1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRANSACT TECHNOLOGIES INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3577 06-1456680
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
7 LASER LANE, WALLINGFORD, CT 06492
(203) 949-9933
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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BART C. SHULDMAN
CHIEF EXECUTIVE OFFICER
7 LASER LANE, WALLINGFORD, CT 06492
(203) 949-9933
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
STEPHEN J. CARLOTTI, ESQ. MICHAEL J. ERICKSON, ESQ.
HINCKLEY, ALLEN & SNYDER HELLER, EHRMAN, WHITE & MCAULIFFE
ONE FINANCIAL CENTER 6100 COLUMBIA CENTER
BOSTON, MASSACHUSETTS 02111-2625 701 FIFTH AVENUE
(617) 345-9000 SEATTLE, WASHINGTON 98104-7098
(206) 447-0900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Offering Price Aggregate Amount of
Title of Each Class of Amount to Be per Offering Registration
Securities to Be Registered Registered(1) Share(2) Price(2) Fee
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Common Stock, par value $.01............ 1,322,500 $11.00 $14,547,500 $5,016
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(1) Includes 172,500 shares subject to the Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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.
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TRANSACT TECHNOLOGIES INCORPORATED
Cross Reference Sheet Pursuant to
Item 501(b) of Regulation S-K
FORM S-1
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Front Cover Page; Inside Front Cover of
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front and Outside Back Cover of
Prospectus
3. Summary Information, Risk Factors......... Prospectus Summary; Risk Factors; The
Company
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page; Description of
Capital Stock
10. Interests of Named Experts and Counsel.... Not Applicable
11. Information with Respect to the Registrant
(a) Description of Business............... The Company; Business; Management's
Discussion and Analysis of the Results
of Operations and Financial Condition;
Relationships Between the Company and
Tridex
(b) Description of Property............... Business -- Properties
(c) Legal Proceedings..................... Business -- Litigation
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters................... Risk Factors; Shares Eligible for Future
Sale; Dividend Policy
(e) Financial Statements.................. Index to Financial Statements
(f) Selected Financial Data.............. Selected Financial Data
(g) Supplementary Financial Information... Not Applicable
(h) Management's Discussion and Analysis
of the Results of Operations and Financial
Condition............................. Management's Discussion and Analysis of
the Results of Operations and Financial
Condition
(i) Disagreements with Accountants....... Not Applicable
(j) Directors and Executive Officers..... Management
(k) Executive Compensation and
Transactions.............................. Management -- Compensation of Executive
Officers
(l) Security Ownership of Certain
Beneficial Owners and Management.......... Tridex as Principal Stockholder
(m) Certain Relationships and Related
Transactions.......................... The Company; Relationship Between the
Company and Tridex
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
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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. THIS PROSPECTUS SHALL NOT 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.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 26, 1996
1,150,000 SHARES
TRANSACT
T E C H N O L O G I E S
I N C O R P O R A T E D
COMMON STOCK
All of the 1,150,000 shares of Common Stock offered hereby are being sold
by Transact Technologies Incorporated ("Transact" or the "Company"), which is
currently a wholly-owned subsidiary of Tridex Corporation ("Tridex"). Prior to
this offering (the "Offering"), there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $9.50 and $11.00 per share. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price. The Company is applying for quotation of the Common Stock on the Nasdaq
National Market under the symbol "TACT."
Upon completion of the Offering, Tridex will own approximately 82.4%
(approximately 80.3% if the Underwriters' over-allotment option is exercised in
full) of the outstanding Common Stock. Tridex has announced its intent, subject
to the satisfaction of certain conditions, to divest its ownership interest in
the Company by means of a tax-free distribution to its stockholders. See "The
Company -- Background of the Offering and the Distribution" and "Tridex as
Principal Stockholder."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
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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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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Per Share...................... $ $ $
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Total(3)....................... $ $ $
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(1) Excludes non-accountable expense allowance payable to Cruttenden Roth
Incorporated, representative of the Underwriters (the "Representative"), and
the value of warrants to purchase up to 115,000 shares of Common Stock at an
exercise price of 120% of the public offering price to be issued to the
Representative (the "Representative's Warrant"). The Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducting expenses, estimated at $1,040,000, payable by the Company,
including the Representative's non-accountable expense allowance of
$240,000. See "Underwriting."
(3) The Company has granted the Underwriters a 30-day option to purchase up to
172,500 additional shares of Common Stock on the same terms and conditions
set forth above, solely to cover over-allotments, if any. If all such shares
are purchased the total Price to Public, Underwriting Discount and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
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The shares of Common Stock are being severally offered by the Underwriters
named herein, subject to prior sale, when, as and if delivered to and accepted
by them, and subject to certain other conditions. The Underwriters reserve the
right to reject any order in whole or in part and to withdraw, cancel or modify
the offer without notice. It is expected that the certificates representing the
shares of Common Stock offered hereby will be available for delivery at the
offices of the Representative, in Irvine, California, on or about ,
1996.
CRUTTENDEN ROTH
I N C O R P O R A T E D
THE DATE OF THIS PROSPECTUS IS , 1996
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TRANSACT
MADE TO ORDER, BUILT TO LAST.
[SERIES 50PLUS PHOTO] [SERIES 90 PHOTO]
SERIES 50PLUS POS PRINTER SERIES 90 POS AND FINANCIAL
SERVICES PRINTER
[SERIES 4000 PHOTO] [SERIES 6000 PHOTO]
SERIES 4000 SERIES 6000
POS, GAMING AND LOTTERY, FINANCIAL SERVICES AND KIOSK PRINTERS
Ithaca, 50Plus and PcOS are registered trademarks of the Company. The
Company has applied for registration of TRANSACT, MAGNETEC and Made to Order,
Built to Last. This Prospectus may also contain trademarks other than those of
the Company.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH
PERSONS PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS IN THE
COMMON STOCK FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS PURSUANT TO
EXEMPTIONS FROM RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. As used
herein, (i) references to the "Company" include each of the subsidiaries of the
Company and the historical operating results and activities of the business
operations which comprise the Company as of the date hereof, (ii) references to
"fiscal 1994" mean the fiscal year of the Company ended April 2, 1994 and (iii)
references to "fiscal 1995" mean the fiscal year of the Company ended April 1,
1995. Unless otherwise specified, all information in this Prospectus assumes no
exercise of the over-allotment option granted to the Underwriters. See
"Underwriting." Investors should carefully consider the information set forth
under the heading "Risk Factors."
THE COMPANY
Transact designs, develops, manufactures and markets transaction based
printers and related products under the Ithaca and MAGNETEC brand names. The
Company's printers are used to provide transaction records such as receipts,
tickets, coupons, register journals and other documents. The Company focuses on
four vertical markets: point-of-sale ("POS") (from which the Company derived
approximately 57.6% of its net sales in the nine months ended December 31,
1995); gaming and lottery (approximately 27.0% of net sales); financial services
(approximately 7.7% of net sales); and kiosks (approximately 7.7% of net sales).
The Company sells its products directly to end users, original equipment
manufacturers ("OEMs"), value added resellers ("VARs") and selected
distributors, primarily in the United States and Canada.
Transact manufactures and sells customizable and custom dot matrix and
thermal printers for applications requiring up to 60 character columns in each
of its four vertical markets. The Company also sells an 80 column laser printer
for kiosk applications. The Company's customizable products include several
series of printers which offer customers the ability to choose from a variety of
features and functions. Options typically include different printing
technologies, print speeds, paper handling capacities and numbers of print
stations. In addition to its customizable printers, Transact manufactures custom
printers for certain OEM customers. In collaboration with these customers, the
Company provides engineering and manufacturing expertise for the design and
development of specialized printers.
Transact markets its products through a network of selected distributors,
OEMs, VARs and systems integrators, as well as directly to end users. The
Company's use of multiple sales channels allows it to reach customers of all
sizes in each of its four vertical markets. Customers of the Company include OEM
customers such as GTECH Holdings Corporation ("GTECH"), the leading worldwide
supplier of on-line lottery systems, Interbold ("Interbold," a joint venture of
Diebold Incorporated and IBM Corporation), a leading worldwide supplier of
automatic teller machines ("ATMs"), Indiana Cash Drawer ("ICD"), a leading
distributor of POS products, and Ultimate Technology Corporation ("Ultimate"), a
VAR and distributor of POS products. In May 1996, the Company entered into a
strategic marketing agreement with Okidata of America, a division of Oki of
America, Inc. ("Okidata"), and, pursuant to that agreement, a separate sales
agreement with its affiliate Oki Europe Limited ("Oki Europe"), establishing Oki
Europe as the exclusive distributor of the Company's POS and kiosk products in
Europe, the Middle East and North Africa. The Company also has a significant
supplier relationship with Okidata, which provides critical components for the
Company's POS printers.
The Company's goal is to become a leading worldwide supplier of transaction
based printers and related products in each of its markets. The Company believes
that significant opportunities exist to satisfy increasing demand for new and
replacement POS equipment, to leverage its existing strategic relationship in
the gaming and lottery market in order to take advantage of the proliferation of
lottery and keno systems, to develop and supply new products for emerging
applications in ATMs and kiosks, and to capture international market share as
worldwide usage of transaction based electronics grows. Key elements of the
Company's strategy for achieving its objectives are: (i) to focus on its four
vertical markets; (ii) to expand its product lines; (iii) to increase its
geographic market penetration; (iv) to emphasize its engineering expertise; and
(v) to capitalize on the efficiencies of its flexible manufacturing systems.
SEPARATION FROM TRIDEX
Upon completion of the Offering, Tridex will beneficially own approximately
82.4% (approximately 80.3% if the Underwriters' over-allotment option is
exercised in full) of the Company's common stock, par value $.01 per share
("Common Stock"). Tridex has advised the Company that it intends to distribute
its
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ownership interest in the Company to the stockholders of Tridex as soon as
practicable after the completion of the Offering through a distribution of
Common Stock of the Company to all Tridex stockholders as a tax-free dividend
(the "Distribution"). The Distribution will be subject to certain conditions,
including the receipt of a ruling from the Internal Revenue Service (the "IRS")
confirming the tax-free nature of the transaction. See "The
Company -- Background of the Offering and the Distribution." In connection with
the Distribution, the Company and Tridex have entered into, or prior to
completion of the Offering will enter into, certain agreements which govern
various interim and ongoing relationships. See "Tridex as Principal Stockholder"
and "Relationship Between the Company and Tridex."
THE OFFERING
Common Stock offered.................................. 1,150,000 shares
Common Stock to be outstanding after the Offering..... 6,550,000 shares(1)
Use of proceeds....................................... Repayment of indebtedness to Tridex,
and for working capital and other
general corporate purposes.
Proposed Nasdaq National Market symbol................ TACT
SUMMARY FINANCIAL DATA (2)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
THREE MONTHS ENDED
FISCAL YEARS ENDED NINE MONTHS ENDED
------------------------------------------ --------------------------- --------------------
MARCH 28, APRIL 3, APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, APRIL 1, MARCH 30,
1992 1993 1994 1995 1994 1995 1995 1996
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COMBINED STATEMENT OF
INCOME DATA:
Net sales.............. $19,509 $25,949 $23,798 $33,362 $ 25,426 $ 25,497 $7,936 $10,463
Gross profit........... 5,204 8,016 8,213 11,013 8,391 7,968 2,622 3,479
Operating expenses..... 4,502 5,223 6,490 7,308 5,361 6,389 1,947 2,208
Operating income....... 702 2,793 1,723 3,705 3,030 1,579 675 1,271
Net income............. 372 1,632 1,093 2,304 1,883 916 416 865
AS OF PRO FORMA
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MARCH 28, APRIL 3, APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, MARCH 30, MARCH 30,
1992 1993 1994 1995 1994 1995 1996 1996(3)
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COMBINED BALANCE SHEET
DATA:
Working capital...... $ 4,495 $ 6,254 $ 5,920 $ 6,301 $ 5,367 $ 6,281 $ 8,547 $ 9,852
Current ratio........ 2.55 2.74 2.92 2.69 2.41 2.64 3.25 3.59
Plant and equipment,
net................ 1,250 1,709 1,696 2,237 2,140 3,041 3,018 3,018
Tridex investment in
the Company........ 9,418 11,326 10,839 11,280 10,591 11,645 13,621 --
Stockholders'
equity............. -- -- -- -- -- -- -- 14,926
Total assets......... 12,323 14,910 13,916 15,358 14,392 15,969 17,961 19,266
PRO FORMA COMBINED STATEMENT OF INCOME DATA (4)
NINE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 30,
1995 1996
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Net sales............................................................................ $ 25,497 $ 10,463
Gross profit......................................................................... 7,968 3,479
Operating income..................................................................... 2,291 1,247
Net income........................................................................... 1,333 851
Earnings per share................................................................... 0.20 0.13
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(1) Does not include (i) 600,000 shares to be reserved for issuance under the
Company's 1996 Stock Plan (the "Stock Plan"), of which 264,000 are subject
to options to be granted as of the date of the Offering (ii) 60,000 shares
to be reserved for issuance under the Company's Non-Employee Directors'
Stock Plan (the "Directors' Plan"), of which 30,000 are subject to options
to be granted as of the date of the Offering and (iii) 115,000 shares of
Common Stock issuable upon exercise of the Representative's Warrant. See
"Underwriting."
(2) The table sets forth selected financial data of the Company. The data should
be read in conjunction with the historical financial statements, notes and
other financial information included herein. The combined statement of
income data for the fiscal years ended April 2, 1994 and April 1, 1995 and
the nine months ended December 31, 1995, and the combined balance sheet data
at April 1, 1995 and December 31, 1995 are derived from the audited
financial statements of the Company. The combined statement of income data
for the fiscal years ended March 28, 1992 and April 3, 1993, the nine months
ended December 31, 1994, and the three months ended April 1, 1995 and March
30, 1996 and the combined balance sheet data at March 28, 1992, April 3,
1993, April 2, 1994, December 31, 1994 and March 30, 1996 are derived from
unaudited financial statements but, in the opinion of the Company's
management, reflect all the adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data. In December
1995, the Company's fiscal year end was changed to December 31 from the
Saturday closest to March 31. The fiscal year ended April 3, 1993 was a 53
week year. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
The historical financial statements of the Company may not necessarily
reflect the results of operations or financial position that would have been
obtained had the Company been a stand alone entity. See "Management's
Discussion and Analysis of the Results of Operations and Financial
Condition."
(3) The pro forma combined balance sheet data are prepared by adjusting the
historical balance sheet to reflect the net proceeds from the Offering and
the repayment of $8.5 million of intercompany indebtedness to Tridex.
(4) The pro forma combined statement of income data for the three months ended
March 30, 1996 and the nine months ended December 31, 1995 are prepared by
adjusting the historical results of operations to reflect the Offering and
other costs and expenses had the Company been a stand alone entity at the
beginning of the most recent period presented. Earnings per share data are
presented elsewhere in this Prospectus and on a pro forma basis only. See
unaudited "Pro Forma Financial Data."
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating the Company and
its business before purchasing any shares of the Common Stock offered hereby.
DEPENDENCE ON CERTAIN SUPPLIER
Okidata is the sole supplier of a printer component kit consisting of a
printhead, control board and carriage (the "Oki Kit"), which is used in
virtually all of the Company's Ithaca brand impact printers, under an agreement
which expires in August 2000. Sales of these printers amounted to approximately
61.0% of the Company's net sales in the nine months ended December 31, 1995. The
time required for delivery of Oki Kits averages 120 days. Any delay or other
disruption in the supply of Oki Kits would have a material adverse effect on the
Company's results of operations. In addition, there can be no assurance that the
agreement will be renewed or, if renewed, that the renewal will be on terms
comparable to those under the current agreement.
RELIANCE ON DISTRIBUTORS AND OTHER SIGNIFICANT CUSTOMERS
A material portion of the Company's net sales are to certain distributors,
VARs, systems integrators and to certain OEM customers. During fiscal 1994,
fiscal 1995 and the nine months ended December 31, 1995, ICD accounted for
approximately 14.9%, 13.6% and 8.6% of the Company's net sales, respectively,
and Diebold Incorporated ("Diebold"), purchasing on behalf of Interbold,
accounted for approximately 9.5%, 9.3% and 5.7% of net sales, respectively.
During the nine months ended December 31, 1995, the first period of significant
shipments to GTECH, sales to GTECH accounted for approximately 12.4% of
Transact's net sales. In addition, sales to Ultimate, a wholly-owned subsidiary
of Tridex, represented approximately 10.9%, 7.9% and 9.2% of Transact's sales in
fiscal 1994, fiscal 1995 and the nine months ended December 31, 1995,
respectively. The Company's results of operations are substantially dependent on
sales to GTECH, Ultimate, ICD and Diebold, and the loss of any of these
customers, or a significant reduction in sales to them, could have a material
adverse effect on the Company's results of operations. There is no obligation on
the part of GTECH, Ultimate, ICD or Diebold to place any additional orders with
the Company.
COMPETITION
The market for transaction based printers is extremely competitive, and the
Company expects such competition to intensify in the future. The Company
competes with a number of companies, many of which have greater financial,
technical and marketing resources than the Company. Transact believes its
ability to compete successfully depends on a number of factors both within and
outside its control, including durability, reliability, quality, design
capability, product customization, price, customer support, success in
developing new products, manufacturing expertise and capacity, supply of
component parts and materials, strategic relationships with suppliers, the
timing of new product introductions by the Company and its competitors, general
market and economic conditions and, in some cases, the uniqueness of its
products. Two of the Company's competitors, Epson America, Inc. ("Epson") and
Star Micronics America, Inc. ("Star") together control approximately 50% to 60%
of the United States market for POS printers, a market in which the Company's
strategy calls for increased market share. Other principal competitors include
Axiohm Incorporated ("Axiohm"), Citizen -- CBM America Corporation ("Citizen")
and DH Technology Incorporated ("DH Technology"). Certain competitors of the
Company with lower costs, attributable to higher volume production and off-shore
manufacturing locations, offer lower prices than the Company from time to time.
In the gaming and lottery, financial services and kiosk markets, no single
supplier holds a dominant position. Certain of the Company's products sold for
gaming and lottery, kiosk and financial service applications compete based upon
the Company's ability to provide highly specialized products, custom engineering
and ongoing technical support. See "Business -- Competition."
RELATIONSHIP WITH PARENT COMPANY
Upon completion of the Offering, Tridex will own approximately 82.4%
(approximately 80.3% if the Underwriters' over-allotment option is exercised in
full) of the Company's outstanding Common Stock. Tridex has filed an application
with the IRS seeking a ruling that the proposed Distribution will constitute a
tax-free reorganization for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"). Until
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the Distribution is completed, Tridex will control the Company and will continue
to be able to elect the entire Board of Directors of the Company and to
determine the outcome of Company actions requiring stockholder approval. The
Board of Directors of the Company currently consists of five directors, two of
whom are also directors of Tridex. In addition, after the Distribution, Seth M.
Lukash, the Chairman and Chief Executive Officer of Tridex and its largest
stockholder, will own approximately 9% of the outstanding Common Stock of the
Company. This overlap of directors, Tridex's ownership of Common Stock pending
the Distribution, Mr. Lukash's ownership interests in both companies and senior
management position at Tridex and other contractual relationships described
under "Relationship Between the Company and Tridex" give rise to conflicts of
interest between Tridex and the Company. Pursuant to a Plan of Reorganization
dated June 24, 1996 (the "Plan of Reorganization"), Tridex has agreed not to
pursue the manufacture of transaction based printers which would be directly
competitive with the Company. As a matter of corporate policy, both Tridex and
the Company will seek the approval of their respective independent directors for
transactions perceived to involve significant potential conflicts of interest.
See "Tridex as Principal Stockholder" and "Relationship Between the Company and
Tridex."
RISK OF NON-COMPLETION OF THE DISTRIBUTION TRANSACTION
If the IRS issues a ruling that the Distribution will constitute a tax-free
reorganization under the Code and certain other conditions are satisfied, Tridex
will proceed with the Distribution, after which approximately 17.6%
(approximately 19.7% if the Underwriters' over-allotment option is exercised in
full) of the outstanding Common Stock will be owned by holders of shares sold in
the Offering, approximately 82.4% (approximately 80.3% if the Underwriters'
over-allotment option is exercised in full) of the outstanding Common Stock will
be owned by the holders of Tridex common stock as of the record date for the
Distribution, and the Company will no longer be a subsidiary of Tridex. No
assurance can be given as to whether or when the IRS will issue a favorable
ruling or that the Distribution will occur. If the IRS does not grant the
ruling, Tridex may either request reconsideration, resubmit its request based on
changes in facts and circumstances, if any, or abandon the Distribution. If
Tridex abandons the Distribution, it may either maintain ownership of the
Company as a consolidated subsidiary or sell shares of Common Stock in
subsequent public offerings or private sales. Although Tridex expects to effect
the Distribution, it is possible that the failure of the Distribution to occur
within the time frame contemplated, or at all, would materially adversely affect
the trading market for the Company's Common Stock. See "Relationship Between the
Company and Tridex."
POSSIBILITY OF SUBSTANTIAL SALES OF COMMON STOCK
The Distribution, if effected as expected, would involve a tax-free
dividend in early 1997 of approximately 5,400,000 shares of Common Stock to the
stockholders of Tridex. All of such shares, other than shares held by affiliates
of the Company, would be eligible for immediate resale in the public market. The
Company is unable to predict whether substantial amounts of Common Stock will be
sold in the open market in anticipation of, or following, the Distribution. Any
sales of substantial amounts of Common Stock in the public market, or the
perception that such sales might occur, whether as a result of the Distribution
or otherwise, could materially adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale" and "Tridex as Principal
Stockholder."
ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY
The Company has never operated as an independent company. After the
Offering and prior to the Distribution, the Company will continue to be a
subsidiary of Tridex, but will, subject to Tridex's rights as a controlling
stockholder, operate as an independent entity, and Tridex will have no
obligation to provide assistance to the Company or any of its subsidiaries
except as described herein. See "Relationship Between the Company and Tridex."
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION
The financial information included herein may not necessarily reflect the
results of operations, financial position and cash flows of the Company in the
future or what the results of operations, financial position and cash flows
would have been had the Company been an independent entity during the periods
presented. The historical financial information included herein does not reflect
the effects on the Company of the Distribution
7
10
or the Offering. In addition, the combined financial statements of the Company
include expenses allocated to the Company from Tridex. Actual expenses of the
Company in the future may vary. See "Management's Discussion and Analysis of the
Results of Operations and Financial Condition -- Overview" and Note 1 to the
Combined Financial Statements.
DEPENDENCE ON KEY PERSONNEL
The Company's future success will depend in significant part upon the
continued service of certain key management and other personnel and the
Company's continuing ability to attract and retain highly qualified managerial,
technical and sales and marketing personnel. There can be no assurance that the
Company will be able to recruit and retain such personnel. The loss of Bart C.
Shuldman, the Company's Chief Executive Officer and President, or the loss of
certain groups of key employees, could have a material adverse affect on the
Company's results of operations. Prior to the completion of the Offering, the
Company intends to enter into employment agreements with Mr. Shuldman and
certain other key employees. See "Management -- Executive Officers and
Directors."
ABILITY TO SUSTAIN AND MANAGE GROWTH
As part of its business strategy, the Company intends to pursue an
aggressive growth strategy. Assuming this growth occurs, it will require the
establishment of distribution relationships in international markets, the
successful development and marketing of new products, expanded customer service
and support, an increased number of personnel throughout the Company and the
continued implementation and improvement of the Company's operational, financial
and management information systems. There can be no assurance that the Company
will be able to successfully implement its growth strategy, or that the Company
can successfully manage expanded operations. As the Company expands, it may from
time to time experience constraints that will adversely affect its ability to
satisfy customer demand in a timely fashion. Failure to manage growth
effectively could adversely affect the Company's results of operations and
financial condition. Demand for POS equipment, including printers, is dependent
on the economic and financial well being of the retail industry which in turn is
affected by the overall level of consumer demand and growth in the general
economy. Any economic slowdown or contraction of the general economy could have
a material adverse effect on retail sales and therefore adversely affect the
demand for POS equipment, including printers manufactured by the Company. See
"Business -- Business Strategy."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company's direct sales outside of the United States totalled
approximately $3,697,000 (approximately 11% of net revenues) in fiscal 1995 and
$1,875,000 (approximately 7% of net revenues) in the nine months ended December
31, 1995. Most of these sales were in Canada. As part of its business strategy,
the Company intends to increase international sales as a percentage of its
revenues. International sales are subject to inherent risks, including
fluctuations in local economies, fluctuating exchange rates, increased
difficulty of inventory management, greater difficulty in accounts receivable
collection, costs and risks associated with localizing products for foreign
countries, unexpected changes in regulatory requirements, tariffs and other
trade barriers and burdens of complying with a variety of foreign laws. There
can be no assurance that these factors will not have a material adverse impact
on the Company's ability to increase or maintain its international sales or on
its results of operations. A substantial portion of the value of the components
used in the manufacture of the Company's POS products is represented by
components purchased from Okidata, which is located in Japan. The Company
purchases these components under an agreement, expiring in August 2000, with
unit prices in U.S. dollar denominations. However, price negotiations, which
occur whenever the contract is renewed, may be affected by a number of factors,
including changes in the currency exchange rate between the U.S. dollar and the
Japanese yen.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards portions of the hardware designs and operating software
incorporated into its products as proprietary and attempts to protect them with
a combination of copyright, trademark and trade
8
11
secret laws, employee and third party nondisclosure agreements and similar
means. The Company owns one United States patent pertaining to an automatic
paper cut-off device, which is a feature offered on certain of the Company's POS
printers. It may be possible for unauthorized third parties to copy certain
portions of the Company's products or to reverse engineer or otherwise obtain
and use, to the Company's detriment, information that the Company regards as
proprietary. Moreover, the laws of some foreign countries do not afford the same
protection to the Company's proprietary rights as do United States laws. There
can be no assurance that legal protections relied upon by the Company to protect
its proprietary rights will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to the Company's technologies. See "Business -- Intellectual Property
and Proprietary Rights."
EVOLVING TECHNOLOGY AND MARKET CHANGE
The transaction based printer industry is characterized by evolving
technology and industry standards. The introduction of products embodying new
technology and the emergence of new industry standards could render existing
products obsolete and unmarketable. The Company's future success will depend on
its ability to continue to develop and manufacture new products and to enhance
existing products, both of which will require continued investment in
engineering and product development. See "Business -- Product Development" and
"-- Competition."
BROAD MANAGEMENT DISCRETION AS TO USE OF PROCEEDS
A portion of the net proceeds to be received by the Company from the
Offering is allocated to working capital. Accordingly, management will have
broad discretion with respect to the expenditure of such proceeds. See "Use of
Proceeds."
NO CASH DIVIDENDS
The Company intends to retain any future earnings for its business and does
not anticipate paying any cash dividends in the foreseeable future. See
"Dividend Policy."
NO PRIOR TRADING MARKET
Prior to the Offering, there has been no public market for the Company's
Common Stock. Although the Company is applying to the Nasdaq National Market for
approval of the Common Stock for quotation and trading, there can be no
assurance that an active trading market will develop or be sustained after the
Offering. Future sales by the holders of Tridex common stock, who will own
approximately 82.4% (approximately 80.3% if the Underwriters' over-allotment
option is exercised in full) of the outstanding Common Stock after the
Distribution, could adversely affect the prevailing market price of Common
Stock. Shares held by affiliates will be subject to certain volume limitations
under Rule 144 promulgated under the Securities Act. See "-- Potential
Substantial Sales of Common Stock" and "-- Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
The public offering price for shares of Common Stock in the Offering is
substantially higher than the net tangible book value per share of Common Stock.
Purchasers of shares of Common Stock in the Offering therefore will incur
immediate and substantial dilution in net per share tangible book value of the
Common Stock. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Following the Offering and the completion of the Distribution, the holders
of Tridex common stock as of the record date for the Distribution will own
approximately 82.4% (approximately 80.3% if the Underwriters' over-allotment
option is exercised in full) of the outstanding Common Stock. Based upon the
position taken
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12
by the Securities and Exchange Commission (the "SEC") in numerous similar
transactions and upon a pending amendment to an applicable regulation under the
Exchange Act, the Company believes the Common Stock distributed to stockholders
of Tridex in the Distribution will be freely tradeable, subject only to the
requirements of Rule 144, promulgated under the Securities Act, applicable to
directors, executive officers and certain stockholders of the Company. Rule 144
generally provides that beneficial owners of Common Stock who have held such
Common Stock for two years may sell, within a three-month period, a number of
shares not exceeding the greater of 1% of the total outstanding shares or the
average weekly trading volume of the shares during the four calendar weeks
preceding such sale. The two-year holding period requirement under Rule 144 will
not apply to shares of Common Stock owned by Transact's directors, executive
officers and certain stockholders which could be sold pursuant to the other
requirements of Rule 144, in the absence of "lockup" agreements with the
Representative. Pursuant to the terms of the Underwriting Agreement, the
Representative has required that Transact's officers, directors and certain
holders of the Common Stock, as well as option holders who are officers and
directors, not sell for 180 days from the date of this Prospectus, without the
prior written consent of the Representative. Future sales of restricted Common
Stock could adversely affect the market price of the Common Stock.
ANTI-TAKEOVER EFFECTS OF CERTAIN STATUTORY AND CHARTER PROVISIONS
Upon completion of the Offering, the Company will be subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law.
In general, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. In addition, certain provisions of the Company's
Certificate of Incorporation and By-laws could have the effect of making it more
difficult for a third party to acquire control of the Company. These statutory
and charter provisions could have the effect of delaying, deferring or
preventing a change in control of the Company and could limit the price that
certain investors might be willing to pay in the future for shares of the Common
Stock. See "Description of Capital Stock -- Anti-Takeover Effects of Certain
Statutory and Charter Provisions." In addition, the Company expects that its
employment agreements with certain executive officers will include provisions
accelerating severance payments and certain other benefits in the event of a
change of control. See "Management -- Employment and Severance Agreements."
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains certain forward looking statements, including,
among others: (i) the size and anticipated growth in the Company's markets; (ii)
the ability of the Company to rely on cash generated from operations and the
proceeds of the Offering to finance its working capital requirements; (iii) the
Company's business strategy, as it relates to expanding product lines and
increasing geographic market penetration; and (iv) the Company's ability to
compete successfully with its current and future competitors. These forward
looking statements are based largely on the Company's current expectations and
are subject to a number of risks and uncertainties. Actual results could differ
materially from these forward looking statements. In addition to the other risks
described in this "Risk Factors" discussion, important factors to consider in
evaluating such forward looking statements include: (i) in certain instances the
Company has relied on secondary sources such as trade publications to report
certain information regarding market size or growth potential available in
studies, surveys or other primary sources not obtained directly by the Company;
(ii) unanticipated working capital or other cash requirements; (iii) changes in
the Company's business strategy or an inability to execute its strategy due to
unanticipated changes in the Company's markets; and (iv) various competitive
factors that may prevent the Company from competing successfully. In light of
these risks and uncertainties, many of which are described in greater detail
elsewhere in this "Risk Factors" discussion, there can be no assurance that the
forward looking statements contained in this Prospectus will in fact transpire.
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THE COMPANY
The Company was incorporated in Delaware on June 17, 1996 and is currently
a wholly-owned subsidiary of Tridex. Upon the completion of the Offering, Tridex
will own approximately 82.4% (approximately 80.3% if the Underwriters'
over-allotment option is exercised in full) of the outstanding Common Stock. The
Company and Tridex have two common directors. Tridex has filed with the IRS an
application for a ruling that the Distribution will constitute a tax-free
reorganization for federal income tax purposes. Until such time as the
Distribution is effected, the Company will be a subsidiary of Tridex and will be
consolidated in the Tridex affiliated group for purposes of Section 1504 of the
Code. The Company and Tridex have undertaken as part of the Plan of
Reorganization to conduct their affairs during the period after the closing of
the Offering on a reasonable arms-length basis pursuant to certain written
agreements. After the Distribution, the business of Tridex will consist of (i)
two subsidiaries: Ultimate, a distributor and VAR of POS systems and components
and a manufacturer of custom keyboards and pole displays; and Cash Bases GB
Limited, which designs, manufactures and markets custom cash drawers, for sale
primarily in Western Europe, and (ii) a line of business involving the
manufacture, marketing and sale of ribbons for use in certain printers
manufactured by the Company. See "Relationship Between the Company and Tridex."
The principal executive offices of the Company are located at 7 Laser Lane,
Wallingford, Connecticut 06492 and its telephone number is (203) 949-9933.
BACKGROUND OF THE OFFERING AND THE DISTRIBUTION
In December 1995, the Board of Directors of Tridex approved a plan to
combine the business operations of two wholly-owned subsidiaries, Magnetec
Corporation ("Magnetec") and Ithaca Peripherials Incorporated ("Ithaca"), under
unified management with Bart C. Shuldman as the Company's President. In May
1996, the Board of Directors of Tridex approved the merger of Ithaca into
Magnetec, as a first step toward effecting the Offering and the Distribution.
Tridex, the Company, Magnetec and Ithaca entered into the Plan of
Reorganization which, among other things, provides for: (i) the merger of Ithaca
into Magnetec; (ii) the sale by the Company to Tridex of certain assets used in
manufacturing a printer ribbon product line; (iii) the issuance by the Company
of 5,400,000 shares of Common Stock to Tridex in exchange for all of the
outstanding shares of capital stock of Magnetec; (iv) the Offering; (v) the
repayment by the Company of approximately $8.5 million of indebtedness to Tridex
with a portion of the proceeds of the Offering; (vi) the execution of certain
agreements between the Company and Tridex relating to the allocation of tax
attributes, the provision of certain services, and the purchase and supply of
certain products; (vii) an undertaking by Tridex to apply for a ruling from the
IRS that the Distribution would be tax-free to such stockholders for federal
income tax purposes; and (viii) an undertaking by Tridex to effect the
Distribution upon the satisfaction of certain conditions precedent, including
the successful completion of the Offering, the completion of the transaction
described under "Relationship Between the Company and Tridex" and the receipt of
a favorable ruling from the IRS.
In the Plan of Reorganization, Tridex agrees, for five years after the
completion of the Distribution, not to compete with the Company in the design,
manufacture or sale of transaction based printers for the POS, gaming and
lottery, financial services and kiosk markets in any geographic market in which
the Company is then doing business. The Plan of Reorganization may be amended
only by the agreement of the Company and Tridex.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,150,000 shares of
Common Stock offered hereby are estimated to be $9.8 million ($11.4 million if
the Underwriters' over-allotment option is exercised in full), after deducting
the estimated underwriting discount and estimated offering expenses payable by
the Company, based on an assumed initial public offering price of $10.25 per
share. The Company expects to use $8.5 million of the net proceeds for the
payment of amounts due to Tridex for intercompany indebtedness. As of March 30,
1996, the Tridex investment in the Company was approximately $13.6 million. Such
amount includes, on a pro forma basis, $8.5 million of intercompany
indebtedness, and the balance represents equity. Pursuant to the Plan of
Reorganization described under "The Company -- Background of the Offering and
the Distribution," upon completion of the Offering, the Company will repay such
indebtedness. The Company may, at its election, pay such indebtedness in full or
pay Tridex an amount not less than $7.5 million in cash and issue to Tridex a
subordinated promissory note in an amount up to $1.0 million. If issued, such
subordinated note would be payable in one year and bear interest at a rate equal
to the rate under Tridex's revolving line of credit, currently the prime rate
plus 1.00%. The balance of the net proceeds, after repayment of intercompany
indebtedness, will be used for working capital and general corporate purposes.
The Company has no specific plans for these net proceeds other than to finance
anticipated growth. Pending use, the proceeds will be invested in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
The Company expects to retain earnings to finance the expansion and
development of its business and has no plans to pay cash dividends on the Common
Stock. See "Risk Factors -- No Cash Dividends."
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DILUTION
The pro forma net tangible book value of the Company at March 30, 1996 was
$.51 per share of Common Stock. The pro forma net tangible book value per share
represents the tangible assets of the Company less its total liabilities,
including the intercompany indebtedness to be repaid to Tridex, divided by the
number of shares outstanding.
Without taking into account any changes in net tangible book value after
March 30, 1996, other than to give effect to the Offering (assuming an initial
public offering price of $10.25 per share), after deduction of the underwriting
discount and commissions and other estimated Offering expenses payable by the
Company and giving effect to the payment by the Company of $8.5 million of
indebtedness to Tridex, the pro forma net tangible book value of the Company
after the Offering at March 30, 1996 would have been $1.92 per share of Common
Stock, representing an increase in net tangible book value of $1.41 per share to
the existing stockholder and dilution of $8.33 per share to new investors.
Dilution is determined by subtracting pro forma net tangible book value per
share after the Offering from the amount of cash paid by a new investor for a
share of Common Stock in the Offering. The following table illustrates this per
share dilution.
Assumed public offering price per share..................... $10.25
Assumed pro forma net tangible book value per share before
the Offering.............................................. $ .51
Increase per share attributable to new investors............ 1.41
Pro forma net tangible book value per share after the
Offering.................................................. 1.92
-------
Dilution per share to new investors......................... $ 8.33
========
The following table summarizes, as of March 30, 1996, after giving effect
to the Offering, the difference between the existing stockholder and the new
investors in the Offering (at an assumed initial public offering price of $10.25
per share) with respect to the number of shares of Common Stock purchased from
the Company, the total consideration paid to the Company and the average price
per share paid.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- ----------- ------- ---------
Existing stockholder................... 5,400,000 82.4% $ 5,121,000 34.3% $0.95
New investors.......................... 1,150,000 17.6 9,805,000 65.7 8.53
--------- -------- ----------- --------
Total........................ 6,550,000 100.0% $14,926,000 100.0%
========= ======== =========== ========
If the Underwriters' over-allotment option is exercised in full, the number
of shares to be purchased by new investors will be increased to 1,322,500 or
approximately 19.7% of the total number of shares of Common Stock outstanding
after the Offering.
The foregoing computations exclude: (i) 600,000 shares to be reserved for
issuance under the Stock Plan, of which 264,000 shares are subject to options to
be granted as of the date of the Offering at a per share exercise price equal to
not less than the Price to Public; (ii) 60,000 shares to be reserved for
issuance under the Director's Plan, of which 30,000 are subject to options to be
granted as of the date of the Offering; and (iii) 115,000 shares issuable on
exercise of the Representative's Warrants. See "Management -- Compensation of
Executive Officers -- Stock Plan," "Description of Capital Stock" and
"Underwriting."
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CAPITALIZATION
The following table sets forth the historical capitalization of the Company
at March 30, 1996, and as adjusted to give effect to: (i) the issuance of
5,400,000 shares of Common Stock to Tridex; (ii) the sale of 1,150,000 shares of
Common Stock offered hereby at the assumed initial public offering price of
$10.25 per share, less applicable underwriting discount and commissions and
other estimated offering expenses payable by the Company; and (iii) the
repayment to Tridex of $8.5 million in intercompany indebtedness. This data
should be read in conjunction with the unaudited pro forma combined balance
sheet and the introduction to the unaudited pro forma combined financial
statements appearing elsewhere in this Prospectus. The as adjusted
capitalization table has been derived from the historical combined financial
statements and reflects certain pro forma adjustments as if the Offering had
been consummated and the intercompany indebtedness had been repaid as of March
30, 1996. The as adjusted information may not reflect the capitalization of the
Company in the future or as it would have been had the Company been a stand
alone entity at March 30, 1996. See "Pro Forma Financial Data."
MARCH 30, 1996
----------------------------------------
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ---------
(IN THOUSANDS)
Intercompany indebtedness................................ $ -- $ 8,500(1) $ --
(8,500)(1)
---------- ----------- ---------
Stockholders' equity:
Unrealized gain on securities available for sale, net
of taxes............................................ 57 -- 57
Tridex investment in the Company....................... 13,621 (13,621)(2) --
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares
authorized, 6,550,000 shares issued and
outstanding, pro forma............................ -- 14,926(3) 14,926
Preferred stock, $.01 par value, 5,000,000 shares
authorized,
no shares issued and outstanding, pro forma....... -- -- --
---------- ----------- ---------
Total stockholders' equity............................... 13,678 1,305 14,983
---------- ----------- ---------
Total capitalization..................................... $ 13,678 $ 1,305 $14,983
======= ========= ========
- ---------------
(1) Reflects the reclassification to intercompany debt of $8,500 from the Tridex
investment in the Company and reflects that portion of the estimated net
proceeds used to repay this intercompany indebtedness.
(2) Reflects the change in Tridex investment in the Company for the issuance of
all outstanding shares of the Company's Common Stock to Tridex ($5,121), and
the intercompany indebtedness to be repaid to Tridex ($8,500).
(3) Reflects the issuance of shares of Common Stock to Tridex ($5,121), and the
estimated net proceeds from the Offering ($9,805).
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SELECTED FINANCIAL DATA
(IN THOUSANDS OF DOLLARS, EXCEPT FOR RATIO AMOUNTS)
The following table sets forth selected financial data of the Company. The
data should be read in conjunction with the historical financial statements,
notes and other financial information included herein. The statement of
operations data for the years ended April 2, 1994 and April 1, 1995 and the nine
months ended December 31, 1995, and the balance sheet data at April 1, 1995 and
December 31, 1995 are derived from the audited financial statements of the
Company. The statement of income data for the fiscal years ended March 28, 1992
and April 3, 1993, the nine months ended December 31, 1994, and the three months
ended April 1, 1995 and March 30, 1996 and the balance sheet data at March 28,
1992, April 3, 1993, April 2, 1994, December 31, 1994 and March 30, 1996 are
derived from unaudited financial statements but, in the opinion of the Company's
management, reflect all the adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data. In December 1995,
the Company's fiscal year end was changed to December 31 from the Saturday
closest to March 31. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. The
fiscal year ended April 3, 1993 was a 53-week year.
The historical financial statements of the Company may not necessarily
reflect the results of operations or financial position that would have been
obtained had the Company been a stand alone entity. See "Management's Discussion
and Analysis of the Results of Operations and Financial Condition." Earnings per
share data are presented elsewhere in this Prospectus and on a pro forma basis
only. See unaudited "Pro Forma Financial Data."
FISCAL YEARS ENDED NINE MONTHS ENDED THREE MONTHS ENDED
----------------------------------------------------- --------------------------- --------------------
MARCH 28, APRIL 3, APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, APRIL 1, MARCH 30,
1992 1993 1994 1995 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------ ------------ -------- ---------
COMBINED STATEMENT OF
INCOME DATA:
Net sales........... $19,509 $25,949 $23,798 $33,362 $ 25,426 $ 25,497 $7,936 $10,463
Cost of sales....... 14,305 17,933 15,585 22,349 17,035 17,529 5,314 6,984
Gross profit........ 5,204 8,016 8,213 11,013 8,391 7,968 2,622 3,479
Engineering, design
and product
development
costs............. 1,218 1,330 1,687 1,708 1,244 1,533 464 666
Selling, general and
administrative
expenses.......... 3,284 3,893 4,803 5,600 4,117 4,556 1,483 1,542
Provision for
restructuring..... -- -- -- -- -- 300 -- --
Operating income.... 702 2,793 1,723 3,705 3,030 1,579 675 1,271
Other income
(expense), net.... 14 (27) 176 127 108 (15) 18 170
Income before income
taxes............. 716 2,766 1,899 3,832 3,138 1,564 693 1,441
Income tax
provision......... 344 1,134 806 1,528 1,255 648 277 576
Net income.......... 372 1,632 1,093 2,304 1,883 916 416 865
MARCH 28, APRIL 3, APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, MARCH 30,
1992 1993 1994 1995 1994 1995 1996
----------- ----------- ----------- -------- ------------ ------------ -----------
COMBINED BALANCE SHEET DATA:
Working capital................ $ 4,495 $ 6,254 $ 5,920 $ 6,301 $ 5,367 $ 6,281 $ 8,547
Current ratio.................. 2.55 2.74 2.92 2.69 2.41 2.64 3.25
Plant and equipment, net....... 1,250 1,709 1,696 2,237 2,140 3,041 3,018
Tridex investment in
the Company.................. 9,418 11,326 10,839 11,280 10,591 11,645 13,621
Total assets................... 12,323 14,910 13,916 15,358 14,392 15,969 17,961
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UNAUDITED PRO FORMA FINANCIAL DATA
The historical combined financial statements of the Company reflect periods
during which the Company operated as wholly-owned subsidiaries of Tridex. The
historical financial statements of the Company may not necessarily reflect the
combined results of operations or financial position of the Company or what the
results of operations would have been if the Company had been a stand alone
entity during such periods.
The unaudited pro forma combined statements of income for the three months
ended March 30, 1996 and the nine months ended December 31, 1995 and the pro
forma combined balance sheet as of March 30, 1996 present the results of the
Company's operations and financial position prepared by adjusting the historical
statements for pro forma adjustments to reflect the Offering and other costs and
expenses and the repayment of intercompany indebtedness to Tridex, as if the
Company had been a stand alone entity at the beginning of the earlier period
presented for the statement of income and as of the balance sheet date
presented.
The unaudited pro forma financial statements should be read in conjunction
with the financial data presented elsewhere in this Prospectus. The unaudited
pro forma financial data are presented for informational purposes only and may
not reflect the future results of operations or financial position of the
Company or what the results of operations or financial position would have been
had the Company been operated as a stand alone entity during such periods.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------- ---------
Net sales................................................ $ 10,463 $ -- $10,463
------- ------- -------
Operating costs and expenses:
Cost of sales.......................................... 6,984 -- 6,984
Engineering, design and product development costs...... 666 -- 666
Selling, general and administrative expenses........... 1,542 24(1) 1,566
------- ------- -------
9,192 24 9,216
------- ------- -------
Operating income......................................... 1,271 (24) 1,247
Other income, net........................................ 170 -- 170
------- ------- -------
Income before income taxes............................... 1,441 (24) 1,417
Income tax provision..................................... 576 (10)(2) 566
------- ------- -------
Net income............................................... $ 865 $ (14) $ 851
======= ======= =======
Income per share......................................... $ 0.13
=======
Weighted average shares of common stock outstanding...... 6,550(3) 6,550(3)
- ---------------
(1) Adjustment reflects (a) the elimination of the allocation of general and
administrative expenses from Tridex of $327 reflected in the Company's
historical combined financial statements and (b) the inclusion of
management's estimate of the cost associated with becoming a stand alone
entity of $351, including costs related to (i) corporate administrative
services such as tax, treasury, risk management and insurance, legal,
accounting, consulting, and other public company related expenses ($193),
(ii) incentive compensation to certain employees for attainment of certain
operating goals ($75) and (iii) salaries and fringe benefits of corporate
officers and other key personnel ($83).
(2) To reflect the tax effect of the pro forma adjustments.
(3) Pro forma weighted average common shares outstanding has been calculated as
if all shares issued to Tridex prior to the Offering, and the shares issued
from the Offering, had been outstanding throughout the period presented.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------- ---------
Net sales................................................ $ 25,497 $ -- $25,497
------- ------- -------
Operating costs and expenses:
Cost of sales.......................................... 17,529 -- 17,529
Engineering, design and product development costs...... 1,533 -- 1,533
Selling, general and administrative expenses........... 4,556 (412)(1) 4,144
Provision for restructuring............................ 300 (300)(2) --
------- ------- -------
23,918 (712) 23,206
------- ------- -------
Operating income......................................... 1,579 712 2,291
Other income (expense), net.............................. (15) -- (15)
------- ------- -------
Income before income taxes............................... 1,564 712 2,276
Income tax provision..................................... 648 295(3) 943
------- ------- -------
Net income............................................... $ 916 $ 417 $ 1,333
======= ======= =======
Income per share......................................... $ 0.20
=======
Weighted average shares of common stock outstanding...... 6,550(4) 6,550(4)
- ---------------
(1) Adjustment reflects (a) the elimination of the allocation of general and
administrative expenses from Tridex of $1,203 reflected in the Company's
historical financial statements and (b) the inclusion of management's
estimate of the cost associated with becoming a stand alone entity of $791
including costs related to (i) corporate administrative services such as
tax, treasury, risk management and insurance, legal, accounting, consulting,
and other public company related expenses ($523) and (ii) salaries and
fringe benefits of corporate officers and other key personnel($268).
(2) Adjustment reflects the elimination of the one-time provision for
restructuring related to the combination of operations of Magnetec and
Ithaca under unified management, principally severance costs.
(3) To reflect the tax effect of the pro forma adjustments.
(4) Pro forma weighted average common shares outstanding has been calculated as
if all shares issued to Tridex prior to the Offering, and the shares issued
from the Offering, had been outstanding throughout the period presented.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 30, 1996
(IN THOUSANDS)
PRO FORMA
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- ---------
ASSETS:
Current assets:
Cash................................................... $ -- $ 1,305(1) $ 1,305
Receivables............................................ 5,230 -- 5,230
Inventories............................................ 6,408 -- 6,408
Deferred tax assets.................................... 374 -- 374
Other current assets................................... 335 -- 335
---------- ----------- ---------
Total current assets................................ 12,347 1,305 13,652
---------- ----------- ---------
Plant and equipment:
Machinery, furniture and equipment..................... 7,524 -- 7,524
Leasehold improvements................................. 254 -- 254
---------- ----------- ---------
7,778 -- 7,778
Less accumulated depreciation............................ 4,760 -- 4,760
---------- ----------- ---------
3,018 -- 3,018
---------- ----------- ---------
Excess of cost over fair value of net assets acquired,
net.................................................... 2,375 -- 2,375
Other assets............................................. 221 -- 221
---------- ----------- ---------
$ 17,961 $ 1,305 $19,266
======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable....................................... $ 2,671 $ -- $ 2,671
Accrued liabilities.................................... 1,129 -- 1,129
Intercompany indebtedness.............................. 8,500(2)
-- (8,500)(2) --
---------- ----------- ---------
Total current liabilities........................... 3,800 -- 3,800
---------- ----------- ---------
Deferred revenue......................................... 294 -- 294
Deferred tax liabilities................................. 189 -- 189
---------- ----------- ---------
483 -- 483
---------- ----------- ---------
Stockholders' equity:
Unrealized gain on securities available for sale, net
of taxes............................................ 57 -- 57
Tridex investment in the Company....................... 13,621 (13,621)(3) --
Stockholders' equity................................... -- 14,926(4) 14,926
---------- ----------- ---------
Total stockholders' equity.......................... 13,678 1,305 14,983
---------- ----------- ---------
$ 17,961 $ 1,305 $19,266
======= ========= ========
- ---------------
(1) To record the estimated net proceeds from the Offering, net of repayment of
intercompany indebtedness to Tridex of $8,500.
(2) Reflects the reclassification to intercompany debt of $8,500 from Tridex
investment in the Company and reflects that portion of the net proceeds used
to repay this intercompany indebtedness.
(3) Reflects the change in Tridex investment in the Company for the issuance of
all outstanding shares of the Company's Common Stock to Tridex ($5,121), and
the intercompany indebtedness to be repaid to Tridex ($8,500).
(4) Reflects the issuance of shares of Common Stock to Tridex ($5,121), and the
net proceeds from the Offering ($9,805).
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
Transact designs, develops, manufactures and markets transaction based
printers and related products, under the Ithaca and MAGNETEC brand names. The
Company's printers are used to provide transaction records such as receipts,
tickets, coupons, register journals and other documents. The Company focuses on
four vertical markets: POS; gaming and lottery; financial services; and kiosks.
The Company operates in one industry segment, computer peripheral equipment, and
sells its products, primarily in the United States and Canada.
For the nine months ended December 31, 1995, sales in the POS market
represented approximately 57.6% of net sales of the Company; sales in the gaming
and lottery market represented approximately 27.0% of net sales; sales in the
financial services market represented approximately 7.7% of net sales; and sales
in the kiosk market represented approximately 7.7% of net sales.
For the nine months ended December 31, 1995, the Company's direct sales
outside of the United States amounted to $1,875,000, or approximately 7.4% of
net sales. A component of the Company's strategic plan is to increase
international sales. To implement this plan, the Company has entered into a
strategic marketing agreement with Okidata and a sales agreement with Oki
Europe, establishing Oki Europe as the exclusive distributor of the Company's
POS and kiosk products in Europe, the Middle East and North Africa.
Prior to December 1995, Tridex conducted the business of the Company
through its wholly-owned subsidiaries, Magnetec and Ithaca. In December 1995,
Tridex began operating the businesses of Magnetec and Ithaca under a single
management team. In June 1996, the Company was incorporated as a wholly-owned
subsidiary of Tridex. Following the incorporation, Tridex, the Company, Magnetec
and Ithaca entered into the Plan of Reorganization whereby, subject to certain
conditions: (i) Ithaca will merge into Magnetec; (ii) the Company will sell
certain assets used in manufacturing a printer ribbon product line to Tridex;
(iii) the Company will issue 5,400,000 shares of Common Stock to Tridex in
exchange for all the outstanding shares of Magnetec; (iv) the Company will
effect the Offering and the Distribution; (v) the Company will repay $8,500,000
of intercompany indebtedness to Tridex; and (vi) the Company will agree to
certain other matters. See "Relationship Between the Company and Tridex."
Because the Company was wholly-owned by Tridex during the periods
presented, the Combined Financial Statements may not necessarily reflect the
results of operations or financial position of the Company or what the results
of operations would have been if the Company had been a stand alone entity
during those periods. This discussion should be read in conjunction with these
financial statements and notes thereto for such periods and such fiscal years
included elsewhere in this Prospectus.
Retailers typically reduce purchases of new POS equipment in the fourth
quarter, due to the increased volume of consumer transactions in that period,
and the Company's sales of printers in the POS market historically have
increased in the third quarter and decreased in the fourth quarter. However, the
Company has not experienced material seasonality in its total net sales, due to
offsetting increased sales in other markets.
In December 1995, the Company's fiscal year end was changed to December 31
from the Saturday closest to March 31.
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RESULTS OF OPERATIONS
The following table summarizes certain components of net income as a
percentage of net sales for the periods indicated.
FISCAL YEAR ENDED NINE MONTHS ENDED THREE MONTHS ENDED
------------------- --------------------------- --------------------
APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, APRIL 1, MARCH 30,
1994 1995 1994 1995 1995 1996
-------- -------- ------------ ------------ -------- ---------
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales..................... 65.5 67.0 67.0 68.7 67.0 66.7
------ ------ ------ ------ ------ ------
Gross profit...................... 34.5 33.0 33.0 31.3 33.0 33.3
------ ------ ------ ------ ------ ------
Operating expenses:
Engineering, design and
product development costs....... 7.1 5.1 4.9 6.0 5.8 6.4
Selling, general and
administrative expenses...... 20.2 16.8 16.2 17.9 18.7 14.7
Provision for restructuring..... -- -- -- 1.2 -- --
------ ------ ------ ------ ------ ------
27.3 21.9 21.1 25.1 24.5 21.1
------ ------ ------ ------ ------ ------
Operating income.................. 7.2 11.1 11.9 6.2 8.5 12.2
Other income (expense), net....... 0.8 0.4 0.4 (0.1) 0.2 1.6
------ ------ ------ ------ ------ ------
Income before income taxes........ 8.0 11.5 12.3 6.1 8.7 13.8
Income tax provision.............. 3.4 4.6 4.9 2.5 3.5 5.5
------ ------ ------ ------ ------ ------
Net income........................ 4.6% 6.9% 7.4% 3.6% 5.2% 8.3%
====== ====== ====== ====== ====== ======
THREE MONTHS ENDED MARCH 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 1, 1995
Net Sales. Net sales for the three months ended March 30, 1996 increased
$2,527,000, or 32%, to $10,463,000 from $7,936,000 in the comparable period of
the prior year. Approximately $1,700,000 of the increase was due to increased
shipments of the Company's recently introduced on-line lottery printers. The
remainder of the increase reflects increased shipments of printers for other
applications in the gaming and lottery market.
Gross Profit. Gross profit increased $857,000, or 33%, to $3,479,000 from
$2,622,000 in the prior year's quarter, primarily as a result of the higher
volume of shipments of printers. The gross margin of 33.3% was essentially
unchanged from the prior year's quarter. The Company currently expects that its
gross profit will increase, as net sales are expected to continue to increase,
while its gross margin will remain relatively stable.
Engineering and Product Development. Engineering, design and product
development costs increased $202,000, or 44%, from $464,000 to $666,000 for the
three months ended March 30, 1996, and increased as a percentage of net sales
from 5.8% to 6.4%. This increase was due primarily to increases in the level of
engineering staff, as well as increased product development and design costs,
particularly for new products in the POS market.
Selling, General and Administrative. Selling, general and administrative
expenses increased $59,000, or 4%, from $1,483,000 to $1,542,000 for the three
months ended March 30, 1996, but decreased as a percentage of net sales from
18.7% to 14.7%. Selling expenses declined slightly due primarily to sales staff
reductions which were largely offset by increased commissions resulting from
higher unit sales volume. A slight increase in general and administrative
expense was attributable primarily to compensation related costs and increased
allocations of general and administrative expenses from Tridex.
Other Income. Other income (expense), net increased $152,000 from $18,000
to $170,000 in the three months ended March 30, 1996, and increased as a
percentage of net sales from 0.2% to 1.6%. This increase was the result of the
inclusion of a $179,000 gain on the sale of marketable securities available for
sale during
20
23
the three months ended March 30, 1996. The Company acquired such securities in
connection with the sale of its solenoid product line in fiscal 1994.
Provision for Income Taxes. The provision for income taxes for the three
months ended March 30, 1996 reflects an effective tax rate of 40.0%. The
effective rate in the comparable prior period was also 40%.
NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1994
Net Sales. Net sales for the nine months ended December 31, 1995 increased
to $25,497,000 from $25,426,000 in the comparable period of the prior year as
the Company's sales in its principal markets were consistent for the relevant
periods.
Gross Profit. Gross profit decreased $423,000, or 5%, to $7,968,000 from
$8,391,000 in the prior year's period. This decrease was primarily due to
certain production start-up costs associated with the Company's new on-line
lottery printer and the relocation of the Company's Connecticut facility in
April 1995. The gross margin declined to 31.3% from 33.0%. In addition to the
above, the Company's lower than historical gross margin in this period reflected
an unfavorable change in the sales mix.
Engineering and Product Development. Engineering, design and product
development costs increased $289,000, or 23%, from $1,244,000 to $1,533,000 for
the nine months ended December 31, 1995, and increased as a percentage of net
sales from 4.9% to 6.0%. The increase reflects the development of new products
and the enhancement of existing products, primarily for the POS market.
Selling, General and Administrative. Selling, general and administrative
expenses increased $439,000, or 11%, from $4,117,000 to $4,556,000 for the nine
months ended December 31, 1995, and increased as a percentage of net sales from
16.2% to 17.9%. The principal increase in general and administrative expense,
constituting approximately 75% of the total increase, resulted primarily from
increased allocations of general and administrative expenses from Tridex and, to
a lesser degree, costs related to the relocation of the Company's Wallingford,
Connecticut facility and increased incentive compensation expense.
Provision for Restructuring. During the nine months ended December 31,
1995, the Company recorded a provision for restructuring of $300,000 primarily
to cover severance costs related to the combination of the Ithaca and Magnetec
businesses under unified management.
Other Income. Other income (expense), net for the prior period includes a
gain of $115,000 from a contingent payment from the fiscal 1995 sale of the
Company's solenoid product line.
Provision for Income Taxes. The provision for income taxes for the nine
months ended December 31, 1995 reflects an effective tax rate of 41.4%. The
effective rate in the comparable prior period was 40%.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales for fiscal 1995 increased $9,564,000, or 40%, to
$33,362,000 from $23,798,000 in fiscal 1994. The increase was primarily the
result of increased unit shipments of printers into the POS and gaming and
lottery markets.
Gross Profit. Gross profit increased $2,800,000, or 34%, to $11,013,000
from $8,213,000 in the prior year primarily due to increased sales in the gaming
and lottery market. The gross margin declined to 33.0% from 34.5%. The decrease
was due primarily to a larger proportion of sales of printers to distributors at
lower average selling prices resulting from volume discount pricing.
Engineering and Product Development. Engineering, design and product
development costs increased slightly from $1,687,000 to $1,708,000, but declined
as a percentage of net sales from 7.1% to 5.1%. Increases in new product
development costs related to printers for the POS market were offset by a
reduction from the prior year in costs incurred related to a new on-line lottery
printer, the development of which was substantially completed in fiscal 1994.
21
24
Selling, General and Administrative. Selling, general and administrative
expenses increased $797,000, or 17%, from $4,803,000 to $5,600,000 in fiscal
1995, but declined as a percentage of net sales from 20.2% to 16.8%. The
increase in selling expenses was the result of increased sales commissions and
increased employee costs to support greater sales volume, as well as the opening
of a European sales office. The increase in general and administrative expenses
was primarily the result of additional employees to support business growth and
increased compensation related expenses.
Other Income. Other income (expense), net for fiscal 1994 consisted
primarily of a gain of $175,000 from the sale of the Company's solenoid product
line. Other income (expense), net for fiscal 1995 included a gain of $115,000
from a contingent payment related to the same transaction.
Provision for Income Taxes. The provision for income taxes for fiscal 1995
reflects an effective tax rate of 39.9%. The effective rate in the prior period
was 42.4%.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flows from operations of $1,431,000, $2,913,000,
and $1,881,000 for fiscal years 1994 and 1995 and the nine months ended December
31, 1995, respectively. For the three months ended March 30, 1996, the Company
used cash of $1,255,000 for operations, primarily for working capital to support
increased sales.
Historically, the Company has participated in the centralized cash
management system which Tridex uses to finance its domestic operations. Cash
deposits from the Company have been transferred to Tridex on a daily basis and
Tridex has funded the Company's disbursement bank accounts as required. Upon the
completion of the Offering, the Company will no longer participate in the Tridex
cash management system.
When necessary, the Company has obtained required funds in excess of cash
flow from operations from Tridex. The Company provided sufficient cash to
support its operations and to provide net cash to Tridex aggregating $1,580,000,
$1,863,000 and $551,000 for fiscal years 1994 and 1995 and the nine months ended
December 31, 1995, respectively. In the three months ended March 30, 1996, the
Company required net funds in the aggregate amount of $1,111,000 from Tridex to
fund its working capital needs, primarily to support increased sales.
The Company is currently negotiating to obtain an independent revolving
credit facility from Tridex's lender. The Company expects to use borrowings on
this credit facility to fund its short-term working capital requirements, as
they arise.
The Company's capital expenditures were approximately $598,000, $1,203,000,
$1,334,000 and $200,000 for fiscal years 1994 and 1995, the nine months ended
December 31, 1995 and the three months ended March 31, 1996, respectively. These
expenditures primarily included tooling and factory machinery and equipment. In
addition, capital expenditures in fiscal 1995 and the nine months ended December
1995 included new leasehold and equipment purchases related to the relocation of
the Company's Wallingford, Connecticut facility. The Company's capital
expenditures for fiscal 1996 are expected to be approximately $2,400,000,
relating primarily to new product tooling.
Management believes that the net proceeds from the Offering, after the
payment of $8,500,000 of intercompany indebtedness to Tridex, together with the
Company's cash flows from operations and available borrowings under its
anticipated credit facility, will provide sufficient resources to meet the
Company's working capital needs, finance its projected capital expenditures and
meet its liquidity requirements through December 31, 1997.
22
25
BUSINESS
TRANSACT designs, develops, manufactures and markets transaction based
printers and related products under the Ithaca and MAGNETEC brand names. The
Company's printers are used to provide transaction records such as receipts,
tickets, coupons, register journals and other documents. The Company focuses on
four vertical markets: POS (from which the Company derived approximately 57.6%
of its net sales in the nine months ended December 31, 1995); gaming and lottery
(approximately 27.0% of net sales); financial services (approximately 7.7% of
net sales); and kiosks (approximately 7.7% of net sales). The Company sells its
products directly to end users, OEMs, VARs and selected distributors, primarily
in the United States and Canada. The Company believes that its success to date
has resulted, in part, from (i) the quality of its printers, which it believes
exceed industry performance norms for durability and reliability and (ii) its
flexible engineering and manufacturing systems, which enable it to design,
manufacture and ship, on a short lead time basis, printers with features and
functions chosen by its customers.
Transact manufactures and sells customizable and custom dot matrix and
thermal printers for applications requiring up to 60 character columns in each
of its four vertical markets. The Company also sells an 80 column laser printer
for kiosk applications. The Company's customizable products include several
series of printers which offer customers the ability to choose from a variety of
features and functions. Options typically include different printing
technologies, print speeds, paper handling capacities and numbers of print
stations. In addition to its customizable printers, Transact manufactures custom
printers for certain OEM customers. In collaboration with these customers, the
Company provides engineering and manufacturing expertise for the design and
development of specialized printers.
INDUSTRY OVERVIEW
The four vertical markets for transaction based printers addressed by the
Company are as follows:
The POS Market. The POS market, the largest market served by the Company,
consists primarily of retailers, including specialty stores, fast-food
restaurants, convenience stores, gas stations, supermarkets and other retail
outlets where a receipt or other printed transaction record is generated in
connection with the sale of a product or service. Until the early 1980s, a small
number of vertically integrated cash register manufacturers dominated the market
for POS devices. The increased use of personal computers ("PCs") in the POS
market and the trend toward open systems, in which hardware and software
elements from different manufacturers can be combined to obtain the mix of
features desired by the customer, has created opportunity in the POS market for
manufacturers of peripheral devices, such as printers. Although PCs can be
utilized in a wide range of POS applications with little or no alteration, a
printer connected to a PC in a POS application must satisfy specialized
requirements for features, functions and reliability. In the context of these
requirements, manufacturers of POS printers have experienced increased demand
for their products. According to a recent study by Venture Development Corp.,
the total number of POS printers sold in the United States in 1995 was estimated
to be 570,000. The Company has identified the following four types of sales
opportunities with respect to the POS market: (i) new POS systems being
installed in existing retail operations; (ii) expansion by existing users of POS
systems into additional locations; (iii) replacement of obsolete or worn out
printers in the installed base of POS printers; and (iv) demand for POS printers
in the international market.
The Gaming and Lottery Market. The gaming and lottery market is comprised
of on-line lottery systems, casinos, keno systems, pari-mutuel betting, video
lottery terminals ("VLTs") and other applications. The number of government
sponsored lottery systems and licensed casinos has grown in recent years. The
Company believes the gaming and lottery industry is established in the United
States, with many states increasingly dependent on revenue from their lotteries
and taxes on casinos and other forms of gaming. Total United States revenues
from casinos, pari-mutuel betting and all forms of lotteries grew from
approximately $643 million in 1984 to approximately $31.1 billion in 1994.
Statistics obtained from LaFleur's World Lottery Almanac indicate that the
number of installed on-line lottery terminals in the United States grew from
approximately 96,000 in 1992 to approximately 125,000 in 1995, for a compound
annual growth rate of approximately 9.3%, and that the number of installed
on-line terminals outside the United States grew from
23
26
135,000 in 1994 to approximately 162,700 in 1995. This growth in the number of
installed terminals has occurred while the number of states in the United States
with on-line lottery systems has remained stable. The Company believes that the
domestic installed base of on-line lottery systems will require new printers as
existing terminals are replaced. The Company also believes that the
international market will experience significant growth in new installations.
The increased use of keno games, either in conjunction with on-line lottery
systems or on a stand alone basis, has contributed to growth in the gaming and
lottery market. From 1989 through 1995, revenue collected by state sponsored
keno games grew from approximately $65.7 million in one state to approximately
$1.3 billion in eleven states. Although the expansion of keno and other forms of
gaming and lottery will depend, in part, on additional states and countries
adopting enabling legislation, the Company believes that strong growth will
continue and that, through its relationship with GTECH, it is well positioned to
meet the increasing demand in this market.
The Financial Services Market. The financial services market is comprised
of ATMs, bank teller systems and money order printers as well as printers used
on the floor of the New York Stock Exchange and in brokerage houses. ATMs
represent the largest sector of this market served by Transact. According to
Retail Banking Research Ltd. ("Retail Banking"), the installed base of ATMs is
approximately 123,000 units in the United States and approximately 483,000 units
worldwide. Retail Banking reports that from 1994 to 1995 the number of ATMs
installed worldwide increased 13.6% from approximately 425,000 units to
approximately 483,000 units, and that regionally the number of installed ATMs
increased 10.1% in Europe, from approximately 133,000 units to approximately
147,000 units, and 12.5% in the United States, from approximately 109,000 units
to approximately 123,000 units. Many banks are deploying ATMs with an increasing
array of products and services, which are available outside typical banking
business hours. Mentis Corp. estimates that consumers used ATMs for
approximately 15% of their retail banking transactions as of early 1996, that
such utilization will increase to approximately 30% in 1997 and that by the year
2000 it will increase to between 40% and 50% of all retail banking transactions.
As the banking industry has expanded applications for ATMs, the Company has sold
over 60,000 ATM account statement printers. The Company has determined that,
assuming utilization continues to rise and the banking industry continues to
develop new applications, opportunities to sell existing products and develop
new products should continue to expand.
The Kiosk Market. The kiosk market is an emerging market comprised of
unattended, interactive devices used to supply information or otherwise complete
transactions in retail, government, education and other settings. For example,
home improvement retailers use kiosks to answer frequently asked questions and,
based on consumer responses to computer prompting, generate printed reports with
product suggestions and the in-store location of the products. State and local
governments also use kiosks to provide routine services. Kiosk technology is an
outgrowth of ATMs, but consumer acceptance and business utilization have not met
the expectations of kiosk vendors. Studies indicate that by 1998 the total
number of installed kiosks will approximate 500,000 and total sales will
approximate $2.7 billion. The Company believes that as new applications and the
installed base of kiosks increase, the opportunity for increased printer sales
will follow.
Common Characteristics of the Four Vertical Markets. In each of the
vertical markets discussed above, customers have, to varying degrees, a common
set of requirements. These requirements include:
- Features and Functions -- A variety of features and functions, including,
validation, journal and slip printing, paper cutting and paper handling,
print speed, foreign language fonts, and firmware options, are required
for applications in these markets;
- Durability and Reliability -- Printers in these four markets generally
must be durable enough to provide a high level of performance while
demonstrating high volume throughput, reduced service requirements and
low error rates;
- Compatibility -- Users must be able to incorporate printers easily into a
broad range of hardware/software configurations; and
- Service -- Customers require service in the following forms: (i) advice
in selecting the appropriate printer for their particular application;
(ii) real time order processing and tracking to inform them of the status
of their orders; (iii) post-sale technical support to ensure satisfactory
installation and use; and (iv) technical service and repair for warranty
and non-warranty items. Large volume customers may also require
maintenance and repair histories of individual products on a unit basis.
24
27
BUSINESS STRATEGY
Transact's goal is to become a leading worldwide supplier of transaction
based printers and related products in each of its markets. Key elements of the
Company's strategy include:
Focus on Four Vertical Markets. Transact has selected the four market
sectors it currently serves based on the growth potential in each market, as
well as the Company's evaluation of its ability to compete effectively with
other suppliers. The Company believes it has significant brand recognition in
each of these four markets. In its largest market, POS, Transact intends to
leverage its brand recognition into a greater market share through the
introduction of new products and broader distribution. In the gaming and lottery
market, Transact intends to maintain its position as a primary supplier of
on-line lottery impact printers to GTECH, the largest provider of on-line
lottery systems in the world, and the primary supplier of impact printers for
casino keno systems in Las Vegas and Reno, Nevada and Atlantic City, New Jersey.
For the diverse financial services market, the Company intends to continue to
offer a broad selection of products in the market for printing receipts, money
orders, 60 column account statements and certain other financial transaction
records. The Company currently provides bank account statement and money order
printers to Interbold, the leading ATM manufacturer in the world. The kiosk
market is in its development stage. In anticipation of future growth, Transact
has developed a broad range of printers available for kiosk applications,
including impact, thermal and laser printers. As this market grows, the Company
intends to position itself as a leading supplier of kiosk printers.
Expand Product Lines. The Company is committed to capitalizing on its
existing market position, technology and engineering expertise by developing new
products as well as product line extensions. In January 1996, the Company
announced its new Ithaca Series 90 impact printer, which will offer print speeds
faster than similarly configured competitors' impact printers. Shipments in
quantity are expected to commence later this year. The Company also has under
development a new Ithaca thermal printer for the POS market, which it expects to
release in the first half of 1997. The Company believes that continued
introduction of technologically advanced products will increase its market
share. The Company believes its accumulated engineering expertise and design
technology enable it to complete new product designs in shortened development
cycles.
Increase Geographic Market Penetration. Historically, the Company has sold
its products primarily in the United States and Canada. The Company believes
that significant opportunities exist to sell its products in markets outside
North America. In order to penetrate these international markets, the Company
has implemented a plan to establish distributor relationships in these growing
markets. For example, the Company has entered into a strategic agreement with
Okidata, pursuant to which the Company recently has entered into an exclusive
sales and marketing agreement with Oki Europe to sell its POS and kiosk products
in Europe, the Middle East and North Africa.
Emphasize Engineering Expertise. The Company has accumulated engineering
expertise in transaction based printer applications and has built an
interdisciplinary staff of design and engineering professionals to develop
reliable printers with the features and functions required by its targeted
markets. The Company believes its expertise in the technology required for
printer applications in the transaction based market distinguish it from other
printer manufacturers less focused on this market. For example, paper handling
in a transaction based printer requires satisfying technical specifications
which typically are significantly more demanding than specifications for other
types of printers. Transact believes it has the ability to satisfy these
specifications and to solve other technical requirements unique to its markets.
The Company intends to fully utilize that ability in developing and marketing
new products.
Capitalize on the Effectiveness of Its Flexible Manufacturing Systems. The
Company's flexible manufacturing systems, based on standardized components and
processes, enable the Company to produce customizable products without costly or
time-consuming interruptions in manufacturing workflow. By utilizing such
systems, the Company also achieves manufacturing efficiencies that allow it to
ship products on a short lead time basis.
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PRODUCTS AND SERVICES
Printers, in both stand alone and open frame configurations, are based on
the following four technology platforms: dot matrix impact, thermal, laser or
ink jet. Customers choose the technology required for an application based on
compatibility, reliability and functionality requirements and operating costs.
The Company's revenues result predominantly from sales of impact printers
because most transaction based applications require the characteristics best
provided by the impact technology platform. However, in accordance with its
product line expansion strategy, the Company has begun pursuing market share and
growth opportunities by providing printers based on thermal and laser
technology. The Company manufactures customizable and custom printers. Custom
printers are specialized products designed and manufactured for OEM customers.
Customizable printers, based on a standardized chassis, include several series
of printers which offer customers the ability to choose from a variety of
optional features and functions available in that series.
Customizable Products. The Company's ability to produce customizable
products is based upon its modular design approach, which facilitates the
incorporation of optional features and functions into the standard model. List
prices for Transact's customizable printers range from $400 to $3,000.
Descriptions of the Company's printers are set forth below.
TARGETED DATE FIRST
PRODUCT MARKETS SHIPPED PRODUCT DESCRIPTION
- ----------------- ------------------ ---------- -------------------------------------------------
Series 50........ POS, Financial 1987 Stand alone dot matrix impact 40 column receipt
Services and ticket printer which provides receipt,
journal and/or 15 line validation printing.
Series 50Plus.... POS, Financial 1995 Series 50 printer enhanced to operate at a
Services significantly higher speed.
