UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998 Commission File No. 0-25148
Global Payment Technologies, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2974651
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
(Address of principal executive offices) (Zip Code)
(516) 256-1000
(Issuer's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. YES _X_ NO ___
Shares of Common Stock outstanding on August 11, 1998 5,570,100
<PAGE>
Global Payment Technologies, Inc.
Index
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 1998 and September 30, 1997 3
Statements of Income - Nine Months ended June 30, 1998 and 1997 4
Statements of Income - Three Months ended June 30, 1998 and 1997 5
Statements of Cash Flows - Nine Months ended June 30, 1998 and 1997 6
Notes to Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
-------- -------------
(Dollar amounts in thousands,
except share data)
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $994 $1,913
Accounts receivable, less allowance for doubtful accounts
of $308 and $225, respectively 8,212 4,840
Inventory, less allowance for obsolescence of $934 and
$742, respectively 9,519 5,120
Prepaid expenses 174 110
Deferred income taxes 464 421
------- -------
Total current assets 19,363 12,404
Property and equipment, net 1,646 1,335
Investment in unconsolidated affiliates 537 355
Other assets 60 60
------- -------
Total assets $21,606 $14,154
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,993 $2,302
Accrued expenses and other current liabilities 2,695 1,230
Income taxes payable 346 109
Note payable to bank 2,500 --
------- -------
Total current liabilities 8,534 3,641
------- -------
Deferred income taxes 80 96
------- -------
Shareholders' equity:
Common stock, 20,000,000 shares authorized; $.01 par value,
5,529,700 and 5,506,200 shares issued and outstanding 55 55
Additional paid-in capital 8,103 7,974
Retained earnings 4,834 2,388
------- -------
Total shareholders' equity 12,992 10,417
------- -------
Total liabilities and shareholders' equity $21,606 $14,154
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended June 30,
--------------------------
1998 1997
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
<S> <C> <C>
Net sales $28,381 $16,376
Cost of sales 16,362 10,321
----------- -----------
Gross profit 12,019 6,055
Operating expenses 8,484 4,415
----------- -----------
Income from operations 3,535 1,640
Other income:
Equity in income (loss) of unconsolidated affiliates 137 (17)
Gain on sale of investment in unconsolidated affiliate 385 --
Interest income, net -- 29
----------- -----------
Total other income 522 12
----------- -----------
Income before provision for income taxes 4,057 1,652
Provision for income taxes 1,611 736
----------- -----------
Net income $2,446 $916
=========== ===========
Net income per share:
Basic $.44 $.17
=========== ===========
Diluted $.41 $.16
=========== ===========
Common shares used in computing net income per share amounts:
Basic 5,514,025 5,500,000
=========== ===========
Diluted 6,022,255 5,726,588
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended June 30,
---------------------------
1998 1997
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
<S> <C> <C>
Net sales $10,528 $6,376
Cost of sales 6,086 3,910
----------- -----------
Gross profit 4,442 2,466
Operating expenses 3,077 1,524
----------- -----------
Income from operations 1,365 942
----------- -----------
Other income (expense):
Equity in income (loss) of unconsolidated affiliates 64 (30)
Gain on sale of investment in unconsolidated affiliate 385 --
Interest (expense) income, net (30) 5
----------- -----------
Total other income (expense) 419 (25)
----------- -----------
Income before provision for income taxes 1,784 917
Provision for income taxes 715 417
----------- -----------
Net income $1,069 $500
=========== ===========
Net income per share:
Basic $.19 $.09
=========== ===========
Diluted $.18 $.09
=========== ===========
Common shares used in computing net income per share amounts:
Basic 5,526,636 5,500,000
=========== ===========
Diluted 6,054,475 5,744,442
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended June 30,
--------------------------
1998 1997
------- -------
(Dollar amounts in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $2,446 $916
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in (income) loss of unconsolidated affiliates (137) 17
Depreciation and amortization 448 250
Provision for losses on accounts receivable 122 12
Provision for inventory obsolescence 225 25
Changes in operating assets and liabilities:
Increase in accounts receivable (3,494) (1,166)
Increase in inventory (4,624) (1,778)
(Increase) decrease in prepaid expenses and other assets (64) 21
(Increase) decrease in deferred income taxes (59) 111
Increase in accounts payable 691 670
Increase in accrued expenses and other current liabilities 1,465 634
Increase (decrease) in income taxes payable 237 (425)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (2,744) (713)
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment,
net of proceeds from disposals (759) (593)
Investments in unconsolidated affiliates (45) (247)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (804) (840)
------- -------
FINANCING ACTIVITIES:
Proceeds from note payable to bank 2,500 --
Issuance of stock upon exercise of stock options and warrants 129 --
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,629 --
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (919) (1,553)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,913 2,727
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $994 $1,174
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $38 $ --
======= =======
Income taxes $1,491 $1,050
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements
June 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Global Payment Technologies,
Inc. (the "Company"), including the September 30, 1997 balance sheet which has
been derived from audited financial statements, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Rule 310 of Regulation S-B.
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 normal recurring
accruals) considered necessary for a fair presentation have been included. The
operating results for the nine-month and three-month periods ended June 30, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1998. For further information, refer to the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1997.
NOTE B - STOCK SPLIT
In August 1997, the Company announced a two-for-one stock split of its Common
Stock. This split was effected by a 100% stock dividend, which was distributed
on September 4, 1997. All information contained in these financial statements
for periods prior thereto has been retroactively restated to give effect to this
stock split.
NOTE C - NET INCOME PER COMMON SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share". In accordance with
SFAS No. 128, net income per common share amounts ("basic EPS") were computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Net income per common share amounts, assuming dilution ("diluted
EPS"), were computed by reflecting the potential dilution from the exercise of
stock options and stock warrants. SFAS No. 128 requires the presentation of both
basic EPS and diluted EPS on the face of the income statement. Net income per
share amounts for the same prior-year periods have been restated to conform to
the provisions of SFAS No. 128.
7
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements (continued)
June 30, 1998
NOTE C - NET INCOME PER COMMON SHARE (continued)
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net income appears below:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 1998 June 30, 1997
(In thousands, except per share data) (In thousands, except per share data)
--------------------------------------- -----------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $2,446 $916
------ ----
Basic EPS
Net income attributable to common stock 2,446 5,514.0 $.44 916 5,500.0 $.17
Effect of dilutive securities
Stock options and warrants -- 508.3 .03 -- 226.6 .01
------ ------- ---- ---- ------- ----
Diluted EPS
Net income attributable to common
stock and assumed option and warrant
exercises $2,446 6,022.3 $.41 $916 5,726.6 $.16
====== ======= ==== ==== ======= ====
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
(In thousands, except per share data) (In thousands, except per share data)
--------------------------------------- -----------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $1,069 $500
------ ----
Basic EPS
Net income attributable to common stock 1,069 5,526.6 $.19 500 5,500.0 $.09
Effect of dilutive securities
Stock options and warrants -- 527.9 .01 -- 244.4 --
------ ------- ---- ---- ------- ----
Diluted EPS
Net income attributable to common
stock and assumed option and warrant
exercises $1,069 6,054.5 $.18 $500 5,744.4 $.09
====== ======= ==== ==== ======= ====
</TABLE>
Options to purchase 44,000 shares of Common Stock in the nine months and three
months ended June 30, 1998, and warrants to purchase 150,000 shares of Common
Stock in the nine months and three months ended June 30,1997, were not included
in the computation of diluted EPS because the exercise prices exceeded the
average market price of the common shares for these periods. These options and
warrants were still outstanding at the end of the related periods.
