all
Indebtedness and obligations being incurred in connection herewith and
therewith will be and will continue to be, Solvent.
4.21 SENIOR INDEBTEDNESS. The Obligations constitute "Senior
Indebtedness" of the Borrower under and as defined in the Senior Subordinated
Note Indenture. The obligations of each Subsidiary Guarantor under the
Guarantee and Collateral Agreement constitute "Senior Indebtedness" of such
Subsidiary Guarantor under and as defined in the Senior Subordinated Note
Indenture.
4.22 REGULATION H. No Mortgage encumbers improved real property
which is located in an area that has been identified by the Secretary of
Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL EXTENSION OF CREDIT. The agreement of
each Lender to make the initial extension of credit requested to be made by
it is subject to the satisfaction, prior to or concurrently with the making
of such extension of credit on the Closing Date, of the following conditions
precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of
the Borrower, (ii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of each party thereto, (iii) each of
the Mortgages, executed and delivered by a duly authorized officer of each
party thereto, (iv) the French Security Document, executed and delivered by
a duly authorized officer of each party thereto, (v) the Australian Pledge
Agreement, executed and delivered by a duly authorized officer of each
party thereto, (vi) the U.K. Pledge Agreement executed and delivered by a
duly authorized officer of each party thereto, (vii) the French Pledge
Agreements, and the related statements of pledge (declarations de gage),
executed and delivered by a duly authorized office of each party thereto
and (viii) for the account of each relevant Lender, Notes conforming to the
requirements hereof and executed and delivered by a duly authorized officer
of the Borrower.
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52
(b) MERGER, ETC. The following transactions shall have been
consummated, in each case, on terms and conditions reasonably satisfactory
to the Lenders:
(i) The Merger shall have been, or shall be concurrently,
consummated pursuant to the Merger Agreement and all required
stockholder approval to effect the Merger shall have been obtained;
and the Merger Agreement shall not have been amended, supplemented,
waived or otherwise modified in any material respect without the prior
written consent of the Administrative Agent;
(ii) The Exchange Offer shall have been consummated and, after
giving effect to the Exchange Offer and the Merger, the Borrower shall
own, directly or indirectly, at least 90% of the stock of Axiohm S.A.;
and
(iii) The Borrower shall have issued and sold the Senior
Subordinated Notes.
(c) PRO FORMA BALANCE SHEET; FINANCIAL STATEMENTS. The Lenders shall
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of the Borrower for the 1994, 1995 and 1996 fiscal
years, (iii) audited consolidated financial statements of Axiohm S.A. for
its 1994, 1995 and 1996 fiscal years and (iv) unaudited interim
consolidated financial statements of the Borrower and Axiohm S.A. for each
fiscal month and quarterly period ended subsequent to the date of the
latest applicable financial statements delivered pursuant to clauses (ii)
and (iii) of this paragraph as to which such financial statements are
available, and such financial statements shall not, in the reasonable
judgment of the Lenders, reflect any material adverse change in the
consolidated financial condition of the Borrower and its Subsidiaries or
Axiohm S.A. and its Subsidiaries, as reflected in the financial statements
or projections contained in the Confidential Information Memorandum.
(d) APPROVALS. All governmental (including compliance with the H-S-R
Act in respect of the Merger and the Exchange Offer, and any required
French governmental approvals in respect of the Exchange Offer),
shareholder and third party approvals (including debtholders', landlords'
and other consents) reasonably necessary or advisable in connection with
the Merger, the Exchange Offer, the financings contemplated hereby and the
continuing operations of Axiohm S.A., Axiohm-IPB, the Borrower and their
Subsidiaries after the Merger shall have been obtained and be in full force
and effect and all applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Tender
Offer or the Merger.
(e) RELATED AGREEMENTS. The Administrative Agent shall have received
(in a form reasonably satisfactory to the Syndication Agent), with a copy
for each Lender, true and correct copies, certified as to authenticity by
the Borrower, of the Transaction Documentation and such other documents or
instruments as may be reasonably requested by the Syndication Agent,
including, without limitation, a copy of the Senior
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53
Subordinated Note Indenture and any other debt instrument, security
agreement or other material contract to which the Loan Parties may be a
party. The documents and materials filed publicly by Axiohm S.A.,
Acquisition Co. and the Borrower in connection with the Merger shall have
been furnished to the Administrative Agent and shall be reasonably
satisfactory in form and substance.
(f) REFINANCING OF TENDER FACILITY. All obligations of Acquisition
Co. or the Borrower under the Tender Facility shall have been refinanced
with the proceeds of the Facilities and the Senior Subordinated Notes.
(g) FEES. The Lenders, the Syndication Agent and the Administrative
Agent shall have received all fees required to be paid, and all expenses
for which invoices have been presented, on or before the Closing Date.
(h) SOLVENCY ANALYSIS. The Lenders shall have received a
satisfactory solvency opinion from Valuemetrics, Inc., which shall document
the solvency of Axiohm S.A., Axiohm-IPB, the Borrower and each of their
Subsidiaries taken as a whole after giving effect to the Tender Offer, the
Merger and the other transactions contemplated hereby.
(i) INSURANCE. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.5 hereof
and Section 5.3 of the Guarantee and Collateral Agreement.
(j) LIEN SEARCHES. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no liens on
any of the assets of the Borrower or its Subsidiaries except for liens
permitted by Section 7.3.
(k) INDEBTEDNESS, LIENS OR PREFERRED CAPITAL STOCK. Neither
Acquisition Co., the Borrower nor their Subsidiaries shall have any
outstanding Indebtedness, Liens or preferred Capital Stock after giving
effect to the Merger other than such Indebtedness, Liens or preferred
Capital Stock permitted by Sections 7.2 and 7.3.
(l) CLOSING CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
(m) LEGAL OPINIONS. The Administrative Agent shall have received the
following executed legal opinions:
(i) the legal opinion of McDermott, Will & Emery, counsel to
the Borrower and its Subsidiaries, substantially in the form of
Exhibit F-1;
(ii) the legal opinion of Wilson, Sonsini, Goodrich & Rosati,
counsel to the Borrower and its Subsidiaries, substantially in the
form of Exhibit F-2;
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54
(iii) the legal opinion of Slaughter and May, French counsel to
the Borrower and its Subsidiaries, substantially in the form of
Exhibit F-3;
(iv) the legal opinion of special Gide Loyrette Nouel, French
counsel to the Agents and the Lenders, substantially in the form of
Exhibit F-4;
(v) the legal opinion of Adrian Holmes, Esq., Australian
counsel to the Borrower, substantially in the form of Exhibit F-5;
(vi) the legal opinion of Allen & Overy, U.K. counsel to the
Agents and the Lenders, substantially in the form of Exhibit F-6; and
(vii) the legal opinion of Sparks Dix, P.C., Colorado counsel to
the Borrower and its subsidiaries, substantially in the form of
Exhibit F-7.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Syndication Agent may
reasonably require.
(n) PLEDGED STOCK; STOCK POWERS. The Administrative Agent shall have
received the certificates representing the shares of Capital Stock pledged
pursuant to the Guarantee and Collateral Agreement, the Australian Pledge
Agreement, the French Pledge Agreement and the U.K. Pledge Agreement,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the pledgor thereof.
(o) FILINGS, REGISTRATIONS AND RECORDINGS. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
(p) MORTGAGES, ETC. (i) The Administrative Agent shall have
received a Mortgage with respect to each Mortgaged Property, executed and
delivered by a duly authorized officer of each party thereto.
(ii) If requested by the Administrative Agent, the Administrative
Agent shall have received, and the title insurance company issuing the
policy referred to in Section 5.1(m)(iii) (the "TITLE INSURANCE COMPANY")
shall have received, maps or plats of an as-built survey of the sites of
the Mortgaged Properties certified to the Administrative Agent and the
Title Insurance Company in a manner satisfactory to them, dated a date
satisfactory to the Administrative Agent and the Title Insurance Company by
an independent professional licensed land surveyor satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats
and the surveys on which they are based shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title
<PAGE>
55
Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the following: (A) the
locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the lines of
streets abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building structures and
improvements on the sites; (F) if the site is described as being on a filed
map, a legend relating the survey to said map; and (G) the flood zone
designations, if any, in which the Mortgaged Properties are located.
(iii) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such insurance. Each such policy shall
(A) be in an amount satisfactory to the Administrative Agent; (B) be issued
at ordinary rates; (C) insure that the Mortgage insured thereby creates a
valid first Lien on such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (D) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (E) be in
the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or
equivalent policies); (F) contain such endorsements and affirmative
coverage as the Administrative Agent may reasonably request and (G) be
issued by title companies satisfactory to the Administrative Agent
(including any such title companies acting as co-insurers or reinsurers, at
the option of the Administrative Agent). The Administrative Agent shall
have received evidence satisfactory to it that all premiums in respect of
each such policy, all charges for mortgage recording tax, and all related
expenses, if any, have been paid.
(iv) If requested by the Administrative Agent, the Administrative
Agent shall have received (A) a policy of flood insurance which (1) covers
any parcel of improved real property which is encumbered by any Mortgage
(2) is written in an amount not less than the outstanding principal amount
of the indebtedness secured by such Mortgage which is reasonably allocable
to such real property or the maximum limit of coverage made available with
respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (3) has a term ending not
later than the maturity of the Indebtedness secured by such Mortgage and
(B) confirmation that the Borrower has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in Section 5.1(m)(iii) and a copy of
all other material documents affecting the Mortgaged Properties.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without
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56
limitation, its initial extension of credit) is subject to the satisfaction
of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct in all material respects on and as of such date
as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall and shall cause
each of its Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to each Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the
end of such year and the related audited consolidated statements of income
and of cash flows for such year, setting forth in each case in comparative
form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by KPMG Peat Marwick LLP or other independent
certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the case
may be, and disclosed therein).
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57
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Agent and
each Lender, or, in the case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of each such Responsible Officer's knowledge, each Loan
Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (ii) in the case of quarterly or annual
financial statements, (x) a Compliance Certificate containing all
information and calculations necessary for determining compliance by the
Borrower and its Subsidiaries with the provisions of this Agreement
referred to therein as of the last day of the fiscal quarter or fiscal year
of the Borrower, as the case may be, and (y) to the extent not previously
disclosed to the Administrative Agent, a listing of any county or state
within the United States where any Loan Party keeps inventory or equipment
and of any Intellectual Property acquired by any Loan Party since the date
of the most recent list delivered pursuant to this clause (y) (or, in the
case of the first such list so delivered, since the Closing Date) the value
of which exceeds $50,000;
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a detailed consolidated
budget for the following fiscal year (including a projected consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the
following fiscal year, and the related consolidated statements of projected
cash flow, projected changes in financial position and projected income),
and, as soon as available, significant revisions, if any, of such budget
and projections with respect to such fiscal year (collectively, the
"PROJECTIONS"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions as of the time
such Projections were delivered and that such Responsible Officer has no
reasonable basis to believe that such Projections are incorrect or
misleading in any material respect; PROVIDED that such certificate may
state that the Responsible Officer gives no assurance that such Projections
will be achieved;
(d) to the extent approval is required by the Required Lenders
pursuant to Section 7.9, no later than 10 Business Days prior to the
effectiveness thereof, copies of substantially final drafts of any proposed
amendment, supplement, waiver or other modification with respect to the
Senior Subordinated Note Indenture;
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58
(e) to the extent not previously delivered hereunder, within five
days after the same are sent, copies of all financial statements and
reports which the Borrower sends to the holders of any class of its debt
securities or public equity securities and within five days after the same
are filed, copies of all financial statements and reports which the
Borrower may make to, or file with, the SEC, including any materials filed
in respect of the Exchange Offer or the Merger; and
(f) promptly, such additional financial and other information
regarding the business of the Borrower and its Subsidiaries as they relate
to the Loan Documents as any Lender (through the Administrative Agent) may
from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be,
all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have
been provided on the books of the Borrower or its Subsidiaries, as the case
may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE, ETC. (a)
(i) Subject to Section 7.15, continue to engage in business of the same
general type as now conducted by it, (ii) preserve, renew and keep in full
force and effect its corporate existence and (iii) take all reasonable action
to maintain all rights, privileges and franchises necessary or desirable in
the normal conduct of its business, except, in each case, as otherwise
permitted by Section 7.4 and except, in the case of clause (iii) above, to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. (a) Subject to Section
7.5, keep all Property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted and (b) maintain with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. (a)
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities and
(b) permit representatives of any Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired and, with
reasonable notice, to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
independent certified public accountants.