Series 60........ POS, Financial 1992 Stand alone printer for inserted forms, which
Services provides any combination of slip, receipt and
journal printing.
Series 70........ Gaming and Lottery 1992 Open frame dot matrix printer, with cutting
mechanism, designed to be integrated into a VLT
with an optional paper transport and/or journal
tape.
Series 90........ POS, Financial 1996 Stand alone, high speed dot matrix printer with
Services built-in universal power supply, which provides
receipt, journal, slip and/or 17 line validation
printing.
Series 3000...... Kiosk 1993 Entry level open frame dot matrix impact printer
with Transact's paper transport and cutting
mechanisms.
Series 4000...... POS, Gaming and 1985 Stand alone or open frame, dot matrix impact
Lottery, Financial printer available with a full line of features.
Services, Kiosk
Series 5000...... Gaming and Lot- 1992 Direct thermal printer offering different types
tery, Financial of exit systems such as automatic paper cutting,
Services, Kiosk adjustable transport and patented self-clearing
paper path.
Series 6000...... POS, Gaming and 1986 Stand alone or open frame, 60 column dot matrix
Lottery, Financial impact printer available with a full line of
Services, Kiosk features.
Series 8000...... Financial 1996 Laser printer to print on three paper sizes from
Services, Kiosk software selectable bins, with a Transact paper
transport system. Lowest operating cost currently
available for laser printers.
Representative customers for the Company's customizable products include
PAR Microsystems Corp. and Panasonic, systems integrators that provide POS
systems to nationally recognized fast food outlets, Blockbuster Entertainment,
Western Auto Supply and WMS Gaming Incorporated.
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Custom Products. In addition to its customizable printers, Transact
manufactures custom printers for certain OEM customers. The Company provides its
engineering and manufacturing expertise to design and develop, in collaboration
with these customers, specialized printers which meet the customer's
specifications. Transact manufactures the following custom printers exclusively
for the following OEM customers:
GTECH -- Transact manufactures for GTECH, the leading worldwide supplier of
on-line lottery systems, a 27 wire printhead, open frame, open paper path,
dot matrix printer. The Company began designing this printer in 1993 and
manufacturing in 1995, and is the sole supplier of this printer pursuant to
a manufacturing agreement, which expires in September 1998.
Interbold -- Transact manufactures for Interbold, a leading worldwide
supplier of ATMs, a 60 column, 9 wire printhead, dot matrix printer with a
document transport mechanism used to print bank account statements for
customers at ATMs. Transact manufactures this custom printer for Interbold
on an as ordered basis.
Other Products. In addition to printer products, the Company manufactures,
designs and sells an optical mark-sense reader which uses a light source to read
lottery, pari-mutuel betting and other gaming slips marked by consumers. Once
the slips are read, a printer produces a lottery ticket or other gaming record.
The Company also manufactures and sells document transport mechanisms required
to deliver the finished printed output to the consumer in unattended
applications, such as ATMs and kiosks. The Company also offers printer ribbons,
paper and replacement parts for all its products.
Customer Service. The Company provides customers with telephone sales and
technical support, a personal account representative for orders, shipping and
general information and expedited shipping for orders of its customizable and
custom products. Technical and sales support personnel receive training in all
the Company's products and services manufactured at their facility. The
Company's printers generally carry a one-year limited warranty. Two-year
warranties are available for purchase to supplement the original warranty.
During the nine months ended December 31, 1995 the Company derived approximately
10% of its revenues from the sale of spare parts and consumables,
out-of-warranty services and extended maintenance agreements. The Company's
costs to provide services and parts required under warranties have historically
not been material.
PRODUCT DEVELOPMENT
In keeping with its strategy of enhancing and expanding its product lines,
the Company has a number of products currently under development. Transact
commenced shipments of its new Series 8000 laser printer for kiosk applications
in June 1996. In January 1996, the Company announced its new Ithaca Series 90
impact printer, which offers print speeds faster than competitors' similarly
configured impact printers. Shipments in quantity are expected to commence in
the fourth quarter of 1996. The Company also has under development a new Ithaca
thermal printer for the POS market, which it expects to release in the first
half of 1997. In May 1996, Transact entered into a strategic agreement with
Okidata, regarding a variety of joint sales, marketing and other opportunities.
In conjunction with this agreement, the Company may collaborate with Okidata or
its affiliates to design, manufacture and sell new products to meet a variety of
market needs. Building on its proven products and technology, Transact intends
to continue to develop new products that fulfill its customers' requirements at
competitive prices.
MANUFACTURING
Transact's integration of computer aided design ("CAD") and computerized
material requirements planning systems with its flexible manufacturing
techniques supports efficient manufacturing and enables the delivery of finished
products on a short lead time basis. The Company believes that these systems and
techniques allow it not only to respond promptly to customer requirements but
also to manage manufacturing operations in more efficient manner. The Company
also believes this capability provides a significant advantage over Transact's
principal competitors, most of which require substantial order lead time.
Transact utilizes CAD systems, designs its products on a modular basis that
emphasizes the use of common parts in different models and organizes its
manufacturing floors with a combination of assembly lines
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and manufacturing cells. In the cell manufacturing system, a small group of
employees, organized around a shared work area, assemble a complete product.
Like assembly lines, these shared work areas are equipped with the tools and
prepositioned components that may be needed to assemble a number of different
products. The use of these cells enables the Company to switch from one product
to another and to produce a large number of small orders efficiently using a
small number of employees and floor space, compared to traditionally configured
assembly lines. Employees at each of the Company's facilities are cross trained
to assemble all products manufactured at their facility. The Company believes
its utilization of CAD systems, manufacturing information systems, modularized
product design, and standardized components and manufacturing processes provide
an efficient combination of productivity and flexibility.
SALES, MARKETING AND DISTRIBUTION
Transact markets its products through a network of selected distributors,
OEMs, VARs and systems integrators, as well as directly to end users. The
Company's use of multiple sales channels allows it to reach customers of all
sizes in each of its four vertical markets. The Company also utilizes a direct
sales force comprised of eight employees located in Connecticut, New York,
California, Georgia and the United Kingdom. Transact markets its custom products
through a consultative sales process, in which its sales managers, engineers and
designers collaborate with the technical staff of a customer or prospective
customer to develop a printer which fulfills the customer's requirements. By
contributing significantly to the product development process, Transact believes
it also builds a competitive advantage into the customer relationship.
Transact also believes that its customer service activities constitute an
integral part of the sales and marketing functions. Personal account
representatives provide information regarding orders and shipping status, and
technical support personnel receive training regarding other manufacturers'
products, so they can assist customers with technical issues encountered when
installing the Company's products in combination with products of other
manufacturers.
In conjunction with the strategic agreement between Transact and Okidata,
Transact entered into a separate agreement that establishes Oki Europe as the
exclusive distributor of Transact's POS and kiosk products in Europe, the Middle
East and North Africa. Although no minimum purchases are required under the
agreement, based on Oki Europe's existing distribution network and the stage of
development of the transaction based printer market in these areas, the Company
anticipates this arrangement will contribute materially to its sales without
requiring the Company to expand its own international sales and marketing
infrastructure.
COMPETITION
The market for transaction based printers is extremely competitive, and the
Company expects such competition to intensify in the future. The Company
competes with a number of companies, many of which have greater financial,
technical and marketing resources than the Company. The Company believes its
ability to compete successfully depends on a number of factors both within and
outside its control, including durability, reliability, quality, design
capability, product customization, price, customer support, success in
developing new products, manufacturing expertise and capacity, supply of
component parts and materials, strategic relationships with other suppliers, the
timing of new product introductions by the Company and its competitors, general
market and economic conditions and, in some cases, the uniqueness of its
products. Two of the Company's competitors, Epson and Star together control
approximately 50% to 60% of the United States market for POS printers, a market
in which the Company's strategy calls for increased market share. Other
principal competitors include Axiohm, Citizen and DH Technology. Certain
competitors of the Company with lower costs, attributable to higher volume
production and off-shore manufacturing locations, offer lower prices than the
Company from time to time. See "Risk Factors -- Competition."
In the gaming and lottery, financial services and kiosk markets, no single
supplier holds a dominant position. Certain of the Company's products sold for
gaming and lottery, kiosk and financial service applications compete based upon
the Company's ability to provide highly specialized products, custom engineering
and continuous technical support.
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PROPERTIES
The Company leases approximately 36,000 square feet of manufacturing and
office space in Ithaca, New York and approximately 44,000 square feet of
manufacturing and office space in Wallingford, Connecticut, which includes the
Company's corporate headquarters. The Company anticipates expanding the
warehouse space in its Ithaca, New York facility. The Company believes its
properties and equipment are in good operating condition and, with the expanded
warehouse space, adequate for present needs.
SOURCES AND AVAILABILITY OF MATERIALS
The principal materials used in manufacturing are copper wire, magnetic
metals, injection molded plastic parts, formed metal parts and electronic
components. Although the Company could experience temporary disruption if
certain suppliers ceased doing business with the Company, the Company's
requirements generally are available from a number of sources. However, the
Company is dependent upon Okidata for Oki Kits. The loss of the supply of Oki
Kits would have a material adverse effect on the Company. Transact has a
contract with Okidata to provide a sufficient quantity of Oki Kits until August
2000. Transact believes its relations with Okidata are good and has received no
indication that the supply agreement will not be renewed beyond the expiration
of the current contract. Transact cannot be certain, however, that the supply
agreement will be renewed, or if renewed, that the terms will be as favorable as
those under the current contract. See "Risk Factors -- Dependence on Certain
Supplier."
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company owns several patents, one of which it considers material. That
patent covers an automated paper cut-off device, which is a feature offered on
certain of the Company's POS printers. The Company regards certain manufacturing
processes and designs to be proprietary and attempts to protect them through
employee and third-party nondisclosure agreements and similar means. It may be
possible for unauthorized third parties to copy certain portions of the
Company's products or to reverse engineer or otherwise obtain and use, to the
Company's detriment, information that the Company regards as proprietary.
Moreover, the laws of some foreign countries do not afford the same protection
to the Company's proprietary rights as do United States laws. There can be no
assurance that legal protections relied upon by the Company to protect its
proprietary position will be adequate or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technologies.
The Company currently holds United States trademarks on the names Ithaca,
50Plus and PcOS, and has applied for registration of TRANSACT, MAGNETEC and Made
to Order, Built to Last. Although the Company regards its trademarks and other
proprietary rights as valuable assets and believes that they have significant
value in the marketing of its products, the Company does not believe that its
overall success is dependent upon legal protections afforded to its intellectual
property rights. See "Risk Factors -- Intellectual Property and Proprietary
Rights."
GOVERNMENT REGULATION AND INDUSTRY STANDARDS
Certain of the Company's products must comply with regulations promulgated
by the Federal Communications Commission in the United States and CE Mark in the
European Union. In addition, the Company must satisfy industry standards set by
the Underwriters Laboratory in the United States, the Canadian Standards
Association and TUV Rheinland or VDE in Germany. The Company's operations are
also subject to certain federal, state and local requirements relating to
environmental, waste management, health and safety regulations. In connection
with the Plan of Reorganization, Tridex has agreed to indemnify the Company from
any liabilities, including certain environmental liabilities, which could arise
in connection with a manufacturing facility owned by Tridex and formerly
operated by the Company. The Company believes its business currently is operated
in compliance with applicable government regulations. There can be no assurance
that future regulations will not require the Company to modify its products or
operations to meet revised requirements. Failure to comply with future
regulations could result in a material adverse effect on the Company's results
of operations.
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One of the Company's key customers, GTECH, must comply with statutes and
regulations regarding on-line lotteries in the United States and numerous
foreign jurisdictions. Failure by GTECH to comply with such statutes or
regulations could result in a loss of orders from GTECH and have a material
adverse effect on the Company's results of operations.
EMPLOYEES
As of June 1, 1996, the Company employed 218 persons, of which 195 were
full-time and 23 were temporary employees. Of the full-time employees, 18 were
employed in sales and marketing functions, 161 were employed in engineering and
manufacturing functions, and the remaining 16 employees performed general and
administrative functions. None of the Company's employees are covered by
collective bargaining agreements. The Company considers its relationship with
its employees to be good.
LITIGATION
As of the date of this Prospectus, the Company is not a party to any
litigation which, if adversely determined, could have a material adverse impact
on the business, financial condition or results of operations of the Company.
From time to time the Company may be involved in litigation in the ordinary
course of business, but the Company does not believe that such matters represent
a material risk to the business, financial condition or results of operations of
the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Information with respect to the executive officers and directors of the
Company, all of whom were elected or appointed to such positions in June 1996,
is set forth below:
NAME AGE POSITION
- ------------------------- --- ----------------------------------------
Thomas R. Schwarz(1)(2) 59 Chairman of the Board
Bart C. Shuldman 39 Chief Executive Officer, President and
Director
Richard L. Cote 54 Executive Vice President, Chief
Financial Officer, Treasurer and
Director
Lucy H. Staley 45 Senior Vice President -- General Manager
(Ithaca, New York facility)
John Cygielnik 51 Senior Vice President -- General Manager
(Wallingford, Connecticut facility)
Michael S. Kumpf 46 Senior Vice President -- Engineering
Graham Y. Tanaka(1)(2) 48 Director
Charles A. Dill(1)(2) 57 Director
- ---------------
(1) Member-designate of the Audit Committee
(2) Member-designate of the Compensation Committee
THOMAS R. SCHWARZ, Chairman of the Board, was Chairman of Grossman's Inc.,
a retailer of building materials, from 1990 to 1994. From 1980 to 1990, he was
President, Chief Operating Officer and a director of Dunkin' Donuts
Incorporated, a food service company. Mr. Schwarz has been a Director of Tridex
since 1995. He is also a director of Lebhar-Friedman Publishing Company.
BART C. SHULDMAN, Chief Executive Officer, President and Director, joined
Magnetec as Vice President of Sales and Marketing in April 1994 and has served
as President of Magnetec since August 1994 and President of the combined
operations of Ithaca and Magnetec since December 1995. Prior to joining
Magnetec, he held several management positions with Mars Electronics
International, a division of Mars, Incorporated from 1989 to 1993. Most
recently, he was Business Manager for the North American Amusement, Gaming and
Lottery operations. From 1979 to 1989, he held manufacturing and sales
management positions with General Electric Company.
RICHARD L. COTE, Executive Vice President, Chief Financial Officer and
Director, has served as Senior Vice President and Chief Financial Officer of
Tridex since September 1993. Mr. Cote joined Tridex as a Vice President in June
1993. From October 1991 to March 1993, he was a self-employed management
consultant. From January 1991 to September 1991, he was Vice President and
Corporate Controller of Wang Laboratories, Inc. From November 1989 to December
1990, he was Executive Vice President of Capital Resources Management, Inc.
Previously, Mr. Cote held management positions with Emhart Corporation, Xerox
Corporation and Price Waterhouse LLP.
LUCY H. STALEY, Senior Vice President-General Manager (Ithaca, New York
facility), has served as a Vice President of Ithaca since she joined the Company
in 1984. From 1984 until 1990, when Tridex acquired Ithaca, Ms. Staley also
served as Treasurer of Ithaca. From 1982 until 1984, Ms. Staley served as Vice
President and Treasurer of Rome Cable Corporation, and from 1975 until 1982 was
employed as a certified public accountant with KPMG Peat Marwick.
JOHN CYGIELNIK, Senior Vice President-General Manager (Wallingford,
Connecticut facility) joined Magnetec as Controller in 1992, and has served as
Vice President of Finance of Magnetec since 1993. From 1976 until 1992, Mr.
Cygielnik was employed by Data General Corporation, a computer hardware
manufacturer, where he served in various positions, most recently as Controller
for Manufacturing and Field Service Operations.
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MICHAEL S. KUMPF, Senior Vice President-Engineering, has served as Vice
President of Engineering of Ithaca since he joined the Company in 1991. From
1973 until 1991, Mr. Kumpf was employed by NCR Corporation, where his most
recent position was Director of Engineering-Retail Systems Printer Division.
GRAHAM Y. TANAKA, Director, has served as a Director of Tridex since 1988.
Mr. Tanaka has been President of Tanaka Capital Management, Inc., an investment
management firm, since 1986. From 1989 until 1996, Mr. Tanaka was a limited
partner of McFarland Dewey & Co., a financial advisor to the Company and Tridex.
CHARLES A. DILL, Director, is a General Partner of Gateway Associates, a
venture capital firm. Mr. Dill has served as Chairman of Saleskit Software Inc.
since 1995. From 1991 until 1995 Mr. Dill served as President, Chief Executive
Officer and a Director of Bridge Information Systems, Inc. and from 1988 to 1990
he was President, Chief Operating Officer and a Director of AVX Corporation. Mr.
Dill currently serves as a Director of Zoltek Companies, Inc. and Stifel
Financial Corp. Prior to 1988, Mr. Dill was Senior Vice President and a member
of the Office of the Chief Executive of Emerson Electric Company.
THE BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
The Certificate of Incorporation of the Company provides for the Board of
Directors to be divided into three classes of directors serving staggered three
year terms, with the initial terms of Messrs. Schwarz and Shuldman expiring in
1999, the initial terms of Messrs. Cote and Tanaka expiring in 1998 and the
initial term of Mr. Dill expiring in 1997. See "Description of Capital
Stock -- Anti-Takeover Effects of Certain Statutory and Charter
Provisions -- Classified Board of Directors."
The Board of Directors will establish an Audit Committee to recommend the
firm to be appointed as independent accountants to audit the Company's financial
statements and to perform services related to the audit, review the scope and
results of the audit with the independent accountants, review with management
and the independent accountants the Company's year-end operating results,
consider the adequacy of the Company's internal accounting and control
procedures, review the non-audit services to be performed by the independent
accountants and consider the effect of such performance on the accountants'
independence. The Audit Committee will consist of Messrs. Schwarz, Tanaka and
Dill, with Mr. Dill as the Chairman.
The Board of Directors will also establish a Compensation Committee and a
Nominating Committee. The Compensation Committee, which will consist of Messrs.
Schwarz, Tanaka and Dill, with Mr. Schwarz as the Chairman, will review and
recommend the compensation arrangements for all directors and officers, approve
such arrangements for other senior level employees and administer and take such
other action as may be required in connection with certain compensation plans of
the Company. The Nominating Committee, which will consist of the full Board of
Directors, will nominate persons for election to the Board of Directors. The
Nominating Committee will consider nominees recommended by stockholders in
accordance with the procedure described under "Description of Capital
Stock -- Anti-Takeover Effects of Certain Statutory and Charter Provisions."
COMPENSATION OF DIRECTORS
The Company's policy for compensation of Directors will provide that each
outside director, in addition to participation in the Directors' Plan described
below under "Stock Plans," of the Company will be entitled to receive (i) $750
for each Board of Directors' meeting attended ($250 for each telephonic
meeting), (ii) $300 for each Board of Directors' committee meeting attended and
(iii) $2,000 for each fiscal quarter served as Director as compensation for
services rendered and expenses incurred. Chairmen of committees will receive
$600 for each committee meeting. Directors occasionally may be asked to perform
additional services for the Company for additional compensation.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid or accrued by the
Company to its Chief Executive Officer and each of its three most highly
compensated executive officers who earned more than $75,000 ($100,000 if
annualized) in salary and bonus in the nine months ended December 31, 1995 for
services rendered in all capacities to the Company during that period.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION(2)
---------------------------------------- --------- ------- ---------------
Bart C. Shuldman........................ $ 107,963 $16,000 $ 5,217
Chief Executive Officer
and President
Richard L. Cote(3)...................... -- -- --
Executive Vice President and
Chief Financial Officer
Lucy H. Staley.......................... 78,862 7,857 4,858
Senior Vice President --
General Manager
(Ithaca, New York facility)
John Cygielnik.......................... 68,203 8,539 4,932
Senior Vice President --
General Manager
(Wallingford, Connecticut facility)
Michael S. Kumpf........................ 83,962 8,539 4,932
Senior Vice President --
Engineering
- ---------------
(1) Includes a portion of salary deferred under the Tridex 401(k) plan and
monthly automobile allowances of $400 for Mr. Shuldman, $350 for Ms. Staley
and $350 for Mr. Kumpf.
(2) Includes aggregate value of contributions under the Tridex 401(k) plan in
the nine months ended December 31, 1995.
(3) Mr. Cote was not an employee of Transact during the nine months ended
December 31, 1995.
The Company intends to enter into employment agreements with Messrs.
Shuldman and Cote, providing for initial annual base salaries of $185,000 and
$150,000, respectively. See "-- Employment and Severance Agreements." The
Company expects the total amount of salary paid in 1996 to Ms. Staley, Mr.
Cygielnik and Mr. Kumpf will equal approximately $119,000, $104,000 and
$122,000, respectively.
Executive Incentive Compensation Plan. Until the completion of the
Distribution, employees of the Company will continue to participate in the
Tridex incentive compensation plan. Upon completion of the Distribution, the
Company intends to establish an Executive Incentive Compensation Plan for the
purpose of providing certain incentives to officers and other key employees of
the Company. Annual cash awards will be made to eligible employees as determined
by the Compensation Committee, subject to the terms and conditions of the Plan.
Awards will be equal to a percentage of base salary specified in the plan by
reference to the level of achievement of objectives set in connection with the
annual business planning process, up to a maximum of 35% of base salary.
The 401(k) Plan. Until the completion of the Distribution, employees of the
Company will participate in the Tridex 401(k) plan. Upon completion of the
Distribution, the Company intends to establish the Transact Technologies
Retirement Plan (the "401(k) Plan"), a defined contribution plan which is
intended to qualify under Sections 401(a) and 501(a) of the Code. All employees
of the Company and certain affiliates will be eligible to participate in the
401(k) Plan.
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Under the 401(k) Plan, a participant may elect to save between 1% and 15%
of eligible annual compensation on a pre-tax basis, subject to limitations
contained in the Code. The Company will be obligated to make a matching
contribution in an amount equal to 37.5% of the first 4% of a participant's
compensation contribution to the 401(k) Plan. Eligible compensation is all
compensation received by the participant not in excess of $9,500 in 1996. The
Company may, at the discretion of the Board, contribute additional amounts to
the 401(k) Plan for the benefit of participants.
Amounts contributed to the 401(k) Plan by the participant and the Company
will be invested as designated by the participant. A participant is always fully
vested in his savings contributions, and earns a vested right to all Company
contributions made on his behalf after six years of vesting services with the
Company, or upon the occurrence of death, disability or retirement at age 65. A
participant may not withdraw any portion of his vested account from the 401(k)
Plan during employment.
Stock Plan. The Stock Plan, which has been approved by Tridex, as the sole
stockholder of the Company, and which will be approved by the Board of Directors
prior to the completion of the Offering, provides for the grant of awards
covering a maximum of 600,000 shares of Common Stock to officers and other key
employees of the Company.
Awards under the Stock Plan may be granted in the form of: (i)incentive
stock options within the meaning of Section 422 of the Code ("Incentive Stock
Options"); (ii) Options not intended to qualify as Incentive Stock Options
("Non-qualified Stock Options"); (iii) shares of Common Stock subject to
specified restrictions ("Restricted Shares"); (iv) restricted units which
entitle the holder thereof to receive one share of Common Stock (or equivalent
cash payments) for each unit in increments during a restricted period
("Restricted Units"); (v) stock appreciation rights ("SARs") accompanying
options or granted separately; or (vi) limited stock appreciation rights
("Limited SARs") accompanying options which are exercisable for cash upon a
change of control. Except for Incentive Stock Options, there are no limitations
on the aggregate number of shares of Common Stock which can be granted pursuant
to such awards to any one individual. Shares reserved for issuance, but never
issued, such as shares covered by expired or terminated options, generally will
be available for subsequent awards.
The Stock Plan will be administered by the Compensation Committee, which
will have the authority subject to the terms of the Stock Plan to determine
persons to whom awards may be granted. Generally, the terms and conditions of
awards under the Stock Plan, include: (i) the number of shares of Common Stock
covered by each award; (ii) the vesting schedule of options or the restricted
period for Restricted Shares or Restricted Unit awards; (iii) the duration of an
option, which, in the case of Incentive Stock Options, cannot exceed ten years
(or five years if granted to a 10% or greater stockholder); (iv) the exercise
price of options, which, in the case of Incentive Stock Options, cannot be less
than the market price of Common Stock on the date of grant (or not less than
110% of such market price if granted to a 10% or greater stockholder); and (v)
events which accelerate the exercisability of options or termination of
restrictions, such as a change of control. All options, SARs and Limited SARs
are nontransferable other than by will or the laws of descent and distribution.
All restrictions on Restricted Shares or Restricted Units lapse upon the death
or total disability of an employee.
An option may be exercised by payment of the option price in cash
(including money loaned by the Company to the optionee in compliance with
applicable law and on such terms and conditions as the Compensation Committee
may determine), or subject to the approval of the Compensation Committee, by
payment in already owned shares of Common Stock or surrender of outstanding
awards under the Stock Option Plan. The Compensation Committee, in its sole
discretion, may determine that upon exercise of such option, no shares of Common
Stock will be delivered and the employee will be entitled only to cash equal to
the "appreciation value" (i.e., the aggregate fair market value of shares
subject to the option less the aggregate exercise price of the option).
Similarly, upon exercise of an SAR, the holder is entitled to receive cash,
shares of Common Stock or a combination thereof in an amount equal to the
appreciation value of shares covered by the SAR.
The Board of Directors of Tridex has recommended, and the Compensation
Committee will grant, incentive stock options for approximately 165,000 shares
in the aggregate, under the Stock Plan to
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Mr. Shuldman, Mr. Cote, Ms. Staley, Mr. Cygielnik and Mr. Kumpf. The grant of
these options is effective as of the date hereof, the exercise price is the
initial public offering price per share paid for shares in the Offering and
rights under these options will vest in five equal annual installments
commencing on the first anniversary of the Offering. These options are
exercisable for 10 years and are subject to all of the terms and provisions of
the Stock Plan.
The Board of Directors of Tridex has recommended, and the Compensation
Committee will grant, restricted shares in the aggregate amount of approximately
39,600 shares to Mr. Shuldman, Mr. Cote, Ms. Staley, Mr. Cygielnik and Mr. Kumpf
effective immediately after the completion of the Distribution.
Directors' Stock Plan. The Directors' Plan, which will be adopted by the
Board of Directors and Tridex, as the sole stockholder of the Company, prior to
completion of the Offering, provides that each non-employee director (a
"participant") who is director at the time of the Offering will be granted an
initial non-qualified option to purchase 10,000 shares of Common Stock as of the
date of the Offering. Any person who becomes a participant after the date of the
Offering will be awarded non-qualified options to purchase 5,000 shares of
Common Stock effective as of the date of their election. Beginning in 1997,
annual grants of non-qualified options to purchase 2,500 shares will be made, as
of the first Board of Directors meeting after the annual meeting of
stockholders, to each participant other than a director who is first elected at
such annual meeting or within six months prior to such meeting. In each case,
the exercise price will be equal to the market price on the date of grant.
Options shall have a ten year term and will vest over a five year period, unless
automatically accelerated in the event of death, disability or a change in
control. Options may be exercised in whole or in part with cash, Common Stock or
both. A total of 60,000 shares of Common Stock will be reserved for issuance
under the Director Plan.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company and Mr. Shuldman will enter into an employment agreement which
provides for an initial term of two years and an initial annual base salary of
$185,000, subject to adjustment in the discretion of the Compensation Committee,
plus an opportunity to earn cash bonus under the Company's Executive Incentive
Compensation Plan. The employment agreement also provides for insurance and
other benefits, continuation of salary and benefits in the event of termination,
other than termination for cause, or following a change of control of the
Company, and contains a non-competition provision.
The Company and Mr. Cote will enter into an employment agreement which
provides for an initial term of two years and an initial annual base salary of
$150,000, subject to adjustment at the discretion of the Compensation Committee,
plus an opportunity to earn cash bonus under the Executive Incentive
Compensation Plan. The employment agreement also provides for insurance and
other benefits, continuation of salary and benefits in the event of termination,
other than termination for cause, or following a change of control of the
Company, and contains a non-competition provision.
The Company also will enter into severance agreements with Ms. Staley, Mr.
Cygielnik, Mr. Kumpf and certain other employees. The severance agreements will
provide for continuation of salary and certain benefits for a period of six
months following a termination of employment other than for cause (as defined in
the agreements) and, for the continuation of salary, the acceleration of vesting
of all stock options and the continuation of certain benefits for one year
following a change of control of the Company (as defined in the agreements).
TRIDEX AS PRINCIPAL STOCKHOLDER
As of the completion of the Offering, Tridex will own approximately 82.4%
(approximately 80.3% if the Underwriters' over-allotment option is exercised in
full) of the outstanding Common Stock. As described under "The
Company -- Background of the Offering and the Distribution," Tridex intends to
distribute its ownership interest in the Company to the stockholders of Tridex
as soon as practicable after the completion of the Offering through the
Distribution. See "Risk Factors -- Risk of Non-Completion of the Distribution
Transaction."
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SECURITY OWNERSHIP IN TRIDEX OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of the common stock of Tridex and the anticipated ownership of Common Stock of
the Company for each person who beneficially owns more than five percent of the
common stock of Tridex as of June 24, 1996, each Director and Executive Officer
of Tridex or the Company and all Directors and Executive Officers of the Company
or Tridex as separate groups. The amounts set forth in this table are based on
ownership of common stock of Tridex as of June 24, 1996 and assume (i) the
completion of the Offering, without the exercise of the Underwriters'
over-allotment option (ii) the completion of the Distribution and (iii) that all
owners of securities exercisable for or convertible into shares of Tridex common
stock will exercise or convert all such securities prior to the record date for
the Distribution. The amounts in this table do not include any options that may
be granted pursuant to the Company's Stock Plan. For all Directors and Executive
Officers of the Company, the address for each beneficial owner listed below is 7
Laser Lane, Wallingford, Connecticut 06492. For all other beneficial owners
other than Jack Silver, the address is 61 Wilton Road, Westport, CT 06880.
TRIDEX COMMON STOCK COMPANY COMMON STOCK
------------------------------------ ------------------------------------
AMOUNT AND NATURE OF PERCENT OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP(1) CLASS BENEFICIAL OWNERSHIP(1) CLASS
----------------------- ---------- ----------------------- ----------
TRIDEX EXECUTIVE OFFICERS AND
DIRECTORS(2)
Seth M. Lukash...................... 535,418(3) 13.1% 597,418 9.1%
Dennis J. Lewis..................... 99,614(4) 2.5 121,514 1.9
George T. Crandall.................. 24,201(5) * 32,001 *
Alvin Lukash........................ 116,603(6) 2.9 116,603 1.8
Paul J. Dunphy...................... 34,950(7) * 34,950 *
Hugh Burnett........................ 7,000(8) * 22,500 *
C. Alan Peyser...................... 0(9) * 0 *
All Directors and Executive Officers
of Tridex as a group (7
persons).......................... 711,483 16.6 818,683 12.5
TRANSACT EXECUTIVE OFFICERS AND
DIRECTORS
Bart C. Shuldman.................... 26,600(10) * 72,100 1.1
Richard L. Cote..................... 24,006(11) * 72,007 1.1
Lucy H. Staley...................... 18,775(12) * 27,175 *
Michael S. Kumpf.................... 15,600(13) * 24,000 *
John Cygielnik...................... 5,120(14) * 9,800 *
Graham Y. Tanaka+................... 79,460(15) 2.0 79,460 1.2
Thomas R. Schwarz+.................. 0(16) * 0 *
Charles A. Dill..................... 0 * 0 *
All Directors and Executive Officers
of Transact as a group (8
persons).......................... 169,561 4.3 284,542 4.3
OTHER BENEFICIAL OWNER
Jack Silver......................... 249,707(17) 6.3 249,707 3.8
150 East 58th Street
New York, NY 10155
- ---------------
* Less than 1%.
+ Indicates a director of both the Company and Tridex.
(1) Except as otherwise indicated, each of the person named in the table has
sole voting power and sole investment power with respect to the shares set
forth opposite his or her name. The number of shares shown below include
options subject to accelerated vesting prior to the Distribution.
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(2) After the completion of the Distribution, the individuals listed in this
section of the table will be executive officers or directors of Tridex but
not the Company.
(3) Includes (i) 11,110 shares issuable upon the conversion of $100,000
principal amount of the Tridex 10.5% Senior Subordinated Convertible
Debentures due December 31, 1997 (the "Debentures"), (ii) 1,000 shares
issuable upon exercise of the detachable Warrant to Purchase Common Stock
of Tridex (the "Private Placement Warrants"), issued in conjunction with
the Debentures, (iii) 96,303 shares subject to an option granted to Seth M.
Lukash by Alvin Lukash which expires on December 31, 1997, (iv) 10,000
shares held of record by Seth M. Lukash as trustee of The Alvin Lukash
Grantor Trust, (v) 18,000 shares subject to options currently exercisable
under the Tridex 1989 Long Term Incentive Plan (the "1989 Plan") and (vi)
16,500 shares issuable upon exercise of an option agreement dated March 30,
1994 between Mr. Lukash and Tridex, which may be purchased at a price of
$7.25 per share prior to March 30, 2000. Does not include (i) 10,000 shares
held of record by Ralph I. Fine as a trustee of The Seth M. Lukash Trust of
February 5, 1987, an irrevocable trust for the benefit of the nieces and
nephews of Seth M. Lukash, under which Mr. Lukash retains no voting or
investment power, (ii) 62,000 shares subject to options not presently
exercisable under the 1989 Plan or (iii) 8,500 shares subject to an option
agreement dated March 30, 1994 between Mr. Lukash and Tridex, which may be
purchased at a price of $7.25 per share prior to the fifth anniversary of
the date of the option becoming exercisable on March 30, 1997.
(4) Includes (i) 60,849 shares issuable upon conversion of $730,198 principal
amount of Tridex 8% Subordinated Convertible Term Promissory Notes due 1997
(the "Notes"), (ii) 16,665 shares issuable upon conversion of $150,000
principal amount of Debentures, (iii) 1,500 shares issuable upon exercise
of Private Placement Warrants and (iv) 19,600 shares subject to options
currently exercisable under the 1989 Plan. Does not include 21,900 shares
subject to options not presently exercisable under the 1989 Plan.
(5) Includes 22,700 shares subject to options currently exercisable under the
1989 Plan. Does not include 7,800 shares subject to options not currently
exercisable under the 1989 Plan.
(6) Includes (i) 10,000 shares held of record by Ralph I. Fine as trustee of
The Alvin Lukash Grantor Trust, (ii) 96,303 shares subject to an option
granted to Seth M. Lukash by Alvin Lukash which expires on December 31,
1997, (iii) 5,350 shares held of record by his wife, Mildred Lukash and
(iv) 4,950 shares issuable upon exercise of an option agreement dated March
30, 1994 between Mr. Lukash and Tridex, which may be purchased at a price
of $7.25 per share prior to March 30, 2000. Does not include 2,550 shares
subject to an option agreement dated March 30, 1994 between Mr. Lukash and
Tridex, which may be purchased at a price of $7.25 per share prior to the
fifth anniversary of the date of the option becoming exercisable on March
30, 1997.
(7) Includes (i) 7,500 shares subject to a warrant agreement, dated April 16,
1992, between Mr. Dunphy and Tridex, which may be purchased at a price of
$5.25 per share at any time prior to April 16, 1997, (ii) 7,500 shares
subject to a warrant agreement, dated February 8, 1993, between Mr. Dunphy
and Tridex, which may be purchased at a price of $9.25 per share at any
time prior to February 8, 1998 and (iii) 4,950 shares issuable upon
exercise of an option agreement dated March 30, 1994 between Mr. Dunphy and
Tridex, which may be purchased at a price of $7.25 per share prior to March
30, 2000. Does not include (i) 2,550 shares subject to an option agreement
dated March 30, 1994 between Mr. Dunphy and Tridex, which may be purchased
at a price of $7.25 per share prior to the fifth anniversary of the date of
the option becoming exercisable on March 30, 1997, or (ii) 2,500 shares
subject to an option agreement dated September 19, 1995 between Mr. Dunphy
and Tridex, which may be purchased at a price of $9.00 per share prior to
the fifth anniversary of the date of the option becoming exercisable, such
exercisability to be 825 shares on September 19, 1996, 825 shares on
September 19, 1997 and 850 shares on September 19, 1998 or (iii) 2,500
shares subject to a warrant agreement, dated May 30, 1996 between Mr.
Dunphy and Tridex, which may be purchased at a price of $11.75 per share
prior to the fifth anniversary of the date of the option becoming
exercisable, such exercisability to be 825 shares on May 30, 1997, 825
shares on May 30, 1998 and 850 shares on May 30, 1999.
(8) Includes 7,000 shares subject to options currently exercisable under the
1989 Plan. Does not include 15,500 shares subject to options not presently
exercisable under the 1989 Plan.
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(9) Does not include (i) 5,000 shares subject to an option agreement dated
September 19, 1995 between Mr. Peyser and Tridex, which may be purchased at
a price of $9.00 per share prior to the fifth anniversary of the date of
the option becoming exercisable, such exercisability to be 1,650 shares on
September 19, 1996, 1,650 shares on September 19, 1997 and 1,700 shares on
September 19, 1998 or (ii) 2,500 shares subject to a warrant agreement,
dated May 30, 1996 between Mr. Peyser and Tridex, which may be purchased at
a price of $11.75 per share prior to the fifth anniversary of the date of
the option becoming exercisable, such exercisability to be 825 shares on
May 30, 1997, 825 shares on May 30, 1998 and 850 shares on May 30, 1999.
(10) Includes 19,500 shares subject to options currently exercisable under the
1989 Plan. Does not include 45,500 shares subject to options not presently
exercisable under the 1989 Plan.
(11) Includes 22,000 shares subject to options currently exercisable under the
1989 Plan. Does not include 48,000 shares subject to options not currently
exercisable under the 1989 Plan.
(12) Includes 13,100 shares subject to options currently exercisable under the
1989 Plan. Does not include 8,400 shares subject to options not currently
exercisable under the 1989 Plan.
(13) Includes 9,600 shares subject to options currently exercisable under the
1989 Plan. Does not include 8,400 shares subject to options not currently
exercisable under the 1989 Plan.
(14) Includes 4,620 shares subject to options currently exercisable under the
1989 Plan. Does not include 4,680 shares subject to options not currently
exercisable under the 1989 Plan.
(15) Includes (i) 7,500 shares subject to a warrant agreement, dated February 8,
1993, between Mr. Tanaka and Tridex, which may be purchased at a price of
$9.25 per share at any time prior to February 8, 1998, (ii) 11,110 shares
issuable upon the conversion of $100,000 principal amount of the Debentures
(iii) 1,000 shares issuable upon the exercise of Private Placement Warrants
and (iv) 4,950 shares issuable upon exercise of an option agreement dated
March 30, 1994 between Mr. Tanaka and Tridex, which may be purchased at a
price of $7.25 per share prior to March 30, 2000. Does not include (i)
2,550 shares subject to an option agreement dated March 30, 1994 between
Mr. Tanaka and Tridex, which may be purchased at a price of $7.25 per share
prior to the fifth anniversary of the date of the option becoming
exercisable on March 30, 1997 (ii) 2,500 shares subject to an option
agreement dated September 19, 1995 between Mr. Tanaka and Tridex, which may
be purchased at a price of $9.00 per share prior to the fifth anniversary
of the date of the option becoming exercisable, such exercisability to be
825 shares on September 19, 1996, 825 shares on September 19, 1997 and 850
shares on September 19, 1998 or (iii) 2,500 shares subject to a warrant
agreement, dated May 30, 1996 between Mr. Tanaka and Tridex, which may be
purchased at a price of $11.75 per share prior to the fifth anniversary of
the date of the option becoming exercisable, such exercisability to be 825
shares on May 30, 1997, 825 shares on May 30, 1998 and 850 shares on May
30, 1999.
(16) Does not include (i) 5,000 shares subject to an option agreement dated
September 19, 1995 between Mr. Schwarz and Tridex, which may be purchased
at a price of $9.00 per share prior to the fifth anniversary of the date of
the option becoming exercisable, such exercisability to be 1,650 shares on
September 19, 1996, 1,650 shares on September 19, 1997 and 1,700 shares on
September 19, 1998 or (ii) 2,500 shares subject to a warrant agreement,
dated May 30, 1996 between Mr. Schwarz and Tridex, which may be purchased
at a price of $11.75 per share prior to the fifth anniversary of the date
of the option becoming exercisable, such exercisability to be 825 shares on
May 30, 1997, 825 shares on May 30, 1998 and 850 shares on May 30, 1999.
(17) Based solely upon the Schedule 13D filed by Mr. Silver with the Securities
and Exchange Commission on October 11, 1995, (a) Mr. Silver has sole voting
power and sole dispositive power with respect to all 249,707 shares and (b)
147,707 of such shares are held of record by Mr. Silver directly, 82,000
are held of record by the Siar Money Purchase Pension Plan, and 20,000 are
held of record by Shirley Silver, Mr. Silver's wife, as custodian for his
children.
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RELATIONSHIP BETWEEN THE COMPANY AND TRIDEX
PLAN OF REORGANIZATION
Tridex, the Company, Magnetec and Ithaca entered into a Plan of
Reorganization which, among other things, provides for: (i) the merger of Ithaca
into Magnetec; (ii) the sale by the Company to Tridex of certain assets used in
manufacturing a printer ribbon product line; (iii) the issuance by the Company
of 5,400,000 shares of Common Stock to Tridex in exchange for all of the
outstanding shares of capital stock of Magnetec; (iv) the Offering; (v) the
payment by the Company of approximately $8.5 million of indebtedness to Tridex
with a portion of the proceeds of this Offering; (vi) the execution by the
Company and Tridex of the agreements described below under "Corporate Services
Agreement," "Tax Sharing Agreement," "Printer Supply Agreement" and "Agreement
Regarding Ribbon Business" (vii) an undertaking by Tridex to apply for a ruling
from the IRS that the Distribution after this Offering of all shares of capital
stock of the Company held by Tridex to the stockholders of Tridex would be
tax-free to such stockholders for federal income tax purposes; and (viii) an
undertaking by Tridex to effect the Distribution upon the satisfaction of
certain conditions precedent, including the successful completion of this
Offering, the completion of the transaction described under "Agreement Regarding
Ribbon Business" and the receipt of a favorable ruling from the IRS.
In the Plan of Reorganization, Tridex also agreed, for five years after the
completion of the Distribution, not to compete with the Company in the design,
manufacture or sale of transaction based printers for the POS, gaming and
lottery, financial services and kiosk markets in any geographic market in which
the Company is then doing business. The Plan of Reorganization may be amended
only by the agreement of the Company and Tridex.
CORPORATE SERVICES AGREEMENT
As provided in the Plan of Reorganization, the Company and Tridex will
enter into a Corporate Services Agreement (the "Services Agreement"), under
which Tridex and its subsidiaries (other than the Company) will provide certain
services, including certain employee benefit administration, human resource and
related services, administrative services, risk management, regulatory
compliance, preparation of tax returns, and certain financial and other services
to the Company. Under the Services Agreement, the Company will pay Tridex the
direct cost to Tridex of providing such services or, when the direct cost cannot
be determined, an amount of Tridex's cost allocated in accordance with Tridex's
historical method of allocation. Upon the mutual agreement of Tridex and the
Company, services may continue to be provided after the dates provided in the
Services Agreement.
TAX SHARING AGREEMENT
The Tax Sharing Agreement between the Company and Tridex will provide the
terms under which the Company is to be included in Tridex's consolidated federal
income tax return. Under current federal tax law, the Company will be included
in the return so long as Tridex owns at least 80% of the total voting power of
the Company's stock, which has a value equal to at least 80% of the total value
of the stock of the Company. The Tax Sharing Agreement covers the period from
the effective date of the Prospectus until the effective date of the
Distribution or such time as the Company otherwise ceases to be eligible to be
included in the consolidated return of Tridex. During this period, for financial
accounting purposes, the Company will compute its income tax expense or benefit
as if it filed separate returns using those elements of income and expense as
reported in the Company's financial statements. If the Company incurs losses or
realizes tax credits, Tridex will pay to the Company the amount of any tax
reduction Tridex realizes by utilizing those losses or credits in its
consolidated income tax return. In addition, at the time of utilization of any
existing tax attributes, the Company will pay to Tridex the tax benefit the
Company obtains by utilizing such tax attributes. Any tax deficiencies or
refunds resulting from amending prior year tax returns or examinations by the
taxing authorities will be the responsibility of or inure to the benefit of the
Company to the extent they relate to the Company or its predecessor entities.
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PRINTER SUPPLY AGREEMENT
The Printer Supply Agreement, which will have an initial term expiring on
December 31, 1998, provides for the Company to sell to Ultimate, which will
remain a subsidiary of Tridex, and for Ultimate to purchase from the Company,
POS printers at price levels historically offered to Ultimate as a subsidiary
under common ownership with the Company. In consideration for these favorable
price terms, the Printer Supply Agreement will require Ultimate to continue to
purchase from the Company a percentage of its total printer requirements at
least equal to the historical percentage of such purchases.
AGREEMENT REGARDING RIBBON BUSINESS
Tridex and the Company will enter into an agreement regarding the transfer
by the Company to Tridex of substantially all of the assets used in connection
with a line of business involving the manufacture, marketing and sale of ribbons
for use in certain printers manufactured by the Company (the "Ribbon Business").
Under the agreement, Tridex will become the owner of the Ribbon Business and
will employ the manufacturing and supervisory personnel required to conduct such
business, and the Company will provide Tridex with space within its Wallingford,
Connecticut manufacturing facility and certain support services. The combined
financial statements of the Company exclude the assets and liabilities of the
Ribbon Business. The fair market value of the Ribbon Business was approximately
$250,000, as determined by McFarland, Dewey and Co., financial advisors to
Tridex and the Company. As a monthly fee for the space and support services
provided to Tridex for the Ribbon Business, Tridex will pay the Company an
amount equal to the direct and indirect costs incurred by the Company to provide
the space and render such services, plus certain related costs.
FINANCIAL ADVISORY SERVICES
McFarland Dewey & Co., a New York investment banking firm ("McFarland
Dewey"), acts as financial advisor to Tridex and the Company, and has provided
financial advisory services to Tridex since 1989. These services include advice
in connection with the Plan of Reorganization, the Distribution and the
Offering. Pursuant to agreement, the Company will pay McFarland Dewey a fee of
$300,000, plus reimbursement of out-of-pocket expenses, for these services and
the Company has agreed to indemnify McFarland Dewey against certain liabilities,
including liabilities under the federal securities laws. Graham Y. Tanaka, a
director of both the Company and Tridex, was a limited partner of McFarland
Dewey from 1989 until 1996.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Transact's authorized capital stock consists of 25,000,000 shares,
including 20,000,000 shares of Common Stock, of which approximately 5,400,000
are to be issued and outstanding and owned by Tridex prior to the completion of
the Offering, and 5,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), none of which have been issued.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, including elections of directors, except as
otherwise required by law or provided in any resolution adopted by the Board of
Directors with respect to any other series or class of Common Stock or series of
Preferred Stock, and the holders of such shares will exclusively possess all
voting power. Subject to any preferential rights of any Preferred Stock
designated by the Transact Board of Directors from time to time, the holders of
Common Stock will be entitled to such dividends as may be declared from time to
time thereon by the Board from funds available therefor. See "Dividend Policy."
Upon a liquidation of the Company, holders of Common Stock will be entitled to
receive pro rata all assets of the Company available for distribution to all
holders of Common Stock.
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REPRESENTATIVE'S WARRANT
For a description of the Representative's Warrant to be purchased by
Cruttenden Roth Incorporated in connection with the Offering see "Underwriting."
PREFERRED STOCK
The Preferred Stock is issuable in one or more series, with such voting
powers, designations, preferences and other special rights, and such
qualifications, limitations or restrictions, as may be stated in the Certificate
of Incorporation or in the resolutions adopted by the Board providing for the
issue of such series and as permitted by the Delaware General Corporation Law.
ANTI-TAKEOVER EFFECTS OF CERTAIN STATUTORY AND CHARTER PROVISIONS
The Certificate of Incorporation (the "Certificate") of the Company
contains several provisions that may make more difficult the acquisition of
control of the Company by means of a tender offer, open market purchases, proxy
fight or otherwise. The By-Laws also contain provisions that could have an
anti-takeover effect.
Section 203 of the Delaware Law. In the Certificate, the Company has
expressly elected to be governed by Section 203 of the Delaware General
Corporation Law (the "Delaware Law"). Section 203 of the Delaware Law prevents
an "interested stockholder" (defined in Section 203 generally as a person owning
15% or more of a corporation's outstanding voting stock), from engaging in a
"business combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote and not by written consent of the holders of two-thirds of the outstanding
voting stock of the corporation not owned by the interested stockholder.
Classified Board of Directors. The Certificate provides for the Board of
Directors of the Company to be divided into three classes of directors serving
staggered three-year terms. The Company believes that a classified board of
directors will help to assure the continuity and stability of the Board of
Directors and the Company's business strategies and policies.
The classified board provision could have the effect of making the removal
of incumbent directors more time-consuming and difficult, and, therefore
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its stockholders. Thus, the classified board provision could
increase the likelihood that incumbent directors will retain their positions.
Advance Notice Provisions for Stockholder Nominations of Directors. The
By-Laws establish an advance notice procedure with regard to the nomination,
other than by or at the direction of the Board or a committee thereof, of
candidates for election as directors (the "Nomination Procedure"). The
Nomination Procedure requires that a stockholder give prior written notice, in
proper form, of a planned nomination for the Board of Directors to the Secretary
of the Company. The requirements as to the form and timing of that notice are
specified in the By-Laws. If the election inspectors determine that a person was
not nominated in accordance with the Nomination Procedure, such person will not
be eligible for election as a director.
Although the By-Laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
of any other business desired by stockholders to be conducted at an annual or
any other meeting, the By-Laws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular annual meeting if the proper procedures are not followed or (ii)
may discourage or deter a third party from conducting a solicitation of proxies
to elect its
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own slate of directors or otherwise attempting to obtain control of the Company,
even if the conduct of such solicitation or such attempt might be beneficial to
the Company and its stockholders.
Additional Common Stock. The Board of Directors is authorized to provide
for the issuance of additional shares of Common Stock. The Company believes that
the availability of the additional Common Stock will provide it with increased
flexibility in structuring possible future financings and in meeting other
corporate needs which might arise.
DIRECTOR LIABILITY
As authorized by the Delaware Law, the Certificate provides that no
director of the Company will be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)in
respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the situations
described in clauses (i) through (iv) above. This provision does not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, the Certificate provides that if the
Delaware Law is amended to authorize the further limitation or elimination of
the liability of a director, then the liability of the directors shall be
eliminated or limited to the fullest extent permitted by the Delaware Law, as so
amended.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as transfer
agent and registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offering, the Company will have 6,550,000 shares
(6,722,500 shares if the Underwriters' over-allotment option is exercised in
full) of Common Stock outstanding. After the Distribution, all of the 1,150,000
shares (1,322,500 shares if the Underwriter's over-allotment option is exercised
in full) sold in the Offering and all of the shares distributed to stockholders
of Tridex, will be freely transferable by persons other than "affiliates" of the
Company, without restriction or further registration under the Securities Act.
The Company, its directors, officers and Seth M. Lukash, the Chairman and
Chief Executive Officer of Tridex, who will own approximately 9% of the
outstanding Common Stock after the Distribution, have also agreed not to sell,
contract or offer to sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representative.
Options to purchase a total of up to 234,000 shares of Common Stock will be
granted under the Stock Option Plan effective as of the date hereof and an
additional 366,000 shares will be available for future stock option grants and
other stock awards under the Stock Option Plan. In addition, options to purchase
a total of 30,000 shares of Common Stock are outstanding under the Director Plan
and an additional 30,000 shares will be available for future grants of options
under such plan. See "Management -- Stock Option Plans." The Company intends to
file registration statements under the Securities Act, as soon as practicable
after the date hereof, covering the shares of Common Stock reserved for issuance
under the Stock Option Plan and the Director's Plan. Shares of Common Stock
issued upon the exercise of options granted under the 1996 Stock Plan and the
Director's Plan, other than shares held by affiliates, will be immediately
eligible for resale in the public market without restriction. No options granted
under the Stock Option Plan or the Director's Plan will vest prior to the first
anniversary date of this Prospectus.
42
45
UNDERWRITING
The Underwriters named below, acting through Cruttenden Roth Incorporated
(the "Representative") have agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock set forth opposite their respective names in the table below:
NUMBER
UNDERWRITERS OF SHARES
---------------------------------------------------------------- ----------
Cruttenden Roth Incorporated....................................
----------
Total...........................................................
========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. The nature of the
Underwriters' obligations is that they are committed to purchase all shares of
Common Stock offered hereby if any of such shares are purchased.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the shares of Common Stock directly to the public at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers (which may include Underwriters) at such public offering price
less a concession not to exceed $ per share. The Underwriters may
allow, and such dealers may reallow, a discount not to exceed $ per
share in sales to certain other dealers. After the Offering to the public, the
public offering price and concessions and discounts may be changed by the
Representative of the Underwriters.
The Company granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an additional
172,500 shares of Common Stock, at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the table above bears to the number of shares of Common Stock
offered hereby, and the Company will be obligated pursuant to the option to sell
such shares to the Underwriters. The Underwriters may exercise the option only
for the purposes of covering over-allotments, if any, made in connection with
the distribution of the shares of Common Stock to the public.
The Company has agreed to pay the Representative at closing a
non-accountable expense allowance of $240,000 (less any advances). The
Representative's expenses in excess of the non-accountable expense allowance,
including its legal expenses, will be borne by the Representative.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales of shares of the Common Stock offered hereby to any
accounts over which they exercise discretionary authority.
The Company and Tridex have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
The Company, Tridex, certain of the Company's directors and executive
officers and Seth M. Lukash, who will own shares of Common Stock upon completion
of the Distribution, have agreed not to sell, offer to sell, contract to sell or
otherwise dispose of, or file a registration statement under the Securities Act
with respect to, any of their shares of Common Stock or any other security
convertible into or exchangeable for, or options or warrants to purchase or
acquire, shares of Common Stock without the prior written consent of the
43
46
Representative for a period of 180 days after the date of this Prospectus. See
"Shares Eligible for Future Sale."
The Company has agreed to sell to the Representative, for nominal
consideration, a warrant to purchase from the Company up to 115,000 shares of
Common Stock at an exercise price per share equal to 120% of the Offering price
(the "Representative's Warrant"). The Representative's Warrant is exercisable
for a period of five years after the closing and beginning one year from the
earlier of (i) the completion of the Distribution or (ii) the date on which
Tridex owns less than 80% of the outstanding Common Stock. The Representative's
Warrant is not transferrable for a period of one year except to officers of the
Representative or to any successor to the Representative. The Representative's
Warrant includes a net exercise provisions permitting the holder(s) to pay the
exercise price by cancellation of a number of shares with a fair market value
equal to the exercise price of the Representative's Warrant. In addition, the
Company has granted certain registration rights to the holders of the
Representative's Warrant.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company,
Tridex and the Representative of the Underwriters. Among the factors considered
in determining the initial public offering price of the Common Stock, in
addition to prevailing market conditions, were the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, the capital structure of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuations of companies in related businesses.
LEGAL MATTERS
Certain legal matters in connection with the validity of the shares of
Common Stock offered hereby will be passed upon for the Company by Messrs.
Hinckley, Allen & Snyder, One Financial Center, Boston, Massachusetts
02111-2625. Heller, Ehrman, White & McAuliffe, Seattle, Washington, has acted as
counsel to the Underwriters in connection with certain legal matters relating to
the Offering.
EXPERTS
The financial statements as of December 31, 1995 and April 1, 1995 and for
the nine months ended December 31, 1995 and for each of the two years in the
period ended April 1, 1995 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Prior to the Offering, the Company has not filed any reports pursuant to
the Securities Exchange Act of 1934, as amended. The Company intends to furnish
its stockholders with annual reports containing audited financial statements and
an opinion thereon expressed by its independent public accountants and with
quarterly reports containing unaudited summary financial information for each of
the first three fiscal quarters of each year.
This Prospectus constitutes a part of a Registration Statement on Form S-1
filed by the Company with the SEC under the Securities Act. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Offering. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the SEC. Each such statement is qualified in its
entirety by such reference. A copy of the Registration Statement may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade
Center, 13th Floor, New York, New York 10098 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60621. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549. Such reports and other information concerning the
Company can also be inspected at the offices of the Nasdaq National Market
System, 1735 K Street, NW, Washington, DC 20006.
44
47
TRANSACT TECHNOLOGIES INCORPORATED
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
NUMBER
------
Report of Independent Accountants................................................... F-1
TransAct Technologies Incorporated Combined Financial Statements:
Combined balance sheets as of April 1, 1995, December 31, 1995, March 30, 1996
(unaudited), and pro forma combined balance sheet as of March 30, 1996
(unaudited).................................................................... F-2
Combined statements of income for fiscal years ended April 2, 1994 and April 1,
1995, the nine months ended December 31, 1994 (unaudited) and December 31,
1995, and the three months ended April 1, 1995 (unaudited) and March 30, 1996
(unaudited).................................................................... F-3
Combined statements of cash flows for fiscal years ended April 2, 1994 and April
1, 1995, the nine months ended December 31, 1994 (unaudited) and December 31,
1995, and the three months ended April 1, 1995 (unaudited) and March 30, 1996
(unaudited).................................................................... F-4
Notes to combined financial statements............................................ F-5
45
48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of TransAct Technologies Incorporated
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and of cash flows present fairly, in all material
respects, the financial position of TransAct Technologies Incorporated,
described in Note 1, at December 31, 1995 and April 1, 1995, and the results of
their operations and their cash flows for the nine months ended December 31,
1995 and for each of the two years in the period ended April 1, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Hartford, Connecticut
June 10, 1996
F-1
49
TRANSACT TECHNOLOGIES INCORPORATED
COMBINED BALANCE SHEETS
(in thousands)
APRIL DECEMBER PRO FORMA
1, 31, MARCH 30, MARCH 30,
1995 1995 1996 1996
------- ---------- ----------- ----------
(UNAUDITED) (UNAUDITED)
ASSETS:
Current assets:
Receivables (Note 4)........................... $ 3,778 $ 3,246 $ 5,230 $ 5,230
Inventories (Note 5)........................... 5,697 6,353 6,408 6,408
Deferred tax assets (Note 9)................... 472 374 374 374
Other current assets........................... 80 134 335 335
------- ------- ------- -------
Total current assets........................ 10,027 10,107 12,347 12,347
------- ------- ------- -------
Plant and equipment:
Machinery, furniture and equipment............. 7,291 7,169 7,524 7,524
Leasehold improvements......................... 81 428 254 254
------- ------- ------- -------
7,372 7,597 7,778 7,778
Less accumulated depreciation.................. 5,135 4,556 4,760 4,760
------- ------- ------- -------
2,237 3,041 3,018 3,018
------- ------- ------- -------
Excess of cost over fair value of net assets
acquired, net (Note 2)......................... 2,548 2,418 2,375 2,375
Other assets (Note 2)............................ 546 403 221 221
------- ------- ------- -------
$15,358 $15,969 $17,961 $17,961
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Intercompany indebtedness (Note 2)............. $ -- $ -- $ -- $ 8,500
Accounts payable............................... 2,676 2,711 2,671 2,671
Accrued liabilities (Note 6)................... 1,050 1,115 1,129 1,129
------- ------- ------- -------
Total current liabilities................... 3,726 3,826 3,800 12,300
------- ------- ------- -------
Deferred revenue................................. 175 252 294 294
Deferred tax liabilities (Note 9)................ 177 189 189 189
------- ------- ------- -------
352 441 483 483
------- ------- ------- -------
Commitments and contingencies (Note 8)
Stockholder's equity:
Unrealized gain on securities available for
sale, net of taxes.......................... -- 57 57 57
Tridex investment in the Company (Notes 3 and
7).......................................... 11,280 11,645 13,621 5,121
------- ------- ------- -------
Total stockholder's equity.................. 11,280 11,702 13,678 5,178
------- ------- ------- -------
$15,358 $15,969 $17,961 $17,961
======= ======= ======= =======
The accompanying notes are an integral part of these combined financial
statements.
F-2
50
TRANSACT TECHNOLOGIES INCORPORATED
COMBINED STATEMENTS OF INCOME
(in thousands)
YEAR ENDED NINE MONTHS ENDED THREE MONTHS ENDED
--------------------- ----------------------------- ----------------------
APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, APRIL 1, MARCH 30,
1994 1995 1994 1995 1995 1996
-------- -------- ------------ ------------ -------- ---------
(UNAUDITED) (UNAUDITED)
Net sales................ $ 23,798 $ 33,362 $ 25,426 $ 25,497 $ 7,936 $10,463
------- ------- ------- ------- ------ -------
Operating costs and
expenses:
Cost of sales.......... 15,585 22,349 17,035 17,529 5,314 6,984
Engineering, design and
product development
costs............... 1,687 1,708 1,244 1,533 464 666
Selling, general and
administrative
expenses............ 4,803 5,600 4,117 4,556 1,483 1,542
Provision for
restructuring (Note
12)................. -- -- -- 300 -- --
------- ------- ------- ------- ------ -------
22,075 29,657 22,396 23,918 7,261 9,192
------- ------- ------- ------- ------ -------
Operating income......... 1,723 3,705 3,030 1,579 675 1,271
Other income (expense),
net (Note 12).......... 176 127 108 (15) 18 170
------- ------- ------- ------- ------ -------
Income before income
taxes.................. 1,899 3,832 3,138 1,564 693 1,441
Income tax provision
(Note 9)............... 806 1,528 1,255 648 277 576
------- ------- ------- ------- ------ -------
Net income............... $ 1,093 $ 2,304 $ 1,883 $ 916 $ 416 $ 865
======= ======= ======= ======= ====== =======
The accompanying notes are an integral part of these combined financial
statements.
F-3
51
TRANSACT TECHNOLOGIES INCORPORATED
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
YEAR ENDED NINE MONTHS ENDED THREE MONTHS ENDED
------------------- --------------------------- --------------------
APRIL 2, APRIL 1, DECEMBER 31, DECEMBER 31, APRIL 1, MARCH 30,
1994 1995 1994 1995 1995 1996
-------- -------- ------------ ------------ -------- ---------
(UNAUDITED) (UNAUDITED)
Cash flows from operating
activities:
Net income...................... $ 1,093 $ 2,304 $ 1,883 $ 916 $ 416 $ 865
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and
amortization............... 842 914 686 729 228 275
Deferred income taxes........ 231 86 -- 82 86 --
Gain on sale of securities
available for sale......... -- -- -- -- -- (179)
Gain on sale of solenoid
product line (Note 12)..... (175) (115) (115) -- -- --
(Gain) loss on disposal of
equipment.................. -- 4 8 5 (4) 8
Changes in operating assets
and liabilities:
Receivables................ (535) 66 (154) 532 220 (1,984)
Inventories and other
current assets.......... 786 (1,005) (17) (710) (988) (256)
Other assets............... (15) (165) (56) 150 (109) --
Accounts payable........... (94) 324 409 35 (85) (40)
Accrued liabilities and
deferred revenue........ (702) 500 315 142 185 56
------ ------ ------ ------ ------ ------
Net cash provided by
(used in) operating
activities............ 1,431 2,913 2,959 1,881 (51) (1,255)
------ ------ ------ ------ ------ ------
Cash flows from investing
activities:
Purchases of plant and
equipment.................... (598) (1,203) (956) (1,334) (252) (200)
Proceeds from sale of securities
available for sale........... -- -- -- -- -- 344
Proceeds from sale of solenoid
product line (Note 12)....... 600 115 115 -- -- --
Proceeds from sale of
equipment.................... -- 8 13 4 -- --
Other........................... 147 30 -- -- 30 --
------ ------ ------ ------ ------ ------
Net cash provided by (used
in) investing activities... 149 (1,050) (828) (1,330) (222) 144
------ ------ ------ ------ ------ ------
Cash flows from financing
activities:
Net transactions with Tridex.... (1,580) (1,863) (2,131) (551) 273 1,111
------ ------ ------ ------ ------ ------
Net change in cash and cash
equivalents..................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
====== ====== ====== ====== ====== ======
The accompanying notes are an integral part of these combined financial
statements.
F-4
52
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
1. BASIS OF PRESENTATION:
Transact Technologies Incorporated is expected to be incorporated in June
1996, as a wholly-owned subsidiary of Tridex Corporation ("Tridex"). Transact
and its wholly-owned subsidiaries are herein referred to as the "Company."
Following the incorporation, Tridex and two of Tridex's wholly-owned
subsidiaries, Magnetec Corporation ("Magnetec") and Ithaca Peripherals, Inc.
("Ithaca") will enter into a Plan of Reorganization whereby: (i) Ithaca will
merge into Magnetec; (ii) the Company will sell certain assets of Magnetec used
in manufacturing a printer ribbon product line to Tridex; (iii) the Company will
issue 5,400,000 shares of Common Stock to Tridex in exchange for all the
outstanding shares of Magnetec; (iv) the Company will approve a public offering
of up to 1,322,500 shares or 19.7% of Common Stock and the subsequent pro rata
distribution of the remaining outstanding equity of the Company to the
stockholders of Tridex in a tax-free reorganization; (v) the Company will repay
approximately $8,500,000 of intercompany indebtedness to Tridex; (vi) the
Company will agree to other matters pursuant to such plan; and (vii) the Company
will apply for a ruling that a distribution of Company shares to Tridex
stockholders will constitute a tax-free reorganization for federal income tax
purposes.
The financial statements of the Company have been prepared principally on
the basis of items (i) and (ii) of the Plan of Reorganization outlined above and
include the financial position and combined results of operations and cash flows
of the business described. The Company carries its assets and liabilities at
historical cost. The financial results in these financial statements are not
necessarily indicative of results that would have occurred if the Company had
been a separate stand alone entity during the periods presented or of future
results of the Company. See Unaudited Pro Forma Financial Data found elsewhere
in this Prospectus for a discussion of the effect on the Company had it been a
separate stand alone entity.
2. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business: The Company operates in one industry segment, computer peripheral
equipment. The Company designs, develops, manufactures and markets transaction
based printers and related products under the Ithaca and MAGNETEC brand names.
Transact's printers are used to provide printed transaction records such as
receipts, tickets, coupons, register journals and other documents for OEM and
POS applications. Operating facilities are located in Wallingford, Connecticut
and Ithaca, New York.
Principles of combination: The accompanying combined financial statements
include the accounts of the Company and its wholly-owned subsidiaries, after
elimination of all material intercompany accounts and transactions.
Change in fiscal year end: In December 1995, the Company's fiscal year end
was changed to December 31 from the Saturday closest to March 31.
Cash and cash equivalents: The Company considers all highly liquid
investments purchased with an initial maturity of three months or less to be
cash equivalents. See Note 3.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Foreign currency: The financial position and results of operations of the
Company's foreign subsidiary are measured using local currency as the functional
currency. Assets and liabilities of this subsidiary have been translated at end
of period exchange rates, and related revenues and expenses have been translated
at weighted average exchange rates. The aggregate effect of translation
adjustments so calculated, which would ordinarily
F-5
53
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
be included as a separate component of stockholders' equity, is de minimis.
Transaction gains and losses are included in other income.
Inventories: Inventories are stated at the lower of cost (principally
first-in, first-out) or market.
Plant and equipment and depreciation: Plant and equipment and leasehold
improvements are stated at cost. Depreciation is provided for primarily by the
straight-line method over the estimated useful lives. The estimated useful life
of machinery, furniture and equipment is five to ten years. Leasehold
improvements are amortized over the shorter of the term of the lease or the
useful life of the asset. Depreciation amounted to $611, $650 and $521 in fiscal
years 1994 and 1995, and the nine months ended December 31, 1995, respectively,
and $215 in the three months ended March 30, 1996 (unaudited).
Excess of cost over fair value of net assets acquired: The excess of cost
over fair value of net assets acquired (goodwill) resulted from the acquisition
of Ithaca in fiscal 1991. The original amount applicable to this acquisition
totaled $3,536 and is being amortized on the straight-line method over 20 years.
Accumulated amortization of goodwill was $988 and $1,118 at April 1, 1995 and
December 31, 1995, respectively, and $1,161 at March 30, 1996 (unaudited). The
Company periodically reviews goodwill to assess recoverability based upon
expectations of non-discounted cash flows from operations for Ithaca. The
Company believes that no impairment of goodwill exists at December 31, 1995 or
April 1, 1995.
Other assets: At December 31, 1995, other current assets includes
marketable securities available for sale, accounted for at market value of $309,
with an unrealized gain of $86, net of related tax effect of $29, recorded as a
component of stockholder's equity. The market value of such securities
approximated carrying value at April 1, 1995. At March 30, 1996, such securities
were accounted for at a market value of $138, with an unrealized gain of $86,
net of related tax effect of $29.
Revenue recognition: Sales are recognized when the product is shipped. Two
customers accounted for approximately 26% of net combined sales for fiscal 1994.
One of these customers accounted for approximately 14% of net combined sales in
fiscal 1995, while a different customer accounted for approximately 12% of net
combined sales in the nine months ended December 31, 1995. Revenue from extended
warranty and maintenance agreements is recognized over the term of such
agreements.
Income taxes: The Company is included in the consolidated federal and
certain state income tax returns of Tridex. Effective April 4, 1993, Tridex
adopted FAS 109 "Accounting for Income Taxes," which mandates the liability
method for computing deferred income taxes. The income tax amounts reflected in
the accompanying financial statements are an allocation of Tridex's consolidated
balances, and are computed as if a separate return had been filed for the
Company, using those elements of income and expense as reported in the
consolidated statements of operations. See Note 9 for a further discussion.
Earnings per share: Historical earnings per share are not presented since
the Company's stock was not part of the capital structure of Tridex for the
periods presented.
Interim financial statements: The interim financial statements included
herein are unaudited. In the opinion of management, all adjustments, consisting
of only normal recurring adjustments, necessary for a fair presentation of such
financial statements have been included. The interim results of operations are
not necessarily indicative of the results to be expected for the full year.
Unaudited Pro Forma Balance Sheet: The unaudited pro forma balance sheet
information at March 30, 1996 reflects a reduction in Tridex investment in the
Company for amounts paid to Tridex for intercompany indebtedness. The unaudited
pro forma balance sheet information does not give effect to the receipt by the
Company of any proceeds from the sale of common stock in the Offering or to any
other transactions expected
F-6
54
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
to take place at the time of the Offering. Accordingly, the unaudited pro forma
balance sheet information is not indicative of the Company's financial position
upon completion of the Offering.
3. RELATED PARTY TRANSACTIONS:
The Company participates in the centralized cash management system used by
Tridex to finance its domestic operations. Cash deposits from the Company are
transferred to Tridex on a daily basis and Tridex funds the Company's
disbursement bank accounts as required. Therefore, no cash or cash equivalents
are reflected in the Company's financial statements.
Included as a component of Tridex investment in the Company are net cash
advances from Tridex to the Company and general and administrative expenses
allocated from Tridex to the Company. Accordingly, no interest expense on net
advances from Tridex has been reflected in the accompanying financial
statements.
Tridex provided certain general and administrative services to the Company,
including tax, treasury, risk management and insurance, legal, marketing,
accounting, auditing, human resources and executive management. These expenses
have been allocated to the Company based upon actual usage for those expenses
directly attributable to the Company, and otherwise allocated based upon other
methods which management believes to be reasonable. These allocations were
$1,192, $1,159 and $1,203 for fiscal years 1994 and 1995 and the nine months
ended December 31, 1995, respectively, and $327 for the three months ended March
30, 1996 (unaudited). These costs may have been different had the Company
operated as a separate stand alone entity during the periods presented.
The Company sells certain POS printers to another wholly-owned subsidiary
of Tridex. Revenues from the sale of such printers to this entity amounted to
$2,601, $2,639 and $2,340 for fiscal years 1994 and 1995 and the nine months
ended December 31, 1995, respectively, and $622 for the three months ended March
30, 1996 (unaudited). In consideration for continued favorable price terms, the
Company expects to enter into a Printer Supply Agreement which will require the
subsidiary to continue to purchase from the Company through 1998 a percentage of
total printer requirements at least equal to the historical percentage of such
purchases.
4. RECEIVABLES:
Receivables are net of the allowance for doubtful accounts. The
reconciliation of the allowance for doubtful accounts is as follows:
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
--------------------- ------------ ------------
APRIL 2, APRIL 1, DECEMBER 31, MARCH 30,
1994 1995 1995 1996
-------- -------- ------------ ------------
(UNAUDITED)
Balance at beginning of period................ $ 44 $102 $ 76 $ 40
Provision for doubtful accounts............. 72 48 12 15
Accounts written off, net of recoveries..... (14) (74) (48) --
---- ---- ---- ---
Balance at end of period...................... $102 $ 76 $ 40 $ 55
==== ==== ==== ===
F-7
55
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
5. INVENTORIES:
The components of inventories are:
APRIL 1, DECEMBER 31, MARCH 30,
1995 1995 1996
-------- ------------ -----------
(UNAUDITED)
Raw materials and component parts......................... $ 4,744 $5,041 $ 5,348
Work-in-process........................................... 606 794 415
Finished goods............................................ 347 518 645
------ ------ ------
$ 5,697 $6,353 $ 6,408
====== ====== ======
6. ACCRUED LIABILITIES:
The components of accrued liabilities are:
APRIL 1, DECEMBER 31, MARCH 30,
1995 1995 1996
-------- ------------ -----------
(UNAUDITED)
Payroll and fringe benefits............................... $ 664 $ 457 $ 573
Other accrued liabilities................................. 386 658 556
------ ------ ------
$ 1,050 $1,115 $ 1,129
====== ====== ======
7. TRIDEX INVESTMENT IN THE COMPANY:
Tridex investment in the Company includes the original investment in the
Company and the net intercompany payable from the Company to Tridex reflecting
transactions described in Note 3. The following analyzes Tridex's investment in
the Company for the periods presented:
NINE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
--------------------- ------------ -------------
APRIL 2, APRIL 1, DECEMBER 31, MARCH 30,
1994 1995 1995 1996
-------- -------- ------------ -------------
(UNAUDITED)
Balance at beginning of the period......... $ 11,326 $ 10,839 $ 11,280 $11,645
Net income............................... 1,093 2,304 916 865
Net transactions with Tridex............. (1,580) (1,863) (551) 1,111
------- ------- ------- -------
Balance at end of the period............... $ 10,839 $ 11,280 $ 11,645 $13,621
======= ======= ======= =======
8. COMMITMENTS AND CONTINGENCIES:
At December 31, 1995, the Company was lessee on operating leases for
equipment and real property. The terms of certain leases provide for escalating
rent payments in later years of the lease as well as payment of minimum rent and
real estate taxes. Rent expense amounted to approximately $533 in fiscal 1994,
$616 in fiscal 1995, $532 in the nine months ended December 31, 1995 and $168 in
the three months ended March 30, 1996 (unaudited). Minimum aggregate rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of December 31, 1995 are as
follows: $605 in 1996; $599 in 1997; $584 in 1998; $582 in 1999; $589 in 2000
and $1,820 thereafter.
The Company has a long-term purchase agreement for certain printer
components. Under the terms of the agreement, the Company receives favorable
pricing for volume purchases over the life of the contract. In the event
anticipated purchase levels are not achieved, the Company would be subject to
retroactive price
F-8
56
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
increases on previous purchases. Management currently anticipates achieving
sufficient purchase levels to maintain the favorable prices.