NOTE D - GAIN ON SALE OF INVESTMENT IN UNCONSOLIDATED AFFILIATE
On May 29, 1998, Hosken Consolidated Investments ("HCI"), a South African
investment company, purchased a one-third interest in the Company's
unconsolidated South African affiliate ("GPT-SA"). Terms of the transaction
called for HCI to purchase certain shares from the Company and the Bevin Trust
(GPT-SA's founding shareholders) as well as additional shares directly from
GPT-SA. The Company recognized a pre-tax gain of $385,000, resulting in an
after-tax gain of $225,000, on the transaction and its ownership of GPT-SA has
been reduced from 50% to 33%.
8
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements (Continued)
NOTE E- RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be
applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
While the Company operates in international markets, it does so presently
without the use of derivatives and therefore this new pronouncement is not
applicable.
9
<PAGE>
Global Payment Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Nine months ended June 30, 1998 compared with nine months ended June 30, 1997
- -----------------------------------------------------------------------------
Sales
Net sales increased by 73.3%, or $12,005,000, to $28,381,000 in the nine months
ended June 30, 1998 from $16,376,000 in the comparative prior year period. The
Company attributed the strong revenue growth to increased demand for its bill
validator products in the international gaming industry, particularly in
Australia, as well as progress in penetrating the international beverage and
vending market.
Gross Profit
Gross profit increased to $12,019,000, or 42.3% of net sales, in the nine months
ended June 30, 1998 from $6,055,000, or 37.0% of net sales, in the comparative
prior year period. The increase in gross profit as a percentage of sales was
primarily the result of increased operating efficiencies as a result of longer
production runs and reduced product costs from volume purchase arrangements.
Operating Expenses
Operating expenses increased to $8,484,000, or 29.9% of net sales, in the nine
months ended June 30, 1998 from $4,415,000, or 27.0% of net sales, in the
comparative prior year period. The primary reason for the increase in operating
expenses was the result of increased sales commission expense of $2,133,000 paid
to distributors of the Company's products, including certain unconsolidated
affiliates providing in-country sales and service in Australia and South Africa.
Excluding the effect of these commissions, which the Company expects will
continue, operating expenses as a percentage of sales were 21.8% in 1998 as
compared with 27.0% in 1997. In addition, the Company incurred increased
staffing and related payroll costs to support its growth strategy planned for
fiscal 1998 and beyond.
Net Income
Net income for the nine months ended June 30, 1998 was $2,446,000, or $.41 per
share, on a diluted basis, as compared with $916,000, or $.16 per share, on a
diluted basis, in the comparative prior year period. During the nine months
ended June 30, 1998, the Company recognized an after-tax gain of $225,000, or
$.04 per share, which was the result of the sale of a portion of the Company's
equity interest in its South African affiliate ("GPT-SA") (See Note D). The
Company now owns a one-third interest in GPT-SA and 50% non-controlling
interests in a local sales and service organization in Australia and a
manufacturing firm in China. Included in the results of operations for the nine
months ended June 30, 1998 and 1997 are the Company's share of profits (net of
losses) of these affiliates of $137,000 and ($17,000), respectively.
Three months ended June 30, 1998 compared with three months ended June 30, 1997
- -------------------------------------------------------------------------------
Sales
Net sales increased by 65.1%, or $4,152,000, to $10,528,000 in the three months
ended June 30, 1998 from $6,376,000 in the comparative prior year period. The
Company attributed the strong revenue growth to increased demand for its bill
validator products in the international gaming industry as well as progress in
penetrating the international beverage and vending market.
Gross Profit
Gross profit increased to $4,442,000, or 42.2% of net sales, in the three months
ended June 30, 1998 from $2,466,000, or 38.7% of net sales, in the comparative
prior year period. The increase in gross profit as a percentage of sales was
primarily the result of increased operating efficiencies as a result of longer
production runs and reduced product costs from volume purchase arrangements.
10
<PAGE>
Global Payment Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Operating Expenses
Operating expenses increased to $3,077,000, or 29.2% of net sales, in the three
months ended June 30, 1998 from $1,524,000, or 23.9% of net sales, in the
comparative prior year period. The primary reason for the increase in operating
expenses was the result of increased sales commission expense of $871,000 paid
to distributors of the Company's products, including certain unconsolidated
affiliates providing in-country sales and service in Australia and South Africa.
Excluding the effect of these commissions, which the Company expects will
continue, operating expenses as a percentage of sales were 20.5% in 1998 as
compared to 23.9% in 1997. In addition, the Company incurred increased staffing
and related payroll costs to support its growth strategy in fiscal 1998 and
beyond.
Net Income
Net income for the quarter was $1,069,000, or $.18 per share, on a diluted
basis, as compared with $500,000, or $.09 per share, on a diluted basis, in the
comparative prior year period. During the three months ended June 30, 1998, the
Company recognized an after-tax gain of $225,000, or $.04 per share, which was
the result of the sale of a portion of the Company's equity interest in GPT-SA
(See Note D). The Company now owns a one-third interest in GPT-SA and 50%
non-controlling interests in a local sales and service organization in Australia
and a manufacturing firm in China. Included in the results of operations for the
three months ended June 30, 1998 and 1997 are the Company's share of net profits
(net losses) of these affiliates of $64,000 and ($30,000), respectively.
Liquidity and Capital Resources
The Company's capital requirements consist primarily of those necessary to
continue to expand and improve manufacturing and product development
capabilities and sales and marketing operations, and to a lesser degree,
interest payments on the Company's indebtedness. The Company believes that its
available resources, including its credit facility, should be sufficient to meet
its obligations as they become due and permit continuation of its planned
expansion throughout fiscal 1998 and beyond.
At June 30, 1998, the Company's cash and cash equivalents were $994,000 compared
with $1,913,000 at September 30, 1997. On February 6, 1998, the Company renewed
its $5,000,000 line of credit with The Chase Manhattan Bank. This facility
allows for borrowings on an unsecured basis and expires on March 31, 1999.
Outstanding borrowings will bear interest at the bank's prime rate per annum or,
at the Company's option, for borrowings greater than $500,000, LIBOR plus 175
basis points per annum. As of June 30, 1998, $2,500,000 was outstanding under
this line of credit.
Net cash used in operating activities was $2,744,000 in the nine months ended
June 30, 1998. This amount is due to increased inventory of $4,624,000 and
increased accounts receivable of $3,494,000, offset, in part, by net income for
the period, adjusted for non-cash items, of $3,104,000, an increase in accrued
expenses and other current liabilities of $1,465,000 and an increase in accounts
payable of $691,000. Net cash used in operating activities was $713,000 in the
nine months ended June 30, 1997. This amount was due to increased inventory of
$1,778,000, increased accounts receivable of $1,166,000 and decreased income
taxes payable of $425,000, offset, in part, by net income for the period,
adjusted for non-cash items, of $1,220,000, an increase in accrued expenses and
other current liabilities of $634,000 and an increase in accounts payable of
$670,000.
Cash used in investing activities in the nine months ended June 30, 1998
amounted to $804,000 as compared with $840,000 in the prior year period.
Investments in property and equipment in the nine months ended June 30, 1998
amounted to $759,000 as compared with $593,000 in 1997. In addition, the Company
loaned its joint ventures approximately $45,000 and $247,000 in the nine months
ended June 30, 1998 and 1997, respectively. These loans have been added to the
investment in unconsolidated affiliates based on the terms of the related
agreements.
11
<PAGE>
Global Payment Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources (continued)
Cash provided by financing activities in the nine months ended June 30, 1998
consisted of bank borrowings of $2,500,000 for working capital needs to fund the
growth of the Company and proceeds of $129,000 received from the exercise of
stock options and warrants.