6.7 NOTICES. Promptly give notice to the Administrative Agent and
each Lender of:
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59
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $1,500,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan; and
(e) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) (i) Comply with all Environmental
Laws applicable to it, and obtain, comply with and maintain any and all
Environmental Permits necessary for its operations as conducted and as
planned; and (ii) take all reasonable efforts to ensure that all of its
tenants, subtenants, contractors, subcontractors, and invitees comply with
all Environmental Laws, and obtain, comply with and maintain any and all
Environmental Permits, applicable to any of them insofar as any failure to so
comply, obtain or maintain reasonably could be expected to adversely affect
the Borrower or any of its Subsidiaries. For purposes of this Section
6.8(a), noncompliance by the Borrower or any of its Subsidiaries with any
applicable Environmental Law or Environmental Permit shall be deemed not to
constitute a breach of this covenant if, upon learning of any actual or
suspected noncompliance, the Borrower or any applicable Subsidiary shall
promptly undertake all reasonable efforts to achieve compliance, and PROVIDED
that, in any case, such non-compliance, and any other noncompliance with
Environmental Law, individually or in the aggregate, could not reasonably be
expected to give rise to a Material Adverse Effect or materially and
adversely affect the value of any Mortgaged Property.
(b) Promptly comply with all material orders and directives of all
Governmental Authorities regarding Environmental Laws, other than such orders
and directives as to which
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60
appropriate proceedings have been timely and properly taken in good faith,
and PROVIDED that the pendency of any and all such proceedings could not
reasonably be expected to give rise to a Material Adverse Effect.
(c) Promptly (and in any case within six months) after the Closing
Date, complete the development of, and implement in all material respects, a
program to promote compliance with and to minimize prudently any liabilities
or potential liabilities under any Environmental Law that may affect the
Borrower or any of its Subsidiaries (the "ENVIRONMENTAL PROGRAM"). The
Environmental Program shall be developed with the assistance of a reputable
independent environmental consulting firm or other independent environmental
professional, in either case, reasonably acceptable to the Agents (an
"ENVIRONMENTAL PROFESSIONAL"). Upon either Agent's request, a reasonably
detailed written description of the Environmental Program shall be provided
to the Agents prior to finalization thereof, after which, upon either Agent's
request, the Borrower and the Environmental Professional involved shall
confer with the Agents concerning the Environmental Program. The Agents
shall have the right, but shall not have any duty, to obtain, review, or
discuss any such description.
(d) Prior to acquiring any ownership or leasehold interest in real
property, or other interest in any real property that could give rise to the
Borrower or any of its Subsidiaries being found an owner, operator, or
otherwise subject to potential liability under any Environmental Law (or any
entity with such interests in any real property): (i) obtain a written report
by a reputable independent environmental consultant reasonably acceptable to
the Agents (an "ENVIRONMENTAL CONSULTANT") of the Environmental Consultant's
assessment of the presence or potential presence of significant levels of any
Materials of Environmental Concern on, in, under, or about such property, or
of other conditions that could give rise to potentially significant liability
under or violations of Environmental Law relating to such acquisition, and
notify the Administrative Agent of such potential acquisition; and (ii) if
requested by the Administrative Agent after learning of such potential
acquisition, provide such report to the Administrative Agent and afford the
Administrative Agent a reasonable opportunity to review and, if requested by
the Administrative Agent, discuss such report with the Environmental
Consultant who prepared it and a knowledgeable representative of the
Borrower. The Administrative Agent shall have the right, but shall not have
any duty, to obtain, review, or discuss any such report.
(e) Promptly upon Administrative Agent's request if there has
occurred or the Administrative Agent reasonably anticipates an Event of
Default, permit an environmental consultant whom the Administrative Agent in
its discretion designates, subject to the approval of the Borrower, which
shall not be unreasonably withheld or delayed, to perform an environmental
assessment (including, without limitation: reviewing documents; interviewing
knowledgeable persons; and sampling and analyzing soil, air, surface water,
groundwater, and/or other media in or about property owned or leased by the
Borrower or any of its Subsidiaries, or on which operations of the Borrower
or any of its Subsidiaries otherwise take place.) Such environmental
assessment shall be in form, scope, and substance reasonably satisfactory to
the Administrative Agent, subject to the approval of the Borrower, which
shall not be unreasonably withheld or delayed. The Borrower or any of its
Subsidiaries shall cooperate fully in the conduct of such environmental
assessment, and shall pay the reasonable costs of such environmental
assessment immediately upon written demand by the Administrative Agent. The
Administrative Agent shall
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61
have the right, but shall not have any duty, to request and/or obtain such
environmental assessment.
6.9 INTEREST RATE PROTECTION. In the case of the Borrower, within
60 days after the Closing Date, enter into Interest Rate Protection
Agreements to the extent necessary to provide that at least $20,000,000 in
aggregate principal amount of the Term Loans is subject to either a fixed
interest rate or interest rate protection for a period of not less than two
years, which Interest Rate Protection Agreements shall have terms and
conditions reasonably satisfactory to the Agents.
6.10 ADDITIONAL COLLATERAL, ETC. (a) With respect to any
Property acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (x) any Property described in paragraph (b), (c) or
(d) below or owned by an Excluded Foreign Subsidiary and (y) any Property
subject to a Lien expressly permitted by Section 7.3(g)) as to which the
Administrative Agent, for the benefit of the Lenders, does not have a
perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such supplements or amendments to the Guarantee and Collateral Agreement or
such other documents as the Administrative Agent deems necessary or
reasonably advisable in order to grant to the Administrative Agent, for the
benefit of the Lenders, a security interest in such Property and (ii) take
all actions necessary or reasonably advisable to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in such Property, including without limitation, the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent.
(b) With respect to any fee interest in any real estate having a
value (together with improvements thereof) of at least $1,000,000 acquired
after the Closing Date by the Borrower or any of its Subsidiaries (other than
any such real estate subject to a Lien expressly permitted by Section
7.3(g)), promptly (i) execute and deliver a first priority mortgage or deed
of trust, as the case may be, in favor of the Administrative Agent, for the
benefit of the Lenders, covering such real estate, in form and substance
reasonably satisfactory to the Administrative Agent, (ii) if reasonably
requested by the Administrative Agent, provide the Lenders with (x) title and
extended coverage insurance covering such real estate in an amount at least
equal to the purchase price of such real estate (or such other amount as
shall be reasonably specified by the Administrative Agent) as well as a
current ALTA survey thereof, together with a surveyor's certificate and (y)
any consents or estoppels reasonably deemed necessary or reasonably advisable
by the Administrative Agent in connection with such mortgage or deed of
trust, each of the foregoing in form and substance reasonably satisfactory to
the Administrative Agent and (iii) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by the Borrower
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary) or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
supplements or amendments to the Guarantee and Collateral Agreement as the
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62
Administrative Agent deems necessary or reasonably advisable in order to
grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in the Capital Stock of such new
Subsidiary which is owned by the Borrower or any of its Subsidiaries, (ii)
deliver to the Administrative Agent the certificates representing such
Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement and (B) to take such actions necessary or
reasonably advisable to grant to the Administrative Agent for the benefit of
the Lenders a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement with respect to such new
Subsidiary, including, without limitation, the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be reasonably
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Subsidiaries or
any Excluded Foreign Subsidiary that existed on the Closing Date which owns
assets with a value in excess of $1,000,000, promptly (i) execute and deliver
to the Administrative Agent such supplements or amendments to the Guarantee
and Collateral Agreement (or, if such Excluded Foreign Subsidiary owns assets
with a value in excess of $1,000,000, such other pledge or security
agreement) as the Administrative Agent deems necessary or reasonably
advisable in order to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in the Capital
Stock of such new Subsidiary which is owned by the Borrower or any of its
Subsidiaries (PROVIDED that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in
blank, executed and delivered by a duly authorized officer of the Borrower or
such Subsidiary, as the case may be, and (iii) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(e) Promptly notify the Administrative Agent if (i) the value of
the plant, property and equipment of the Borrower and its Subsidiaries
located in Mexico exceeds $1,000,000 or (ii) the value of the inventory of
the Borrower and its Subsidiaries located in Mexico exceeds the lesser of (A)
$5,000,000 or (B) 20% of the aggregate worldwide inventory of the Borrower
and its Subsidiaries; and, unless, at such time, the Consolidated Leverage
Ratio as at the last day of the most recent period of four consecutive fiscal
quarters of the Borrower is less than 2.50 to 1.00, take all actions
necessary or reasonably advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in such assets, including, without limitation, the establishment and
maintenance of a trust with an independent financial institution for such
purpose.
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63
6.11 LIMITATION ON DESIGNATED SENIOR DEBT. Designate any
Indebtedness as "Designated Senior Debt" under the Senior Subordinated Note
Indenture.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain
in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or any Agent hereunder, the Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANTS.
(a) CONSOLIDATED LEVERAGE RATIO. Permit the Consolidated Leverage
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to
the Closing Date) ending with any fiscal quarter set forth below to exceed
the ratio set forth below opposite such fiscal quarter:
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
December 31, 1997 5.50 to 1.00
March 31, 1998 5.50 to 1.00
June 30, 1998 5.50 to 1.00
September 30, 1998 5.25 to 1.00
December 31, 1998 4.75 to 1.00
March 31, 1999 3.50 to 1.00
June 30, 1999 3.50 to 1.00
September 30, 1999 3.50 to 1.00
December 31, 1999 3.50 to 1.00
March 31, 2000 2.50 to 1.00
June 30, 2000 2.50 to 1.00
September 30, 2000 2.50 to 1.00
December 31, 2000 2.50 to 1.00
March 31, 2001 1.50 to 1.00
June 30, 2001 1.50 to 1.00
September 30, 2001 1.50 to 1.00
December 31, 2001 1.50 to 1.00
March 31, 2002 1.50 to 1.00
June 30, 2002 1.50 to 1.00
September 30, 2002 1.50 to 1.00
December 31, 2002 1.50 to 1.00
Thereafter 1.50 to 1.00
; PROVIDED, that for the purposes of determining the ratio described above for
the fiscal quarters of the Borrower ending December 31, 1997, March 31, 1998 and
June 30, 1998, Consolidated
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64
EBITDA for the relevant period shall be deemed to equal Consolidated EBITDA
for such fiscal quarter (and, in the case of the latter two such
determinations, each previous fiscal quarter commencing after the Closing
Date) MULTIPLIED BY 4, 2 and 4/3, respectively.