In conjunction with the Plan of Reorganization, as described in Note 1,
Tridex plans to agree to indemnify the Company from any liabilities, including
certain environmental liabilities, which could arise in connection with a
manufacturing facility owned by Tridex and formerly operated by the Company.
9. INCOME TAXES:
The components of the income tax provision are as follows:
NINE MONTHS
YEAR ENDED ENDED
--------------------- ------------
APRIL 2, APRIL 1, DECEMBER 31,
1994 1995 1995
-------- -------- ------------
Current:
Federal............................. $483 $ 1,212 $476
State............................... 92 230 90
---- ------ ----
575 1,442 566
---- ------ ----
Deferred:
Federal............................. 206 77 73
State............................... 25 9 9
---- ------ ----
231 86 82
---- ------ ----
Total income tax provision............ $806 $ 1,528 $648
==== ====== ====
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The Company's gross deferred tax assets and liabilities were
comprised of the following:
APRIL 1, DECEMBER 31,
1995 1995
-------- ------------
Gross deferred tax assets:
Currently non-deductible liabilities and
reserves.................................. $541 $469
==== ====
Gross deferred tax liabilities:
Depreciation................................. $246 $284
==== ====
At December 31, 1995, the Company had foreign net operating loss
carryforwards of approximately $100 which do not expire. A full valuation
allowance has been recorded with respect to the foreign net operating loss
carryforwards.
F-9
57
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Differences between the U.S. statutory federal income tax rate and the
Company's effective income tax rate are analyzed below:
NINE MONTHS
YEAR ENDED ENDED
--------------------- ------------
APRIL 2, APRIL 1, DECEMBER 31,
1994 1995 1995
-------- -------- ------------
Federal statutory tax rate.................... 34.0% 34.0% 34.0%
State income taxes, net of federal income
taxes.................................... 4.4 4.2 4.4
Non-deductible purchase accounting
adjustments.............................. 3.3 1.6 2.8
Other....................................... 0.7 0.1 0.2
----- ---- - ---- -
Effective tax rate............................ 42.4% 39.9% 41.4%
===== ===== =====
10. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of trade accounts receivable, other current assets,
trade accounts payable, and accrued expenses approximate fair value because of
the short maturity of those instruments. The carrying value of marketable
securities available for sale is equal to fair value, as discussed in Note 2.
11. NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board (the "FASB") issued Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" (FAS 121) in March 1995. FAS 121
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The entity must estimate the future
cash flows expected to result from the use of the asset and its eventual
disposition, and recognize an impairment loss for any difference between the
fair value of the asset and the carrying amount of the asset. FAS 121 must be
adopted for the year beginning after December 15, 1995. The effect, if any, on
the Company's financial position or results of operations from adoption of FAS
121 is not expected to be material.
The FASB issued Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation," in October 1995 effective for years beginning after
December 15, 1995. Under provisions of this accounting standard, the Company is
not required to change its method of accounting for stock-based compensation.
Management expects to retain its current method of accounting.
12. SIGNIFICANT TRANSACTIONS:
In December 1995, the operations of Magnetec and Ithaca were combined under
unified management. In connection with this combination, the Company recorded a
provision for restructuring costs of $300, which covers the costs associated
with combining operations under unified management and is primarily comprised of
severance costs.
In fiscal 1994, the Company sold its solenoid product line. Proceeds from
the sale were cash and shares of common stock of the purchaser ("marketable
securities"). In the same period, the Company recognized a gain of $175 on the
sale of the product line. During fiscal 1995, the Company recognized an
additional gain of $115 as the result of a contingent payment received from the
purchaser. In addition, during the three months ended March 30, 1996, the
Company sold a portion of the marketable securities and recognized a gain of
$179. These gains are included in other income in the applicable period.
F-10
58
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
13. INTERNATIONAL OPERATIONS:
The Company has foreign operations primarily from Ithaca Peripherals Ltd.,
a wholly-owned subsidiary, which had sales of $355, $332 and $68 in fiscal 1995,
in the nine months ended December 31, 1995 and in the three months ended March
30, 1996 (unaudited), respectively. The Company had export sales from its United
States operations of approximately $3,342 in fiscal 1995, $1,543 in the nine
months ended December 31, 1995, and $512 in the three months ended March 30,
1996 (unaudited). Such sales were primarily to Canada and were not material in
prior years.
F-11
59
===============================================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE 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 ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH AN
OFFER OR SOLICITATION IS NOT QUALIFIED TO SO DO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
-----
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 11
Use of Proceeds....................... 12
Dividend Policy....................... 12
Dilution.............................. 13
Capitalization........................ 14
Selected Financial Data............... 15
Unaudited Pro Forma Financial Data.... 16
Management's Discussion and Analysis
of the Results of Operations and
Financial Condition................. 19
Business.............................. 23
Management............................ 31
Tridex as Principal Stockholder....... 35
Relationship Between the Company and
Tridex.............................. 39
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 42
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Available Information................. 45
Index to Combined Financial
Statement........................... 45
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
===============================================================================
===============================================================================
1,150,000 SHARES
TRANSACT
T E C H N O L O G I E S
I N C O R P O R A T E D
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
CRUTTENDEN ROTH
I N C O R P O R A T E D
, 1996
===============================================================================
60
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the issuance and distribution of the securities being registered. All the
amounts shown are estimated, except the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
Securities and Exchange Commission Registration Fee.............. $ 5,020
NASD Filing Fee.................................................. 1,955
Nasdaq National Market Listing Fee............................... 34,000
Blue Sky Fees and Expenses (includes fees and expenses of
counsel)....................................................... 10,000
Representative's Non-accountable Expense Allowance............... 240,000
Transfer Agent and Registrar Fees................................ 10,000
Financial Advisory Fee........................................... 300,000
Accounting Fees and Expenses..................................... 195,000
Legal Fees and Expenses.......................................... 150,000
Printing, Engraving and Delivery Expenses........................ 80,000
Miscellaneous.................................................... 14,025
-------
Total.......................................................... $1,040,000
=======
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company issued 100 shares of Common Stock to Tridex on June 25, 1996 in
connection with the organization of the Company in reliance on Section 4(2) of
the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------
1.1 Form of Underwriting Agreement by and among Tridex, the Company and Cruttenden
Roth Incorporated.
1.2 Form of Warrant Agreement by and between the Company and Cruttenden Roth
Incorporated.
3.1 Certificate of Incorporation of the Company, filed with the Secretary of the
State of Delaware on June 17, 1996.
3.2 By-laws of the Company.
4.1 Specimen Common Stock Certificate.*
4.2 See Exhibits 3.1 and 3.2 for provisions in the Certificate of Incorporation and
By-laws of the Company defining the rights of the holders of Common Stock.
II-1
61
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------
5.1 Opinion of Hinckley, Allen & Snyder, counsel to the Company, dated ,
1996, regarding the legality of the Common Stock.*
10.1 [Intentionally Omitted]
10.2 Plan of Reorganization by and among Tridex, the Company, Magnetec and Ithaca,
dated as of June 24, 1996.
10.3 Form of Corporate Services Agreement by and between Tridex and the Company.
10.4 Form of Tax Sharing Agreement by and between Tridex and the Company.
10.5 Form of Printer Supply Agreement by and between the Company and Ultimate.*
10.6 Form of Agreement and Plan of Merger of Ithaca Peripherals Incorporated with and
into Magnetec Corporation to be filed with the Secretaries of the States of
Delaware and Connecticut.*
10.7 Form of 1996 Stock Plan.
10.8 Form of Non-Employee Directors' Stock Plan.
10.9 Sales and Marketing Agreement by and between the Company and Oki Europe Limited
dated May 9, 1996. (Pursuant to Rule 477 under the Securities Act, the Company
has requested confidential treatment of portions of this exhibit deleted from
the filed copy.)
10.10 OEM Manufacturing Agreement by and between GTECH and Magnetec commencing
September 7, 1994. (Pursuant to Rule 477 under the Securities Act, the Company
has requested confidential treatment of portions of this exhibit deleted from
the filed copy.)
10.11 OEM Purchase Agreement by and between OKIDATA and Tridex dated January 24, 1990.
(Pursuant to Rule 477 under the Securities Act, the Company has requested
confidential treatment of portions of this exhibit deleted from the filed copy.)
10.12 Strategic Agreement by and between OKIDATA and Tridex dated May 9, 1996.
(Pursuant to Rule 477 under the Securities Act, the Company has requested
confidential treatment of portions of this exhibit deleted from the filed copy.)
10.13 Lease Agreement by and between Pyramid Construction Company and Magnetec dated
August 1, 1994.
10.14 Lease Agreement by and between Bomax Properties and Ithaca, dated as of March
23, 1992.
10.15 First Amendment to Lease Agreement by and between Bomax Properties and Ithaca,
dated as of October 18, 1993.
10.16 Amended and Restated Credit Agreement dated as of December 15, 1995, by and
among Tridex, Ithaca, Magnetec, Ultimate, Cash Bases Incorporated, and Fleet
Bank, National Association.
10.17 Amendment No. 1 to Amended and Restated Credit Agreement dated as of March 15,
1996, by and among Tridex, Ithaca, Magnetec, Ultimate, Cash Bases Incorporated,
and Fleet Bank, National Association.
10.18 Form of Agreement by and between Tridex and the Company regarding the Ribbon
Business.*
10.19 Form of Employment Agreement by and between the Company and Bart C. Shuldman.*
10.20 Form of Employment Agreement by and between the Company and Richard L. Cote.*
10.21 Form of Severance Agreement by and between the Company and Lucy H. Staley.*
10.22 Form of Severance Agreement by and between the Company and John Cygielnik.*
10.23 Form of Severance Agreement by and between the Company and Michael S. Kumpf.*
21.1 Subsidiaries of the Company.
II-2
62
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------
23.1 Consent of Independent Accountant.
23.2 Consent of Hinckley, Allen & Snyder (included in the opinion filed as Exhibit
5.1).
24.1 Powers of Attorney (contained on page II-4).
27.1 Financial Data Schedule.
- ---------------
* To be filed by amendment.
b. Financial Statement Schedules.
All schedules have been omitted because the information is not required or
is not applicable, or because the information required is included in the
consolidated financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona find offering thereof.
II-3
63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the Town of Wallingford,
State of Connecticut, on June 25, 1996.
Transact Technologies Incorporated
By: /s/ BART C. SHULDMAN
-------------------------------
Chief Executive Officer
and President
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Bart C. Shuldman, Richard L. Cote, Stephen J. Carlotti and Paul Bork
and each of them, with full power of substitution and full power to act without
the other, as his true and lawful attorney-in-fact and agent to act in his name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this registration statement relating to the same offering as this
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by virtue hereof.
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.
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------- ----------------
/s/ Bart C. Shuldman President, Chief Executive June 25, 1996
- ------------------------------------------ Officer, and Director (Principal
Bart C. Shuldman Executive Officer)
/s/ Richard L. Cote Executive Vice President, Chief June 25, 1996
- ------------------------------------------ Financial Officer and Director
Richard L. Cote (Principal Financial Officer and
Principal Accounting Officer)
/s/ Thomas R. Schwarz Chairman of the Board June 25, 1996
- ------------------------------------------
Thomas R. Schwarz
/s/ Graham Y. Tanaka Director June 25, 1996
- ------------------------------------------
Graham Y. Tanaka
/s/ Charles A. Dill Director June 25, 1996
- ------------------------------------------
Charles A. Dill
II-4
1
EXHIBIT 1.1
__,000,000 Shares
TRANSACT TECHNOLOGIES INCORPORATED
Common Stock
UNDERWRITING AGREEMENT
Irvine, California
___________, 1996
CRUTTENDEN ROTH INCORPORATED
As Representative of the Several Underwriters
18301 Von Karman, Suite 100
Irvine, California 92715
Dear Sirs:
Transact Technologies Incorporated, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell an aggregate of ___,000,000 shares of its Common Stock, $___ par
value (the "Common Shares"), to Cruttenden Roth Incorporated (the
"Representatives") and the several underwriters named in Schedule I hereto
(collectively with the Representatives, the "Underwriters" and individually, an
"Underwriter," which terms shall also include any Underwriter substituted as
hereinafter provided in Section 11). The aforementioned ___,000,000 Common
Shares to be issued and sold to the several Underwriters by the Company are
hereinafter referred to as the "Offered Shares." The Offered Shares shall be
offered to the public at an initial offering price of $____ per Offered Share
(the "Offering Price"). The Company is a wholly-owned subsidiary of Tridex
Corporation, a Delaware corporation ("Tridex"). The incorporation of the
Company, the transactions comprising the merger of Ithaca Peripherals
Incorporated, a Delaware corporation, with and into Magnetec Corporation, a
Connecticut corporation ("Magnetec"), and the issuance of by the Company of all
of its outstanding capital stock to Tridex in exchange of all the outstanding
capital stock of Magnetec are herein collectively referred to as the
"Reorganization."
In addition, the several Underwriters, in order to cover over-allotments
in the sale of the Offered Shares, may purchase from the Company within 30 days
after the Effective Date (as hereinafter defined), for their own account for
offering to the public at the Offering Price, up to ____,000 additional Common
Shares (the "Optional Shares"), upon the terms and
1
2
conditions set forth in Section 4 hereof. The Offered Shares and the Optional
Shares are hereinafter collectively referred to as the "Shares." It is
understood and agreed by all parties that the Company, intending to be legally
bound hereby, confirms its agreement with each of the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and
warrants to the several Underwriters that:
(i) The Company has prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules, regulations, releases and instructions (the "Regulations")
of the Securities and Exchange Commission (the "SEC") under the Act in
effect at all applicable times and has filed with the SEC a
registration statement on Form S-1 (File No. 333-___________) and one
or more amendments thereto registering the Shares under the Act. Any
preliminary prospectus included in such registration statement or filed
with the SEC pursuant to Rule 424(a) of the Regulations is hereinafter
called a "Preliminary Prospectus." The various parts of such
registration statement, including all exhibits thereto and the
information contained in any form of final prospectus filed with the
SEC pursuant to Rule 424(b) of the Regulations in accordance with
Section 5(i) of this Agreement and deemed by virtue of Rule 430A of the
Regulations to be part of such registration statement at the time it
was declared effective, each as amended at the time such registration
statement became effective, are hereinafter collectively referred to as
the "Registration Statement." The final prospectus in the form included
in the Registration Statement or first filed with the SEC pursuant to
Rule 424(b) of the Regulations and any amendments or supplements
thereto is hereinafter referred to as the "Prospectus."
(ii) The Registration Statement has become effective under the
Act as of the Effective Date, and the SEC has not issued any stop order
suspending the effectiveness of the Registration Statement or
preventing or suspending the use of any Preliminary Prospectus nor has
the SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an order. The
Company has not received any stop order suspending the sale of the
Shares in any jurisdiction designated by the Representatives pursuant
to Section 5(vi) hereof, and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are threatened or
contemplated. The Company has complied with any request of the SEC or,
to the Company's knowledge, any state securities commission in a state
designated by the Representatives pursuant to Section 5(vi) hereof, for
additional information to be included in the Registration Statement or
Prospectus or otherwise. Each Preliminary Prospectus conformed to the
Act and the Regulations as of its date and did not as of its date
contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the
2
3
circumstances under which they were made, not misleading, except the
foregoing shall not apply to statements in or omissions from any
Preliminary Prospectus in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of any
Underwriter through the Representatives expressly for use therein. The
Registration Statement on the date on which it was declared effective
by the SEC (the "Effective Date") conformed, and any post-effective
amendment thereof on the date it shall become effective, and the
Prospectus at the time it is filed with the SEC pursuant to Rule 424(b)
of the Regulations and on the Closing Date (as defined in Section 3
hereof) and any Option Closing Date (as defined in Section 4(b) hereof)
will conform, to the requirements of the Act and the Regulations, and
neither the Registration Statement, any post-effective amendment
thereof nor the Prospectus (including, without limitation, the section
entitled "Relationship With Tridex Corporation") will, on any of such
respective dates, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except that
this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter through the
Representatives expressly for use therein. It is understood that the
statements appearing in any Preliminary Prospectus, the Prospectus or
the Registration Statement (a) on the inside front cover page with
respect to stabilization, (b) in the section entitled "Underwriting,"
and (c) in the section entitled "Legal Matters" with respect to the
identity of counsel for the Underwriters constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement.
(iii) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with all
necessary corporate power and authority, and all required licenses,
permits, certifications, registrations, approvals, consents and
franchises to own or lease and operate its properties and to conduct
its business as described in the Prospectus and to execute, deliver and
perform this Agreement. The Company is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company.
(iv) Except for Magnatec (the "Subsidiary"), the Company does
not own any stock or other equity interest in, or control, directly or
indirectly, any corporation or partnership. The Subsidiary is a
corporation duly organized, validly existing and in good standing under
the laws of Connecticut, with all necessary corporate power and
authority, and all required licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and
operate its properties and to conduct its
3
4
business as described in the Prospectus and to execute, deliver and
perform this Agreement. The Subsidiary is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Subsidiary.
All of the issued shares of capital stock of the Subsidiary (i) have
been duly authorized and are validly issued, fully paid and
non-assessable and (ii) are owned directly by the Company, free and
clear of all liens, encumbrances, securities interests, mortgage,
pledge, equities or claims;
(v) The Company has all necessary corporate power and
authority to execute and deliver the warrants to purchase Common Shares
to be issued and sold to the Representatives under the terms of the
Warrant Agreement (as hereinafter defined) in accordance with Section
5(xvi) of this Agreement (the "Representatives Warrants").
(vi) This Agreement, the Warrant Agreement and the
Representatives Warrants have been duly authorized, executed and
delivered by the Company and constitute its valid and binding
obligations, enforceable against the Company in accordance with their
respective terms, except as rights to indemnity and contribution
hereunder or thereunder may be limited by federal or state securities
laws or principles of public policy, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. This Agreement,
the Warrant Agreement and the Representatives Warrants conform to the
description thereof in the Prospectus.
(vii) The execution, delivery and performance of this
Agreement, the Warrant Agreement and the Representatives Warrants by
the Company does not and will not, with or without the giving of notice
or the lapse of time, or both, (a) conflict with any terms or
provisions of the charter or bylaws of the Company or its Subsidiary,
as amended to the date hereof and the Closing Date or Option Closing
Date, as the case may be; (b) result in a breach of, constitute a
default under, result in the termination or modification of or result
in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties of the Company or its Subsidiary
pursuant to any indenture, mortgage, deed of trust, contract,
commitment or other agreement or instrument to which the Company or its
Subsidiary is a party or by which any of their properties or assets are
bound or affected, the effect of which would have a material adverse
effect on the business or properties of the Company or its Subsidiary;
(c) violate any law, rule, regulation, judgment, order or decree of any
government or governmental agency, instrumentality or court, domestic
or foreign, having jurisdiction over the Company, or its Subsidiary, or
any of their properties or businesses or (d) result in a breach,
termination or lapse of the power and authority of the Company
4
5
or its Subsidiary to own or lease and operate their properties and
conduct their business as described in the Prospectus, the effect of
which would have a material adverse effect on the business or
properties of the Company or its Subsidiary.
(viii) The Plan of Reorganization and each of the Corporate
Services Agreement, the Tax Sharing Agreement, the Product Supply
Agreement (each such term, as defined in the Registration Statement)
(collectively, the "Ancillary Agreements") have been duly authorized,
executed and delivered by the Company and its Subsidiary and each such
agreement constitutes a valid and binding agreement of the Company and
its Subsidiary, enforceable against the Company and its Subsidiary in
accordance with their respective terms, except as rights to indemnity
and contribution hereunder or thereunder may be limited by federal or
state securities laws or principles of public policy, and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles. The Plan of Reorganization and each of the Ancillary
Agreements conform to the description thereof in the Prospectus.
(ix) The compliance by the Company with all of the provisions
of the Plan of Reorganization and each of the Ancillary Agreements will
not conflict with or result in a breach or the violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or its Subsidiary is bound or to which
the Company or its Subsidiary is subject, nor will such actions result
in any violation of the provisions of the charter or bylaws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution and delivery by the Company of, and compliance by the Company
with, the provisions of the Plan of Reorganization and each of the
Ancillary Agreements.
(x) The Company has authorized and outstanding capital stock
and, as of the date or dates indicated the Company had the
capitalization, set forth under the caption "Capitalization" in the
Prospectus and will have the as-adjusted capitalization set forth under
the caption "Capitalization" in the Prospectus. On the Effective Date,
the Closing Date and any Option Closing Date, there will be no options
or warrants for the purchase of, other outstanding rights to purchase,
agreements or obligations to issue or agreements or other rights to
convert or exchange any obligation or security into, capital stock of
the Company or securities convertible into or exchangeable for capital
stock of the Company, except as described in the Prospectus with
respect to the outstanding options that have been granted to employees
and directors to purchase
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_____________ Common Shares (the "Employee Options"), the
Representatives Warrants and the Over-allotment Option (as hereinafter
defined).
(xi) The authorized capital stock of the Company, including,
without limitation, the outstanding Common Shares and the Shares being
issued on the Closing Date and Option Closing Date (if any and to the
extent applicable), conforms to the descriptions thereof in the
Prospectus, and such descriptions conform to the descriptions thereof
set forth in the instruments defining the same. The information in the
Prospectus insofar as it relates to the Employee Options and the
Representatives Warrants, in each case as of the Effective Date, the
Closing Date and any Option Closing Date, is true, correct and complete
in all material respects.
(xii) The outstanding Common Shares have been duly
authorized and are validly issued, fully paid and non-assessable. The
Employees Options have been duly authorized and validly issued and are
valid and binding obligations enforceable against the Company in
accordance with their terms, and except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally
or by general equitable principles. The Warrant Agreement and the
Representatives Warrants, as of the Closing Date, will have been duly
authorized and validly issued and, when executed and delivered by the
Company, will be valid and binding obligations enforceable against the
Company in accordance with their terms, and except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. The Common Shares
issuable pursuant to the Employee Options and the Representatives
Warrants, when issued in accordance with the respective terms thereof,
will be duly authorized, validly issued, fully paid and non-assessable.
None of such outstanding Common Shares or Employee Options were, and
none of the Representatives Warrants or such issuable Common Shares
will be, issued in violation of any preemptive rights of any security
holder of the Company. The Company has reserved a sufficient number of
Common Shares for issuance pursuant to the Employee Options and the
Representatives Warrants. The holders of the outstanding Common Shares
are not, and will not be, subject to personal liability solely by
reason of being such holders, and the holders of the Common Shares
issuable pursuant to the Employee Options and the Representatives
Warrants will not be subject to personal liability solely by reason of
being such holders. The offers and sales of the outstanding Common
Shares and the Employee Options were, and the issuance of the Common
Shares pursuant to the Employee Options and the Representatives
Warrants will be, made in conformity with applicable registration
requirements or exemptions therefrom under federal and applicable state
securities laws.
(xiii) The issuance and sale of the Shares by the Company have
been duly
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authorized and, when the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and non-assessable, and the holders thereof
will not be subject to personal liability solely by reason of being
such holders. None of the Shares will be issued in violation of any
preemptive rights of any stockholder of the Company. The certificates
representing the Shares are in proper legal form under, and conform to
the requirements of the Delaware General Corporation Law, as amended
(the "GCL"). Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives
any security holder of the Company any rights, other than those which
have been waived, for or relating to the registration of any Common
Shares or other security of the Company.
(xiv) No consent, approval, authorization, order,
registration, license or permit of any court, government, governmental
agency, instrumentality or other regulatory body or official is
required for the valid authorization, issuance, sale and delivery by
the Company of any of the Shares, or for the execution, delivery or
performance by the Company of this Agreement, except such as may be
required for the registration of the Shares under the Act, the
Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which consent, approval and authorization have been
obtained, and for compliance with the applicable state securities or
Blue Sky laws, or the bylaws, rules and other pronouncements of the
National Association of Securities Dealers, Inc. (the "NASD") and the
Nasdaq National Market. Upon the effectiveness of the Registration
Statement, the Common Shares will be registered pursuant to Section
12(g) of the Exchange Act, and will be included for traded on the
Nasdaq National Market. The Company has taken no action designed, or
likely, to have the effect of terminating the registration of the
Common Shares under Section 12(g) of the Exchange Act or the inclusion
of the Common Shares on the Nasdaq National Market, nor has the Company
received any notification that the SEC or the Nasdaq National Market is
contemplating terminating such registration or inclusion.
(xv) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references to
contracts, agreements or other documents, are accurate in all material
respects and present or summarize fairly, the information required to
be disclosed under the Act and the Regulations, and there are no
contracts, agreements or other documents required to be described or
referred to in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the
Regulations that have not been so described, referred to or filed, as
required.
(xvi) The financial statements (including the notes thereto)
filed as part of any Preliminary Prospectus, the Prospectus and the
Registration Statement present fairly the
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financial position of the Company, as of the respective dates thereof,
and the results of operations and cash flows of the Company, for the
periods indicated therein, all in conformity with generally accepted
accounting principles consistently applied, except as may be otherwise
stated therein. The supporting schedules included in the Registration
Statement fairly state the information required to be stated therein in
relation to the basic financial statements taken as a whole. The
financial information included in the Prospectus under the captions
"Prospectus Summary" and "Selected Financial Data" presents fairly the
information shown therein and has been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement.
(xvii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not been (a) any material adverse
change (including, whether or not insured against, any material loss or
damage to any assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets, management,
condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and its
Subsidiary taken as a whole, (b) any transaction entered into by the
Company or its Subsidiary that is material to the Company and its
Subsidiary taken as a whole, (c) any dividend or distribution of any
kind declared, paid or made by the Company or the Subsidiary on their
respective capital stock, (d) any liabilities or obligations, direct or
indirect, incurred by the Company or the Subsidiary that are material
to the Company and the Subsidiary taken as a whole, or (e) any material
change in the short-term debt or long-term debt of the Company and the
Subsidiary taken as a whole. The Company and the Subsidiary do not have
any contingent liabilities or obligations that are material and that
are not disclosed in the Prospectus.
(xviii) The Company has not distributed and, prior to the
later to occur of the Closing Date, the Option Closing Date or the
completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering or sale of the Shares
other than the Registration Statement, each Preliminary Prospectus and
the Prospectus, in any such case only as permitted by the Act and the
Regulations.
(xix) The Company and its Subsidiary have filed with the
appropriate federal, state and local governmental agencies, and all
foreign countries and political subdivisions thereof, all tax returns
that are required to be filed, or have duly obtained extensions of time
for the filing thereof and have paid all taxes shown on such returns
and all assessments received by them to the extent that the same have
become due. The Company and its Subsidiary have not executed or filed
with any taxing authority, foreign or domestic, any agreement extending
the period for assessment or collection of any income taxes, are not a
party to any pending action or proceeding by any foreign
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or domestic governmental agencies for the assessment or collection of
taxes, and no claims for assessment or collection of taxes have been
asserted against the Company that might materially adversely affect the
general affairs, properties, assets, condition (financial or
otherwise), results of operations, stockholders' equity, business or
prospects of the Company and its subsidiary taken as a whole.
(xx) Price Waterhouse LLP, which is certifying the financial
statements included in the Prospectus and forming a part of the
Registration Statement, is a firm of independent public accountants as
required by the Act and the Regulations.
(xxi) The Company and its Subsidiary are not in violation of,
or in default under, any of the terms or provisions, of (a) their
charter or bylaws, each as amended to the date hereof, the Closing Date
or the Option Closing Date, as the case may be, (b) any indenture,
mortgage, deed of trust, contract, loan or credit agreement, commitment
or other agreement or instrument to which the Company or its Subsidiary
is a party or by which it or any of their properties are bound or
affected, (c) any law, rule, regulation, judgment, order or decree of
any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over the Company or the
Subsidiary or any of their properties or businesses or (d) any license,
permit, certification, registration, approval, consent or franchise
referred to in subsections (ii) or (iii) of this Section 1, except
where such violation or default would not have a material adverse
effect on the business or properties of the Company and the Subsidiary
taken as a whole.
(xxii) There are no claims, actions, suits, proceedings,
arbitrations investigations, or inquiries pending before, or to the
Company's knowledge, threatened or contemplated by, any governmental
agency, instrumentality, court or tribunal, domestic or foreign, or
before any private arbitrational tribunal, relating to or affecting the
Company, it Subsidiary or their properties or businesses that might
affect the issuance or validity of any of the Shares or the validity of
any of the outstanding Common Shares, or that, if determined adversely
to the Company or its Subsidiary, would, in any case or in the
aggregate, result in any material adverse change in the general
affairs, properties, assets, condition (financial or otherwise),
results of operations, stockholders' equity, business or prospects, of
the Company or its Subsidiary; nor, to the Company's knowledge, is
there any reasonable basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental
agency, instrumentality or other tribunal enjoining the Company or its
Subsidiary from, or requiring the Company or its Subsidiary to take or
refrain from taking any action, or to which the Company, its
subsidiary, or any of its properties, assets or businesses is bound or
subject.
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10
(xxiii) Except as otherwise stated in the Prospectus, the
Company and its Subsidiary own, or possess adequate rights to use all
patents, patent applications, trademarks, trademark registrations,
applications for trademark registration, trade names, service marks,
mask works, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential technology, information, systems, design methodologies and
devices or procedures developed or derived from the Company's
businesses), trade secrets, confidential information, processes and
formulations necessary for, used in or proposed to be used in the
conduct of its business as described in the Prospectus (collectively,
the "Intellectual Property") that, if not so owned or possessed, would
materially adversely affect the general affairs, properties, condition
(financial or otherwise), results of operations, stockholders' equity,
business or prospects of the Company. To the Company's knowledge, the
Company and its Subsidiary have not infringed, are not infringing or
have not received any notice of conflict with the asserted rights of
others with respect to the Intellectual Property, and no others have
infringed upon or are in conflict with the Intellectual Property.
(xxiv) The Company and its Subsidiary have obtained all
permits, licenses and other authorizations that are required, to the
extent required, under all environmental laws, including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Section
1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C. Section
6901 et seq.), Safe Drinking Water Act (21 U.S.C. Section 349, 42
U.S.C. Sections 201, 300f), Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.),
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601 et seq.), other appropriate laws of
jurisdictions in which the Company's products have been used or located
and any other laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes under any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder (collectively, the
"Environmental Laws"), other than any permits, licenses or other
authorizations which, if not obtained, would not have a material
adverse effect on the business or properties of the Company and its
Subsidiary taken as a whole. The Company and its Subsidiary are in
compliance with all terms and conditions of any required permits,
licenses and authorizations, and are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in the
Environmental Laws, except where the failure to so comply would not
have a material adverse effect on the Company and its Subsidiary taken
as a whole.
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11
(xxv) There are no present or, to the Company's knowledge,
past events, conditions, circumstances, activities, practices,
incidents, actions or plans relating to the business as presently being
conducted by the Company or its Subsidiary that interfere with or
prevent compliance with or continued compliance with the Environmental
Laws, the non-compliance with which would have a material adverse
effect on the Company and its Subsidiary taken as a whole, or which
would be reasonably likely to give rise to any material legal liability
(whether statutory or common law) or otherwise would be reasonably
likely to form the basis of any claim, action, demand, suit,
proceeding, hearing, notice of violation, study, investigation,
remediation, or clean up based on or related to the generation,
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release
into the workplace, community or environment of any pollutant,
contaminant, chemical or industrial, toxic, or hazardous substance or
waste, which claim, action, demand, suit, proceeding, hearing, notice
of violation, study, investigation, remediation, or clean up would have
a material adverse effect on the Company and it Subsidiary taken as a
whole.
(xxvi) The Company and its Subsidiary have good and marketable
title to all personal property (tangible and intangible) described in
the Prospectus as being owned by them, free and clear of all liens,
security interests, charges or encumbrances, except such as are
described in the Prospectus or which are not material to the business
of the Company and the Subsidiary taken as a whole. The Company and it
Subsidiary have adequately insured the personal property of the Company
and the Subsidiary against loss or damage by fire or other casualty and
maintains, in adequate amounts, insurance against such other risks as
management of the Company deems appropriate. The Company and the
Subsidiary do not own any real property, and all real property used or
leased by the Company and the Subsidiary, as described in the
Prospectus (the "Premises"), is held by the Company or the Subsidiary,
as the case may be, under a valid, subsisting and enforceable lease,
and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles. The Premises, and all operations conducted thereon, are now
and, since the Company or the Subsidiary began to use such Premises,
always have been and, to the Company's knowledge, prior to when the
Company or the Subsidiary began to use such Premises, always had been,
in compliance with the Environmental Laws. There is no, and the Company
or the Subsidiary have not received notice of any, claim, demand,
investigation, regulatory action, suit or other action instituted or
threatened against any of them or the Premises relating to any of the
Environmental Laws. The Company or the Subsidiary have not received any
notice of material violation, citation, complaint, order, directive,
request for information or response thereto, notice letter, demand
letter or compliance schedule to or from any governmental or regulatory
agency arising out of or in connection with hazardous substances (as
defined by applicable
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Environmental Laws) on, about, beneath, arising from or generated at
the Premises.
(xxvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability
for assets, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xxviii) No unregistered securities of the Company have been
sold by the Company or on behalf of the Company by any person or
persons controlling, controlled by or under common control with the
Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
(xxix) Each contract or other instrument (however
characterized or described) to which the Company or the Subsidiary is a
party or by which any of the properties or business of it is bound or
affected and to which reference has been made in the Prospectus or
which has been filed as an exhibit to the Registration Statement has
been duly and validly executed by the Company or the Subsidiary, and by
the other parties thereto. Except as described in the Prospectus, each
such contract or other instrument is in full force and effect and is
enforceable against the parties thereto in accordance with its terms,
and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles, and neither the Company, nor the Subsidiary, nor any other
party is in default thereunder and no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a
default thereunder.
(xxx) Except for the Company's 401(k), disability,
supplemental executive retirement plan, health and life insurance
plans, the Company has not had any employee benefit plan, profit
sharing plan, employee pension benefit plan or employee welfare benefit
plan or deferred compensation arrangements (collectively, "Plans") that
are subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations
thereunder ("ERISA"). To the Company's knowledge, all Plans that are
subject to ERISA are, and have been at all times since their
establishment, in compliance with ERISA and, to the extent required by
the Internal Revenue Code of 1986, as amended (the "Code"), in
compliance with the Code. To the Company's knowledge, the Company has
not had any employee pension benefit plan that is subject to Part 3 of
Subtitle B of Title 1 of ERISA or any defined
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benefit plan or multiemployer plan. To the Company's knowledge, the
Company has not maintained retiree life and retiree health insurance
plans that are employee welfare benefit plans providing for continuing
benefit or coverage for any employee or any beneficiary of any employee
after such employee's termination for employment, except as required by
Section 4980B of the Code. To the Company's knowledge, no fiduciary or
other party in interest with respect to any of the Plans has caused any
of such Plans to engage in a "prohibited action" as defined in Section
406 of ERISA. As used in this subsection, the terms "defined benefit
plan," "employee benefit plan," "employee pension benefit plan,"
"employee welfare benefit plan," "fiduciary" and "multiemployer plan"
shall have the respective meanings assigned to such terms in Section 3
of ERISA.
(xxxi) To the Company's knowledge, no labor dispute exists
with the employees of the Company or its Subsidiary and no such labor
dispute is imminent. There is no existing or, to the Company's
knowledge, imminent labor disturbance by the employees of any of the
Company's or its Subsidiary's principal suppliers, contractors or
customers (including, without limitation, any distributors or end-users
of its products).
(xxxii) The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein.
(xxxiii) Except as described in the Prospectus or as otherwise
disclosed to the Underwriters, the Company is not a party to, and is
not bound by, any agreement pursuant to which any material royalties,
honoraria or fees are payable by the Company to any person by reason of
the ownership or use of any Intellectual Property.
(xxxiv) Except as disclosed in the Prospectus, there are no
business relationships or related party transactions required to be
disclosed therein by Item 404 of Regulation S-K of the Regulations.
(xxxv) The Company is familiar with the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
continue to conduct, its affairs in such a manner to ensure that it
will not become an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(xxxvi) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company has, directly or indirectly, (a) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to any political activity, (b) made any unlawful payment to
foreign or domestic governments or governmental officials or employees
or
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to foreign or domestic political parties or campaigns from corporate
funds, (c) violated any provision of the Foreign Corrupt Practices Act
of 1977, as amended or (d) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment. Neither the Company nor
any of its affiliates does business with the government of Cuba or with
any person or affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes.
(b) Tridex represents and warrants to, and agrees with, the several
Underwriters to the same effect as the representations and warranties of the
Company set forth in Section 1(a) of this Agreement and, in addition, that:
(i) Tridex is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, with all necessary
corporate power and authority, and all required licenses, permits,
certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business and
to execute, deliver and perform this Agreement. Tridex is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on Tridex.
(ii) All of the issued shares of capital stock of the Company
are owned directly by Tridex, free and clear of all liens,
encumbrances, securities interests, mortgage, pledge, equities or
claims;
(iii) This Agreement has been duly authorized, executed and
delivered by Tridex.
(iv) The consummation of the Reorganization and the execution,
delivery and performance of the Plan of Reorganization and each of the
Ancillary Agreements did not and will not (a) conflict with or result
in a breach or the violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Tridex or any
of its subsidiaries was or is bound or to which Tridex or any of its
subsidiaries was or is subject, (b) nor will such actions result in any
violation of the provisions of the charter or bylaws of Tridex or any
of its subsidiaries, (c) nor will such actions result in any violation
of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Tridex or any
of its subsidiaries or any of their properties or assets, except, in
the case of (a) and (c) above, such conflicts, breaches, violations and
defaults as would not have a material adverse effect upon the current
or future position (financial or otherwise), business, assets, results
of operations, or prospects of Tridex and its subsidiaries taken as a
whole, or upon the
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ability of Tridex or its subsidiaries to perform their respective
obligations under the Agreement or upon the validity or consummation of
the transactions contemplated hereby or thereby. No consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution and
delivery by Tridex of, and compliance by Tridex with, the provisions of
the Plan of Reorganization and each of the Ancillary Agreements (except
for such consents, approvals, authorizations, orders, filings,
registrations and qualifications the failure to obtain which would not
have a material adverse effect on the Company and its subsidiaries
taken as a whole).
(v) The issue and sale of the Shares by the Company, the
compliance by the Company and Tridex with all the provisions of this
Agreement which are applicable to them and the consummation of the
transactions herein contemplated have been duly authorized by all
necessary corporate and stockholder action on the part of each Tridex
and the Company, will not (a) conflict with or result in a breach or
violation of any terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Tridex or any subsidiary thereof was
or is bound or to which any of the property or assets of Tridex or any
of its subsidiaries was or is subject, (b) result in any violation of
the provisions of the charters or bylaws of Tridex or any of its
respective subsidiaries or (c) result in any violation of the
provisions of any statute or any order, rule or regulation of any court
of any governmental agency or body having jurisdiction over Tridex or
any of its respective subsidiaries or any of their properties, except,
in the case of (a) and (c) above, such conflicts, breaches, violations
or defaults that, individually or in the aggregate, would not have a
material adverse effect upon the current or future position (financial
or otherwise), business, assets, results of operations or prospects of
Tridex and its subsidiaries, taken as a whole, or upon the ability of
Tridex and its subsidiaries to perform their respective obligations
under this Agreement or upon the validity or consummation of the
transactions contemplated hereby or thereby; and no consent, approval,
authorization or other order of, or filing with, any court or any such
regulatory authority or other governmental body is required to be
obtained by Tridex or any of its subsidiaries for the issue and sale of
the Shares, the consummation by the Company and Tridex of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters.
(vi) Tridex has applied for a ruling from the United Stated
Internal Revenue Services that the Distribution, after the consummation
of the offering contemplated herein, of all the shares of capital stock
of the Company held by Tridex to the shareholders of Tridex will
constitute a tax-free reorganizations for the purposes of the
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Internal Revenue Code of 1986, as amended.
(vii) Neither Tridex nor any of its subsidiaries has taken, or
will take, directly or indirectly, any action which is designed to or
which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the common stock of
Tridex or the Common Stock.
Any certificate signed by any officer of the Company or Tridex in such
capacity and delivered to the Representatives or to counsel for the Underwriters
pursuant to this Agreement shall be deemed a representation and warranty by the
Company or Tridex to the several Underwriters as to the matters covered thereby.
2. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company shall sell the
Offered Shares to the several Underwriters at the Offering Price less the
underwriting discount shown on the cover page of the Prospectus (the
"Underwriting Discount"), and the Underwriters, severally and not jointly, shall
purchase from the Company, on a firm commitment basis, at the Offering Price
less the Underwriting Discount, the respective Offered Shares set forth opposite
their names on Schedule I hereto. In making this Agreement, each Underwriter is
contracting severally, and not jointly, and, except as provided in Sections 4
and 11 hereof, the agreement of each Underwriter is to purchase only that number
of Offered Shares specified with respect to that Underwriter in Schedule I
hereto. The Underwriters shall offer the Offered Shares to the public as set
forth in the Prospectus.
3. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be made
to the Company by certified or official bank check payable to the order of the
Company in New York Clearing House funds (next day funds), at the offices of
Heller Ehrman White & McAuliffe, 6100 Columbia Center, 701 Fifth Avenue,
Seattle, Washington 98104, or at such other location as shall be agreed upon by
the Company and the Representatives, or in immediately available funds wired to
such account or accounts as the Company may specify (with all costs and expenses
incurred by the Underwriters in connection with such settlement in immediately
available funds (including, but not limited to, interest or cost of funds
expenses) to be borne by the Company), against delivery of the Offered Shares to
the Representatives at the offices of Cruttenden Roth Incorporated, 18301 Von
Karman, Irvine, California 92715, for the respective accounts of the
Underwriters. Such payments and delivery will be made at 10:00 A.M., Pacific
time, on the third business day after the date of this Agreement or at such
other time and date not later than one business days thereafter as the
Representatives and the Company shall agree upon. Such time and date are
referred to herein as the "Closing Date." The certificates representing the
Offered Shares to be sold and delivered will be in such denominations and
registered in such names as the Representatives request not less than one full
business day prior to the Closing Date, and will be made
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available to the Representatives for inspection, checking and packaging at the
office of the Company's Transfer Agent, not less than one full business day
prior to the Closing Date.
4. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Offered Shares as
contemplated by the Prospectus, subject to the terms and conditions
herein set forth, the several Underwriters are hereby granted an option
by the Company to purchase all or any part of the Optional Shares from
the Company (the "Over-allotment Option"). The purchase price per share
to be paid for the Optional Shares shall be the Offering Price less the
Underwriting Discount. The Over-allotment Option granted hereby may be
exercised by the Representatives on behalf of the several Underwriters
as to all or any part of the Optional Shares at any time (but not more
than once) within 30 days after the Effective Date. No Underwriter
shall be under any obligation to purchase any Optional Shares prior to
an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised
by the Representatives on behalf of the several Underwriters by giving
notice to the Company by a letter sent by registered or certified mail,
postage prepaid, telex, telegraph, telegram or facsimile (such notice
to be effective when sent), addressed as provided in Section 13 hereof,
setting forth the number of Optional Shares to be purchased, the date
and time for delivery of and payment for the Optional Shares and
stating that the Optional Shares referred to therein are to be used for
the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. If such notice is given
prior to the Closing Date, the date set forth therein for such delivery
and payment shall not be earlier than either three full business days
thereafter or the Closing Date, whichever occurs later. If such notice
is given on or after the Closing Date, the date set forth therein for
such delivery and payment shall be a date selected by the
Representatives that is not later than three full business days after
the exercise of the Over-allotment Option. The date and time set forth
in such a notice is referred to herein as the "Option Closing Date,"
and a closing held pursuant to such a notice is referred to herein as
the "Option Closing." The number of Optional Shares to be sold to each
Underwriter pursuant to the exercise of the Overallotment Option shall
be the number that bears the same ratio to the aggregate number of
Optional Shares being purchased through such Over-allotment Option
exercise as the number of Offered Shares opposite the name of such
Underwriter in Schedule I hereto bears to the total number of all
Offered Shares; subject, however, to such adjustment as the
Representatives may approve to eliminate fractional shares and subject
to the provisions for the allocation of Optional Shares purchased for
the purpose of covering over-allotments set forth in Section 9 of the
Agreement Among Underwriters. Upon the exercise of the Over-allotment
Option, the Company shall become obligated and sell to
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the Representatives for the respective accounts of the Underwriters,
and on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions
herein set forth, and the several Underwriters shall become severally,
but not jointly, obligated to purchase from the Company, the number of
Optional Shares specified in each notice of exercise of the
Over-allotment Option.
(c) Payment for the Optional Shares shall be made to the
Company by certified or official bank check payable to the order of the
Company in New York Clearing House funds (next day funds), at the
office of Heller Ehrman White & McAuliffe, 6100 Columbia Center, 701
Fifth Avenue, Seattle, Washington 98104, or such other location as
shall be agreed upon by the Company and the Representatives, or in
immediately available funds wired to such account as the Company may
specify (with all costs and expenses incurred by the Underwriters in
connection with such settlement in immediately available funds
(including, but not limited to, interest or cost of funds expenses) to
be borne by the Company), against delivery of the Optional Shares to
the Representatives at the offices of Cruttenden Roth Incorporated,
18301 Von Karman, Irvine, California 92715, for the respective accounts
of the Underwriters. The certificates representing the Optional Shares
to be issued and delivered will be in such denominations and registered
in such names as the Representatives request not less than one full
business day prior to the Option Closing Date, and will be made
available to the Representatives for inspection, checking and packaging
at the office of the Company's Transfer Agent not less than one full
business day prior to the Option Closing Date.
5. CERTAIN COVENANTS AND AGREEMENTS (a) The Company covenants and
agrees with the several Underwriters as follows:
(i) If Rule 430A of the Regulations is employed, the Company
will timely file the Prospectus pursuant to and in compliance with Rule
424(b) of the Regulations and will advise the Representatives of the
time and manner of such filing.
(ii) The Company will not at any time, whether before or after
the Registration Statement shall have become effective, during such
period as, in the opinion of counsel for the Underwriters, the
Prospectus is required by law to be delivered in connection with sales
by the Underwriters or a dealer, file or publish any amendment or
supplement to the Registration Statement or Prospectus of which the
Representatives have not been previously advised and furnished a copy,
or which is not in compliance with the Regulations, or, during the
period before the distribution of the Offered Shares and the Optional
Shares is completed, file or publish any amendment or supplement to the
Registration Statement or Prospectus to which the Representatives
reasonably object in writing.
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(iii) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time and date that this
Agreement is executed and delivered by the parties hereto, to become
effective and will advise the Representatives immediately, and confirm
such advice in writing, (a) when the Registration Statement, or any
post-effective amendment to the Registration Statement, is filed with
the SEC, (b) of the receipt of any comments from the SEC, (c) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, or when any supplement to the
Prospectus or any amended Prospectus has been filed, (d) of any request
of the SEC for amendment or supplementation of the Registration
Statement or Prospectus or for additional information, (e) during the
period when the Prospectus is required to be delivered under the Act
and Regulations, of the happening of any event which in the Company's
judgment makes any material statement in the Registration Statement or
the Prospectus untrue or which requires any changes to be made in the
Registration Statement or Prospectus in order to make any material
statements therein not misleading and (f) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, the suspension of the
qualification of any of the Shares for offering or sale in any
jurisdiction in which the Underwriters intend to make such offers or
sales, or of the initiation or threatening of any proceedings for any
such purposes. The Company will use its best efforts to prevent the
issuance of any such stop order or of any order preventing or
suspending such use and, if any such order is issued, to obtain as soon
as possible the lifting thereof.
(iv) The Company has delivered to the Representatives, without
charge, and will continue to deliver from time to time until the
Effective Date, as many copies of each Preliminary Prospectus as the
Representatives may reasonably request. The Company will deliver to the
Representatives, without charge, as soon as possible after the
Effective Date, and thereafter from time to time during the period when
delivery of the Prospectus is required under the Act, such number of
copies of the Prospectus (as supplemented or amended, if the Company
makes any supplements or amendments to the Prospectus) as the
Representatives may reasonably request. The Company hereby consents to
the use of such copies of each Preliminary Prospectus and the
Prospectus for purposes permitted by the Act, the Regulations and the
securities or Blue Sky laws of the jurisdictions in which the Shares
are offered or sold by the several Underwriters and by all dealers to
whom Shares may be offered or sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Act to be delivered in connection
with sales by any Underwriter or dealer. The Company has furnished or
will furnish to the Representatives two signed copies of the
Registration Statement as originally filed and of all amendments
thereto, whether filed before or after the Effective Date, two copies
of all exhibits filed therewith and two signed copies of all consents
and certificates of experts, and will
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deliver to the Representatives such number of conformed copies of the
Registration Statement, including financial statements and exhibits,
and all amendments thereto, as the Representatives may reasonably
request.
(v) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit
the continuance of offers and sales of, and dealings in, the Shares for
as long as may be necessary to complete the distribution of the Shares
as contemplated hereby.
(vi) The Company will furnish such information as may be
required and otherwise cooperate in the registration or qualification
of the Shares, or exemption therefrom, for offering and sale by the
several Underwriters and by dealers under the securities or Blue Sky
laws of such jurisdictions in which the Representatives determine to
offer the Shares, after consultation with the Company, and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided, however, that no such qualification shall be required in any
jurisdiction where, solely as a result thereof, the Company would be
subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or to
take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject. The Company will, from
time to time, prepare and file such statements and reports as are or
may be required to continue such qualification in effect for so long a
period as is required under the laws of such jurisdiction for such
offering and sale.
(vii) Subject to subsection (ii) of this Section 5, in case of
any event, at any time within the period during which, in the opinion
of counsel for the Underwriters, a prospectus is required to be
delivered under the Act and Regulations, as a result of which event any
Preliminary Prospectus or the Prospectus, as then amended or
supplemented, would contain, in the judgment of the Company or in the
opinion of counsel for the Underwriters, an untrue statement of a
material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, or, if it is necessary at any time to
amend any Preliminary Prospectus or the Prospectus to comply with the
Act and Regulations or any applicable state securities or Blue Sky
laws, the Company promptly will prepare and file with the SEC, and any
applicable state securities commission, an amendment or supplement that
will correct such statement or omission or an amendment that will
effect such compliance and will furnish to the Representatives such
number of copies of such amendment or amendments or supplement or
supplements to such Preliminary Prospectus or the Prospectus (in form
and substance satisfactory to the Representatives and counsel for
Underwriters) as the Representatives may reasonably request. For
purposes of this subsection, the Company
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will furnish such information to the Representatives, the Underwriters'
counsel and counsel for the Company as shall be necessary to enable
such persons to consult with the Company with respect to the need to
amend or supplement any Preliminary Prospectus or the Prospectus, and
shall furnish to the Representatives and the Underwriters' counsel such
further information as each may from time to time reasonably request.
If the Company and the Representatives agree that any Preliminary
Prospectus or the Prospectus should be amended or supplemented, the
Company, if requested by the Representatives, will, if and to the
extent required by law, promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or
supplement.
(viii) The Company will make generally available to its
security holders as soon as practicable and in any event not later than
45 days after the end of the period covered thereby, an earnings
statement of the Company (which need not be audited unless required by
the Act, the Regulations, the Exchange Act or the rules or
regulations thereunder) that shall comply with Section 11(a) of the Act
and cover a period of at least 12 consecutive months beginning not
later than the first day of the Company's fiscal quarter next following
the Effective Date.
(ix) For a period of five years from the Effective Date, the
Company will deliver to the Representatives upon request: (a) a copy of
each report or document, including, without limitation, reports on
Forms 8-K, 10-C, 10-K and 10-Q (or such similar forms as may be
designated by the SEC), registration statements and any exhibits
thereto, filed with or furnished to the SEC or any securities exchange
or the NASD, as soon as practicable after the date each such report or
document is so filed or furnished, (b) as soon as practicable, copies
of any reports or communications (financial or other) of the Company
mailed to its security holders and (c) every material press release in
respect of the Company or its affairs that was released or prepared by
the Company.
(x) During the course of the distribution of the Shares, the
Company has not taken, nor will it take, directly or indirectly, any
action designed to or that might, in the future, reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Shares.
(xi) The Company will cause each person listed on Schedule II
hereto to execute a legally binding and enforceable agreement (a
"lockup agreement") to, for a period of 180 days from the Effective
Date, not sell, offer to sell, contract to sell, grant any option for
the sale of or otherwise transfer or dispose of any Common Shares
(except for the sale of the Shares as contemplated by this Agreement),
any options to purchase Common Shares or any securities convertible
into or exchangeable for Common Shares (excluding the issuance of
Common Shares pursuant to the Employee
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Options) without the prior written consent of Cruttenden Roth
Incorporated, which lockup agreement shall be in form and substance
satisfactory to the Representatives and the Underwriters' counsel, and
deliver such lockup agreement to the Representatives prior to the
Effective Date. Appropriate stop transfer instructions will be issued
by the Company to the transfer agent for the securities affected by the
lockup agreements.
(xii) The Company will not sell, issue, contract to sell, offer to sell
or otherwise dispose of any Common Shares, options to purchase Common
Shares or any other security convertible into or exchangeable for
Common Shares, from the date of the Effective Date through the period
ending 180 days after the Effective Date, without the prior written
consent of Cruttenden Roth Incorporated, except for the sale of the
Shares as contemplated by this Agreement, the granting of options, and
the issuance of Common Shares upon their exercise, under the Company's
stock option plans described in the Prospectus, the issuance of Common
Shares pursuant to the Employee Options and the Warrants and the
issuance of the Representatives Warrants.
(xiii) The Company will use all reasonable efforts to maintain
the inclusion of the Common Shares on the Nasdaq National Market, or to
list the Common Shares on the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "AMEX").
(xiv) The Company shall, at its sole cost and expense, supply
and deliver to the Representatives and the Underwriters' counsel (in
the form they require), within a reasonable period after the Closing
Date, six transaction binders, each of which shall include the
Registration Statement, as amended or supplemented, all exhibits to the
Registration Statement, each Preliminary Prospectus, the Prospectus,
the Preliminary Blue Sky Memorandum and any supplement thereto and all
underwriting and other closing documents.
(xv) The Company will use the net proceeds from the sale of
the Shares to be sold by it hereunder substantially in accordance with
the description thereof set forth in the Prospectus and shall file such
reports with the SEC with respect to the sale of such Shares and the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(xvi) On the Closing Date, the Company shall sell to the
Representatives, at a purchase price of $0.001 per warrant,
Representatives Warrants to purchase _____,000 Common Shares. Such
Representatives Warrants shall be issued pursuant to the terms of the
Warrant Agreement, shall have an exercise price per share equal to
$_____, shall not be exercisable until the first anniversary of the
date on which Tridex owns less than 80% of the outstanding voting
capital of the Company, shall thereafter be exercisable until the fifth
anniversary of the Closing, shall contain customary anti-
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dilution and registration rights provisions and shall otherwise be in a
form that is acceptable to the Representatives and their counsel.
(b) Tridex agrees, jointly and severally with each of the Underwriters
that, during the period beginning from the Effective Date and
continuing and including the date 180 days after Tridex will not (and,
except as may be disclosed in the Prospectus, will not announce or
disclose any intention to) (i) sell, offer to sell, solicit an offer to
buy, contract to sell, grant any option to purchase, pledge, transfer,
establish an open "put equivalent position" (within the meaning of Rule
16a-1(h) under the Exchange Act) or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares
of Common Stock currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Exchange Act) by
Tridex; or (ii) file any registration statement under the Act with
respect to Shares, securities convertible into or exchangeable for
Shares, rights or warrants to acquire stock or any other securities
substantially similar to Shares, in each case without your prior
written consent.
6. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated and regardless of the reason this Agreement
is terminated, the Company will pay or cause to be paid, and bear or
cause to be borne, all costs and expenses incident to the performance
of the obligations of the Company under this Agreement, including: (i)
the fees and expenses of the accountants and counsel for the Company
incurred in the preparation of the Registration Statement and any
post-effective amendments thereto (including financial statements and
exhibits), each Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto; (ii) printing and mailing expenses
associated with the Registration Statement and any post-effective
amendments thereto, each Preliminary Prospectus, the Prospectus
(including any supplement thereto), this Agreement, the Agreement Among
Underwriters, the Underwriters' Questionnaire, the Power of Attorney,
the Selected Dealer Agreement and related documents and the Preliminary
Blue Sky Memorandum and any supplement thereto; (iii) the costs (other
than fees and expenses of the Underwriters' counsel except in
connection with Blue Sky filings or exemptions as provided herein)
incident to the authentication, issuance, delivery and transfer of the
Shares to the Underwriters; (iv) all taxes, if any, on the issuance,
delivery and transfer of the Shares to be sold by the Company; (v) the
fees, expenses and all other costs of qualifying the Shares for the
sale under the securities or Blue Sky laws of those jurisdictions in
which the Shares are to be offered or sold including the reasonable
fees and disbursements of Underwriters' counsel and such local counsel
as may have been reasonably required and retained for such purpose;
(vi) the fees, expenses and other
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costs of, or incident to, securing any review or approvals by or from
the NASD exclusive of fees of the Underwriters' counsel; (vii) the
filing fees of the SEC; (viii) the cost of furnishing to the
Underwriters copies of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including any supplement or amendment
thereto) as herein provided; (ix) the Company's travel expenses in
connection with meetings with the brokerage community and institutional
investors and expenses associated with hosting such meetings, including
meeting rooms, meals, facilities and ground transportation expenses;
(x) the costs and expenses associated with settlement in same day funds
(including, but not limited to, interest or cost of funds expenses), if
desired by the Company; (xi) the fees for inclusion of the Shares on
the Nasdaq National Market; (xii) the cost of printing and engraving
certificates for the Shares; (xiii) the cost and charges of any
transfer agent; and (xiv) all other costs and expenses reasonably
incident to the performance of its obligations hereunder that are not
otherwise specifically provided for in this Section 6, provided that,
except as specifically set forth in subsection (c) of this Section 6,
the Underwriters shall be responsible for their out-of-pocket expenses,
including their lodging and travel expenses associated with meetings
with the brokerage community and institutional investors, and the fees
and expenses of their counsel for other than Blue Sky work.
(b) The Company shall pay as due any registration,
qualification and filing fees and any accountable out-of-pocket
disbursements in connection with such registration, qualification or
filing in the jurisdictions in which the Representatives determine,
after consultation with the Company, to offer or sell the Shares.
(c) In addition to the foregoing expenses, the Company shall
at the Closing Date pay to the Representative a non-accountable expense
allowance equal to $240,000 (less any previous advances to the
Representatives by the Company).
(d) In the event the Underwriters are willing to proceed with
the issuance and sale of the Offered Shares as contemplated by this
Agreement and the Company elects not to proceed for any reason, the
Company shall reimburse the Representatives for all of their
out-of-pocket expenses incurred in connection with the offering of the
Offered Shares (including but not limited to the fees and disbursements
of its counsel), in an amount not to exceed $150,000.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Offered Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 4 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy of the representations and
warranties of the Company set forth herein, to the performance by the Company of
its covenants, agreements and obligations hereunder and to the following
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additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., Eastern time, on the date of this Agreement, or
at such later time or on such later date as the Representatives may
agree to in writing; if required by the Regulations, the Prospectus
shall have been filed with the SEC pursuant to Rule 424(b) of the
Regulations within the applicable time period prescribed for such
filing by the Regulations and in accordance with subsection (i) of
Section 5 hereof; on or prior to the Closing Date or any Option Closing
Date, as the case may be, no stop order or other order preventing or
suspending the effectiveness of the Registration Statement or the sale
of any of the Shares shall have been issued under the act or any state
securities law and no proceedings for that purpose shall have been
initiated or shall be pending or, to the Representatives' knowledge or
the knowledge of the Company, shall be contemplated by the SEC or any
authority in any jurisdiction designated by the Representatives
pursuant to subsection (vi) of Section 5 hereof and any request on the
part of the SEC for additional information shall have been complied
with to the reasonable satisfaction of counsel for the Underwriters.
(b) All corporate proceedings and other matters incident to
the authorization, form and validity of this Agreement, the Warrant
Agreement, the Representatives Warrants and the Shares and the form of
the Registration Statement, each Preliminary Prospectus and the
Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby, shall be satisfactory in all
respects to counsel to the Underwriters; the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters; and the
Representatives shall have received from the Underwriters' counsel,
Heller Ehrman White & Mcauliffe, a favorable opinion, dated as of the
Closing Date and any Option Closing Date, as the case may be, and
addressed to the Representatives individually and as the
Representatives of the several Underwriters with respect to the due
authorization, execution and delivery of this Agreement, that the
issuance and sale of the Shares have been duly authorized by the
Company, that when the Shares have been duly delivered against payment
therefor as contemplated by this Agreement, they will be validly
issued, fully paid and non-assessable and that the Registration
Statement has become effective under the Act.
(c) The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of any of the
Shares.
(d) The Representatives shall have received copies of the
lockup agreements described in subsection (xxii) of Section 5 signed by
those persons set forth on Schedule II hereto.
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(e) The Representatives shall have received at or prior to the
Closing Date from the Underwriters' counsel a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to
the qualification for offering and sale by the Underwriters of the
Shares under the securities or Blue Sky laws of such jurisdictions
designated by the Representatives pursuant to subsection (f) of Section
5 hereof.
(f) You shall have received on the Closing Date and on the
Option Closing Date, if any, the following opinions of Hinckley, Allen
& Snyder, counsel for the Company and Tridex, dated the Closing Date
and the Option Closing Date, if any, and addressed to the Underwriters
and with reproduced copies or signed counterparts thereof for each of
the Underwriters:
(i) Each of the Company and Tridex have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their jurisdictions of incorporation;
(ii) Each of the Company and Tridex have the
corporate power to own, lease and operate its properties and to conduct
its business as described in the Prospectus; and each of the Company
and Tridex are duly qualified to do business as a foreign corporation
and are in good standing in each jurisdiction in which the ownership or
leasing of properties or the conduct of its respective business
requires such qualification, except where the failure so to qualify
taken in the aggregate would not have a material adverse effect on the
business, operations or financial condition of the Company or Tridex;
(iii) The consummation of the Reorganization and the
execution, delivery and performance of all documents and instruments
executed and delivered therewith were authorized by all necessary
corporate action on the part of the Company and Tridex, all consents,
approvals, authorizations, orders, licenses, certificates, permits,
registrations or qualifications which the failure to obtain would not,
individually or in the aggregate, have a material adverse effect; the
consummation of the Plan of Reorganization and the execution, delivery
and performance of all documents and instruments executed and delivered
therewith did not and will not (a) conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed or trust, loan agreement
or other agreement or instrument to which the Company, Tridex or any of
their subsidiaries was or is bound or to which any of the property or
assets of the Company, Tridex or any of their subsidiaries was or is
subject, (b) result in any violation of the provisions of the charter
or bylaws of the Company, Tridex or any of their subsidiaries or (c)
result in any violation of the provisions of any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the
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Company, Tridex or any of their subsidiaries or any of their
properties, other than, in the case of clauses (a) and (c) above, such
conflicts, breaches, violations or defaults that, individually or in
the aggregate, would not have a material adverse effect;
(iv) All of the issued shares of capital stock of the
Company other than those to be delivered by the Company at the Closing
and the Option Closing pursuant to this Agreement are owned of record
by Tridex, free and clear of all liens, encumbrances, security
interests, mortgages, pledges, equities or claims; all of the issued
shares of capital stock of Magnetec (a) have been duly authorized and
are validly issued, fully paid and non-assessable and (b) are owned of
record by the Company, free and clear of all liens, encumbrances,
security interests, mortgages, pledges, equities or claims;
(v) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the
caption "Capitalization" as of the dates stated therein; the issued and
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable, and to
such counsel's knowledge have not been issued in violation of any
preemptive right, or co-sale right, registration right, right of first
refusal or other similar right;
(vi) The Shares to be issued and sold by the Company
to the several Underwriters pursuant to the terms of this Agreement
will be, upon issuance and delivery against payment therefor in
accordance with the terms hereof, duly authorized and validly issued
and fully paid and nonassessable; and the stockholders of the Company
do not have any preemptive rights, co-sale rights, rights of first
refusal or other similar rights, which rights have not previously been
waived, to purchase any of the Shares pursuant to the Company's charter
or bylaws, or to such counsel's knowledge, any agreement to which the
Company is a party;
(vii) The Common Shares to be issued and sold by the
Company to the several Underwriters pursuant to the terms of the
Warrant Agreement (the "Warrant Shares") will be, upon issuance and
delivery against payment therefor in accordance with the terms thereof,
duly authorized and validly issued and fully paid and nonassessable;
and the stockholders of the Company do not have any preemptive rights,
co-sale rights, rights of first refusal of other similar rights, which
rights have not previously been waived, to purchase any of the Warrant
Shares pursuant to the Company's charter or bylaws, or to such
counsel's knowledge, any agreement to which the Company is a party;
(viii) The Company and Tridex have the corporate
power and authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued, sold and delivered
by it hereunder;
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(ix) The Company has the corporate power and
authority to enter into the Warrant Agreement, and to issue, sell and
deliver to the Representatives the Representatives' Warrants and the
Warrant Shares to be issued, sold and delivered by it thereunder;
(x) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and Tridex, and
has been duly executed and delivered by the Company and Tridex;
(xi) To such counsel's knowledge, except as described
in the Prospectus, the Company does not own or control, directly or
indirectly, any corporation, association or other entity.
(xii) The Warrant Agreement and the Representatives'
Warrants, when issued, have been duly authorized by all necessary
corporate action on the part of the Company and have been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by you, are valid and binding agreements of the Company,
except insofar as the indemnification and contribution provisions may
be limited by applicable law.
(xiii) The Registration Statement has become
effective under the Act, and, to such counsel's knowledge, no stop
orders suspending the effectiveness of the Registration Statement have
been issued and no proceedings for that purpose have been instituted or
are pending or threatened under the Act;
(xiv) The Registration Statement and the Prospectus,
and each amendment or supplement thereto (other than the financial
statements, financial and statistical data and supporting schedules
included or incorporated by reference in the Registration Statement and
the Prospectus and each amendment or supplement thereto, as to which
such counsel need express no opinion) as of the effective date of the
Registration Statement, complied as to form in all material respects
with the requirements of the Act and the applicable Rules and
Regulations;
(xv) The terms and provisions of the capital stock of
the Company conform in all material respects to the description thereof
contained in the Registration Statement and Prospectus, and the
information in the Prospectus under the captions "Description of
Capital Stock," "Management -- Employee Stock Plans," and "Share
Eligible For Future Sale" to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by such counsel and are
correct in all material respects, and the form of certificate
evidencing the Common Stock complies with Delaware law;
(xvi) The descriptions in the Registration Statement
and the Prospectus
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of the charter and bylaws of the Company and of the GCL, the Act, and
the Regulations are accurate and fairly present the information
required to be presented by the Act or the Regulations;
(xvii) To such counsel's knowledge, there are no
agreements, contracts, leases or documents of a character required to
be described or referred to in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement that are not
described or referred to therein and filed as required;
(xviii) The performance of this Agreement and the
Warrant Agreement and the consummation of the transactions contemplated
in each will not result in any violation of the Company's or Tridex's
charter or bylaws, or, to such counsel's knowledge, result in a
material breach or violation of any of the terms or provisions of, or
constitute a material default under, any material indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, or any material lease, contract or other
agreement or instrument which has been filed as an exhibit to the
Registration Statement, or, to such counsel's knowledge, any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental
agency or body having jurisdiction over the Company or Tridex, or over
any of the Company's or Tridex's properties or operations; provided,
however, that no opinion need be rendered concerning Blue Sky laws;
(xix) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
consummation of the transactions herein contemplated, except such as
have been obtained under the Act or as may be required by the NASD, the
Nasdaq National Market or under state or other securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters;
(xx) To such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened against the Company
or Tridex of a character that are required to be disclosed in the
Registration Statement or the Prospectus, by the Act or the
Regulations;
(xxi) To such counsel's knowledge, no holders of
Common Stock or other securities of the Company or Tridex have
registration rights with respect to securities of the Company;
(xxii) The Company has reserved out of its authorized
and unissued shares of Common Stock a number of Warrant Shares
sufficient to provide for the exercise of the rights of purchase
represented by the Representatives' Warrants; and
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(xxiii) The Company is not an "investment company" or
an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940.
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of
the Company, Tridex, representatives of the independent public
accountants for the Company, representatives of the independent public
accountants for Tridex, and you, at which the contents of the
Registration Statement and Prospectus and related matters were
discussed and, although such counsel is not passing upon, and does not
assume any responsibility for the accuracy, completeness or fairness of
the statements, except for those referred to in Subsection (xv) of this
Section 7(f), contained in the Registration Statement and Prospectus,
no facts have come to such counsel's attention that lead them to
believe that either the Registration Statement (including the
incorporated documents, if any) at the time such Registration Statement
became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or the
Prospectus (including the incorporated documents) as of its date
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except
that such counsel need express no opinion with respect to the financial
statements, schedules and other financial and statistical data included
in the Registration Statement or Prospectus.
In giving their opinion, Hinckley, Allen & Snyder may rely as
to matters of fact, to the extent Hinckley, Allen & Snyder deems
appropriate, on certificates of responsible Company and Tridex officers
and public officials.
(g) At the Closing Date and any Option Closing Date: (i) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with
the Act and the Regulations and shall conform, in all material
respects, to the requirements of the Act and the Regulations, and
neither the Registration Statement nor any post-effective amendment
thereto nor the Prospectus and any amendments or supplements thereto
shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, (ii) since the respective dates as of which
information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments
or supplements thereto, except as otherwise stated therein, there shall
have been no material adverse change in the properties, condition
(financial or otherwise), results of operations, stockholders' equity,
business or management of the Company, from that set forth therein,
whether or not arising in the ordinary course of
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business, other than as referred to in the Registration Statement or
Prospectus, (iii) since the respective dates as of which information is
given in the Registration Statement and any post-effective amendment
thereto and the Prospectus or any amendment or supplement thereto,
there shall have been no transaction, contract or agreement entered
into by the Company, other than in the ordinary course of business and
as set forth in the Registration Statement or Prospectus that has not
been, but would be required to be, set forth in the Registration
Statement or Prospectus; (iv) no action, suit or proceeding at law or
in equity shall be pending or, to the knowledge of the Company,
threatened against the Company that would be required to be set forth
in Prospectus, other than as set forth therein, and no proceedings
shall be pending or, to the knowledge of the Company, threatened
against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would materially adversely affect the
properties, condition (financial or otherwise), results of operations,
stockholders' equity or business of the Company, other than as set
forth in the Prospectus. The Representatives shall have received at the
Closing Date and any Option Closing Date certificates of each of the
Chief Executive Officer and the Chief Financial Officer of the Company
and of Tridex dated as of the date of the Closing Date or Option
Closing Date, as the case may be, and addressed to the
Representatives, individually and as the Representatives of the several
Underwriters, to the effect, that the conditions set forth in this
subsection have been satisfied and as to the accuracy and performance,
as of the Closing Date or the Option Closing Date, as the case may be,
of the agreements, representations and warranties of the Company set
forth herein.
(h) At the time this Agreement is executed and at the Closing
Date and any Option Closing Date, the Representatives shall have
received a letter addressed to the Representatives, individually and as
the Representatives of the several Underwriters, and in form and
substance satisfactory to the Representatives in all respects
(including the nonmaterial nature of the changes or decreases, if any,
referred to in clause (iii) below) from Price Waterhouse LLP dated as
of the date of this Agreement, the Closing Date or Option Closing Date,
as the case may be:
(i) confirming that they are independent public
accountants within the meaning of the Act and the Regulations
and stating that the section of the Registration Statement
under the caption "Experts" is correct insofar as it relates
to them;
(ii) They are independent certified public
accountants with respect to the Company and its subsidiaries
within the meaning of the Act and the applicable published
rules and regulations thereunder;
(iii) In their opinion, the financial statements and
any supplementary
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financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information)
examined by them and included in the Prospectus or the
Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in
accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited
consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified
in such latter, as indicated in their reports thereon, copies
of which have been furnished to the Representatives;
(iv) They have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of
which have been separately furnished to the Representatives
and on the basis of specified procedures including inquiries
of officials of the Company who have responsibility for
financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred
to in paragraph (vii)(a) below comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related published rules and regulations,
nothing came to their attention that caused them to believe
that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations;
(v) The unaudited selected financial information with
respect to the consolidated results of operations and
financial position of the Company for the five most recent
fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in
the audited consolidated financial statements for such five
fiscal years;
(vi) They have compared the information in the
Prospectus under selected captions with the disclosure
requirements of Regulations S-K and on the basis of limited
procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused
them to believe that this information does not conform to all
material respects with the disclosure requirements of Items
301, 302 and 402, respectively, of Regulation S-K;
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(vii) On the basis of limited procedures, not
constituting an examination in accordance with generally
accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information referred
to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the
date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries, responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them
to believe that:
(a) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus
(i) do not comply as to form in all material respects
with the applicable accounting requirements of the
Act and the related published rules and regulations,
or (ii) any material modifications should be made to
the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus
for them to be in conformity with generally
accepted accounting principles;
(b) any other unaudited income statement state and
balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such
data and items were derived, and any such unaudited
data and items were not determined on a basis
substantially consistent with the basis for the
corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(c) the unaudited financial statements which were not
included in the Prospectus but from which were
derived any unaudited condensed financial statements
referred to in clause (a) and any unaudited income
statement data and balance sheet items included in
the Prospectus and referred to in clause (b) were not
determined on a basis substantially consistent with
the basis for the audited consolidated financial
statements included in the Prospectus;
(d) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do
not comply as to form in all material respects with
the applicable accounting requirements of the Act and
the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied
to the historical amounts in
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the compilation of those statements;
(e) as of a specified date not more than five days
prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options
and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of
convertible securities, in each case which were
outstanding on the date of the latest financial
statements included in the Prospectus) or any
increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders'
equity or other items specified by the
Representatives, or any increases in any items
specified by the Representatives, in each case as
compared with amounts shows in the latest balance
sheet included in the Prospectus, except in each case
for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or
which are described in such letter; and
(f) for the period from the date of the latest
financial statements included in the Prospectus to
the specified date referred to in clause (e) there
were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by
the Representatives, or any increases in any items
specified by the Representatives, in each case as
compared with the comparable period of the preceding
year and with any other period of corresponding
length specified by the Representatives, except in
each case for decreases or increases which the
Prospectus discloses have occurred or may occur or
which are described in such letter; and
(viii) In addition to the examination referred to in
their report(s) included in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above,
they have carried out certain specified procedures, not
constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the
Representatives, which are derived from the general accounting
records of the Company and its subsidiaries, which appear in
the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting
records of the Company and its subsidiaries and have found
them to be in agreement.
(i) The Company shall have executed and delivered a Warrant
Agreement in
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a form satisfactory to the Representatives (the "Warrant Agreement")
and here shall have been tendered to the Representatives certificates
representing all of the Representatives Warrants described in
subsection (xvi) of Section 5, to be purchased by the Representatives
on the Closing Date.
(j) At the Closing Date and any Option Closing Date, the
Representatives shall have been furnished such additional documents and
certificates as they shall reasonably request.