Year 2000:
In July 1996, the Emerging Issues Task Force of the Financial Accounting
Standards Board (FASB) reached a consensus on Issue 96-14, "Accounting for the
Costs Associated with Modifying Computer Software for the Year 2000," which
requires that costs associated with modifying computer software for the Year
2000 be expensed as incurred. The Company has formed a senior management team to
develop a comprehensive plan to address the year 2000 issues. A significant
amount of analysis has been completed and the Company continues to assess and
thus far believes, based upon its internal review and other factors, that future
external and internal costs to be incurred relating to the modification of
internal-use software for the year 2000 will not have a material effect on the
Company's results of operations or financial position.
Special Note Regarding Forward-Looking Statements: A number of statements
contained in this discussion and analysis are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the applicable statements. These risks and
uncertainties include but are not limited to: the Company's dependence on the
paper currency validator market and its potential vulnerability to technological
obsolescence; the risks that its current and future products may contain errors
or defects that would be difficult and costly to detect and correct; potential
manufacturing difficulties; possible risks of product inventory obsolescence;
potential shortages of key parts and/or raw materials; potential difficulties in
managing growth; dependence on key personnel; the Company's dependence on a
limited base of customers for a significant portion of sales; the possible
impact of competitive products and pricing; uncertainties with respect to the
Company's business strategy; general economic conditions in the domestic and
international markets in which the Company operates; and other risks described
in the Company's Securities and Exchange Commission filings.
12
<PAGE>
Global Payment Technologies, Inc.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit # Description
--------- -----------
10.11 Supplier agreement dated May 14, 1998 between Global Payment
Technologies, Inc. and Aristocrat Leisure Industries Pty Ltd (1) (2)
27 Financial Data Schedule (1)
- ----------
(1) Filed herewith.
(2) The Company has applied for Confidential Treatment for portions of
this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
13
<PAGE>
Global Payment Technologies, Inc.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Global Payment Technologies, Inc.
By: /s/ Thomas McNeill
-------------------------------
Vice President,
Chief Financial Officer and
Principal Accounting Officer
Dated: August 14, 1998
14
Exhibit 10.11
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS EXHIBIT PURSUANT TO
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
AGREEMENT DATED 14 MAY 1998
BETWEEN
Global Payment Technologies, Inc.
20 East Sunrise Highway, New York
in the state of New York, United States Of America
and
Aristocrat Leisure Industries Pty Ltd A.C.N. 001 660 715
85-113 Dunning Ave, Rosebery
in the state of New South Wales, Australia
The following are the terms and conditions, upon which this Agreement between
Aristocrat Leisure Industries Pty Ltd (the "Purchaser"), and Global Payment
Technologies, Inc. (the "Supplier") is to operate. This Agreement is for the
supply of Bill Validator, Stacker and Spare Parts requirements (the "Goods
and/or Services") to the Purchaser.
Global Payment Technologies-Australia (the "Representative"), who is not a
signatory to this Agreement, is the Supplier's in-country partner and will
provide services to the Purchaser as outlined in this Agreement. In the case
where the Representative is unable to fulfill the required responsibilities,
these requirements will become the responsibility of the Supplier.
1. ENTIRE AGREEMENT
(a) This Agreement constitutes an offer by the Supplier to supply the
Goods and/or Services to the Purchaser, on the terms and conditions
set out below and on any document that is attached to or incorporated
by reference into this document (collectively called "these
Conditions"). This document replaces all other existing Supply
Agreements between the Purchaser and Supplier. The Supplier
acknowledges and agrees that the Purchaser is not obliged to purchase
or otherwise acquire the Goods and/or Services from the Supplier
unless provided a written order. Such an order (referred to as the
"Purchase Order") must be properly executed and signed by an
authorized representative of the Purchaser. The list of authorized
representatives of the Purchaser is outlined in Clause 26.
(b) In the event of any inconsistency between the terms and conditions on
the back of the Purchaser's Purchase Order document or any such
attached or incorporated document (on the one hand), those terms and
conditions will not
Page 1
<PAGE>
take precedence over the terms and conditions contained in this
Agreement (on the other hand) and will not be construed as varying
them to the extent of any such inconsistency. If special terms are
applied to the front of the Purchase Order and agreed to by both
parties, then these terms would take precedence over the terms and
conditions contained in this Agreement.
(c) This Agreement shall be the entire terms and conditions for the supply
of the Goods and/or Services and shall override any other terms and
conditions.
2. PURCHASE ORDERS IN WRITING
(a) All Purchase Orders placed by the Purchaser for the supply of Goods
and/or Services shall be in writing. Goods and/or Services supplied or
purported to be supplied by the Supplier otherwise than in accordance
with this Clause shall be rejected by the Purchaser.
(b) All Purchase Orders placed by the Purchaser for the supply of Goods
and/or Services shall authorize the Supplier to deliver specified
quantities of the Goods and/or Services establish firm delivery dates.
(c) The Purchaser will place Purchase Orders for a **** (the "Blanket
Order") of expected production requirements and also submit a weekly
delivery schedule for this period. The Supplier will use this blanket
order and delivery schedule to assure that adequate supplies of
product are in country, in transit and being ordered and manufactured
at its production facility.
(d) During the term of the **** blanket order, the Purchaser on a monthly
basis will continue to provide a rolling **** forecast of Product
requirements. Ninety (90) days prior to the end of a given blanket
purchase order the Purchaser will provide the Supplier with a new
blanket order for the next **** period.
3. PRICES
(a) Prices for the products are F.I.S. the Purchaser's Rosebery facility,
and are comprised of the ex works prices from the Supplier's
production facility (the "First Costs") and the costs to land and
deliver the products (the "Second Costs"). These prices are quoted in
U.S. dollars and are provided in Product Pricing Schedule A of this
Agreement. First costs for the products are fixed, firm and not
subject to escalation during the initial twelve (12) month term of
this Agreement, other than as provided for in Clauses 3f and 17.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
(b) Shipping and delivery costs are quoted in U.S. dollars and shall
include all packaging, use or supply of pallets and containers,
freight, insurance, customs charges, handling, warehousing and
delivery to the Purchaser's Rosebery facility. Deliveries of new Goods
are to be one time per week to the Purchaser's Rosebery facility.
Deliveries of new Goods of more than one time per week are subject to
additional charges, as defined in Product Pricing Schedule A.
(c) Second Costs shall be firm, fixed and not subject to escalation during
the **** term of this Agreement. Exceptional price increases of the
Second Costs outside the control of the Supplier will be passed onto
the Purchaser. Such exceptional price increases include, but are not
limited to, changes to government policy which effect duties, goods
and services tax and any surcharges that are issued by the shippers
that are not yet applicable.
(d) Exceptional price increases shall also apply, to circumstances whereby
the Purchase Orders raised by the Purchaser are exceptional to the
Blanket Order or if the weekly delivery schedule is adjusted such that
air freight shipments are required to meet product demand. These
additional costs shall be passed onto the Purchaser by way of an
exceptional price increase. The exceptional price increase shall only
apply to Goods and/or Services incorporated in that specific delivery.
It is the responsibility of the Supplier to advise the Purchaser, in
writing, of any exceptional costs that may be incurred, at the point
in time whereby the Purchaser's request is made to the Supplier, and
prior to incurring exceptional costs. Without written acceptance of
exceptional costs, by the Purchaser, exceptional price increases will
not be accepted, by the Purchaser.
(e) The Supplier is to undertake continual manufacturing, technical
development and product redesign that may yield price reduction in the
Goods and/or Services. To the extent that the Supplier realizes
significant cost reductions from its current base cost (at the time of
Agreement signing), the Purchaser will share in these savings on a
**** basis. The Supplier shall provide the Purchaser with details of
base cost calculations for the Goods and/or Services.