(b) CONSOLIDATED INTEREST COVERAGE RATIO. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to
the Closing Date) ending with any fiscal quarter set forth below to be less
than the ratio set forth below opposite such fiscal quarter:
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- ----------------------
December 31, 1997 1.75 to 1.00
March 31, 1998 1.50 to 1.00
June 30, 1998 1.70 to 1.00
September 30, 1998 1.90 to 1.00
December 31, 1998 2.10 to 1.00
March 31, 1999 3.10 to 1.00
June 30, 1999 3.10 to 1.00
September 30, 1999 3.10 to 1.00
December 31, 1999 3.10 to 1.00
March 31, 2000 4.50 to 1.00
June 30, 2000 4.50 to 1.00
September 30, 2000 4.50 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 6.50 to 1.00
June 30, 2001 6.50 to 1.00
September 30, 2001 6.50 to 1.00
December 31, 2001 6.50 to 1.00
March 31, 2002 6.50 to 1.00
June 30, 2002 6.50 to 1.00
September 30, 2002 6.50 to 1.00
December 31, 2002 6.50 to 1.00
Thereafter 6.50 to 1.00
(c) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit the
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower ending with any fiscal quarter set forth
below to be less than the ratio set forth below opposite such fiscal quarter:
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Consolidated Fixed
Fiscal Quarter Charge Coverage Ratio
-------------- ---------------------
September 30, 1998 1.00 to 1.00
December 31, 1998 1.05 to 1.00
March 31, 1999 1.05 to 1.00
June 30, 1999 1.20 to 1.00
September 30, 1999 1.20 to 1.00
December 31, 1999 1.20 to 1.00
March 31, 2000 1.50 to 1.00
June 30, 2000 1.50 to 1.00
September 30, 2000 1.50 to 1.00
December 31, 2000 1.50 to 1.00
March 31, 2001 1.70 to 1.00
June 30, 2001 1.70 to 1.00
September 30, 2001 1.70 to 1.00
December 31, 2001 1.70 to 1.00
March 31, 2002 1.70 to 1.00
June 30, 2002 1.70 to 1.00
September 30, 2002 1.70 to 1.00
December 31, 2002 1.70 to 1.00
Thereafter 1.70 to 1.00
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer
to exist (in each case, to "INCUR") any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness between the Borrower and a Subsidiary or between one
Subsidiary and another; PROVIDED that (a) if the Borrower is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated in
liquidation to the prior payment in full in cash of all Obligations; and
(b) if a Subsidiary that is not a Subsidiary Guarantor is the obligor on
such Indebtedness, such Indebtedness owing to the Borrower or any
Subsidiary Guarantor, together with all intercompany Indebtedness owing
from all Subsidiaries that are not Subsidiary Guarantors to the Borrower or
a Subsidiary Guarantor, does not exceed $5,000,000 in aggregate principal
amount at any time outstanding;
(c) Indebtedness secured by Liens permitted by Section 7.3(g) in an
aggregate principal amount not to exceed $2,000,000 at any one time
outstanding;
(d) Capital Lease Obligations in an aggregate principal amount not to
exceed $5,000,000 at any one time outstanding;
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66
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) to the Disclosure Letter and any refinancings, refundings,
renewals or extensions thereof (without any increase in the principal
amount thereof);
(f) unsecured Indebtedness of any Loan Party incurred in the ordinary
course of business as a result of open account arrangements or accrued
expenses in current account payables;
(g) Guarantee Obligations of any Indebtedness permitted by this
Section 7.2; and
(h) Indebtedness under Interest Rate Protection Agreements required
by Section 6.9;
(i) Indebtedness in respect of a revolving credit facility (the
"FRENCH REVOLVER") for the purpose of funding the working capital needs in
the ordinary course of business of Axiohm S.A. in French francs; PROVIDED
that (i) the Dollar equivalent (determined in good faith by the Borrower)
of the aggregate outstanding principal amount thereof (the "AXIOHM S.A.
EQUIVALENT OUTSTANDINGS") shall not exceed $10,000,000 at any one time and
(ii) on the date of any incurrence thereof, after giving effect thereto,
the sum of the Axiohm S.A. Equivalent Outstandings and aggregate Revolving
Extensions of Credit of all Revolving Credit Lenders shall not exceed the
aggregate Revolving Credit Commitments of all Revolving Credit Lenders;
PROVIDED, FURTHER, that, for purposes of this clause (ii) only, the undrawn
and unexpired amount of any outstanding Letter of Credit (in a face amount
not to exceed $10,000,000) issued to support obligations under the French
Revolver shall not be deemed to be a Revolving Extension of Credit;
(j) additional Indebtedness of Subsidiaries that are not Subsidiary
Guarantors in an aggregate principal amount at any time outstanding not to
exceed $5,000,000;
(k) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of obligations of any Subsidiary
Guarantor that is a Domestic Subsidiary; and
(l) (i) Indebtedness of the Borrower in respect of the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$100,000,000 and (ii) Guarantee Obligations of any Subsidiary Guarantor in
respect of such Indebtedness subordinated to the Obligations to the same
extent as such Indebtedness.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
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67
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) zoning restrictions, easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not in
any case materially detract from the value of the Property subject thereto
or materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f)
to the Disclosure Letter, securing Indebtedness permitted by Section
7.2(e), PROVIDED that no such Lien is spread to cover any additional
Property after the Closing Date and that the amount of Indebtedness secured
thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition
of fixed or capital assets, PROVIDED that (i) such Liens shall be created
within 90 days of the acquisition of such fixed or capital assets, (ii)
such Liens do not at any time encumber any Property other than the Property
financed by such Indebtedness and (iii) the amount of Indebtedness secured
thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased;
(j) Liens arising from precautionary UCC financing statement filings
regarding operating leases or consignment arrangements entered into by the
Borrower or its Subsidiaries in the ordinary course of business;
(k) licenses, sublicenses, leases and subleases permitted hereunder
granted to others not interfering in any material respect in the business
of the Borrower or any of its Subsidiaries;
(l) attachment or judgment Liens which are not outstanding for more
than thirty (30) days in an aggregate amount (not paid or fully covered by
insurance as to which the
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68
relevant insurance company has acknowledged coverage) outstanding at any
one time not in excess of $1,000,000;
(m) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Borrower or any of its Subsidiaries in the ordinary course of business;
and
(n) Liens on property at the time of its acquisition or existing on
property or assets of a Person which becomes a Subsidiary after the date
hereof, PROVIDED that (i) such Liens existed at the time of such
acquisition or at the time such Person became a Subsidiary and were not
created in anticipation thereof, and (ii) any such Lien is not spread to
cover any additional property or assets, including property or assets of
such corporation after the time such corporation becomes a Subsidiary; and
(o) Liens in favor of customs and revenue authorities arising as a
matter of law to secure the payment of customs duties in connection with
the importation of goods by the Borrower or its Subsidiaries.
7.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of, all or substantially
all of its Property or business, or make any material change in its present
method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (PROVIDED that the Borrower shall be the continuing or
surviving corporation) or with or into any Subsidiary Guarantor that is a
Domestic Subsidiary (PROVIDED that the Subsidiary Guarantor shall be the
continuing or surviving corporation);
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary Guarantor that is a Domestic Subsidiary;
(c) the Pre-Merger Transactions and, immediately thereafter (and
substantially concurrently therewith) the Merger, may be consummated, so
long as concurrently therewith all amounts outstanding under the Tender
Facility shall be repaid in full; and
(d) transactions permitted by Section 7.5.
7.5 LIMITATION ON SALE OF ASSETS. Dispose of any of its Property
or business (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to
any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
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69
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Subsidiary Guarantor that is a Domestic Subsidiary;
(e) the licensing and sublicensing of Intellectual Property of the
Borrower and its Subsidiaries in the ordinary course of business;
(f) the leasing or subleasing of real property of the Borrower and
its Subsidiaries in the ordinary course of business;
(g) Dispositions permitted by Section 7.11; and
(h) Asset Sales the Net Cash Proceeds of which are applied toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.10.
7.6 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other
than dividends payable solely in common stock or warrants to purchase common
stock of the Person making such dividend) on, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of Capital Stock of the Borrower or any Subsidiary or any
warrants or options to purchase any such Capital Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations
of the Borrower or any Subsidiary (collectively, "RESTRICTED PAYMENTS"),
except that:
(a) any Subsidiary may make Restricted Payments to the Borrower or
any Subsidiary Guarantor that is a Domestic Subsidiary;
(b) the Exchange Offer;
(c) (i) as long as no Default or Event of Default shall have occurred
and be continuing, the Borrower may make (including tax indemnification
amounts) Restricted Payments into a trust in connection with the purchase
of vested options on the Borrower's common stock in an amount not to exceed
$2,000,000 as contemplated by the Merger Agreement and (ii) at any time,
such trust may make payments or distributions in accordance with the terms
of the agreements governing the operation of such trust; PROVIDED that in
no event shall the Borrower make Restricted Payments pursuant to this
clause (c) in an amount in excess of $2,000,000; and
(d) so long as no Default or Event of Default shall have occurred and
be continuing, the Borrower may repurchase its common stock at fair market
value in an amount not to exceed $500,000 during the 1998 and 1999 fiscal
years of the Borrower and $750,000 during the 2000 fiscal year of the
Borrower.
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7.7 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make
(by way of the acquisition of securities of a Person or otherwise) any
Capital Expenditure, except Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business not exceeding the amount set
forth below with respect to any fiscal year of the Borrower:
Fiscal Year Amount
----------- ------
1997 $3,000,000
1998 $10,500,000
1999 $11,500,000
2000 $12,500,000
2001 $13,500,000
2002 $14,500,000
Thereafter $14,500,000
7.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit (by way of guaranty or otherwise) or
capital contribution to, or purchase any stock, bonds, notes, debentures or
other securities of or any assets constituting all or a material part of a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Borrower or its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$500,000 at any one time outstanding;
(e) so long as no Default or Event of Default shall have occurred and
be continuing, the purchase of all or substantially all of the assets of
Saint Maxim, a company organized in Taiwan, for aggregate consideration not
in excess of $250,000;
(f) the Tender Offer and the Pre-Merger Transactions;
(g) investments made by the Borrower or any of its Subsidiaries with
the proceeds of any Reinvestment Deferred Amount;
(h) investments, loans or advances by the Borrower or any of its
Subsidiaries in or to the Borrower or any Person that, prior to such
investment, loan or advance is a Subsidiary Guarantor that is a Domestic
Subsidiary;
(i) cash pledged to the Lenders pursuant to the Loan Documents;
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(j) investments by the Borrower or its Subsidiaries in Interest Rate
Protection Agreements required by Section 6.9;
(k) investments in the form of intercompany Indebtedness permitted
by Section 7.2(b) and (j); and
(l) so long as no Defaultor Event of Default shall have occurred
and be continuing, other investments by the Borrower or any Subsidiary or
any Person having an aggregate (for all said investments) fair market
value (measured as of the date such investment is made) not to exceed
$3,000,000.
7.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS OR MERGER AGREEMENT, ETC. (a) Make or offer to make any
payment, prepayment, repurchase or redemption of or otherwise defease or
segregate funds with respect to the Senior Subordinated Notes (other than
scheduled interest payments required to be made in cash: provided that such
scheduled interest payments may not be made with "Permitted Proceeds" (as
defined in the Senior Subordinated Note Indenture) at any time when payments
of interest or the Senior Subordinated are prohibited pursuant to Sections
10.02 or 10.03 of the Senior Subordinated Note Indenture except with
Permitted Proceeds), (b) amend, modify, waive or otherwise change, or consent
or agree to any amendment, modification, waiver or other change to, any of
the terms of (i) the Senior Subordinated Notes (other than any such
amendment, modification, waiver or other change which (A) would extend the
maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or extend the date for payment of interest thereon and
(B) does not involve the payment of a consent fee), (ii) the Merger Agreement
or (iii) any class of its Capital Stock or (c) designate any Indebtedness as
"Designated Senior Debt" for the purposes of the Senior Subordinated Note
Indenture.
7.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Subsidiary in the ordinary course of business on fair and
reasonable terms) unless such transaction is (a) otherwise permitted under
this Agreement, (b) in the ordinary course of business of the Borrower or
such Subsidiary, as the case may be, and (c) upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate. Notwithstanding the foregoing, the following
transactions may be consummated: (i) the Tender Offer, the Pre-Merger
Transactions and each of the transactions provided for or described in the
Transaction Documentation, (ii) each of the employment agreements entered
into by any of the Loan Parties and William Gibbs or Walter Sobon dated as of
July 14, 1997, (iii) as set forth on Schedule 7.10 to the Disclosure Letter,
(iv) Restricted Payments permitted by Section 7.6, and (v) the payment of
fees and indemnities to directors, officers and employees of the Loan Parties
in the ordinary course of business.
7.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary, except if the Net Cash Proceeds of such sale are applied toward
the prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments pursuant to Section 2.10.
7.12 LIMITATION ON CHANGES IN FISCAL PERIODS. Permit the fiscal
year of the Borrower to end on a day other than December 31 or change the
Borrower's method of determining fiscal quarters.