(k) No action shall have been taken by the NASD the effect of
which is to make it improper, at any time prior to the Closing Date or
any Option Closing Date, for members of the NASD to execute
transactions as principal or as agent in the Shares or to trade or deal
in the Shares, and no proceedings for the purpose of taking such action
shall have been instituted or shall be pending or, to the Company's or
the Representatives' knowledge, shall be contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or any Option Closing Date, as the
case may be, shall not have been fulfilled, the Representatives may on behalf of
the several Underwriters terminate this Agreement or, if they so elect, waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
8. INDEMNIFICATION.
(a) The Company and Tridex jointly and severally shall
indemnify and hold harmless each Underwriter, and each person, if any,
who controls each Underwriter within the meaning of the Act or the
Exchange Act, against any and all loss, liability, claim, damage and
expense whatsoever, including, but not limited to, any and all expense
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever or in
connection with any investigation or inquiry of, or action or
proceeding that may be brought against, the respective indemnified
parties, arising out of or based upon any untrue statements or alleged
untrue statements of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
application or other document (in this Section 8 collectively called
"application") executed by the Company or Tridex and based upon written
information furnished by or on behalf of the Company or Tridex filed in
any jurisdiction in order to qualify all or any part of the Shares
under the securities laws thereof or filed with the SEC or the NASD, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing indemnity (i) shall not apply in
respect of any statement or omission made in reliance upon and in
conformity with
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written information furnished to the Company, Tridex or any Underwriter
through the Representatives expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus, or any amendment
or supplement thereof, or in any application or in any communication to
the SEC, as the case may be, and (ii) with respect to any Preliminary
Prospectus, shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages, liabilities or
expenses purchases the Shares that are the subject thereof (or to the
benefit of any person controlling such Underwriter) if at or prior to
the written confirmation of the sale of such Shares a copy of an
amended Preliminary Prospectus or the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person and
the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the amended Preliminary
Prospectus or Prospectus (or the Prospectus as amended or
supplemented). It is understood that the statements appearing in any
Preliminary Prospectus, the Prospectus or the Registration Statement
(A) on the inside front cover page with respect to stabilization, (B)
in the section entitled "Underwriting," and (C) in the section entitled
"Legal Matters" with respect to the identity of counsel for the
Underwriters constitute the only information furnished in writing by or
on behalf of any Underwriter for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement. This
indemnity agreement will be in addition to any liability the Company
and Tridex may otherwise have.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, Tridex, each of the directors
of the Company and Tridex, each of the officers of the Company and
Tridex who shall have signed the Registration Statement and each other
person, if any, who controls the Company or Tridex within the meaning
of the Act or the Exchange Act to the same extent as the foregoing
indemnities from the Company or Tridex to the several Underwriters, but
only with respect to any loss, liability, claim, damage or expense
resulting from (i) statements or omissions, or alleged statements or
omissions, if any, made in any Preliminary Prospectus, Registration
Statement or Prospectus or any amendment or supplement thereof or any
application in reliance upon, and in conformity with written
information furnished to the Company or Tridex by any Underwriter
through the Representatives with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment
or supplement thereof or any application, as the case may be, (ii) the
failure of any Underwriter at or prior to the written confirmation of
the sale of Shares to send or deliver a copy of an amended Preliminary
Prospectus or the Prospectus (or the Prospectus as amended or
supplemented) to the person asserting any such losses, claims, damages,
liabilities or expenses who purchased the Shares that are the subject
thereof and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the amended
Preliminary Prospectus or Prospectus (or the Prospectus as amended or
supplemented) or (iii) the failure to
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qualify the offering or sale of the Shares by the several Underwriters
under the state securities or Blue Sky laws or any jurisdiction
referred to in Section 5(vi) hereof which failure to qualify is the
result of the failure to file the pertinent materials in any such
jurisdiction. This indemnity agreement will be in addition to any
liability such Underwriter may otherwise have.
(c) If any action, inquiry, investigation or proceeding is
brought against any person in respect of which indemnity may be sought
pursuant to any of the two preceding paragraphs, such person
(hereinafter called the "indemnified party") shall, promptly after
formal notification of, or receipt of service of process for, such
action, inquiry, investigation or proceeding, notify in writing the
party or parties against whom indemnification is to be sought
(hereinafter called the "indemnifying party") of the institution of
such action, inquiry, investigation or proceeding and the indemnifying
party, upon the request of the indemnified party, shall assume the
defense of such action, inquiry, investigation or proceeding, including
the employment of counsel (reasonably satisfactory to such indemnified
party) and payment of expenses. No indemnification provided for in this
Section 8 shall be available to any indemnified party who shall fail to
give such notice if the indemnifying party does not have knowledge of
such action, inquiry, investigation or proceeding and shall have been
materially prejudiced by the failure to give such notice, but the
omission so to notify the indemnifying party shall not relieve the
indemnifying party otherwise than under this Section 8. Such
indemnified party or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless
the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such action or
the indemnifying party shall not have employed counsel to have charge
of the defense of such action, inquiry, investigation or proceeding or
such indemnified party or parties shall have been advised by counsel
that there is a conflict of interest that would prevent counsel to the
indemnifying party from representing both parties, in any of which
events the reasonable fees and expenses of such counsel shall be borne
by the indemnifying party. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than
one separate counsel (in addition to one local counsel in each
jurisdiction in which any proceeding may be brought) for all
indemnified parties. In the case of any such separate counsel for the
Underwriters, such firm shall be designated in writing by the
Representative. Expenses covered by the indemnification in this
subsection (c) of this Section 8 shall be paid by the indemnifying
party as they are incurred by the indemnified party. Anything in this
subsection to the contrary notwithstanding, the indemnifying party
shall not be liable for any settlement of any such claim effected
without its written consent. The indemnifying party shall promptly
notify the indemnified party of the commencement of any litigation,
inquiry, investigation or proceeding against the
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indemnifying party or any of its officers or directors in connection
with the issue and sale of any of the Shares or in connection with such
Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereto or supplement thereof or any such application.
(d) If the indemnification provided for in this Section 8 is
unavailable to or is insufficient to hold harmless an indemnified party
under subsections (a) or (b) of this Section 8 in respect of any
losses, liabilities, claims, damages or expenses (or actions,
inquiries, investigations or proceedings in respect thereof) referred
to therein except either by reason of the provisions set forth in
subsections (a) or (b) or the failure to give notice as required in
subsection (c) (provided that the indemnifying party does not have
knowledge of the action, inquiry, investigation or proceeding and has
been materially prejudiced by the failure to give such notice), then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, liabilities,
claims, damages or expenses (or actions, inquiries, investigations or
proceedings in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company or Tridex on the
one hand and the Underwriters on the other from the offering of the
Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the
Company or Tridex on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such
losses, liabilities, claims or reasonable expenses (or actions,
inquiries, investigations or proceedings in respect thereof), as well
as any other relevant equitable considerations. The relative benefits
received by the Company or Tridex on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by
the Company or Tridex bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative faults
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or Tridex on the one hand or the Underwriters
on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
The Company, Tridex and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this section (d)
of this Section 8 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any
method or allocation that does not take account of the equitable
considerations referred to above in this subsection (d) of this Section
8. The amount
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paid or payable by an indemnified party as a result of the losses,
liabilities, claims, damages or reasonable expenses (or actions,
inquiries, investigations or proceedings in respect thereof) referred
to above in this subsection (d) of this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection
(d) of this Section 8, (i) the provisions of the Agreement Among
Underwriters shall govern contribution among Underwriters, (ii) no
Underwriter (except as provided in the Agreement Among Underwriters)
shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (iii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligation in this
subsection (d) of this Section 8 to contribute are several in
proportion to their respective underwriting obligations and not joint.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters, the Company and
Tridex, including without limitation the indemnity and contribution agreements
contained in Section 8 hereof and the agreements contained in Sections 6, 9, 10
and 13 hereof, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any Underwriter or any controlling
person, and shall survive delivery of the Shares and termination of this
Agreement, whether before or after the Closing Date or any Option Closing Date.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as to
Sections 6, 8, 9, 10 and 13 and, as to all other provisions, (i) if at
the time of execution and delivery of this Agreement the Registration
Statement has not become effective, at 9:30 A.M., Eastern time, on the
first business day following the Effective Date, or (ii) if at the time
of execution and delivery of this Agreement the Registration Statement
has been declared effective, at 9:30 A.M., Eastern time, on the date of
execution of this Agreement; but this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement
becomes effective as the Representatives may determine by notice to the
Company or Tridex or by release of any of the Shares for sale to the
public. For the purposes of this Section 10, the Shares shall be deemed
to have been so released upon the release for publication of any
newspaper advertisement relating to the Shares or upon the release by
the Representatives of telegrams (i) advising the Underwriters that the
shares are released for public offering or
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(ii) offering the Shares for sale to securities dealers, whichever may
occur first. The Representatives may prevent the provisions of this
Agreement (other than those contained in Sections 6, 8, 9, 10 and 13)
hereof from becoming effective without liability of any party to any
other party, except as noted below, by giving the notice indicated in
subsection (c) of this Section 10 before the time the other provisions
of this Agreement become effective.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections
7 and 11 hereof or if any of the following have occurred: (i) since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company or
Tridex, or the earnings, business affairs, management or business
prospects of the Company or Tridex, whether or not arising in the
ordinary course of business; (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic,
political or financial market conditions if such outbreak, calamity,
crisis or change would, in the Representatives' reasonable judgment,
have a material adverse effect on the Company or Tridex, the financial
markets of the United States or the offering or delivery of the Shares;
(iii) suspension of trading generally in securities on the NYSE, the
AMEX or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities or
the promulgation of any federal or state statute, regulation, rule or
order of any court or other governmental authority which in the
Representatives' reasonable opinion materially and adversely affects
trading on either such Exchange or the over-the-counter market; (iv)
the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other
governmental authority which in the Representatives' reasonable opinion
materially and adversely affects or will materially and adversely
affect the business or operations of the Company or Tridex; (v)
declaration of a banking moratorium by either federal or state
authorities; (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs
which in the Representatives' reasonable opinion has a material adverse
effect on the securities markets in the United States; (vii)
declaration of a moratorium in foreign exchange trading by major
international banks or other institutions or (viii) trading in any
securities of the Company or Tridex shall have been suspended or halted
by the NASD or the SEC.
(c) If the Representatives elect to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in
this Section 10, the Representatives shall notify the Company and
Tridex thereof promptly by telephone, telex, telegraph or facsimile,
confirmed by letter.
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11. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Offered Shares or Optional Shares
hereunder, and if the Offered Shares or Optional Shares with respect to
which such default relates do not exceed the aggregate of 10 percent of
the number of Offered Shares or Optional Shares, as the case may be,
that all Underwriters have agreed to purchase hereunder, then such
Offered Shares or Optional Shares to which the default relates shall be
purchased severally by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
(b) If such default relates to more than 10 percent of the
Offered Shares or Optional Shares, as the case may be, the
Representatives may in its discretion arrange for another party or
parties (including a non-defaulting Underwriter) to purchase such
Offered Shares or Optional Shares to which such default relates, on the
terms contained herein. In the event that the Representatives do not
arrange for the purchase of the Offered Shares or Optional Shares to
which a default relates as provided in this Section 11, this Agreement
may be terminated by the Representatives or by the Company or Tridex
without liability on the part of the several Underwriters (except as
provided in Section 8 hereof) or the Company or Tridex (except as
provided in Sections 6 and 8 hereof), but nothing herein shall relieve
a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company or Tridex for damages occasioned by its
default hereunder.
(c) If the Offered Shares or Optional Shares to which the
default relates are to be purchased by the non-defaulting Underwriters,
or are to be purchased by another party or parties as aforesaid, the
Representatives, the Company or Tridex shall have the right to postpone
the Closing Date or any Option Closing Date, as the case may be, for a
reasonable period but not in any event exceeding seven days, in order
to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to
the Registration Statement or supplement to the Prospectus which in the
opinion of counsel for the Underwriters may thereby be made necessary.
The terms "Underwriters" and "Underwriter" as used in this Agreement
shall include any party substituted under this Section 11 with like
effects as if it had originally been a party to this Agreement with
respect to such Offered Shares or Optional Shares.
12. INFORMATION FURNISHED BY UNDERWRITERS. The statements appearing in
any Preliminary Prospectus, the Prospectus or the Registration Statement (a) on
the inside front cover page with respect to stabilization, (b) in the section
entitled "Underwriting," and (c) in the section entitled "Legal Matters" with
respect to the identity of counsel for the Underwriters constitute the only
information furnished in writing by or on behalf of any Underwriter for
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inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement referred to in subsection (ii) of Section 1(a) hereof and subsections
(a) and (b) of Section 8 hereof.
13. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Cruttenden Roth Incorporated, 18301 Von
Karman, Irvine, California 92715 Attention: James M. Stearns, Managing Director,
with a copy to Heller Ehrman White & McAuliffe, 6100 Columbia Center, 701 Fifth
Avenue, Seattle, Washington 98104, Attention: Michael J. Erickson, Esquire; if
sent to the Company shall be mailed, delivered, telexed, telegrammed,
telegraphed or telecopied and confirmed to 7 Laser Lane, Wallingford,
Connecticut 06492, Attention: Bart C. Shuldman, Chief Executive Officer, with a
copy to Hinckley, Allen & Snyder, One Financial Center, Boston, Massachusetts,
Attention: Stephen J. Carlotti, Esquire; if sent to the Tridex shall be mailed,
delivered, telexed, telegrammed, telegraphed or telecopied and confirmed to 61
Wilton Road, Westport, Connecticut 06880, Attention: Seth M. Lukash, Chief
Executive Officer, with a copy to Hinckley, Allen & Snyder, One Financial
Center, Boston, Massachusetts, Attention: Stephen J. Carlotti, Esquire.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, Tridex and the
controlling persons, directors and officers referred to in Section 8 hereof, and
their respective successors, assigns, heirs and legal representatives, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors" and "assigns" shall not
include any purchaser of the Shares merely because of such purchase.
15. DEFINITION OF BUSINESS DAY. For purposes of this Agreement,
"business day" means any day on which the NYSE is open for trading.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
17. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington applicable to agreements
made and performed entirely within such State.
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Please sign and return to us the enclosed duplicate of this letter,
whereupon this letter will become a binding agreement between the Company,
Tridex and the several Underwriters, in accordance with its terms.
Very truly yours,
TRIDEX CORPORATION
By:
---------------------------
Name:
---------------------
Title:
--------------------
TRANSACT TECHNOLOGIES INCORPORATED
By:
---------------------------
Name:
---------------------
Title:
--------------------
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in Irvine, California as of
the date first above written.
CRUTTENDEN ROTH INCORPORATED
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By CRUTTENDEN ROTH INCORPORATED
By:
--------------------------
Its:
----------------------
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SCHEDULE I
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
Cruttenden Roth Incorporated................................
---------------
- ------------------------....................................
---------------
TOTAL........................................
---------------
===============
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SCHEDULE II
Seth M. Lukash
Bart C. Shuldman
Richard L. Cote
Thomas R. Schwarz
Graham Y. Tanaka
Charles Dill
Lucy Staley
John Cygielnik
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EXHIBIT 1.2
WARRANT AGREEMENT
This WARRANT AGREEMENT ("Agreement") dated as of _____________, 1996 is
by and between Transact Technologies, Inc., a Delaware corporation (the
"Company"), and Cruttenden Roth Incorporated ("Cruttenden" or the
"Representative").
WHEREAS, the Representative has agreed pursuant to the Underwriting
Agreement dated _____________, 1996 (the "Underwriting Agreement") to act as the
representative of the several underwriters in connection with the proposed
public offering by the Company and certain selling stockholders of up to
____________ shares in the aggregate of Common Stock, including ___,000 of such
shares covered by an over-allotment option (the "Public Offering").
WHEREAS, pursuant to Section 5(xvi) of the Underwriting Agreement, the
Company has agreed to issue warrants to the Representative (the "Warrants") to
purchase, at a price of $0.001 per Warrant, up to an aggregate of ___,000 shares
(hereinafter, and as the number thereof may be adjusted hereto, the "Warrant
Shares"), of the Company's Common Stock, $____ par value per share (the "Common
Stock"), each Warrant initially entitling the holder thereof to purchase one
share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Underwriting Agreement set forth and for other good
and valuable consideration, the parties hereto agree as follows:
1. Issuance of Warrants; Form of Warrant. The Company will issue and
deliver to the Representative, Warrants to purchase ____,000 Warrant Shares on
the Closing Date referred to in the Underwriting Agreement in consideration for,
and as part of the Representative's compensation in connection with, the
Representative acting as the representative of the several underwriters for the
Public Offering pursuant to the Underwriting Agreement. The text of the Warrants
and of the form of election to purchase shares shall be substantially as set
forth in Exhibit A attached hereto. The Warrants shall be executed on behalf of
the Company by the manual or facsimile signature of the present or any future
Chairman of the Board, President or Vice President of the Company, under its
corporate seal, affixed or in facsimile, attested by the manual or facsimile
signature of the Secretary or an Assistant Secretary of the Company.
Warrants bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrants or did not hold such
offices on the date of this Agreement. Warrants shall be dated as of the date of
execution thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
2. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company (the "Warrant Register") as they are issued. The
Company shall be entitled to
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treat the registered holder of any Warrant on the Warrant Register (the
"Holder") as the owner in fact therefor for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. Warrants to purchase ___,000 shares
each shall be registered initially in the name of "Cruttenden Roth
Incorporated," or in such other denominations as Cruttenden may request in
writing to the Company.
3. Exchange of Warrant Certificates. Subject to any restriction upon
transfer set forth in this Agreement, each Warrant certificate may be exchanged
for another certificate or certificates entitling the Holder thereof to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Holder to purchase. Any Holder desiring to
exchange a Warrant certificate or certificates shall make such request in
writing delivered to the Company, and shall surrender, properly endorsed, the
certificate or certificates to be so exchanged. Thereupon, the Company shall
execute and deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.
4. Transfer of Warrants. Until __________, 1997, the Warrants will not
be sold, transferred, assigned or hypothecated except to bona fide officers and
partners of the Representative who agree in writing to be bound by the terms
hereof, and after ____________, 1997, the Warrants will not be sold,
transferred, assigned or hypothecated except to the foregoing persons and
employees of the Representative who agree in writing to be bound by the terms
hereof. The Warrants shall be transferable only on the Warrant Register upon
delivery thereof duly endorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
the original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited with the Company in its discretion. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. The Warrants may be exchanged at the option of the Holder
thereof, for another Warrant or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares upon surrender to the Company or its duly authorized agent.
5. Term of Warrants; Exercise of Warrants.
5.1 Each Warrant entitles the registered owner thereof to
purchase one share of Common Stock at any time after 10:00 a.m., Pacific time,
on the first anniversary of date on which Tridex Corporation, a Delaware
corporation, owns less than eighty-percent (80%) of the outstanding shares of
the Company (the "Initiation Date") until 6:00 p.m., Pacific time, on
______________, 2001 (the "Expiration Date") at a purchase price of $_____ [120%
of the Offering Price], subject to adjustment (the "Warrant Price").
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5.2 The Warrant Price and the number of Warrant Shares
issuable upon exercise of Warrants are subject to adjustment upon the occurrence
of certain events, pursuant to the provisions of Section 11 of this Agreement.
Subject to the provisions of this Agreement, each Holder of Warrants shall have
the right, which may be exercised as expressed in such Warrants, to purchase
from the Company (and the Company shall issue and sell to such Holder of
Warrants) the number of fully paid and nonassessable Warrant Shares specified in
such Warrants, upon surrender to the Company, or its duly authorized agent, of
such Warrants, with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Warrant Price, as
adjusted in accordance with the provisions of Section 11 of this Agreement, for
the number of Warrant Shares in respect of which such Warrants are then
exercised. Payment of such Warrant Price shall be made in cash or by certified
or official bank check, or a combination thereof. No adjustment shall be made
for any dividends on any Warrant Shares of stock issuable upon exercise of a
Warrant.
5.3 Upon such surrender of Warrants, and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Holder of such
Warrants and in such name or names as such registered Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants, together with cash, as provided in Section
12 of this Agreement, in respect of any fraction of a share otherwise issuable
upon such surrender and, if the number of Warrants represented by a Warrant
Certificate shall not be exercised in full, a new Warrant Certificate, executed
by the Company for the balance of the number of whole Warrant Shares represented
by the Warrant Certificate.
5.4 If permitted by applicable law, such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares as of the date of the surrender of such Warrants and payment of the
Warrant Price as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the registered Holders thereof, either
as an entirety or from time to time for only part of the shares specified
therein and, in the event that any Warrant is exercised in respect of less than
all of the Warrant Shares specified therein at any time prior to the Expiration
Date, a new Warrant or Warrants will be issued for the remaining number of
Warrant Shares specified in the Warrant so surrendered.
6. Compliance with Government Regulations. The Company covenants that
if any shares of Common Stock required to be reserved for purposes of exercise
or conversion of Warrants require, under any Federal or state law or applicable
governing rule or regulation of any national securities exchange, registration
with or approval of any governmental authority, or listing on any such national
securities exchange before such shares may be issued upon exercise, the Company
will in good faith and as expeditiously as possible endeavor to cause such
shares to be duly registered, approved or listed on the relevant national
securities exchange, as the case may be; provided, however, that (except to the
extent legally permissible with respect to Warrants of which the Representative
is the Holder) in no event shall such shares of Common Stock be issued, and the
Company is hereby authorized to suspend the exercise of all Warrants, for the
period during which such registration, approval or listing is required but not
in effect.
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7. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any Warrants or certificate for Warrant Shares in a name
other than that of the registered Holder of such Warrants.
8. Mutilated or Missing Warrants. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company may in its discretion issue
and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant of like tenor and representing an equivalent right
or interest; but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant and, if requested,
indemnity or bond also reasonably satisfactory to the Company. An applicant for
such substitute Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
9. Reservation of Warrant Shares. There have been reserved out of the
authorized and unissued shares of Common Stock, a number of shares sufficient to
provide for the exercise of the rights of purchase represented by the Warrants,
and the transfer agent for the Common Stock ("Transfer Agent") and every
subsequent Transfer Agent for any shares of the Company's capital stock issuable
upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will supply such Transfer Agent with
duly executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be issuable as provided in Section
12 of this Agreement. The Company will furnish to such Transfer Agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Holder pursuant to Section 11.2 of this Agreement. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be cancelled.
10. Obtaining Stock Exchange Listings. The Company will from time to
time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.
11. Adjustment of Warrant Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter defined. For purposes of this Section
11, "Common Stock" means shares now or hereafter authorized of any class of
common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
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11.1 Mechanical Adjustments. The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock or (iv) issue by reclassification of its shares of Common Stock
other securities of the Company (including any such reclassification in
connection with a consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or would have been
entitled to receive after the happening of any of the events described above,
had such Warrants been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant to
this paragraph (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in paragraph (a) above or in the
paragraph immediately following this paragraph) or rights, options or warrants,
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of each Warrant by a fraction, the numerator of which shall be
the then current market price per share of Common Stock (as defined in paragraph
(c) below) on the date of such distribution, and the denominator of which shall
be the then current market price per share of Common Stock, less the then fair
value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options or warrants,
or of such convertible or exchangeable securities applicable to one share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made, and shall become effective on the date of distribution retroactive to the
record date for the determination of stockholders entitled to receive such
distribution.
In the event of a distribution by the Company to all holders of
its shares of Common Stock of stock of a subsidiary or securities convertible
into or exercisable for such stock, then in lieu of an adjustment in the number
of Warrant Shares purchasable upon the exercise of each Warrant, the Holder of
each Warrant, upon the exercise thereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such Holder
would have been entitled if such Holder had exercised such Warrant immediately
prior thereto, all subject to further
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adjustment as provided in this Section 11.1; provided, however, that no
adjustment in respect of dividends or interest on such stock or other securities
shall be made during the term of a Warrant or upon the exercise of a Warrant.
(c) For the purpose of any computation under paragraph (b) of this
Section, the current market price per share of Common Stock at any date shall be
the average of the daily closing prices for 20 consecutive trading days
commencing 30 trading days before the date of such computation. The closing
price for each day shall be the last such reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the closing bid and asked prices of the Common Stock in the over-the
counter market as reported by the Nasdaq National Market System or Nasdaq
SmallCap System or if not approved for quotation on the Nasdaq National Market
System or Nasdaq SmallCap System, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose.
(d) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (d) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(e) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the Warrant Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Warrant Price immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares purchasable immediately thereafter.
(f) No adjustment in the number of Warrant Shares purchasable upon
the exercise of each Warrant need be made under paragraph (b) if the Company
issues or distributes to each Holder of Warrants the rights, options, warrants,
or convertible or exchangeable securities, or evidences of indebtedness or
assets referred to in those paragraphs which each Holder of Warrants would have
been entitled to receive had the Warrants been exercised prior to the happening
of such event or the record date with respect thereto. No adjustment need be
made for a change in the par value of the Warrant Shares.
(g) In the event that at any time, as a result of an adjustment
made pursuant to paragraph (a) above, the Holders shall become entitled to
purchase any securities of the Company other than shares of Common Stock,
thereafter the number of such other shares so purchasable upon exercise of each
Warrant and the Warrant Price of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
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the provisions with respect to the Warrant Shares contained in paragraphs (a)
through (f), inclusive, above, and the provisions of Sections 5, 11.2 and 11.3,
with respect to the Warrant Shares, shall apply on like terms to such other
securities.
(h) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not have been exercised,
the Warrant Price and the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been originally adjusted (or had
the original adjustment not been required, as the case may be) as if (i) the
only shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants or
conversion or exchange rights whether or not exercised; provided, however, that
no such readjustment shall have the effect of increasing the Warrant Price or
decreasing the number of shares of Common Stock purchasable upon the exercise of
each Warrant by an amount in excess of the amount of the adjustment initially
made in respect to the issuance, sale or grant of such rights, options, warrants
or conversion or exchange rights.
11.2 Notice of Adjustment. Whenever the number of Warrant
Shares, purchasable upon the exercise of each Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to each Holder notice of such adjustment
or adjustments and a certificate of a firm of independent public accounts
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made. Such certificate shall be conclusive evidence of the
correctness of such adjustment.
11.3 No Adjustment for Dividends. Except as provided in
Section 11.1, no adjustments in respect of any dividends shall be made during
the term of a Warrant or upon the exercise of a Warrant.
11.4 Preservation of Purchase Rights Upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale, transfer or
lease to another corporation of all or substantially all the property of the
Company, the Company or such successor or purchasing corporation, as the case
may be, shall execute with each Holder an agreement that each Holder shall have
the right thereafter upon payment of the Warrant Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind and
amount of shares and other securities, cash and property which he would have
owned or would have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such Warrant been exercised
immediately prior to such action; provided, however, that no adjustment in
respect of dividends, interest or other
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income on or from such shares or other securities, cash and property shall be
made during the term of a Warrant or upon the exercise of a Warrant. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 11. The
provisions of this Section 11.4 shall similarly apply to successive
consolidations, mergers, sales transfer or leases.
11.5 Statements on Warrants. Irrespective of any adjustments
in the Warrant Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
12. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same holder, the
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash equal to the closing price for one share of the Common
Stock, as defined in paragraph (c) of Section 11.1, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such faction.
13. Registration Under the Securities Act of 1933. The Representative
represents and warrants to the Company that it will not dispose of the Warrants
or the Warrant Shares except pursuant to (i) an effective registration statement
under the Securities Act of 1933, as amended (the "Act'), including a
post-effective amendment to the Registration Statement, (ii) Rule 144 under the
Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) an opinion of counsel, reasonably satisfactory to counsel
of the Company that an exemption from such registration is available.
14. Certificate to Bear Legends. The Warrant shall be subject to a
stop-transfer order and the certificate or certificates therefore shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
The Warrant Shares or other securities issued upon exercise of the
Warrant shall be subject to a stop-transfer order and the certificate or
certificates evidencing any such Warrant Shares or securities shall bear the
following legend:
THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
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SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.
15. Registration Rights.
15.1 Demand Registration Rights. The Company covenants and
agrees with the Representative and any subsequent Holders of the Warrants and/or
Warrants Shares that, on one occasion, within 60 days after receipt of a written
request from the Representative or from Holders of more than 25% in interest of
the aggregate of Warrants and/or Warrant Shares issued pursuant to this
Agreement that the Representative or such Holders of the Warrants and/or Warrant
Shares desires and intends to transfer more than 25% in interest of the
aggregate number of the Warrants and/or Warrant Shares under such circumstances
that a public offering, within the meaning of the Act, will be involved, the
Company shall, on that one occasion, file a registration statement (and use its
best efforts to cause such registration statement to become effective under the
Act at the Company's expense) with respect to the offering and sale or other
disposition of the Warrant Shares (the "Offered Warrant Shares"); provided,
however, that the Company shall have no obligation to comply with the foregoing
provisions of this Section 15.1 if in the opinion of counsel to the Company
reasonably acceptable to the Holder or Holders, from whom such written requests
has been received, registration under the Act is not required for the transfer
of the Offered Warrant Shares in the manner proposed by such person or persons
or that a post-effective amendment to an existing registration statement would
be legally sufficient for such transfer (in which latter event the Company shall
promptly file such post-effective amendment (and use its best efforts to cause
such amendment to become effective under the Act)). Notwithstanding the
foregoing, the Company shall not be obligated to file a registration statement
with respect to the Offered Warrant Shares on more than one occasion.
The Company may defer the filing of a registration statement
for up to 90 days after the request for registration is made if the Board of
Directors determines in good faith that such registration or post-effective
amendment would adversely affect or otherwise interfere with a proposed or
pending transaction by the Company, including without limitation a material
financing or a corporate reorganization, or during any period of time in which
the Company is in possession of material inside information concerning the
Company or its securities, which information the Company determines in good
faith is not ripe for disclosure.
The Company shall not honor any request to register Warrant
Shares pursuant to this Section 15.1 received later than five (5) years from the
effective date of the Company's Registration Statement on Form S-1 (File No.
333-______) (the "Effective Date"). The Company shall not be required (i) to
maintain the effectiveness of the registration statement beyond the earlier to
occur of 90 days after the effective date of the registration statement or the
date on which all of the Offered Warrant Shares have been sold (the "Termination
Date"); provided, however, that if at the Termination Date the Offered Warrant
Shares are covered by a registration statement which also covers other
securities and which is required to remain in effect beyond the Termination
Date, the Company shall maintain in effect such registration statement as it
relates
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to Offered Warrant Shares for so long as such registration statement (or
any substitute registration statement) remains or is required to remain in
effect for any such other securities, or (ii) to cause any registration
statement with respect to the Warrant Shares to become effective prior to the
Initiation Date. All expenses of registration pursuant to this Section 15.1
shall be borne by the Company.
The Company shall be obligated pursuant to this Section 15.1
to include in the registration statement Warrant Shares that have not yet been
purchased by a Holder of Warrants so long as such Holder of Warrants submits an
undertaking to the Company that such Holder intends to exercise Warrants
representing the number of Warrant Shares to be included in such registration
statement prior to the consummation of the public offering with respect to such
Warrant Shares. In addition, such Holder of Warrants is permitted to pay the
Company the Warrant Price for such Warrant Shares upon the consummation of the
public offering with respect to such Warrant Shares.
15.2 Piggy-back Registration Rights. The Company covenants and
agrees with the Holders and any subsequent Holders of the Warrants and/or
Warrant Shares that in the event the Company proposes to file a registration
statement under the Act with respect to any class of security (other than in
connection with an exchange offer, a non-cash offer or a registration statement
on Form S-8 or other unsuitable registration statement form) which becomes or
which the Company believes will become effective at any time after the
Initiation Date then the Company shall in each case give written notice of such
proposed filing to the Holders of Warrants and Warrant Shares at least 30 days
before the proposed filing date and such notice shall offer to such Holders the
opportunity to include in such registration statement such number of Warrant
Shares as they may request, unless, in the opinion of counsel to the Company
reasonably acceptable to any such holder of Warrants or Warrant Shares who
wishes to have Warrant Shares included in such registration statement,
registration under the Act is not required for the transfer of such Warrants
and/or Warrant Shares in the manner proposed by such Holders. The Company shall
not honor any such request to register any such Warrant Shares if the request is
received later than seven (7) years from the Effective Date, and the Company
shall not be required to honor any request (a) to register any such Warrant
Shares if the Company is not notified in writing of any such request pursuant to
this Section 15.2 within at least 20 days after the Company has given notice to
the Holders of the filing, or (b) to register Warrant Shares that represent in
the aggregate fewer than 25% of the aggregate number of Warrant Shares. The
Company shall permit, or shall cause the managing underwriter of a proposed
offering to permit, the Holders of Warrant Shares requested to be included in
the registration (the "Piggy-back Shares,") to include such Piggy-back Shares in
the proposed offering on the same terms and conditions as applicable to
securities of the Company included therein or as applicable to securities of any
person other than the Company and the Holders of Piggy-back Shares if the
securities of any such person are included therein. Notwithstanding the
foregoing, if any such managing underwriter shall advise the Company in writing
that it believes that the distribution of all or a portion of the Piggy-back
Shares requested to be included in the registration statement concurrently with
the securities being registered by the Company would materially adversely affect
the distribution of such securities by the Company for its own account, then the
Holders of such Piggy-back Shares shall delay their offering and sale of
Piggyback Shares (or the portion thereof so designated by such managing
underwriter) for such
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period, not to exceed 120 days, as the managing underwriter shall request
provided that no such delay shall be required as to Piggy-back Shares if any
securities of the Company are included in such registration statement for the
account of any person other than the Company and the Holders of Piggy-back
Shares. In the event of such delay, the Company shall file such supplements,
post-effective amendments or separate registration statement, and take any such
other steps as may be necessary to permit such Holders to make their proposed
offering and sale for a period of 90 days immediately following the end of such
period of delay ("Piggy-back Termination Date"); provided, however, that if at
the Piggy-back Termination Date the Piggyback Shares are covered by a
registration statement which is, or required to remain, in effect beyond the
Piggy-back Termination Date, the Company shall maintain in effect the
registration statement as it relates to the Piggy-back Shares for so long as
such registration statement remains or is required to remain in effect for any
of such other securities. All expenses of registration pursuant to this Section
15.2 shall be borne by the Company, except that underwriting commissions and
expenses attributable to the Piggy-back Shares and fees and disbursements of
counsel (if any) to the Holders requesting that such Piggy-back Shares be
offered will be borne by such Holders.
The Company shall be obligated pursuant to this Section 15.2
to include in the Piggy-back Offering, Warrant Shares that have not yet been
purchased by a holder of Warrants so long as such Holder of Warrants submits an
undertaking to the Company that such Holder intends to exercise Warrants
representing the number of Warrant Shares to be included in such Piggy-back
Offering prior to the consummation of such Piggy-back Offering. In addition,
such Holder of Warrants is permitted to pay the Company the Warrant Price for
such Warrant Shares upon the consummation of the Piggy-back Offering.
If the Company decides not to proceed with a Piggy-back
Offering, the Company has no obligation to proceed with the offering of the
Piggy-back Shares, unless the Holders of the Warrants and/or Warrant Shares
otherwise comply with the provisions of Section 15.1 hereof (without regard to
the 60 days' written request required thereby). Notwithstanding any of the
foregoing contained in this Section 15.2, the Company's obligation to offer
registration rights to the Piggy-back Shares pursuant t this Section 15.6 shall
terminate two (2) years after the Expiration Date.
15.3 In connection with the registration of Warrants Shares in
accordance with Section 15.1 and 15.2 above, the Company agrees to:
(a) Use its best efforts to register or qualify the
Warrant Shares for offer or sale under the state securities or Blue Sky
laws of such states which the Holders of such Warrant Shares shall
designate, until the dates specified in Section 15.1 and 15.2 above in
connection with registration under the Act; provided, however, that in
no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action
which would subject it to general service of process in any
jurisdiction where it is not now so subject or to register or get a
license as a broker or dealer in securities in any jurisdiction where
it is not so registered or licensed or to register or qualify the
Warrant Shares for offer or sale under the state securities or Blue
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Sky laws of any state other than the states in which some or all of the
shares offered or sold in the Public Offering were registered or
qualified for offer and sale.
(b) (i) In the event of any post-effective amendment
or other registration with respect to any Warrant Shares pursuant to
Section 15.1 or 15.2 above, the Company will indemnify and hold
harmless any Holder whose Warrant Shares are being so registered, and
each person, if any, who controls such Holder within the
meaning of the Act, against any losses, claims, damages or liabilities,
joint or several, to which such Holder or such controlling person may
be subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any such
registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each such Holder
and each such controlling person for any legal or other expenses
reasonably incurred by such Holder or such controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in any
such registration statement, any preliminary prospectus or final
prospectus, or any amendment or supplement thereto, in reliance upon
and in conformity with written information furnished by such Holder
expressly for use in the preparation thereof. The Company will not be
liable to a claimant to the extent of any misstatement corrected or
remedied in any amended prospectus if the Company timely delivers a
copy of such amended prospectus to such indemnified person and such
indemnified person does not timely furnish such amended prospectus to
such claimant. The Company shall not be required to indemnify any
Holder or controlling person for any payment made to any claimant in
settlement of any suit or claim unless such payment is approved by the
Company.
(ii) Each Holder of Warrants and/or Warrant
Shares who participates in a registration pursuant to Section 15.1 or
15.2 will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed any such registration
statement, and each person, if any, who controls the Company within the
meaning of the Act, against any losses, claims, damages or liabilities
to which the Company, or any such director, officer or controlling
person may become subject under the Act, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in any such registration statement, any
preliminary prospectus or final prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in any such registration statement, any
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preliminary prospectus or final prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in the
preparation thereof; and will reimburse any legal or other expenses
reasonably incurred by the Company, or any such director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the indemnity agreement contained in this subparagraph (ii) shall not
apply to amounts paid to any claimant in settlement of any suit or
claim unless such payment is first approved by such Holder.
(iii) In order to provide for just and equitable
contribution in any action in which a claim for indemnification is made
pursuant to this clause (b)(iii) of Section 15.3 but is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this clause
(b)(iii) of Section 15.3 provides for indemnification in such case, all
the parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that each Holder whose Warrant
Shares are being registered is responsible pro rata for the portion
represented by the public offering price received by such Holder from
the sale of such Holder's Warrant Shares, and the Company is
responsible for the remaining portion; provided, however, that (i) no
Holder shall be required to contribute any amount in excess of the
public offering price received by such Holder from the sale of such
Holder's Warrant Shares and (ii) no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. This subsection (b)(iii) shall not
be operative as to any Holder of Warrant Shares to the extent that the
Company has received indemnity under this clause (b)(iii) of Section
15.3.
16. No Rights as Stockholder; Notices to Holders. Nothing contained in
this Agreement or in any of the Warrants shall be construed as conferring upon
the Holders or their transferee(s) the right to vote or to receive dividends or
to consent to or receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. If, however, at any
time prior to the expiration of the Warrants and prior to their exercise, any of
the following events shall occur:
(a) the Company shall declare any dividend payable in
any securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock; or
(b) the Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock or
securities convertible into or exchangeable for shares of Common Stock
or any right to subscribe to or purchase any thereof; or
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(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, sale,
transfer or lease of all or substantially all of its property, assets,
and business as an entirety) shall be proposed,
then in any one or more of said events the Company shall (i) give notice in
writing of such event to the Holders, as provided in Section 17 hereof and (ii)
if there are more than 100 Holders, cause notice of such event to be published
once in The Wall Street Journal (national edition), such giving of notice and
publication to be completed at least 20 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights, or
for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
publish, mail or receive such notice or any defect therein or in the publication
or mailing thereof shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up.
17. Notices. Any notice pursuant to this Agreement to be given or made
by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
CRUTTENDEN ROTH INCORPORATED
18301 Von Karman, Suite 100
Irvine, California 92715
Attention: Mr. Byron C. Roth
Notices or demands authorized by this Agreement to be given or made by the
Company to the registered Holder of any Warrant shall be sufficiently given or
made (except as otherwise provided in this Agreement) if sent by first-class
mail, postage prepaid, addressed to such Holder at the address of such Holder as
shown on the Warrant Register.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.
19. Supplements and Amendments. The Company and the Representative may
from time to time supplement or amend this Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Representative may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interests of the Holders. This Agreement may also be
supplemented or amended from time to time by a writing executed by or on behalf
of the Company and all of the Holders.
20. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective
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successors and assigns hereunder. Assignments by the Holders of their rights
hereunder shall be made in accordance with Section 4 hereof.
21. Merger or Consolidation of the Company. So long as Warrants remain
outstanding, the Company will not merge or consolidate with or into, or sell,
transfer or lease all or substantially all of its property to, any other
corporation unless the successor or purchasing corporation, as the case may be
(if not the Company), shall expressly assume, by supplemental agreement executed
and delivered to the Holders, the due and punctual performance and observance of
each and every covenant and condition of this Agreement to be performed and
observed by the Company.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Agreement, but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders of the Warrants and Warrant Shares.
23. Captions. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
24. Counterparts. This Agreement may be executed in any number of
counterparts each of which when so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
CRUTTENDEN ROTH INCORPORATED
Attest:
By:
- ----------------------------- ---------------------------
Name:
-------------------------
Title:
------------------------
TRANSACT TECHNOLOGIES, INC.
Attest:
By:
- ----------------------------- ---------------------------
Name:
-------------------------
Title:
------------------------
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EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
EXERCISABLE ON OR BEFORE __________, 2001
No. _____,000 Warrants
Warrant Certificate
TRANSACT TECHNOLOGIES INCORPORATED
This Warrant Certificate certifies that Cruttenden Roth
Incorporated, or registered assigns, is the registered holder of Warrants
expiring ___________, 2001 (the "Warrants") to purchase Common Stock, $0.001 par
value per share (the "Common Stock"), of Transact Technologies Incorporated, a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company from 10:00 a.m., Pacific time, on the first
anniversary of date on which Tridex Corporation, a Delaware corporation, owns
less than eighty-percent (80%) of the outstanding shares of the Company through
and until 6:00 p.m., Pacific time, on _____________, 2001, one fully paid and
nonassessable share of Common Stock (a "Warrant Share") at the initial exercise
price (the "Exercise Price") of $_____, payable in lawful money of the United
States of America upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office of the Company designated for such purpose, but
only subject to the conditions set fort herein and in the Warrant Agreement
referred to on the reverse hereof. The Exercise Price and number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 6:00 p.m., Pacific time, on
_____________, 2001, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Company.
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IN WITNESS WHEREOF, TRANSACT TECHNOLOGIES INCORPORATED has caused this
Warrant Certificate to be signed by its President and by its Secretary and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: _____________, 1996
TRANSACT TECHNOLOGIES INCORPORATED
By:
---------------------------
Title:
------------------------
By:
---------------------------
Title:
------------------------
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring ____________, 2001 entitling the holder on
exercise to receive shares of Common Stock, $0.001 par value per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement, dated as of _____________, 1996 (the "Warrant Agreement"),
duly executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
The Warrants may be exercised at any time on or before _______________,
2001. The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with payment
of the Exercise Price in cash at the office of the Company designated for such
purpose. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
adjustment shall be made for any dividends on any Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant shall be adjusted. If the number of shares of Common Stock issuable upon
such exercise is adjusted, the Warrant Agreement provides that the Exercise
Price set forth on the face hereof may, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration rights
with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
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Upon due presentation for registration of transfer of this Warrant
certificate at the office of the Company a new Warrant certificate or Warrant
certificates of like tenor and evidencing
in the aggregate a like number of Warrants shall be issued to other
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
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[Form of Election to Purchase]
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ________ shares of
Common Stock and herewith tenders payment for such shares to the order of
Transact Technologies, Inc., in the amount of $_______ in accordance with the
terms hereof. The undersigned requests that a certificate for such shares be
registered in the name of ____________________, whose address is
______________________________________ and that such shares be delivered to
______________________________, whose address is
_________________________________. If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant certificate representing the remaining balance of such shares be
registered in the name of ________________________________, whose address is
_________________________, and that such Warrant certificate be delivered to
_____________________, whose address is __________________________________.
Date: Signature:
Signature Guaranteed:
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TRANSACT TECHNOLOGIES INCORPORATED
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of Delaware, hereby certifies that:
1. The name of the Corporation is TransAct Technologies Incorporated.
2. The registered office and registered agent of the Corporation is The
Corporation Trust Company, County of New Castle, 1209 Orange Street,
Wilmington, Delaware 19801.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock that the Corporation is
authorized to issue is 5,000,000 shares of Preferred Stock and 20,000,000 shares
of Common Stock, par value $.01 each.
5. The name and address of the incorporator is Paul Bork, Hinckley,
Allen & Snyder, One Financial Center, Boston, Massachusetts 02111.
6. The Board of Directors of the Corporation, acting by majority vote,
may alter, amend or repeal the By-Laws of the Corporation.
7. The Directors may be elected by resolution or consent of a majority
of stockholders, without separate written ballots as such.
8. The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as determined by the board, one class initially to be elected for a
term expiring at the annual meeting to be held in 1997, another class initially
to be elected for a term expiring at the annual meeting to be held in 1998, and
another class initially to be elected for a term expiring at the annual meeting
to be held in 1999, with the members of each class to hold office until their
successors have
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been elected and qualified. At each annual meeting, the successors of the class
of directors whose term expires at the annual meeting shall be elected to hold
office for a term expiring at the annual meeting held in the third year
following the year of their election. Directors need not be stockholders.
9. The Board of Directors may provide for the issuance of additional
shares of Common and Preferred Stock from time to time, which may have such
rights, designations and references as the Board may adopt pursuant to its
authority duly granted hereunder.
10. The Corporation shall be governed by Section 203 of the General
Corporation Law of Delaware.
11. No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of his or her fiduciary duty
as a director, provided that nothing contained in this Article shall eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) under Section 174 of the General Corporation Law of the State
of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
12. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of this Corporation as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the
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creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
13. Any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (whether or not by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, incorporator, employee, or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
incorporator, employee, partner, trustee or agent of another corporation,
partnership, joint venture, trust, or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the Corporation to the
full extent then permitted by law against expenses (including attorneys' fees),
judgments, fines (including excise taxes assessed on a person with respect to an
employee benefit plan), and amounts paid in settlement incurred by him in
connection with such action, suit, or proceeding. Such right of indemnification
shall continue as to a person who has ceased to be a director, officer,
incorporator, employee, partner, trustee, or agent and shall inure to the
benefit of the heirs and personal representatives of such a person. The
indemnification provided by this Article 13 shall not be deemed exclusive of any
other rights which may be provided now or in the future under any provision
currently in effect or hereafter adopted of the By-Laws, by any agreement, by
vote of stockholders, by resolution of disinterested directors, by provision of
law, or otherwise.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation on June 17, 1996.
TransAct Technologies
Incorporated, Incorporator
/s/ Paul Bork (L.S.)
----------------------------
Paul Bork, Sole Incorporator
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EXHIBIT 3.2
B Y - L A W S
OF
TRANSACT TECHNOLOGIES INCORPORATED
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 1.02 Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 Meetings of Stockholders. All meetings of the stockholders
shall be held in Wallingford, Connecticut, at such place as may be fixed from
time to time by the board of directors, or at such other place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.02 Annual Meetings of Stockholders. Annual meetings of
stockholders shall be held on the first Thursday in May, unless such day is a
legal holiday, (in which case the meeting will be held on the next secular day
following), or on such other date and at such other time as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting, at which they shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 2.03 Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
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Section 2.04 List of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, 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 2.05 Special Meetings of Stockholders. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by statute
may be called by the Chairman of the Board or the President and shall be called
by the Chairman of the Board or Secretary at the request in writing of the board
of directors, or at the request in writing of stockholders owning 50% in amount
of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 2.06 Notice of Special Meetings of Stockholders. 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.
Section 2.07 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholder for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. 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, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
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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 2.08 Majority Voting. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock 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, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 2.09 Voting Rights. Unless otherwise provided in the
Certificate of Incorporation each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on, after three years from its date, unless allowed by the laws of the
State of Delaware or unless the proxy provides for a longer period.
Section 2.10 Stockholders Consent. Any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock 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. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 3.01 Election of Directors. The number of directors which shall
constitute the whole board shall be not less than five, or as the board of
directors or the stockholders shall determine by resolution. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 3.02 of this Article. All nominations by stockholders shall be made
pursuant to timely notice in proper written form to the Secretary of the
Corporation. To be timely, a stockholder's
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notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 30 days nor more than 60 days prior to
the meeting; provided, however, that in the event that less than 40 days notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper written form, such stockholder's notice shall set forth in
writing (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; and (ii) as to the
stockholder giving the notice, the (x) name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation the information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. In the event that a stockholder
seeks to nominate one or more directors, the Secretary shall appoint two
inspectors, who shall not be affiliated with the Corporation, to determine
whether a stockholder has complied with this Section 3. If the inspectors shall
determine that a stockholder has not complied with this Section 3, the
inspectors shall direct the chairman of the meeting to declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-laws of the Corporation, and the chairman shall so declare to the meeting
and the defective nomination shall be disregarded.
Section 3.02 Vacancies on Board of Directors. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by the affirmative vote of a majority of the directors
then in office, though less than a quorum, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual meeting at which
the term of office of the class to which such director has been elected expires
and until such director's successor has been duly elected and qualified. No
decrease in the number of directors constituting the board shall shorten the
term of any incumbent director. If at any time, by reason of death or
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resignation or other cause, the corporation should have no directors in office,
then any officer or any stockholder or an executor, administrator, trustee or
guardian of a stockholder, or other fiduciary entrusted with like responsibility
for the person or estate of a stockholder, may call a special meeting of
stockholders in accordance with the provisions of the Certificate of
Incorporation or these By-Laws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided by law.
Section 3.03 Powers of Board of Directors. The business of the
corporation shall be managed by its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
Section 3.04 Meetings of Board of Directors. The board of directors of
the corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 3.05 First Meeting of Board of Directors. The first meeting of
each newly elected board of directors shall be held at such time and place as
shall be fixed by the vote of the stockholders or incorporators and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders or the incorporators to fix the time or place of
such first meeting of the newly elected board of directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders or the
incorporators, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 3.06 Regular Meetings of Board of Directors. Regular meetings
of the board of directors may be held without notice at such time and at such
place as shall from time to time be determined by the board.
Section 3.07 Special Meetings of Board of Directors. Special meetings
of the board may be called by the Chairman of the Board or the President on 24
hours' notice to each director, either personally or by mail, by telegram or by
telephone; special meetings shall be called by the Chairman of the Board or
Secretary in like manner and on like notice on the written request of two
directors unless the board consists of only one director in which case special
meetings shall be called by the
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President or Secretary in like manner and in like notice on the written request
of the sole director.
Section 3.08 Quorum. At all meetings of the board, a majority of the
directors, but not fewer than one, shall constitute a quorum, unless the board
consists of only one director, in which case the sole director shall constitute
a quorum, for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 3.09 Director Consents. Any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 3.10 Telephone Meetings of Board of Directors. Members of the
board of directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any 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 such
participation in a meeting shall constitute presence in person at the meeting.
Section 3.11 Committee of Directors. The board of directors may, by
resolution 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. In the absence or disqualification of a member of a
committee the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. 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
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seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority, except as allowed by the laws
of the State of Delaware, in reference to:
(i) amending the Certificate of Incorporation,
(ii) adopting an agreement of merger or consolidation, unless the resolution
creating such committee expressly so provides,
(iii) recommending it to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, unless
the resolution creating such committee expressly so provides,
(iv) recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution,
(v) amending the By-Laws of the corporation,
(vi) taking any action with respect to the issuance of the corporation's
stock, unless the resolution creating such committee expressly so
provides, and
(vii) declaring a dividend, unless the resolution creating such committee
expressly so provides.
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.
Section 3.12 Committee Minutes. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
Section 3.13 Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as directed. No such payment shall 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.
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Section 3.14 Removal of Directors. Unless otherwise retracted by the
Certificate of Incorporation or by statute or law, any director may be removed
from office only for cause by the affirmative vote of the holders of at least
80% of the voting power of all shares of the corporation entitled to vote
generally in the election of directors, voting together as a single class.
Section 3.15 Chairman of the Board. The Chairman of the Board of
Directors, if there is one, shall be elected annually by and from the board of
directors and shall preside at all meetings of the stockholders and directors at
which he shall be present.
ARTICLE IV
NOTICES
Section 4.01 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 require
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
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.
Section 4.02 Waiver of Notice. Whenever a 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 thereto.
ARTICLE V
OFFICERS
Section 5.01 Necessary Officers. The officers of the corporation shall
be chosen by the board of directors and there shall be elected from among the
officers of the corporation, persons having the titles and exercising the duties
(as
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prescribed by the By-Laws or by the Board) President, Vice President, Secretary,
and Treasurer. The board of directors may also choose one or more
Vice-Presidents, Assistant Secretaries, and Assistant Treasurers. Any number of
offices may be held by the same person. No officer need be a stockholder.
Section 5.02 Election of Officers. The board of directors at its first
meeting after each annual meeting of stockholders shall choose a Chairman of the
Board, a President, a Secretary and a Treasurer.
Section 5.03 Other Officers. The board of directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board.
Section 5.04 Officers' Salaries. The salaries of all officers and
agents of the corporation shall be fixed by the board of directors.
Section 5.05 Term of Office. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
Section 5.06 Chairman of the Board. The Chairman of the Board shall
perform such duties and have such powers additional to the foregoing as the
board of directors shall designate.
Section 5.07 President. The President shall be the Chief Executive
Officer of the corporation and shall preside at all meetings of the stockholders
and of the board of directors in the absence of the Chairman of the Board. It
shall be his duty and he shall have the power to see that all orders and
resolutions of the board of directors are carried into effect. The President, as
soon as reasonably possible after the close of each fiscal year, shall submit to
the board of directors a report of the operations of the corporation for such
year and a statement of its affairs and shall from time to time report to the
board of directors all matters within his knowledge which the interests of the
corporation may require to be brought to its notice. The President shall perform
such duties and have such powers additional to the foregoing as the board of
directors shall designate.
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Section 5.08 Vice Presidents. In the absence or disability of the
President, his powers and duties shall be performed by the Vice President, if
only one, or, if more than one, by the one designated for the purpose by the
board of directors. Each Vice President shall have such other powers and perform
such other duties as the board of directors shall from time to time designate.
Section 5.09 Treasurer. The Treasurer shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as shall be designated by the
board of directors or in the absence of such designation in such depositories as
he shall from time to time deem proper. He shall disburse the funds of the
corporation as shall be ordered by the board of directors, taking proper
vouchers for such disbursements. He shall promptly render to the President and
to the board of directors such statements of his transactions and accounts as
the President and board of directors respectively may from time to time require.
The Treasurer shall perform such duties and have such powers additional to the
foregoing as the board of directors may designate.
Section 5.10 Assistant Treasurers. In the absence of disability of the
Treasurer, his powers and duties shall be performed by the Assistant Treasurer,
if one be elected, or, if more than one, by the one designated for the purpose
by the board of directors. Each Assistant Treasurer shall have such other powers
and perform such other duties as the board of directors shall from time to time
designate.
Section 5.11 Treasurer's Bonds. If required by the board of directors,
the treasurer shall give the corporation a bond (which shall be renewed every
six years) in such sum and with such surety or sureties as shall be satisfactory
to the board of directors, for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 5.12 Secretary. The Secretary shall record in books kept for
the purpose all votes and proceedings of the stockholders and of the board of
directors at their meetings and shall perform like duties for the standing
committees when required. Unless the board of directors shall appoint a transfer
agent and/or registrar or other officer or officers for the
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purpose, the Secretary shall be charged with the duty of keeping, or causing to
be kept, accurate records of all stock outstanding, stock certificates issued
and stock transfers; and, subject to such other or different rule as shall be
adopted from time to time by the board of directors, such records may be kept
solely in the stock certificate books. The Secretary shall perform such duties
and have such powers additional to the foregoing as the board of directors shall
designate.
Section 5.13 Temporary and Assistant Secretaries. In the absence of the
Secretary from any meeting of the stockholders or board of directors, if there
be no Assistant Secretary, if one be elected, or, if there be more than one, the
one designated for the purpose by the board of directors, otherwise a Temporary
Secretary designated by the person presiding at the meeting, shall perform the
duties of the Secretary. Each Assistant Secretary shall have such other powers
and perform such other duties as the board of directors may from time to time
designate.
ARTICLE VI
CERTIFICATES OF STOCK
Section 6.01 Certificates of Stock. Every holder of stock in the
corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the corporation, signed by or in the name of the
corporation by (a) either the Chairman of the Board of Directors, the President
or a Vice-President and (b) either the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificates which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to
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represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 6.02 Signature on Stock Certificates. Where a certificate is
countersigned, (1) by a transfer agent other than the corporation or its
employee, or (2) by a registrar other than the corporation or its employee, any
other signature on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
Section 6.03 Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorized such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 6.04 Transfers of Stock. Upon surrender to the corporation or
the 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. The board may make such additional rules and
regulations as it may deem advisable concerning the issue and transfer of
certificates representing shares of the capital stock of the Corporation.
Section 6.05 Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment
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thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution of
allotment of any rights, or 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, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. 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; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 6.06 Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01 Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of applicable law, may be declared by the
board of directors at any regular or special meeting, and paid either (a) out of
its surplus, as defined by law, or (b) in case there shall be no such surplus,
out of the corporation's net profits 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 law, 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 shall not, except as allowed by the laws of the State of
Delaware, declare and pay out of such net profits any dividends upon any shares
of any classes of the corporation's 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.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
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Section 7.02 Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors may think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 7.03 Annual Statement. The board of directors shall present at
each annual meeting, and at any special meeting of the Stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 7.04 Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 7.05 Fiscal Year. The fiscal year of the corporation shall end
on December 31.
Section 7.06 Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the word "Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7.07 Indemnification of Officers and Directors. The corporation
shall indemnify any director, officer, employee or agent of the corporation who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, to the full extend authorized and permitted by the laws of the
State of Delaware. The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware. The
corporation's indemnity of any person who is or was a director, officer,
employee or agent of the corporation shall be reduced by any amounts such person
may collect as
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indemnification under any policy of insurance purchased and maintained on his
behalf by the corporation.
The indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any
certificate of incorporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The right of reimbursement for liabilities and expenses so imposed or
incurred shall include the right to receive such reimbursement in advance of the
final disposition of any such action, suit or proceeding upon the Corporation's
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation pursuant to law or this Section 7.07. Neither the
amendment nor repeal of this Section 7.07, nor the adoption of any provisions of
the Certificate of Incorporation inconsistent with this Section 7.07, shall
eliminate or reduce the effect of this Section 7.07 in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Section 7.07
would accrue or arise, prior to such amendment, repeal or adopting of an
inconsistent provision.
Section 7.08 Reliance upon Books, Reports and Records. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the corporation, including reports made to the corporation by any of its
officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section 7.09 Inspection of Books by Stockholders. Subject to the laws
of the State of Delaware, the board of directors shall have the power to
determine from time to time and at any time whether and to what extent and at
what times and places and under what conditions and regulations the records of
account, books and stock ledgers of the corporation, or any of them, shall be
open to inspection and copying by stockholders, their agents or attorneys; and
no stockholder, his agent or attorney shall have any right to inspect or copy
any record of account or book or stock ledger, or any part thereof, of the
corporation, except as conferred by the laws of the State of Delaware, unless
and until authorized so to do by resolution of the board of directors or of the
stockholders and unless and
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until such stockholder agrees to comply with, and abide by, such conditions and
regulations governing inspection and copying thereof, as determined by the board
of directors.
Section 7.10 Transactions with Directors, Officers, etc. The
corporation may enter into contracts or transactions with one or more of its
directors, officers, employees or stockholders, or with any other corporation,
partnership, association, or other organization in which one or more of its
directors, officers, employees or stockholders are directors, officers,
partners, employees or stockholders, or have a financial interest, to the full
extent authorized and permitted by the laws of the State of Delaware.
ARTICLE VIII
Section 8.01 Amendments. These By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the stockholders or by the board of
directors at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such meeting, or by any consent of the
stockholders or directors executed in accordance with the Certificate of
Incorporation or these By-Laws.
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EXHIBIT 10.2
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION dated as of June 24, 1996 by and among Tridex
Corporation, a Connecticut corporation ("Tridex"), with executive offices at 61
Wilton Road, Westport, Connecticut 06880, Magnetec Corporation, a Connecticut
corporation ("Magnetec"), and TransAct Technologies Incorporated, a Delaware
corporation ("Transact") each with executive offices located at 7 Laser Lane,
Wallingford, CT 06492 and Ithaca Peripherals Incorporated ("Ithaca"), a Delaware
corporation, with executive offices at 20 Bomax Drive, Ithaca, New York 14850;
WHEREAS, Magnetec, TransAct and Ithaca are wholly-owned, direct
subsidiaries of Tridex;
WHEREAS, Tridex believes it to be in its best interest if the business,
operations and related assets used and useful in the printer business and
related activities conducted by Tridex through its subsidiaries, Magnetec and
Ithaca, be contained within a single corporation, its subsidiary, TransAct,
separate and apart from Tridex; and
WHEREAS, after the execution and delivery of this Agreement, up to
1,322,500 shares of TransAct Common Stock (or such other number as shall equal
approximately 19.7% of the outstanding shares of the Common Stock of TransAct on
a pro forma basis after giving effect to the Exchange and the Offering, as
defined herein) shall be registered under the Securities Act of 1933, as amended
(the "Securities Act") for sale in a firm commitment underwritten public
offering.
WHEREAS, on or about the date hereof, Tridex has filed or will file an
application with the United States Internal Revenue Service (the "IRS") seeking
a ruling (the "Ruling") that a pro rata distribution by Tridex of all shares of
TransAct Common Stock held by Tridex to its stockholders (the "Distribution")
would not be treated as taxable for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
I. TRANSFERS OF ASSETS; ISSUANCE OF SECURITIES.
1.1 Ithaca Merged Into Magnetec. Subject to the terms and conditions
set forth herein, and as soon as practicable after the date hereof, Tridex, as
sole shareholder of Magnetec and
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Ithaca, and the Boards of Directors of Ithaca and Magnetec, respectively, agree
to take all steps necessary to effectuate the merger of Ithaca with and into
Magnetec (the "Merger"), such merger to be effective no later than the day
before the Effective Date (as defined below), including but not limited to the
execution of agreements, plans and certificates of merger pursuant to the laws
of the states of organization of the merging entities, Delaware and Connecticut,
respectively.
1.2 Issuance of TransAct Common Stock. Subject to the terms and
conditions set forth herein, as soon as practicable, but in no event later than
the day before the Effective Date, TransAct shall issue to Tridex, and Tridex
shall acquire from TransAct, 5,400,000 shares of TransAct Common Stock, par
value $.01 per share ("TransAct Common Stock") (or such other number as shall
equal no less than approximately 80.3% of the outstanding TransAct Common Stock
after giving effect to such issuance and the Offering) constituting all of the
then outstanding capital stock of TransAct, in exchange for the tender and
delivery by Tridex of all of the outstanding shares of common stock, par value
$.01 per share, of Magnetec (the "Magnetec Shares") (the "Exchange"). It is the
intent of the parties hereto that, upon the completion of the Offering by
TransAct contemplated under Section 1.3 below, that Tridex will own no less than
approximately 80.3% of the outstanding shares of TransAct Common Stock.
1.3 Offer of TransAct Shares. TransAct shall use its commercially
reasonable best efforts to issue and sell, in a firm commitment underwritten
public offering pursuant to a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act, up to 1,322,500 shares of
TransAct Common Stock, par value $.01 per share (the "Offering"). TransAct shall
prepare and file with the Securities and Exchange Commission (the "SEC") a
Registration Statement, and any amendments thereto necessary or advisable for
purposes of this Plan of Reorganization. The "Effective Date" shall be the date
on which the SEC declares the Registration Statement on Form S-1 to be
effective.
1.4 Payment of Intercompany Indebtedness. Subject to the terms and
conditions set forth herein and the completion of the Offering contemplated
under Section 1.3 above, TransAct hereby agrees to advance to Magnetec, from the
proceeds of the Offering, sufficient funds to enable Magnetec to pay to Tridex
$8,500,000 of intercompany indebtedness. Magnetec shall pay at least $7,500,000
of such intercompany indebtedness at, or as soon as practicable after the
closing of the Offering and, at its option, may pay the balance either at such
closing or by issuance of a promissory note for $1,000,000. If TransAct elects
to issue such
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note, (i) it shall be payable one year after issuance, bear interest at a rate
equal to the rate paid by Tridex under its revolving credit agreement with Fleet
Bank, National Association, and provide for prepayment without penalty and (ii)
TransAct's obligation to advance funds to Magnetec from the proceeds of the
Offering shall be reduced by the amount of the Note. Tridex shall furnish to
Magnetec and TransAct a written acknowledgment that payment of such $8,500,000
satisfies any and all intercompany indebtedness owed by Magnetec or TransAct to
Tridex.
1.5 Related Agreements. TransAct and Tridex hereby agree that, no later
than the day before the Effective Date, they shall enter into certain agreements
relating to the allocation of taxes and tax attributes, the provision of certain
corporate and administrative services and the sale of printers by TransAct to
Ultimate Technology Corporation, a wholly-owned subsidiary of Tridex. Forms of a
Corporate Services Agreement, Tax Sharing Agreement and Printer Supply Agreement
between TransAct and Tridex are attached hereto as Exhibits A, B and C,
respectively.
1.6 Application for Internal Revenue Service Ruling. Tridex hereby
agrees that it will use its commercially reasonable best efforts to prosecute
the Ruling and to obtain a favorable result from the IRS so that the
distribution on a pro rata basis of all of the shares of TransAct Common Stock
owned by Tridex after the Exchange and Offering (constituting at least 80.3% of
the shares of TransAct Common Stock outstanding after the completion of the
Offering) would be a tax-free distribution to Tridex stockholders for federal
income tax purposes.
1.7 Pro Rata Distribution. Tridex hereby agrees that, upon the
successful completion of the Offering and the receipt of a favorable Ruling from
the IRS as contemplated under Section 1.6 above, it shall distribute on a pro
rata basis, to stockholders of record of Tridex common stock all shares of
TransAct Common Stock owned by Tridex; in no case shall Tridex have any
obligation to complete such distribution before receipt of a favorable Ruling.
1.8 Granby Street Liability. Tridex hereby agrees that, upon completion
of the Merger and Exchange contemplated under Section 1.1 and Section 1.2 above,
respectively, it shall indemnify and hold harmless Magnetec and TransAct from
any and all liabilities (as former occupant, operator or otherwise), including
but not limited to liabilities with respect to environmental matters, concerning
the real property located at 96 Granby Street, Bloomfield, CT.
1.9 Release from Guarantees. Upon completion of the Merger and
Exchange, TransAct hereby agrees to use commercially
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reasonable efforts to obtain the release of Tridex from any and all of Tridex's
obligations and liabilities under guarantees of leases of real property or
equipment used by TransAct.
1.10 Release of Magnetec and Ithaca from Fleet Lien. Upon completion of
the Offering, Tridex shall obtain the release of Magnetec, the Magnetec Shares
and Ithaca from any and all obligations under the Fleet loan documents.
1.11 27-Wire Printhead. Tridex hereby acknowledges and confirms that it
has no right, title or interest in or to any form of intellectual property or
other rights of ownership in the 27-wire printhead manufactured and sold by
Magnetec to GTECH Holdings Corporation and to the extent it may have any basis
to assert or claim such right, title or interest, Tridex (intending to confirm
Magnetec's exclusive ownership of such technology) hereby unconditionally
releases and forever discharges Magnetec from any and all claims related
thereto.
1.12 Assignment of Okidata Agreements. Upon completion of the Merger
and Exchange, Tridex hereby agrees to assign, transfer, convey and deliver its
rights under a Strategic Agreement by and between it and Okidata, a division of
Oki America, Inc. dated as of May 9, 1996 pursuant to which Tridex has entered
into an exclusive Sales Agreement with Oki Europe Limited dated as of May 10,
1996 to sell POS and kiosk products in Europe, the Middle East and North Africa.
Upon completion of the Merger and Exchange, TransAct hereby agrees to assume
from Tridex any and all liabilities under the Strategic Agreement and Exclusive
Sales Agreement.
II. REPRESENTATIONS AND WARRANTIES OF TRIDEX, MAGNETEC AND ITHACA.
Tridex, Magnetec and Ithaca hereby represent and warrant to TransAct as
follows:
2.1 Organization; Good Standing; Subsidiaries. Tridex, Magnetec and
Ithaca are corporations duly organized, validly existing and in good standing
under the laws of the states of Connecticut, Connecticut and Delaware,
respectively. Each is qualified to do business as a foreign corporation under
the laws of all other states or jurisdictions in which such qualification is
required because of the properties owned, leased or operated by it or the nature
of the business currently conducted by it. Each has corporate power and
authority to own its properties and to conduct its businesses as presently
conducted.
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2.2 Authorization; Binding Effect. The execution and delivery of this
Plan of Reorganization by each of Tridex, Magnetec and Ithaca and the
performance of its respective obligations thereunder (a) have been duly
authorized by all necessary corporate action, (b) do not conflict with any of
the provisions contained in the Certificate of Incorporation or by-laws of any
of Tridex, Magnetec or Ithaca, or in any agreement, indenture or other
instrument to which any of them is a party, or by which any of its respective
assets may be bound, (c) do not violate any law, regulation, order or decree,
and (d) will not result in the creation of any lien or encumbrance upon any of
the assets being transferred except as contemplated hereby. This Plan of
Reorganization and the other instruments to be executed and delivered by each of
Tridex, Magnetec and Ithaca hereunder will constitute valid and binding
obligations.
2.3 Magnetec Shares. The Magnetec Shares have been duly authorized and
are fully paid and non-assessable shares of capital stock of Magnetec, free and
clear of all liens and encumbrances, except for the lien in favor of Fleet Bank,
National Association.
III. REPRESENTATIONS AND WARRANTIES OF TRANSACT
TransAct represents and warrants to Tridex, Magnetec and Ithaca as
follows:
3.1 Organization and Good Standing. TransAct is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and will have by the Effective Date registered as a foreign corporation
under the laws of Connecticut and New York. TransAct has the corporate power and
authority to conduct its business as presently proposed.
3.2 Authorization. The execution, delivery and performance of this and
the other agreements and instruments to be executed and delivered by TransAct in
accordance herewith (a) have been duly authorized by all necessary corporate
action, (b) do not conflict with any of the provisions contained in the
Certificate of Incorporation or By-laws of TransAct, or in any other agreement,
indenture or instrument to which TransAct is a party or by agreement, indenture
or instrument to which TransAct is a party or by which Transact or its assets
may be bound and (c) do not violate any law, regulation, order or decree. This
Plan of Reorganization and the other instruments to be executed and delivered by
TransAct hereunder will constitute valid and binding obligations of TransAct.
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3.3 Shares of TransAct Capital Stock. Upon the completion of the
Exchange, the 5,400,000 shares of Common Stock issued to Tridex shall be duly
authorized and validly issued shares of capital stock of TransAct, fully paid
and non-assessable.
IV. CONDITIONS TO CLOSING
4.1 Conditions to Obligations of TransAct and Tridex. The obligations
of TransAct and Tridex to complete the transactions provided for herein are
subject to the satisfaction or waiver of the following conditions:
(a) There shall not be any pending or threatened governmental action or
proceeding by or before any court or governmental body or agency which shall
seek to restrain, prohibit or invalidate the transactions contemplated by this
Plan or Reorganization.
(b) TransAct shall have filed the Registration Statement with the SEC.
(c) Prior to the Effective Date, Tridex and TransAct shall have entered
into an agreement regarding the disposition of the ribbon business.
(d) The Merger shall have been completed.
V. CLOSING OF EXCHANGE
The closing of the transactions in connection with the Exchange shall
be held at the offices of Hinckley, Allen & Snyder, One Financial Center,
Boston, MA 02111 at the close of business no later than the day before the
Effective Date (the "Closing").
5.1 Obligations of Tridex.
At the Closing, Tridex shall deliver to TransAct:
(a) A certificate representing the Magnetec Shares, duly endorsed for
transfer to TransAct;
(b) Proof of filing of the Ruling;
(c) A Good Standing Certificate from the Secretary of State of the
State of Connecticut;
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(d) Certificates of Merger certified by the Secretaries of the States
of Delaware and Connecticut;
(e) All books and records of Magnetec and Ithaca; and
(f) Executed Corporate Services Agreement, Tax Sharing Agreement and
Printer Supply Agreement.
5.2 Obligations of TransAct.
At the Closing, TransAct shall deliver to Tridex:
(a) A certificate representing 5,400,000 shares of the Common Stock of
TransAct, issued to Tridex;
(b) Executed Corporate Services Agreement, Tax Sharing Agreement and
Printer Supply Agreement; and
(c) A good standing certificate from the Secretary of the State of
Delaware;
VI. COVENANT NOT TO COMPETE; CONFIDENTIALITY
6.1 Covenant Not to Compete. For a period of five (5) years from the
date of the pro rata distribution of the capital stock of TransAct to Tridex
shareholders contemplated under Section 1.7 above, Tridex shall not, whether as
owner, part owner, partner, director, officer, trustee, employee, consultant,
agent or in any other capacity, directly or indirectly, engage or participate in
any business, organization or entity located in or doing business in any
geographic market in which TransAct is then doing business, in the design,
manufacture, sale or distribution of printers or printer goods, for use in
point-of-sales, gaming and wagering, financial services and kiosk markets. The
foregoing shall not prohibit Tridex from holding five percent (5%) or less of
the outstanding equity securities of any corporation whose equity securities are
regularly traded on any national stock exchange or recognized "over-the-counter"
market.
6.2 Remedies. Any breach of Section 6.1 of this Plan of Reorganization
may not be adequately compensated by damages at law, and TransAct shall be
entitled, in addition to any other available remedies, to equitable relief in a
court of equity by injunction or otherwise, without the necessity or proving
actual damages for breach of such Section 6.
6.3 Confidentiality. Each party to this Plan of Reorganization shall
hold, and shall cause its officers,
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directors, employees, agents, affiliates, consultants and authorized
representatives to hold in strict confidence all information concerning the
other party in its possession or furnished by the other or the other's
representatives pursuant to this Plan of Reorganization (except to the extent
that such information can be shown to have been (a) in the public domain through
no fault of such party, or (b) later lawfully acquired from other sources by
such party) and neither party shall disclose or release such information to any
other person except its authorized representatives unless compelled to by
judicial or administrative process, as advised by counsel or by other
requirement of law. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve the confidentiality of its own
information.
VII. MISCELLANEOUS
7.1 Waivers and Amendments.
(a) This Plan of Reorganization may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by any party hereto of a
breach of any provision of this Plan of Reorganization shall not operate as a
waiver of any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy by such party
preclude any right or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
7.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Plan of Reorganization shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail, return receipt requested, postage prepaid
(a) if to Tridex, to Tridex Corporation, with executive offices at 61 Wilton
Road, Westport, CT 06880, Attention: Seth M. Lukash, Chairman and Chief
Executive Officer; (b) if to Magnetec, Ithaca or TransAct, to TransAct
Technologies Incorporated, 7 Laser Lane, Wallingford, CT 06492, Attention: Bart
C. Shuldman, President and Chief Executive Officer, or to such other address as
the parties shall have specified by notice in writing to the other.