4. PAYMENTS AND INVOICES
(a) Unless otherwise specified on the Purchaser's Purchase Order document
and agreed in writing with the Supplier, all invoices for the Goods
and/or Services will be payable, by the Purchaser, net thirty (30)
days from invoice date. Payments will be made via telegraphic transfer
of funds to the following account: ****
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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(b) It is the Purchaser's intent, and the Supplier agrees to accept
Australian dollars in payment of all invoiced charges, even though the
underlying invoices and obligations are in U.S. dollars. Each invoice
generated by the Supplier will be in U.S. dollars, and will indicate
the comparable amount due in Australian dollars by multiplying the
U.S. dollar amount by a factor of 1.6. Both parties will review such
factor at the end of the initial twelve (12) month period. At the end
of each month, the Supplier will summarize the amount of Australian
dollars received on outstanding invoices and converted to U.S.
dollars, and compared to the initial obligation in U.S. dollars. In
the event there remains an amount due the Supplier, an additional
invoice will be generated. In the event there remains an amount due
the Purchaser, the Supplier will notify the Purchaser of the amount
and the invoice number that such credit will be applied against.
(c) Subject to clause 4(d), the Supplier shall maintain a credit limit of
U.S. **** for the term of this Agreement. All invoiced charges will
accrue against this credit limit. Changes in this credit limit may be
requested by the Purchaser in writing, and the Supplier agrees to
respond to any formal request within thirty (30) days of written
notification. During this thirty (30) day period, temporary increases
in the credit limit may be granted by the Supplier, to the Purchaser.
(d) All credit limits are to be based on current financial information and
condition of the Purchaser. Credit limits are subject to approval by
the Supplier's Finance Department, and financial information is to be
provided by the Purchaser on no less than a semi-annual basis. If the
Purchaser fails to make timely payments of outstanding invoices, or
other significant changes occur in the Purchaser's financial
condition, then the Supplier has the option of modifying the credit
limit or terms. Any proposed modification to the Purchaser's credit
limit or terms will be provided to the Purchaser, by the Supplier, in
writing, and the Purchaser shall respond to this formal notification,
within thirty (30) days of receipt of such notification.
(e) In the case whereby the Goods and/or Services invoices outstanding to
the Purchaser exceed the credit limit available to the Purchaser, the
production of Goods and/or Services shall proceed without delay. The
delivery of Goods and/or Services under this condition are subject to
the outstanding account balance being paid to within the credit limit
(f) In the event that the Purchaser agrees that delivery of the Goods
and/or Services may be made by installments or that progress payments
may be claimed by the Supplier in respect to the Goods and/or
Services, the Supplier may invoice each installment or progress
payment separately under the same terms as outlined in Clause 4(a).
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
(g) Unless otherwise specified in these Conditions or requested by the
Purchaser, all invoices must be sent to the Purchaser at the following
address, marked to the attention of:
Accounts Payable Supervisor
Aristocrat Leisure Industries Pty. Ltd.
85-113 Dunning Avenue,
Rosebery 2018
New South Wales Australia
5. TOOLAGE
(a) All patterns, dies, tools, jigs, gauges and fixtures ("toolage")
supplied or paid for by the Purchaser shall remain the property of the
Purchaser and shall be returned to the Purchaser on completion of the
supply of the Goods and/or Services, unless otherwise agreed to by the
Purchaser in writing.
(b) Any toolage loaned to the Supplier by the Purchaser is to be reported
on by Supplier as to general condition. Advice should be given by the
Supplier as to whether modification/ renewal is required and whether
the loaned toolage is an aid to the manufacture of the Goods and/or
Services. The Purchaser accepts no responsibility as to the accuracy
or suitability or otherwise of such toolage.
(c) The Supplier shall keep in good order and repair any toolage referred
to in this Clause 5 and in the event of loss, destruction or damage of
such toolage shall, without prejudice to any other right or remedy
available to the Purchaser in respect of the same, on demand by the
Purchaser's (and at the Purchaser's option) either replace or pay to
the Purchaser the actual cost incurred by the Purchaser in replacing
or repairing such toolage.
(d) General toolage wear and tear is at Supplier's expense.
(e) The Purchaser on the submission of any toolage, to the Supplier, will
clearly identify in writing, to the Supplier, the replacement cost of
any toolage and fixtures. Failure to do so in writing and without
formal consent by the Supplier of the terms, will relieve the Supplier
of any obligation to replace toolage or fixtures, if damaged or lost.
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<PAGE>
6. DELIVERY
(a) The Goods and/or Services shall be delivered to the specified premises
of the Purchaser on the date specified in a Purchaser's written
Purchase Order ("the Delivery Date") or call-off schedule.
(b) The Supplier shall notify the Purchaser immediately of any matters
which have or could delay any scheduled deliveries.
(c) Unless otherwise specified in these Conditions or agreed in writing by
the Purchaser, the Goods and/or Services may not be delivered by
installments after a delivery date and if the delay materially affects
the use of the Goods and/or Services by the Purchaser, the Supplier
may not be entitled to progress payments in respect or on account of
the supply of the Goods and/or Services.
(d) The Supplier shall ensure that all invoices, packing slips, delivery
dockets and correspondence show the Purchaser's Purchase Order number,
Purchaser's Goods and/or Services part number and description shown on
the front of the Purchaser's Purchase Order. Failure to do so may
result in delays in processing such documents, in inspection and
acceptance of Goods and/or Services and payment and shall entitle the
Purchaser in such circumstances to claim an extension of time for
attending to the same.
(e) The Goods and/or Services, shall be addressed for delivery to the
Purchaser's site at 85-113 Dunning Avenue, Rosebery, 2018, New South
Wales, Australia, unless otherwise specified in the purchase order.
(f) The Purchaser reserves the right to refuse to accept liability for any
Goods and/or Services delivered in excess of the quantity ordered or
not in accordance with the Purchaser's Purchase Order.
(g) All deliveries from the Supplier or its authorized Representative will
be accompanied by a delivery docket. An authorized representative of
the Purchaser must acknowledge delivery of Goods and/or Services in
writing. Such acknowledgment shall not mean that the Purchaser accepts
the quality or merchantability of the Goods and/or Services, and the
Goods and/or Services shall be subject of inspection pursuant to
Clause 8.
7. PACKAG1NG
Goods and/or Services must be suitably packed or otherwise prepared for
transportation in such a way as to avoid damage, to comply with carrier's
requirements and to secure minimum transportation costs and insurance
rates.
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<PAGE>
8. INSPECTION, TITLE AND RISK
(a) Goods and/or Services delivered to the Purchaser are subject to the
Purchaser's inspection.
(b) Goods and/or Services shall, notwithstanding acceptance of a delivery
or the payment by the Purchaser of the whole or any part of the
purchase price therefore, be subject to inspection and testing by the
Purchaser after arrival and unpacking at the ultimate destination. If
Goods and/or Services are to be incorporated into any plant or
premises, such inspection and testing may be carried out after
installation or incorporation and under operating conditions. If the
Goods and/or Services are found to be unsatisfactory, defective or of
inferior quality or workmanship or not in accordance with these
Conditions, the Purchaser may, without prejudice to any other right or
remedy available to it in respect of the same, reject the Goods and/or
Services. These Goods and/or Services will be returned to the Supplier
at the Representative's in-country facility and will be replaced with
Goods that meet the agreed specifications. The Purchaser has ten (10)
working days from receipt of goods to provide written notice of
unsatisfactory, defective or inferior quality of workmanship.
(c) The Purchaser, after seventy two (72) hours prior, written notice to
the Supplier, also reserves the right to inspect, and where
practicable test, the Goods and/or Services whilst they are in the
course of being produced or installed and may for this purpose enter
upon the premises of the Supplier from time to time. Any such
inspection shall not relieve the Supplier of any of its obligations
under these Conditions.
(d) Title in and risk of loss in the Goods and/or Services shall pass to
the Purchaser upon delivery to the Purchaser or the Purchaser's agent.
The Supplier shall make good any loss or damage to the Goods and/or
Services, which takes place prior to delivery of the Goods and/or
Services.