7.13 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
the Borrower or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its Property or
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72
revenues, whether now owned or hereafter acquired, other than (a) this
Agreement and the other Loan Documents, (b) any agreements governing any
purchase money Liens or Capital Lease Obligations otherwise permitted hereby
(in which case, any prohibition or limitation shall only be effective against
the assets financed thereby) and (c) the Senior Subordinated Note Indenture.
7.14 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS.
Enter into or suffer to exist or become effective any consensual encumbrance
or restriction on the ability of any Subsidiary of the Borrower to (a) pay
dividends or make any other distributions in respect of any Capital Stock of
such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any
other Subsidiary of the Borrower, (b) make loans or advances to the Borrower
or any other Subsidiary of the Borrower or (c) transfer any of its assets to
the Borrower or any other Subsidiary of the Borrower, except for such
encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents and (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement which has been
entered into in connection with the Disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary otherwise permitted
hereunder.
7.15 LIMITATION ON LINES OF BUSINESS. Enter into any business,
either directly or through any Subsidiary, except for those businesses in
which the Borrower and its Subsidiaries are engaged on the date of this
Agreement or which are reasonably related or incidental thereto.
7.16 LIMITATION ON ACTIVITIES OF THE DARDEL AND AXIOHM-INV.
Permit Dardel or Axiohm-Inv, notwithstanding anything to the contrary in this
Agreement or any other Loan Document, to (a) conduct, transact or otherwise
engage in, or commit to conduct, transact or otherwise engage in, any
business or operations other than those incidental to its ownership of the
Capital Stock of its Subsidiary, (b) incur, create, assume or suffer to exist
any Indebtedness or other liabilities or financial obligations, except (i)
nonconsensual obligations imposed by operation of law, (ii) pursuant to the
Loan Documents to which it is a party and (iii) obligations with respect to
its Capital Stock (other than any such obligations constituting
Indebtedness), (c) own, lease, manage or otherwise operate any properties or
assets (including cash and cash equivalents) other than the ownership of
shares of Capital Stock of its Subsidiary, (d) create or permit to exist any
Subsidiary other than a wholly owned Subsidiary or (e) directly or
indirectly, convey, sell, transfer of otherwise dispose of, or create,
assume, incur or permit to be created, assumed, incurred or to exist, any
Lien of any kind upon, any Capital Stock of its Subsidiary (except pursuant
to the Loan Documents).
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
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73
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (ii) of Section 6.4(a)
(with respect to any Loan Party), Section 6.7(a), Section 7, or Sections
5.6 or 5.8 of the Guarantee and Collateral Agreement or (ii) an "Event of
Default" under and as defined in any Mortgage shall have occurred and be
continuing; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days after notice
to the Borrower from the Administrative Agent or the Required Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness (including, without
limitation, any Guarantee Obligation, but excluding the Loans) beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (ii) default in making any payment
of any interest on any such Indebtedness beyond the period of grace (not to
exceed 10 days), if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance
or performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; PROVIDED, that a default, event or condition
described in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default under this Agreement unless, at
such time, one or more defaults, events or conditions of the type described
in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred
and be continuing with respect to Indebtedness the outstanding principal
amount of which exceeds in the aggregate $1,000,000; or
(f) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other
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74
similar official for it or for all or any substantial part of its assets,
or the Borrower or any of its Subsidiaries shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) the Borrower or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $1,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party or any Affiliate of any Loan
Party shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority purported
to be created thereby; or
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(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) (i) The Permitted Investors shall cease to own of record and
beneficially an amount of common stock of the Borrower equal to at least
40% of the amount of common stock of the Borrower have voting power for the
election of directors of the Borrower; (ii) any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT")), excluding the Permitted
Investors, shall become, or obtain rights (whether by means or warrants,
options or otherwise) to become, the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly,
of more than 25% of the outstanding common stock of the Borrower; or
(iii) the board of directors of the Borrower shall cease to consist of a
majority of Continuing Directors; or
(l) The Senior Subordinated Notes or the guarantees thereof shall
cease, for any reason, to be validly subordinated to the Obligations or the
obligations of the Subsidiary Guarantors under the Guarantee and Collateral
Agreement, as the case may be, as provided in the Senior Subordinated Note
Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee
in respect of the Senior Subordinated Notes or the holders of at least 25%
in aggregate principal amount of the Senior Subordinated Notes shall so
assert;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) above with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries
of the then outstanding Letters of Credit shall have presented the documents
required thereunder) shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Majority Revolving Credit
Facility Lenders, the Administrative Agent may, or upon the request of the
Majority Revolving Credit Facility Lenders, the Administrative Agent shall,
by notice to the Borrower declare the Revolving Credit Commitments to be
terminated forthwith, whereupon the Revolving Credit Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the other Loan Documents (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit
with respect to which presentment for honor shall not have occurred at the
time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit. Amounts held in such cash collateral account shall
be applied by the Administrative
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Agent to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay other obligations of
the Borrower hereunder and under the other Loan Documents. After all such
Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations
of the Borrower hereunder and under the other Loan Documents shall have been
paid in full, the balance, if any, in such cash collateral account shall be
returned to the Borrower (or such other Person as may be lawfully entitled
thereto).
SECTION 9. THE AGENTS
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent,
in such capacity, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the such Agent by the terms
of this Agreement and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, no Agent shall have any duties
or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.
9.2 DELEGATION OF DUTIES. Each Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning
all matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it
with reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither any Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or
provided for in, or received by the Agents under or in connection with, this
Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement
or any other Loan Document or for any failure of any Loan Party a party
thereto to perform its obligations hereunder or thereunder. The Agents shall
not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party.
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77
9.4 RELIANCE BY ADMINISTRATIVE AGENT. Each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Loan Parties), independent accountants and other experts selected by the
Administrative Agent. The Agents may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent. Each Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders (or, if so
specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the Required Lenders
(or, if so specified by this Agreement, all Lenders), and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders and all future holders of the Loans.
9.5 NOTICE OF DEFAULT. No Agent shall be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder
unless such Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating
that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); PROVIDED that unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
9.6 NON-RELIANCE ON AGENTS AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation
or warranty by any Agent to any Lender. Each Lender represents to the Agents
that it has, independently and without reliance upon any Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
the Loan Parties and their affiliates and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon any Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the
other Loan Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property,
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78
financial and other condition and creditworthiness of the Loan Parties and
their affiliates. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent shall have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party which may
come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify each Agent in
its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according
to their respective Revolving Credit Percentages, Tranche A Term Loan
Percentages and Tranche B Term Loan Percentages in effect on the date on
which indemnification is sought under this Section 9.7 (or, if
indemnification is sought after the date upon which the Commitments shall
have terminated and the Loans shall have been paid in full, ratably in
accordance with such Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby
or thereby or any action taken or omitted by such Agent under or in
connection with any of the foregoing; PROVIDED that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements which are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from such Agent's gross
negligence or willful misconduct. The agreements in this Section 9.7 shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 AGENT IN ITS INDIVIDUAL CAPACITY. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in
any kind of business with any Loan Party as though such Agent were not an
Agent. With respect to its Loans made or renewed by it and with respect to
any Letter of Credit issued or participated in by it, each Agent shall have
the same rights and powers under this Agreement and the other Loan Documents
as any Lender and may exercise the same as though it were not an Agent, and
the terms "Lender" and "Lenders" shall include each Agent in its individual
capacity.
9.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or
Section 8(f) with respect to the Borrower shall have occurred and be
continuing) be approved by the Borrower (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Administrative Agent's rights,
powers and duties as
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79
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. If no successor agent has
accepted appointment as Administrative Agent by the date that is 30 days
following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon
become effective and the Lenders shall assume and perform all of the duties
of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. The
Syndication Agent may, at any time, by notice to the Lenders and the
Administrative Agent, resign as Syndication Agent hereunder, whereupon the
duties, rights, obligations and responsibilities hereunder shall
automatically be assumed by, and inure to the benefit of, the Administrative
Agent, without any further act by the Syndication Agent, the Administrative
Agent or any Lender. After any retiring Agent's resignation as Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement
and the other Loan Documents.
9.10 AUTHORIZATION TO RELEASE LIENS. The Administrative Agent is
hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Borrower or any of its Subsidiaries that is the
subject of a Disposition which is permitted by this Agreement or which has
been consented to in accordance with Section 10.1.
9.11 ARRANGER. The Arranger, in its capacity as such, shall not
have any duties or any responsibilities hereunder nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Arranger in its capacity as such.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this Section 10.1.
The Required Lenders and each Loan Party party to the relevant Loan Document
may, or (with the written consent of the Required Lenders) the Agents and
each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders, or the Agents, as the case
may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and
its consequences; PROVIDED that no such waiver and no such amendment,
supplement or modification shall (i) forgive the principal amount or extend
the final scheduled date of maturity of any Loan, extend the scheduled date
of any amortization payment in respect of any Term Loan, reduce the stated
rate of any interest, fee or letter of credit commission payable hereunder or
extend the scheduled date of any payment thereof, or increase the amount or
extend the expiration date of any Lender's Revolving Credit Commitment, in
each case without the consent of each Lender directly affected thereby; (ii)
amend, modify or waive any provision of this Section 10.1 or reduce any
percentage specified in the definition of Required Lenders or Required
Prepayment Lenders, consent to the
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assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral or release all or substantially all of
the Subsidiary Guarantors from their obligations under the Guarantee and
Collateral Agreement, in each case without the written consent of all
Lenders; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section
5.2 (including, without limitation, in connection with any waiver of an
existing Default or Event of Default) without the written consent of the
Majority Revolving Credit Facility Lenders; (iv) reduce the percentage
specified in the definition of Majority Facility Lenders without the written
consent of all Lenders under each affected Facility; (v) amend, modify or
waive any provision of Section 9 without the written consent of the Agents;
or (vi) amend, modify or waive any provision of Section 3 without the written
consent of the Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and
shall be binding upon the Loan Parties, the Lenders, the Administrative Agent
and all future holders of the Loans. In the case of any waiver, the Loan
Parties, the Lenders and the Administrative Agent shall be restored to their
former position and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered, or three Business Days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Borrower, the
Syndication Agent and the Administrative Agent, and as set forth in an
administrative questionnaire delivered to the Administrative Agent in the
case of the Lenders, or to such other address as may be hereafter notified by
the respective parties hereto:
The Borrower: Axiohm Transaction Solutions, Inc.
15070 Avenue of Science
San Diego, California 92128
Attention: Walter H. Gibbs
Telecopy: (619) 451-0326
Telephone: (619) 451-3485
The Syndication Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Telecopy: (212) 528-0819
Telephone: (212) 526-0330
The Administrative Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
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81
Telecopy: (212) 528-0819
Telephone: (212) 526-0330
PROVIDED that any notice, request or demand to or upon any of the parties
hereto shall not be effective until received (except in the case of any
notice, request or demand to or upon any of the Loan Parties by any of the
Agents or the Lenders in connection with the exercise of remedies of any of
the Agents or the Lenders pursuant to the Loan Documents or otherwise,
including, without limitation, any notice pursuant to Section 8).
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the either Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents
and in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.
10.5 PAYMENT OF EXPENSES. The Borrower agrees (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Agents, (b) to pay or reimburse each Lender and
the Agents for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, the fees
and disbursements of counsel (including the allocated fees and expenses of in-
house counsel) to each Lender and of counsel to the Agents, (c) to pay,
indemnify, and hold each Lender and the Agents harmless from, any and all
recording and filing fees or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender and the Agents and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "indemnitee") harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower any of its Subsidiaries or any of the Properties (all the foregoing
in this clause (d), collectively, the
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"indemnified liabilities"), PROVIDED that the Borrower shall have no
obligation hereunder to any indemnitee with respect to indemnified
liabilities to the extent such indemnified liabilities are found by a final
and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such indemnitee.