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7.3 Expenses; Further Assurances. All expenses associated with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall be paid by Tridex. At the request of any
party, on or after the Effective Date, Tridex, Magnetec, Ithaca and TransAct
shall cause to be executed and delivered, such documents or instruments in
addition to those required by this Plan of Reorganization, as may reasonably be
necessary or desirable to carry out or implement any provision of this Plan of
Reorganization.
7.4 Access to and Information Concerning Properties, Records, Etc. of
TransAct After Closing. After the Closing, TransAct agrees to maintain any
records and files of Magnetec and Ithaca acquired at the Closing and, upon
reasonable notice, to provide Tridex and its authorized representatives during
normal business hours, with such access to the books, records and files of
TransAct for purposes of copying by Tridex as may reasonably be required in
connection with its tax, financial reporting and legal obligations for a period
of six (6) years from the Effective Date. After the Closing, Tridex agrees to
provide access to TransAct and its authorized representatives reasonable notice
and during normal business hours to any and all records which may be deemed
necessary to its tax, financial reporting and legal obligations for the same
period.
7.5 Miscellaneous. This Plan of Reorganization and the Exhibits hereto
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior correspondence and other writing
between the parties in connection with the subject matter of this Agreement, and
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Connecticut
without regard to its principles of choice of law. Any provision of this Plan of
Reorganization 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 or
affecting the validity or enforceability of such provision in any other
jurisdiction. All Exhibits mentioned in this Plan of Reorganization shall be
attached to this Plan of Reorganization, and shall form an integral part
thereof. All terms defined in this Plan of Reorganization which are used in any
Exhibit shall, unless the context otherwise requires, have the same meaning
therein as given herein. This Plan of Reorganization may be executed in any
number of counterparts, each of which shall be
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deemed to be an original and all of which together shall be deemed to be one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first above written.
TRIDEX CORPORATION
By:____________________________
Title: Seth M. Lukash,
Chairman and Chief
Executive Officer
MAGNETEC CORPORATION
By:____________________________
Title: Bart C. Shuldman
President
ITHACA PERIPHERALS INCORPORATED
By:____________________________
Title: Vice President
TRANSACT TECHNOLOGIES INC.
By:____________________________
Title: Bart C. Shuldman
President and Chief
Executive Officer
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LIST OF SCHEDULES/EXHIBITS
Exhibit A - Corporate Services Agreement
Exhibit B - Tax Sharing Agreement
Exhibit C - Printer Supply Agreement
11
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EXHIBIT 10.3
FORM OF CORPORATE SERVICES AGREEMENT
THIS CORPORATE SERVICES AGREEMENT (the "Agreement") is dated as of ____
__, 1996 by and between Tridex Corporation, a Connecticut corporation
("Tridex"), and TransAct Technologies Incorporated, a Delaware corporation
("TransAct").
WHEREAS, TransAct and its subsidiary Magnetec Corporation
(collectively, the "TransAct Group") desire to obtain administrative and other
services from Tridex and Tridex is willing to furnish or make such services
available to Transact; and
WHEREAS, Tridex and its subsidiaries Ultimate Technology Corporation
and Cash Bases GB Ltd. (collectively the "Tridex Group") desire to obtain
certain financial services from TransAct and TransAct is willing to furnish or
make such services available to Tridex;
WHEREAS, Tridex and TransAct desire to set forth the basis for the
provision of services of the type referred to herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Services.
1.1 Beginning on the effective date of the Registration Statement on
Form S-1 (the "Registration Statement") filed in connection with the public
offering of TransAct common stock ( the "Effective Date"), Tridex will provide
or otherwise make available to the TransAct Group certain general corporate
services provided by Tridex's corporate staff, including but not limited to
certain human resources, employee benefit administration, financial reporting,
insurance, risk management and general administrative services. The services
will include the following:
(a) Human resources and employee benefit related services - General
human resources services (including but not limited to administration of all
employee matters), administration of TransAct's employee participation in
employee benefit plans and insurance programs sponsored by Tridex such as the
following: 401(k) plan, group medical insurance, group life insurance,
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employee stock option plans and filing of all required reports under ERISA for
employee benefit plans sponsored by Tridex.
(b) Financial reporting and securities compliance related services -
Maintenance of corporate records, assistance, if and when necessary, in
preparation of Securities and Exchange Commission filings, including without
limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the
preparation of Proxies and Proxy Statements and the solicitation of proxies, and
assistance in the preparation of the Annual and Quarterly Reports to
Stockholders.
(c) Risk management and insurance related services - Provision of risk
management (including, but not limited to premiums attributable to TransAct) and
related services and maintenance of all policies of liability, fire, workers'
compensation and other forms of insurance for the benefit of TransAct, its
employees, assets and facilities.
(d) Services in addition to those enumerated in subsections 1.1(a)
through 1.1(e) above to include, but not be limited to, corporate recordkeeping,
other general administrative activities and financial services as reasonably
requested from time to time by TransAct or as provided by Tridex.
1.2 For performing the services described above in Section 1.1,
TransAct shall pay Tridex in accordance with the following schedule:
(a) TransAct shall reimburse Tridex for one-half (50%) of total cash
compensation (consisting of salary, a pro-rated portion of annual bonus actually
paid and other out-of-pocket expenditures for medical, life insurance and other
benefits) paid by Tridex to or on behalf of Mr. Thomas Curtain, Tridex's Vice
President of Human Resources, for the period from the Effective Date until
December 31, 1997. Mr. Curtain, Tridex and TransAct shall cooperate to make Mr.
Curtain available to TransAct for one half (50%) of his total working time for
the provision of services to TransAct for this period.
(b) TransAct shall reimburse Tridex for one-half (50%) of the total
cash compensation (consisting of salary, a pro-rated portion of annual bonus
actually paid and other out-of-pocket expenditures for medical, life insurance
and other benefits) paid by Tridex to or on behalf of Mr. George Crandall,
Tridex's Vice President, Secretary and Comptroller, for the period from the
Effective Date until March 31, 1997. Mr. Crandall, Tridex and TransAct shall
cooperate to make Mr. Crandall available to TransAct for one half (50%) of his
total working time for the provision of services for this period.
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(c) For as long as TransAct remains a subsidiary of the Tridex Group,
TransAct shall reimburse Tridex for the provision of risk management, insurance
related, corporate recordkeeping and general administrative services using the
following methods: (1) TransAct shall reimburse Tridex for services based upon
actual usage for expenses directly attributable to TransAct; (2) services
directly attributable to other members of the Tridex Group shall be allocated to
such other members; and (3) all services which are not directly attributable to
TransAct shall be allocated using the same method as the audited financial
statements of TransAct which appear in the Registration Statement. The services
provided under Sections 1.2(a) and (b) and 1.4 hereunder shall be allocated and
reimbursable in the methods discussed thereunder.
1.3 TransAct will reimburse Tridex for expenses incurred for insurance
(including but not limited to property, casualty, group life and health and
workers compensation), accounting and legal services in accordance with
Tridex's historical allocation methods.
In addition, TransAct will reimburse Tridex for other expenses
incurred to provide specific services requested by TransAct, as agreed by
TransAct and Tridex when such services are requested.
1.4 Beginning on the Effective Date, TransAct will provide or otherwise
make available to the Tridex Group certain financial services customarily
provided by a chief financial officer, including but not limited to management
of corporate finance and accounting matters. For performing the services
described herein, Tridex shall reimburse TransAct for fifteen percent (15%) of
the total cash compensation (consisting of salary, a pro-rated portion of annual
bonus actually paid and other out-of-pocket expenditures for medical, life
insurance and other benefits) paid by TransAct to or on behalf of Mr. Richard L.
Cote, TransAct's Executive Vice President, Chief Financial Officer and
Treasurer, for the period of the Effective Date, until March 31, 1997. Mr. Cote,
TransAct and Tridex shall cooperate to make Mr. Cote available to Tridex for
fifteen percent (15%) of his total working time for the provision of services to
Tridex during this period. Upon the Effective Date, Mr. Cote will become a
full-time employee of TransAct, and his office will be relocated to TransAct's
Wallingford, Connecticut facility.
1.5 The charges for services pursuant to Sections 1.2, 1.3 and 1.4
above will be determined and payable no less frequently than on a monthly basis;
provided that reimbursement of a pro-rated portion of bonuses shall be payable
after such bonuses are paid by Tridex or TransAct. The charges will be due when
billed and shall
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be paid no later than ten (10) business days from the date of billing.
1.6 When services of the type described in this Agreement are provided
by outside vendors to Tridex, TransAct or, in connection with the provision of
such services, out-of-pocket costs such as travel are incurred, the cost thereof
will be paid directly by the party receiving the service. If either party to
this Agreement is billed for services provided to the other party, the billed
party may pay the bill and charge the party receiving the services the amount of
the bill or forward the bill to the party receiving the services for payment.
2. TransAct's Directors and Officers. Nothing contained herein will be
construed to relieve the directors or officers of TransAct from the performance
of their respective duties or to limit the exercise of their powers in
accordance with the charter or By-Laws of TransAct or in accordance with any
applicable statute or regulation.
3. Liabilities; Disclaimer. In furnishing TransAct with services as
herein provided neither Tridex, any member of the Tridex Group nor any of their
respective officers, directors, employees or agents shall be liable to any
member of the TransAct Group or their respective creditors or shareholders for
errors of judgment or for anything except willful malfeasance, bad faith or
gross negligence in the performance of their duties or reckless disregard of
their obligations and duties under the terms of this Agreement. The provisions
of this Agreement are for the sole benefit of the Tridex Group and the
TransAct Group and will not, except to the extent otherwise expressly stated
herein, inure to the benefit of any third party. Tridex further does not make
any express or implied warranty or representation with respect to the quality
of the services provided hereunder.
4. Term.
(a) Term. The initial term of this Agreement shall begin on the
Effective Date and continue until December 31, 1997.
(b) Termination. This Agreement may be terminated by either party at
any time on ninety (90) days' prior notice to the other; provided, however,
that the provisions of Sections 1.2(a) and (b) and Section 1.4 shall survive
any such termination.
5. Status. Each member of the Tridex Group shall be deemed to be an
independent contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act or represent any member of TransAct.
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6. Employment Changes.
(a) With respect to the employment and compensation levels of Mr.
Curtain and Mr. Crandall, Tridex shall advise TransAct in writing ten (10) days
prior to any change in Mr. Curtain's or Mr. Crandall's compensation level or
employment status initiated by Tridex. Tridex agrees to consult with TransAct
regarding any such change in Mr. Curtain's or Mr. Crandall's compensation level
or employment status prior to such change.
(b) With respect to the employment of Mr. Curtain, Tridex shall notify
TransAct whether it intends to continue Mr. Curtain's employment beyond December
31, 1997. If Tridex notifies TransAct that it does not intend to employ Mr.
Curtain beyond December 31, 1997, TransAct shall, within fifteen (15) days from
the date of Tridex's notice to TransAct, notify Tridex of its intent to employ
Mr. Curtain beyond December 31, 1997.
7. Notices. All notices, billings, requests, demands, approvals,
consents and other communications which are required or may be given under this
Agreement will be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
If to TransAct:
TransAct Technologies Incorporated
7 Laser Lane
Wallingford, CT 06492
Attention: President
If to Tridex:
Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: President
8. Confidentiality. Tridex and TransAct hereby agree to hold, and cause
its respective employees, agents and authorized representatives to hold, in
strict confidence, all information concerning the other party furnished pursuant
to this Agreement.
9. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and should not be deemed to confer upon any third
party any right, remedy or claim in excess of those existing without reference
to this Agreement.
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10. Access to Information. Tridex shall afford to TransAct and its
authorized representatives, agents and employees, and TransAct shall afford to
Tridex and its authorized representatives, agents and employees, access during
normal business hours to all records, books, contracts and other data, including
but not limited to corporate, financial, accounting, personnel and other
business records, for a period of six (6) years following the termination of
this Agreement.
11. No Assignment. This Agreement shall not be assignable except with
the prior written consent of the other party to this Agreement.
12. Applicable Law. This Agreement shall be governed by and construed
under the laws of the State of Connecticut applicable to contracts made and to
be performed therein.
13. Section Headings. The section headings used in his Agreement are
for convenience of reference only and will not be considered in the
interpretation of construction of any of the provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized officers as of the date
first above written.
TRIDEX CORPORATION
By:_______________________
Title:____________________
TRANSACT TECHNOLOGIES INCORPORATED
By:_______________________
Title:____________________
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EXHIBIT 10.4
FORM OF TAX SHARING AGREEMENT
THIS AGREEMENT, executed this _____ day of July, 1996, is entered into
by and between Tridex Corporation, a Connecticut corporation ("Tridex") and
TransAct Technologies Incorporated, a Delaware corporation ("TransAct").
RECITALS
WHEREAS, Tridex, TransAct, Magnetec Corporation, a Connecticut
corporation and wholly-owned subsidiary of Tridex ("Magnetec"), and Ithaca
Peripherals, Incorporated a Delaware corporation and wholly-owned subsidiary of
Tridex (Ithaca"), have entered into a Plan of Reorganization dated as of June
24, 1996 (the "Plan") pursuant to which, among other things, (i) TransAct is
acquiring from Tridex all of the outstanding capital stock of Magnetec, (ii)
TransAct is issuing [5,400,000] shares of its common stock to Tridex and (iii)
TransAct is issuing up to 1,322,500 shares of common stock pursuant to an
underwritten public offering registered under the Securities Act of 1933, as
amended (the "Securities Act") on a Registration Statement on Form S-1 (the
"Offering");
WHEREAS, as contemplated by the Plan, the shares of outstanding common
stock of TransAct held by Tridex are to be distributed on a pro rata basis to
the record holders of shares of Tridex common stock (the "Distribution") upon
the satisfaction of certain conditions;
WHEREAS, Tridex and its subsidiaries, including Magnetec and Ithaca,
have heretofore: (1) joined in filing consolidated federal income tax returns
under the Internal Revenue Code of 1986, as amended (the "Code"), and the
applicable Treasury Regulations promulgated thereunder by the Treasury
Department (the "Regulations"); (2) joined in filing certain consolidated,
combined, and unitary state income tax returns; and (3) in some cases filed
income tax returns on a separate company basis.
WHEREAS, during the period prior to the consummation of the
Distribution, TransAct is expected to remain within the affiliated group (within
the meaning of Section 1504(a) of the Code) of corporations (the "Tridex Group")
of which Tridex is the common parent;
2
WHEREAS, the parties hereto desire to allocate their respective
federal, state, local and foreign income tax (or similar tax) liabilities,
assessed in connection with the filing of returns, including but not limited to
consolidated, combined, unitary, or separate returns, among themselves for all
fiscal years thereafter during which TransAct remains a member of the Tridex
Group;
WHEREAS, the parties hereto desire to provide for the compensation and
reimbursement of each other for Tax Deficiencies (as hereinafter defined) or Tax
Refunds (as hereinafter defined) as a result of audits by or applications to the
Internal Revenue Service (the "Service") and other taxing authorities or by
judicial determination, if any, involving consolidated federal, consolidated,
combined or unitary state and local income tax returns and similar aggregate
reporting for certain foreign jurisdictions;
WHEREAS, the parties hereto desire to provide and fix the
responsibilities for: (1) the preparation and filing of tax returns along with
the payments of taxes shown to be due and payable therein (as well as estimated
or advance payments required prior to the filing of said returns) for all
periods prior to and following the Effective Date (as hereinafter defined); (2)
the retention and maintenance of all relevant records necessary to prepare and
file appropriate tax returns, as well as the provision for appropriate access to
those records for all parties to this Agreement; (3) the conduct of audits,
examinations, and proceedings by appropriate governmental authorities which
could result in a redetermination of tax liabilities (for all periods prior to
or following the Effective Date) of any party to this Agreement; and (4) the
cooperation of all parties with one another in order to fulfill their duties and
responsibilities under this Agreement and under applicable laws.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(a) "Affiliated Group" shall have the meaning attributed to that term
in Section 1504 of the Code, determined without regard to Section 1504(b) of the
Code.
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(b) "Code" shall have the meaning attributed to that term in the
recitals above.
(c) "Common Parent" shall have the meaning attributed to that term in
the Consolidated Return Regulations (Treas. Reg. Section 1.1502-1 et seq.)
promulgated pursuant to Section 1502 of the Code.
(d) "Consolidated Return Regulations" shall have the meaning attributed
to that term in Section 4 hereof.
(e) "Effective Date" shall mean the date on which the Registration
Statement relating to the Offering is declared effective under the Securities
Act.
(f) "IRS" or "Service" shall have the meaning attributed to that term
in the recitals above.
(g) "Joint Contest" shall mean a Tax Contest seeking a redetermination
of Taxes involving one of more Members (determined by reference to the time of
such contest rather than the period for which such return was filed) of the
Tridex Group and one or more Members of the TransAct Group, whether such
corporations joined in the filing of returns on a consolidated, combined, or
unitary basis (including similar aggregate reporting for certain foreign
jurisdictions).
(h) "Member" shall have the meaning attributed to that term in Section
1.1502-1(b) of the Regulations, but without regard to whether a corporation
qualifies to be a Member of an Affiliated Group under Section 1504(b) of the
Code.
(i) "Minimum Tax Credit" shall have the meaning attributed to that term
in Section 5 hereof.
(j) "Offering" shall have the meaning attributed to that term in the
recitals above.
(k) "Plan" shall have the meaning attributed to that term in the
recitals above.
(l) "Regulations" shall have the meaning attributed to that term in the
recitals above.
(m) "Separate Contest" shall mean a Tax Contest which involves: (i)
only Members (or their direct and indirect subsidiaries) of the Tridex Group or
(ii) only Members (or their direct and indirect subsidiaries) of the TransAct
Group.
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(n) "Separation Date" shall mean the date, if any, that TransAct shall
cease to be a member of the Tridex Group.
(o) "Tax" or "Taxes" shall mean (i) all federal income taxes and state,
local, and foreign income and franchise taxes (or taxes in lieu thereof) plus
(ii) any penalties, fines or additions to tax with respect thereto, plus (iii)
any interest with respect to the items contained in (i) and (ii).
(p) "Tax Attributes" shall mean any losses, credits and other tax
attributes that may be carried forward or back by any Member of the Tridex Group
or the TransAct Group on a separate return or consolidated basis to a taxable
year other than the taxable year in which such attribute is recognized,
including, but not limited to, net operating losses, alternative minimum tax
credits, targeted jobs tax credits, investment tax credits, foreign tax credits,
research and development credits, and similar credits under state or local law.
(q) "Tax Contest" shall mean an audit, review, examination or the like,
inclusive of litigation, with the purpose or effect of redetermining Taxes of
any corporation or other entity (without regard to whether such matter was
initiated by an appropriate taxing authority or in response to a claim for a
refund).
(r) "Tax Deficiency" or "Tax Deficiencies" shall mean with respect to
previously filed returns an assessment for Taxes as a result of audits by or
applications to the Service and other taxing authorities or judicial
determination.
(s) "Tax Liability" or "Tax Liabilities" shall mean a liability for
Taxes.
(t) "Tax Refund" or "Tax Refunds" shall mean with respect to previously
filed returns, a refund of Taxes as a result of audits by or application to the
Service and other taxing authorities or judicial determination.
(u) "TransAct" shall have the meaning attributed to that term in the
preamble hereof.
(v) "TransAct Group" shall mean the group of corporations at any given
time after the Separation Date which would be the Affiliated Group of which
TransAct is the Common Parent if TransAct was a "common parent" within the
meaning of the Consolidated Return Regulations, and where relevant, all other
subsidiaries which are owned directly or indirectly by its Members.
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(w) "Tridex" shall have the meaning attributed to such term in the
preamble hereof.
(x) "Tridex Group" shall mean the group of corporations at any given
time (either prior to, or subsequent to, the Effective Date) which would be the
Affiliated Group of which Tridex is the Common Parent if Tridex was a "common
parent" within the meaning of the Consolidated Return Regulations, and where
relevant, all other subsidiaries which are owned directly or indirectly by its
Members.
SECTION 2. CONSOLIDATED RETURN ELECTION; ALLOCATION OF TAX OBLIGATIONS;
POST-SEPARATION DATE ALLOCATIONS AND PAYMENTS; TREATMENT OF TAX
CARRYFORWARDS; AND COMPUTATION OF INCOME TAX PROVISIONS.
(a) CONSOLIDATED RETURN ELECTION. In determining Tax Liabilities of
the Tridex Group and its Members for Fiscal 1996 and where relevant any
subsequent fiscal year up to the Separation Date, the computations of the tax
liabilities of the Tridex Group and its Members shall, to the extent permitted
by law, be made in accordance with the methods used in the consolidated returns
for the fiscal years ending prior to Fiscal 1996 which include Tridex and
TransAct.
(b) ALLOCATION OF TAX OBLIGATIONS.
(i) Taxes assessed pursuant to the returns described in the preceding
subsection will be allocated among the Members of the Tridex Group
pursuant to the Tridex Group's historic tax allocation method,
described in Section 1552(a)(2) of the Code and Section 1502-33(d)(3)
of the Regulations (applying a fixed percentage of 100 percent).
(ii) With respect to fiscal 1996 and any subsequent fiscal year or
portion thereof up to the Separation Date for which TransAct remains a
Member of the Tridex Group, TransAct shall pay to Tridex an amount
equal to the federal income taxes for such period which the TransAct
Group would have been liable but for the fact of being a Member of the
Tridex Group.
(iii) With respect to Taxes which are determined on a consolidated,
combined or unitary basis, similar principles as those described in
Section 2(b)(i) and (ii) shall govern the allocation of such Tax
Liabilities among the parties hereto.
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(c) POST-SEPARATION DATE ALLOCATIONS AND PAYMENTS. With respect to any
fiscal year or portion thereof when TransAct is no longer a member of the Tridex
Consolidated Group, beginning on the Separation Date, the allocations (to be
made by Tridex and TransAct for any fiscal year) will be made not later than 90
days following the filing of the Federal consolidated income tax return of the
Tridex Group for each such period. Any payments required as a result of the
allocations for any portion of any fiscal year in which the Separation Date
occurs will be made by TransAct or Tridex as the case may be, in federal or
immediately available funds to such bank account as shall be designated by the
recipient. Subject to the provisions of Section 10(c) hereof, such payment shall
be made not later than 95 days after the aforementioned returns are filed.
(d) TREATMENT OF TAX CARRYFORWARDS. Magnetec currently has available
for its use certain net operating loss and tax credit carryforwards. If for any
fiscal year beginning after the Effective Date, TransAct uses any net operating
loss or tax credit carryforward of Magnetec's, in excess of that amount which
would be determinable on a separate company basis by Magnetec, TransAct will
pay to Tridex an amount equal to the net benefit of the carryforward used in
the taxable year. If for any fiscal year beginning after the Effective Date,
Tridex uses any net operating loss in tax credit carryforward of TransAct,
which would be determinable on a separate company basis by TransAct, Tridex
will pay to TransAct an amount equal to the net benefit of the carryforward used
in the taxable year. Such payment will be made not later than 90 days following
the filing of the Federal consolidated income tax return of the Tridex Group
for each such period.
(e) COMPUTATION OF INCOME TAX PROVISIONS. For financial reporting
purposes, the TransAct Group will compute its income tax accounts as if a
separate return had been filed, using those elements of income and expense as
reported in the TransAct consolidated or combined financial statements in
accordance with U.S. Generally Accepted Accounting Principles.
SECTION 3. SEPARATE COMPANY LIABILITIES.
Notwithstanding the provisions of Section 2 hereof, for all fiscal
years prior to the Separation Date, Taxes imposed (including refunds owed) upon
Tridex or a Member of the Tridex Group or any of their direct and indirect
subsidiaries and which are determined or assessed on a separate company basis
will be the separate liability (or asset in the case of a refund) of Tridex or
such Member or such subsidiary and not subject to allocation or sharing among
other Members of the Tridex Group.
SECTION 4. ALLOCATION OF TAX ATTRIBUTES.
Except as otherwise provided in Section 5 hereof, all Tax Attributes of
the Tridex Group (other than foreign tax credits) will be allocated among
Tridex, TransAct and their respective
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subsidiaries, in accordance with the Regulations promulgated pursuant to Section
1502 of the Code or analogous provisions of state, local or foreign law (the
"Consolidated Return Regulations"). All foreign tax credits generated by
Tridex's investment in subsidiaries other than members of the TransAct Group
shall be allocated to Tridex.
SECTION 5. MINIMUM TAX CREDIT.
(a) ALLOCATION OF CREDIT. The credit against income tax provided by
Section 53 of the Code, as well as analogous credits provided by state, local,
or foreign law, for payment of alternative minimum tax in periods through and
including those ending on the Separation Date (the "Minimum Tax Credit"), shall
be allocated as follows:
(i) For each year or portion of the year in which the Separation
Date occurs, the Minimum Tax Credit for each such year shall be
allocated to TransAct in the amount of such credit multiplied by a
fraction whose numerator is the sum of the alternative minimum
taxable income or loss for such year for all Members of the
TransAct Group and whose denominator is the sum of the alternative
minimum taxable income or loss for such year for all Members of the
TransAct Group and all Members of the Tridex Group. The remaining
portion of such credits shall be allocated to Tridex.
(ii) In no event shall either Tridex or TransAct be allocated for
any period an amount of Minimum Tax Credit in excess of that
available to the Tridex Group for such period. If in any period
TransAct's Minimum Tax Credits calculated on a separate company
basis exceeds that available to the Tridex Group, Tridex will
reimburse TransAct for any such excess.
(b) FUTURE REGULATIONS. Notwithstanding Section 2(c) hereof, in the
event that regulations are promulgated which do not permit the Minimum Tax
Credit to be allocated among the members of the Tridex Group in the manner set
forth herein, Tridex or TransAct, as the case may be, will be obligated to make
a payment to the other in an amount equal to the excess of the Minimum Tax
Credit that is allocated to it and its Members by such regulations over that
which would be allocated to it pursuant to Subsection 5(a)(i) above.
SECTION 6. CARRYBACKS OF TAX ATTRIBUTES.
(a) TRANSACT CARRYBACKS. If for any taxable year beginning on or
after the Separation Date, TransAct or any Member of the TransAct Group
recognizes a Tax Attribute which TransAct or such Member of the TransAct Group,
under the applicable
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provisions of the Code and Regulations promulgated under Section 1502 thereof,
is permitted or required to carry back to a prior taxable year of the Tridex
Group or the prior taxable year of a Member of the Tridex Group (either on a
consolidated, combined, unitary or separate return basis), Tridex (or a Member
of the Tridex Group) shall, at TransAct's cost and expense, file appropriate
refund claims within a reasonable period after being requested by TransAct.
Tridex (or the Member of the Tridex Group receiving such refund) shall promptly
remit to TransAct any refunds it receives with respect to any Tax Attribute so
carried back.
(b) TRIDEX CARRYBACKS. If for any taxable year Tridex or any Member of
the Tridex Group recognizes a Tax Attribute which Tridex or such Member of the
Tridex Group, under the applicable provision of the Code and Consolidated Return
Regulations, carries back to one of its prior taxable years, Tridex or such
Member of the Tridex Group may file appropriate refund claims and shall be
entitled to any refund resulting from such claims.
SECTION 7. CONDUCT OF TAX CONTESTS.
(A) JOINT CONTESTS.
(i) Each party shall have the right and obligation to pursue and defend
against any Joint Contest. TransAct shall conduct Joint Contests,
without prejudice to any right or obligation of Tridex relating to such
Joint Contest. Tridex, as the Common Parent of the Tridex Group or
otherwise, agrees to take all such actions and to cause its
subsidiaries to take all such actions as may be necessary to permit
TransAct to conduct such Joint Contests. Each party shall cooperate
fully with the other during the course of a Joint Contest as provided
in Section 7(c) herein, and shall bear its own costs in so doing except
as otherwise provided in clause (iv) or clause (v) of this Section
7(a).
(ii) Each party hereto shall have the right to extend the statute of
limitations on assessments with respect to any Taxes of such party
without regard to whether the extension leads to the initiation or the
continuation of a Joint Contest; the other party hereto shall cooperate
fully with the requesting party in accordance with Section 7(c), and
shall execute such documentation as may be required to extend the
statute if extension is not otherwise within the legal power of the
requesting party. Similarly, each party hereto
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shall have the right to file a claim for a Tax Refund without regard to
whether such claim leads to the initiation or the continuation of a
Joint Contest; the other party hereto shall cooperate fully with the
requesting party in accordance with Section 7(c), and shall execute
such documentation as may be required to claim the Tax Refund if it is
not otherwise within the legal power of the requesting party to file
such claim. Neither the extension of the statute nor the filing of a
claim for Tax Refund in accordance with this paragraph shall entitle
either party to any indemnity from the other, except as provided in
clause (v) of this Section 7(a).
(iii) The party hereto that receives the first information that a
taxing authority is conducting an examination of a Tax return which
included the other party hereto and/or its subsidiaries shall
immediately notify the other that a possible Joint Contest exists and
shall afford such other party the opportunity to participate, at its
own expense, in contesting in administrative and judicial proceedings
all relevant items that affect the Tax Liability or Tax Attributes of
such entities. TransAct and Tridex shall share jointly in any decisions
involved in connection with settlements of Joint Contests to the extent
that items are involved that affect the Taxes or Tax Attributes of both
parties or subsidiaries of both parties. Neither party may agree to
settle such a dispute without the consent of the other, which shall not
be unreasonably withheld. If both parties agree to pursue or defend a
Joint Contest, then each party shall bear its own costs of contesting
the matter. Notwithstanding the preceding sentence, if the parties
agree on the use of third party advisors or experts, the costs thereof
shall be shared equally between both parties. If one party acting
reasonably and in good faith declines to pursue or defend a Joint
Contest, such declining party nevertheless shall cooperate fully with
the contesting party in accordance with Section 7(c) herein, and shall
bear its own associated costs and expenses, if any, and shall not be
entitled to any indemnity from the contesting party except as provided
in clause (v) of this Section 7(a); provided however, that the
declining party shall not be required to incur any costs of any third
party advisors or experts to whose engagement it has not agreed. Each
party shall be liable for its share of any redetermined liability for
Taxes in accordance with Section 8 herein.
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(iv) Each party hereto shall act reasonably and in good faith in
exercising its right to share jointly in any decisions involved in
connection with Joint Contests affecting its Taxes or Tax Attributes. A
determination of whether a party is acting reasonably and in good faith
shall be made taking into account all relevant facts and circumstances;
provided however, that it shall not be considered to be acting
reasonably and in good faith for purposes of this Section 7(a) if a
party declines a reasonable, good faith request by the other party to
facilitate the extension of the statute of limitations or the claim of
a Tax Refund (as described in clause (ii) of this Section 8(a)).
(v) Neither party shall be required to indemnify or hold harmless the
other for any cost or expense incurred in connection with this
Agreement. Notwithstanding the preceding sentence, one party shall
indemnify the other to the extent of costs (other than Taxes and
interest assessed by any taxing authority with respect thereto)
incurred by the indemnitee that would not have been incurred but for
the failure of the indemnifying party to act reasonably and in good
faith in accordance with this Section 7(a). In addition, one party
shall indemnify and hold harmless the other from any costs or claims of
third party advisors or experts engaged in connection with a Tax
Contest and to whose engagement the indemnitee has not agreed.
(b) SEPARATE CONTESTS. Any Separate Contests with respect to tax
returns filed by any Member of either the Tridex Group or the TransAct Group on
a separate company basis shall be conducted by the entity which filed such tax
return (or the Common Parent of the Affiliated Group of which such entity is a
Member at the time of such contest), and such entity shall have sole and
complete authority to conduct such Tax Contest, including the authority to
negotiate with and enter into settlements with any taxing authority. If at any
point of the proceedings of a Separate Contest, it becomes a Joint Contest, then
the Tax Contest shall thereafter be conducted as a Joint Contest.
(c) COOPERATION. Tridex (and the Members of the Tridex Group) and
TransAct (and the Members of the TransAct Group) shall each provide the
assistance reasonably requested by the other with respect to conducting any Tax
Contest, including without limitation providing access to or furnishing books,
records, tax returns and supporting work papers, executing any powers of
attorney or other appropriate documentation required to
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pursue or defend any Tax Contest, attending administrative or judicial
proceedings in connection with Joint Contests as necessary, performing necessary
computations, and other functions necessary or helpful to the pursuit or defense
of any Tax Contest.
SECTION 8. REDETERMINED TAX LIABILITIES.
In the event of a redetermination of Taxes as a result of audits by the
Service or other taxing authority and/or judicial determinations, payments in
connection therewith, if any, made or received by or among Tridex, TransAct, and
their respective subsidiaries, shall be governed by the following principles:
(a) SEPARATE CONTESTS. In the case of matters arising out of Separate
Contests, the redetermined liability will be borne (that is, any increases in
Tax Liability will be paid by, and any decreases in Tax Liability will be
received by) the applicable entity.
(b) JOINT CONTESTS. In the case of matters arising out of any Joint
Contest, a Tax Deficiency shall be paid to the relevant taxing authority by, and
a Tax Refund received from the relevant taxing authority shall be paid to,
Tridex and/or its subsidiaries; provided, however, that whether or not a payment
is required to or from a relevant taxing jurisdiction and subject to the
provisions of Section 8(c) hereof, TransAct and/or its subsidiaries shall make
payments to Tridex and/or its subsidiaries, or receive payments from Tridex
and/or its subsidiaries, based on the following principles:
(i) in the case of adjustments which increase the taxable income of
Members of the TransAct Group, TransAct shall make a payment equal to
the amount of the adjustment multiplied by the highest applicable
marginal rate of taxation in effect for the period for which the
adjustment is made; or
(ii) in the case of adjustments which decrease taxable income of
Members of the TransAct Group, Tridex shall make a payment equal to the
amount of the adjustment multiplied by the highest applicable marginal
rate of taxation in effect for the period for which the adjustment is
made;
(iii) in the case of adjustments which decrease current year credits
(exclusive of credits carried back or forward into such year) of
Members of the TransAct
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Group, TransAct shall make a payment to Tridex in the amount of such
decrease; or
(iv) in the case of adjustments which increase current year credits
(exclusive of credits carried back or forward into such year) of
Members of the TransAct Group, Tridex shall make a payment to TransAct
in the amount of such increase.
Notwithstanding the provisions of Section 8(b)(iii) or (iv), no payment will be
required under this Section 8(b) in the case of increases or decreases to the
amount of Alternative Minimum Tax Credit. Changes in the amount of Alternative
Minimum Tax Credit will be controlled by the provisions of Section 8(c) below.
(c) TAX ATTRIBUTE REALLOCATIONS. If there is a redetermination of Tax
Liabilities in connection with either a Joint Contest or a Separate Contest, or
for purposes of this Section 8(c) only, as a result of carrybacks or
carryforwards of Tax Attributes, and as a result thereof there is an adjustment
to Tax Attributes (inclusive of Minimum Tax Credits) allocated among the parties
pursuant to Sections 4 and 5 hereof:
(i) Tridex shall, in the case of credits, make a payment to TransAct
equal to the amount of any resulting reduction in items allocated to
Members of the TransAct Group, or in the case of income items
(including but not limited to net operating losses) Tridex shall make a
payment to TransAct equal to the amount of the reduction multiplied by
the highest applicable marginal rate of taxation in effect for the
period in which the adjustment is made; and
(ii) TransAct shall, in the case of credits, make a payment to Tridex
equal to the amount of any resulting increase in items allocated to
Members of the TransAct Group, or in the case of income items
(including but not limited to net operating losses) TransAct shall make
a payment to Tridex equal to the amount of the increase multiplied by
the highest applicable marginal rate of taxation in effect for the
period in which the adjustment is made.
(d) CERTAIN REORGANIZATION-RELATED REDETERMINATIONS. Any Tax Liability
arising from adjustments to income in connection with the transactions
contemplated by and effected under the Plan shall be borne entirely by Tridex.
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(e) TIMING OF PAYMENTS. Any payments required by Section 8(b) or (c)
hereof shall be made within 15 days of such adjustments becoming final.
(f) INTEREST. Payments, if any pursuant to this Section 8 shall bear
interest determined by applying similar principles as those described herein.
SECTION 9. RETENTION OF RECORDS; ACCESS TO RECORDS; COOPERATION & ASSISTANCE.
(a) RETENTION OF RECORDS.
(i) DUTIES OF TRANSACT. TransAct shall retain all tax returns, tax
reports, related work papers and all schedules (along with all
documents that pertain to any such tax returns, reports, work papers or
schedules) which relate to a tax period ending on or before the
Separation Date. TransAct shall make such documents available at no
cost to Tridex and/or its subsidiaries at Tridex's request. TransAct
shall not dispose of such documents without the permission of Tridex.
(ii) DUTIES OF TRIDEX. Tridex shall retain all tax returns, tax
reports, related work papers and all schedules (along with all
documents that pertain to any such tax returns, reports, work papers or
schedules) which relate to any tax period ending on or before the
Separation Date. Tridex shall make such documents available at no cost
to TransAct and/or its subsidiaries at TransAct's request. Tridex shall
not dispose of such documents without the permission of TransAct.
(b) ACCESS TO RECORDS.
(i) Duties of TransAct. TransAct shall permit Tridex or any Members of
the Tridex Group (or their direct and indirect subsidiaries), or their
designated representative, to have access at any reasonable time and
from time to time, after the Separation Date, to all relevant tax
returns and supporting papers therefor in respect of periods ending on
or before the Separation Date, wherever located, and shall furnish, and
request that the independent accountants of TransAct or any of the
members of the TransAct Group furnish, to Tridex and its subsidiaries,
as the case may be, such additional tax and other information and
documents with respect to consolidated federal and
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state income tax returns filed in respect of periods ending on or
before the Separation Date, as Tridex or any of its subsidiaries may
from time to time reasonably request.
(ii) Duties of Tridex. Tridex shall permit TransAct or any Members of
the TransAct Group (or their direct and indirect subsidiaries), or
their designated representative, to have access at any reasonable time
and from time to time, after the Separation Date, to all relevant tax
returns and supporting papers therefor of Tridex and the other members
of the Tridex Group in respect of periods ending on or before the
Separation Date, wherever located, and shall furnish, and request that
the independent accountants of Tridex or any of the members of the
Tridex Group furnish, to TransAct and its subsidiaries, as the case may
be, such additional tax and other information and documents with
respect to consolidated federal and state income tax returns filed in
respect of periods ending on or before the Separation Date, as TransAct
or any of its subsidiaries may from time to time reasonably request.
(c) ASSISTANCE AND COOPERATION. Tridex (and Members of the Tridex
Group) and TransAct (and Members of the TransAct Group) will provide
each other with such cooperation, assistance and information as either
of them reasonably may request of the other with respect to the filing
of any tax return, amended return, claim for refund or other document
with any taxing authority. With respect to the federal consolidated tax
return or any consolidated, combined, or unitary state or local tax
return (or similar aggregate reporting for foreign tax purposes) filed
by Tridex for tax periods which begin before the Separation Date and
end after the Separation Date, such assistance shall include the timely
submission by TransAct to Tridex of pro forma tax returns for TransAct
and each Member of the TransAct Group, prepared on the basis that each
such Member's tax period ended on the Separation Date.
SECTION 10. PREPARATION OF TAX RETURNS; ESTIMATED PAYMENTS.
(a) FY 1996 AND ALL PRE-SEPARATION DATE TAXABLE YEARS. Tridex shall prepare
and timely file the Tridex Group consolidated returns for fiscal 1996 and all
taxable periods prior to the Separation Date. In connection therewith, TransAct
shall (1) permit Tridex to have access at any reasonable time and from time to
time, after the Separation Date, to all tax returns
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and supporting papers therefor of TransAct and its subsidiaries, wherever
located; and (2) furnish to Tridex such additional tax and other information and
documents in the possession of such companies, with respect to consolidated
federal and state income tax returns filed in respect of periods including or
ending before the Separation Date, as Tridex may from time to time reasonably
request. TransAct shall, and shall cause its subsidiaries to, cooperate in
connection with the preparation of the consolidated federal and state income tax
returns of the Tridex Group for fiscal 1996. It shall be the responsibility of
Tridex to make any payments required in connection therewith to the applicable
taxing authorities.
(b) POST-SEPARATION DATE TAXABLE YEARS.
(i) TransAct's Separate Returns. All tax returns of the TransAct Group
which are filed on a consolidated or combined basis for tax periods
beginning after the Separation Date shall be prepared and filed by
TransAct. TransAct shall be solely responsible for the payment of all
Taxes due with respect to such tax returns for such tax periods.
(ii) Tridex's Separate Returns. All tax returns of the Tridex Group
which are filed on a consolidated or combined basis for tax periods
beginning after the Separation Date shall be prepared and filed by
Tridex. Tridex shall be solely responsible for the payment of all Taxes
due with respect to such tax returns for such tax periods.
(c) ESTIMATED PAYMENTS. All payments (including estimated payments or
payments made in connection with requests for extensions of time to
file such returns) made subsequent to the date hereof with respect to
consolidated, combined, or unitary income tax liabilities of the Tridex
Group and its Members for any and all tax years prior to the Separation
Date shall be made by Tridex. Tridex shall promptly thereafter notify
TransAct of the portion, if any, of such payment which it in good faith
believes to be attributable to TransAct's share of the liability, as
determined under the provisions of Section 2 hereof. TransAct shall,
within five (5) business days of the due date for such estimated
payments, pay such amount to Tridex or advise Tridex of the basis for
its disagreement.
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SECTION 11. INDEMNIFICATION.
With respect to all consolidated federal and state income tax returns filed
by the Tridex Group:
(a) SELF-ASSESSMENTS. Tridex shall indemnify and hold harmless TransAct
and its subsidiaries, and TransAct shall indemnify and hold harmless
Tridex and its subsidiaries, from and against any liability, cost, or
expense, including, without limitation, any fine, penalty (including
interest on penalties or penalty increments to interest) or
accountants' or attorneys' fees, arising out of fraudulent or
negligently prepared information, workpapers, documents, and other
items used in the preparation of, or presented in, any return, amended
return, or claim for refund filed for the Tridex Group for the tax
years in which a Separation Date occurs, and which information,
workpapers, documents, or other items originated with and/or were
prepared by such indemnifying party.
(b) REDETERMINATIONS. Except as otherwise provided in Section 11(a)
hereof:
(i) Tridex shall indemnify and hold harmless TransAct from and against
any liability, cost, or expense incurred or paid by TransAct in excess
of its share thereof as allocated pursuant to Section 8 hereof,
including any amount paid by TransAct in connection with an assessment
by the Service or other taxing authority; and
(ii) TransAct shall indemnify and hold harmless Tridex from and against
any liability, cost, or expense incurred or paid by Tridex in excess of
its share thereof as allocated pursuant to Section 8 hereof, including
any amount paid by Tridex in connection with an assessment by the
Service or other taxing authority.
SECTION 12. RESOLUTION OF DISPUTES.
Any disputes between the parties with respect to this Agreement that
cannot be resolved by the parties shall be resolved by a public accounting firm
or a law firm reasonably satisfactory to Tridex and TransAct, the determination
of which shall be final and binding on both parties. The fees and expenses of
such firm shall be borne equally by Tridex and TransAct.
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SECTION 13. SUBSIDIARIES.
Any reference herein to a subsidiary or subsidiaries includes Members
(and their direct and indirect subsidiaries) of the Tridex Group and the
TransAct Group. To the extent that the provisions of the Agreement pertain to a
subsidiary or subsidiaries of Tridex or TransAct, Tridex and TransAct
respectively agree that it will cause the respective subsidiary or subsidiaries
to carry out the terms of this Agreement.
SECTION 14. SURVIVABILITY/ASSIGNABILITY.
This Agreement and each of its provisions shall be binding upon and
inure to the benefit of the parties and their respective heirs and successors.
Nothing in this Agreement is intended or shall be construed to give any person
or entity other than the parties and their respective heirs or successors any
rights or remedies under or by reason of the Agreement and neither party shall
assign its rights and obligations hereunder without the express written consent
of the other party, which consent each party reserves the right to withhold in
its sole and absolute discretion.
SECTION 15. NOTICES.
All notices and other communications required or permitted under this
Agreement shall be in writing, shall be deemed delivered upon receipt, and shall
be delivered in person or by courier or sent by certified or registered mail,
return receipt requested, first class, postage prepaid, to the parties at their
respective addresses set forth below, or as to any party at such other address
as shall be designated by such party in a written notice to the other party:
To TransAct: TransAct Technologies Incorporated
7 Laser Lane
Wallingford, CT 06492
Attention: President
To Tridex: Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: President
SECTION 16. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Connecticut.
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SECTION 17. COSTS AND EXPENSES.
In any action brought to enforce or interpret this Agreement, each
party shall pay its own costs and expenses of maintaining or defending such
action.
SECTION 18. REMEDIES CUMULATIVE.
The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute one and the same Agreement.
SECTION 20. SEVERABILITY.
In the event that any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court or governmental agency having
jurisdiction, this Agreement shall be construed as if such portion had not been
inserted herein, except when such construction would operate as an undue
hardship on any party to this Agreement or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this
Agreement.
SECTION 21. AMENDMENTS; WAIVER.
This Agreement may be amended, and the observance of any terms of this
Agreement may be waived, only in a written document signed by Tridex and
TransAct.
SECTION 22. EFFECTIVENESS OF AGREEMENT.
This Agreement shall become effective upon the Effective Date and shall
continue in effect until otherwise agreed in writing by Tridex and TransAct, or
their successors.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
TRIDEX CORPORATION
By:_________________________
Title:______________________
TRANSACT TECHNOLOGIES INCORPORATED
By:_________________________
Title:______________________
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EXHIBIT 10.7
================================================================================
FORM OF
TransAct Technologies Incorporated
1996 STOCK PLAN
Effective ________________
================================================================================
2
TransAct Technologies Incorporated
1996 STOCK PLAN
1. Purpose
TransAct Technologies Incorporated (the "Company") desires to attract
and retain the best available talent and encourage the highest level of
performance by employees and other persons who perform services for the Company
in order to serve the best interests of the Company and stockholders. By
affording eligible persons the opportunity to acquire proprietary interests in
the Company and by providing them incentives to put forth maximum efforts for
the success of the Company's business, the TransAct Technologies Incorporated
1996 Stock Plan (the "1996 Plan") is expected to contribute to the attainment of
those objectives.
2. Scope and Duration
Awards under the 1996 Plan may be granted in the form of incentive
stock options ("incentive stock options") as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), in the form of
non-qualified stock options ("non-qualified options") (unless otherwise
indicated, references in the 1996 Plan to "options" include incentive stock
options and non-qualified options), in the form of shares of the common stock,
par value $.01 per share, of the Company (the "Common Stock") that are
restricted as provided in paragraph 11 ("restricted shares"), in the form of
units to acquire shares of Common Stock that are restricted as provided in
paragraph 11 ("restricted units") or in the form of stock appreciation rights
("rights") or limited stock appreciation rights ("limited rights"). The maximum
aggregate number of shares of Common Stock as to which awards may be granted
from time to time under the 1996 Plan is 660,000 shares. The shares available
may be in whole or in part, as the Board of Directors of the Company (the "Board
of Directors") shall from time to time determine, authorized but unissued shares
or issued shares reacquired by the Company. Unless otherwise provided by the
Compensation Committee, shares covered by expired or terminated options and
forfeited restricted shares or restricted units will be available for subsequent
awards under the 1996 Plan, except to the extent prohibited by Rule 16b-3, as
amended, or any successor provision thereto ("Rule 16b-3"), or other applicable
rules under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Any shares issued by the Company in respect of the
assumption or substitution of outstanding awards from a corporation or other
business entity by the Company shall not reduce the number of shares available
for awards under the 1996 Plan. No incentive stock option shall be granted more
than 10 years after the Effective Date.
3. Administration
The 1996 Plan shall be administered by the Compensation Committee of
the Board of Directors, consisting of not less than two members who shall
qualify to administer the 1996 Plan as contemplated by Rule 16b-3 (unless Rule
16b-3 shall permit fewer than two members to so qualify); provided, however,
that, with respect to individual participants who are not subject to Section
16(b) of the Exchange Act, the Compensation Committee of the Board of Directors
may delegate authority to administer the 1996 Plan to another committee of
directors which committee may include directors who do not meet the standards
set forth immediately above. Unless the context otherwise requires, the term
"Committee" shall refer to both the Compensation Committee and any other
committee of directors to whom authority have been delegated.
3
The Committee shall have plenary authority in its discretion, subject
to and not inconsistent with the express provisions of the 1996 Plan to grant
options, to determine the purchase price of the shares of Common Stock covered
by each option, the term of each option, the persons to whom, and the time or
times at which options shall be granted, and the number of shares to be covered
by each option; to designate options as incentive stock options or non-qualified
options and to determine which options shall be accompanied by rights and
limited rights; to grant rights and to determine the terms and conditions
applicable to such rights; to grant restricted shares and restricted units and
to determine the term of the restricted period and other conditions applicable
to such shares or units, the persons to whom, and the time or times at which,
restricted shares or restricted units shall be granted and the number of shares
or units to be covered by each grant; to interpret the 1996 Plan; to prescribe,
amend and rescind rules and regulations relating to the 1996 Plan; to determine
the terms and provisions of the option and rights agreements (which need not be
identical) and the restricted share and restricted units agreements (which need
not be identical) entered into in connection with awards under the 1996 Plan;
and to make all other determinations deemed necessary or advisable for the
administration of the 1996 Plan. The Committee may delegate to one or more of
its members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the 1996 Plan.
The Committee may employ attorneys, consultants, accountants or other
persons and the Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all persons who have
received awards, the Company and all other interested persons. No member or
agent of the Committee shall be personally liable for any action, determination
or interpretation taken or made in good faith with respect to the 1996 Plan or
awards made thereunder, and all members and agents of the Committee shall be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
4. Eligibility; Factors to be Considered in Granting Awards
Awards will be limited to officers and other key employees of the
Company and its subsidiaries, and except in the case of incentive stock options,
any other non-employees who may provide services to the Company or its
subsidiaries (all such persons being hereinafter referred to as "employees"). In
determining the employees to whom awards shall be granted and the number of
shares or units to be covered by each award, the Committee shall take into
account the nature of the employees' duties, their present and potential
contributions to the success of the Company and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the 1996 Plan. A
director of the Company or of a subsidiary who is not also an employee of the
Company (or deemed to be an employee of the Company as provided above) will not
be eligible to receive an award.
Awards may be granted singly, in combination or in tandem and may be
made in combination or in tandem with, in replacement of, or as alternatives to,
awards or grants under any other employee plan maintained by the Company, its
present and future subsidiaries. An employee who has been granted an award or
awards under the 1996 Plan may be granted an additional award or awards, subject
to such limitations as may be imposed by the Code on the grant of incentive
stock options. No award of incentive stock options shall result in the aggregate
fair market value of Common Stock with respect to which incentive stock options
are exercisable for the first time by any employee during any calendar year
(determined at the time the incentive stock option is granted) exceeding
$100,000. The Committee, in its sole discretion, may grant to an employee who
has been granted an award under the 1996 Plan or any other employee plan
maintained by the Company or its subsidiaries, or any predecessors or successors
thereto, in exchange for the surrender and cancellation of such award, a new
award in the same or a different form and containing such terms, including
without limitation a price which is different (either higher or lower) than any
price provided in the award so surrendered and cancelled, as the Committee may
deem appropriate.
2
4
5. Option Price
The purchase price of the Common Stock covered by each option shall be
determined by the Committee, but in the case of an incentive stock option shall
not be less than 100% of the fair market value (110% in the case of a 10%
shareholder of the Company) of the Common Stock on the date the option is
granted, which shall be deemed to equal the closing price of the Common Stock as
quoted by NASDAQ (the "Market Value") for the date on which the option is
granted, or if there are no sales on such date, on the next preceding day on
which there were sales. The Committee shall determine the date on which an
option is granted, provided that such date is consistent with the Code and any
applicable rules or regulations thereunder. In the absence of such
determination, the date on which the Committee adopts a resolution granting an
option shall be considered the date on which such option is granted, provided
the employee to whom the option is granted is promptly notified of the grant and
an option agreement is duly executed as of the date of the resolution. The
purchase price of the Common Stock covered by each option shall also be
applicable in connection with the exercise of any related right or limited
right. The purchase price shall be subject to adjustment as provided in
paragraph 14.
6. Terms of Options
The term of each incentive stock option granted under the 1996 Plan
shall not be more than 10 years (5 years in the case of a 10% shareholder of the
Company) from the date of grant, as the Committee shall determine, subject to
earlier termination as provided in paragraphs 12 and 13. The term of each
non-qualified stock option granted under the 1996 Plan shall be such period of
time as the Committee shall determine, subject to earlier termination as
provided in paragraphs 12 and 13.
7. Exercise of Options; Loans
(a) Subject to the provisions of the 1996 Plan, an option granted under
the 1996 Plan shall become vested as determined by the Committee. The Committee
may, in its discretion, determine as a condition of any option, that all or a
stated percentage of the options shall become exercisable, in installments or
otherwise, only after completion of a specified service requirement. The
Committee may also, in its discretion, accelerate the exercisability of any
option at any time and provide, in any option agreement, that the option shall
become immediately exercisable as to all shares of Common Stock remaining
subject to the option on or following either (i) the first purchase of shares of
Common Stock pursuant to a tender offer or exchange offer (other than an offer
by the Company or any of its subsidiaries) for all, or any part of, the Common
Stock ("Offer"), (ii) a change in control of the Company (as defined in this
paragraph), (iii) approval by the Company's stockholders of a merger in which
the Company does not survive as an independent, publicly owned corporation, a
consolidation, or a sale, exchange or other disposition of all or substantially
all the Company's assets, or (iv) a change in the composition of the Board of
Directors during any period of two consecutive years such that individuals who
at the beginning of such period were members of the Board of Directors cease for
any reason to constitute at least a majority thereof, unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period (the date upon which an
event described in clause (i), (ii), (iii) or (iv) of this paragraph 7(a) occurs
shall be referred to herein as an "acceleration date"). A "change in control" is
deemed to occur at the time of any acquisition of voting securities of the
Company by any person or group (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), but excluding (i) the Company or any of its subsidiaries,
(ii) any person who was an officer or director of the Company on the day
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immediately prior to the Effective Date hereof, or (iii) any savings, pension or
other benefits plan for the benefit of employees of the Company or any of its
subsidiaries, which theretofore did not beneficially own voting securities
representing more than 30% of the voting power of all outstanding voting
securities of the Company, if such acquisition results in such entity, person or
group owning beneficially securities representing more than 30% of the voting
power of all outstanding voting securities of the Company. As used herein,
"voting power" means ordinary voting power for the election of directors of the
Company.
(b) An option may be exercised at any time or from time to time
(subject, in the case of an incentive stock option, to such restrictions as may
be imposed by the Code), as to any or all full shares as to which the option has
become exercisable. Notwithstanding the foregoing provision, no option may be
exercised without the prior consent of the Committee by an employee who is
subject to Section 16(b) of the Exchange Act until the expiration of six months
from the date of the grant of the option.
(c) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise; payment may be made in cash,
which may be paid by check, or other instrument acceptable to the Company, or,
with the consent of the Committee, in shares of the Common Stock, valued at the
Market Value on the date of exercise, or if there were no sales on such date, on
the next preceding day on which there were sales or (if permitted by the
Committee and subject to such terms and conditions as it may determine) by
surrender of outstanding awards under the 1996 Plan. In addition, any amount
necessary to satisfy applicable federal, state or local tax requirements shall
be paid promptly upon notification of the amount due. The Committee may permit
such amount to be paid in shares of Common Stock previously owned by the
employee, or a portion of the shares of Common Stock that otherwise would be
distributed to such employee upon exercise of the option, or a combination of
cash and shares of such Common Stock.
(d) Except as provided in paragraphs 12 and 13, no option may be
exercised at any time unless the holder thereof is then an employee of or
performing services for the Company or one of its subsidiaries. For this
purpose, "subsidiary" shall include, as under Treasury Regulations Section
1.421-7(h)(3) and (4), Example (3), any corporation that is a subsidiary of the
Company during the entire portion of the requisite period of employment during
which it is the employer of the holder.
(e) The Committee, in its sole discretion, may elect, in lieu of
delivering all or a portion of the shares of Common Stock as to which an option
has been exercised, if the fair market value of the Common Stock exceeds the
exercise price of the option (i) to pay the employee in cash or in shares of
Common Stock, or a combination of cash and Common Stock, an amount equal to the
excess of (A) the Market Value on the exercise date of the shares of Common
Stock as to which such option has been exercised, or if there were no sales on
such date, on the next preceding day on which there were sales over (B) the
option price, or (ii) in the case of an option which is a non-qualified option,
to defer payment and to credit the amount of such excess on the Company's books
for the account of the optionee and either (a) to treat the amount in such
account as if it had been invested in the manner from time to time determined by
the Committee, with dividends or other income therein being deemed to have been
so reinvested or (b) for the Company's convenience, to contribute the amount
credited to such account to a trust, which may be revocable by the Company, for
investment in the manner from time to time determined by the Committee and set
forth in the instrument creating such trust; provided, however, that, to the
extent required by Rule 16b-3 or other applicable rules under Section 16(b) of
the Exchange Act, in order to perfect the exemption provided thereunder for cash
settlements of stock appreciation rights, the Committee shall not exercise its
discretion to grant cash to any employee who is subject to the provisions of
Section 16(b) of the Exchange Act unless the exercise occurs during any period
commencing on the third business day following the date of release for
publication of any annual or quarterly summary statements of the Company's sales
and earnings and ending on the twelfth business day following such date (a
"Window Period"). The Committee's election pursuant to this subparagraph shall
be made by giving
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written notice of such election to the employee (or other person exercising the
option). Shares of Common Stock paid pursuant to this subparagraph will be
valued at the Market Value on the exercise date, or if there were no sales on
such date, on the next preceding day on which there were sales.
(f) Subject to any terms and conditions that the Committee may
determine in respect of the exercise of options involving the surrender of
outstanding awards, upon, but not until, the exercise of an option or portion
thereof in accordance with the 1996 Plan, the option agreement and such rules
and regulations as may be established by the Committee, the holder thereof shall
have the rights of a stockholder with respect to the shares issued as a result
of such exercise.
(g) The Company may make loans to such option holders as the Committee,
in its discretion, may determine (including a holder who is a director or
officer of the Company) in connection with the exercise of options granted under
the 1996 Plan; provided, however, that the Committee shall not authorize the
making of any loan where the possession of such discretion or the making of such
loan would result in a "modification" (as defined in Section 424 of the Code) of
any incentive stock option. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Committee shall
determine not inconsistent with the 1996 Plan. Such loans shall bear interest at
such rates as the Committee shall determine from time to time, which rates may
be below then current market rates (except in the case of incentive stock
options). In no event may any such loan exceed the fair market value, at the
date of exercise, of the shares covered by the option, or portion thereof,
exercised by the holder. No loan shall have an initial term exceeding five
years, but any such loan may be renewable at the discretion of the Committee.
When a loan shall have been made, shares of Common Stock having a fair market
value at least equal to the principal amount of the loan shall be pledged by the
holder to the Company as security for payment of the unpaid balance of the loan.
Every loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
8. Award and Exercise of Rights
(a) A right may be awarded by the Committee in connection with any
option granted under the 1996 Plan (a "tandem right"), either at the time the
option is granted or thereafter at any time prior to the exercise, termination
or expiration of the option. A right may also be awarded separately (a
"free-standing right"). Each tandem right shall be subject to the same terms and
conditions as the related option and shall be exercisable only to the extent the
option is exercisable.
The term of each freestanding right granted under the 1996 Plan shall
be such period of time as the Committee shall determine. Subject to the
provisions of the 1996 Plan, such right shall become vested as determined by the
Committee. Prior to becoming 100% vested, each freestanding right shall become
exercisable, in installments or otherwise, as the Committee shall determine. The
Committee may also, in its discretion, accelerate the exercisability of any
freestanding right at any time and provide, in the agreement covering a
freestanding right, that the right shall become immediately exercisable on or
following an acceleration date (as defined in paragraph 7(a)).
No right shall be exercisable by an employee who is subject to the
provisions of Section 16(b) of the Exchange Act without the prior consent of the
Committee prior to the expiration of six months from the date the right is
awarded (and then, as to a tandem right, only to the extent the related option
is exercisable). Notwithstanding the foregoing, no right shall be exercisable by
an employee who is subject to the provisions of Section 16(b) of the Exchange
Act without the prior consent of the Committee prior to the expiration of one
year from the date of the initial sale of shares of Common Stock of the Company
to the public.
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(b) A right shall entitle the employee upon exercise in accordance with
its terms (subject, in the case of a tandem right, to the surrender unexercised
of the related option or any portion or portions thereof which the employee from
time to time determines to surrender for this purpose) to receive, subject to
the provisions of the 1996 Plan and such rules and regulations as from time to
time may be established by the Committee, a payment having an aggregate value
equal to (A) the excess of (i) the fair market value on the exercise date of one
share over (ii) the option price per share, in the case of a tandem right, or
the price per share specified in the terms of the right, in the case of a
freestanding right, times (B) the number of shares with respect to which the
right shall have been exercised. The payment shall be made in the form of all
cash, all shares of Common Stock, or a combination thereof, as elected by the
employee, provided that, unless otherwise approved by the Committee, the
election by an employee who is subject to the provisions of Section 16(b) of the
Exchange Act to receive all or a part of a payment in cash, as well as the
exercise by the employee of the right for cash, shall be made only during a
Window Period (as defined in paragraph 7(e) hereof); and provided further, that
the Committee shall have sole discretion to consent to or disapprove the
election of an officer or director to receive all or part of a payment in cash
(which consent or disapproval may be given at any time after the election to
which it relates). The price per share specified in a freestanding right shall
be determined by the Committee but in no event shall be less than the average of
the daily closing prices for the Common Stock as reported by NASDAQ during a
period determined by the Committee in its sole discretion that shall consist of
any trading day or any number of consecutive trading days, not exceeding 30,
during the period of 30 trading days ending on the trading day immediately
preceding the date the right is granted, provided that, in the absence of a
different determination by the Committee, the price per share shall be
determined on the basis of a period consisting of 30 trading days. Such price
shall be subject to adjustment as provided in paragraph 14. The Committee shall
determine the date on which a freestanding right is granted. In the absence of
such determination, the date on which the Committee adopts a resolution granting
such right shall be considered the date of grant, provided the employee is
promptly notified of the grant and an agreement is duly executed as of the date
of the resolution.
If upon exercise of a right the employee is to receive a portion of the
payment in shares of Common Stock, the number of shares received shall be
determined by dividing such portion by the fair market value of a share on the
exercise date. The number of shares received may not exceed the number of shares
covered by any option or portion thereof surrendered. Cash will be paid in lieu
of any fractional share.
No payment will be required from the employee upon exercise of a right,
except that any amount necessary to satisfy applicable federal, state or local
tax requirements shall be withheld or paid promptly upon notification of the
amount due and prior to or concurrently with delivery of cash or a certificate
representing shares. The Committee may permit such amount to be paid in shares
of Common Stock previously owned by the employee, or a portion of the shares of
Common Stock that otherwise would be distributed to such employee upon exercise
of the right, or a combination of cash and shares of such Common Stock.
(c) For purposes of this paragraph 8, the fair market value of a share
on any particular date shall mean the Market Value of such share on such date,
or if there are no sales on such date, on the next preceding day on which there
were sales; provided, however, that with respect to exercises of rights by an
employee who is subject to the provisions of Section 16(b) of the Exchange Act
during any Window Period, the Committee may prescribe, by rule of general
application, such other measure of fair market value per share as the Committee
may, in its discretion, determine but not in excess of the highest sale price of
the Common Stock during such Window Period and, in the case of rights that
relate to an incentive stock option, not in excess of the maximum amount that
would be permissible under Section 422 of the Code and the Treasury Regulations
thereunder without disqualifying such option as an incentive stock option under
Section 422.
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(d) Upon exercise of a tandem right, the number of shares subject to
exercise under the related option shall automatically be reduced by the number
of shares represented by the option or portion thereof surrendered.
(e) A right related to an incentive stock option may only be exercised
if the fair market value of a share of Common Stock on the exercise date exceeds
the option price.
(f) Whether payments to employees upon exercise of tandem rights
related to non-qualified options or of freestanding rights are made in cash,
shares of Common Stock or a combination thereof, the Committee shall have sole
discretion as to timing of the payments, whether in one lump sum or in annual
installments or otherwise deferred, which deferred payments may in the
Committee's sole discretion (i) bear amounts equivalent to interest or cash
dividends, (ii) be treated as invested in the manner from time to time
determined by the Committee, with dividends or other income thereon being deemed
to have been so reinvested, or (iii) for the convenience of the Company,
contributed to a trust, which may be revocable by the Company or subject to the
claims of its creditors, for investment in the manner from time to time
determined by the Committee and set forth in the instrument creating such trust,
all as the Committee shall determine.
(g) If a freestanding right is not exercised, or neither a tandem right
nor the related option is exercised, before the end of the day on which the
right ceases to be exercisable and the fair market value of a share on such date
exceeds (i) the option price per share in the case of a tandem right or (ii) the
price per share specified in the terms of the right in the case of a
freestanding right, such right shall be deemed exercised and a payment in the
amount prescribed by subparagraph 8(b), less any applicable taxes, shall be paid
to the employee in cash.
9. Award and Exercise of Limited Rights
(a) A limited right may be awarded by the Committee in connection with
any option granted under the 1996 Plan with respect to all or some of the shares
of Common Stock covered by such related option. A limited right may be granted
either at the time the option is granted or thereafter at any time prior to the
exercise, termination or expiration of the option. A limited right may be
granted to an employee irrespective of whether such employee is being granted or
has been granted a right under paragraph 8 hereof. A limited right may be
exercised only during the ninety-day period beginning on an acceleration date
(as defined in paragraph 7(a)). In addition, each limited right shall be
exercisable only if, and to the extent that, the related option is exercisable
and, in the case of a limited right granted in respect of an incentive stock
option, only when the fair market value per share of the Common Stock exceeds
the option price per share. Upon exercise of a limited right, such related
option shall cease to be exercisable to the extent of the shares of Common Stock
with respect to which such limited right is exercised. Upon the exercise or
termination of a related option, the limited right with respect to such related
option shall terminate to the extent of the shares of Common Stock with respect
to which the related option was exercised or terminated.
(b) Upon the exercise of limited rights, the holder thereof shall
receive in cash whichever of the following amounts is applicable:
(i) in the case of an exercise of limited rights by reason of the
occurrence of an Offer (as defined in paragraph 7(a)(i)), an amount equal to the
Offer Spread (as defined in paragraph 9(d));
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(ii) in the case of an exercise of limited rights by reason of an
acquisition of Common Stock described in paragraph 7(a)(ii), an amount equal to
the Acquisition Spread (as defined in paragraph 9(h) hereof);
(iii) in the case of an exercise of limited rights by reason of an
event described in paragraph 7(a)(iii), an amount equal to the Merger Spread (as
defined in paragraph 9(f) hereof); or
(iv) in the case of an exercise of limited rights by reason of a change
in the composition of the Board of Directors as described in paragraph 7(a)(iv),
an amount equal to the Spread (as defined in paragraph 9(i) hereof).
Notwithstanding the foregoing, in the case of a limited right granted
in respect of an incentive stock option, the holder may not receive an amount in
excess of such amount as will enable such option to qualify as an incentive
stock option.
(c) The term "Offer Price per Share" as used in this paragraph 9 shall
mean, with respect to the exercise of any limited right by reason of the
occurrence of an Offer, the greater of (i) the highest price per share of Common
Stock paid in any Offer, which Offer is in effect at any time during the
ninety-day period ending on the date on which such limited right is exercised,
or (ii) the highest fair market value per share of Common Stock during such
ninety-day period. Any securities or property which are part or all of the
consideration paid for shares of Common Stock in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.
(d) The term "Offer Spread" as used in this paragraph 9 shall mean an
amount equal to the product computed by multiplying (i) the excess of (A) the
Offer Price per Share over (B) the option price per share of Common Stock at
which the related option is exercisable, by (ii) the number of shares of Common
Stock with respect to which such limited right is being exercised.
(e) The term "Merger Price per Share" as used in this paragraph 9 shall
mean, with respect to the exercise of any limited right by reason of an event
described in paragraph 7(a) (iii), the greater of (i) the fixed or formula price
for the acquisition of shares of Common Stock occurring pursuant to such event
if such fixed or formula price is determinable on the date on which such limited
right is exercised, and (ii) the highest fair market value per share of Common
Stock during the ninety-day period ending on the date on which such limited
right is exercised. Any securities or property which are part or all of the
consideration paid for shares of Common Stock pursuant to such event shall be
valued in determining the Merger Price per Share at the higher of (A) the
valuation placed on such securities or property by the corporation, person or
other entity which is a party with the Company to such event or (B) the
valuation placed on such securities or property by the Committee.
(f) The term "Merger Spread" as used in this paragraph 9 shall mean an
amount equal to the product computed by multiplying (i) the excess of (A) the
Merger Price per Share over (B) the option price per share of Common Stock at
which the related option is exercisable, by (ii) the number of shares of Common
Stock with respect to which such limited right is being exercised.
(g) The term "Acquisition Price per Share" as used in this paragraph 9
shall mean, with respect to the exercise of any limited right by reason of an
acquisition of Common Stock described in paragraph 7(a)(ii), the greater of (i)
the highest price per share stated on the Schedule 13D or any amendment thereto
filed by the holder of 30% or more of the Company's voting power which gives
rise to the exercise of such limited right, and (ii) the highest fair market
value per share of Common Stock during the ninety-day period ending on the date
the limited right is exercised.
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(h) The term "Acquisition Spread" as used in this paragraph 9 shall
mean an amount equal to the product computed by multiplying (i) the excess of
(A) the Acquisition Price per Share over (B) the option price per share of
Common Stock at which the related option is exercisable, by (ii) the number of
shares of Common Stock with respect to which such limited right is being
exercised.
(i) The term "Spread" as used in this paragraph 9 shall mean, with
respect to the exercise of any limited right by reason of a change in the
composition of the Board described in paragraph 7(a) (iv), an amount equal to
the product computed by multiplying (i) the excess of (A) the highest fair
market value per share of Common Stock during the ninety-day period ending on
the date the limited right is exercised over (B) the option price per share of
Common Stock at which the related option is exercisable, by (ii) the number of
shares of Common Stock with respect to which the limited right is being
exercised.
(j) Notwithstanding any other provision of the 1996 Plan, rights
granted pursuant to paragraph 8 may not be exercised to the extent that any
limited rights granted with respect to the same option are then exercisable.
(k) For purposes of this paragraph 9, "fair market value per share of
Common Stock" for any day shall mean the Market Value for such day (or if there
were no sales on such day, on the next preceding day on which there were sales).
10. Non-Transferability of Options and Rights
Options, rights and limited rights granted under the 1996 Plan shall
not be transferable otherwise than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
Section 414(p) of the Code. Options, rights and limited rights may be exercised
during the lifetime of the employee only by the employee or by the employee's
guardian or legal representative (unless such exercise would disqualify an
option as an incentive stock option).
11. Award and Delivery of Restricted Shares or Restricted Units
(a) At the time an award of restricted shares or restricted units is
made, the Committee shall establish a period of time (the "Restricted Period")
applicable to such award. Each award of restricted shares or restricted units
may have a different Restricted Period. The Committee may, in its sole
discretion, at the time an award is made, prescribe conditions for the
incremental lapse of restrictions during the Restricted Period, for the lapse or
termination of restrictions upon the satisfaction of other conditions in
addition to or other than the expiration of the Restricted Period with respect
to all or any portion of the restricted shares or restricted units and provide
for the lapse of all restrictions with respect to all restricted shares or
restricted units covered by the award upon the occurrence of an acceleration
date as defined in paragraph 7(a). The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any conditions
for the lapse or termination of restrictions with respect to all or any portion
of the restricted shares or restricted units. Notwithstanding the foregoing, all
restrictions shall lapse or terminate with respect to all restricted shares or
restricted units upon death or total disability (as defined in paragraph 13).
(b) Upon the grant of an award of restricted shares, a stock
certificate representing a number of shares of Common Stock equal to the number
of restricted shares granted to an employee shall be registered in the
employee's name but shall be held in custody by the Company for the employee's
account. The employee shall generally have the rights and privileges of a
stockholder as to such restricted shares, including the right to
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vote such restricted shares, except that, subject to the provisions of paragraph
12, the following restrictions shall apply: (i) the employee shall not be
entitled to delivery of the certificate until the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed by
the Committee; (ii) none of the restricted shares may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the Restricted
Period and until the satisfaction of any other conditions prescribed by the
Committee; and (iii) all of the restricted shares shall be forfeited and all
rights of the employee to such restricted shares shall terminate without further
obligation on the part of the Company unless the employee has remained an
employee of the Company or any of its subsidiaries or any combination thereof
until the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee applicable to
such restricted shares. At the discretion of the Committee, cash and stock
dividends with respect to the restricted shares may be either currently paid or
withheld by the Company for the employee's account subject to the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, and interest may be paid on the amount
of cash dividends withheld at a rate and subject to such terms as determined by
the Committee. Upon the forfeiture of any restricted shares, such forfeited
restricted shares and any cash or stock dividends withheld for the employee's
account shall be transferred to the Company without further action by the
employee. The employee shall have the same rights and privileges, and be subject
to the same restrictions, with respect to any shares received pursuant to
paragraph 14.
(c) Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee or at such
earlier time as provided for in paragraph 12, the restrictions applicable to the
restricted shares shall lapse and a stock certificate for the number of shares
of Common Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, except any that may be imposed by law,
to the employee or the employee's beneficiary or estate, as the case may be. The
Company shall not be required to deliver any fractional share of Common Stock
but will pay, in lieu thereof, the fair market value (determined as of the date
the restrictions lapse) of such fractional share to the employee or the
employee's beneficiary or estate, as the case may be. No payment will be
required from the employee upon the issuance or delivery of any restricted
shares, except that any amount necessary to satisfy applicable federal, state or
local tax requirements shall be withheld or paid promptly upon notification of
the amount due and prior to or concurrently with the issuance or delivery of a
certificate representing such shares. The Committee may permit such amount to be
paid in (i) shares of Common Stock previously owned by the employee, (ii) a
portion of the shares of Common Stock that otherwise would be distributed to
such employee upon the lapse of the restrictions applicable to the restricted
shares, or (iii) a combination of cash and shares of such Common Stock;
provided, however, unless otherwise approved by the Committee, that an election
by an employee subject to Section 16(b) of the Exchange Act to use shares of
Common Stock described in clause (ii) above to satisfy any federal, state or
local tax requirement shall be made only during a Window Period (as defined in
paragraph 7(e) hereof), and provided further that the Committee shall have sole
discretion to consent to or disapprove of any such election (which consent or
disapproval may be given at any time after the election to which it relates).