9. INFRINGEMENT
The Supplier agrees that the sale or use of the Goods and/or Services by
the Purchaser does not infringe upon any Australian patent, trade mark or
copyright, and the Supplier shall hold the Purchaser and person acquiring
the Goods and/or Services from the Purchaser harmless against any suit or
judgment entered against the Purchaser or vendors on account of any
infringement. The Supplier agrees to pay all costs, damages, fines and
profits recoverable in any such action.
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<PAGE>
10. GENERAL COMPLIANCE
(a) In the performance of this Agreement, the Supplier shall strictly
comply with all applicable laws, ordinances, orders, rules and
regulations, whether International, National, State or Local, and upon
request by the Purchaser, the Supplier shall furnish it with such
evidence of compliance as the Purchaser may require at any time.
(b) The Purchaser shall submit any requirements for compliance to the
Supplier in writing, and the Supplier has a period of ninety (90) days
to review and generate an action plan to meet any compliance issue.
11. QUALITY
(a) If a specification is not provided, the minimum quality level of Goods
and/or Services will be that of an agreed Australian standard or on
samples submitted by the Supplier and approved by the Purchaser. The
Supplier recognizes the desire by the Purchaser to obtain and maintain
minimum quality system requirements that would satisfy AS/ISO
9001-9003. The Supplier is in the process of obtaining certification
against ISO requirements. Certification is expected to be completed on
or before April 1999. The Supplier will keep the Purchaser informed as
to the progress and schedule for this certification on a quarterly
basis.
(b) The Supplier, as part of the Agreement is expected to maintain a
minimum level of performance and reliability criteria. In the case
where the Goods fail to meet the performance and reliability criteria,
the Supplier is obligated to initiate measures that bring the Goods
within the specifications. For the purposes of the Agreement, the
criteria are summarized as follows:
i. Soaking: The Supplier will perform a minimum **** hour soak
(burn-in) of its validator products. The Supplier will perform a
minimum soak (burn-in) of its stacker products equivalent to no
less than **** cycles.
ii. Infant Mortality Rate (Stackers and Validators): Less Than ****.
This rate is measured after the Purchaser has run its own
**** hour soak and test of the machines.
iii. Acceptance Rate (Australian Program): The unit will accept notes
in 4 directions with an average acceptance rate of greater than
****. The acceptance rate will be calculated as defined in the
Supplier's published test criteria.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
iv. In-Field Reliability: The Supplier will work with the Purchaser
to provide continuous in-field reliability improvements based on
documented failures reported.
12. STANDARDS
The Goods and/or Services must conform to the specifications agreed by the
Purchaser in writing and shall not be varied without the Purchaser's
written consent. The Supplier acknowledges that all changes in
specifications for the Goods and/or Services may have to be submitted to
and approved by a government or regulatory agency and the Supplier agrees
to notify the Purchaser of any changes in writing at least two (2) months
prior to any proposed change in any specification for the Goods and/or
Services. Approval of any changes requested by the Supplier will not be
unreasonably withheld by the Purchaser.
13. WARRANTY
(a) Notwithstanding the Purchaser's acceptance or right of inspection
and/or any other terms and conditions provided in this Agreement, the
Supplier warrants that all articles are free from defects in design,
materials, workmanship and performance as stated in the Supplier's
Warranty. The Supplier warrants that the products are manufactured in
accordance with the agreed upon specifications set out or referred to
in these conditions. The Supplier further warrants that the articles
fully comply with the specifications and that the articles are
suitable for the use and conditions intended. The Goods and/or
Services are purchased from the Supplier in reliance on the
aforementioned warranties.
(b) The Supplier shall indemnify and keep indemnified the Purchaser
against any reasonable actions, claims, costs, damages and expenses
arising out of any damage to property or persons arising out of or in
connection with a breach of the warranties contained in Clause 13(a)
or 13(c) of this Agreement or otherwise referred to in these
Conditions.
(c) The Supplier warrants that the Goods and/or Services are free and
clear of all liens and encumbrances whatsoever and that the Supplier
has a good and marketable title to same, and the Supplier agrees to
hold the Purchaser free and harmless against any and all claims in
relation to the Goods and/or Services. The Supplier's liability under
this warranty shall include in-country repair or replacement services
of faulty equipment and defective Goods and/or Services, at the
Representative's in-country facility, for a twelve (12) month period,
from the date of Goods and/or Services receipt by the Purchaser. This
is provided that notification of such failure or defect is given to
the Supplier, in written form, immediately upon the same becoming
apparent. The Supplier
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<PAGE>
requires, that the Goods and/or Services are promptly returned to the
Representative's in-country repair site, unless otherwise specified in
writing by the Supplier. Response time by the Representative, for
repair or replacement of the faulty equipment, is expected to be on
average **** working days or less
(d) Inward and return freight, packaging and delivery charges shall be the
responsibility of the Purchaser, for warranty returns outside
Australia.
(e) Inward and return freight and delivery charges shall be the
responsibility of the Representative, for warranty returns to and from
the Purchaser's Rosebery site and the Representative's local service
depot. These deliveries will take place typically once every ****
working days, or as agreed between both parties.
(f) The Supplier agrees to review the warranty period for its GIII product
line.
(g) ****
14. ASSIGNMENT
This Agreement shall be neither assigned nor sub contracted to a third
party by the Supplier without the prior written consent of the Purchaser,
such consent can not be unreasonably withheld by the Purchaser.
15. FREIGHT CHARGES
The Supplier shall be accountable for any difference in freight charges
arising from the Supplier's failure to follow any shipping instructions
which may be specified in contract or Purchase Order agreement.
16. CHANGES
The Purchaser has the right at any time to make recommendations which
effect specifications or drawings for the Goods and/or Services. If such
changes cause an increase or decrease in the amount due or in the time
required for performance, an equitable adjustment shall be made in the
reasonable opinion of the Purchaser and the Supplier.
17. CANCELLATION
Purchase Orders as raised by the Purchaser, on the Supplier are not
cancelable.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
18. CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY
(a) Any specifications, engineering and other data, software, drawings,
blueprints and other documents, in tangible or electromagnetic forms
provided by either party (or any third party at request of either
party) or any information otherwise disclosed by the either party to
the other for the purposes of this Agreement (the "Information") shall
be treated as highly confidential. Each party agrees that with respect
to information given to it by the other party, the party receiving the
information will:
i. not use or copy the information for any purpose other than the
fulfillment of this Agreement;
ii. not disclose the information to any other person without the
prior written consent of the other party; and
iii. to return the information (including, if so demanded by the other
party, all copies) to the other party on completion of the
delivery of the Goods and/or Services.
(b) The developing party shall retain title to any intellectual property
rights (which shall mean to include any statutory or common law
copyright, trademark, patent, design or circuit layout rights) arising
out of or in connection with any specifications, drawings, designs, or
layouts in any tangible or electromagnetic forms which are otherwise
or disclosed to the other party in relation to the performance of this
Agreement. Either party shall also retain all intellectual property
rights, as aforesaid in relation to any improvement, modification or
enhancement which the developing party may perform, in relation to the
Goods and/or Services and the other party shall have a royalty free
non-exclusive license to use such improvements, modifications or
enhancements solely for the purpose of performing its obligations
under this Agreement.
(c) In the event that either party wishes to utilize any such intellectual
property in relation to products to be sold to third parties, both
parties shall mutually agree on the terms and conditions of such
license Agreement, from time to time.
(d) Both parties warrant that neither the Goods and/or Services, nor any
components of the Goods and/or Services, nor any associated
documentation, or any part thereof, infringe the intellectual property
rights of any person.
19. INSURANCE AND SAFETY PRECAUTIONS
(a) Anything furnished to the Supplier by the Purchaser pursuant to this
Agreement including, without limitation, samples, drawings, patterns,
tooling,
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<PAGE>
equipment, work in progress and materials, shall remain the property
of the Purchaser, shall be held at the Supplier's risk and the
Supplier will be deemed the insurer thereof and shall be returned upon
completion of the work or upon demand by the Purchaser.