Without limiting the foregoing (including, without limitation, the proviso to
the preceding sentence), and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries not to assert,
and hereby waives and agrees to cause its Subsidiaries to so waive, all
rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature, under or related to Environmental
Laws, that any of them might have by statute or otherwise against any
Indemnitee. The agreements in this Section 10.5 shall survive repayment of
the Loans and all other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. 7\E
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "PARTICIPANT")
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the
other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan for all purposes under this
Agreement and the other Loan Documents, and the Borrower and the Agents shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents. In no event shall any Participant under any such participation
have any right to approve any amendment or waiver of any provision of any
Loan Document, or any consent to any departure by any Loan Party therefrom,
except to the extent that such amendment, waiver or consent would reduce the
principal of, or interest on, the Loans or any fees payable hereunder, or
postpone the date of the final maturity of the Loans, in each case to the
extent subject to such participation. The Borrower agrees that if amounts
outstanding under this Agreement and the Loans are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect
of its participating interest in amounts owing under this Agreement to the
same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, PROVIDED that, in purchasing
such participating interest, such Participant shall be deemed to have agreed
to share with the Lenders the proceeds thereof as provided in Section 10.7(a)
as fully as if it were a Lender hereunder. The Borrower also agrees that
each Participant shall be entitled to the benefits of Sections 2.17, 2.18 and
2.19 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; PROVIDED that, in the
case of Section 2.18, such Participant shall have complied with the
requirements of said Section and
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83
PROVIDED, FURTHER, that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such
transfer occurred and the Borrower shall not be required to pay a greater
amount.
(c) Any Lender (an "ASSIGNOR") may, in accordance with applicable
law and with written notice to the Syndication Agent, at any time and from
time to time assign to any Lender or any Affiliate thereof or a Person under
common management with such Lender or, with the consent of the Borrower and
the Agents (which, in each case, shall not be unreasonably withheld or
delayed), to an additional bank, financial institution or other entity (an
"ASSIGNEE") all or any part of its rights and obligations under this
Agreement pursuant to an Assignment and Acceptance (an "ASSIGNMENT AND
ACCEPTANCE"), substantially in the form of Exhibit E, executed by such
Assignee, such Assignor, the Syndication Agent and the Administrative Agent
(and, where the consent of the Borrower is required pursuant to the foregoing
provisions, by the Borrower) and delivered to the Administrative Agent for
its acceptance and recording in the Register; PROVIDED that no such
assignment to an Assignee (other than any Lender or any Affiliate thereof)
shall be in an aggregate principal amount of less than $5,000,000 (other than
in the case of an assignment of all of a Lender's interests under this
Agreement), unless otherwise agreed by the Borrower, the Syndication Agent
and the Administrative Agent. Any such assignment need not be ratable as
among the Facilities. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have
the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the
extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of an Assignor's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this Section 10.6, the consent of the
Borrower shall not be required for any assignment which occurs at any time
when any of the events described in Section 8(f) shall have occurred and be
continuing.
(d) The Administrative Agent shall maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "REGISTER") for the recordation of the
names and addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time and any Notes
evidencing such Loans. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Administrative Agent and
the Lenders shall treat each Person whose name is recorded in the Register as
the owner of the Loan and any Note evidencing such Loan recorded therein for
all purposes of this Agreement. Any assignment of any Loan whether or not
evidenced by a Note shall be effective only upon appropriate entries with
respect thereto being made in the Register (and each Note shall expressly so
provide). Any assignment or transfer of all or part of a Loan evidenced by a
Note shall be registered on the Register only upon surrender for registration
of assignment or transfer of the Note evidencing such Loan, accompanied by a
duly executed Assignment and Acceptance, and thereupon one or more new Notes
in the same aggregate principal amount shall be issued to the designated
Assignee and the old Notes shall be returned by the Administrative Agent to
the Borrower marked "cancelled". The Register shall be
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available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof or a Person under common management
with such Lender, by the Borrower, the Administrative Agent, the Syndication
Agent and the Issuing Lender) together with payment to the Administrative
Agent of a registration and processing fee of $2,000 (except that no such
registration and processing fee shall be payable (y) in connection with an
assignment by Lehman Commercial Paper Inc. or (z) in the case of an Assignee
which is already a Lender or is an affiliate of a Lender or a Person under
common management with a Lender), the Administrative Agent shall (i) promptly
accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders
and the Borrower. On or prior to such effective date, the Borrower, at its
own expense, upon request, shall execute and deliver to the Administrative
Agent (in exchange for the Revolving Credit Note and/or Term Notes, as the
case may be, of the assigning Lender) a new Revolving Credit Note and/or Term
Notes, as the case may be, to the order of such Assignee in an amount equal
to the Revolving Credit Commitment and/or applicable Term Loans, as the case
may be, assumed or acquired by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Revolving Credit Commitment
and/or Term Loans, as the case may be, upon request, a new Revolving Credit
Note and/or Term Notes, as the case may be, to the order of the assigning
Lender in an amount equal to the Revolving Credit Commitment and/or
applicable Term Loans, as the case may be, retained by it hereunder. Such
new Notes shall be dated the Closing Date and shall otherwise be in the form
of the Note replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments
of Loans and Notes relate only to absolute assignments and that such
provisions do not prohibit assignments creating security interests,
including, without limitation, any pledge or assignment by a Lender of any
Loan or Note to any Federal Reserve Bank in accordance with applicable law.
10.7 ADJUSTMENTS; SET-OFF. (a) Except to the extent that this
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "BENEFITTED LENDER") shall at any time
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan and/or of the Reimbursement
Obligations owing to each such other Lender, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
PROVIDED that if all or any portion of such excess payment or benefits is
thereafter recovered from such
<PAGE>
85
Benefitted Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, upon the occurrence and during the
continuance of an Event of Default, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured, at
any time held or owing by such Lender or any branch or agency thereof to or
for the credit or the account of the Borrower. Each Lender agrees promptly
to notify the Borrower and the Administrative Agent after any such setoff and
application made by such Lender, PROVIDED that the failure to give such
notice shall not affect the validity of such setoff and application.
10.8 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower
and the Administrative Agent.
10.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
10.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or
any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general
<PAGE>
86
jurisdiction of the Courts of the State of New York, the courts of the
United States for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 10.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 10.12 any special, exemplary, punitive or consequential
damages.
10.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower and the Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 CONFIDENTIALITY. Each of the Agents and each Lender agrees to
keep confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; PROVIDED that nothing herein
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87
shall prevent any Agent or any Lender from disclosing any such information
(a) to the Administrative Agent, any other Lender or any affiliate of any
Lender, (b) to any Participant or Assignee (each, a "TRANSFEREE") or
prospective Transferee which agrees to comply with the provisions of this
Section 10.15, (c) to the employees, directors, agents, attorneys,
accountants and other professional advisors of such Lender or its affiliates,
(d) upon the request or demand of any Governmental Authority having
jurisdiction over the such Agent or such Lender, (e) in response to any order
of any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (f) if requested or required to do so in
connection with any litigation or similar proceeding, (g) which has been
publicly disclosed other than in breach of this Section 10.15, (h) to the
National Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender, or (i) in connection with the exercise of
any remedy hereunder or under any other Loan Document.
10.16 Post Closing Restructuring Transactions. (a) Notwithstanding
the provisions of Sections 7.2, 7.4, 7.5, 7.6, 7.8, 7.10, or 7.16, the
Borrower and its Subsidiaries may, subject to compliance with the conditions
set forth in paragraph (b) below, consummate the following transactions:
(i) the Borrower may sell its 52% interest in Axiohm S.A. to
Axiohm-Inv for fair value (approximately $60,000,000), represented by a
promissory note made by Axiohm-Inv to the Borrower, which promissory note
shall be pledged pursuant to the Guarantee and Collateral Agreement;
(ii) Dardel may contribute its 48% interest in Axiohm S.A. (except
for one share to be retained by Dardel) to Axiohm-Inv;
(iii) Dardel may distribute or sell, or Axiohm-Inv may issue, one
share of Axiohm-Inv either to Borrower or to a Domestic Subsidiary; and
(iv) Axiohm S.A. may distribute 100% of the Capital Stock of
Axiohm-IPB to Axiohm-Inv, after giving effect to which Axiohm-IPB will be
a wholly owned Subsidiary of Axiohm-Inv, Axiohm-Inv will be a wholly owned
Subsidiary of Dardel (except for the one share owned by Borrower directly
or through a Domestic Subsidiary), and Dardel will be a wholly owned
Subsidiary of the Borrower.
(b) The right of the Borrower and its Subsidiariers to consummate the
transactions described in paragraph (a) above is subject to the following
conditions:
(i) after giving effect to each such transaction and to any "check
the box" elections made by the Borrower under the Internal Revenue Code
in connection therewith, the guarantees and Collateral held by the
Administrative Agent will remain unimpaired, except that, if Axiohm S.A.
ceases to be a U.S. branch for U.S. income tax purposes and as a result
thereof Axiohm S.A. becomes an Excluded Foreign Subsidiary, the guarantee
of Axiohm S.A. will be released, the pledge of 35% of the Capital Stock
of Axiohm S.A. will be released and Axiohm S.A. will be released from the
French Security Document; and
(ii) in connection with such transactions, the Borrower and its
Subsidiaries will deliver to the Administrative Agent such documents and
other information, and will execute and deliver such amendments and other
instruments, as shall be required to give effect to the requirements
described in clause (b)(i) above, and will deliver to the Administrative
Agent such legal opinions in respect thereof as the Administrative Agent
shall reasonably request.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
AXIOHM TRANSACTION SOLUTIONS, INC.
By: /s/ Stuart Groom
-------------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a Lender
By: /s/ Dennis J. Dee
-------------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent and as a Lender
By: /s/ Dennis J. Dee
-------------------------------------
Name:
Title:
<PAGE>
Annex A
-------
PRICING GRID FOR REVOLVING CREDIT LOANS AND
TRANCHE A TERM LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Consolidated Leverage Ratio Applicable Margin Applicable Margin
for Eurodollar for Base Rate
Loans Loans
- --------------------------------------------------------------------------------
Greater than or equal to 3.50 to 1.00 2.50% 1.50%
- --------------------------------------------------------------------------------
Less than 3.50 to 1.00 but greater than 2.25% 1.25%
or equal to 3.00 to 1.00
- --------------------------------------------------------------------------------
Less than 3.00 to 1.00 but greater than 2.00% 1.00%
or equal to 2.50 to 1.00
- --------------------------------------------------------------------------------
Less than 2.50 to 1.00 1.75% 0.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Changes in the Applicable Margin with respect to Revolving Credit Loans and
Tranche A Term Loans resulting from changes in the Consolidated Leverage
Ratio shall become effective on the date (the "ADJUSTMENT DATE") on which
financial statements are delivered to the Lenders pursuant to Section 6.1
(but in any event not later than the 45th day after the end of each of the
first three quarterly periods of each fiscal year or the 90th day after the
end of each fiscal year, as the case may be) and shall remain in effect until
the next change to be effected pursuant to this paragraph. If any financial
statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Leverage Ratio as at the end of the fiscal period that would
have been covered thereby shall for the purposes of this definition be deemed
to be greater than 3.50 to 1.00. In addition, at all times while an Event of
Default shall have occurred and be continuing, the Consolidated Leverage
Ratio shall for the purposes of this definition be deemed to be greater than
3.50 to 1.00. Each determination of the Consolidated Leverage Ratio pursuant
to this definition shall be made with respect to the period of four
consecutive fiscal quarters of the Borrower ending at the end of the period
covered by the relevant financial statements.
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
STOCK OPTION AGREEMENT
I. NOTICE OF STOCK OPTION GRANT
Name: Malcolm Unsworth
Address: Axiohm IPB Inc.