(d) In the case of an award of restricted units, no shares of Common
Stock shall be issued at the time the award is made, and the Company shall not
be required to set aside a fund for the payment of any such award. At the
discretion of the Committee, cash and stock dividends with respect to the Common
Stock ("Dividend Equivalents") may be currently paid or withheld by the Company
for the employee's account subject to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee, and interest may be paid on the amount of cash dividends withheld at
a rate and subject to such terms as determined by the Committee.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee or at such
earlier time as provided for in paragraph 12, the Company shall deliver to the
employee or the employee's beneficiary or estate, as the case may be, one share
of Common
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Stock for each restricted unit with respect to which the restrictions have
lapsed ("vested unit"), and cash equal to any Dividend Equivalents credited with
respect to each such vested unit and any interest thereon; provided, however,
that the Committee may, in its sole discretion, elect to pay cash or part cash
and part Common Stock in lieu of delivering only Common Stock for vested units.
If a cash payment is made in lieu of delivering Common Stock, the amount of such
cash payment shall be equal to the Market Value for the date on which the
Restricted Period lapsed with respect to such vested unit, or if there are no
sales on such date, on the next preceding day on which there were sales. No
payment will be required from the employee upon the award of any restricted
units, the crediting or payment of any Dividend Equivalents, or the delivery of
Common Stock or the payment of cash in respect of vested units, except that any
amount necessary to satisfy applicable federal, state or local tax requirements
shall be withheld or paid promptly upon notification of the amount due. The
Committee may permit such amount to be paid in (i) shares of Common Stock
previously owned by the employee, (ii) a portion of the shares of Common Stock
that otherwise would be distributed to such employee in respect of vested units,
or (iii) a combination of cash and shares of such Common Stock; provided,
however, unless otherwise approved by the Committee, that an election by an
employee subject to Section 16(b) of the Exchange Act to use the shares of
Common Stock described in clause (ii) above to satisfy any federal, state or
local tax requirement shall be made only during a Window Period (as defined in
paragraph 7(e) hereof); and provided further that the Committee shall have sole
discretion to consent to or disapprove of any such election (which consent or
disapproval may be given at any time after the election to which it relates).
Upon the occurrence of an acceleration date (as defined in paragraph
7(a)), all outstanding vested units (including any restricted units whose
restrictions have lapsed as a result of the occurrence of such acceleration
date) and credited Dividend Equivalents shall be payable as soon as practicable
but in no event later than 90 days after such acceleration date in cash, in
shares of Common Stock, or part in cash and part in Common Stock, as the
Committee, in its sole discretion, shall determine. To the extent that an
employee receives cash in payment for his vested units, such employee shall
receive an amount equal to the product of (i) the number of vested units
credited to such employee's account for which such employee is receiving payment
in cash times (ii) the Multiplication Factor (as defined below). To the extent
that an employee receives Common Stock in payment for his vested units, such
employee shall receive the number of shares of Common Stock determined by
dividing (i) the product of (x) the number of vested units credited to such
employee's account for which such employee is receiving payment in Common Stock
times (z) the Multiplication Factor, by (ii) the fair market value per share of
the Common Stock as of the day preceding the payment date. "Multiplication
Factor" shall mean (i) in the event of the occurrence of an Offer as defined in
paragraph 7(a)(i), the Offer Price per Share as modified below, (ii) in the case
of an acquisition of Common Stock described in paragraph 7(a) (ii), the
Acquisition Price per Share as modified below, (iii) in the case of an event
described in paragraph 7(a)(iii), the Merger Price per Share as modified below,
or (iv) in the case of a change in the composition of the Board of Directors as
described in paragraph 7(a)(iv), the highest fair market value per share of the
Common Stock for any day during the applicable ninety-day period described
below. For purposes of the preceding sentence, (i) the applicable ninety-day
period described in paragraphs 9(c), (e) and (g) and in clause (iv) above shall
mean the ninety-day period ending on or within 89 days following an acceleration
date which the Committee, in its sole discretion, shall select and (ii) fair
market value per share of the Common Stock shall mean the Market Value.
(e) The restricted unit award agreement may permit an employee to
request that the payment of vested units (and Dividend Equivalents and the
interest thereon with respect to such vested units) be deferred beyond the
payment date specified in the agreement. The Committee shall, in its sole
discretion, determine whether to permit such deferment and to specify the terms
and conditions, which are not inconsistent with the 1996 Plan, to be contained
in the agreement. In the event of such deferment, the Committee may determine
that interest shall be credited annually on the Dividend Equivalents, at a rate
to be determined by the Committee. The Committee may also determine to compound
such interest.
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12. Termination of Employment
Unless otherwise determined by the Committee, and subject to such
restrictions as may be imposed by the Code in the case of any incentive stock
options, in the event that the employment of an employee to whom an option,
right or limited right has been granted under the 1996 Plan shall be terminated
(except as set forth in paragraph 13), such option, right or limited right may,
subject to the provisions of the 1996 Plan, be exercised (to the extent that the
employee was entitled to do so at the termination of his employment) at any time
within three months after such termination, or, in the case of an employee whose
termination results from retirement from active employment at or after age 55
within one year after such termination, but in no case later than the date on
which the option, right or limited right terminates; provided, however, that any
option, right or limited right held by an employee whose employment is
terminated for cause shall forthwith terminate, to the extent not theretofore
exercised.
Unless otherwise determined by the Committee, if an employee to whom
restricted shares or restricted units have been granted ceases to be an employee
of the Company or of a subsidiary prior to the end of the Restricted Period and
the satisfaction of any other conditions prescribed by the Committee for any
reason other than death or total disability (as defined in paragraph 13), the
employee shall immediately forfeit all restricted shares and restricted units.
Awards granted under the 1996 Plan shall not be affected by any change of duties
or position so long as the holder continues to be an employee of the Company or
any of its subsidiaries. Any option, right, limited right, restricted share or
restricted unit agreement, or any rules and regulations relating to the 1996
Plan, may contain such provisions as the Committee shall approve with reference
to the determination of the date employment terminates and the effect of leaves
of absence. Any such rules and regulations with reference to any option
agreement shall be consistent with the provisions of the Code and any applicable
rules and regulations thereunder. Nothing in the 1996 Plan or in any award
granted pursuant to the 1996 Plan shall confer upon any employee any right to
continue in the employ of the Company or any of its subsidiaries or interfere in
any way with the right of the Company or any such subsidiary to terminate such
employment at any time.
Notwithstanding anything else in the 1996 Plan to the contrary, if the
corporation employing an individual to whom an option, right, limited right,
restricted unit or restricted share has been granted under the 1996 Plan ceases
to be a subsidiary of the Company, then the Committee may provide that service
with such employer or its direct or indirect subsidiaries in any capacity
shall be considered employment with the Company for purposes of the 1996 Plan.
13. Death or Total Disability of Employee
If an employee to whom an option, right or limited right has been
granted under the 1996 Plan shall die or suffer a "total disability" while
employed by the Company or its subsidiaries or within three months (or, in the
case of an employee whose termination results from retirement from active
employment at or after age 55, within one year) after the termination of such
employment (other than termination for cause), such option, right or limited
right may be exercised, to the extent that the employee was entitled to do so at
the termination of employment (including by reason of death or total
disability), as set forth herein (subject to the restrictions set forth in
paragraphs 8 and 9 with respect to persons subject to Section 16(b) of the
Exchange Act) by the employee, the legal guardian of the employee (unless such
exercise would disqualify an option as an incentive stock option), a legatee or
legatees of the employee under the employee's last will, or by the employee's
personal representatives or distributees, whichever is applicable, at any time
within one year after
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14
the date of the employee's death or total disability, but in no case later than
the date on which the option, right or limited right terminates. For purposes
hereof, "total disability" is defined as the permanent inability of an employee,
as a result of accident or sickness, to perform any and every duty pertaining to
such employee's occupation or employment for which the employee is suited by
reason of the employee's previous training, education and experience.
14. Adjustment upon Changes in Capitalization, etc.
Notwithstanding any other provision of the 1996 Plan, the Committee may
at any time, in its sole discretion, make or provide for such adjustments to the
1996 Plan, to the number and class of shares available thereunder or to any
outstanding options, rights, restricted shares or restricted units as it may
deem appropriate to prevent dilution or enlargement of rights, including
adjustments in the event of distributions to holders of Common Stock other than
a normal cash dividend, changes in the outstanding Common Stock by reason of
stock dividends, split-ups, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, liquidations
and the like. In the event of any offer to holders of Common Stock generally
relating to the acquisition of their shares, the Committee may, in its sole
discretion, make any adjustment as it deems equitable in respect of outstanding
options, rights, limited rights and restricted units, including in the
Committee's discretion revision of outstanding options, rights, limited rights
and restricted units so that they may be exercisable for or payable in the
consideration payable in the acquisition transaction. Any such determination by
the Committee shall be conclusive. No adjustment shall be made in respect of an
incentive stock option if such adjustment would disqualify such option as an
incentive stock option under Section 422 of the Code and the Treasury
Regulations thereunder. No adjustment shall be made in the minimum number of
shares with respect to which an option may be exercised at any time. Any
fractional shares resulting from such adjustments to options, rights, limited
rights or restricted units shall be eliminated.
15. Effective Date
The 1996 Plan shall be effective as of ___________, 1996, (the
"Effective Date"), provided that the adoption of the 1996 Plan shall have been
approved by the stockholders of the Company. The Committee thereafter may, in
its discretion, grant awards under the 1996 Plan, the grant, exercise or payment
of which shall be expressly subject to the conditions that, to the extent
required at the time of grant, exercise or payment, (i) if the Company deems it
necessary or desirable, a Registration Statement under the Securities Act of
1933 with respect to such shares shall be effective, and (ii) any requisite
approval or consent of any governmental authority of any kind having
jurisdiction over awards granted under the 1996 Plan shall be obtained.
16. Termination and Amendment
The Board of Directors of the Company may suspend, terminate, modify or
amend the 1996 Plan, provided that any amendment that would increase the
aggregate number of shares that may be issued under the 1996 Plan, materially
increase the benefits accruing to participants under the 1996 Plan, or
materially modify the requirements as to eligibility for participation in the
1996 Plan shall be subject to the approval of the Company's stockholders to the
extent required by Rule 16b-3, applicable law or any other governing rules or
regulations, except that any such increase or modification that may result from
adjustments authorized by paragraph 14 does not require such approval. If the
1996 Plan is terminated, the terms of the 1996 Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. In
addition, no suspension, termination, modification or amendment of the 1996 Plan
may, without the consent of the employee to whom an award shall theretofore have
been granted, adversely affect the rights of such employee under such award.
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15
17. Written Agreements
Each award of options, rights, limited rights, restricted shares or
restricted units shall be evidenced by a written agreement, executed by the
employee and the Company, which shall contain such restrictions, terms and
conditions as the Committee may require.
18. Effect on Other Stock Plans
The adoption of the 1996 Plan shall have no effect on awards made or to
be made pursuant to other stock plans covering employees of the Company or its
subsidiaries, or any predecessors or successors thereto.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Plan as of the _____ day of ________, 1996.
TransAct Technologies Incorporated
By:________________________________
Title:_____________________________
14
1
Exhibit 10.8
FORM OF
TransAct Technologies Incorporated
NON-EMPLOYEE DIRECTORS' STOCK PLAN
TransAct Technologies Incorporated Non-Employee Directors' Stock Plan
(the "Plan") is adopted by TransAct Technologies Incorporated (the "Company")
for the purpose of advancing the interests of the Company by providing
compensation and other incentives for the continued services of the Company's
non-employee directors and by attracting able individuals to directorships with
the Company.
1. Definitions. For purposes of this Plan, the following terms shall
have the meanings set forth below:
"Administrator" means the person(s) appointed by the Board to
administer the Plan as provided in Paragraph 2 hereof.
"Annual Meeting" means the annual meeting of the Company's
stockholders.
"Board" means the Board of Directors of TransAct Technologies
Incorporated.
"Change of Control" means (i) approval by the Company's stockholders of
a merger in which the Company does not survive as an independent, publicly owned
corporation, a consolidation, or a sale, exchange or other disposition of all or
substantially all the Company's assets, or (ii) any acquisition of voting
securities of the Company by any person or group (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), but excluding (a) the Company or
any of its subsidiaries, (b) any person who was an officer or director of the
Company on the day prior to the Effective Date, or (c) any savings, pension or
other benefits plan for the benefit of employees of the Company or any of its
subsidiaries, which theretofore did not beneficially own voting securities
representing more than 30% of the voting power of all outstanding voting
securities of the Company, if such acquisition results in such entity, person or
group owning beneficially securities representing more than 30% of the voting
power of all outstanding voting securities of the Company. As used herein,
"voting power" means ordinary voting power for the election of directors of the
Company.
"Common Shares" means the Company's common stock, $.01 par value per
share.
"Company" means TransAct Technologies Incorporated, a Delaware
corporation.
"Effective Date" means the date of the initial offering of the
Company's Common Shares to the public.
"Grant Date" means the effective date of a grant of options pursuant to
Paragraph 4(a) hereof.
"Market Value" means the closing price of the Common Shares as reported
by NASDAQ.
"Participant" means a director who has met the requirements of
eligibility and participation described in Paragraph 3 hereof.
2. Administration. The Plan shall be administered by the Administrator.
The Administrator may establish, subject to the provisions of the Plan, such
rules and regulations as it deems necessary for the proper
2
administration of the Plan, and make such determination and take such action in
connection therewith or in relation to the Plan as it deems necessary or
advisable, consistent with the Plan.
3. Eligibility and Participation.
(a) A non-employee director of the Company shall automatically become a
Participant in the Plan as of the later of (i) the Effective Date, or (ii) the
date of initial election to the Board. A director who is a regular employee or
officer of the Company is not eligible to participate in the Plan.
(b) A Participant shall cease participation in the Plan as of the date
the Participant (i) fails to be re-elected to the Board, (ii) resigns or
otherwise vacates his position on the Board, or (iii) becomes a regular employee
or officer of the Company.
4. Compensation. For all services rendered as a director of the
Company, the Company shall grant options to each Participant as provided herein.
(a) Grant of Options. Each person who is a Participant on the Effective
Date shall be awarded a non-qualified option to purchase 10,000 Common Shares
effective as of the Effective Date, at a price equal to the Market Value of
Common Shares on that date. Any person who becomes a Participant after the
Effective Date shall be awarded non-qualified options to purchase 5,000 Common
Shares effective as of the date of the Annual Meeting at which such election
occurs, or if the Participant is first elected to the Board other than at an
Annual Meeting, as of the date of such election, at a price equal to the Market
Value of Common Shares on that date.
For years beginning after 1996, on the date of the first Board meeting
following the Annual Meeting of each year, a Participant (other than a director
who is first elected at the Annual Meeting for that year or within six months
prior to such Annual Meeting), shall be awarded non-qualified options to
purchase 2,500 Common Shares, effective as of the date of such Board meeting, at
a price equal to the Market Value of Common Shares on that date.
(b) Term and Exercisability. All options shall have a term of 10 years
and shall vest in accordance with the following schedule:
Percentage of Options Vesting Date
--------------------- ------------
20% 1st anniversary of Grant Date
20% 2nd anniversary of Grant Date
20% 3rd anniversary of Grant Date
20% 4th anniversary of Grant Date
20% 5th anniversary of Grant Date
Notwithstanding the foregoing, all options shall become immediately
exercisable upon a Change of Control of the Company.
(c) Method of exercise. An option granted under the Plan may be
exercised, in whole or in part, by submitting a written notice to the Board,
signed by the Participant or such other person who may be entitled to exercise
such option, and specifying the number of Common Shares as to which the option
is being
2
3
exercised. Such notice shall be accompanied by the payment of the full option
price for such Common Shares, or shall fix a date (not more than ten business
days from the date of such notice) for the payment of the full option price of
the Common Shares being purchased. Payment shall be made in the form of cash,
Common Shares (to the extent permitted by law), or both. A certificate or
certificates for the Common Shares purchased shall be issued by the Company
after the exercise of the option and full payment therefor.
(d) Termination of Directorship. If a Participant fails to be
re-elected to the Board, resigns or otherwise ceases to be a director of the
Company for reasons other than death or disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code), all options granted under this
Plan to such Participant which are not exercisable on such date shall
immediately terminate, and any remaining options shall terminate if not
exercised before thirty (30) days following such termination, or at such earlier
time as may be applicable under Paragraph 4(b) above. If the Participant dies or
becomes disabled within the thirty (30) day period described above, such
remaining options may be exercised by the Participant or the Participant's
personal representative at any time before the expiration of twelve (12) months
following the date of death or commencement of disability.
If a Participant ceases to be a director of the Company by reason of
death or disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code), all options granted under this Plan to such Participant which are
not exercisable on such date shall become immediately exercisable, and may be
exercised at any time before the expiration of twelve (12) months following the
date of death or commencement of disability, or such earlier time as may be
applicable under Paragraph 4(b) above.
(e) Non-transferability. Each option and all rights thereunder shall be
exercisable during the Participant's lifetime only by him and shall be
non-assignable and non-transferable by the Participant except, in the event of
the Participant's death, by will or by the laws of descent and distribution. In
the event the death of a Participant occurs, the representative or
representatives of the Participant's estate, or the person or persons who
acquired (by bequest or inheritance) the rights to exercise the Participant's
options in whole or in part may exercise the option prior to the expiration of
the applicable exercise period, as specified in Paragraph 4(d) above.
(f) No rights as stockholder. A Participant shall have no rights as a
stockholder with respect to any Common Shares subject to the option prior to the
date of issuance of a certificate or certificates for such Common Shares.
(g) Compliance with securities laws. Options granted and Common Shares
issued by the Company upon exercise of options shall be granted and issued only
in full compliance with all applicable securities laws, including laws, rules
and regulations of the Securities and Exchange Commission and applicable state
Blue Sky Laws. With respect thereto, the Board may impose such conditions on
transfer, restrictions and limitations as it may deem necessary and appropriate
to assure compliance with such applicable securities laws.
5. Shares Subject to the Plan.
(a) The Common Shares to be issued and delivered by the Company upon
the exercise of options under the Plan may be either authorized but unissued
shares or treasury shares of the Company.
3
4
(b) The aggregate number of Common Shares of the Company which may be
issued under the Plan shall not exceed 100,000 shares; subject, however, to the
adjustment provided in Paragraph 6 in the event of stock splits, stock
dividends, exchanges of shares or the like occurring after the effective date of
this Plan.
(c) Common Shares covered by an option which is no longer exercisable
with respect to such shares shall again be available for issuance under this
Plan.
6. Share Adjustments. In the event there is any change in the Company's
Common Shares resulting from stock splits, stock dividends, combinations or
exchanges of shares, or other similar capital adjustments, equitable
proportionate adjustments shall automatically be made without further action by
the Board or Administrator in (i) the number of Common Shares available for
award under this Plan, (ii) the number of Common Shares subject to options
granted under this Plan, and (iii) the option price of options granted under
this Plan.
7. Amendment or Termination. The Board may terminate this Plan at any
time, and may amend the Plan at any time or from time to time; provided,
however, that the Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder; and further provided
that any amendment that would increase the aggregate number of Common Shares
that may be issued under the Plan, materially increase the benefits accruing to
Participants under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the Company stockholders to the extent required by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or any other governing rules or
regulations except that such increase or modification that may result from
adjustments authorized by Paragraph 6 does not require such approval. If the
Plan is terminated, any unexercised option shall continue to be exercisable in
accordance with its terms.
8. Company Responsibility. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Company.
9. Implied Consent. Every Participant, by acceptance of an award under
this Plan, shall be deemed to have consented to be bound, on his or her own
behalf and on behalf of his or her heirs, assigns, and legal representatives, by
all of the terms and conditions of this Plan.
10. Delaware Law to Govern. This Plan shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officer as of the _____ day of __________________, 1996.
TransAct Technologies Incorporated
By:________________________________
Title:_____________________________
4
1
[CONFIDENTIAL TREATMENT REQUESTED]
INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED, ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH
THE COMMISSION PURSUANT TO RULE 406.
Exhibit 10.9
STRICTLY CONFIDENTIAL
THE PRINTER GROUP (TPG) AND
OKI EUROPE LIMITED (OEL) EXCLUSIVE SALES AGREEMENT
PURPOSE: The purpose of this Agreement is to define an Exclusive Sales and
Marketing Agreement between The Printer Group (TPG), a subsidiary of TRIDEX
Corporation, and Oki Europe Limited (OEL), a subsidiary of OKI ELECTRIC
INDUSTRY COMPANY LIMITED of JAPAN. This Agreement is an attachment to the
Strategic Agreement between TPG and OKIDATA America, a Division of OKI AMERICA
Inc. of MOUNT LAUREL, NEW JERSEY.
1. Terms and Conditions
1.1 Products. As used in this Agreement, "Products" means all the
Printer Products for the Point of Transaction (POT) market, as well as spare
parts, subassemblies, operating supplies, maintenance kits, and options, if
any, manufactured or sold in the Sales Territories managed by OEL. Any other
type of product for these markets can be included in this Agreement as an
Attachment.
1.2 Markets. As used in this Agreement, "Markets" means products
developed for Point of Sale, Point of Transaction, and or Kiosk Markets or
their derivatives.
1.3 Services. As use in this Agreement, "Services" means the ancillary
services, if any, provided for the Markets in regards to the products as stated
in this Agreement.
1.4 Attachments. As used in this Agreement, "attachments" means any
document included in or with this Agreement to further define any product,
market or services as defined in this Agreement.
1.5 Term and Termination.
[CONFIDENTIAL TREATMENT REQUESTED]
2. Exclusive Sales and Marketing Agreement
2.1 Sales and Marketing Responsibility. All sales and marketing
responsibility for the territories managed by OEL will be the sole
responsibility of OEL for those customers based in those markets. These
territories are defined in
2
STRICTLY CONFIDENTIAL
Attachment 1, Territories. Any addition or deletion of territories within
Attachment 1, must be agreed upon by both TPG and OEL, in writing, by a duly
authorized representative of each party, and made part of Attachment 1.
2.2 Volume Commitment. Within the terms of this Agreement, both
parties undertake to provide best endeavors to achieve or exceed a total of
thirty thousand (30,000) printers to be ordered for delivery from TPG during
the first fourteen (14) months of this Agreement. For every 12 month time
period after through the term of this Agreement, a yearly volume expectation
will be submitted by OEL and mutually agreed upon by TPG. The products included
in the volume commitment will be defined in Attachment 2. All other products
(to be known as OEM products) are outside the volume commitment as stated in
Attachment 2.
2.3 Forecast. A three (3) month fixed order and rolling twelve (12)
month forecast defining volume and product in Attachment 2 will be submitted by
OEL to TPG. This forecast will be submitted on a monthly basis, and to be
provided by OEL to TPG by the 23rd day of each month. All other products will
be produced by TPG for OEL on an order by order basis.
2.4 Products and Pricing. OEL agrees to purchase the products per
the prices as defined in this Agreement per Attachment 3. These prices are in
effect for the first fourteen (14) months of this Agreement. Prices are subject
to change, upon request and mutual agreement of both parties, due to changes in
the market or OKIDATA America kit prices. For every year after, through the
term of this Agreement, prices will be subject to change and determined based
on market conditions and order forecasts presented by OEL.
2.5 [CONFIDENTIAL TREATMENT REQUESTED]
2.6 Consumables. Consumables for products sourced from TPG with the
exemption of paper and printheads may be purchased directly from TPG or
manufactured by OEL or ODA. In the event of OEL manufacturing or sourcing
consumables other than from TPG, a royalty as specified in Attachment 4 will be
paid to TPG by OEL.
3
STRICTLY CONFIDENTIAL
2.7 Termination. In the event the parties are unable to agree on either the
volume or pricing after the expiration of the first 14 months, then either
party may terminate this agreement, after giving 90 days notice to the other.
3. Sales Support and Training
3.1 European Support. TPG agrees to provide support to OEL in the
form of a TPG European Manager based in the United Kingdom.
3.2 Pre and Post Sales Support. Pre and Post sales support as
required will be available to OEL under the direction of the TPG European
manager.
3.3 Technical Training and Support. Technical Training and Support
as required will be available to OEL under the direction of the TPG European
manager.
4. Quality
4.1 Procedural Approvals. All products and the associated
consumables as defined in Attachment 3 will be subject to the quality approval
of both TPG and OEL for sale in the market.
4.2 Agency Approvals. All products supplied to OEL by TPG must
confirm to the relevant safety and agency approval where appropriate, to sell
the product within the defined market.
5. Schedule of Implementation
5.1 Milestones. TPG and OEL agree to put forth the maximum effort
to achieve the specified milestones below.
MILESTONE DATE
- ----------------------------------------------------------------------------
[CONFIDENTIAL TREATMENT REQUESTED]
o Customer launch October 1
4
STRICTLY CONFIDENTIAL
5.2 [CONFIDENTIAL TREATMENT REQUESTED]
5.3
5.4
5.5
6.0 Product Liability. TPG shall indemnify OEL from and against any
and all liability (whether criminal or civil) claims, judgments, loss, damage,
costs, charges or expenses, including without limitation legal fees and costs
of litigation or settlement, whether direct or indirect incurred in connection
with or arising as a result of any breach by TPG of the Warranty contained in
clause 2.5 of this Agreement, or any failure by TPG to provide OEL with
reasonable notice of any breach of the said Warranty of which TPG is aware or
of any limitations or changes in quality levels of the Products subject to
clauses 6.01 to 6.02 as follows:
6.01 OEL shall notify TPG of any claims or proceedings alleging any
defect or failure in the Products amounting to a breach of the said Warranty
within 60 days after receipt by OEL at its principal office of notice of such
claim or service of process relating thereto and OEL shall permit TPG to
conduct the defence of any such proceedings provided always TPG consults with
and keeps OEL informed as to such proceedings, and acts reasonably in relation
thereto and such proceedings shall be at the cost of TPG (TPG having first
indemnified and secured OEL to its reasonable satisfaction against any such
costs). For the purpose of such proceedings OEL shall provide TPG with such
information as is in the possession of OEL which is reasonably relevant to such
defence.
6.02 The indemnity in clause 6.01 above is subject to the condition
that any sale by OEL to its customers of Products purchased from TPG is on
terms whereby OEL warrants that the Products will conform to their
specification and be free from
5
STRICTLY CONFIDENTIAL
defects in manufacture and design for the period not exceeding twelve (12)
months from the date of purchase by OEL's customer (save as otherwise agreed
by TPG in writing).
6.1 Manufacturer's/Producer's Liability for Damages. TPG will be
responsible for all manufacturer's and producer's liability for damages to
third parties arising as a result of or caused by defects in the Product and
shall indemnify OEL from and against any and all liability (whether criminal or
civil) claims, judgments, loss, damage, costs, charges or expenses including
legal costs and costs of litigation or settlement whether direct or indirect
resulting from liability imposed in any country by law, contract or otherwise
upon OEL in consequence of or in connection with the sale of the Products to
OEL's customers or the distribution, use or performance of such Products and
whether any claim or proceedings take place in the English courts or in the
courts of any other country and without prejudice to the generality of the
foregoing such indemnity shall cover claims for liability in respect of death
or personal injury, damage to property or loss of use thereof and claims for
indirect special or consequential damage or compensation. This indemnity shall
apply regardless of whether any liability or claim is a result of or alleged to
be the result of any error or omission on the part of TPG relating to the
Products (provided always such liability or claim is not the result of any
default or negligence on the part of OEL).
6.2 Comprehensive General Liability Insurance. TPG shall at its
sole expense at all times whilst this Agreement is in force maintain a
comprehensive general liability insurance policy or equivalent policy with an
insurance company acceptable to OEL to include insurance cover for the
liability of TPG under clauses 6.0 and 6.1 above with liability limits of not
less than five million US Dollars ($5,000,000) combined single limit, naming
OEL as an additional insured. TPG shall provide OEL at all times with a
certificate of such insurance and shall promptly notify OEL of any termination,
cancellation or material change in such policy, including without limitation
changes in policy limits, covered or conditions.
7.0 Infringement of Third Party Patents. TPG warrants that any
product (or part thereof) furnished hereunder shall be free from any rightful
claim of any third party for infringements of patent, design, copyright or any
other right of third parties.
7.1 [CONFIDENTIAL TREATMENT REQUESTED]
6
STRICTLY CONFIDENTIAL
defence and all related settlement negotiation of such Claims; provided further
that, no such Claims arise by fault of OEL.
7.2 Limiting of Liability. Notwithstanding the foregoing, TPG shall
have no liability to OEL for actual or claimed infringement arising out of: (a)
use of PRODUCTS in combination with other equipment or software not reasonably
contemplated by TPG: or, (b) use of the PRODUCTS in any process not reasonably
contemplated by TPG.
8.0 Governing Law. This Agreement shall be governed by the laws of
England in every particular including formation and interpretation and shall
be deemed to have been made in England notwithstanding paragraph K of the
Strategic Agreement.
8.1 Alternative Dispute Resolution. If any dispute or difference
arises out of or in connection with this Agreement the parties shall seek to
resolve the dispute or difference amicably by using an alternative dispute
resolution ("ADR") procedure acceptable to both parties before pursing any
other remedies available to them. If either party fails or refuses to agree or
to participate in the ADR procedure or if in any event the dispute or
difference is not resolved to the satisfaction of both parties within 90 days
after it has arisen the parties will be free to pursue their remedies without
further reference to this clause.
8.2 Jurisdiction. Any proceedings arising out of or in connection
with this Agreement shall be brought in any competent court of jurisdiction in
England. The submission by the parties to such jurisdiction shall not limit the
right of OEL to commence any proceedings arising out of this Agreement in any
other jurisdiction it may consider appropriate. TPG hereby irrevocably and
unconditionally appoints Ithaca Peripherals Limited (a subsidiary of the Tridex
Corporation) of Shaw Wood Business Park, Leger Way, Doncaster DN2 5TB to
receive for and on its behalf service of process in any proceedings with
respect to this Agreement. This subclause shall apply notwithstanding the
provisions of paragraph G of the Strategic Agreement.
8.3 Agreement of Tridex Corporation and OkiData. This Agreement is
signed by Tridex Corporation and OKIDATA by way of agreement to its terms and
by way of variation to the Strategic Agreement.
7
STRICTLY CONFIDENTIAL
IN WITNESS WHEREOF, the parties have executed this Execlusive Sales Agreement,
by duly authorized representatives as of the date set forth below.
The Printer Group Old Europe Limited
By: /s/ Bart C. Shuldman By: /s/ Christopher J. Gill
-------------------------- --------------------------
(Signature) (Signature)
Name: Bart C. Shuldman Name: Christopher J. Gill
------------------------ ------------------------
(Printed or Typewritten) (Printed or Typewritten)
Title: President Title: Director
----------------------- -----------------------
Date: May 10, 1996 Date: May 13th 1996
------------------------ ------------------------
Tridex Corporation OKIDATA
By: /s/ Seth M. Lukash By: /s/ David L. Vaughan
-------------------------- --------------------------
(Signature) (Signature)
Name: Seth M. Lukash Name: David L. Vaughan
------------------------ ------------------------
(Printed or Typewritten) (Printed or Typewritten)
Title: Chairman & CEO Title: Mgr., Legal Affairs
----------------------- -----------------------
Date: May 9, 1996 Date: May 10, 1996
------------------------ ------------------------
1
[CONFIDENTIAL TREATMENT REQUESTED]
INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED, ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
COMMISSION PURSUANT TO RULE 406.
EXHIBIT 10.10
GTECH CORPORATION
Agreement No. 95530098001
-----------
By and Between
GTECH CORPORATION
55 TECHNOLOGY WAY
WEST GREENWICH, RI 02817
AND
MAGNETEC CORPORATION
--------------------
61 WEST DUDLEY TOWN ROAD
------------------------
BLOOMFIELD, CONNECTICUT 06002
-----------------------------
For The Purchase of
Refer to Section 1
-----------------------------
Commencement Date: September 7, 1994
-------------------
Term: Forty-eight (48) months
-------------------------
GTECH Representatives: Vendor Representatives:
Peter Liakos Bart Shuldman
- ----------------------------------- -----------------------------------
Dennis Abbott Mark Goebel
- ----------------------------------- -----------------------------------
Don Troppoli
- ----------------------------------- -----------------------------------
Everett Zurlinden
- -----------------------------------
2
GTECH CORPORATION OEM PURCHASE AGREEMENT
1. TERMS AND CONDITIONS
1.1 Products
1.2 Services
1.3 OEM Purchases
1.4
2. ORDERING
2.1 Purchase Orders
2.2 Priority Orders
2.3 Provisioning Orders
2.4
2.5 Rescheduling
2.6 Cancellation for Convenience
2.7 Forecast
3. SHIPPING, PACKAGING, DELIVERY
3.1 F.O.B.; Title; Risk of Loss
3.2 Shipment
3.3 Packaging
3.4 International Shipments
3.5 Early Arrival
4. PRICE
4.1 Unit Prices
4.2
4.3
4.4
5. PAYMENT
6. TAXES AND DUTIES
7. CHANGES
7.1 Product Changes
3
7.2 GTECH Changes
7.3
8. PRODUCT QUALITY AND RELIABILITY REQUIREMENTS
8.1 Vendor Survey
8.2 Final Test and Inspection Data
8.3 Test Equipment and Procedure Correlation
8.4 Source Inspection
8.5
8.6 Failure Analysis and Corrective Action
8.7 GTECH's Rights with Respect to Non conforming Goods
9. INSURANCE
9.1 Vendor Insurance Coverage
9.2 Workers Compensation and Employers Liability
9.3 Automobile Liability
9.4 Public Liability
9.5 Umbrella Policy
9.6 Crime Insurance
9.7 Proof of Insurance
10. INDEMNITY
11. SPARE PARTS
11.1 Recommended Spare Parts
11.2 Non-Standard Parts
11.3 Emergency Stock
11.4 Spares Support
12. REPAIR SUPPORT
12.1
12.1.1. Non-Warranty Repair Cost
12.2
12.3 Failure Analysis
12.4 Repair Capabilities
12.5 Test Equipment
12.6 Qualified Vendor List
12.7 Diagnostics
12.8
4
13. TRAINING
13.1 Initial Training
13.2 Component Level Training
13.3 Future Training
14. WARRANTIES
14.1 Vendor Standards
14.2 Authority
14.3 Title; Infringement
14.4 Conformance; Defects
14.5 Freight Costs on Warranty Repairs
14.6 Freight Charges on Non-Warranty
15. BAILMENT AGREEMENT
16. TOOLING
17. FORCE MAEJURE
18. CONFIDENTIALITY
19. PUBLIC ANNOUNCEMENTS
20. NOTICES
21. ASSIGNMENT
22. TERMS AND TERMINATION
22.1 Terms
22.2 Termination; GTECH's Rights
22.3 Termination; Vendor's Rights
22.4 Obligations on Termination
23. CONFLICTING PROVISIONS
24. MANUFACTURING RIGHTS
25. MISCELLANEOUS
5
ATTACHMENTS
1. - Product Specifications
2. - Pricing
2A. - Recommended Spare Parts List and Pricing
3. - Lead Time & Rescheduling
4. - Bailment Agreement
5. - Non-Warranty Repair Costs
6. - Manufacturing Rights
6
GTECH OEM PURCHASE AGREEMENT
THIS AGREEMENT between GTECH CORPORATION, a Rhode Island corporation,
with offices at 55 Technology Way, West Greenwich, RI 02817 ("GTECH") and
Magnetec Corporation a Connecticut corporation. with offices at 61 West Dudley
Town Road, Bloomfield, Connecticut 06002 ("VENDOR") sets out the terms and
conditions under which VENDOR will sell the Products and provide the Services
described in this Agreement and Attachments to GTECH.
1. Terms and Conditions
1.1 Products. As used in this agreement. "Products" means the products,
as well as the VENDOR's recommended spare parts, subassemblies, operating
supplies, maintenance kits, and options, if any, produced in accordance with the
specifications attached hereto as Attachment 1 ("Specifications") and any
subsequent modifications authorized in accordance with the terms of this
Agreement. Products include pre-approved vendor model numbers in conjunction
with the specification.
1.2 Services. As used in this Agreement, "Services" means the ancillary
services, if any, to be provided by VENDOR in accordance with the terms of this
Agreement including without limitation, those services described in Section 11
and 12 of this Agreement.
1.3 OEM Purchases, GTECH represents that the Products purchased under
this Agreement are intended primarily for resale, rental or lease directly and
indirectly to GTECH's customers under trademarks and trade names selected by
GTECH for use in conjunction with GTECH systems or with other value added by
GTECH, its subsidiaries or its distributors. Products may also be used by GTECH
and its subsidiaries for their internal use.
1.4
[CONFIDENTIAL TREATMENT REQUESTED]
2. Ordering
2.1 Purchase Orders, All purchases under this Agreement will be made
under purchase orders referencing this Agreement issued by GTECH or by any
subsidiary or affiliate of GTECH. Purchase Orders will be deemed accepted by
VENDOR unless rejected in writing by VENDOR specifying the reasons for rejection
within fourteen (14) calendar days after receipt of the Purchase Order. Purchase
orders may be rejected by VENDOR only if a Purchase Order does not comply
7
with the terms and conditions of this Agreement or proposes new or additional
terms that are not acceptable to VENDOR.
2.2 Priority Orders. GTECH Purchase Orders for spare parts identified
as "Priority Orders" shall be shipped within twenty-four (24) hours after
receipt by VENDOR's Customer Service Division. In the event that Products
ordered within the Normal Lead Time are overdue for delivery to GTECH, VENDOR
shall ship replacement Product to GTECH at no cost to GTECH, and any premium air
freight charges shall be prepaid by, and borne by VENDOR.
2.3 Provisioning Orders. GTECH Purchase Orders for spare parts
identified as "Provisioning Orders" shall be shipped within twenty (20) days
after receipt by VENDOR. Provisioning Orders shall not be decremented by
placement of any Priority Orders, unless expressly requested by GTECH.
2.4
2.5 Rescheduling. GTECH may reschedule delivery of any Product or
Service by written notice to VENDOR at anytime before the delivery date
specified in the applicable Purchase Order, as specified in Attachment 3.
2.6 Cancellation for Convenience, GTECH may cancel any or all Purchase
Orders or part thereof at any time prior to the scheduled delivery date. In such
event, with respect to customized GTECH-specific Products which cannot be
resold, GTECH and VENDOR will negotiate a reasonable cancellation charge based
on VENDOR's cost, as supported by proper documentation, to be paid to VENDOR as
liquidated damages as GTECH's sole obligation and VENDOR's sole remedy. In no
event shall such cancellation charges exceed the amount specified in Attachment
2, Pricing.
2.7 Forecast. Any forecast is provided as a good faith estimate of
GTECH's anticipated requirements for Products for the periods indicated based on
current market conditions and does not constitute a commitment to purchase any
quantity of Products or Services.
3. Shipping, Packaging, And Delivery
3.1 F.O.B., Title, Risk of Loss. Unless otherwise agreed, deliveries of
Products will be made F.O.B. VENDOR's dock, continental U.S. facility. Subject
to proper packaging, title and risk of loss shall pass to GTECH upon proper
tender of the Products to the carrier. VENDOR will
8
provide proof of delivery upon request and will provide reasonable assistance to
GTECH at no charge in any claim GTECH may make against a carrier or insurer for
misdelivery, loss or damage to Products after title has passed to GTECH.
3.2 Shipment. VENDOR will ship Product in accordance with GTECH's
instructions if a "promise date" is specified in the purchase order. In the
absence of any other instructions, Products will be shipped by common carrier
commercial land freight for delivery in the continental United States and by
ocean freight for deliveries elsewhere, insurance and shipping charges collect.
3.3 Packaging. VENDOR shall affix to the outside of each shipment a
list of contents, including serial numbers, to allow for review of contents upon
receipt. Products shall be packaged in accordance with any special instructions
in Attachment 1. Where no special instructions for packaging is provided,
GTECH's general packaging specification, Attachment 6, (or current version
supplied to VENDOR) shall be used.
3.4 International Shipments. If GTECH specifies delivery for
international shipment by GTECH or GTECH's freight forwarder, VENDOR will be
responsible for obtaining any necessary U.S. Department of Commerce export
licenses, permits or approvals. GTECH will be responsible for any licenses,
permits or approvals of the country of import.
3.5 Early Arrival. GTECH reserves the right to reject Products arriving
at GTECH's facilities more than five (5) days before the "promise date" if one
is specified in the Purchase Order.
4. Price
4.1 Unit Prices. The prices for Products, Services, (if separately
priced) operating supplies, maintenance kits, and spare parts under this
Agreement will be as specified in Attachment 2. Unless otherwise stated in
Attachment 2, the prices and pricing formulas in Attachment 2 will remain in
effect for the Term of the Agreement and any extensions. GTECH international
subsidiaries may purchase Products under the same conditions as in Attachment 2,
in U.S. dollars. Pricing for Products and Services may be renegotiated from time
to time by mutual agreement of the parties.
4.2
[CONFIDENTIAL TREATMENT REQUESTED]
4.3
9
4.4 [CONFIDENTIAL TREATMENT REQUESTED]
5. Payment
6. Taxes and Duties
Attachment 2 sets forth all taxes applicable to the Products. GTECH
will pay as a separate invoiced item only such sales, use, value-added or
similar tax listed therein (all other taxes are excluded, including, without
limitation, taxes based upon VENDOR's net income), lawfully imposed on the sale
of the Products or provision of Services to GTECH. Taxes, duties or like charges
imposed on the Products after title has passed to GTECH will be paid by GTECH
unless such charges are the result of a trade sanction imposed on VENDOR's
Products, as specified in Section 22.2, below. In lieu of taxes, GTECH may
furnish to VENDOR a tax exemption certificate. VENDOR agrees to provide
reasonable assistance to GTECH, without charge, in any proceeding for the refund
or abatement of any taxes GTECH is required to pay under this Section 6.
7. Changes
7.1 Product Changes. VENDOR shall submit evaluation samples of all
Products changes that affect form, fit, function, maintainability,
repairability, reliability or appearance at least ninety (90) days before such
changes are implemented. VENDOR shall forward (2) copies of all requests to make
the changes generally described above to: GTECH CORPORATION, 55 Technology Way,
West Greenwich, RI 028l7 Attention: Purchasing Agent. GTECH may, at its option,
decline to have such changes incorporated into the Products. Proposed changes
will not be incorporated into the Products until accepted in writing by GTECH.
In no event will GTECH ever be deemed to have accepted any change in the price
or delivery schedule without its prior written consent.
7.2 GTECH Changes. GTECH may request changes in the Products at any
time or times during the term of this Agreement. If such changes in the Products
will require changes in the prices and/or delivery schedule, VENDOR must respond
promptly with a written change proposal
10
setting forth the changes in prices and/or delivery schedule. Such proposal,
when signed by an authorized representative of GTECH, will become part of this
Agreement. If VENDOR cannot respond within thirty (30) days, VENDOR must provide
a written explanation to GTECH as to why they cannot and notify GTECH as to when
they can, within thirty (30) day period. If VENDOR does not respond with a
written communication within thirty (30) days after receipt of GTECH's request,
such changes will be implemented without any alteration in the price and/or
delivery schedule. Such changes are and shall remain the property of GTECH, and
Vendor may not use such changes or disclose them to others without the prior
written consent of GTECH.
7.3
8. Quality and Reliability Requirements
GTECH requires that the vendor have in place at their manufacturing
facility or facilities, adequate quality and reliability safeguards to ensure
that all product shipped to GTECH meets or exceeds all parameters called forth
in the product specification, Attachment 1.
8.1 Vendor Survey. The Vendor will allow GTECH to perform a vendor
survey at the vendor's facility or facilitates. This survey will include, but is
not limited to, an audit of the manufacturing process, reviewing the yields at
each inspection and test point in the manufacturing process, and review of the
on-going reliability test data.
8.2 Final Test and Inspection Data. The vendor will make final test and
inspection data (yield information), and on-going reliability test data
available at the request of GTECH throughout the life of the product.
8.3 Test Equipment and Procedure Correlation. The test equipment and
procedures used in the vendor's final inspection and test, will correlate with
the test equipment and procedures used by GTECH; if correlation is not achieved
within 30 days prior to the first production shipment, the vendor agrees to
obtain additional test equipment and/or develop procedures which are capable of
correlation. Said test equipment and procedures will be mutually agreed upon by
both the vendor and GTECH OEM Test Engineering, Procurement Quality and
Purchasing.
8.4 Source Inspection. The vendor will allow' GTECH ( or its
representatives) to perform source inspection at their facility (or facilities),
using mutually agreed upon test equipment
11
and procedures. To do this in a timely fashion, the vendor will notify GTECH (or
its representative) that source inspection is available at least one week prior
to the requested source inspection date. Source inspection activity will
continue, at the discretion of GTECH Procurement Quality Organization,
throughout the life of the product, or until such time as the product meets or
exceeds all requirements of the GTECH Ship-To-Stock program.
8.5
8.6 Failure Analysis and Corrective Actions. The vendor agrees to
supply, within 15 calendar days of, written failure analysis and corrective
actions for any in warranty devices failing to meet any and all form, fit,
function, quality or reliability requirements called out in the product
specification.
8.7 GTECH's fights with respect to non conforming goods. The testing
procedures available to GTECH are discretionary and not mandatory. In the event
GTECH chooses not to perform any or some portion of such testing, or such
testing would not reasonably reveal a non conformance in the Products, GTECH
reserves its fight under the Uniform Commercial Code to reject any shipment of
Products and to purchase similar Products and be immediately reimbursed by the
Vendor for the difference between the cost of such products and the Vendors'
Products.
9. Insurance
9.1 Vendor Insurance Coverage. Vendors shall purchase and maintain
throughout the life of this agreement, such insurance as will protect it and
GTECH from claims set forth below which may arise out of or result from the
Vendor's operations under this agreement whether such operations be by it or by
any subcontractor or by anyone for whose acts any of them may be liable. Vendor
shall cause GTECH to be named insured under all coverages except Workers
Compensation. Appropriate endorsements will be attached to state that the
vendors policy will be primary to any other policies that may be in effect.
9.2 Worker's Compensation and Employers Liability. Workers Compensation
Insurance as required by statute, and if applicable contractors liability under
the Federal Longshoremen and Harbor Workers Act. Employers liability coverage
shall be in an amount of no less than $500,000.
9.3 Automobile Liability.- Policies should provide a minimum combined
single limit of $1,000,000 for each occurrence of bodily injury and property
damage.
12
9.4 Public Liability. Policies will provide a minimum of $1,000,000 per
occurrence for bodily injury and property damage, endorsed at a minimum with the
following coverages:
* Products and completed operations to the policy limits;
* Fire Legal Liability to policy limits;
* Blanket Contractual Liability to policy limits;
* Independent contractors inclusion to policy limits:
* Personal injury or the equivalent as provided by a Broad
form Comprehensive general Liability Policy.
9.5 Umbrella Policy. An umbrella policy with limits of no less than
$5,000,000 will be in place and will include all the above listed primary
policies.
9.6 Crime Insurance. A Crime Insurance (Fidelity Bond) policy in the
amount of $500,000 that will pay on behalf of the contractor to GTECH for losses
caused by the dishonest acts of the Vendor or his employees, agents, or
designees.
9.7 Proof of Insurance. Evidence of said insurance will be in the form
of a certificate of insurance and will be provided within 10 days from the date
of this agreement. Notification to GTECH will occur within 15 days of any
cancellation or material change in coverage. In the event of a failure to
furnish such proof or the cancellation or material change of such insurance,
without prejudice to any other remedy GTECH may have, GTECH may terminate this
agreement, or at its option, charge the cost of required insurance to the
vendor. Coverage will be in effect with Insurance carriers licensed to do
business in any state that the Vendor will perform its services and will be
rated no less than A by the AM Best Company. All Certificates of Insurance are
to be forwarded to: GTECH Corporation, 55 Technology Way, West Greenwich, RI
02817, ATTN: Risk Management Department.
10. Indemnity
[CONFIDENTIAL TREATMENT REQUESTED]
13
11. Spare Parts
11.1 Recommended Spare Parts. VENDOR shall provide a Recommended Spare
Parts List (RSL) for all Products covered by this Agreement (See attachment 2A).
The RSL shall include all parts and assemblies necessary to repair and maintain
the Products purchased under this Agreement. A separate RSL shall be supplied
for each product model or configuration, identifying all common parts.
11.2 Non-Standard Parts, If the Product contains a part not readily
available in the marketplace VENDOR shall make such part available to GTECH in
accordance with Section 11.4.
11.3 Emergency Stock. VENDOR shall maintain an adequate supply of spare
parts at its facility to support Priority Orders, as described in Section 2.2.
11.4 Spares Support. VENDOR shall make all spare parts including
Non-Standard Parts as described in Section 11.2 above, available during the term
of this Agreement and for a period of five (5) years thereafter. In the event
VENDOR is unable to fill GTECH's Purchase Orders promptly, VENDOR shall make
available, at no charge to GTECH, VENDOR's manufacturing drawings and
specifications, list of suppliers, and information necessary to purchase and/or
manufacture all parts and/or assemblies or subassemblies for the parts which are
not available from the VENDOR, and Vendor shall be liable for the difference
between GTECH's cost of manufacture and Vendor's sales price.
12. Repair Support
12.1 [CONFIDENTIAL TREATMENT REQUESTED]
12.2
14
12.3 Failure Analysis. VENDOR shall provide a failure analysis on each
Product which is returned for repair under warranty. On serialized Products
repair data shall be provided for each serialized unit returned. Vendor shall
provide general failure data on out of warranty returns.
12.4 Repair Capabilities. GTECH reserves the fight to repair any
out-of-warranty assemblies, subassemblies, or other items comprising the Product
purchased under this Agreement. VENDOR will supply GTECH with the necessary
documentation to repair the Products including the information listed under
Sections 12.4, 12.5, 12.6, 12.7 and 12.8.
12.5 Test Equipment. VENDOR shall make available to GTECH, upon written
request by GTECH, any test procedures, special tools, jigs, fixtures,
diagnostics, programs, test equipment or supplies, with supporting
documentation, necessary to repair the unit, any of the assemblies,
subassemblies, piece parts, components, or other items comprising the Product
purchased under this Agreement to component level.
12.6 Qualified Vendor List. VENDOR shall supply GTECH a qualified
vendor list (QVL) for standard components used in the products purchased under
this Agreement. This QVL shall include the manufacturers and vendors along with
the corresponding part numbers for standard components used in the Product, any
of the assemblies, subassemblies, piece parts, components, or other items
comprising the Products purchased under this Agreement. Updates to this list
shall be forwarded to GTECH CORPORATION, 55 Technology Way, West Greenwich, RI
02817 Attention: Procurement Agent Responsible for Commodity.
12.7 Diagnostics. VENDOR agrees to sell GTECH at prices to be mutually
agreed upon, with supporting documentation, any of its diagnostics, test
programs and test routines, necessary to repair to component level, the unit,
any of the assemblies, subassemblies, piece parts, components, or other items
comprising the Products purchased under this Agreement.
12.8
[CONFIDENTIAL TREATMENT REQUESTED]
15
13. Training
13.1 Initial Training. VENDOR agrees to provide, at no charge to GTECH,
two (2) training classes with up to twelve (12) students per class at GTECH
World Headquarters, 55 Technology Way, West Greenwich, RI or at Magnetec's
facility at 61 West Dudley Town Road, Bloomfield, CT during the term of this
Agreement. Pursuant to the above, GTECH shall: (1) reimburse VENDOR for
instructors reasonable transportation and living expenses and, (2) provide
equipment (or reimburse VENDOR for equipment transportation) as required to
support training classes. VENDOR shall provide the instructor and his
instructional materials for the above referenced classes. Training classes may
be video taped for future us by GTECH.
13.2 Component Level Training. VENDOR shall provide at no charge to
GTECH, such training necessary to enable GTECH to repair to a component level,
the unit, any of the assemblies, subassemblies, or other items comprising the
Products purchased under this Agreement. A minimum of one (1) of the training
classes described in Section 13.1 may consist of Component Level Training, if
desired.
13.3 Future Training. GTECH may schedule a maximum of three (3)
students per quarter in VENDOR's regularly scheduled classes at GTECH World
Headquarters, 55 Technology Way, West Greenwich, RI, or Magnetec's facility at
61 West Dudley Town Road, Bloomfield, CT, during the term of this agreement.
GTECH agrees to pay a $65.00 per hour trainer charge.
14. Warranties
14.1 VENDOR represents and warrants that all Products delivered to
GTECH under this Agreement will comply with applicable U.L, CSA, TUV and VDE
standards and will comply with the applicable FCC rules for the type of Product
involved, including type acceptance or certification where required. VENDOR will
provide all necessary information and assistance to GTECH with respect to
listings, certifications and approvals that are required to be in GTECH's name.
14.2 Authority. VENDOR warrants that: (a) it has the right to enter
into this Agreement; (b) all necessary actions, corporate and otherwise, have
been taken to authorize the execution and delivery of this Agreement and the
same is the valid and binding obligation of VENDOR; (c) all licenses, consents
and approvals necessary to carry out all of the transactions contemplated in
this Agreement have been obtained by VENDOR; and, (d) VENDOR'S performance of
this Agreement will not violate the terms of any license contract, note or other
obligation to which VENDOR is a party.
14.3 Title: Infringement. VENDOR warrants that: (a) it has and shall
pass to GTECH good title to the Products free and clear of all liens and
encumbrances; (b) the Products do not infringe any patent, trademark or
copyright or otherwise violate the rights of any third party; (c) no claim or
action is, to the best of its knowledge, pending or threatened against VENDOR
or, to VENDOR's knowledge, against any licenser or supplier of VENDOR that would
adversely affect the right of GTECH or any customer of GTECH to use the Products
for their intended use.
16
14.4 Conformance: Defects. Unless otherwise specified in Attachment 1,
VENDOR warrants that the Products will: (a) be new: (b) conform to the
Specification; (c) conform to the standards and procedures as set forth in the
GTECH Quality And Reliability Procedure, Attachment 7; and, (d) be free from
defects in materials and workmanship for a period of fifteen (15) months from
date of shipment from VENDOR whether GTECH or a customer. Upon written notice
from GTECH of a Product or part that fails to meet the foregoing warranty,
VENDOR will promptly repair or replace such Products(s) within ten (10) calendar
days of receipt by VENDOR of the failed or non-conforming Product or spare part.
14.5
14.6 Freight Charges on Non-Warranty Repairs. Freight charges directly
associated with the repair of non-warranty products and/or spare parts shall be
borne by GTECH.
15. BAILMENT AGREEMENT
Any tools, equipment, software, documentation or other materials
supplied by GTECH to VENDOR whether separately listed or not, are made available
pursuant to the terms and conditions of the GTECH Bailment Agreement attached
hereto as Attachment 4 and are provided solely for use by VENDOR in its
performance of this Agreement.
16. Tooling
Any Tooling purchased by GTECH for the manufacture of the Product,
whether kept at GTECH's or VENDOR's premises, shall remain the property of GTECH
for GTECH's exclusive use. The Tooling purchased by GTECH and used by VENDOR in
the manufacture of this Product shall be stored and maintained by VENDOR but may
be removed from the VENDOR's location at any time by GTECH, without notice, and
at no additional cost to GTECH. VENDOR shall take such steps to protect GTECH's
title to the Tooling as GTECH may reasonably request. At a minimum, VENDOR shall
cause a sign to be affixed to such tooling stating "Property of GTECH
Corporation".
17. Force Maejure
Either party shall be excused from its performance hereunder to the
extent that its performance is prevented by fire, flood, acts of God, strikes or
other causes beyond its reasonable control; provided that, the party claiming
Force Maejure notifies the other in writing within five (5) days of the
commencement of the condition preventing its performance and its intent to rely
thereon to extend the time for its performance of this Agreement.
17
18. Confidentiality
18.1 VENDOR acknowledges and agrees that all documents, data, software
or information in any form which are provided by GTECH (hereinafter
"Confidential Information") is the property of GTECH. VENDOR will receive and
maintain all Confidential Information in the strictest confidence and, except as
provided herein, shall not use Confidential Information for its own benefit or
disclose it or otherwise make it available to third parties without the prior
written consent of GTECH. VENDOR agrees to limit the use of Confidential
Information to only those of its employees who need Confidential Information for
the purpose of this Agreement and to advise all of its employees of GTECH's
rights in the Confidential Information. Nothing in this Agreement shall be
construed as granting or conferring any rights by license or otherwise in any
Confidential Information, trademarks, patents or copyrights of GTECH, except for
the limited purposes of VENDOR's performance hereunder. Confidential Information
does not include information which is: (a) in the public domain; (b) already
known to the party to whom it is disclosed (hereinafter "Recipient") at the time
of such disclosure; (c) subsequently received by Recipient in good faith from a
third party having prior right to make such subsequent disclosure; (d)
independently developed by Recipient without use of the information disclosed
pursuant to this Agreement; (e) approved in waiting for unrestricted release or
unrestricted disclosure by the party owning or disclosing the information
(hereinafter "Discloser"); or (f) produced or disclosed pursuant to applicable
laws, regulations or court order, provided the Recipient has given the Discloser
written notice of such request such that the Discloser has an opportunity to
defend, limit or protect such production or disclosure. At the request of a
Discloser, and in any event upon the expiration or other termination of this
Agreement, each Recipient shall promptly deliver to Discloser all products,
components and equipment provided by Discloser as well as all records or other
things in any media containing or embodying Discloser's Confidential Information
within its possession or control which were delivered or made available to each
Recipient during or in connection with this Agreement, including any copies
thereof.
18.2 GTECH acknowledges and agrees that all confidential and
proprietary information of VENDOR provided to GTECH, including, without
limitation the manufacturing package and the printhead design and manufacture
documents, data, software or information in any form (hereinafter "Confidential
Information") is the property of VENDOR. GTECH will receive and maintain all
Confidential Information in the strictest confidence, and, except as provided
herein, shall not use Confidential Information for its own benefit or disclose
it or otherwise make it available to third parties without the prior written
consent of VENDOR. GTECH agrees to limit the use of Confidential Information to
only those of its employees who need Confidential Information for the purpose of
this Agreement and to advise all of its employees of VENDOR's rights in the
Confidential Information. Nothing in this Agreement shall be construed as
granting or conferring any rights by license or otherwise in any Confidential
Information, trademarks, patents or copyrights of VENDOR, except for the limited
purposes of GTECH's performance hereunder. Confidential Information does not
include information which is: (a) in the public domain; (b) already known to the
party to whom it is disclosed (hereinafter "Recipient") at the time of
disclosure; (c) subsequently received by Recipient in good faith from a third
party having prior right to make such subsequent disclosure; (d) independently
developed by Recipient without use of
18
the information disclosed pursuant to this Agreement; (e) approved in writing
for unrestricted release or unrestricted disclosure by the party owning or
disclosing the information (hereinafter "Discloser"); or (f) produced or
disclosed pursuant to applicable laws, regulations or court order, provided the
Recipient has given the Disclosure written notice of such request such that the
Disclosure has an opportunity to defend, limit or protect such production or
disclosure. At the request of a Disclosure, and in any event upon the expiration
or other termination of this Agreement, each Recipient shall promptly deliver to
Disclosure all products, components and equipment provided by Disclosure as well
as all records or other things in any media containing or embodying Disclosure's
Confidential Information within its possession or control which were delivered
or made available to each Recipient during or in connection with this Agreement,
including any copies thereof.
19. Public Announcements
VENDOR agrees not to make any public announcements regarding this
Agreement or to disclose any of the terms and conditions hereof to any third
party without prior written consent of GTECH, except as may be required by law
or court of competent jurisdiction.
20. Notices
All notices required or contemplated by this Agreement shall be deemed
effective if written and delivered in person or actually received or if sent by
registered mail, return receipt requested, or overnight delivery to GTECH at the
address shown above to the attention of GTECH's Representative or to VENDOR at
the address shown above to the attention of VENDOR's Representative; or such
other persons or addresses as may hereafter be designated by the respective
parties. Notices to GTECH under Section 19 hereof shall not be effective unless
a copy is delivered personally, actually received or sent by registered mail, or
overnight delivery, return receipt requested to the Office of the General
Counsel of GTECH at the address shown above.
21. Assignment
This Agreement and the disclosure of confidential information hereunder
is made in reliance upon VENDOR's reputation, skill and expertise. VENDOR agrees
not to assign this Agreement or any right or obligation hereunder without the
prior written consent of GTECH in each instance, which will not be unreasonably
withheld. This Agreement may be assigned to any purchaser or transferee of
substantially all of the VENDOR's business assets, without the consent of, but
upon notice to GTECH. GTECH can cancel if an assignment is not acceptable to
GTECH.
GTECH may assign its rights and/or obligations hereunder, in whole or
in part, to any parent or subsidiary corporation, or any affiliate, without the
consent of, but upon notice to, VENDOR.
22. Term and Termination
22.1 Terms. This agreement will commence on the 7th day of September,
1994, and will continue for [ ]. The Term is specified
19
above and includes any renewals or extensions unless terminated earlier as
provided in this Agreement. Unless either party notifies the other in writing at
least ninety (90) days before the end of the Terms of its intent to terminate
this Agreement at the end of the Term, this agreement will be extended
automatically and will continue in effect without any volume commitment until
terminated by either party on ninety (90) days prior notice. Unless otherwise
agreed in writing, the prices during any such extension shall be the prices in
effect at the end of the term, as set forth in Attachment 2.
22.2 [CONFIDENTIAL TREATMENT REQUESTED]
22.3 Termination: By VENDOR. VENDOR may terminate this Agreement if;
(a) GTECH fails to perform any of its obligations hereunder and such condition
has not been cured within thirty (30) days of written notice thereof by VENDOR;
provided that, VENDOR may not terminate this Agreement for reason of non-payment
by GTECH of any amounts disputed in good faith, or (b) if any assignment is made
of GTECH's business for the benefit of creditors; or, (c) if a petition in
bankruptcy is filed by or against GTECH and is not dismissed within ninety (90)
days, or if a receiver or similar officer is appointed to take charge of all or
part of GTECH's property, or if GTECH is adjudicated a bankrupt.
22.4 Obligations of Termination. Upon expiration or termination of this
Agreement for any reason, VENDOR shall promptly deliver to GTECH all tools,
equipment, software documentation and other materials furnished to VENDOR by
GTECH hereunder. VENDOR's obligations under Section 2, 9, 10, 11, 13, 15, 17,
18, 21 and 24 hereof shall survive expiration or Termination of this Agreement
or its extensions regardless of the manner of Termination.
23. Conflicting Provisions
In the event of a conflict between the terms and conditions of this
Agreement and the terms and conditions of any Purchase Order, typewritten terms
added by GTECH on a Purchase Order shall control the terms and conditions of
this Agreement, and the terms and conditions of this agreement shall control the
printed terms and conditions on any purchase order. Typewritten terms added by
GTECH on any purchase order shall apply to the Products and/or Services ordered
under such individual Purchase Order. The terms and conditions of this agreement
and, if applicable, the
20
typewritten terms and conditions added by GTECH on any purchase order shall
prevail over any inconsistent terms and conditions contained in any Vendor
acknowledgment or invoice.
Notwithstanding any assignment, VENDOR shall remain responsible for the
full performance of all of the terms and conditions of this Agreement.
24. Manufacturing Rights.
Manufacturing Rights will be governed by Attachment 6.
25. Miscellaneous
This Agreement and Attachments and Purchase Orders issued and Accepted
hereunder set forth the entire understanding of the parties with respect to the
Products and merges all prior written and oral communications relating thereto.
It can be modified or amended only in a writing signed by a duly authorized
representative of each party. Section headings are provided for the convenience
of reference only and shall not be construed otherwise.
Not failure to exercise, or delay in exercising, on the part of either
party, any right, power or privilege hereunder shall operate as a waiver
thereof, or will any single or partial exercise of any right, power or privilege
hereunder preclude the further exercise of the same right or the exercise of any
other right hereunder.
This Agreement is made pursuant to and shall be governed by the laws of
the State of Rhode Island, without regard to its rules regarding conflict of
laws. The parties agree that the courts of the State of Rhode Island, and the
Federal Courts located therein, shall have exclusive jurisdiction over all
matters arising from this Agreement.
21
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT ON
THE DATES MENTIONED BELOW.
MAGNETEC CORPORATION GTECH CORPORATION
BY /s/ Bart Shuldman BY /s/ John C. Smith
-------------------------------- --------------------------------
SIGNATURE SIGNATURE
Bart Shuldman John C. Smith
- ----------------------------------- ----------------------------------
NAME NAME
President Vice-President, Hardware
- ----------------------------------- ----------------------------------
TITLE TITLE
September 7, 1994 September 7, 1994
- ----------------------------------- ----------------------------------
DATE DATE
GTECH CORPORATION
BY /s/ Peter A. Liakos
----------------------------------
SIGNATURE
Peter A. Liakos
----------------------------------
NAME
Director, Corporate Purchasing
----------------------------------
TITLE
September 7, 1994
----------------------------------
DATE
1
Exhibit 10.11
[OKIDATA LETTERHEAD]
April 26, 1996
Mr. Bart Shuldman
Ithaca Peripherals Incorporated
7 Laser Lane
Wallingford, CT 06492
Re: OEM Agreement
Dear Bart:
The purpose of this letter is to renew our OEM Agreement for another five (5)
year term which will begin August 28, 1995 and expire August 28, 2000, with
deliveries to be completed by February 28, 2001, and to replace Exhibit A with
the new Exhibit A as attached. The terms and conditions of this new Agreement
will be as stated in the OEM Agreement which we entered in January 21, 1991 and
all subsequent agreed upon amendments made thereto.
This Agreement will be subject to the provisions of a Strategic Agreement upon
execution of that Agreement between the Parties.
If you agree to this renewal contract, please indicate your acceptance by
signing both originals in the space provided. Retain one duplicate original for
your records and return the other to my attention.
Certain we appreciate our long standing business relationship as we look
forward to continued success in the future.
Sincerely, Ithaca Peripherals Incorporated
/s/ Bart C. Shuldman
/s/ David L. Vaughn ---------------------------------
(Signature)
David L. Vaughn
Manager, Legal Affairs Bart C. Shuldman
---------------------------------
(Name)
Enclosure May 9, 1996
---------------------------------
cc: T. Donahue (Date)
E. Morris
J. Rowley
2
T A B L E O F C O N T E N T S
OKIDATA OEM PURCHASE AGREEMENT
Page
1. TERM OF AGREEMENT ........................................... 2
2. CUSTOMER ORDERS ............................................. 2
3. PRICES ...................................................... 2
4. DELIVERY SCHEDULES .......................................... 3
5. RESCHEDULING OF DELIVERIES .................................. 3
6. CANCELLATION CHARGES ........................................ 4
7. CUSTOMER FORECASTS .......................................... 5
8. PAYMENT ..................................................... 5
9. PATENT INDEMNITY ............................................ 5
10. TERMINATION ................................................. 5
11. SHIPPING AND RISK OF LOSS ................................... 6
12. LIMITATION OF LIABILITY ..................................... 6
13. TRAINING .................................................... 7
14. VALUE ADDED ................................................. 7
15. EXPORT RESTRICTIONS ......................................... 7
16. CONFIDENTIALITY AND PROPRIETARY RIGHTS ...................... 7
17. GENERAL PROVISIONS .......................................... 8
EXHIBIT A - ...................................................... PRICES
EXHIBIT B - ...................................................... WARRANTY
EXHIBIT C - ...................................................... SPARE PARTS
REVISED 1/24/90
3
OKIDATA
DIVISION OF OKI AMERICA, INC.
OEM PURCHASE AGREEMENT
Ithaca Peripherals, Inc. agrees to purchase and OKIDATA Division of OKI
AMERICA, INC., (OKIDATA) agrees to sell the Product(s) together with their
associated documentation, in the quantity specified in the annexed Exhibit A
(the Specified Quantity), at the prices set forth in that Exhibit A and upon
the terms and conditions set forth herein. "Products" as used herein and
throughout the Agreement pertain to printers. "Standard product" refers to that
Product available "off the shelf" from OKIDATA without modification to meet a
particular custom configuration.
4
1. TERM OF AGREEMENT
The term of this Agreement shall be two (2) years commencing on the date on
which the last of the parties executes this Agreement (the Effective Date).
Orders placed during this twenty-four (24) month ordering period must be
scheduled for delivery within thirty (30) months of the Effective Date.
2. CUSTOMER ORDERS
Purchases by Customer will be by individual written Customer purchase orders
made during the term of this Agreement issued to and accepted by OKIDATA. Each
purchase order, subject to the conditions set forth in Paragraph 4 below, shall
set forth the desired delivery schedule for each Product.
3. PRICES
A. Subject to the conditions set forth in subparagraph B below, the unit
price for the Specified Quantity and any quantity in excess thereof
purchased by Customer shall be as set forth in Exhibit A.
B.
(i) [CONFIDENTIAL TREATMENT REQUESTED]
(ii)
2
5
(iii)
4.
A.
[CONFIDENTIAL TREATMENT REQUESTED]
5. RESCHEDULING OF DELIVERIES
A. With respect to any Standard Product on any single purchase order,
Customer may, by issuing a written amendment to that purchase order, and
upon the following conditions, reduce the quantity of the Standard
Product to be delivered in accordance with the purchase order delivery
schedule:
(i) There has been no prior reduction in delivery of that Product
on that purchase order.
(ii) A new delivery schedule will be set forth in the amendment for
Standard Products deleted from the original delivery schedule of
the purchase order.
(iii) A maximum reduction of seventy-five (75%) percent of the
quantity may be made provided the amendment is received by
OKIDATA more than sixty (60) days prior to scheduled delivery.
(iv) A maximum reduction of fifty (50%) percent of the quantity may
be made provided the amendment is received by OKIDATA between
thirty-one (31) and sixty (60) days prior to scheduled delivery.
(v) Any attempted reduction exceeding the quantities set forth in
this Paragraph 5, to the extent of the excess of the quantities
specified in sub-paragraphs C and D, and any attempted
reduction made within thirty (30) days prior to scheduled
delivery may, at the option of
3
6
OKIDATA, be treated as a cancellation, effective on the date purchase
order, and Customer shall pay the cancellation charges set forth in
Paragraph 6 below.
B. Rescheduling of deliveries for Non-Standard Product will be quoted on a
case by case basis and will vary from the above modification required and a
fully executed addendum will be enjoined to this Agreement accordingly.
6. CANCELLATION CHARGES
A. In the event Customer cancels any purchase order or portion thereof,
Customer, upon receipt of invoice shall pay OKIDATA cancellation charges
computed for Standard Product as follows:
CANCELLATION NOTICE
RECEIVED BY OKIDATA CANCELLATION CHARGE
31 to 60 days prior to Ten (10%) percent of the
originally scheduled Specified Quantity price.
delivery date.
Excess of 60 days No charge.
Cancellation notices received within the thirty (30) day period prior to
the originally scheduled delivery or attempted cancellation of a previously
rescheduled deliveries will be void and of no force and effect, and
Customer will be liable for the full unit price of each Standard Product.
B. Cancellation charges for "Non Standard Product" will vary depending on the
extent that the "Non Standard Product" differ from the Standard Product as
set forth in an addendum to this Agreement.
7. CUSTOMER FORECASTS
Once each month Customer will furnish to OKIDATA a written non-binding
forecast of its requirements for the Product(s) for the ensuing
one-hundred eighty (180) days.
8. PAYMENT
A.
[CONFIDENTIAL TREATMENT REQUESTED]
4
7
B.
9. PATENT INDEMNITY
A. OKIDATA shall defend or settle any suit or proceeding brought against
Customer to the extent that such suit or proceeding is based on a claim
that Products manufactured to OKIDATA's design and purchased hereunder
constitute an infringement of an existing United States Patent, provided
OKIDATA is notified promptly in writing and given complete authority,
information and assistance required for defense of same, and OKIDATA shall
pay all damages and costs awarded as a result thereof against Customer.
OKIDATA, however, shall not be responsible for any cost, expense, or
compromise incurred or made by Customer without OKIDATA's prior written
consent.
B. In the event any Product furnished hereunder is, in OKIDATA's opinion,
likely to or does become the subject of a claim of infringement of a
patent, OKIDATA may, at its option and expense, procure for Customer the
right to continue using the Product, replace same with a non-infringing
Product of similar capability, or modify the Product so it becomes
non-infringing. If, in OKIDATA's opinion, none of the foregoing
alternatives is reasonably available to OKIDATA, OKIDATA may terminate this
Agreement forthwith by written notice to Customer and, upon return or
disposal of the Product in accordance with the written instructions of
OKIDATA, refund the price paid by Customer, less straight line depreciation
on the basis of a five (5) year life of the Product.
C. OKIDATA shall have no responsibility or liability for any claim of
infringement (i) arising out of the use of its Products in combination with
non-OKIDATA products, or (ii) if such infringement arises out of Product
manufactured to Customer's design, or (iii) if such infringement arises as
a result of a customer modification to the product.
D. The foregoing states the entire liability of OKIDATA with respect to
infringement of any patent by the Products of OKIDATA or any parts thereof
and, anything herein to the contrary notwithstanding, OKIDATA's liability
to Customer hereunder shall in no event exceed the total price plus taxes
and other associated charges paid to OKIDATA by Customer for each
infringing Product purchased pursuant to this Agreement.
10. TERMINATION
This Agreement may be terminated or canceled as follows:
5
8
A. By either party at any time if the other party violates any provision of
this Agreement. The defaulting party shall have a period of thirty (30)
days from the date of receipt of written notice from the non-defaulting
party describing the default within which to remedy the default. Should
Customer be the defaulting party, OKIDATA, during the aforesaid thirty
(30) day period, shall be relieved of any obligations imposed on it by
this Agreement until the default is cured. The termination shall become
effective at the end of the thirty (30) day period if the defaulting
party has failed to remedy the default.
B. If either party (i) admits in writing its inability to pay its
debts generally as they become due, or (ii) makes an assignment for the
benefit of its creditors, or (iii) institutes or consents to the filing
of a petition in bankruptcy, whether for reorganization or liquidation,
under federal or similar applicable state laws, or (iv) is adjudged
bankrupt or insolvent by a court having jurisdiction, then in either
of such events, the other party may, by written notice, immediately
terminate this Agreement.
C. Termination by OKIDATA of this Agreement or any other similar agreement
with Customer shall be sufficient justification, at OKIDATA's option,
and without liability to OKIDATA, for termination of any or all other
Agreements between OKIDATA and Customer.
D. Customer's obligation to pay for all Products received by it hereunder
shall survive termination of this Agreement. Moreover, should
termination be effected by OKIDATA for any of the reasons set forth in
this Paragraph 10, Customer shall be liable for the undelivered quantity
of Products to the same extent as if Customer had canceled deliveries
pursuant to Paragraphs 3.B. or 6 above, at OKIDATA's option.
11. SHIPPING AND RISK OF LOSS
All prices are F.O.B. OKIDATA's Cherry Hill, N.J. facilities. OKIDATA
will package the Products in accordance with accepted standard
commercial practices for normal shipment considering the type of Product
involved and the normal risks encountered in shipments. Customer shall
designate the method of shipment on each individual purchase order
issued against this Agreement. OKIDATA shall arrange for shipment by the
designated method. All transportation charges are freight collect.
12. LIMITATION OF LIABILITY
In no event will OKIDATA be liable for loss of profits or incidental,
special, or consequential damages arising out of any breach of
obligations under this Agreement, nor will OKIDATA be liable for any
damages caused by delay in delivery of the Products being purchased
hereunder.
6
9
13. TRAINING
OKIDATA will provide one course for six (6) Customer Employees for a period
appropriate to the particular Product purchased (usually two (2) days). The
course will be given at OKIDATA's Mt. Laurel facility and will be scheduled
at a mutually agreeable time. OKIDATA will provide course material and
documentation free of charge. Travel and living expenses are to be borne by
Customer. Customer on-site training may be given at Customer's expense and
in accordance with OKIDATA's policy at the time of execution of this
Agreement.