(b) The Supplier shall indemnify the Purchaser in accordance with the
provisions of Clause 13(b), and shall obtain and maintain at the
Supplier's expense a product liability insurance policy in relation to
the supply of Goods and/or Services to the Purchaser for an amount not
less than **** dollars **** in relation to each claim. The Supplier
shall provide the Purchaser with evidence of such insurance as
required from time to time.
20. NON-WAIVER
Failure of the Purchaser to insist upon strict performance of any of these
conditions shall not be deemed a waiver of any rights or remedies that the
Purchaser shall have, and shall not be deemed a waiver of any subsequent
default. The shipping or receiving of any article under this Agreement
shall not be deemed a waiver of any rights for any prior failure by the
Supplier to comply with any of the provisions of the Agreement.
21. FORCE MAJEURE
Neither the Supplier nor the Purchaser shall be liable to the other for
default or delay in performing its obligations under the Agreement caused
by any occurrence beyond its reasonable control including, without
limitation, fires, strikes, industrial disturbances, riots, wars, acts of
God, Government order or regulation, storm, tempest or epidemics.
22. GOVERNING LAW
These conditions shall be governed by and construed in accordance with the
law of the state of New South Wales, Australia.
23. TERMINATION
(a) This Agreement and any Purchase Order placed pursuant to this
Agreement, may be terminated in whole or in part at the option of the
aggrieved party, having such right by providing written notice to the
other party, upon the happening of any of the following events;
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
i. In the event that either party is adjudicated bankrupt, or if a
receiver or trustee is appointed for such party, or for a
substantial portion of its assets, or if assignment for the
benefit of its creditors is made;
ii. In the event that either party shall have failed substantially to
perform any material covenant, obligation, representation or
warranty by it made or to be performed hereunder, or shall have
violated any material covenant, obligation, Agreement, or
representation or warranty herein contained, provided, however,
that no termination may be effected hereunder unless and until
the injured party shall have delivered to the other party written
notice informing the other party of the alleged default, and such
default is not cured within sixty (60) days after receipt of such
notice, excluding obligations to make payment for Goods and/or
Services under this Agreement;
iii. By the Purchaser, in the event the Supplier shall have failed to
correct non-conformities in the Goods and/or Services when
required. Identification of any non-conformities shall require
written notification by the Purchaser to the Supplier. This
notification will include a description of the non-conformity and
both parties will then establish a mutually agreed upon plan and
schedule to address the issue and monitor the overall improvement
made towards correcting the non-conformity;
iv. The exercise of the right to terminate by either party shall be
in addition to any other rights or remedies available to it at
law unless limited or precluded by this Agreement and shall not
have the effect of waiving other rights to which such party might
otherwise be entitled;
v. If either party is in breach of these Conditions and repudiates
the Agreement or any other Agreement with the other party or if
either party becomes insolvent, commits an act of bankruptcy,
stops payments of debts or calls a meeting of or enters into
composition with or for the benefit of the party's creditors or
has a receiver, receiver/manager, manager, administrator,
controller or provisional liquidator appointed to its undertaking
or assets or any part of it or a winding up petition is presented
against either party or either party goes into liquidation
(except for the purpose of reconstruction or amalgamation) the
other party may at its discretion and regardless of any default
or failure and without prejudice to its other rights under the
Agreement or otherwise immediately cancel or suspend the
Agreement or any unfulfilled part of the Agreement;
vi. In the event of cancellation or suspension, neither party shall
be liable for any loss, damages, costs or expenses arising from
such cancellation or suspension. The only liability of either
party to the other in the
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<PAGE>
circumstances set out in this clause shall be for payment of
Goods and/or Services delivered and the committed and documented
work-in-process; and
vii. With the terms specified for guaranteed supply (Clause 27), the
Supplier will provide the Purchaser with protection against
interruption of supply. For its part, in the case of termination,
the Purchaser is obligated to provide Purchase Orders, take
delivery and pay for the **** supply of finished goods and parts,
held by the Supplier, the Supplier's vendors, the Supplier's
in-country Representative, and in transit to the supplier's
in-country Representative. In the event this Agreement is
terminated or expires, then the Purchaser is obligated to
continue to take delivery of the entire guaranteed supply of
Goods at the same delivery rate and on the same terms and
conditions in effect at the time of termination or expiration
period.
24. GAMING AUTHORITY REQUIREMENTS
The Supplier acknowledges that the Purchaser is subject to various
regulations imposed by government gaming authorities in a number of
jurisdictions around the world (hereafter called the "Gaming Authorities")
in relation to the manufacture, distribution, marketing and sale of gaming
machines. The Purchaser, as part of the regulations imposed upon it, is
obliged to conduct its affairs in a manner which is both ethical and in
accordance with the regulations imposed by the Gaming Authorities. The
Purchaser may be required to disclose details of its dealings in relation
to the supply of parts and components for use in its gaming machines and
the Supplier shall agree to fully cooperate with the Purchaser in relation
to any information requested or otherwise required to be disclosed to the
Gaming Authorities. The Purchaser shall use its best endeavours to ensure
that such information, where it is commercially sensitive to the Supplier,
is disclosed to the Gaming Authorities requesting the same subject to an
obligation of confidentiality and non-disclosure. The Supplier shall
provide all reasonable assistance to the Purchaser to enable the Purchaser
to obtain any approvals required to be obtained from the Gaming Authorities
in relation to the manufacture, distribution or sale of any of the
Purchaser's gaming machines in any jurisdiction. The Purchaser shall meet
the reasonable expenses incurred, if any, by the Supplier complying with
this clause.
25. DISPUTES
Subject to the approval of the Supplier, any dispute arising out of or
relating to these Conditions of Purchase or the Agreement must first be
discussed by the parties and failing agreement or settlement, shall at the
suggestion of the Purchaser or the Supplier be the subject of mediation,
administered by the Australian Commercial
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
Disputes Centre ("ACDC") conducted and held in accordance with the Rules of
ACDC in force at the date of the dispute. The selection of ACDC as the
agency for disputes is subject to approval by the Supplier. With the
agreement of the Supplier on ACDC, and in the event the dispute has not
been resolved within twenty-eight (28) days (or such other period as is
agreed to in writing by the parties) after the appointment of the mediator
by the parties, the dispute shall be submitted to arbitration, administered
by ACDC, conducted and held in accordance with and subject to the laws of
the State of New South Wales. Any mediation or arbitration meetings and
proceedings shall be held in Sydney, Australia, unless otherwise agreed.
26. NOTICES
(a) Any notices required pursuant to the Agreement, shall be in writing,
addressed to the parties at the address specified on the Purchase
Order (or at such other address or addresses as may be provided in
writing for the purpose) and once given or made shall be deemed to be
duly given or made:
(i) in the case of delivery by a reputable courier service such as
Fedex or DHL, three (3) days after the delivery to such service;
(ii) in the case of facsimile, when sent; and
(iii) in the case of personal delivery, when delivered. All notices to
Supplier shall be duplicated to the Representative, unless otherwise
instructed by the Supplier:
o to Supplier (Corporate Office):
Global Payment Technologies, Inc.
20 East Sunrise Highway, Suite 201
Valley Stream, New York 11581
United States of America
Phone:516-256-1000
Fax: 516-256-1620
Contacts:
Account and Sales: Robert W Nader, VP Product/Market Dev.