950 Danby Road
Ithaca, New York 14850
In consideration for the surrender and cancellation of your option to
purchase 1,583 shares of the Common Stock of Axiohm S.A. and subject to the
closing of the merger ("Merger") of AX Acquisition Corporation into DH
Technology, Inc. (which will be renamed Axiohm Transaction Solutions, Inc. at
the time of the Merger) you have been granted an option to purchase Common Stock
of the Company as follows:
Date of Grant: October 2, 1997
---------------
Vesting Commencement Date: October 2, 1997
---------------
Exercise Price per Share: $7.15
---------------
Total Number of Shares Granted: 231,118
---------------
Total Exercise Price: $1,652,493.70
---------------
Type of Option: Nonstatutory Stock Option
-------------------------
Expiration Date: December 31, 2005
-----------------
VESTING SCHEDULE: This Option may be exercised, in whole or in part,
in accordance with the following schedule:
20% of the shares subject to this Option (46,224 shares) are immediately
exercisable; an additional 20% shall become exercisable on January 1 of
each year thereafter, beginning with January 1, 1998.
TERMINATION PERIOD: This Option may be exercised for 60 days after
termination of Optionee's employment with the Company or a Subsidiary or Parent,
or such longer period as may be applicable upon death or Disability of Optionee
as provided in this Option Agreement, but in no event later than the Expiration
Date as provided above.
<PAGE>
II. AGREEMENT
1. DEFINITIONS. As used herein, the following definitions
shall apply:
(a) "ADMINISTRATOR" means the Board or such of its Committees as
shall be administering the Company's 1992 Stock Option Plan.
(b) "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option plans under applicable securities laws,
California corporate law and the Code.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means Axiohm Transaction Solutions, Inc., a California
corporation.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" means that the employment or
consulting relationship is not interrupted or terminated by the Company, any
Parent or Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; PROVIDED,
however, that for purposes of Incentive Stock Options, any such leave may not
exceed ninety (90) days, unless reemployment upon the expiration of such leave
is guaranteed by contract (including certain Company policies) or statute; or
(ii) transfers between locations of the Company or between the Company, its
Parent, its Subsidiaries or its successor.
(h) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(i) "EMPLOYEE" means any person employed by the Company or any Parent
or Subsidiary of the Company. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
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<PAGE>
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(m) "NONSTATUTORY STOCK OPTION" means any Option that is not an
Incentive Stock Option.
(n) "NOTICE OF GRANT" means a written notice evidencing certain terms
and conditions of an individual Option. The Notice of Grant is part of the
Option Agreement.
(o) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option.
(q) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant.
(r) "OPTIONED STOCK" means the Common Stock subject to an Option or
Right.
(s) "OPTIONEE" means an Employee who holds an outstanding Option or
Right.
(t) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
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<PAGE>
(u) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(v) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(w) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
2. GRANT OF OPTION. Subject to the closing of the Merger, the Company
hereby grants to the Optionee named in the Notice of Grant attached as Part I of
this Agreement (the "Optionee") an option (the "Option") to purchase the number
of Shares set forth in the Notice of Grant at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price").
3. OPTION CANCELLATION. Optionee currently holds an option to purchase
1,583 shares of the Common Stock of Axiohm S.A. (the "Axiohm Option"). Optionee
and Company acknowledge and agree that, notwithstanding any other term or
provision of the Axiohm Option, and subject to the closing of the Merger, the
Axiohm Option is hereby canceled and surrendered to the Company and Optionee
shall have no further rights, claims or benefits in connection with such Axiohm
Option. Axiohm S.A. shall be entitled to rely on Optionee's agreements in this
paragraph.
4. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of this Option Agreement. In the event of Optionee's
death, Disability or other termination of Optionee's employment relationship,
the exercisability of the Option is governed by the applicable provisions this
Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice in the form attached as Exhibit A (the "Exercise Notice") which
shall state the election to exercise the Option, the number of Shares as to
which the Option is being exercised (the "Exercised Shares") and such other
representations and agreements as may be required by the Company pursuant to
this Agreement. The Exercise Notice shall be signed by the Optionee and shall
be delivered in person or by certified mail to the Shareholders' Services
Department of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price and any required
withholding tax.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange
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<PAGE>
upon which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed Exercise Notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares that (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than
six (6) months on the date of surrender, and (ii) have a Fair Market Value on
the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. TERMINATION OF EMPLOYMENT RELATIONSHIP. In the event an Optionee's
Continuous Status as an Employee terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise this Option, but only within
such period of time as is determined by the Administrator at the time of grant
and specified in the Notice of Grant and only to the extent that the Optionee
was entitled to exercise it at the date of such termination (but in no event
later than the expiration of the term of this Option as set forth in this Option
Agreement). To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, and to the extent that the Optionee does
not exercise this Option (to the extent otherwise so entitled) within the time
specified herein, this Option shall terminate.
7. DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee terminates as a result of the Optionee's Disability, the Optionee
may exercise his or her Option, but only within such period of time following
the date of termination due to Disability not exceeding ten (10) years as is
determined by the Administrator, and only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of the term of this Option as set forth in this Option
Agreement). To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, and to the extent that the Optionee does
not exercise this Option (to the extent otherwise so entitled) within the time
specified herein, this Option shall terminate.
8. DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the deceased
Optionee's Option by bequest or
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<PAGE>
inheritance may exercise this Option, but only within ten (10) years following
the date of death, and only to the extent that the Optionee was entitled to
exercise it at the date of death (but in no event later than the expiration of
the term of this Option as set forth in the Option Agreement). To the extent
that Optionee was not entitled to exercise this Option at the date of death, and
to the extent that the Optionee's estate or a person who acquired the right to
exercise this Option does not exercise this Option (to the extent otherwise so
entitled) within the time specified herein, this Option shall terminate.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET
SALE OR CHANGE OF CONTROL.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
this Option, as well as the price per share of Common Stock covered by each this
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; PROVIDED,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that this Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that this Option shall terminate as
of a date fixed by the Board and give Optionee the right to exercise this Option
as to all or any part of the Optioned Stock, including Shares as to which this
Option would not otherwise be exercisable.
(c) MERGER OR ASSET SALE. Subject to the provisions of paragraph (d)
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, this
Option shall be assumed or an equivalent Option substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation does not agree to assume this Option or to
substitute an equivalent option, the Administrator shall, in lieu of such
assumption or substitution, provide for the Optionee to have the right to
exercise this Option as to all or a portion of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If the Administrator
makes an Option exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee that
this Option shall be exercisable for a period of
-6-
<PAGE>
fifteen (15) days from the date of such notice, and this Option will terminate
upon the expiration of such period. For the purposes of this paragraph,this
Option shall be considered assumed if, immediately following the merger or sale
of assets, this Option confers the right to purchase, for each Share of
Optioned Stock subject to this Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); PROVIDED, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation and the participant, provide for the
consideration to be received upon the exercise of this Option, for each Share of
Optioned Stock subject to this Option, to be solely common stock of the
successor corporation or its Parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
(d) CHANGE IN CONTROL. In the event of a "Change in Control" of the
Company, as defined in paragraph (e) below, then the following acceleration and
valuation provisions shall apply:
(i) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, any portion of this
Option outstanding on the date such Change in Control is determined to have
occurred that is not yet exercisable and vested on such date shall become fully
exercisable and vested;
(ii) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, any portion of this
Option, to the extent that it is exercisable and vested (including any portion
that shall become exercisable and vested pursuant to subparagraph (i) above),
shall be terminated in exchange for a cash payment equal to the Change in
Control Price, (reduced by the exercise price, if any, applicable to this
Option). These cash proceeds shall be paid to the Optionee or, in the event of
death of an Optionee prior to payment, to the estate of the Optionee or to a
person who acquired the right to exercise the Option by bequest or inheritance.
(e) DEFINITION OF "CHANGE IN CONTROL". For purposes of
this Section 11, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company
employee benefit plan, including any trustee of such plan acting as trustee) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election of directors;
or
-7-
<PAGE>
(ii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets; or
(iii) A change in the composition of the Board of Directors of
the Company, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date the Plan is approved by the
shareholders, or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(f) CHANGE IN CONTROL PRICE. For purposes of this Section 11,
"Change in Control Price" shall be, as determined by the Board, (i) the highest
Fair Market Value of a Share within the 60-day period immediately preceding the
date of determination of the Change in Control Price by the Board (the "60-Day
Period"), or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period, or (iii) such
lower price as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a Share.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
11. TAX CONSEQUENCES. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION. If this Option does not qualify as an
Incentive Stock Option, the Optionee may incur regular federal income tax
liability upon exercise. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the fair market value of the Exercised Shares on the date of exercise
over their aggregate Exercise Price. If the Optionee is an employee or a former
employee, the Company will be required to withhold from his or her compensation
or collect from Optionee and pay to the
-8-
<PAGE>
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(b) DISPOSITION OF SHARES. If the Optionee holds the Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
12. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of this Option unless the exercise of this Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of
this Option the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of this Option Agreement. Optionee has reviewed this
Option Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Option Agreement.
OPTIONEE: AXIOHM TRANSACTION SOLUTIONS, INC.
- ----------------------------- By:
Signature -------------------------------
- ----------------------------- Title:
Print Name ----------------------------
-9-
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of this Option Agreement. In consideration of the Company's
granting his or her spouse the right to purchase Shares as set forth in this
Option Agreement, the undersigned hereby agrees to be irrevocably bound by the
terms and conditions of the this Option Agreement and further agrees that any
community property interest shall be similarly bound. The undersigned hereby
appoints the undersigned's spouse as attorney-in-fact for the undersigned with
respect to any amendment or exercise of rights under this Option Agreement.
--------------------------------
Spouse of Optionee
-10-
<PAGE>
EXHIBIT A
AXIOHM TRANSACTION SOLUTIONS, INC.
EXERCISE NOTICE
Axiohm Transaction Solutions, Inc.
15070 Avenue of Science
San Diego, CA 92128
Attention: Shareholders' Services Department
1. EXERCISE OF OPTION. Effective as of today, ___________, 199__, the
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of DH Technology, Inc. (the "Company") under and
pursuant to the Stock Option Agreement dated ________ (the "Option Agreement").
The aggregate purchase price for the Shares shall be $___________, as required
by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date the stock certificate
evidencing such Shares is issued, as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Option Agreement is incorporated
herein by reference. This Agreement and the Option Agreement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser
-1-
<PAGE>
with respect to the subject matter hereof, and such agreement is governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: AXIOHM TRANSACTION SOLUTIONS, INC.
- ----------------------------- By:
Signature -------------------------------
- ----------------------------- Its:
Print Name -----------------------------
ADDRESS: ADDRESS:
- --------------------------- 15070 Avenue of Science
San Diego, CA 92128
- ---------------------------
-2-
<PAGE>
EXHIBIT 21.1
Subsidiaries of Axiohm Transaction Solutions, Inc. (Registrant)
<TABLE>
<CAPTION>
Name of Jurisdiction of Direct Owner(s) The Borrower's
Subsidiary Incorporation Direct or Indirect
Ownership Interest
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Axiohm IPB, Delaware (USA) Axiohm S.A. 100%
Inc.
Axiohm S.A. France Dardel Technologies, S.A. 100%
Axiohm Investissements
Axiohm France Dardel Technologies, S.A. 100%
Investissements
Dardel France Axiohm Transaction 100%
Technologies, Solutions, Inc.
S.A.
Axiohm Limited Hong Kong Axiohm S.A. 100%
Axiohm Japan Japan Axiohm S.A. 100%
Inc.
DH Technology United Kingdom Axiohm Transaction 99%*
plc Solutions, Inc.
DH Tecnologia Mexico Axiohm Transaction 100%
de Mexico, S.A. Solutions, Inc.
de C.V.
DH Technology Australia Axiohm Transaction 100%
Ltd. Solutions, Inc.
Stadia Colorado Colorado (USA) Axiohm Transaction 100%
Corp. Solutions, Inc.
Cognitive California (USA) Axiohm Transaction 100%
Solutions, Inc. Solutions, Inc.
- -------------------------------------------------------------------------------
* 1 share held by William Gibbs, an Officer of the Registrant.