14. VALUE ADDED
Customer warrants and represents that the Products purchased hereunder are
for use and resale by Customer as part of, or as accessories to, equipment
manufactured or assembled by Customer.
15. EXPORT RESTRICTIONS
Customer warrants that it shall not at any time make or permit any export
or reexport of OKIDATA products directly or indirectly to any country,
without full compliance with United States export laws and regulations as
issued by the United States Department of Commerce, Office of Export
Administration, as amended from time to time, as those laws and regulations
apply to OKIDATA products, and all other things delivered to, or derived
from things delivered to, Customer under the OEM Purchase Agreement.
Customer's failure to comply with the requirements of this paragraph
constitutes an event of default giving OKIDATA the right to terminate the
OEM Purchase Agreement immediately.
16. CONFIDENTIALITY AND PROPRIETARY RIGHTS
Customer (including its agents and employees) warrants that it shall not
disclose to any third party, or use or reproduce for any purpose
whatsoever, and treat as proprietary to OKIDATA, OKIDATA's trade secrets,
technical data, methods, processes or procedures or any other confidential,
financial, or business information or data of OKIDATA which Customer has
access to or becomes aware of during the course of its performance of the
OEM Purchase Agreement, without the prior written consent of OKIDATA.
Nothing herein shall limit Customer's use or dissemination of information not
derived from OKIDATA, or any information that was,
7
10
or subsequently has been, made public by OKIDATA. This obligation shall survive
the cancellation or other termination of the OEM Purchase Agreement.
17. GENERAL PROVISIONS
A. All notices required to be given hereunder will be sent by registered or
certified mail, return receipt requested, postage prepaid, forwarded to the
appropriate party at the address shown below, or at such other addresses as
that party may, from time to time, advise in writing, and which have been
received in the ordinary course of post.
B. Neither party shall have the right to assign its rights or obligations
under this Agreement except with the written consent of the other party,
provided, however, that a successor in interest by merger, by operation of
law, or by assignment, purchase or otherwise of the entire business of
either party, shall acquire all interest of such party hereunder. Any
prohibited assignment shall be null and void.
C. The failure of either party to enforce at any time the terms, conditions,
requirements, or any other provisions of this Agreement shall not be
construed as a waiver by such party of any succeeding non-performance of
the same term, condition, requirement or any other provision of this
Agreement.
D. The headings of paragraphs contained herein are for convenience and
reference only and are not a part of this Agreement, nor shall they in any
way affect the interpretation thereof.
E. The parties agree that if any portion of this Agreement shall be held
illegal and/or unenforceable, the remaining portions of this Agreement
shall continue to be binding and enforceable provided that the effectivity
of the remaining portion of this Agreement would not defeat the overall
business intent of the parties, or give one party any substantial financial
benefit to the detriment of the other party.
F. This Agreement and its appendices shall be governed by the laws of the
party against whom a claim is being made in any dispute, or if such claim
is made in litigation, by the laws of the state of the defendant.
8
11
G. This Agreement constitutes the entire Agreement between the parties
and supersedes all prior discussion either oral or in writing.
H. The terms and conditions of this Agreement will prevail notwithstanding
any variance with the terms and conditions of any order or release
submitted by Customer, or any release acknowledgment returned by
OKIDATA. Except as expressly set forth in this Agreement, this
Agreement shall not be deemed, or construed to be, modified, amended,
rescinded, or canceled in whole or in part, except by written amendment
executed by the parties hereto. I. EXHIBIT B, WARRANTY, AND EXHIBIT C,
SPARE PARTS, attached hereto, are hereby incorporated herein
by this reference.
IN WITNESS WHEREOF, the parties hereto have set their names on the dates
hereinafter set forth.
ITHACA PERIPHERALS, INC. OKIDATA
767 Warren Road Division of OKI AMERICA,
ITHACA, NY 13073 532 Fellowship Road
Mt. Laurel, New Jersey 08054
BY: /s/ S. SCOTT KUMPF BY: /s/ D. L. VAUGHN
-------------------- ----------------------
S. Scott Kumpf David L. Vaughn
- ------------------------ ----------------------------
Typed name Typed name
President Mgr. Sales Operations Mgmt.
- ------------------------ ----------------------------
Title Title
1/18/91 1/21/91
- ------------------------ ----------------------------
Date Date
9
1
Exhibit 10.12
[CONFIDENTIAL TREATMENT REQUESTED]
INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED, ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH
THE COMMISSION PURSUANT TO RULE 406.
STRATEGIC AGREEMENT
BETWEEN
TRIDEX CORPORATION
AND
OKIDATA
2
TABLE OF CONTENTS
The Overriding Character of this Agreement ................................. 1
Duration and Termination ................................................... 2
Sales and Marketing Responsibility ......................................... 2
Manufacturing Responsibility ............................................... 3
Right of First Refusal ..................................................... 3
Proprietary Rights and Non-disclosure ...................................... 3
Disputes ................................................................... 4
Notice ..................................................................... 5
Force Majeure .............................................................. 5
Entire Agreement ........................................................... 5
Controlling Law ............................................................ 5
Assignment ................................................................. 5
Non-Waiver ................................................................. 5
Paragraph Headings ......................................................... 5
Severability ............................................................... 6
Independent Contractors .................................................... 6
3
STRATEGIC AGREEMENT
This is a Strategic Agreement dated as of ___________________, between Tridex
Corporation, a Connecticut Corporation, with offices at 61 Wilton Road,
Westport CT 06880 (hereinafter "TPG") and OKIDATA, a Division of Oki America,
Inc., a Delaware Corporation, with offices at 532 Fellowship Road, Mt. Laurel,
NJ 08054 (hereinafter "Okidata").
Whereas, Okidata is a company engaged in the development, manufacture,
marketing, sales, and service of computer peripherals and related consumables.
Whereas, TPG is a Division of Tridex Corporation engaged in the development,
manufacture, and sale of Point of Transaction/Sale Systems.
Whereas, both companies desire to use their resources, alliances, and knowhow
to grow together in the Point of Transaction/Sale marketplace.
Now therefore, in consideration of the mutual promises hereinafter set forth,
and intending to be legally bound, the parties agree as follows:
A. The Overriding Character of this Agreement
1. Unless otherwise agreed by both parties in writing, This Strategic
Agreement applies to all present and future Subsidiary Agreements, both
domestic and international, between the parties, their subsidiaries and
affiliates as it relates to sales and purchases of equipment utilized
in the Point of Transaction/Sale Marketplace as further described in
section four of this clause. Each Subsidiary Agreement will be appended
to this Strategic Agreement as an addendum after its execution by the
parties.
2. Unless otherwise agreed by both parties in writing for a specific
transaction, no inconsistent or additional term or condition in any
Subsidiary Agreement shall be applicable to a transaction within the
scope of this Strategic Agreement. Both parties specifically agree that
any terms and conditions in any Subsidiary Agreements which are in any
way inconsistent with this Strategic Agreement shall be inapplicable and
the terms of this Strategic Agreement shall govern unless such terms and
conditions clearly indicate to the contrary.
3. The parties agree to use reasonable efforts to place a legend on each
Subsidiary Agreement within the scope of this Strategic Agreement
substantially as follows:
"This Agreement is subject to the provisions of a Strategic
Agreement dated ___________________, between the parties."
4
The terms of this Strategic Agreement shall, however, apply to
any Subsidiary Agreement under its terms regardless of whether
any such legend shall have been placed on same.
4. This Strategic Agreement will apply to forty column or less dot
matrix printer products and thermal printer products which are
used in equipment designed to support Point of Transaction/Sale
processing (hereinafter "Products").
5. The parties will strive to produce products, sub-components,
accessories, and consumables which provide the lowest cost and
best value possible for the Point of Transaction/Sale
marketplace.
B. Duration and Termination
1. The effective date of this Strategic Agreement is _____________.
Unless canceled according to the provisions of subparagraphs 2
and 3, below, this Agreement shall be in force and effect for a
period of five (5) years from the effective date.
2. In case either party shall breach this Agreement or any
attachments hereto, or be in default of the effective
performance or any of the terms, conditions, covenant or
agreements contained in this Strategic Agreement or any
Subsidiary Agreement, the other party may give to such breaching
or defaulting party written notice of such breach or default,
and if such breaching or defaulting party does not effect an
adequate cure thereof within sixty (60) days after the date of
said notice, this Strategic and all Subsidiary Agreements may be
terminated at the option of the complaining party by dispatch of
written notice to that effect. The foregoing is in addition to
any rights or remedies the non-defaulting party may have in law
or in equity.
3. In the event that one of the parties to this agreement ceases
to carry on its business or becomes the subject of any
proceedings under state or federal law for the relief of debtors
or otherwise become insolvent, bankrupt, or makes an assignment
for the benefit of creditors, the other party, at its option,
may terminate this Strategic Agreement or any Subsidiary
Agreement by written notice to said party.
C.
[CONFIDENTIAL TREATMENT REQUESTED]
5
D.
1. [CONFIDENTIAL TREATMENT REQUESTED]
2.
E.
F. Proprietary Rights and Non-disclosure
1. Each party acknowledges that in the implementation of this Strategic
Agreement it may receive information from the other which is
considered to be a proprietary trade secret or which is copyrighted,
trademarked or patented. Each party agrees to treat as confidential
all such information received by it and so designated in writing as
confidential, or if so designated verbally, said designation being
confirmed in writing within ten (10) days. Said confidential
information shall be held and used with the same degree of care to
avoid disclosure as the receiving party would employ with respect to
its own proprietary trade secret, confidential, or proprietary
information.
2. The following information shall be deemed proprietary and
confidential or as representing trade secret information and the
obligation of this article shall not apply to any such material
which:
a. is known to the receiving party from third parties at time of
receipt;
b. is or becomes publicly known through no wrongful act of the
receiving party;
c. is developed independently by the receiving party; or
d. is approved for release by written authorization from whichever
party owns the information in question.
6
3. Except as required by law or to conform with the law, neither party will
advertise, issue press releases or otherwise disclose the existence of
this Agreement or any terms hereof or arrangements hereunder without the
other parties prior written consent.
4. The provisions of this paragraph F shall survive termination of this
Agreement for any reason.
5. The parties acknowledge that there is no adequate remedy at law for a
breach by any party of the provisions of this paragraph F and agree that
the non-breaching party shall have the right to seek and obtain injunctive
relief with respect to any breach or threatened breach of the provisions
of this paragraph F by the other party, provided that the right shall in
no way diminish the jurisdiction of the arbitration provisions of
paragraph G except in respect to the specific provisions of this
paragraph.
G. Disputes
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration in accordance with the
rules of the alternative dispute resolutions firm JAMS/Endispute or its
successor or if no such successor exists, the Commercial Arbitration
Rules of the American Arbitration Association, said arbitration to take
place in Philadelphia, Pennsylvania, and judgement upon the award rendered
by the arbitrator(s) may be entered into any court having jurisdiction
thereof, and shall be non-appealable and fully enforceable.
H. Notice
Any notice, request, demand, or other communication that is required or
permitted under this Agreement shall be deemed properly given if it is
deposited in the United States Mail, postage prepaid, properly addressed
as follows:
1. If to The Printer Group; 7 Laser Lane
Wallingford, CT 06492
Attn.: Bart Shuldman
President
2. If to Okidata; OKIDATA, Division of Oki America, Inc.
532 Fellowship Road
Mt. Laurel, NJ 08054
Attn.: David L. Vaughn
Manager, Legal Affairs
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I. Force Majeure
Neither party shall be liable for any default hereunder due to causes
beyond its reasonable control and occasioned without its fault or
negligence including, but not limited to, acts of God, public enemy,
fire, flood, shipwreck, strikes, freight and shipping embargoes,
governmental order, regulations or action, provided that, in order to
excuse its default hereunder for any one or more of the reasons
enumerated above, upon the occurrence thereof, said party shall notify
immediately the other of the existence of any such causes and best
efforts will be made to correct the problem.
J. Entire Agreement
This Strategic Agreement contains the entire understanding of the
parties hereto with respect to the subject matter hereof, there being no
contemporaneous understandings, agreements or representations, promises
or inducements whatsoever except any Subsidiary Agreements, and
supersedes all prior agreements, promises, representations and
warranties, written or verbal, between the parties.
K. Controlling Law
The validity, interpretation, and performance of this agreement shall be
governed under the laws of the state of New Jersey without giving effect
to its conflict of laws provisions.
L. Assignment
Neither party shall have the right to assign or otherwise transfer its
rights and obligations under this Strategic Agreement or any Subsidiary
Agreement except to a subsidiary of such party or with the prior written
consent of the other party.
M. Non-Waiver
The failure of either party to enforce at any time the terms,
conditions, requirements, or any other provisions of this Strategic or
any Subsidiary Agreement shall not be construed as a waiver by such
party of any right regarding any succeeding non-performance of the same
term, condition, requirement or any other provision.
N. Paragraph Headings
The headings of paragraphs contained herein are for convenience and
reference only and are not a part of this Strategic Agreement, nor in
any way affect the interpretation thereof.
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O. Severability
The parties agree that if any portion of this Strategic Agreement or any
Subsidiary Agreement shall be held illegal and/or unenforceable, the
remaining portions of this Strategic Agreement shall continue to be
binding and enforceable provided that the remaining portion of this said
Agreement would not defeat the overall business intent of the parties,
or give one party any substantial financial benefit to the detriment of
the other party.
P. Independent Contractors
The relationship of the parties as established under this Strategic
Agreement shall be and at all times remain one of independent
contractors, and neither party shall at any time or in any way represent
itself as being an agent, partner or other representative of the other
party or as having authority to assume or create obligations or
otherwise act in any manner on behalf of the other party.
IN WITNESS WHEREOF, the parties have executed this Strategic Agreement by duly
authorized representatives as of the date first set forth above.
Tridex Corporation OKIDATA, Division of Oki America, Inc.
By: /s/ Seth M. Lukash By: /s/ David L. Vaughn
---------------------------- -------------------------------
Name: Seth M. Lukash Name: David L. Vaughn
-------------------------- -----------------------------
(Printed or Typewritten) (Printed or Typewritten)
Title: Chairman CEO Title: Mgr., Legal Affairs
-------------------------- -----------------------------
Date: May 9, 1996 Date: May 8, 1996
-------------------------- -----------------------------
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EXHIBIT 10.13
LEASE OF INDUSTRIAL PROPERTY
FOR AND IN CONSIDERATION of the mutual covenants herein contained, the
parties hereto do hereby agree as follows:
1. Incorporated Terms. The following terms are incorporated by
reference into this Agreement:
(a) DATE OF LEASE: August 1, 1994
(b) NAME AND ADDRESS OF LANDLORD: PYRAMID CONSTRUCTION COMPANY
275 North Franklin Turnpike
P.O. Box 369
Ramsey, NJ 07446-0369
(c) NAME AND ADDRESS OF TENANT: MAGNETEC CORP.
61 W. Dudley Town Road
Bloomfield, CT 06002
(d) DESCRIPTION OF PROPERTY: Nine (9) acres in Wallingford,
CT, consisting of 10,000 s.f.
of office space and 32,000 s.f.
of light manufacturing located
in Medway Park, and shown as
Lot 2 on the Resubdivision Plan
prepared by Angus L. McDonald &
Associates dated November 2,
1993.
(e) TERM OF LEASE: Ten (10) Years
Commencement Date: April 1, 1995
Expiration Date: March 31, 2005
(f) PERMITTED USE: Office and light manufacturing
and use incidental thereto.
(g) SECURITY DEPOSIT: None
(h) BROKER: None
(i) RIDERS TO LEASE: Option to Expand the Premises
Option to Purchase Property
Guaranty of Lease
(j) TENANT's S.I.C. NUMBER: _______________________________
(k) FIXED RENTAL SCHEDULE:
The Fixed Rent payable by Tenant to Landlord shall be at the annual
rate and payable in the monthly installments as follows:
Period Monthly Installment Annual Rate
------ ------------------- -----------
04/01/95-03/31/00 $22,220.00 $266,640.00
04/01/00-03/31/05 $25,930.00 $311,160.00
(l) ESTIMATED MONTHLY ADDITIONAL RENT: $4,000.00
(m) GUARANTOR: Tridex Corporation
2. Description of Property. Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord, the land (the "Land"), building (the "Building") and
other improvements described in Section 1(d) (collectively the "Property") and
shown on the site plan attached hereto as Exhibit A. Exhibit A sets forth the
general layout of the building and property and no material changes shall be
made
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to the plan without Tenant's consent. Landlord shall, at its sole cost and
expense, obtain all necessary governmental approvals for construction of the
building, and Landlord shall perform all work with respect to the building and
site improvements in conformance with Exhibit B attached hereto. Landlord and
Tenant acknowledge that complete construction drawings will replace Exhibit B in
this Lease once said drawings are prepared. The substituted Exhibit B shall be
in conformance with Exhibit B as originally made a part hereto and acceptable to
both parties.
3. Term. The term of the Lease (the "Term") shall commence on the date
set forth in Section 1(e) (the "Commencement Date") and terminate on the date
set forth in Section 1(e) (the "Expiration Date"), except as hereinafter
provided.
Notwithstanding the above, the Lease Term shall commence on the
Occupancy Date, which shall be deemed to mean the earlier of (a) the date on
which Tenant takes occupancy and conducts business, or (b) the date on which
Landlord has obtained a Certificate of Occupancy or temporary Certificate of
Occupancy (provided the municipal authorities allow use and occupancy under a
temporary certificate of occupancy) for the Property and has substantially
completed same and made same available for Tenant's occupancy, provided that
Landlord shall have given Tenant thirty (30) days' written notice of the date on
which the Building is to be substantially completed and available to Tenant.
"Substantially completed" shall mean that Landlord's work is in compliance with
the plans and specs in Exhibits B and C and subject only to minor punchlist
items on the punchlist provided by Tenant pursuant to Article 10 which will not
materially interfere with Tenant's use and occupancy of the Premises.
When the commencement and expiration dates of the Lease term have been
determined, as provided herein, Landlord and Tenant shall execute and deliver a
written statement, in recordable form, specifying the commencement and
expiration dates of the Lease Term. Such statement, when so executed and
delivered, will be deemed to be incorporated in, and become a part of, this
Lease.
Landlord may not be able to deliver possession of the Property to
Tenant on the date specified in Section 1(e) as the Commencement Date. Landlord
shall not be liable to Tenant if Landlord does not deliver possession of the
Property to Tenant on the specified Commencement Date. In such event the
Commencement Date shall be delayed until possession of the Property is delivered
to Tenant and the Term shall be extended for a period equal to the delay in
delivery of possession of the Property to Tenant, plus the number of days
necessary to end the Term on the last day of a month. In the event Landlord has
not received site plan approval one day after the October Planning Board
Meeting, Tenant may terminate this Lease by providing Landlord with written
notice of Tenant's election to terminate. Tenant must provide said notice no
later than seven (7) days after the October Planning Board Meeting. If Landlord
does not deliver possession of the Property to Tenant by June 1, 1995, Tenant
may elect to cancel this Lease by giving written notice to Landlord no later
than ten (10) days after the period ends, and neither party shall have any
further obligations to the other under this Lease.
If Tenant occupies and uses the Property for normal operations prior to
the Commencement Date, the Term of the Lease shall then commence, but the
Expiration Date shall not be advanced. Tenant's early occupancy of the Property
shall be subject to all of the provisions of this Lease and Tenant shall pay the
rent and all other charges specified in this Lease from the Tenant's occupancy
date.
If delivery of possession of the Property to Tenant is on a date other
than the specified Commencement Date, at the request of either party, Landlord
and Tenant shall execute an instrument setting forth the Commencement Date and
Expiration Date.
The first Lease year shall be the period commencing on the Commencement
Date and ending twelve calendar months thereafter, provided, however, that if
the Commencement Date is not the first day of a month, the first Lease Year
shall commence on the Commencement Date and end twelve calendar months from the
last day of the month in which the Commencement Date occurs. Each succeeding
twelve calendar month period thereafter shall be a Lease Year.
4. Fixed Rent. Tenant shall pay to Landlord at the address(es) set
forth in Section 1(b), or to such other person or at such other place as
Landlord may
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from time to time designate, without previous demand therefor and without
counterclaim, deduction or set-off, the rent ("Fixed Rent") set forth in Section
1(k), such Fixed Rent to be payable in monthly installments in advance on the
first business day of each month during the term of the Lease. If the
Commencement Date shall be other than the first day of a calendar month, Tenant
shall pay on the Commencement Date, the proportionate amount of Fixed Rent for
the balance of such month. The first monthly installment of Fixed Rent will be
paid by Tenant upon closing title for the purchase of the property by Landlord
for Tenant's building.
5. Net Lease. It is the intention of Landlord and Tenant that this is a
net Lease and that the Fixed Rent shall be absolutely net to Landlord and that
Tenant shall be solely responsible for and pay all costs for the use, operation,
maintenance, care and repair of the Property, except as otherwise expressly
provided herein. All obligations with respect to the Property payable by Tenant
other than the Fixed Rent are additional rent under this Lease. The term "rent"
means the Fixed Rent and additional rent.
6. Real Property Taxes. (a) Tenant shall pay all real property
impositions during the Term. As used herein, the term "real property
impositions" means (i) any tax, assessment or other governmental charge of any
kind which at any time during the Term may be assessed, levied, imposed upon or
become due and payable with respect to the Property; (ii) any tax on the
Landlord's right to receive, or the receipt of rent or income from the Property
(excluding all federal or state income tax), or against Landlord's business of
leasing the Property; (iii) any tax or charge for fire protection, refuse
collection, streets, sidewalks or road maintenance or other services provided to
the Property by any governmental agency; and (iv) any tax replacing or
supplementing in whole or in part any tax previously included within the
definition of real property impositions under this Lease. During the first and
last years of the Term, the real property impositions payable by Tenant shall be
prorated for the fraction of the tax fiscal year included in the Term.
(b) Tenant shall pay real property impositions (as defined in Paragraph
(a) of this Section) to Landlord in monthly installments (in the manner set
forth in Section 4) on an estimated basis as determined by Landlord. Landlord
may adjust such estimate at any time and from time to time based upon Landlord's
experience and anticipation of such impositions. After the end of each calendar
year during the term, Landlord shall deliver to Tenant a statement setting forth
the actual real property impositions for such calendar year for which estimated
payments were made, the amount paid by Tenant on account thereof, and the amount
due to or from Tenant. If Tenant has paid less than the actual amount due,
Tenant shall pay the difference to Landlord (in the manner set forth in Section
4) within ten (10) days after Landlord's request therefor. Any amount paid by
Tenant which exceeds the amount due shall be credited against the next
succeeding estimated payments due hereunder, unless the Term has then expired,
in which amount the excess amount shall be refunded to Tenant.
(c) If an assessment for public improvements is levied against the
Property, Landlord shall be deemed to have elected to pay such assessment in the
maximum number of installments then permitted by law (whether or not Landlord
actually so elects), and Tenant shall pay the installments payable during or
attributable to the Term, together with any interest due as a result of the
installment payments. Any installment for a period during which the Commencement
Date or Expiration Date occurs shall be prorated for the fraction of the period
included in the Term. Tenant may prepay the entire assessment in one installment
on the balance at any time if this will result in a net tax savings on the
property.
(d) Real property impositions do not include Landlord's federal or
state income, franchise, inheritance or estate taxes and Tenant shall have no
obligation in connection therewith.
(e) Tenant shall not, without Landlord's prior written consent, which
shall not be unreasonably withheld, institute or prosecute any appeal or other
proceeding with respect to any assessments for real property impositions or
assessments for public improvements levied, assessed or imposed upon or against
the Property. Landlord will bring such proceeding at Tenant's cost. In the event
Landlord is not using a contingency firm to appeal taxes, and Landlord is in the
process of finding a firm to appeal the taxes, Landlord will notify Tenant
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and within fifteen (15) days, Tenant may provide a proposed contract with a firm
to handle the appeal and Landlord will use said firm so long as the cost for the
firm proposed by Tenant is materially less than one the Landlord would have
employed.
7. Insurance. (a) Landlord's Insurance. At all times during the term of
this Lease, Landlord will carry and maintain fire and extended coverage
insurance at full replacement cost agreed value, boiler, rental value insurance,
and sprinkler insurance covering the Property, and public liability (at a
minimum of $5,000,000 on a per occurrence basis) and property damage insurance
in such amounts as Landlord determines from time to time in its reasonable
discretion. Tenant will pay Landlord, as additional rent, for the costs of all
such insurance in accordance with the manner set forth for real property taxes
under Section 6(b) of the Lease.
(b) Tenant's Insurance. At all times during the term of this Lease,
Tenant will carry and maintain, at Tenant's expense, the following insurance, in
the amounts specified below or such other amounts as Landlord may from time to
time reasonably request, with insurance companies and on forms satisfactory to
landlord:
(i) Public liability and property damage liability insurance,
with a combined single occurrence limit of not less than $1,000,000.00. All such
insurance will specifically include, without limitation, contractual liability
coverage for the performance by Tenant of the indemnity agreements set forth in
Section 25 of this Lease.
(ii) Fire and extended coverage insurance covering all leasehold
improvements in the Premises and all of Tenant's merchandise, equipment, trade
fixtures, appliances, furniture, furnishings and personal property, from time to
time in, on, or upon the Premises, in an amount not less than the full
replacement cost without deduction for depreciation from time to time during the
term of this lease, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended peril (all risk), boiler, flood, glass breakage and sprinkler
leakage. All policy proceeds will be used for the repair or replacement of the
property damaged or destroyed; however, if this Lease ceases under the
provisions of Section 19 , Tenant will be entitled to any proceeds resulting
from damage to Tenant's merchandise, equipment, trade fixtures, appliances,
furniture and personal property, and Landlord will be entitled to all other
proceeds.
(iii) Workmen's compensation insurance insuring against and
satisfying Tenant's obligations and liabilities under the workmen's compensation
laws of the state in which the Premises are located.
(c) Forms of the Policies. All policies of liability insurance which
Tenant is obligated to maintain according to this Lease (other than any policy
of workmen's compensation insurance) will name Landlord and such other persons
or firms as Landlord specifies from time to time as additional insureds.
Original or true copies of original policies (together with copies of the
endorsements naming Landlord and any others specified by Landlord as additional
insureds) and evidence of the payment of all premiums of such policies will be
delivered to Landlord prior to Tenant's occupancy of the Premises and from time
to time at least thirty (30) days prior to the expiration of the term of each
such policy. All public liability and property damage liability policies
maintained by Tenant will contain a provision that Landlord and any other
additional insureds, although named as an insured, will nevertheless be entitled
to recover under such policies for any loss sustained by Landlord and such other
additional insureds, its agents and employees as a result of the acts or
omissions of Tenant. All such policies maintained by Tenant will provide that
they may not be terminated or amended except after thirty (30) days' prior
written notice to Landlord. All public liability, property damage liability and
casualty policies maintained by Tenant will be written as primary policies, not
contributing with and not supplemental to the coverage that Landlord may carry.
No insurance required to be maintained by Tenant by this Section 7 will be
subject to more than a $5,000.00 deductible limit without Landlord's prior
written consent. All Tenant's policies required to be maintained under this
Lease shall contain "severability of interests" and "cross liability"
endorsements, and such policies shall be written by an insurance company having
a Best Rating of A (VI) or better.
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(d) Adequacy of Coverage. Landlord, its agents and employees make no
representation that the limits of liability specified to be carried by Tenant
pursuant to this Section 7 are adequate to protect Tenant. If Tenant believes
that any of such insurance coverage is inadequate, Tenant will obtain, at
Tenant's sole expense, such additional insurance coverage as Tenant deems
adequate.
(e) Inadequate Insurance. Upon failure of Tenant to comply with the
provisions of Section 7, in addition to any other rights and remedies of the
Landlord, Landlord shall have a right to obtain such insurance, to pay the
premiums for the same, and to recover the cost of such insurance at once as
additional rent due from Tenant to Landlord under this Lease. In the event
Landlord fails to obtain insurance as specified in 7(a), Tenant, after notice to
Landlord and Landlord not obtaining required insurance within seven (7) days,
shall have a right to obtain and pay premiums for same and to recover the cost
at once from Landlord.
(f) Waiver of Subrogation. Landlord and Tenant each waive any and all
rights to recover against the other or against any other tenant or occupant of
the property, or against the officers, directors, shareholders, partners, joint
venturers, employees, agents, customers, invitees or business visitors of such
other party or of such other tenant or occupant of the property, for any loss or
damage to such waiving party arising from any cause covered by any insurance
required to be carried by such party. Landlord and Tenant, from time to time,
will use their respective insurers to issue appropriate waiver of subrogation
rights endorsements to all policies of insurance carried in connection with the
property or the Premises or the contents of the property or the Premises. Tenant
agrees to cause all other occupants of the Premises claiming by, under, or
through Tenant to execute and deliver to Landlord such a waiver of claims and to
obtain such waiver of subrogation rights endorsements.
8. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all light, power, natural gas, fuel, oil, sewer service, sprinkler
stand-by service, water, telephone, refuse disposal and other utilities and
services supplied to the Property. Landlord shall not be liable to Tenant, and
Tenant's obligations under the Lease shall not be abated, in the event of any
interruption or inadequacy of any utility or service supplied to the Property.
Landlord will, however, be liable to Tenant in the event of interruption or
inadequacy of any utility due to Landlord's negligence. Tenant shall have the
right to contract for additional utilities supplied to the Premises, provided
Tenant undertakes all costs necessary to bring such additional utilities to the
property and subject to Landlord's review and approval of plans and
specifications for additional utility service. Said Landlord consent is not to
be unreasonably withheld.
9. Use of Property. (a) The Property may only be used for the use set
forth in Section 1(f) and all uses incidental thereto.
(b) Notwithstanding the foregoing, Tenant shall not use or permit
the Property to be used for (i) any unlawful purpose; (ii) in violation of any
certificate of occupancy covering the Property; (iii) any use which may
constitute a public or private nuisance or make voidable any insurance in force
relating to the Property; (iv) any purpose which creates or produces noxious
odors, smoke, fumes, emissions, noise or vibrations; or (v) any use which
involves or results in the generation, manufacture, refining, transportation,
treatment, storage, handling or disposal of petroleum products or hazardous
substances or wastes. However, the Tenant may store and handle substances which
are classified as hazardous provided they are incidental to the normal operation
of an office and light industrial manufacturing facility, and further provided
that such substances are stored, handled and disposed of in accordance with
applicable State and Federal statutes and regulations.
(c) Tenant shall not cause or permit any overloading of the floors
of the Building. Tenant shall not install any equipment or other items upon or
through the roof, or cause openings to be made in the roof, without Landlord's
prior written consent. Tenant shall not install any underground storage tanks or
facilities at the Property.
(d) No storage of any goods, equipment or materials shall be
permitted outside the Building on the Property; however, overnight parking of
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company vehicles not storing goods is permissible on a temporary basis.
Temporary shall be defined as not longer than two (2) nights.
10. Existing Conditions. Upon five (5) days written notice by Landlord
to Tenant, Tenant will conduct a walk-through inspection of the Premises with
Landlord and prepare a punch-list of items needing additional work by Landlord.
Other than the items specified in the punch-list, by taking possession of the
Premises, Tenant will be deemed to have accepted the Premises in their condition
on the date of delivery of possession; however, Landlord will be responsible for
repairs of latent defects in the structure or in any mechanical system for
twelve (12) months from the Commencement Date. The punch-list will not include
any damage to the Premises caused by Tenant's move-in or early access, if
permitted. Damage caused by Tenant will be repaired or corrected by Landlord, at
Tenant's expense. Tenant acknowledges that neither Landlord nor its agents or
employees have made any representations or warranties as to the suitability or
fitness of the Premises for the conduct of Tenant's business or for any other
purpose, nor has Landlord or its agents or employees agreed to undertake any
alterations or construct any improvements to the Premises except as expressly
provided in this Lease and Exhibits B and C to this Lease. If Tenant fails to
submit a punch-list to Landlord within three (3) business days of Tenant's
inspection, it will be deemed that there are no items needing additional work or
repair (except for latent defects). Landlord's contractor will complete all
reasonable punch-list items within thirty (30) days after the walk-through
inspection or as soon as practicable after such walk-through.
11. Maintenance and Repairs. (a) Tenant shall keep and maintain the
Property (including all structural, non-structural, exterior, interior and
landscaped areas, and systems and equipment) in good order, condition and repair
during the Term. Tenant shall promptly replace any portion of the property or
any systems or equipment thereof which cannot be fully repaired. All repairs and
replacements shall be performed in a good and workmanlike manner. All of
Tenant's obligations to maintain and repair the Property shall be accomplished
at Tenant's sole expense. Tenant shall not be responsible to repair damages
occasioned by Landlord's negligence.
(b) Tenant shall keep and maintain all portions of the Property and
the parking areas, sidewalks and landscaped areas, in the same condition as
received from Landlord, reasonable wear and tear excepted, free of dirt and
rubbish, and clear the parking areas and sidewalks of accumulations of snow and
ice.
(c) During the Term, Tenant shall procure and maintain the
following service contracts: (i) contract for inspection and maintenance of the
roof of the Building (the inspections pursuant to such contract shall be made at
least annually); (ii) contract for the inspection, service, maintenance and
repair of all heating, ventilating and air conditioning equipment installed in
the Building (the inspection pursuant to such contract shall be made at least
quarterly); (iii) contract for maintenance of the landscaped areas of the
Property; however, Tenant is not obligated to provide a service contract for
maintenance of landscaping provided Tenant adheres to the maintenance
obligations set forth in (b) above; and (iv) contract for the inspection,
testing, service, maintenance, and repair of the sprinkler system in accordance
with the requirements of the National Fire Protection Association (NFPA) and the
governmental bodies having jurisdiction. The identity of each contractor and
each contract shall be subject to Landlord's reasonable approval. Copies of
reports of inspections made hereunder shall be promptly supplied to Landlord.
12. Alterations and Improvements. (a) Tenant shall not make any
alterations, additions or improvements to the Property (the "Alterations")
without Landlord's prior written consent, except for interior non-structural
Alterations which do not exceed $10,000.00 in cost which are not visible from
the outside of the Building and which meet all applicable laws and building
codes, and which do not affect the insurability or cost of insuring the
Premises. In no event shall Alterations reduce the size of the Building or
reduce the value of the Property. Tenant shall submit to Landlord detailed plans
and specifications for Alterations requiring Landlord's consent and reimburse
Landlord for all reasonable expenses incurred by Landlord in connection with its
review thereof. Tenant shall also provide to landlord for its reasonable
approval the identity of the contractor Tenant proposes to employ to construct
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the Alterations for those Alterations requiring Landlord's consent. All
Alterations shall be accomplished in accordance with the following conditions:
(1) Tenant shall procure all governmental permits and
authorizations for the Alterations, and obtain and provide to Landlord an
official certificate of occupancy and/or compliance upon completion of the
Alterations, if appropriate.
(2) Tenant shall arrange for extension of its general liability
insurance to apply to the construction of the Alterations. Further, Tenant shall
procure and maintain Builders Risk Casualty Insurance in the amount of the full
replacement cost of the Alterations and statutory Workers Compensation Insurance
covering persons employed in connection with the work.
(3) Tenant shall construct the Alterations in a good and
workmanlike manner utilizing materials of quality commensurate with others in
the building and in compliance with all laws and governmental regulations.
(b) Upon completion of the Alterations, if Landlord so requests, Tenant
shall provide Landlord with "as built" reproducible transparency plans of the
Alterations; however, Tenant will not be required to provide plans for
non-structural alterations which do not require a building permit.
(c) Alterations shall be the property of Landlord and shall remain on
the Property upon termination of the Lease or, if Landlord so requires, a
portion of or all Alterations shall be removed by Tenant on or prior to the
termination of the Lease and Tenant shall restore the Property to its condition
prior to such Alterations, reasonable wear and tear excepted. Landlord will,
upon Tenant's request, notify Tenant of those Alterations which must be removed
at Lease end.
13. Covenant Against Liens. Tenant shall not have any right to subject
Landlord's interest in the Property to any mechanic's lien or any other lien
whatsoever. If any mechanic's lien or other lien, charge or order for payment of
money shall be filed as a result of the act or omission of Tenant, Tenant shall
cause such lien, charge or order to be discharged or appropriately bonded within
twenty (20) days after written notice from Landlord thereof, and Tenant shall
indemnify and save Landlord harmless from all liabilities and costs resulting
therefrom.
14. Signs. Tenant shall not place any signs on the Property without
Landlord's prior written approval of its design, location and manner of
installation, such approval not to be unreasonably withheld. In no event shall
any sign be installed on the roof or above the parapet height of the Building.
Tenant shall remove its signs upon termination of this Lease and restore the
Property to its condition prior to installation of the signs, reasonable wear
and tear excepted.
15. Compliance with Law. Tenant shall take all necessary action to
conform to and comply with all laws, orders and regulations of any governmental
authority or Landlord's or Tenant's insurers, or any Landlord's Mortgagee, now
or hereafter applicable to the Property or Tenant's use or occupancy. Tenant
shall obtain all permits, including a certificate of occupancy, necessary for
Tenant's occupancy or use of the Property. Tenant has no obligation to obtain a
certificate of occupancy for any work specified to be done by Landlord in the
approved plans and specifications in Exhibit B. If the Tenant must make any
capital expenditure in accordance with this section, which expenditure is not
due to Tenant's specific use, Tenant will only pay a portion of the expense,
said portion to be calculated as the number of years remaining on the Lease
Term, or Extended Lease Term, divided by the depreciable life of the capital
expenditure under generally accepted accounting principles multiplied by the
capital expenditure. Tenant will not be required to make any capital
expenditures to conform the property to any laws, orders and regulations of any
governmental authority which were in existence as of the date of receipt of a
building permit for construction of the facility.
16. Environmental Representations and Compliance. (a) The Tenant, its
officers, partners, employees, agents and subsidiaries, agree to indemnify,
defend and hold the Landlord, its officers, partners, employees, successors or
assigns, harmless from any and all claims, causes of action, and any and all
damages, liabilities, costs and expenses of any kind whatsoever, including
fines,
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assessments, clean-up costs, shut-down fees, contractor's costs and actual
attorney fees, which arise out of, are asserted on account of, or traceable to
Tenant's use, storage, manufacture, dumping, leakage or the carrying on of any
activities or occurrence upon the Premises that is the subject of this Lease
relating to oil, waste oil, thinners, spirits, materials all petro-chemical
by-products, and any substance, material or compound classified as toxic or
hazardous under any federal, state or local environmental law, and any other
material or compound known to have an adverse environmental impact. However,
nothing herein contained shall make Tenant responsible for conditions existing
prior to Tenant's occupancy.
(b) In addition, Tenant hereby makes the following representations with
respect to Tenant's occupancy and use of the Premises to Landlord, understanding
that Landlord shall and does in fact rely thereon. Tenant shall also indemnify,
defend and hold Landlord harmless from any and all claims, costs, damages,
expenses, attorney fees, and causes of action arising as a result of, or
associated with these representations made by Tenant. However, nothing herein
contained shall make Tenant responsible for conditions existing prior to
Tenant's occupancy. (Note: Although clauses (1) through (4) below are
representations made in the present tense, these representations shall be
considered in compliance provided the representations are in fact accurate at
the time of occupancy and thereafter):
(1) Air Quality:
(i) Tenant represents that any and all air emission permits
required by state, local or federal authorities have been properly obtained and
will remain in force.
(ii) Tenant represents that its facility is in compliance with any
conditions attendant to such permits.
(iii) Tenant represents that its facility is and will remain in
compliance with Occupational Safety Health Act requirements governing exposure
of workers to hazardous materials in the workplace.
(2) Water Pre-Treatment:
(i) Tenant represents that any present discharge of industrial
waste water into the sewer system has been properly permitted by local, state or
federal authorities.
(ii) Tenant represents that all permits have been properly complied
with and that Tenant is not in violation of any permits, ordinances, or
compliance requirements.
(3) Underground Storage Tanks:
(i) Tenant acknowledges that there are presently no underground
storage tanks upon the property and that none will be installed without
Landlord's specific written consent.
(4) Water Discharge:
(i) Tenant represents that any permits for such water discharge
have been properly obtained and are current and that Tenant is in compliance
therewith.
However, in the event of unintentional violation of any of these
representations, Tenant shall be entitled to the notice and cure rights provided
in Section 23 hereof.
(c) Tenant further understands and agrees that Landlord shall be
entitled to enter upon the Premises to conduct environmental audit inspections,
tests, borings, samplings and the like which Landlord deems reasonable and
necessary to determine the environmental status of the property at Landlord's
sole cost and expense. Landlord shall provide prior notice and agrees not to
interfere with Tenant's occupancy; Landlord to repair any damage done to
Premises; Landlord to indemnify Tenant for any damage or accidents.
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(d) Tenant agrees that it shall, at its sole cost and expense, fulfill,
observe and comply with all of the terms and provisions of all federal, state
and local environmental laws now in effect or hereinafter enacted, as any of the
same may be amended from time to time, and all rules, regulations, ordinances,
opinions, orders and directives issued or promulgated pursuant thereto or in
connection therewith, as and to the extent any of the foregoing may be
applicable to the Property and Tenant's use and occupancy thereof except that
Tenant shall not be obligated to make any changes to the structural elements or
building systems unless necessitated by Tenant's specific use.
(e) Within ten (10) days after written request by the Landlord or any
mortgagee of Landlord, and, in any event, on each anniversary of the
commencement date hereof, Tenant shall deliver to Landlord or Landlord's
mortgagee, as the case may be, a duly executed and acknowledged affidavit of
Tenant or Tenant's chief executive officer, certifying:
(1) The proper four digit Standard Industrial Classification number
("S.I.C. number") relating to Tenant's then current use of the Property (said
S.I.C. number to be obtained by reference to the then current Standard
Industrial Classification Manual prepared and published by the Executive Office
of the President, Office of Management and Budget or the successor to such
publication). Tenant hereby represents, warrants and covenants that its S.I.C.
number as of the date of this Lease is as set forth in Section 1(i) hereof; and
(2) (a) That Tenant's use of the Property does not involve and has not
involved the generation, manufacture, refining, transportation, treatment,
storage, handling, or disposal of petroleum products or hazardous substances or
wastes (as hazardous substances and hazardous wastes are defined in any
Environmental Laws) on site, above ground or below ground (all of the foregoing
being hereinafter collectively referred to as the Presence of Hazardous
Substances); or (b) that Tenant's use does involve or has involved the Presence
of Hazardous Substances, in which event, such affidavit shall describe in detail
that portion of Tenant's operations which involves or involved the Presence of
Hazardous Substances. Said description shall identify each Hazardous Substance
and describe the manner in which it is or was generated, handled, manufactured,
refined, transported, treated, stored, and/or disposed of. Tenant shall supply
Landlord or Landlord's mortgagee with such additional information relating to
said Presence of Hazardous Substances as Landlord or Landlord's mortgagee may
request. However, the Tenant may store and handle substances which are
classified as hazardous provided they are incidental to the normal operation of
an office and light industrial manufacturing facility, and further provided that
such substances are stored, handled and disposed of in accordance with
applicable State and Federal statutes and regulations.
(f) Tenant shall provide Landlord with copies of all reports,
information and materials filed with or provided to any governmental agency or
authority pursuant to any of the environmental laws.
(g) In the event that, upon the date of termination or expiration of
the term of this Lease, Tenant has not satisfied and complied with all
requirements imposed upon Landlord or Tenant under any environmental laws or by
any governmental agency or authority pursuant to any environmental laws, Tenant
shall continue to pay Fixed Rent at the annual rent payable immediately prior to
such date of termination or expiration plus an increase for each year until such
obligation terminates, each such annual increase to be determined by the
percentage increase in the Consumer Price Index published by the Bureau of Labor
Statistics of the United States for All Urban Consumers (1982-1984 = 100). Such
increased portion of rent over the Fixed Rent shall be computed by the increase
in the Index from three (3) months prior to the initial Term of the Lease to the
later of three (3) months prior to the expiration of the Lease or three (3)
months prior to the anniversary of each continuance of the Lease multiplied by
the annual rental during the last year of the Lease. The increased rental when
added to the previous Fixed Rent shall become the new Fixed Rent. In no event
shall Fixed Rent be reduced below the amount payable for the prior year. Such
Fixed Rent shall be payable notwithstanding that Tenant may be barred and
precluded from occupying and using the Property. Such payments of Fixed Rent
shall continue until Tenant has complied in full with the requirements imposed
by environmental laws or by governmental agencies and authorities having
jurisdiction with respect thereto and has provided to Landlord written
confirmation from governmental agency or authority having jurisdiction that such
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compliance has in fact occurred. Tenant shall, in addition to payments of Fixed
Rent as aforesaid, promptly pay any fines, penalties, levies or assessments
against the Property or Landlord which are imposed at any time or from time to
time as a result of any action, act or failure to act of the Tenant relating to
environmental laws. For as long as Tenant shall remain liable for rent under
this subparagraph (g), Tenant shall have control over any remediation efforts,
provided such remediation is in compliance with all applicable federal, state
and local laws.
(h) Tenant agrees that each and every provision of this Section shall
survive the expiration or earlier termination of the Term of this Lease.
17. Landlord's Access. Landlord and its representatives may enter the
Property at all reasonable times (or at any time in the event of emergency) for
the purpose of inspecting the Property, or making any necessary repairs, or to
show the Property to prospective purchasers, investors, encumbrancers, tenants
or other parties, or for any other purpose Landlord deems necessary. During the
final six (6) months of the Term, Landlord may place customary "For Sale" or
"For Lease" signs on the Property. Landlord shall, in the exercise of its rights
under this Section, use its best efforts not to unreasonably interfere with
Tenant's use and occupancy of the Property.
18. Assignment and Subletting. Except as otherwise provided herein,
Tenant shall not assign or encumber Tenant's interest in this Lease, sublet any
portion of the Property, or grant concessions or licenses with respect to the
Property.
(a) If Tenant requests Landlord's consent to an assignment of this
Lease or a subletting of all of any part of the Premises, Tenant shall submit to
Landlord: (1) the name of the proposed assignee or subtenant; (2) the terms of
the proposed assignment or subletting together with a conformed or photostatic
copy of the proposed assignment or sublease; (3) the nature of business of the
proposed assignee or subtenant's business and its proposed use of the Premises;
(4) such information as to its financial responsibility and general reputation
as Landlord may require; and (5) a summary of plans and specifications for
revising the floor layout of the Premises.
(b) Upon the receipt of such information from Tenant, Landlord shall
have the option, to be exercised in writing within twenty (20) days after such
receipt, to cancel and terminate this Lease if the request is to assign this
Lease or to sublet all of the Premises or, if the request is to sublet a portion
of the Premises only, to cancel and terminate this Lease with respect to such
portion, in each case as of the date set forth in Landlord's notice of exercise
of such option.
(c) If Landlord shall cancel this Lease, Tenant shall surrender
possession of the Premises, or the portion of the Premises which is the subject
of the request, as the case may be, on the date set forth in such notice in
accordance with the provisions of this lease relating to surrender of the
Premises. If this Lease shall be canceled as to a portion of the Premises only,
the Minimum Rent and Additional Rent payable by Tenant hereunder shall be abated
proportionately according to the ratio that the number of square feet in the
portion of space surrendered (as computed by Landlord) bears to the Rentable
Area of the Premises.
(d) If Landlord shall elect not to exercise its option to cancel and
terminate this Lease with respect to all of part of the Premises as above
provided, Landlord agrees not to unreasonably withhold its consent to the
proposed assignment or sublease. However, if the proposed assignee or subtenant
is or has been a tenant of Landlord or Landlord's affiliates, or if the proposed
assignee or subtenant has had contact with Landlord or Landlord's affiliates
within twelve (12) months preceding the proposed assignment or sublease
regarding potentially leasing space from the Landlord or Landlord's affiliates,
then failure of Landlord to consent shall not be unreasonable. Landlord shall
notify Tenant, within twenty (20) days after Landlord's receipt of the
information described herein, whether (i) Landlord consents to the proposed
assignment or sublease or (ii) does not consent to the proposed assignment or
sublease. The cumulative change of more than fifty-one (51%) percent of the
ownership interest of Tenant shall be deemed to be an assignment of this Lease
requiring Landlord's consent. However, Tenant may assign this Lease or sublet
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant, provided such
assignee shall assume all of
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Tenant's obligations under this Lease, and such assignee or sublessee shall then
have a net worth at least equal to that of Tenant on the date hereof.
(e) In the event of a permitted assignment or subletting, Tenant shall
remit to Landlord as additional rent each month during the remainder of the Base
Term fifty (50%) percent of any rent or other sums received by Tenant from its
assignee or sublessee in excess of the Fixed Rent and other charges paid by
Tenant allocable to the Property or portion thereof sublet, as the case may be,
and 100% of any rent or other sums received by Tenant from its assignee or
sublessee in excess of the Fixed Rent and other charges paid by Tenant allocable
to the Property or portion thereof sublet, as the case may be for any term in
effect beyond a ten (10) year term.
(f) No assignment or subletting hereunder, whether or not with
Landlord's consent, shall release Tenant from any obligations under this Lease,
and Tenant shall continue to be primarily liable hereunder. Unless otherwise
previously released from liability by Landlord, if Tenant's assignee or
sublessee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing its remedies against the assignee or sublessee. Consent
to one assignment or subletting shall not be deemed a consent to any subsequent
assignment or subletting. Landlord may consent to subsequent assignments or
modifications of this Lease or sublettings without notice to Tenant and Tenant
shall not be relieved of liability under this Lease.
(g) Tenant shall pay to Landlord upon demand all costs, including
reasonable legal fees, which Landlord shall incur in reviewing any proposed
assignment or subletting; however, Landlord will provide an estimate of costs
beforehand and Tenant may decline to have Landlord review or ask Landlord to
review and pay such amounts as are due.
19. Casualty. If the Building is damaged by fire or other casualty, and
(i) the insurance proceeds received by Landlord on account of such damage are
sufficient to pay for the necessary repairs, (ii) Landlord's Mortgagee permits
Landlord to utilize the insurance proceeds to repair such damage, and (iii) the
Building can be fully repaired within one hundred thirty-five (135) days after
such casualty occurred, this Lease shall remain in effect and Landlord shall
repair the damage as soon as reasonably possible. If any of the foregoing
conditions requiring Landlord to repair the Building is not met, Landlord may
elect either to (i) terminate this Lease; or (ii) repair the damage as soon as
reasonably possible, in which event this Lease shall remain in full force and
effect (but Tenant shall then have the right to terminate this Lease if the
Building cannot be fully repaired within six (6) months after such casualty
occurred). Landlord shall notify Tenant, in writing, of its election within
thirty (30) days after Landlord receives notice of the occurrence of the
casualty. Tenant's notification, if any, shall be required within ten (10) days
thereafter. The Monthly Base Rent and other charges will be abated
proportionately during any period in which, by reason of any damage or
destruction not occasioned by the negligence or willful misconduct of Tenant or
Tenant's employees or invitees, there is a substantial interference with the
operation of the business of Tenant. Such abatement will be proportional to the
measure of business in the Premises which Tenant may be required to discontinue.
The abatement will continue for the period commencing with such destruction or
damage and ending with the completion by the Landlord of such work, repair, or
reconstruction as Landlord is obligated to do. Tenant waives the protection of
any law which grants a tenant the right to terminate a lease in the event of the
destruction of a leased property, and agrees that the provisions of this
paragraph shall govern in the event of any destruction of the Building. Landlord
shall not be required to repair improvements or alterations to the Property made
by Tenant.
20. Condemnation. If more than twenty-five (25%) percent of the Land
and/or Building shall be taken under the power of eminent domain or sold under
the threat thereof ("Condemnation") and Tenant's use of the Property is
materially adversely affected in the reasonable opinion of Tenant, this Lease
shall terminate on the date on which title to the Property or portion thereof
shall vest in the condemning authority. If this Lease shall remain in effect as
to the portion of the Property not taken, Landlord shall restore the
improvements of the Property not taken as nearly as reasonably practicable to
their condition prior to the Condemnation, and the Fixed Rent and Additional
Rent shall be reduced proportionately in accordance with the reduction in the
square foot area
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of the Building following the Condemnation. Landlord shall be entitled to
receive the entire award in any Condemnation proceeding relating to the
Property, except that Tenant may assert a separate claim to an award for its
moving expenses and for fixtures and personal property installed by Tenant at
its expense. It is understood that Tenant shall have no claim against Landlord
for the value of the unexpired Term of this Lease or any options granted under
this lease. Landlord shall not be required to restore improvements or
alterations to the Property made by Tenant.
21. Surrender of Property. Upon termination of the Lease, Tenant shall
surrender the Property to Landlord, broom clean, and in good order and
condition, except for ordinary wear and tear, and damage by casualty which
Tenant was not obligated to remedy under Section 19. Tenant shall remove its
machinery, equipment and personal property and repair any damage to the Property
caused by such removal. Tenant shall not remove any power wiring or power
panels, lighting or lighting fixtures, wall coverings, blinds or other window
coverings, carpets or other floor coverings, heaters or air conditioners or
fencing or gates, except if installed by Tenant and required by Landlord to be
removed from the Property. All personal property of Tenant remaining on the
Property after Tenant's removal shall be deemed abandoned and at Landlord's
election may either be retained by Landlord or may be removed from the property
at Tenant's expense.
22. Holdover. In the event Tenant remains in possession of the Property
after the expiration of the Term of this Lease (the "Holdover Period"), in
addition to any damages to which Landlord may be entitled or other remedies
Landlord may have by law, Tenant shall pay to Landlord a rental for the Holdover
Period at the rate of one hundred fifty (150%) percent the sum of (i) the annual
rent payable during the last lease year of the Term, plus (ii) all items of
additional rent and other charges with respect to the Property payable by Tenant
during the last lease year of the Term. Nothing herein contained shall be deemed
to give Tenant any right to remain in possession of the Property after the
expiration of the Term of this lease. The sum due to Landlord hereunder shall be
payable by Tenant upon demand. Prior to asserting a claim for damages due to a
lost or delayed prospective tenant, Landlord must provide evidence of any claim
against Tenant for missed rent or other damages from a lost prospective tenant
due to holdover of Tenant.
23. Events of Default; Remedies. (a) Tenant shall be in default upon
the occurrence of one or more of the following events (an "Event of Default"):
(i) Tenant fails to pay rent or any other sum of money required to be paid by
Tenant hereunder within five (5) days of the date when due; however, Tenant
shall be entitled to pay within five (5) days written notice from Landlord on
two (2) occasions per year and not be in default; (ii) Tenant fails to perform
any of Tenant's non-monetary obligations under this Lease for a period of thirty
(30) days after written notice thereof from Landlord. If Tenant is diligently
pursuing to cure any non-monetary default and such default cannot be effected
within thirty (30) days, then Tenant will be allowed additional time as required
to effect such cure; (iii) Tenant abandons the Property for thirty (30) days or
more; or (iv) Tenant makes an assignment for the benefit of creditors, or if a
petition for adjudication of bankruptcy or for reorganization is filed by or
against Tenant and is not dismissed within thirty (30) days, or if a receiver or
trustee is appointed for a substantial part of Tenant's property and such
appointment is not vacated within thirty (30) days.
(b) On the occurrence of an Event of Default, without limiting any
other right or remedy Landlord may have, Landlord may give written notice to
Tenant of its intention to take the following actions on the earliest date
permitted by law or any later date specified in such notice:
(i) Terminate this Lease and Tenant's right to possession of the
Property by any lawful means, or, without terminating this Lease, take
possession of the Property. In any such event Tenant shall immediately surrender
possession of the Property to Landlord and shall remain liable to Landlord as
follows. At its option, Landlord may occupy the Property or cause the Property
to be redecorated, altered, divided, consolidated with other adjoining property,
or otherwise prepared for reletting, and may relet the Property or any part
thereof for a term or terms to expire prior to, at the same time or subsequent
to the original Expiration Date, and receive the rent therefor, applying the
sums received first to the payment of such expenses as Landlord may have
incurred in connection with the recovery of possession, and restoring the
Property to the
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condition in which Tenant was obligated to maintain the Property under this
Lease, to brokerage and attorneys' fees, and then to the payment of damages in
amounts equal to the rent hereunder and to the cost and expense of performance
of the other covenants of Tenant under this Lease. Tenant agrees to pay to
Landlord damages equal to the rent and other sums payable by Tenant under this
Lease, reduced by the net proceeds of the reletting, if any, as ascertained from
time to time. In reletting the Property, Landlord may grant rent concessions,
and Tenant shall not be entitled to any credit therefor. Tenant shall not be
entitled to any surplus resulting from any reletting. If Landlord elects to
occupy the Property or any part thereof, there shall be allowed against Tenant's
obligation for rent during the period of Landlord's occupancy, the reasonable
value of such occupancy, not to exceed in any event the rent payable hereunder
for such portion of the Property. Such occupancy shall not be construed as a
release of Tenant's liability hereunder. In all respects hereto, the Landlord
has an affirmative duty to mitigate its damages by attempting to relet the
Property.
(ii) Permit Tenant to remain in possession of the Property, in
which event this Lease shall continue in effect. Landlord shall be entitled to
enforce all of Landlord's rights and remedies under this Lease, including the
right to receive the rent as it becomes due under this lease.
(iii) Pursue any other remedy now or hereafter available under the
laws of the jurisdiction in which the Property is located.
(c) The remedies available to Landlord herein specified are not
intended to be exclusive and prevent Landlord from exercising any other remedy
or means of redress to which Landlord may be lawfully entitled. In addition to
other remedies provided in this Lease, Landlord shall be entitled to restraint
by injunction of any violation or threatened violation by Tenant of any of the
provisions of this Lease. Landlord's exercise of any right or remedy shall not
prevent Landlord from exercising any other right or remedy.
(d) Tenant, for itself and any person claiming through or under Tenant,
waives any equity or right of redemption provided by any law.
24. Service Fee; Interest. (a) Tenant's failure to pay rent promptly or
make other payments required under this Lease may cause Landlord to incur
unanticipated costs, which are impractical to ascertain. Therefore, if Landlord
does not receive full payment of Fixed Rent, additional rent or other sums due
from Tenant to Landlord within five (5) days after it becomes due, Tenant shall
pay Landlord as additional rent a service fee equal to five (5%) percent of the
overdue amount; however, Tenant will be allowed one (1) written notice of
delinquency per year without imposition of the service fee, providing Tenant
pays all amounts due with three (3) days of receipt of Landlord's notice. This
service fee shall be in addition to reasonable legal fees and costs incurred by
Landlord in enforcing this Lease in the event of default.
(b) Any amount owed by Tenant to Landlord which is not paid when due
shall bear interest at the rate per annum of three (3%) percent in excess of the
then prime rate of CitiBank, N.A., of New York, New York ("Default Interest")
from the date of default in payment of such amount. The payment of Default
Interest on such amounts shall not extend the due date of any amount owed. If
the interest rate specified in this Lease shall exceed the rate permitted by
law, the Default Interest shall be deemed to be the maximum legal interest rate
permitted by law.
25. Indemnification by Tenant. Tenant shall indemnify and hold harmless
Landlord from and against all liability, claims or costs including reasonable
legal fees, arising from (i) Tenant's use of the Property; (ii) any breach of
this Lease by Tenant; (iii) any other act or omission of Tenant; or (iv) any
injury including claims for death to person or damage to property occurring on
or about the Property, except for acts of gross negligence by Landlord. Tenant
shall defend Landlord against any such claim of a third party, with counsel
reasonably acceptable to Landlord or, at Landlord's election, Tenant shall
reimburse Landlord for reasonable legal fees incurred by Landlord's employment
of its own counsel.
26. Landlord's Right to Cure Tenant's Default. If Tenant fails to make
any payment or perform any act on its part to be made or performed, then
Landlord, without waiving or releasing Tenant from such obligation, may, but
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shall not be obligated to, make such payment or perform such act on Tenant's
part, and the costs incurred by Landlord in connection with such payment or
performance, together with Default Interest thereon, shall be paid on demand by
Tenant to Landlord as additional rent.
27. Waiver of Liability. Landlord shall not be liable for any injury or
damage to the business, equipment, merchandise or other property of Tenant or
any of Tenant's employees or invitees or any other person on or about the
Property, resulting from any cause, including, but not limited to: (i) fire,
steam, electricity, water, gas or rain; (ii) leakage, obstruction or other
defects of pipes, sprinklers, wires, plumbing, air conditioning, boilers or
lighting fixtures; or (iii) condition of the Property. The preceding excludes
any acts of negligence by Landlord.
28. Force Majeure. If either party is unable to perform any of its
obligations due to events beyond such party's reasonable control, the time
provided to such party for performing such obligations shall be extended by a
period of time equal to the duration of such events, and the other party shall
not be entitled to any claim against such party by reason thereof. Events beyond
a party's reasonable control include, but are not limited to, acts of God, war,
civil commotion, labor disputes, strikes, casualty, weather conditions, labor or
material shortages, or government regulation or restriction. Nothing herein
shall delay or affect Tenant's obligation to pay Fixed Rent, real property
impositions or other items of additional rent payable by Tenant under this Lease
as the same becomes due. The above provisions will not apply to the receipt of
approvals by October 31, 1994.
29. Notice of Landlord's Default. Tenant shall give written notice of
any failure by Landlord to perform any of its obligations under this Lease to
Landlord and any ground lessor or Landlord's Mortgagee whose name and address
have been furnished to Tenant. Landlord shall not be in default under this Lease
unless Landlord (or such ground lessor or Landlord's Mortgagee) fails to cure
such non-performance within thirty (30) days after receipt of Tenant's notice.
If more than thirty (30) days are required to cure such non-performance,
Landlord shall not be in default if such cure is commenced within such thirty
(30) day period and thereafter diligently pursued to completion. If Landlord
shall be in default as aforesaid, Tenant's only right or remedy shall be to
perform such work or take such action as shall be reasonably necessary to cure
or correct such default. In no event shall Tenant have the right to terminate
this Lease by reason of any such default, and in no event shall Tenant have the
right to deduct from Fixed Rent or additional rent any amounts expended by
Tenant pursuant to this Section.
30. Landlord's Liability Limited. (a) There shall be no personal
liability of the Landlord or any partner, stockholder, officer, director or
other principal of Landlord in connection with this Lease. Tenant agrees to look
solely to the interest of Landlord in the Property for the collection of any
judgment or other judicial process requiring the payment of money by Landlord in
the event of any default or breach by Landlord with respect to this Lease or in
any way relating to the Property. No other assets of Landlord or any principal
of Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Tenant's remedies.
(b) The term "Landlord" as used in this lease means only the owner or
mortgagee in possession for the time being of the Property or the owner of a
lease thereof so that, in the event of any sale of the Property, or an
assignment or transfer of such lease, or an assignment of this Lease, Landlord
shall be, and hereby is, entirely freed, relieved and released of all
obligations of Landlord hereunder, and it shall be deemed, without further
agreement between the parties and such purchaser(s) or assignee(s) that the
purchaser or assignee has agreed to perform all of the obligations of Landlord
hereunder. This provision shall relate only to obligations which arise after the
date of such transfer and do not relieve Landlord for liability for obligations
arising prior to such transfer.
31. Estoppel Statement; Financial Statement. (a) Upon Landlord's
request, Tenant shall execute, acknowledge and deliver to Landlord a written
statement certifying: (i) the Commencement Date; (ii) the Expiration Date; (iii)
that this Lease is in full force and effect and unmodified (or if modified,
stating the modifications); (iv) the last date of payment of the Fixed Rent and
other charges and the time period covered by each payment; (v) that Landlord is
not in default
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under this Lease (or, if Landlord is claimed to be in default, stating the
nature of the default); and (vi) such other matters as may be reasonably
required by Landlord or any Landlord's Mortgagee. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's written request. Any
such statement may be given to and relied upon by any prospective purchaser or
encumbrancer of the Property.
(b) Within ten (10) days after Landlord's request, Tenant shall deliver
to Landlord such financial statements as are reasonably required to verify the
net worth of Tenant and provided such financial statements have been previously
filed with public authorities as required. Any such statement may be given by
Landlord to any Landlord's Mortgagee or prospective encumbrancer of the
Property, but otherwise shall be kept confidential by Landlord. Tenant
represents to Landlord that each such financial statement is a true and accurate
statement as of the date of such statement.
32. Quiet Enjoyment. Landlord covenants that as long as Tenant pays the
Fixed Rent and additional rent and performs its other obligations under this
Lease, Tenant shall peaceably and quietly have, hold and enjoy the Property for
the Term provided by this Lease, subject to the provisions of this Lease, any
mortgage or other agreements to which this Lease is subordinate.
33. Subordination; Attornment. (a) This Lease is subject and
subordinate to any mortgage and related documents or liens which may now or
hereafter encumber the Property, and any renewals, modifications,
consolidations, replacements or extensions thereof.
(b) If Landlord's interest in the Property is acquired by Landlord's
Mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the
transferee of or successor to Landlord's interest in the Property and recognize
such transferee or successor as Landlord under this Lease. Such transferee or
successor shall not be liable for any act or omission of any prior landlord, or
be subject to any offsets or defenses which Tenant might have against any prior
landlord, or be bound by any Fixed Rent which Tenant might have paid for more
than the current month to any prior landlord, or be liable for any security
deposit under this Lease unless actually transferred to such transferee or
successor.
(c) Tenant agrees that this Lease shall be modified in accordance with
the reasonable request of any institutional Landlord's Mortgagee, provided no
such modification adversely affects the business terms, or operation of Tenant's
business, of this Lease.
(d) The foregoing provisions shall be self-operative and no further
instrument or act on the part of Tenant shall be necessary to effect the same.
Tenant shall nevertheless sign and deliver any document necessary or appropriate
to evidence the subordination, attornment or agreement above provided, providing
Tenant is provided with a non-disturbance agreement, acceptable to Tenant,
granting Tenant the right to have, hold and enjoy the Property for the Term (so
long as Tenant pays the Fixed and Additional Rent and performs its other
obligations under this Lease).
34. Brokerage. Each party represents to the other that it did not deal
with any real estate broker in connection with this Lease, other than the real
estate broker (if any) whose identity is set forth in Section 1(h). The
commission of such broker (if any) shall be paid by the party as set forth in
Section 1(h). Each party shall indemnify and hold the other harmless from any
claim for a commission or other fee made by any broker with whom the
indemnifying party has dealt, other than the broker identified in Section 1(h).
35. Notices. All notices in connection with this Lease or the Property
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid or by overnight carrier which obtains
delivery receipts (e.g. Federal Express). Notices to Landlord shall be delivered
to the address specified in Section 1(b). Notices to Tenant shall be delivered
to the address specified in Section 1(c). All notices shall be effective upon
the earlier of delivery or attempted delivery in accordance with this provision.
Either party may change its notice address upon written notice to the other
party given in accordance with this provision.
15
16
36. Memorandum of Lease. Tenant shall not record this Lease. However,
either Landlord or Tenant may require that a memorandum of this Lease executed
by both parties be recorded. Such memorandum shall include such portions of this
Lease as either party may reasonably require, but shall not specify the amount
of Fixed rent payable hereunder.
37. Miscellaneous. (a) The failure of either party to insist on strict
performance of any provision of this Lease, or to exercise any right contained
herein, shall not be construed as a waiver of such provision or right in any
other instance. All amendments to this lease shall be in writing and signed by
both parties.
(b) The captions in this Lease are intended to assist the parties in
reading this Lease and are not a part of the provisions of this Lease. Whenever
required by the context of this Lease, the singular shall include the plural and
the plural shall include the singular. The masculine, feminine and neuter
genders shall each include the other.
(c) Landlord and Tenant hereby waive trial by jury in any legal
proceeding brought by either of them against the other with respect to any
matters arising out of or in any way connected with this Lease or the Property.
(d) The laws of the state in which the Property is located shall govern
this Lease.
(e) If Tenant is a corporation or partnership, each person signing this
lease on behalf of Tenant represents that he has full authority to do so and
that this Lease binds the corporation or partnership, as the case may be.
(f) This Lease shall be binding upon, and inure to the benefit of,
Landlord and Tenant and their respective heirs, executors, administrators,
successors (by operation of law or otherwise) and assigns, subject, however, to
the limitations on Tenant's right to assign and sublet as set forth in Section
18 hereof.
(g) The submission of this Lease to Tenant shall not be deemed to be an
offer and shall not bind either party until duly executed by Landlord and
Tenant.
(h) This Lease may be executed in counterparts, and, when all
counterpart documents are executed, the counterparts shall constitute a single
binding instrument.
(i) A determination by a court of competent jurisdiction that any
provision of this Lease or any part thereof is illegal or unenforceable shall
not invalidate the remainder of this Lease or such provision, which shall
continue to be in effect.
(j) Waiver of Jury Trial. Landlord and Tenant by this Section 38 waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties to this Lease against the other on any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use or occupancy of the Premises, or any other claims
(including without limitation claims for personal injury or property damage),
and any emergency statutory or any other statutory remedy.
The riders enumerated in Section 1(i) are attached hereto and make
a part of this Lease as fully as if set forth herein at length. The Terms used
in the rider have the same meanings as set forth in the Lease. The provisions of
a rider shall prevail over any provisions of the Lease which are inconsistent or
conflict with the provisions of the rider.
16
17
IN WITNESS WHEREOF, the parties hereby have duly executed this
Lease as of the date set forth in Section 1(a).
WITNESS: LANDLORD:
PYRAMID CONSTRUCTION COMPANY
/s/ By: /s/ William J. Coleman
- --------------------------- ----------------------------
William J. Coleman
----------------------------
ATTEST: TENANT:
MAGNETEC CORP.
By: /s/ By: /s/ Bart C. Shuldman
------------------------ ----------------------------
, Secretary Bart C. Shuldman, President
[CORPORATE SEAL]
17
18
OPTION TO EXPAND THE PREMISES
DATE OF LEASE: August 1, 1994
LANDLORD: PYRAMID CONSTRUCTION COMPANY
TENANT: MAGNETEC CORP.
1. Grant of Option. Subject to the provisions of Section 3 of this Rider,
Landlord hereby grants to Tenant one (1) option (such option is
hereunder referred to as the "Option") to expand the premises 10,000
square feet by giving notice during the original term of the Lease.
2. Exercise of Option. The Option shall be exercised only by written
notice (the "Expansion Notice") delivered to Landlord in accordance
with Section 35 of the Lease prior to the last twelve (12) months of
the Lease and at least six (6) months prior to the date that the
expanded premises is required.
3. Conditions Precedent to Option. The Option shall be exercisable by
Tenant and the Lease shall continue for the term provided under Clause
5 on the following conditions:
(a) At the time Landlord receives the Expansion Notice, the Tenant
shall not be in default under any of the provisions of the Lease.
(b) At the time Landlord receives the Expansion Notice, the Tenant
named in Section 1(c) of the Lease shall not have assigned the
Lease or sublet any portion of the Property, except as permitted
in Section 18(a) of the Lease.
4. Description of Expansion. 10,000 square feet of light manufacturing
finished the same as the original 32,000 square foot portion of the
42,000 square foot building.
5. Expansion Term Provisions.
(a) The terms and conditions of the expansion premises shall be on
the same terms and conditions set forth in the original Lease
except for the rent and the term of the Lease.
(b) Rent on the addition shall commence on the earlier of the date
Tenant takes occupancy or the date the building has reached
substantial completion and a certificate of occupancy or
temporary certificate of occupancy (provided the municipal
authorities allow use and occupancy under a temporary certificate
of occupancy) is issued. The Landlord shall furnish notice to the
Tenant of the date of substantial completion.
(c) The term of the original Lease is extended ten (10) years from
the rent commencement date of the expansion space. If the term
ends during a month, then the term is extended to the end of that
month.
(d) The Fixed Annual Rent under the Lease shall be adjusted annually
in accordance with the following schedule which is broken down in
two (2) components for the Premises; that is rental for the
42,000 square feet and rental for the 10,000 square feet. The
Annual Fixed Rent shall be the sum of the two (2) components.
(1) Portion of Fixed Rent under original term.
(i) 42,000 sq. ft. - As shown under 1.(k) of the Lease.
(ii) 10,000 sq. ft. = Annual Fixed Rent = $5.25 x (1.02)n
n = number of lease or partial lease years that the
original lease has been in effect.
18
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(2) Portion of Fixed Rent under the extended term =
(i) 42,000 sq. ft. - $311,160 x (1.02)n
n = number of lease or partial lease
years that the original lease has
been in effect beyond a 10-year
term.
(ii) 10,000 sq. ft. - Annual Fixed Rent = $5.25 x (1.02)n
n = number of lease or partial lease
years that the original lease plus
any extensions of the original lease
has been in effect.
(e) All other terms and conditions under the original Lease for
payment of rent shall remain unchanged.
(f) Since the Lease Commencement Term for the original premises and
the Lease Term for the expanded premises are different, the
Annual Rental Adjustment will take place during different periods
for each space in the same year.
19
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OPTION TO PURCHASE PROPERTY
Date of Lease: August 1, 1994
Landlord: PYRAMID CONSTRUCTION COMPANY
Tenant: MAGNETEC CORP.
1. Grant of Option. Subject to the provisions of Section 3 of this Rider,
Landlord hereby grants to Tenant an Option to Purchase the Property
which is the subject of this Lease on an "as is" condition basis.
2. Exercise of Option. The Option shall be exercised only by written
notice delivered to Landlord in accordance with Section 35 of the Lease
at least twelve (12) months before the expiration of the Initial Term.
Time shall be of the essence with respect to delivery of the notice and
if the Tenant fails to deliver the notice within the specified time
period, the Option shall lapse, and Tenant shall have no further right
to purchase the property.
3. Conditions Precedent to Option. The Option shall be exercisable by
Tenant on the following conditions:
(a) The Tenant is not in default under any provisions of the Lease.
(b) The Tenant named in Section 1(c) of the Lease shall not have
assigned the Lease or sublet any portion of the Property, except
as permitted in Section 18(a) of the Lease.
4. Purchase Provisions. The Tenant (Buyer) shall pay the Landlord (Seller)
a Purchase Price the product of twelve and one-half (12 1/2) multiplied
by the Fixed Rent in effect at the time of closing of title. The Tenant
shall close Title within ninety (90) days from the date notice of
exercise of the option is delivered to the Landlord.
5. Place of Title Closing. The closing shall take place at the offices of
the Landlord (Seller) during regular business hours.
6. Form of Deed. Landlord (Seller) shall deliver a General Warranty Deed.
7. Title. The property shall be free and clear of encumbrances, other than
a mortgage or other first deed of trust. It is intended by the parties
that easements are not encumbrances. Any restrictions or easements
shall not interfere with the present use of the property. The property
shall be marketable and insurable at ordinary title insurance rates. In
the event the property is encumbered by a mortgage, then Tenant, in its
election to purchase, may either assume the mortgage, if assumable, or
pay for any prepayment fees which Landlord would incur in prepaying the
mortgage. Landlord agrees not to place any additional easements on the
property which would prevent the Tenant from using the building for the
use in 1(f).
8. Risk of Loss. The risk of loss or damage by fire other insurance
casualty shall be upon landlord (Seller) until title closing.
9. Prorations and Adjustments. All prorations and adjustments shall be
made as of the day of title closing.
10. Closing Expenses. Landlord (Seller) shall pay for the preparation of a
Deed. Landlord (Seller) shall pay for the recording of the Deed and any
transfer costs.