Corporate: Ed Seidenberg, President/COO
Finance: Tom McNeill, VP/Chief Financial Officer
Purchasing: Sharon Stadelmaier, Customer Service Manager
Technical: Mark Martino, Application Specialist
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<PAGE>
o to Representative (Australian Office):
Global Payment Technologies, Inc.- Australia
844 Pacific Highway
Gordon, New South Wales 2072
Australia
Phone: 612-9499-3100
Fax: 612-9499-3048
Contacts:
Account and Sales: Andre Soussa, Managing Director
Technical: Mike Flor, Service Support
o to Purchaser: Aristocrat Leisure Industries Pty. Ltd.
85-113 Dunning Avenue,
Rosebery, New South Wales. 2018
Australia
Phone: 612-9693-0351
Fax: 612-9313-4290
Contacts:
Purchasing and Supply: Neale J Slack
Finance: Kelvin Atkinson
Authorized Purchase Order Signatures: Mardi Wilson, Neale Slack,
Robin Simpson
Product Design: Jon Fletcher
Research and Development: Gareth Phillips
Technical Services: Gary Johnson, Geoff Carr.
27. CONTINUITY AND GUARANTEE OF SUPPLY
(a) Due to the Supplier being the primary source of bill acceptor products
for the Purchaser worldwide, the Supplier recognizes the need to
provide a guaranteed supply of Goods and Goods parts that will assure
the Purchaser with continuous supply of Goods and/or Services and
Goods parts, in the case of an urgent requirement. This guaranteed
supply of Goods and/or Services will take the following form:
i. The Supplier will maintain a stock of finished Goods and parts in
the configuration(s) agreed upon by both parties equivalent to an
average **** supply of production requirement. The Supplier will
base this stock of finished Goods and parts on the average weekly
shipments of the current Blanket Order by the Purchaser.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 16
<PAGE>
ii. This **** supply of Goods and Goods and/or Services parts will
take the form of **** of finished Goods held in-country (either
by the shipping agent or at the Supplier's facility), **** of
finished Goods in transit, to the Supplier's in-country
Representative, and **** of finished Goods and parts offsite from
the Supplier in a location(s) separate from the Supplier's main
production facility. Within **** of this Agreement being signed,
the Supplier will submit a plan, to the Purchaser, in writing,
demonstrating the **** Goods and Goods and/or Services parts
supply, covering the intent of this guaranteed supply clause.
iii. The Supplier shall, at the Purchaser's request, provide a
document outlining the current in-country stock holdings of Goods
and Goods parts, held by the Supplier's in-country
Representative.
iv. This guaranteed supply of Goods will be available to the
Purchaser within **** days of the signing of this Agreement and
the receipt of the Purchaser's initial **** Blanket Order.
v. In the case where during the term of this Agreement the Supplier
establishes secondary production operations that can provide
Goods to the Purchaser, then the supply of Goods and parts
outlined above in (ii) shall be reviewed by the Purchaser and the
Supplier.
vi. The Supplier shall maintain a supply of the Goods and/or Services
for the term of this Agreement. In the event that the term of
this Agreement expires and the parties have been negotiating in
good faith to renew this Agreement then these conditions shall
continue to apply subject to either party providing four (4)
months notice in writing that this Agreement shall be terminated.
28. CONFIGURATION MANAGEMENT
In order to maintain a high level of configuration management, with respect
to software revisions, the Supplier shall not release software or hardware
configurations unless there has been authorization by the Purchaser's
Rosebery site.
29. PROGRAMME RELEASE
A formal Programme Release Procedure has been submitted by the Supplier and
in effect agreed upon by the Purchaser. This Programme Release Procedure
outlines the steps required to have software programs and hardware
configurations developed, documented, implemented and maintained by the
Purchaser and the Supplier.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 17
<PAGE>
30. DOWNLOAD OF VALIDATOR SOFTWARE
(a) The Supplier shall provide authorization, training and the tools
(inclusive of white reference paper), to enable the Purchaser to down
load validator programs, both at the Purchaser's Rosebery site and in
the field. All training and tools for software download, provided by
the Supplier, to the Purchaser, shall be at no cost to the Purchaser.
Costs for software upgrades which are out of the control of the
Supplier (viz. new currency releases), are subject to agreed upon
levels between both the Supplier and the Purchaser.
(b) The Purchaser shall require a sufficient supply of Download Keys to
perform the task of in-field program upgrades. These Keys or
comparable device will be provided by the Supplier to the Purchaser
(for its sole use only) free of charge and an agreed upon safety stock
of Keys will be maintained at the Supplier's in-country
Representative's facility. The Purchaser shall implement procedures to
ensure the return of all empty download Keys to the Representative.
(c) The Purchaser shall keep the Supplier informed of all program versions
installed in the field, on a regular basis.
31. DOWNLOAD OF VALIDATOR KERNELS
The Supplier has established an in-country service and support Representative
which has the authorization, training and tools, to down load validator kernels.
This capability will reside and be performed at the Representative's Sydney
office, but the capability to perform this process in the field will be
supported by the in-country Representative.
32. TECHNICAL RESPONSE AND IN-COUNTRY PRODUCT SUPPORT
(a) The Supplier has established an in-country sales/technical support
Representative, based within the vicinity of Sydney, Australia. This
Representative will maintain the technical expertise to be capable of
advising, troubleshooting and training representatives of the
Purchaser, in all technical details associated with the Goods and/or
Services. The Representative will provide training to the Purchaser's
technicians for servicing all models of the Goods and/or Services.
(b) Response or acknowledgement of all technical and business inquiries
will be provided within **** hours of request, if from the Supplier,
and within **** hours of request, if from the Representative. This
response will either be in the form of an answer or an acknowledgement
of the request with an estimated date of completion.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24-2 under the Securities Exchange Act of 1934, as
amended.
Page 18
<PAGE>
(c) The Representative will also maintain a stock of Goods spare parts and
Goods advance replacement units, which will be made available for use
in both warranty and non-warranty repair. The Supplier's **** parts
and labor warranty for new equipment will be covered in-country by the
Representative and non-warranty repairs will be supplied by the
Representative. The Supplier shall work towards and establish standard
repair costs for non-warranty Goods repairs.
(d) The Representative shall provide, at no cost to the Purchaser, full
sets of technical documentation, pertinent to the Goods and/or
Services provided to the Purchaser. Detailed Goods and/or Services
parts lists pertinent to Australian and New Zealand variants, shall
form part of the technical documentation.
(e) The Supplier shall provide a catalogue of software databases, to the
Purchaser, which includes Country, Denominations and Directions
Accepted. This catalogue shall be updated quarterly.
(f) The Supplier and Representative shall provide to the Purchaser, a
Maintenance Schedule, including a Recommended Spare Parts List.
(g) The Supplier and Representative shall supply the Purchaser a list of
service tools, test equipment and special fixtures to enable proper
service by the Purchaser directly or through its appointed
agents/distributors. The Supplier, shall provide prices for these
tools at the time, when the tools are requested by the Purchaser.
(h) The Representative will provide full technical training of the
Purchaser's personnel and conduct both in-house and in-field training
courses to assure that the level of knowledge of the product is
adequate to serve the market. This training will take, at a minimum,
the form of:
i. In-house product seminars, **** times per year to review
product basics and new features.
ii. Certified training courses at the Representative's facility to
provide an approved level of technical competence for authorized
service personnel.
iii. In-field training courses for authorized service personnel. These
courses are to be coordinated with the Purchaser's technical
service group.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 19
<PAGE>
33. PRODUCT DEVELOPMENT
(a) Development of new applications and products associated with the Goods
and/or Services, shall be undertaken jointly by the Purchaser and the
Supplier, on an ongoing basis, for the term of the Agreement.
(b) Determination shall be made by both parties, as to the marketplace
potential and strategy to pursue the development. At that time, a
Product Development Specification and breakdown of funding
requirements shall be established. Any development agreements shall be
separately negotiated and attached to the Supply Agreement.