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors and Shareholders
Axiohm Transaction Solutions, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
San Diego, California
November 26, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the Prospectus constituting part of this Registration
Statement on Form S-4 of Axiohm Transaction Solutions, Inc., of our report dated
September 12, 1997 relating to the consolidated financial statements of Axiohm
S.A. which appears in such Prospectus. We also consent to the reference to us
under the headings "Independent Accountants" in such Prospectus.
Price Waterhouse
PRICE WATERHOUSE
Paris, France
November 26, 1997
<PAGE>
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) /_/
- --------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
- --------------------------------------------
AXIOHM TRANSACTION SOLUTIONS, INC.
(Exact name of obligor as specified in its charter)
California 94-2917470
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Table of Other Registrants
Axiohm S.A.R.L. France Not Applicable
Axiohm Investissements E.U.R.L. France Not Applicable
Axiohm IPB, Inc. Delaware 06-1413894
Cognitive L.L.C. Delaware
Cognitive Solutions, Inc. California 77-0132482
Dardel Technologies E.U.R.L. France Not Applicable
Stadia Colorado Corp. Colorado 84-0599240
15070 Avenue of Science
San Diego, California 92128
(Address of principal executive offices) (Zip code)
______________________
New 9 3/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
<S> <C> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
</TABLE>
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State OF New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 4th day of November, 1997.
THE BANK OF NEW YORK
By: /s/ THOMAS B. ZAKRZEWSKI
----------------------------
Name: THOMAS B. ZAKRZEWSKI
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Exhibit 7
- ------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 35,352,045
LESS: Allowance for loan and
lease losses .............. 625,042
LESS: Allocated transfer risk
reserve........................ 429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
-----------
Total assets ......................... $57,514,958
-----------
-----------
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ................ 11,213,657
Interest-bearing ................... 15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing ................ 596,369
Interest-bearing ................... 15,737,901
<PAGE>
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
-----------
Total liabilities .................... 52,937,421
-----------
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion adjustments .................. (12,272)
-----------
Total equity capital ................ 4,577,537
-----------
Total liabilities and equity
capital ........................... $57,514,958
-----------
-----------
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith
J. Carter Bacot
Thomas A. Renyi Directors
<PAGE>
LETTER OF TRANSMITTAL
AXIOHM TRANSACTION SOLUTIONS, INC.
OFFER TO EXCHANGE ITS
NEW 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
AND NEW SUBSIDIARY GUARANTEES OF SUCH NEW NOTES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
AND SUBSIDIARY GUARANTEES OF SUCH OUTSTANDING NOTES
PURSUANT TO THE PROSPECTUS
DATED , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1997 (20 BUSINESS DAYS FOLLOWING EFFECTIVENESS OF THE
EXCHANGE OFFER REGISTRATION STATEMENT ON FORM S-4, UNLESS EXTENDED BY AXIOHM
TRANSACTION SOLUTIONS, INC. IN ITS SOLE DISCRETION) (SUCH TIME ON SUCH DATE, AND
AS SUCH TIME AND DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
If you desire to accept the Exchange Offer (as defined below), this Letter
of Transmittal should be completed, signed, and submitted to:
THE BANK OF NEW YORK
Exchange Agent
BY MAIL, OVERNIGHT DELIVERY OR HAND:
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attn: Thomas E. Tabor, Corporate Trust Department
(Axiohm Transaction Solutions, Inc., 9 3/4% Senior
Subordinated Notes due 2007)
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 815-5381
FACSIMILE TRANSMISSIONS:
(212) 815-5915
(Originals of all documents sent by facsimile should be sent promptly by hand,
overnight courier or registered or certified mail.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Existing Notes
(as defined below) either if Existing Notes are to be forwarded herewith or if
tenders of Existing Notes are to be made by book-entry
A-1
<PAGE>
transfer to an account maintained by The Bank of New York (the "Exchange Agent")
at The Depository Trust Company ("DTC") pursuant to the procedures set forth in
"The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus.
Holders of Existing Notes whose certificates (the "Certificates") for such
Existing Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Existing
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Existing Notes" in the Prospectus. See
Instruction 1 hereto. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
Ladies and Gentlemen:
The undersigned hereby tenders to Axiohm Transaction Solutions, Inc., a
California corporation (the "Company"), the aggregate principal amount of the
Company's 9 3/4% Senior Subordinated Notes due 2007 (the "Existing Notes")
described in Box 1 below, along with the Subsidiary Guarantees of such 9 3/4%
Senior Subordinated Notes due 2007 (the "Existing Subsidiary Guarantees") in
exchange for a like aggregate principal amount of the Company's new 9 3/4%
Senior Subordinated Notes due 2007 (the "New Notes"), and new Subsidiary
Guarantees of such New Notes (the "New Subsidiary Guarantees"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1997 (as the same may be amended or supplemented from time to time,
the "Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitutes the "Exchange
Offer").
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Existing Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Existing Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
The Bank of New York as the Exchange Agent (the "Exchange Agent") as its agent
and attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Company in connection with the Exchange Offer) with respect to
the tendered Existing Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver Certificates for Existing Notes to the Company together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of
the New Notes to be issued in exchange for such Existing Notes, (ii) present
Certificates for such Existing Notes for transfer, and to transfer the Existing
Notes on the books of the Company, and (iii) receive for the account of the
Company all benefits and otherwise exercise all rights of beneficial ownership
of such Existing Notes, all in accordance with the terms and conditions of the
Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE EXISTING
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
EXISTING NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE EXISTING NOTES TENDERED
HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS
A-2
<PAGE>
UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO
ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Existing
Notes tendered hereby should be printed in Box 1 below, if they are not already
set forth below, as they appear on the Certificates representing such Existing
Notes. The Certificate number(s) and the Existing Notes that the undersigned
wishes to tender should be indicated in the appropriate box below.
If any tendered Existing Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Existing Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Existing Notes will be returned (or, in the case of Existing
Notes tendered by book-entry transfer, such Existing Notes will be credited to
an account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Existing Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for Tendering
Existing Notes" in the Prospectus and in the instructions hereto will, upon the
Company's acceptance for exchange of such tendered Existing Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Existing Notes tendered
hereby.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions" below (Box 7), the undersigned hereby directs that the New Notes
be issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Existing Notes, that such New Notes be credited to the account
indicated below maintained at DTC. If applicable, substitute Certificates
representing Existing Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Existing
Notes, will be credited to the account indicated below maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions" (Box
8), please deliver New Notes to the undersigned at the address shown below the
undersigned's signature.
BY TENDERING EXISTING NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (i) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY, (ii) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (iii) THE UNDERSIGNED
HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER, AND (iv) IF THE UNDERSIGNED IS NOT A
BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE
IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES.
BY TENDERING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS
LETTER OF TRANSMITTAL, A HOLDER OF EXISTING NOTES WHICH IS A BROKER-DEALER
REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY
THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE
COMMISSION TO THIRD PARTIES, THAT SUCH EXISTING NOTES WERE ACQUIRED BY SUCH
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES (SUCH A BROKER-DEALER WHICH IS TENDERING EXISTING NOTES
IS HEREIN REFERRED TO AS A "PARTICIPATING BROKER-DEALER") AND IT WILL DELIVER
THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
PARTICIPATING BROKER-DEALER WILL NOT
A-3
<PAGE>
BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER IN CONNECTION WITH RESALES
OF NEW NOTES RECEIVED IN EXCHANGE FOR EXISTING NOTES, WHERE SUCH EXISTING NOTES
WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD
ENDING ONE YEAR AFTER THE EXPIRATION DATE OR, IF EARLIER, WHEN ALL SUCH NEW
NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD,
EACH PARTICIPATING BROKER-DEALER, BY TENDERING SUCH EXISTING NOTES AND EXECUTING
THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY
OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY
STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY
MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF
CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE
PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO
CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS
GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE.
Each New Note will bear interest from the most recent date to which interest
has been paid or duly provided for on the Existing Note surrendered in exchange
for such New Note or, if no such interest has been paid or duly provided for on
such Existing Note, from October 2, 1997. Holders of the Existing Notes whose
Existing Notes are accepted for exchange will not receive accrued interest on
such Existing Notes for any period from and after the last Interest Payment Date
to which interest has been paid or duly provided for on such Existing Notes
prior to the original issue date of the New Notes or, if no such interest has
been paid or duly provided for, will not receive any accrued interest on such
Existing Notes, and will be deemed to have waived the right to receive any
interest on such Existing Notes accrued from and after such Interest Payment
Date or, if no such interest has been paid or duly provided for, from and after
October 2, 1997.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except
pursuant to the withdrawal rights set forth in the Prospectus, this tender is
irrevocable.
A-4
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE
BOXES BELOW AND FOLLOW THE INSTRUCTIONS BEGINNING ON PAGE A-10 HEREOF.
ALL TENDERING HOLDERS COMPLETE THIS BOX 1:
<TABLE>
<C> <C> <C>
-------------------------------------------------------------------------
BOX 1
DESCRIPTION OF EXISTING NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
--------------------------------------------------------------------------
CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
IF OF EXISTING NOTES* EXISTING NOTES EXISTING NOTES TENDERED**
BLANK,
PLEASE
PRINT
NAME(S)
AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S),
EXACTLY
AS
NAME(S)
APPEAR(S)
ON
EXISTING
NOTE
CERTIFICATE(S):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TOTAL PRINCIPAL TOTAL PRINCIPAL AMOUNT
AMOUNT $ TENDERED $
-------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Existing Notes may be tendered in whole or in part in denominations of
$1,000 and integral multiples thereof. All Existing Notes held shall
be deemed tendered unless a lesser number is specified in this column.
See Instruction 4.
----------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------BOX
2
BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1 BELOW)
----------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________________________________
DTC Account Number ______________________________________________________
Transaction Code Number _________________________________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------BOX
3
NOTICE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 1 BELOW)
-------------------------------------------------------------------------
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holders(s) ___________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ___________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ___________________________________________
DTC Account Number ______________________________________________________
Transaction Code Number _________________________________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------BOX
4
RETURN OF NON-EXCHANGED EXISTING NOTES TENDERED BY BOOK-ENTRY TRANSFER
(SEE INSTRUCTIONS 4 AND 6 BELOW)
-------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
EXISTING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
----------------------------------------------------------------------------
A-5
<PAGE>
----------------------------------------------------------------------------
BOX 5
PARTICIPATING BROKER-DEALER
----------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE EXISTING NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE TEN
ADDITIONAL COPIES OF THE PROSPECTUS AND TEN COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ___________________________________________________________________
Address: ________________________________________________________________
__________________________________________________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
-------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6 BELOW)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 IN BOX 9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
-------------------------------------------------------------------------
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Existing Notes hereby tendered or on a security
position listing, or by a person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including such
opinions of counsel, certifications and other information as may be required
by the Company or the Trustee for the Existing Notes to comply with the
restrictions on transfer applicable to the Existing Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer
of a corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5 below.
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date
------------------, 1997
Name(s) ____________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
____________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
____________________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1, 2 AND 5 BELOW)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(PLEASE PRINT)
Date
----------------------------, 1997
Capacity or Title __________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
----------------------------------------------------------------------------
A-6
<PAGE>
----------------------------------------------------------------------------
BOX 7
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6 BELOW)
----------------------------------------------------------------------------
To be completed ONLY if the New Notes are to be issued in the name of
someone other than the registered holder of the Existing Notes whose name(s)
appear(s) above.
Issue New Notes to:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
____________________________________________________________________________
(Taxpayer Identification or Social Security No.)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BOX 8
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6 BELOW)
----------------------------------------------------------------------------
To be completed ONLY if New Notes are to be sent to someone other than
the registered holder of the Existing Notes whose name(s) appear(s) above,
or to such registered holder(s) at an address other than that shown above.
Mail New Notes to:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
____________________________________________________________________________
(Taxpayer Identification or Social Security No.)
----------------------------------------------------------------------------
A-7
<PAGE>
<TABLE>
<C> <S> <C>
- --------------------------------------------------------------------------------------------------
BOX 9
SUBSTITUTE FORM W-9
- ----------------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9 BELOW)
SIGN THIS SUBSTITUTE FORM W-9 IN ADDITION TO THE SIGNATURE(S) REQUIRED IN BOX 6
PAYER'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------------------------
SUBSTITUTE Part I--Please provide your TIN (either TIN ------------------
FORM W-9 your social security number or employer
DEPARTMENT OF THE TREASURY identification number) in the box to the
INTERNAL REVENUE SERVICE right and certify by signing and dating
below.
Part 2--Awaiting TIN / /
SIGN THIS FORM AND THE CERTIFICATION OF
PAYER'S REQUEST FOR AWAITING TAXPAYER IDENTIFICATION NUMBER BELOW.
TAXPAYER
IDENTIFICATION NUMBER Part 3--Exempt / /
(TIN) See enclosed Guidelines for additional information and SIGN THIS
FORM.
AND CERTIFICATION
- --------------------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for
a number to be issued to me); and
(2) I am not subject to backup withholding because (i) I am exempt from backup withholding, or (ii)
I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding.
(3) Any other information provided on this form is true and correct.
CERTIFICATION INSTRUCTIONS--You must cross out item (iii) in Part (2) above if you have been
notified by the IRS that you are subject to backup withholding because of underreporting interest
or dividends on your tax return and you are no longer subject to backup withholding.
SIGNATURE -------------------------------------------------- DATE ----------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 2 OF THE SUBSTITUTE FORM W-9
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued
to me, and either (1) I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the time of payment, 31% of
all payments made to me on account of the New Notes shall be retained until I provide a taxpayer
identification number to the Exchange Agent and that, if I do not provide my taxpayer
identification number within 60 days, such retained amounts shall be remitted to the Internal
Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will
be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification
number.
SIGNATURE -------------------------------------------------- DATE ----------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
FOR ADDITIONAL INFORMATION.
A-8
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
GENERAL
Please do not send Certificates for Existing Notes directly to the Company.
Your Existing Note Certificates, together with your signed and completed Letter
of Transmittal and any required supporting documents should be mailed in the
enclosed addressed envelope, or otherwise delivered, to the Exchange Agent, at
either of the addresses indicated on the first page hereof. THE METHOD OF
DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES
This Letter of Transmittal is to be completed if either (a) Certificates are
to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Existing Notes" in the Prospectus. Certificates,
or timely confirmation of a book-entry transfer of such Existing Notes into the
Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to 5:00 p.m., New York City time, on the Expiration Date.
Existing Notes may be tendered in whole or in part in the principal amount of
$1,000 and integral multiples of $1,000.
Holders who wish to tender their Existing Notes and (i) whose Existing Notes
are not immediately available or (ii) who cannot deliver their Existing Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent on or prior to the Expiration Date or (iii) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Existing Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus
and by completing Box 3 hereof. Pursuant to such procedures: (i) such tender
must be made by or through an Eligible Institution (as defined below); (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates
(or a book-entry confirmation (as defined in the Prospectus)) representing all
tendered Existing Notes, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three New
York Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for
Tendering Existing Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Existing Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein, "Eligible Institution" means a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor
institution," including (as such terms are defined therein) (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association, that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program.
A-9
<PAGE>
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the
Existing Notes) of Existing Notes tendered herewith, unless such holder(s)
has completed either the box entitled "Special Exchange Instructions" (Box
7) or the box entitled "Special Delivery Instructions" (Box 8) above, or
(ii) such Existing Notes are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal (Box 6). See Instruction 5.
3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Existing Notes"
is inadequate, the Certificate number(s) and/or the principal amount of Existing
Notes and any other required information should be listed on a separate signed
schedule which should be attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS
Tenders of Existing Notes will be accepted only in the principal amount of
$1,000 and integral multiples thereof. If less than all the Existing Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Existing Notes which are to be tendered in Box 1 under the column
"Principal Amount of Existing Notes Tendered". In such case, new Certificate(s)
for the remainder of the Existing Notes that were evidenced by your Existing
Certificate(s) will only be sent to the holder of the Existing Notes, promptly
after the Expiration Date. All Existing Notes represented by Certificates
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at its address set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Existing Notes to be
withdrawn, the aggregate principal amount of Existing Notes to be withdrawn, and
(if Certificates for such Existing Notes have been tendered) the name of the
registered holder of the Existing Notes as set forth on the Certificate for the
Existing Notes, if different from that of the person who tendered such Existing
Notes. If Certificates for the Existing Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Existing Notes, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Existing Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Existing Notes tendered for the
account of an Eligible Institution. If Existing Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Existing Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Existing Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Existing Notes may not be
rescinded. Existing Notes properly withdrawn will not be deemed validly tendered
for purposes of the Exchange Offer, but may be retendered at any subsequent time
on or prior to the Expiration Date by following any of the procedures described
in the Prospectus under "The Exchange Offer--Procedures for Tendering Existing
Notes."
A-10
<PAGE>
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give such notification. Any Existing Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS
If this Letter of Transmittal is signed by the registered holder(s) of the
Existing Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Existing Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Existing Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Notes are to be
issued in the name of a person other than the registered holder(s). However, if
New Notes are to be issued in the name of a person other than the registered
holder(s), signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Existing Notes listed, the certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as the Company or the Trustee for the Existing Notes may require in accordance
with the restrictions on transfer applicable to the Existing Notes. Signatures
on such Certificates or bond powers must be guaranteed by an Eligible
Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
If New Notes are to be issued in the name of a person other than the signer
of this Letter of Transmittal, or if New Notes are to be sent to someone other
than the signer of this Letter of Transmittal or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed (Box 7 and 8). Certificates for Existing Notes not exchanged will be
returned by mail or, if tendered by book-entry transfer, by crediting the
account indicated above maintained at DTC. See Instruction 4.
7. DETERMINATION OF VALIDITY
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Existing Notes, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus
A-11
<PAGE>
under "The Exchange Offer--Certain Conditions to the Exchange Offer" or any
conditions or irregularity in any tender of Existing Notes of any particular
holder whether or not similar conditions or irregularities are waived in the
case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Existing Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent.
9. 31% [RUN THIS BY TAX DEPT] BACKUP WITHHOLDING; SUBSTITUTE FORM W-9
For U.S. Federal income tax purposes, holders are required, unless an
exemption applies, to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 of this Letter of
Transmittal (Box 9) and certify, under penalties of perjury, that such number is
correct and he or she is not subject to backup withholding. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Existing Notes
exchanged pursuant to the Exchange Offer, or with respect to New Notes following
the Exchange Offer, may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 (Box 9) may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below Substitute Form W-9 in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent.
The holder is required to give the Exchange Agent the TIN (i.e., social
security number or employer identification number) of the registered owner of
the Existing Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Existing Notes. If the Existing Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below and check the box in Part 3 of
Box 9 for "exempt", to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
A-12
<PAGE>
10. LOST, DESTROYED OR STOLEN CERTIFICATES
If any Certificate(s) representing Existing Notes have been lost, destroyed
or stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed.
11. SECURITY TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, New Notes are to
be delivered to, or are to be issued in the name of, any person other than the
registered holder of the Existing Notes tendered, or if a transfer tax is
imposed for any reason other than the exchange of Existing Notes in connection
with the Exchange Offer, then the amount of any such transfer tax (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
A. TIN--The Taxpayer Identification Number for most individuals is their social
security number. Refer to the following chart to determine the appropriate
number:
<TABLE>
<CAPTION>
GIVE THE GIVE THE
SOCIAL EMPLOYER
FOR THIS TYPE OF SECURITY FOR THIS TYPE OF IDENTIFICATION
ACCOUNT NUMBER OF ACCOUNT NUMBER OF
- -------------------------- -------------------- -------------------------- --------------------
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or, if
combined funds, the first individual on
the account (1)
3. Custodian account of a minor (Uniform The minor (2)
Gift to Minors Act)
4. a. The usual revocable savings trust The grantor-trustee (1)
(grantor is also trustee)
b. So-called trust account that is not a The actual owner (1)
legal or valid trust under state law
5. Sole proprietorship The owner (3)
6. Sole proprietorship The owner (3)
7. A valid trust, estate or pension trust Legal entity (4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational or other tax-
exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's name and social security
number.
(3) Show the individual's name. You may also enter your business name or "doing
business as" name. You may use either your Social Security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
A-13
<PAGE>
B. Exempt Payees--The following lists exempt payees. If you are exempt, you
must nonetheless complete the form and provide your TIN in order to
establish that you are exempt. Check the box in Part 3 of the form, sign and
date the form.
For this purpose, Exempt Payees include: (1) A corporation; (2) An
organization exempt from tax under section 501(a), or an individual
retirement plan (IRA) or a custodial account under section 403(b)(7); (3)
The United States or any of its agencies or instrumentalities; (4) A state,
the District of Columbia, a possession of the United States, or any of their
political subdivisions or instrumentalities; (5) A foreign government or any
of its political subdivisions, agencies or instrumentalities; (6) An
international organization or any of its agencies or instrumentalities; (7)
A foreign central bank of issue; (8) A dealer in securities or commodities
required to register in the U.S. or a possession of the U.S.; (9) A real
estate investment trust; (10) An entity or person registered at all times
during the tax year under the Investment Company Act of 1940; (11) A common
trust fund operated by a bank under section 584(a); (12) A financial
institution.
C. OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, application for a Social Security Number, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
D. PRIVACY ACT NOTICE
Section 6109 requires most recipients of dividend, interest or other
payments to give taxpayer identification numbers to payers who must report
the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not payees are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number. Certain penalties may also apply.
E. Penalties
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of
an under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
A-14
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
AXIOHM TRANSACTION SOLUTIONS, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 9 3/4% Senior Subordinated
Notes due 2007 (the "Existing Notes") are not immediately available, (ii) the
Existing Notes, the Letter of Transmittal and all other required documents
cannot be delivered to The Bank of New York (the "Exchange Agent") on or prior
to the Expiration Date (as defined in the Prospectus referred to below) or (iii)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer Procedures for Tendering Existing Notes"
in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY MAIL, OVERNIGHT DELIVERY OR HAND:
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attn: Thomas E. Tabor, Corporate
Trust Department
(Axiohm Transaction Solutions, Inc.,
9 3/4% Senior Subordinated Notes due 2007)
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 815-5381
FACSIMILE TRANSMISSIONS:
(212) 815-5915
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Axiohm Transaction Solutions, Inc., a
California corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus dated (as the same may be amended
or supplemented from time to time, the "Prospectus") and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Existing Notes set
forth below pursuant to the guaranteed delivery
B-1
<PAGE>
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering Existing Notes."
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
DESCRIPTION OF EXISTING NOTES TENDERED
- -------------------------------------------------------------------------------------------
<S> <C>
NAME(S), ADDRESS(ES) AND AREA CODE(S) AND TELEPHONE
NUMBER(S) OF REGISTERED HOLDER(S): CERTIFICATE NUMBER(S) (IF
AVAILABLE):
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
Aggregate Principal Amount Tendered: $
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
Signature(s):
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
If Existing Notes will be tendered by book-entry transfer, please provide the following
information:
Name of Tendering Institution:
DTC Account Number:
Date:
Transaction Code Number:
<CAPTION>
- -------------------------------------------------------------------------------------------
</TABLE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein) (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association, that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), hereby guarantees to deliver to the Exchange Agent, at
its address set forth above, either the Existing Notes tendered hereby in proper
form for transfer, or confirmation of the book-entry transfer of such Existing
Notes to the Exchange Agent's account at The Depository Trust Company ("DTC"),
pursuant to the procedures for book-entry transfer set forth in the Prospectus,
in either case together with one or more properly completed and duly executed
Letter(s) of Transmittal (or facsimile thereof) and any other required documents
within three New York Stock Exchange trading days after the date of execution of
this Notice of Guaranteed Delivery.
B-2
<PAGE>
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Existing Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------
Name of Firm: Authorized Signature:
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
Address: Name (Please Print):
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
Capacity or Title:
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
Area Code and Telephone Number: Date:
<CAPTION>
- -------------------------------------------------------------------------------------------
</TABLE>
NOTE: DO NOT SEND EXISTING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF EXISTING NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
B-3