34. DATABASE DEVELOPMENT
(a) ****
(b) The yearly specified number of priority database development projects,
exclusive of the Euro dollar shall be:
**** databases per year of the Agreement for GII products.
**** databases per year of the Agreement, for GIII
products (in excess of existing GII databases).
(c) While the Purchaser shall select a particular country database that
requires development, the Supplier can not guarantee that a suitable
database can be created due to quality of currency and features. In
that case, the Purchaser shall have the right to select another
country to pursue, as it seeks to expand market opportunities.
(d) The Supplier and the Purchaser shall share information on product
release plans, in various markets, to enable both parties to prepare
mutually acceptable schedules for development of currency profile
programs for various denomination notes.
(e) The Supplier shall supply the Purchaser any updated currency database
programs, for error attributable to faulty programming free of charge,
at all times.
(f) Database programs, at times, require updating to accommodate aging of
notes and removal of counterfeit bills. The Supplier shall provide,
free of charge to the Purchaser, all enhancements for these
conditions. The Purchaser, shall be responsible for obtaining
regulatory approval, and may be required to install
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 20
<PAGE>
the new currency program in the gaming machine. The Purchaser
understands that the Supplier can not guarantee against the acceptance
of frauds or the complete elimination of identified frauds from being
accepted.
(g) The Purchaser shall establish and maintain a database for version
control of programs installed in gaming equipment, world-wide.
35. PURCHASER COMMITMENT
(a) While the Supplier continues to provide product that fulfills the
mutually agreed upon specifications, remains price and performance
competitive, and is a useable option in the Purchaser's product, the
Purchaser agrees that the Supplier will be the Purchaser's "Most
Favoured Supplier" source of bill validator Goods and/or Services.
Accordingly, the Purchaser agrees to procure the Supplier's Goods
and/or Services as its standard, in all its gaming machine sales. The
Most Favoured Supplier status will remain in effect for the term of
this Agreement, unless the Supplier or the Supplier's Representative,
are in material breach of any of these terms and conditions.
(b) The Supplier is committed to assuring that the Purchaser does not lose
sales opportunities because of its products. Therefore, in the case
where a customer has requested another currency validator, the
Purchaser may choose to install the competitive currency validator to
fulfill the terms of this order.
36. GENERATION III (GIII) PRODUCT
(a) Currently the Supplier is developing its new Generation III (GIII)
Goods and/or Services. Funding for the new Goods and/or Services and
all technical and patent rights shall be borne by and belong to the
Supplier.
(b) The Supplier does not guarantee that the GIII product line will
provide an overall competitive advantage in the Gaming industry.
However, current design goals and expectations are focused towards
achieving cost reductions in the GIII product range and setting new
standards in performance, functionality and reliability.
(c) As part of the Supplier's GIII commitment to the Purchaser, the
Supplier will grant the Purchaser preferred conditions for its new
GIII validator product. These conditions would include preferential
pricing and database development for the Purchaser's Sales/Marketing
group as outlined in Clause 34.
(d) In regards to the Supplier's product development on GIII, the
following milestones apply:
****
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 21
<PAGE>
37. RE-SUBMISSION COSTS
****
38. SEVERABILITY
If any provision of these Conditions or the Agreement is invalid, all other
provisions which are self-sustaining and capable of separate enforcement
shall continue to be valid and enforceable in accordance with the terms.
39. AGREEMENT AMENDMENTS
The Agreement may be amended, modified, superseded, cancelled, renewed, or
extended, only by written instrument, signed by both the Purchaser and the
Supplier. No delay on the part of either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of either party of any right, power or privilege
hereunder preclude any further exercise thereof or the exercise of any
right, power or privilege hereunder.
40. W.C.M. (WORLD CLASS MANUFACTURING) MEETING
At an agreed time and day, at least quarterly, representatives of both the
Purchaser and the Supplier are to convene, with the intention of
Purchaser/Supplier performance review. Minutes of such meetings are to be
published and distributed.
41. TERM
The Term of this Agreement shall be for a period of twenty four (24)
months, from the date of this Agreement and as otherwise provided herein.
At the end of the initial **** month period of the Agreement, there
will be a Supplier/Purchaser performance review to highlight any
recommendations that can be made to improve all aspects of the product and
business partnership.
42. YEAR 2000 COMPLIANCE
(a) Notwithstanding any other provision of the Agreement, The Supplier
warrants that the Product will provide full functionality and operate
without adverse effect with respect to each of the following dates
(the "Critical Dates"): 9 September 1999, 31 December 1999, 1 January
2000 and all dates thereafter. The Supplier further warrants that the
Product has been specifically designed, programmed and tested to
ensure full functionality and operation without adverse effect to
these Critical Dates.
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 22
<PAGE>
(b) The requirement that the Product provide full functionality referred
to in Clause 42(a) hereof, with respect to each of the Critical Dates,
includes the Product being able to:
(i) deal properly with the transition from 31 December 1999 to 1
January 2000;
(ii) distinguish properly (including when comparing and sequencing)
between dates occurring before 1 January 2000 and after 31
December 1999;
(iii)where relevant, calculate correctly the number of days between a
date occurring before 1 January 2000 and a date occurring after
31 December 1999; and
(iv) distinguish properly between leap years and non-leap years.
(c) Supplier agrees to provide documentation on their Year 2000 Compliance
within sixty (60) days of signing of this Agreement.
43. RE-NEGOTIATION
Re-negotiation of this Agreement is to commence during the term of this
Agreement. Such re-negotiation is to start no later than 180 days prior to
the end of this Supply Agreement
COMPANY SIGNATURES:
For and on behalf of: For and on behalf of:
Aristocrat Leisure Industries Pty. Ltd. Global Payment Technologies, Inc.
Signed: ______________________________ Signed: ____________________________
Date: _______________________________ Date: _____________________________
Witness: _____________________________ Witness: ___________________________
Date: ________________________________ Date: ______________________________
Page 23
<PAGE>
Product Pricing Schedule A:
****
**** Represents material redacted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
Page 24
<PAGE>
SUPPLY AGREEMENT WARRANTY PROVISION
The Supplier extends the following warranty to the original purchaser or
original operator of the Supplier's currency validator.
All parts are guaranteed to be free of defects in material and workmanship for a
period of one year from date of purchase.
The Supplier agrees to repair or replace, without charge during the foregoing
period, any part which proves defective upon examination by the Supplier or the
Representative. All costs of shipping any allegedly defective parts to or from
the offices of the Supplier or the Representative, shall be borne as follows:
1. Inward and return freight, packaging and delivery charges shall be the
responsibility of the Purchaser, for warranty returns outside
Australia.
2. Inward and return freight and delivery charges shall be the
responsibility of the Representative, for warranty returns to and from
the Purchaser's Rosebery facility and the Representative's local
service depot. These deliveries will take place typically once every
five (5) working days, or as agreed between both parties.
In case of repair parts purchased by the Supplier as components, the Supplier
extends the same warranty period as extended by the original manufacturer
(typically 60-90 days).
The above warranty applies provided that all parts of the Goods have been
serviced properly as directed in the technical manual, and provided the alleged
defective part upon examination by the Supplier and/or the Representative, shall
prove to be thus defective. This warranty will not apply to any validator in
which the electronic PCB assemblies or any other part has been subject to any
modification, accident, abuse or misuse.
The warranty described in this paragraph shall be in lieu of any other warranty,
expressed or implied, including but not limited to, any implied warranty or
merchantability or fitness for a particular purpose. There are no warranties,
which extend beyond the description of the face hereof.
If this product does not perform as warranted herein, owner's sole remedy shall
be repair or replacement, at the Supplier's option. In no event will the
Supplier or Representative be liable for damages, lost revenue, lost wages, lost
savings, or any incidental or consequential damages arising from the purchase,
even if the Supplier or Representative have been advised of the possibility of
such damages.
Page 25
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0
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