20
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11. Tenant may designate an assignee to accept title as long as such
assignee is owned or controlled by, or under common ownership or
control, or owns or controls, Tenant.
12. At the time of closing, the Landlord (Seller) shall provide to the
Tenant (Buyer) a general warranty deed conveying good and marketable
fee simple title to the Property subject only to real property taxes
not due and payable until after the delivery of the deed and any
mortgage or other first deed of trust. Furthermore, Seller shall
deliver at closing an owners affidavit in form reasonably acceptable to
the Buyer's title insurance company. Landlord shall also supply the
following documents: Bill of Sale, if applicable, to equipment;
Assignment of all warranties then in effect on the building and
equipment; Seller's Title Affidavit; Conveyance Tax Statements;
Non-Foreign Affidavit; all applicable keys and existing plans and
building specifications.
If Seller is unable to convey title to the premises in accordance with
the provisions of this option, Seller may elect to adjourn the closing
for a period or periods not to exceed thirty (30) days in the aggregate
in order to eliminate exceptions to title other than those permitted
herein. If, at the end of such adjournment, Seller is unable to convey
title to the premises in accordance with the provisions hereof, Buyer
nevertheless may elect to accept such title as Seller may be able to
convey. If Tenant shall not so elect, Tenant may elect to terminate its
right to purchase pursuant to this option, such termination to be
effective immediately upon given written notice of same to Landlord.
Such termination shall not terminate Tenant's other rights or
obligations under this Lease.
21
22
LEASE AMENDMENT
THIS LEASE AMENDMENT dated September 14, 1994, hereby amends a lease
entitled Lease of Industrial Property (the "Lease") dated August 1, 1994 by and
between Magnetec Corp., 61 W. Dudley Town Road, Bloomfield, CT 06002 (Tenant),
Tridex Corporation, 215 Main Street, Westport, CT 06880 (Guarantor), and
Pyramid Construction Company, 275 N. Franklin Turnpike, P.O. Box 369, Ramsey,
NJ 07446-0369 (Landlord).
WHEREAS, Landlord and Tenant have agreed in the Lease that possession
of the property will be delivered by June 1, 1995; and
WHEREAS, Landlord and Tenant have agreed to extend the date for
delivery of the property to the Tenant;
NOW, THEREFORE, Landlord and Tenant agree, and the Guarantor hereby
acknowledges and agrees to, the following modification to the Lease.
1. In Section 3 Term, paragraph 4, last sentence beginning "If
Landlord does" and ending "under this Lease", the date of June 1, 1995 is
changed to July 1, 1995.
If there are any conflicts between this Lease Amendment and the Lease,
this Lease Amendment shall prevail.
All other terms and conditions of the Lease remain in full force and
effect.
WITNESS: LANDLORD:
PYRAMID CONSTRUCTION COMPANY
/s/ By: /s/ William J. Coleman
- ---------------------------- ----------------------------
ATTEST: TENANT:
MAGNETEC CORP.
/s/ By: /s/ Bart C. Shuldman
- ---------------------------- ----------------------------
Secretary Bart C. Shuldman, President
ATTEST: GUARANTOR:
TRIDEX CORPORATION
/s/ By: /s/ Seth M. Lukash
- ---------------------------- ----------------------------
Secretary Seth M. Lukash, President
23
LEASE AMENDMENT II
THIS LEASE AMENDMENT II dated September 21, 1994, hereby amends a lease
entitled Lease of Industrial Property (the "Lease") dated August 1, 1994 by and
between Magnetec Corp., 61 W. Dudley Town Road, Bloomfield, CT 06002 (Tenant),
Tridex Corporation, 215 Main Street, Westport, CT 06880 (Guarantor), and
Pyramid Construction Company, 275 N. Franklin Turnpike, P.O. Box 369, Ramsey,
NJ 07446-0369 (Landlord).
WHEREAS, Tenant has requested that Landlord increase the size of the
office portion of the building; and
WHEREAS, Landlord has agreed to enlarge the office building;
NOW, THEREFORE, Landlord and Tenant agree, and the Guarantor hereby
acknowledges and agrees to, the following modification to the Lease.
1. In Section 1(d) Description of Property, "10,000 s.f. of office"
is hereby replaced with "12,055 s.f. of office".
2. Section 1(k) Fixed Rent Schedule is omitted and is replaced with
the following.
The fixed rent payable by Tenant to Landlord shall be at the
annual rate and payable in monthly installments as follows:
Period Monthly Installment Annual Rate
------ ------------------- -----------
04/01/95-03/31/00 $23,310 $279,720
04/01/00-03/31/05 $27,205 $326,460
3. Section 1(l) Estimated Monthly Additional Rent is changed from
"$4,000" to "$4,200".
4. In Option to Expand Premises, Section 5(d), 1st paragraph,
"42,000" is changed to "44,055".
and in 5(d)(1)(i) "42,000" is changed to "44,055".
and in 5(d)(2)(i) "42,000" is changed to "44,055" and "$311,160"
is changed to "$326,460".
and in 4 "42,000" is changed to "44,055".
If there are any conflicts between this Lease Amendment II and the
Lease, this Lease Amendment II shall prevail.
All other terms and conditions of the Lease remain in full force and
effect.
WITNESS: LANDLORD:
PYRAMID CONSTRUCTION COMPANY
By: /s/ William J. Coleman
- --------------------------------------- -------------------------------------
ATTEST: TENANT: MAGNETEC CORP.
/s/ George T. Crandall By: /s/ Seth M. Lukash
- --------------------------------------- -------------------------------------
George T. Crandall, Secretary Seth M. Lukash, Senior Vice President
ATTEST: GUARANTOR: TRIDEX CORPORATION
/s/ George T. Crandall By: /s/ Seth M. Lukash
- --------------------------------------- -------------------------------------
George T. Crandall, Assistant Secretary Seth M. Lukash, CEO, President
24
LEASE AMENDMENT III
THIS LEASE AMENDMENT III dated April 19, 1995, hereby amends a lease
entitled Lease of Industrial Property (the "Lease") dated August 1, 1994 by and
between Magnetec Corp., 61 W. Dudley Town Road, Bloomfield, CT 06002 (Tenant),
Tridex Corporation, 61 Wilton Road, Westport, CT 06880 (Guarantor), and Pyramid
Construction Company, 275 N. Franklin Turnpike, P.O. Box 369, Ramsey, NJ
07446-0369 (Landlord).
WHEREAS, Pursuant to the Lease, Tenant has certain rights which are
detailed on a Rider to the Lease entitled "Option to Expand the Premises" and
WHEREAS, Landlord and Tenant have agreed to amend said Rider to the
Lease in order to clarify the original intent of the Rider.
NOW, THEREFORE, Landlord and Tenant agree, and the Guarantor hereby
acknowledges and agrees to the following modification to the Rider to the Lease
entitled "Option to Expand the Premises":
1. Section 3 should be supplemented to add the following Section
(c):
(c) In the event Landlord's interest in the property is
acquired by Landlord's mortgagee, or purchaser at a
foreclosure sale, Tenant herein waives its option rights
to expand the premises as set forth in this Rider.
If there are any conflicts between the Lease Amendment III and the
Lease, or Lease Amendment I or II, this Lease Amendment III shall prevail.
All other terms and conditions of the Lease remain in full force and
effect.
WITNESS: LANDLORD:
PYRAMID CONSTRUCTION COMPANY
/s/ By: Illegible
- ---------------------------- ----------------------------
ATTEST: TENANT: MAGNETEC CORPORATION
/s/ George T. Crandall By: /s/ Seth M. Lukash
- ---------------------------- ----------------------------
George T. Crandall, Secretary Seth M. Lukash, Senior V.P.
ATTEST: GUARANTOR: TRIDEX CORPORATION
/s/ George T. Crandall By: /s/ Richard L. Cote
- ---------------------------- ----------------------------
George T. Crandall, Richard L. Cote,
Assistant Secretary Senior V.P. & CFO
25
GUARANTY OF LEASE
LANDLORD: PYRAMID CONSTRUCTION COMPANY
TENANT: MAGNETEC CORP.
LEASE: APRIL 1, 1995 - MARCH 31, 2005
GUARANTOR: TRIDEX CORPORATION
DATE: August 1, 1994
The Tenant wishes to enter into the Lease with the Landlord. The
Landlord is unwilling to enter into the Lease unless the Guarantor assures
Landlord of the full performance of the Tenant's obligations under the Lease.
The Guarantor is willing to do so.
Accordingly, in order to induce Landlord to enter into the Lease with
the Tenant, and for good and valuable consideration, whose receipt and adequacy
are acknowledged by Guarantor:
1. The Guarantor unconditionally guarantees to the Landlord, and the
successors and assigns of the Landlord, the Tenant's full and punctual
performance of its obligations under the Lease. If Tenant defaults, Landlord
will notify Guarantor at Tridex Corp., 215 Main Street, Westport, CT 06880 or
such other address as Guarantor may provide. If Tenant defaults in the
performance of its obligations under the Lease, upon the Landlord's request, the
Guarantor will perform the Tenant's obligations under the Lease.
2. Any act of the Landlord, or the successors or assigns of the
Landlord, consisting of a waiver of any of the terms or conditions of the Lease,
or the giving of any consent to any matter related to or thing relating to the
Lease, or the granting of any indulgences or extensions of time to the Tenant,
may be done without notice to the Guarantor and without affecting the
obligations of the Guarantor under this Guaranty.
3. The obligations of the Guarantor under this Guaranty will not be
released by the Landlord's receipt, application, or release of security given
for the performance of the Tenant's obligations under the Lease, nor by any
modification of the Lease. In case of any such modification, the liability of
the Guarantor will be deemed modified in accordance with the terms of any such
modification.
4. The liability of the Guarantor under this Guaranty will not be
affected by (a) the release or discharge of the Tenant from its obligations
under the Lease in any creditors' receivership, bankruptcy, or other
proceedings, or the commencement or pendency of the liability of the Tenant or
the estate of the Tenant in bankruptcy, or any remedy for the enforcement of the
Tenant's liability under the Lease, resulting from the operation of any present
or future bankruptcy code or other statute, or from the decision in any court;
(c) the rejection or disaffirmance of the Lease in any such proceedings; (d) the
assignment or transfer of the Tenant; or (f) the cessation from any cause (other
than full performance of all Tenant's obligations under the Lease) whatsoever of
the liability of the Tenant under the Lease.
5. Until all of the Tenant's obligations under the Lease are fully
performed, the Guarantor; (a) waives any right of subrogation against the Tenant
by reason of any payment or acts of performance by the Guarantor, in compliance
with the obligations of the Guarantor under this Guaranty; and (c) subordinates
any liability or indebtedness of the Tenant held by the Guarantor to the
obligations of the Tenant to the Landlord under the Lease.
6. This Guaranty will apply to the Lease, any extension or renewal of
the Lease, and any holdover term following the term, or any such extension or
renewal.
26
7. This Guaranty may not be changed, modified, discharged, or
terminated orally or in any manner other than by an agreement in writing signed
by the Guarantor and the Landlord.
8. The Guarantor is primarily obligated under the Lease. Landlord may,
at its option, proceed against the Guarantor without proceeding against the
Tenant or anyone else obligated under the Lease.
9. The Guarantor will pay on demand the reasonable attorneys' fees and
costs incurred by the Landlord, or its successors and assigns, in connection
with the enforcement of this Guaranty.
10. The Guarantor irrevocably appoints the Tenant as its agent for
service of process related to this Guaranty.
The Guarantor has executed this Guaranty as of the date written above.
ATTEST: GUARANTOR: TRIDEX CORPORATION
By: /s/ George T. Crandall By: /s/ Seth M. Lukash
--------------------------------------- -------------------------
George T. Crandall, Assistant Secretary Seth M. Lukash, President
27
EXHIBIT B
GENERAL BUILDING DESCRIPTION
Magnatec Office and Warehouse Building
Thorpe Avenue
Wallingford, CN.
GENERAL REQUIREMENTS
- Single story 42,000 s.f. masonry building
- 10,000 s.f. general offices
- 32,000 s.f. warehouse
- 10,000 s.f. warehouse expansion
- 4 loading docks
- clear height in warehouse 18'0"
- parking for 161 cars.
SITE WORK
- as per approved engineered site plan
CONCRETE
- 5" concrete floor stab (3,000 PSI). (Floors to be sealed)
- concrete foundations.
MASONRY
- brick and concrete block exterior walls at offices
- decorative concrete block exterior walls at warehouse
METALS
- structural steel framing
- steel bar joists.
- steel roof decking.
- typical (30' X 30').
THERMAL AND MOISTURE PROTECTIONS
- under slab board type building insulation at building perimeter.
- thermal insulation in masonry cells of exterior walls.
28
EXHIBIT B (CONT'D)
- single ply membrane roofing system with rigid roof insulation
- metal base and counterflashings.
- exterior wall flashings and expansion joints.
- aluminum fascia and gravel stops.
- elastomeric sealants at exterior joints.
STEEL DOORS AND FRAMES
- steel man doors and frames (exterior)
- 4 overhead 10' x 10' doors with steel frames (warehouse)
FLUSH WOOD DOORS
- interior wood doors with steel frames (office)
ALUMINUM ENTRANCES AND STOREFRONTS
- Aluminum and glass exterior entrance door and vestibule doors (office)
ALUMINUM WINDOWS
- commercial grade aluminum painted window frames with fixed insulating
glass (office)
GYPSUM DRYWALL
- metal studs and gypsum wallboard,taped, spackled and painted for
interior partitions
- metal furring and gypsum wallboard taped, spackled and painted for
perimeter office walls.
TILE
- ceramic floor tile and 4-foot high ceramic wall tile in bathrooms
CARPET
- commercial grade carpet and vinyl base (office)
2
29
EXHIBIT B (CONT'D)
ACOUSTICAL TILE CEILINGS
- acoustical 2 x 4 lay-in tile ceiling and metal suspension
system in offices (approximately 9'0")
PAINTING
- gypsum drywall to receive flat latex finish.
- 1 coat primer & 1 coat interior flat paint.
TOILET COMPARTMENTS
- floor-anchored toilet participations and screens with baked
enamel finish
LOADING DOCK EQUIPMENT
- 2 loading docks to have dock bumpers and mechanical recessed
dock levelers
HVAC
- office area and warehouse will be heated and air-conditioned
with ductwork using rooftop units to provide interior
condition 80 F. dry bulb and not over 50% relative humidity
when outside conditions are 95 degrees F. dry bulb and 75
degrees F. inside when outside temperature is 0 degrees F.
ELECTRICAL
- 2,000 amp service, 208 volt, three phase.
- lighting (office) 2 x 4 recessed fluorescent units with
acrylic diffusers.
- lighting (warehouse) designed to provide 30-foot candles.
PLUMBING
- bathrooms and all other plumbing to be as per building codes.
SPRINKLER SYSTEMS
- automatic sprinkler system throughout as per HFPA-13 Code.
3
1
EXHIBIT 10.14
LEASE
LANDLORD BOMAX PROPERTIES
Ithaca, New York
TENANT ITHACA PERIPHERALS
INCORPORATED
Groton, New York
2
TABLE OF CONTENTS
Page
I. Leased Property ............................................. 1
II. Term ........................................................ 6
III. Rent ........................................................ 7
IV. Real Property Taxes ......................................... 10
V. Utilities ................................................... 14
VI. Use ......................................................... 14
VII. Condition of Property ....................................... 15
VIII. Alterations/Mechanics Lien ................................ 16
IX. Repairs and Maintenance ..................................... 18
X. Inspection .................................................. 20
XI. Surrender of Premises ....................................... 21
XII. Insurance ................................................... 21
XIII. Fire or Casualty Loss ....................................... 23
XIV. Liability ................................................... 25
XV. Covenant of Quiet Enjoyment ................................. 25
XVI. Subordination ............................................... 25
XVII. Assignment .................................................. 26
XVIII. Appropriation ............................................... 27
XIX. Lessee Defaults ............................................. 28
XX. Lessor Defaults ............................................. 30
XXI. No Waiver of Rights ......................................... 31
XXII. Indemnification ............................................. 31
XXIII. Benefit ..................................................... 33
XXIV. Notices ..................................................... 33
XXV. Entire Agreement ............................................ 33
XXVI. Captions .................................................... 34
XXVII. Severability ................................................ 34
XXVIII. Governing Law ............................................... 34
XXIX. Recording ................................................... 34
XXX. Lessee's CertifiCate ........................................ 35
XXXI. No Broker ................................................... 35
EXHIBITS
Map of Premises A
List of Liens and Encumbrances B
October 10, 1991 Building Specifications C
Malloy Agreement D
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LEASE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ of December,
1991, between BOMAX PROPERTIES, a New York general partnership with an office at
2415 North Triphammer Road, Ithaca, New York 14850, (hereinafter referred to as
"Lessor"), and ITHACA PERIPHERALS INCORPORATED, a Delaware corporation with an
office at 767 Warren Road, Ithaca, New York 14850 (hereinafter referred to as
"Lessee").
W I T N E S S E T H :
That in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
LEASED PROPERTY
A. Real Property. Lessor represents that it is the owner in fee of a
certain tract of land located in the Village of Lansing, County of Tompkins,
State of New York, more particularly described in Exhibit A, which is attached
hereto and made a part hereof, free and clear of all liens, easements and
encumbrances, except those described on Exhibit B which is attached hereto and
made a part hereof. Exhibit A depicts two parcels of land, Parcel 1 of
approximately five and one half acres which is hereinafter referred to as
"Premises," and Parcel 2, hereinafter referred to as "Parcel Two."
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Lessor hereby leases and lets, and Lessee hereby hires, the Premises,
together with an easement in common with others over Bomax Drive and the
connecting private driveway for the purposes of ingress and egress from Warren
Road to the Premises. Lessee shall pay one-half (50%) of the maintenance costs
pursuant to a maintenance agreement made _______________ between Lessor and
Bernard Malloy, a copy of which is attached hereto as Exhibit D. The easement
and maintenance agreement regarding Bomax Drive shall continue only until such
time as Bomax Drive shall have been dedicated to and accepted by the Village or
Town of Lansing as a public street or highway.
B. Option and Right of First Refusal. At any time during the Lease
term, Lessee shall have the option, upon written notice to Lessor, of including
a contiguous portion of Parcel 2 within this Lease. If Lessee exercises its
option, Lessee and Lessor shall have 90 days during which to negotiate the terms
upon which the portion of Parcel 2 will be included within this Lease,
including, if applicable, the terms upon which Lessor will construct and lease
any proposed expansion of the building leased to Lessee hereunder. If the
parties reach agreement, Lessor shall take all necessary action to obtain
subdivision approval to divide the remaining acres of Parcel 2.
If the parties are unable to agree upon lease terms for Parcel Two
within the 90-day period, Lessor shall be free to lease all or any portion of
Parcel 2 to a third party, subject to the following right of first refusal of
Lessee to
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match any lease terms offered to the third party. If Lessor contemplates lease
or sale of any other contiguous parcel owned by Lessor and shown on Exhibit A,
Lessee shall have the right of first refusal to lease such property at the same
price and under the same terms and conditions that Lessor is willing to accept
pursuant to a bona fide offer received from any third party. Lessor shall
present such offer to Lessee in writing, and Lessee shall have thirty (30) days
thereafter to either accept or reject the offer. If Lessee does not accept the
offer in writing delivered to Lessor, then Lessor may lease the property to the
bona fide third party on substantially the same terms and conditions as
contained in the offer.
C. Improvements. Lessor agrees to construct on the Premises, at its own
cost and expense, a building and other improvements in accordance with plans
revised as of October 14, 1991 ("Revision #2) and specifications dated October
10, 1991, prepared by Tallman & Tallman, architects, which plans and
specifications have previously been reviewed and approved by both parties
hereto. The specifications as of October 10, 1991, are set forth in Exhibit C
which is attached hereto and made a part hereof. The Premises, building and
improvements are hereinafter referred to as the "Leased Property."
D. Contingencies. Lessor and Lessee hereby agree that it is a condition
of this Lease that Lessor shall have obtained acceptable financing, contractor
bids, and final drawings by March 1, 1992. If Lessor is unable to obtain
financing, contractor bids or final drawings on terms
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acceptable to Lessor in its discretion, then Lessor shall provide written notice
to Lessee by March 1, 1992, and this Lease shall terminate as of March 1, 1992,
without further liability of one party to the other.
E. Completion of Improvements. Construction of the improvements shall
commence on or before March 15, 1992, and shall be completed and delivered to
Lessee for lawful occupation by October 1, 1992. On or about June 1, 1992,
Lessor will advise Lessee of the projected date for occupancy. If occupancy is
not available by October 1, 1992, Lessor will pay Lessee Nine Thousand and
no/100 Dollars ($9,000.00) per month. In the event construction is not completed
and a Certificate of Compliance issued by January 1, 1993, Lessee shall have the
option of terminating the Lease, without further liability or obligation, upon
written notice to Landlord. Said improvements shall be constructed, and the
Leased Property upon substantial completion shall be rendered to Lessee for
occupancy, in compliance with the building code of the Town and Village of
Lansing, County of Tompkins and State of New York, for use as a light
manufacturing facility. Lessee, by entering into occupancy of the Leased
Property, shall be deemed to have agreed that: (1) Lessor, up to the time of
such substantial completion and occupancy, had performed all of its obligations
and that the Leased Property, except for minor details of construction,
decoration and mechanical adjustment, were in satisfactory condition as of the
date of such occupancy and (2) the term of this Lease shall commence as of the
date specified in Article II below.
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F. Representations and Warranties. Lessor represents and warrants the
following matters, each of which shall be a condition to commencement of the
Lease term and shall survive the execution and delivery of this Lease:
(1) The Lessor has obtained or will obtain prior to the
commencement of the Lease term all governmental permits, licenses, certificates
and approvals necessary to construct and occupy the building and improvements
set forth in Exhibit C.
(2) Lessor has obtained or will obtain prior to commencement
of the Lease term all subdivision approvals necessary for the lease of the
Leased Property and construction of the building and improvements thereon.
(3) The building and improvements described on Exhibit 3 will
be constructed in a good and workmanlike manner, in compliance with all
applicable governmental laws, rules and regulations, and will conform to the
specifications set forth in Exhibit C.
(4) The Leased Property is zoned for use as a light
manufacturing facility contemplated by Lessee, without the need for a special
use permit or variance.
(5) On and after the commencement date of this Lease, the
Leased Premises shall be free and clear of all liens and encumbrances which
could adversely affect the use and enjoyment of the Leased Property in
accordance with the terms of this Lease.
(6) The Leased Property is, and upon the commencement of the
Lease term shall be, free of any
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petroleum or petroleum product, hazardous waste, hazardous material, hazardous
substance or any other contaminant or pollutant. In the event that during the
Lease term any such substance is discharged onto or released from the Lease
Property (other than from causes arising out of Lessee's use or occupancy of the
Leased Property), Lessor shall promptly take all appropriate and necessary
remedial action and indemnify and hold Lessee harmless from all costs and
expenses thereof.
(7) The Leased Property is served by public water and the
building to be constructed on the Leased Property will be connected to the
public water system.
(8) Lessor shall furnish to Lessee an acceptable Phase I
environmental assessment of the Leased Property showing no environmental
problems associated with the property. If Lessor's lender requires a more
detailed environmental study, Lessor shall provide same to Lessee.
ARTICLE II
TERM
The term of this Lease shall extend for a period of ten (10) years,
commencing on the date on which Lessor delivers the Leased Property to Lessee
with evidence from the Village of Lansing permitting the Lessee to lawfully
occupy the Leased Property for the intended purpose. Lessee has the option to
renew this Lease for two (2) additional five (5) year terms. Lessee shall notify
Lessor in writing of its intent to renew at least one hundred eighty (180) days
prior
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to the end of the original term or of the first five (5) year renewal term.
ARTICLE III
RENT
A. Rent. Upon commencement of the term of this Lease, Lessee shall pay
to Lessor rent for the Leased Property during the term of this Lease on a gross
square footage basis as determined by the exterior dimensions of the building
excluding the courtyard (it being the intention of the parties that the gross
square footage will be approximately 26,000) at the following annual rates:
Year 1 $6.00 per gross square foot
Year 2 $6.00 per gross square foot
Year 3 $6.00 per gross square foot
Year 4 $7.00 per gross square foot
Year 5 $7.00 per gross square foot
Year 6 $7.50 per gross square foot
Year 7 $7.50 per gross square foot
Year 8 $8.25 per gross square foot
Year 9 $8.25 per gross square foot
Year 10 $8.25 per gross square foot
The rent shall be due and payable in equal monthly installments, in advance, on
the first day of each and every month during the term of this Lease. If this
Lease commences on a day other than the first of a month, the rent for the first
and last months shall be prorated accordingly.
In the event the building is not one hundred percent completed by the
occupancy date, Lessee shall be entitled to
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a rent abatement in the amount of a percentage equal to the percentage of
unfinished interior items using the allocation established under the ALA
construction contract. Lessor shall have thirty (30) days to complete any
interior punch list items agreed to by the parties. If any exterior items are
unfinished, the parties shall agree to a punch list, and Lessor shall provide a
written undertaking to provide said exterior items within a specific time frame
when weather permits. Lessor will give Lessee a rent offset in the event
exterior items are not completed within the agreed time frame.
Lessee shall pay said monthly rental payments without notice or demand
and without abatement, deduction or set off except as expressly provided herein,
in lawful money of the United States at the office of Lessor or at such other
place as Lessor may designate in writing.
In the event Lessee fails to pay a monthly rental payment or additional
rent or any other charge due Lessor by Lessee under this Lease, by the fifth day
of the month, Lessee shall pay, as additional rent, a five percent (5%) late
charge on the amount due.
B. Triple Net Lease. It is intended that this shall be a triple net
Lease. Under the terms of this Lease, it is contemplated that Lessee, in
addition to paying the rent above, shall pay all real property taxes and
assessments, utilities and other costs of operation of said building, and
insurance.
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C. Commencement. Lessor and Lessee agree that all financial obligations
of Lessee under this Lease, including its obligation to pay rent, real property
taxes, insurance and utilities commences only upon, and is prorated as of, the
commencement of the lease term.
D. Renewal Term Rent. The rental during any renewal term shall be
calculated based on the increase, if any, in the cost of living as determined by
the Consumer Price Index for all Urban Consumers (CPI-U) "all items" column
(published monthly by the United States Department of Labor), hereinafter called
the "Index".
(i) The Index number indicated in the column for "all items"
for the first month of the last year of the original term shall be the "Base
Index" and the corresponding Index number for the last month of the year or
renewed year of this Lease immediately preceding the year just renewed and for
which this calculation is made (Index) shall be the "Current Index Number." The
"Current Index Number" shall be divided by the Base Index Number. From the
quotient thereof, there shall be subtracted the integer 1, and any resulting
positive number shall be deemed to be the percentage of increase in the cost of
living.
(ii) The percentage of increase shall then be multiplied by
the annual rent for the last year of the original term and the product shall be
considered the increase required in the annual rent, provided, however, that the
percentage of increase shall not exceed six percent (6%). This calculation of
increase shall be made at the
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commencement of the first renewal term and the increased annual rent will be the
rent required to be paid for the first three (3) years of the renewal term.
Thereafter, the annual rent will be increased by the aforesaid calculation at
the commencement of years four, six, and eight of the renewal term or terms.
(iii) Lessor shall, within a reasonable time after obtaining
the appropriate data necessary for computing such increase, give Lessee notice
of any increase so determined, and Lessor's computation thereof shall be
conclusive and binding but shall not preclude any adjustment which may be
required in the event of a published amendment of the index figures upon which
the computation was based unless Lessee shall, within sixty (60) days after the
giving of such notice, notify Lessor of any claimed error therein. Any dispute
between the parties as to any such computation shall be determined by
arbitration.
(iv) If at the time of any calculation for an increase the
Current Index Number is equal to or less than the Base Index number, the annual
rent as provided in this Lease shall not be adjusted but shall remain the same
for said new year.
ARTICLE IV
REAL PROPERTY TAXES
A. Impositions. Lessee shall pay and discharge, as soon as the same
shall become due and payable, all real property taxes, special or general,
ordinary or extraordinary, assessments, water and sewer rents, charges
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for public utilities, excises, levies, license and permit fees, and other
governmental charges which shall be imposed upon or become due and payable or
become a lien upon the Leased Property or any part thereof, including any
building and improvements which may hereafter be placed or erected thereon, or
on the sidewalks or streets in front of the same by any federal, state,
municipal or other governmental or public authority under existing law or
practice, or under any future law or practice (all such real property taxes,
assessments, rents, rates, excises, levies and charges being hereinafter
referred to as "Impositions"). If, at any time during the term of this Lease,
the present method of taxation shall be changed so that the whole or any part of
the said Impositions shall be transferred to the rentals received from the said
real estate, Lessee covenants and agrees to pay such Impositions, whether levied
on said real estate in whole or in part, or against said rentals in whole or in
part, it being the intent of the parties that Lessee shall pay the Impositions
assessed, levied or imposed upon the Leased Property, as above expressed, but
not income tax or its equivalent, and Lessee agrees to protect and save the
Lessor harmless against any such Impositions. If any assessments may be paid in
installments, however, Lessee shall be required to pay only such installments as
become due and payable during the term of this Lease and at the time each such
installment becomes due and payable. Upon Lessor's written request, copies of
all receipted tax and similar bills paid by Lessee shall be sent promptly to
Lessor. Impositions for periods during which this Lease commences and
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terminates shall be apportioned as of commencement and termination of the lease
term.
B. Tax Abatement. Lessor and Lessee agree that the Leased Property
[ ] qualifies for a Tompkins County Industrial Development Agency ("TCIDA") tax
abatement pursuant to an agreement between Lessor and TCIDA. Lessor will take
all reasonable steps to [ ] finalize a payment in lieu of taxes agreement in
accordance with TCIDA approval, but it is expressly agreed that this Lease is
not contingent upon the [ ] finalization of such payment. The parties agree that
there are approximately $10,000.00 - $15,000.00 fees payable to the TCIDA, to be
paid in the first year.
[ ]
C. Default. Upon default of the payment of any Impositions by Lessee
for thirty (30) days after the said Impositions shall have become due and
payable, Lessor may, but shall not be obligated to, pay the same plus any
interest and penalties, and any amount so paid, with interest at the rate of
prime plus 2% per annum, as charged from time to time by Norstar Bank, or its
successor, may be added to and be collectible as additional rental hereunder.
The bill or receipt issued by the taxing agency shall be deemed conclusive
evidence of the amount of tax and the amount paid.
D. Tax Challenge. Lessee shall have the right to review or contest, by
legal proceedings instituted and conducted at Lessee's own expense and free of
expense to Lessor, any such Impositions imposed upon or against the Leased
Property, and in case any such Impositions shall, as a result of such proceeding
or otherwise, be reduced,
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cancelled, set aside or to any extent discharged, Lessee shall be obligated to
pay the amount that shall be finally assessed or imposed against the Leased
Property, or be adjudicated to be due and payable, or any such disputed or
contested items.
In the event Lessee exercises its right to review, by legal
proceedings, any such Impositions imposed upon or against the Leased Property,
Lessee shall, nevertheless, pay and continue to pay such Impositions, and if
there be a refund payable with respect thereto, Lessee shall be entitled to
receive any such refund to the extent that the same has been paid by Lessee. Any
refunds received by Lessor, which are payable to Lessee for the reasons stated
above, shall be deemed trust funds, and as such, are to be received by Lessor in
trust and paid to Lessee forthwith. The term "legal proceedings" as here used
shall be construed to include (but not limited to) appropriate appeals from any
judgments, decrees or orders, and certiorari proceedings and appeals from orders
therein, including appeals to the court of last resort.
E. Tax Escrow. In the event that Lessor is required, by its lender or
any other entity or agency, to pay the aforesaid Impositions in the first
instance and/or establish an escrow account for the payment of such taxes,
Lessee agrees to reimburse Lessor for any taxes paid, and to fund any escrow
account to the extent required, on a monthly basis, together with any amounts
required by the lender to establish, initially, the escrow account; it being the
intention of the parties that Lessee will hold Lessor
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harmless against the payment of any real estate taxes or Impositions, this being
a triple net Lease, as expressed in ARTICLE III, paragraph B above. Any such
reimbursement and payment into the aforesaid escrow account shall be regarded as
additional rent due under this Lease. Notwithstanding this reference to the
escrow account obligation as additional rent or anything else in the Lease to
the contrary, the escrow account and any interest therein shall at all times
remain the property of Lessee.
ARTICLE V
UTILITIES
Upon commencement of the lease term, Lessee shall pay all charges for
utilities, including, but not limited to, gas, electricity, light, heat, water,
sewer rental charges, power and telephone or other communication service used,
rendered or supplied, upon or in connection with the Leased Property, and shall
indemnify Lessor against any liability or damages on such account.
ARTICLE VI
USE
Lessee shall use and occupy the Leased Property as light manufacturing
and offices. Lessee shall not use or occupy, or permit the Leased Property to be
used or occupied, nor do or permit anything to be done in or on the Leased
Property, in a manner which will in any way violate any certificate of occupancy
affecting the Leased Property, or make void or voidable any insurance then in
force with respect thereto, or which will make it impossible to obtain fire or
other
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insurance required to be furnished hereunder or which will cause such insurance
to increase, or which will cause or be likely to cause structural damage to the
building or any part thereof or which will increase the hazard of fire or which
shall be in violation of the rules of the Board of Fire Underwriters or the
provisions of the insurance policies on the premises, or which will constitute a
public or private nuisance, and shall not use or occupy the Leased Property in
any manner which will violate any present or future laws or regulations of any
governmental authority.
Lessee agrees that the Leased Property will be used and occupied in a
careful, safe and proper manner, and that Lessee will not permit waste, damage
or injury to occur therein.
ARTICLE VII
CONDITION OF PROPERTY
Neither Lessor nor its agents have made any other representations with
respect to the Leased Property, except as expressly set forth in the provisions
of this Lease.
Lessor hereby assigns all of its right, title and interest (including
specifically all remedies) in all warranties and guarantees with respect to the
construction of the building on the Premises. Lessor shall turn over to Lessee
all documents and literature evidencing such warranties and shall execute
written assignments of all rights thereunder, as and when requested by Lessee.
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ARTICLE VIII
ALTERATIONS/MECHANICS LIENS
A. Alterations. Lessee will not make any alterations of or upon any
part of the Leased Property except by or with the written consent of Lessor and
any mortgagee, if required by the mortgagee. Lessor agrees not to withhold
unreasonably its consent to any such alterations proposed by Lessee.
Notwithstanding the foregoing, Lessee shall be entitled to place on the Leased
Property one identifying sign, which sign shall conform to the requirements of
the Village of Lansing Sign Ordinance, without Lessor's consent. No change or
alteration shall at any time be made which shall impair the structural soundness
or diminish the value of the Leased Property, and all alterations will be
completed in a workmanlike manner. All alterations to the Leased Property shall
remain for the benefit of Lessor unless otherwise provided in said written
consent, and Lessee further agrees, in the event of making such alterations as
herein provided, to indemnify and save harmless Lessor from any expenses, liens,
claims or damages to persons or property on the Leased Property, arising out of
or resulting from the undertaking or making of said alterations. Lessee shall
provide as-built plans for all alterations at the termination of this Lease.
No changes or alterations shall be undertaken until Lessee shall have
procured and paid for any required municipal and other governmental permits and
authorizations of the various municipal departments and governmental
subdivisions having jurisdiction.
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In the event, however, any alterations, additions or improvements are
made to the demised premises without the consent of Lessor, Lessee shall, upon
the expiration of this Lease, or any renewal thereof, unless otherwise agreed to
in writing by Lessor and Lessee, restore the demised premises to its original
condition as of the date of the commencement of the term hereunder, with
consideration given for normal wear and use.
Nothing in this Article shall be deemed or construed as (a) Lessor's
consent to any person, firm or corporation for the performance of any work or
services or the supply of any materials to the Premises or any improvement
thereon, or (b) giving the Lessee or any other person, firm or corporation any
right to contract for or to perform or supply any work, services or materials
that would permit or give rise to a lien against the Premises or any part
thereof.
B. Mechanic's Liens. If, because of any act or omission by Lessee, any
mechanic's or other lien for the payment of money shall be filed against the
Leased Property, Lessee shall cause the lien to be discharged of record or
bonded within ten (10) days after notice to Lessee of the filing of the lien and
Lessee shall defend, indemnify and hold Lessor harmless against any and all
costs, liabilities, suits or claims, including reasonable attorney's fees,
resulting therefrom. If Lessee fails to comply with the foregoing provision,
Lessor shall have the option of discharging or bonding any such lien, and Lessee
shall reimburse Lessor as additional rent all the costs and
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expenses, including reasonable attorney fees, in connection with such discharge
within ten (10) days after notification by Lessor.
ARTICLE IX
REPAIRS AND MAINTENANCE
A. Lessor's Repairs. Except where damage is caused by Lessee, Lessor,
at Lessor's expense, shall make all necessary structural repairs to the roof,
foundation and exterior walls. Lessor shall assign to Lessee, or make other
suitable arrangements for Lessee to obtain the benefit of, all builder's and
equipment warranties, including warranties on pipes, plumbing and septic system.
Lessor shall take all reasonable steps to obtain warranties of the duration
previously provided to Lessee, but it is expressly agreed that this Lease is not
contingent upon receipt of such warranties. No diminution of rent shall be
claimed or allowed for inconvenience or discomfort arising from the making of
repairs to the Leased Property unless all or a substantial portion of the Leased
Premises shall be uninhabitable for a period of five days or more.
B. Lessee's Repairs. Lessee shall, at its own expense, make all other
necessary repairs and replacements to the Leased Property during the term of
this Lease. Lessee shall maintain in a good and safe condition the Leased
Property, including, but not limited to, the pipes, plumbing and septic systems,
heating and cooling system, window glass, fixtures, appliances, appurtenances
and equipment used in connection with the Leased Property. Such repairs and
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replacements shall apply to the interior and exterior of said Leased Property,
and shall be in quality and class at least equal to the original work. Lessee
shall also, at its own expense, maintain and keep the parking area and sidewalks
and curbs in a clean and orderly condition (including resurfacing of the parking
area as required), reasonably free of dirt, rubbish, snow, ice and unlawful
obstructions. In the event municipal sewer service becomes available to the
Leased Property during the course of construction and prior to issuance of a
Certificate of Compliance, the cost of connection to such services shall be
borne by Lessor; in the event municipal sewer service becomes available to the
Leased Property following issuance of a Certificate of Compliance, the cost of
connection to such services shall be borne by Lessee.
C. Default. On default of Lessee in making such repairs or
replacements, 30 days after Lessor gives written notice to Lessee and a right to
cure such default, Lessor may, but shall not be required to, make any remaining
repairs and replacements for Lessee's account, and the expense thereof shall
constitute and be collectible as additional rent. The receipted bills of the
mechanics or contractors employed by Lessor, showing the payment by Lessor for
the making of such repairs or alterations, shall be prima facie evidence of the
reasonableness of such charges therefor, and of their payment by Lessor.
D. Indemnification. Lessee shall indemnify Lessor against all costs,
expenses, liabilities, losses, damages, suits, fines, penalties, claims and
demands, including
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reasonable counsel fees, because of Lessee's failure to comply with the
foregoing, and Lessee shall not call upon Lessor for any disbursement or outlay
whatsoever in connection therewith, and hereby expressly releases and discharges
Lessor of and from any liability therefor.
E. Arbitration. In case any dispute shall arise at any time between
Lessor and Lessee as to the standard of care and maintenance of the Leased
Property, such dispute shall be determined by arbitration according to the
then-current commercial arbitration rules of the American Arbitration
Association in Ithaca, New York, before a single arbitrator; provided, that if
the requirement for making repairs or replacements is imposed by any
governmental authority or the holder of any mortgage to which this Lease is
subordinate, then such requirement for repairs or replacements shall be complied
with by Lessee and shall not be considered an arbitratable dispute, unless
arbitration is provided for by law or by agreement with the applicable
governmental authority or mortgage holder.
ARTICLE X
INSPECTION
Lessee agrees to permit Lessor, or Lessor's representatives, to inspect
or examine the Leased Property at any reasonable time, to permit Lessor to make
such repairs to the building as Lessor may determine are reasonably necessary
for its safety or preservation and which Lessee has failed to do, and to have
access for purpose of showing the premises to prospective tenants or purchasers.
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ARTICLE XI
SURRENDER OF PREMISES
At the expiration of the lease term, or at any other termination of
this Lease, Lessee shall surrender to Lessor the Leased Property, broom clean,
and in as good condition and repair as it was at the commencement of this Lease,
ordinary wear and tear or damage by fire or other act of God, the only
exceptions. Any holdover by Lessee of the end of this Lease shall be considered
to be on a month-to-month basis on the same terms and conditions as expressed
herein except the monthly rental payment shall be two times the rental provided
at that time unless the parties mutually agree to a different amount.
ARTICLE XII
INSURANCE
A. Lessee's Insurance. Lessee shall carry at its own expense, fire and
extended coverage insurance on its own leasehold improvements, on the contents
of the premises and on any other personal property owned by Lessee located at
the premises.
Lessee, at its sole cost and expense, and for the mutual benefit of
Lessor and Lessee, shall carry and maintain loss of rent coverage in an amount
equal to at least twelve months' rent.
B. Insurance. Lessor shall procure, provide and maintain insurance for
the mutual benefit of Lessor and Lessee against claims for bodily injury or
death or injury to
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or destruction of tangible property, under a policy of general public liability
insurance, with $1,000,000.00 combined single limit for bodily injury, death and
property damage for each annual policy period. The liability policy provided for
in this section shall be primary to any similar coverage maintained by Lessor or
Lessee.
Lessor shall procure, provide and maintain the necessary insurance and
pay the premiums for fire, extended coverage and all risk insurance for the
benefit of Lessor against loss or damage to the demised premises, and to any
improvements in an amount sufficient to prevent Lessor from becoming a
co-insurer under the terms of the applicable policies but, in any event, in an
amount not less than 80% of the full insurable value thereof, as determined from
time to time. The term "full insurable value" shall mean actual replacement cost
(exclusive of cost of excavation, foundations and footings below the basement
floor) without deduction for physical depreciation. If Lessee does anything that
increases Lessor's fire insurance premiums, Lessee shall pay the increase in
full as additional rent within ten (10) days of Lessor's notice.
C. Reimbursement. Lessee shall reimburse Lessor for the cost of such
insurance obtained by Lessor. Lessee shall make payment of the premium cost
within ten (10) days of the rendering of the bill by Lessor. The cost of such
insurance premium shall be considered and treated as additional rent hereunder.
If Lessee feels that the premium cost of the insurance procured by Lessor is
excessive, Lessee will be entitled to obtain competitive quotes for comparable
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coverage, and if such quotes are less than the actual cost, Lessor will switch
insurance coverage for the next policy year.
D. Waiver of Liability. Lessor and all parties claiming under Lessor
hereby release Lessee from any and all claims and liabilities arising from or
caused by any hazards covered by the fire insurance policy obtained by Lessor on
the Premises, regardless of the cause of such casualty. Lessee and all parties
claiming under Lessee hereby release Lessor from any and all claims and
liabilities arising from or caused by any hazards covered by the fire insurance
policy obtained by Lessee on the Premises, regardless of the cause of such
casualty. Lessor shall not be liable for any damage to Lessee's fixture,
merchandise or personal property caused by fire regardless of the cause thereof,
and Lessee hereby releases Lessor of and from all liabilities for such damage.
Lessee shall not be liable for any damages to Lessor's building, fixtures or
property caused by fire regardless of the cause thereof and Lessor hereby
releases Lessee from all liabilities for such damage.
ARTICLE XIII
FIRE OR CASUALTY LOSS
In the event of damage to the Leased Property by fire or other
casualty, Lessor, at its sole expense, shall promptly restore, upon receipt of
insurance proceeds, the Leased Property as nearly as possible to its condition
prior to such damage or destruction. All insurance proceeds received by the
Lessor pursuant to the provisions of this Lease, less the
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cost, if any, of obtaining such recovery, shall be held by Lessor and applied by
Lessor to the payment of such restoration, as such restoration progresses. In
the event of any such partial destruction or damage, provided that there shall
be in force the loss-of-rent coverage required by Article XII, A (Lessee's
Insurance), there shall be a proportionate abatement of rent until such time as
the Leased Property is repaired and delivered to the Lessee based upon the
extent to which the Leased Property is rendered untenantable.
If, at any time during the term of this Lease, the Leased Property is
completely destroyed or so damaged by fire or other casualty covered by
insurance as to render it unfit for its designated use, and repair or
restoration cannot be completed within nine months, either party may terminate
this Lease on written notice to Lessee of at least ten days and no more than
forty-five days. Such notice shall be given within sixty days after the date of
such damage or destruction. If the Lease shall so terminate, all basic and
additional rent shall be apportioned to the date of the termination, and all
insurance proceeds shall belong to Lessor.
If the Lease is not so terminated, Lessor shall promptly rebuild and
restore the Leased Property as nearly as possible to its condition prior to such
damage. Lessee's obligation to pay rent and all other charges, and to perform
all other terms of this Lease, to the extent of the loss-of-rent coverage
required by Article XII, A, shall abate during the period the Leased Property is
untenantable. Any loss of rent
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insurance proceeds receivable on account of such destruction or damage shall
belong to Lessor.
ARTICLE XIV
LIABILITY
Lessor shall not be liable to Lessee or those claiming under Lessee for
any damage done to or loss of personal property located in the Premises, or
damage or loss suffered by the business or occupation of Lessee arising from the
bursting of water pipes, sprinkler system, overflowing or leaking of water,
sewer or other pipes, or from the heating or plumbing fixtures or from the
electric wiring, or from gas odors or from any other cause whatsoever, unless
resulting from the negligence or intentional acts of Lessor.
ARTICLE XV
COVENANT OF QUIET ENJOYMENT
Lessee, upon the payment of the rent and other charges herein provided
for, and performing all other terms of this Lease, shall at all times during the
lease term, peaceably and quietly enjoy the Premises without any disturbance
from Lessor or from any other person claiming through Lessor.
ARTICLE XVI
SUBORDINATION
This Lease is and shall be subject and subordinate to any mortgage or
mortgages now in force or which shall at any time be placed upon the Premises or
any part thereof or the building of which the Premises is a part, provided the
mortgage contains a standard non-disturbance clause allowing
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this Lease to remain in effect so long as Lessee is not in default hereunder
and, in the event of a fire or other casualty, gives Lessor access to insurance
proceeds to enable Lessor to fulfill its obligations under Article XIII. Lessee
agrees that it will, upon demand, execute and deliver such instruments as
necessary to effect more fully such subordination of this Lease to the lien of
any such mortgage or mortgages as shall be desired by any mortgagee, or proposed
mortgagee, and in the event of the failure of Lessee to execute such instrument,
Lessee hereby nominates and appoints Lessor attorney-in-fact for the purpose of
executing any such instrument of subordination.
ARTICLE XVII
ASSIGNMENT
Lessee shall have the right to assign this Lease, or to sublease the
Leased Property for any purpose lawful under the Village of Lansing Zoning Law
without the consent of Lessor. Lessee shall remain liable for the payment of all
rent and other charges to be paid hereunder and for the performance of all the
terms, covenants and conditions herein undertaken by Lessee for the remainder of
the original term and any renewal term or terms. If Lessor in its sole
discretion consents to an assignment by Lessee, Lessor shall release and
discharge Lessee from any further obligation under this Lease or any renewal
term or terms.
Lessor shall have the right to assign the within Lease to a corporation
or to a partnership or proprietorship now in existence or hereinafter formed,
with no further obligation
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on the part of Lessor, provided such assignment will not have an adverse affect
on any tax abatement applicable to the Leased Premises. Upon such assignment,
Lessor shall have no further liability hereunder.
Lessee shall not mortgage or pledge its leasehold interest in the
Premises or its rights under this Lease, except upon the written consent of
Lessor, which consent shall not be unreasonably withheld.
ARTICLE XVIII
APPROPRIATION
If the whole of the Leased Property, or such portion of the building
thereon as will make the Leased Property unsuitable for use as a manufacturing
facility and office, is taken by condemnation or the right of eminent domain, or
by agreement between Lessor and those authorized to exercise such right, then,
in any of such events, this Lease shall cease and be terminated from the time
when possession is taken by such public authority, and rental and other payments
shall be accounted for between Lessor and Lessee as of the date of surrender of
possession. Such termination shall be without prejudice to the rights of either
Lessor or Lessee to recover compensation from the condemning authority for any
loss or damage caused by such condemnation. Any portion of an award attributable
to the Leased Property shall be the sole property of Lessor, provided the Lessee
is entitled to claim, prove and receive the value of its leasehold improvements,
fixtures and moving costs. Neither Lessor nor
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If such default or condition is not corrected or remedied or Lessee has
not substantially undertaken a cure within the applicable time period, if any,
this Lease and the rights of Lessee thereunder shall, at Lessor's option, cease
and terminate. Lessor shall provide written notice of such termination to
Lessee.
Lessor shall have the right to enter and repossess said Leased Property
by force, summary or dispossess proceedings, or otherwise, and to dispossess and
remove therefrom any and all occupants and their effects without being liable to
prosecution or damages therefore, and to hold said premises as if this Lease had
ceased by expiration through maturity of the term above specified. Lessee shall
pay or cause to be paid to Lessor the deficits between the monthly amount of the
rent hereby reserved and the monthly amount of rents which shall be collected
and received or might with due diligence be collected and received from the
Leased Property during the remainder of the term of this Lease as the several
amounts of such deficits shall from month to month be ascertained.
If Lessor at any time is compelled to pay or elects to pay any sum of
money, by reason of the failure of Lessee to comply with any provision of this
Lease, or if Lessor reasonably incurs any expense, including reasonable
attorney's fees, in instituting, prosecuting and/or defending any action or
proceeding instituted by reason of any default of Lessee hereunder, the sum or
sums so paid by Lessor, with all interest costs and damages, shall be deemed to
be additional rent hereunder and shall be due from Lessee to
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Lessor within ten (10) days following the incurring of such respective expenses.
Lessor and Lessee agree that in any action or proceeding brought by either
Lessor or Lessee against the other on any matters whatsoever arising out of,
under or by virtue of the terms of this Lease, that Lessor and Lessee shall and
do hereby waive trial by jury.
Lessee hereby expressly waives (to the extent legally permissible), for
itself and all persons claiming by, through or under it, any right of redemption
and for the restoration of the operation to this Lease under any present or
future law in case Lessee shall be dispossessed for any cause or in case Lessor
shall obtain possession of the Leased Property as herein provided.
ARTICLE XX
LESSOR DEFAULTS
The Lessor shall be in default of this Lease upon the happening of any
of the following events:
A. Lessor shall fail to keep and perform any of the covenants,
agreements or conditions of this Lease to be kept or performed by Lessor after
thirty days notice in writing thereof has been delivered to Lessor, and such
default shall not have been cured or a cure has been substantially commenced
within said thirty day period.
B. Any of the representations and warranties made by Lessor herein
shall prove to have been materially inaccurate when made.
C. [ ] A Lessor shall (i) file a petition in bankruptcy or a petition
seeking reorganization or other relief under
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applicable bankruptcy or creditors' rights laws or seeking the appointment of a
receiver or (ii) have filed against it a petition seeking relief under any of
the foregoing which petition shall not have been stayed or dismissed within 60
days after the filing thereof.
Upon the occurrence of an event of default specified above, which
default is not cured or a cure is not substantially undertaken within the
applicable time period, if any, Lessee may terminate this Lease upon written
notice to Lessor.
ARTICLE XXI
NO WAIVER OF RIGHTS
The failure of Lessor or Lessee to insist upon a strict performance of
any term or condition of this Lease shall not be deemed a waiver of any right or
remedy that the Lessor or Lessee may have, and shall not be deemed a waiver of
any subsequent breach of such term or condition.
ARTICLE XXII
INDEMNIFICATION
Lessee will indemnify Lessor against all liabilities, damages and other
expenses, including reasonable attorney's fees which may be imposed upon,
incurred by, or asserted against Lessor by reason of any of the following
occurring during the term of this Lease:
A. Any use or condition of the Leased Property (other than a condition
for which Lessor is responsible under this
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Lease) or any part thereof, or any parking area, sidewalk, curb or space
adjacent thereto;
B. Any negligence on the part of Lessee, or its agents, contractors,
licensees or invitees;
C. Any personal injury or property damage occurring on or about the
Leased Property or any adjoining street, sidewalk, curb or space if caused by
the negligence or intentional act of Lessee;
D. Any failure on the part of Lessee to perform or comply with any
covenant required to be performed or complied with by Lessee hereunder.
If any action or proceeding is brought against Lessor by reason of any
such occurrence, Lessee will, at Lessee's expense, resist or defend such action
or proceeding by counsel approved by Lessor, such approval not to be withheld
unreasonably.
Lessor will indemnify Lessee against all liabilities, damages and other
expenses, including reasonable attorneys' fees, which may be imposed upon,
incurred by or asserted against Lessee by reason of any of the following:
A. Any negligent or intentional act on the part of Lessor or its
agents, contractors, licensees, invitees or employees.
B. The failure on the part of Lessor to perform or comply with any
covenant or obligation required to be performed or complied with by Lessor
hereunder.
C. The material breach of any representation or warranty made by Lessor
in this Lease.
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ARTICLE XXIII
BENEFIT
This Lease and its terms and conditions shall inure to the benefit of
Lessor, its successors and assigns, and Lessee, its successors and assigns,
limited, however, by the provisions herein expressed to the contrary. An
assignment for the benefit of creditors of Lessee by an operation of law shall
not be effective to transfer or assign Lessee's interests herein without and
unless Lessor shall first consent thereto in writing.
ARTICLE XXIV
NOTICES
Any notice under this Lease must be in writing and must be sent by
registered or certified mail, postage prepaid, return receipt requested, to the
last address of the party to whom the notice is to be given, as designated by
such party in writing. Lessor hereby designates its address as _________________
_______, Ithaca, New York 14850. Lessee hereby designates its address as
________________________, ________________, New York _______. Either party may
change its designated address by written notice to the other party, in the
manner herein provided.
Such notice shall be deemed to have been given on the date received by
the other party.
ARTICLE XXV
ENTIRE AGREEMENT
This Lease contains the entire agreement and understanding between the
parties. There are no oral
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understandings, terms or conditions, and neither party has relied upon any
representation, express or implied, not contained in this Lease. All prior
understandings, terms or conditions are deemed merged in this Lease. This Lease
cannot be changed or supplemented orally.
ARTICLE XXVI
CAPTIONS
The captions of this Lease are inserted only as a matter of convenience
and for reference, and in no way define, limit or describe the scope or intent
of this Lease, nor in any way affect this Lease.
ARTICLE XXVII
SEVERABILITY
If any provision of this Lease shall be declared invalid or
unenforceable, the remainder of the Lease shall continue in full force and
effect.
ARTICLE XXVIII
GOVERNING LAW
This Lease shall be governed by, construed and enforced in accordance
with the laws of the State of New York.
ARTICLE XXIX
RECORDING
Lessee shall not record this Lease without written consent of Lessor;
however, both parties shall join in the execution of a memorandum or so-called
short form of this Lease for the purpose of recordation. Said memorandum or
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36
short form of this Lease shall describe the parties, the Premises, and the term
of this Lease, shall describe the easements and options set forth in Article I
and shall incorporate this Lease by reference.
ARTICLE XXX
LESSEE'S CERTIFICATE
At any time within ten(10) days after request by Lessor, Lessee, by
written instrument, duly executed and acknowledged, shall certify to Lessor, any
Mortgagee, assignee of a Mortgagee, any purchaser, or any person specified by
Lessor, to the effect (a) whether or not Lessee is in possession of the Leased
Premises; (b) whether or not this Lease is unmodified and in full force and
effect (or if there has been modification, that the same is in full force and
effect as modified and setting forth such modification); (c) whether or not
there are then existing set-offs or defenses against the enforcement of any
right or remedy of Lessor, or any duty or obligation of Lessee (and, if so,
specifying the same); and (d) dates, if any, to which any rent or other charges
have been paid in advance.
ARTICLE XXXI
NO BROKER
Lessor and Lessee warrant and represent that each has dealt with no
broker and shall indemnify and hold each other harmless for any and all claims
from any broker, including reasonable attorney's fees.
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IN WITNESS WHEREOF, the parties have executed these presents in
duplicate on the day and year first above written.
BOMAX PARTNERSHIP
(Lessor)
By:_____________________________________
Title: General Partner
ITHACA PERIPHERALS INCORPORATED
By:_____________________________________
Title:__________________________________
STATE OF NEW YORK )
)ss:
COUNTY OF ______________)
On this _____ day of __________, 1991, before me, the subscriber,
personally appeared _____________________________________ to me personally
known, who, being by me duly sworn, did depose and say that he resides at
_____________________________ that he is a general partner of BOMAX PARTNERSHIP,
a New York general partnership, described in and which executed the above lease.
________________________________________
Notary Public
STATE OF NEW YORK )
)ss:
COUNTY OF ______________)
On this _____ day of __________, 1991, before me, the subscriber,
personally appeared _____________________________________, to me personally
known, who, being by me duly sworn, did depose and say that he resides at
_____________________________, that he is an officer of ITHACA PERIPHERALS
INCORPORATED, on whose behalf he signed the above lease.
________________________________________
Notary Public
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GUARANTY OF LEASE
WHEREAS, BOMAX PROPERTIES as Lessor, and ITHACA PERIPHERALS
INCORPORATED, as Lessee, have entered into a Lease Agreement dated _____________
_____, 1991 for the lease of premises at ____ Bomax Drive, Village of Lansing,
New York (the "Lease"); and
WHEREAS, BOMAX PROPERTIES has required that ITHACA PERIPHERALS
INCORPORATED furnish a guaranty of the Lease executed by its parent, TRIDEX
CORPORATION;
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, TRIDEX CORPORATION ("Guarantor") hereby guarantees
unto BOMAX PROPERTIES the full and faithful performance of all of the
obligations of ITHACA PERIPHERALS INCORPORATED under the Lease, including,
without limitation, the prompt payment of all base rent and additional rent due
under the Lease or under any renewal or extension thereof.
BOMAX PROPERTIES agrees to give to Guarantor written notice of any
default by ITHACA PERIPHERALS INCORPORATED under the Lease at the address set
forth below (or at such other address as the Guarantor may designate in
writing), and to permit Guarantor to cure any such default within any applicable
cure period set forth in the Lease.
DATED: _______________________________
Address for Notices: TRIDEX CORPORATION
215 West Main Street
Westport, CT 06880 By: __________________________
Title: _______________________
BOMAX PROPERTIES
By: __________________________
Title: _______________________
1
Exhibit 10.15
LEASE AMENDMENT
This Lease Amendment, dated as of October 18, 1993, is by and
between BOMAX PROPERTIES, a New York general partnership with an office at 2415
North Triphammer Road, Ithaca, New York 14850 ("Lessor"), ITHACA PERIPHERALS
INCORPORATED, a Delaware corporation with an office at 20 Bomax Drive, Ithaca,
New York 14850 ("Lessee"), THE TOMPKINS COUNTY INDUSTRIAL DEVELOPMENT AGENCY, a
New York public benefit corporation organized pursuant to the New York Public
Authorities Law ("IDA"), and TRIDEX CORPORATION, a corporation with an office at
215 West Main Street, Westport, Connecticut ("Guarantor").
RECITALS
A. Lessor and Lessee are parties to a Lease Agreement dated as
of March 23, 1992 ("Lease"), pursuant to which Lessor leased to Lessee
approximately 5.34 acres of land in the Village of Lansing, Tompkins County,
State of New York and agreed to construct a manufacturing and office building
for Lessee on the Premises. Permanent occupancy of the building was obtained by
Lessee on or about November 20, 1992 and the lease commencement date under the
Lease was November 20, 1992.
B. Lessor transferred the Premises to the IDA, subject to the
Lease, on or about June 11, 1993 and entered into an installment sales contract
to purchase the property back from the IDA. Under the installment sales
contract, Lessor retains all beneficial rights and interests in the Premises.
2
C. The Lease was guaranteed by Guarantor, the parent company
of Lessee.
D. Lessee has requested Lessor to construct an addition of
approximately 10,476 square feet to the Leased Property (as defined in the
Lease). The purpose of this Lease Amendment is to provide for the construction
of such addition and to amend the Lease accordingly.
NOW, THEREFORE, in consideration of the following mutual
covenants, the parties agree as follows:
1. All capitalized terms used herein which are not otherwise
defined shall have the same meaning given to those terms in the Lease.
2. The last sentence of the first paragraph of Article I,
Section C of the Lease is amended to read as follows:
The Premises, building and improvements, including the
Addition referenced below, are hereafter referred to as the
"Leased Property."
3. The following paragraph is hereby added at the end of the
first paragraph of Article I, Section C:
Lessor agrees to construct on the Premises, at its own cost
and expense, an addition of approximately 10,476 sq. ft. on
the rear of the building currently located on the Premises
(along with parking space for 24 additional cars) (hereafter
referred to as the "Addition"). The Addition shall be
constructed in accordance with the following plans and
drawings prepared by Tallman & Tallman, Architects, which
plans have previously been reviewed and approved by Lessor and
Lessee, along with such other changes thereto as may be
hereinafter approved by Lessor and Lessee:
-2-
3
Description Date Revised
----------- ---- -------
AD-1 6/10/93 8/11/93
AD-2 6/10/93 8/11/93
AD-3 6/10/93 8/11/93
A8 1/27/92 8/11/93
ME-1 8/11/93 N/A
The foregoing plans and drawings shall be deemed to have been
modified to provide for the elimination of the entire south
wall of the existing building.
4. The following new paragraph shall be added at the end of
Article I, Section E:
Construction of the Addition shall commence on or before
October 21, 1993 and shall be completed and delivered to
Lessee for lawful occupation by June 1, 1994. The Addition
shall be constructed, and the Addition shall be rendered to
Lessee for occupancy, in compliance with the Building Code of
the Town and Village of Lansing, County of Tompkins and State
of New York for use as a light manufacturing facility.
5. Article I, Section F(1) of the Lease is hereby amended to
read as follows:
(1) The Lessor has obtained or will obtain all governmental
permits, licenses, certificates and approvals necessary to
construct and occupy the building and improvements (including
the Addition) set forth in the plans as described in paragraph
C above.
6. The first sentence of Article II of the Lease is amended as
follows to confirm the actual lease commencement date:
The term of this Lease shall extend for a period of ten (10)
years commencing on November 20, 1992.
-3-
4
7. The first sentence of Article III, Section A of the Lease
is hereby amended as follows to confirm the actual square footage of the
existing building:
Upon commencement of the term of this Lease, Lessee shall pay
to Lessor rent for the Leased Property (excluding the
Addition) during the term of this Lease based on 25,715 sq.
ft. at the following annual rates:
8. The following is hereby added to Article III, Section A
following the chart on page 8:
In addition to the foregoing, Lessee shall pay to Lessor rent
for the Addition during the term of this Lease on a gross
square footage basis as determined by the exterior dimensions
of the Addition (approximately 10,476 sq. ft.) at the
following annual rates:
Year One - Not applicable
Year Two - $4.00 per gross square foot
Year Three - $4.00 per gross square foot
Year Four - $5.00 per gross square foot
Year Five - $5.00 per gross square foot
Year Six - $5.50 per gross square foot
Year Seven - $5.50 per gross square foot
Year Eight - $6.25 per gross square foot
Year Nine - $6.25 per gross square foot
Year Ten - $6.25 per gross square foot
Payment of this additional rent with respect to the Addition
shall commence only upon completion of the Addition and
issuance of a certificate of occupancy for the Addition, and
shall be prorated for the year. If the Addition is completed
On a day other than the - first of a month, the first and last
month's rent for the Addition shall be prorated accordingly.
-4-
5
9. All references in the Lease to the "building and
improvements" or phrases of similar meaning shall be deemed to include the
Addition as described herein.
10. Except as specifically amended hereby, the Lease Agreement
remains in full force and effect in accordance with its terms.
11. The IDA is signing this Lease Amendment solely for the
purpose of signifying its consent to the amendment of the Lease but does not
undertake and shall not be liable or responsible for any of the obligations or
liabilities of the landlord under the Lease Agreement, as amended.
12. The Guarantor is signing this Lease Amendment solely for
the purpose of signifying its consent hereto and confirming that its guarantee
of the Lease, as hereby amended, remains in full force and effect.
13. This Lease Amendment may be signed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-5-
6
IN WITNESS WHEREOF, the parties have subscribed this Lease
Amendment as of the date first written above.
BOMAX PROPERTIES
By: /s/ Robert T. Dean /s/ Maxine Dean
------------------------------------
Title: Partners
---------------------------------
-6-
7
IN WITNESS WHEREOF, the parties have subscribed this Lease
Amendment as of the date first written above.
ITHACA PERIPHERALS INCORPORATED
By: /s/ S. Scott
------------------------------------
Title: President
---------------------------------
TRIDEX CORPORATION
By: /s/ Richard L. Cote
------------------------------------
Title: Senior Vice President & CFO
---------------------------------
-7-
8
IN WITNESS WHEREOF, the parties have subscribed this Lease
Amendment as of the date first written above.
THE TOMPKINS COUNTY INDUSTRIAL DEVELOPMENT
AGENCY
By:
-----------------------------------------
Title:
--------------------------------------
-8-
1
Exhibit 10.16
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of December 15, 1995
among
TRIDEX CORPORATION,
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION,
CASH BASES INCORPORATED
and
FLEET BANK, NATIONAL ASSOCIATION
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2
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 15, 1995
among TRIDEX CORPORATION, a corporation organized under the laws of the State of
Connecticut, ITHACA PERIPHERALS INCORPORATED, a corporation organized under the
laws of the State of Delaware, ULTIMATE TECHNOLOGY CORPORATION, a corporation
organized under the laws of the State of New York, MAGNETEC CORPORATION, a
corporation organized under the laws of the State of Connecticut, and CASH BASES
INCORPORATED, a corporation organized and existing under the laws of the State
of Delaware (collectively, all such corporations being the "Borrowers" and each,
individually, a "Borrower"), and FLEET BANK, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States of America
(the "Bank").
PRELIMINARY STATEMENTS.
A. The Borrowers (other than Cash Bases Incorporated) and the Bank have
entered into a Credit Agreement dated as of June 17, 1994. Cash Bases
Incorporated was added as a "Borrower" under said Credit Agreement pursuant to
the terms of a certain Letter Agreement dated as of December 23, 1994 among Cash
Bases Incorporated, the Bank and the other Borrowers. The Credit Agreement was
amended by a Letter Amendment dated as of March 31, 1995, and Amendment No. 1
dated as of June 22, 1995, and the Revolving Credit Termination Date has been
extended pursuant to correspondence between the Bank and the Borrowers (said
Credit Agreement, as so amended and modified, being hereinafter referred to as
the "Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, the Borrowers are
indebted to the Bank in the aggregate principal amount of $5,291,333.32 as of
the Closing Date (the "Indebtedness"), which indebtedness is owed by the
Borrowers to the Bank without offset, defense, counterclaim of any kind, nature
or description. As security for such Indebtedness, the Borrowers have heretofore
granted to the Bank a first priority security interest in all of the Borrowers'
personal property, whether now owned or hereafter acquired, wherever located of
any kind, nature or description, tangible or intangible, including, without
limitation, the Borrowers' accounts receivable, inventory, equipment, and
general intangibles, and such security interests and liens granted by the
Borrowers to the Bank are hereby reacknowledged and reconfirmed by Borrowers.
C. The Borrowers have requested that the Bank increase the principal
amount available under the Existing Credit Agreement, extend certain maturity
dates under the Existing Credit Agreement and otherwise amend certain provisions
of the Existing Credit Agreement, and the Bank has agreed to do so, subject to
the conditions precedent set forth herein.
D. Effective upon compliance with the conditions precedent set forth in
Section 4.1 hereof, the Existing Credit Agreement is amended and restated in its
entirety to read as set forth herein.
ARTICLE DEFINITIONS; ACCOUNTING TERMS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Adjusted Leverage Ratio" means, for the Borrowers, as at any date, on
a consolidated basis, the ratio of Consolidated Funded Debt to EBITDA, as
measured at the end of each fiscal quarter for the twelve month period then
ended (a rolling twelve month calculation measured as of the end of each
successive quarter).
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any Borrower or
any of its Subsidiaries; (b) which directly or indirectly beneficially owns or
holds five percent or more of any class of voting stock of any Borrower or any
such Subsidiary; (c) five percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by any Borrower or such
Subsidiary; or (d) which is a partnership in which any Borrower or any of its
Subsidiaries is a general partner. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
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"Amortization Date" means the last day of each calendar month,
commencing on May 31, 1996, up to (and including) the Maturity Date, provided
that if any such day is not a Banking Day, such day shall be the next succeeding
Banking Day (or, if such next succeeding Banking Day falls in the next calendar
month, the next preceding Banking Day).
"Banking Day" means any day on which commercial banks are not
authorized or required to close in Hartford, Connecticut, and whenever such day
relates to a LIBOR Loan or notice with respect to any principal amounts bearing
interest at the LIBO Rate, a day on which dealings in Dollar deposits are also
carried out in the London interbank market.
"Borrowing Base" means, as of any date of determination thereof, an
amount equal to the sum of (i) 80% of Eligible Receivables, plus (ii) the lesser
of (A) 25% of Eligible Inventory or (B) $1,500,000. Unless the Bank shall
otherwise determine, the Borrowing Base as of any date shall be the Borrowing
Base set forth on the most current Borrowing Base Certificate certified and
delivered by a Borrower pursuant to either Section 6.8 or Section 4.2. If, at
any time, the Borrowing Base shall exceed the Working Capital Commitment, for
purposes of this Agreement the Borrowing Base shall be deemed to be equal to the
Working Capital Commitment.
"Borrowing Base Certificate" means a certificate substantially in the
form of Exhibit G hereto or such other form agreed to in writing by the Bank and
the Borrowers.
"Borrowing" means any Loan or Foreign Exchange Transaction requested by
any Borrower hereunder.
"Capital Expenditures" means, for any Person for any period, the Dollar
amount of gross expenditures (including obligations under Capital Leases) made
by such Person during such period for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but not
repairs thereof) incurred by such Person during such period.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Cash Bases GB" means Cash Bases GB Limited, a corporation organized
under the laws of the United Kingdom and a Subsidiary of the Parent.
"Cash Bases GB Excess Cash Flow" means (i) excess cash flow after all
sources and uses of cash as shown on Cash Bases GB's annual audited statement of
cash flows less (ii) the amount (if any) by which (A) the outstanding principal
amount of advances under any working capital or overadvance facility provided to
Cash Bases GB or any of its Subsidiaries as at the end of such fiscal year
exceeds (B) the outstanding principal amount of any such advances as at the end
of the fiscal year immediately preceding such fiscal year. If Cash Bases GB has
any Subsidiaries at any time, the foregoing calculation shall be done on a
consolidated basis with its Subsidiaries.
"Cash Bases GB Pledge Agreement" means the Charge Over Shares and
Securities dated June 20, 1994 by and between the Parent and the Bank, a
photocopy of which is attached hereto as Exhibit H.
"Cash Bases USA" means Cash Bases Incorporated, a Delaware corporation.
"Closing Date" means the date this Agreement has been executed by the
Borrowers and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the Term Commitment together with the Working
Capital Commitment.
"Consolidated Capital Expenditures" means Capital Expenditures of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Current Assets" means Current Assets of the Borrowers and
their Consolidated Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Current Liabilities" means Current Liabilities of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
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"Consolidated Funded Debt" means Funded Debt of the Borrowers and their
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means Net Income of the Borrowers and their
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Senior Liabilities" means Senior Liabilities of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of a Person in accordance with
GAAP.
"Consolidated Tangible Capital Base" means Tangible Capital Base of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Tangible Net Worth" means Tangible Net Worth of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Current Assets" of any Person at any time means all cash, Receivables
and inventory of such Person.
"Current Liabilities" means all liabilities of a Person treated as
current liabilities in accordance with GAAP, including without limitation (a)
all obligations payable on demand or within one year after the date in which the
determination is made and (b) installment and sinking fund payments required to
be made within one year after the date on which determination is made, but
excluding all such liabilities or obligations which are renewable or extendible
at the option of such Person to a date more than one year from the date of
determination.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
property or services (except trade payables in the ordinary course of business);
(c) Unfunded Benefit Liabilities of such Person (if such Person is not the
Parent, determined in a manner analogous to that of determining Unfunded Benefit
Liabilities of the Parent); (d) the face amount of any outstanding letters of
credit issued for the account of such person; (e) obligations arising under
acceptance facilities; (f) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person,
or otherwise to assure a creditor against loss, including any contingent
obligations under swaps, derivatives, currency exchanges and similar
transactions; (g) obligations secured by any Lien on property of such Person;
and (h) obligations of such Person as lessee under Capital Leases.
"Debt Service Coverage Ratio" means, for any Person, as at any date, on
a consolidated basis, the ratio of (a) EBITDA to (b) the sum of (i) the amount
of principal installments and other principal maturities of Consolidated Funded
Debt of such Person for such period, plus (ii) Interest Expense for such period.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and, to
the extent permitted by law, any other amount payable by any Borrower under this
Agreement or any Note that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date, to, but excluding the date on which such amount is paid
in full equal to two percent above the Variable Rate as in effect from time to
time plus the applicable Margin (provided that, if the amount so in default is
principal of a Fixed Rate Loan and the due date thereof is a day other than the
last day of the Interest Period therefor, the "Default Rate" for such principal
shall be, for the period from and including the due date and to but excluding
the last day of the Interest Period therefor, 2% above the interest rate for
such Loan as provided in Section 2.10 hereof and, thereafter, the rate provided
for above in this definition).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, for any Person, for any period, earnings before
Interest Expense, taxes, depreciation, amortization and extraordinary items for
such Person determined in accordance with GAAP.
"Eligible Inventory" means, as of any date of determination thereof,
all Inventory (valued at the lower of the cost or fair market value on a
first-in-first-out basis), but excluding (a) those items that have no use in the
current product line of the Borrowers, (b) obsolete items and used parts, (c)
those finished goods that are not of merchantable quality in the
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ordinary course of business, (d) all Inventory in which the Bank does not have a
first perfected security interest, subject to no other Lien prior to or on a
parity with such security interest, (e) scrap, (f) work-in-process and (g) all
other Inventory which is determined by the Bank to be ineligible for any other
reason generally accepted in the commercial finance business as a reason for
ineligibility. Notwithstanding the preceding sentence, "Eligible Inventory"
shall not include any Inventory not located at premises owned by or leased to a
Borrower unless such Inventory is in transit (and insured) or such Borrower has
made a formal financing statement filing against the consignee of such Inventory
and has given any party claiming of record a security interest in such
consignee's inventory, or other assets that might include such Inventory, notice
of such Borrower's consignment arrangements with such consignee or has taken
equivalent protective steps satisfactory to the Bank.
"Eligible Receivable" means, as of any date of determination thereof,
all Receivables owing to the Borrowers net of the Borrowers' customary reserves,
unearned customer deposits, taxes, trade or other documents, discounts, claims,
credits, returns, rebates, allowances or set-offs, excluding the following:
(i) any Receivable unpaid for 90 or more days from the date of the
original invoice;
(ii) any goods the sale of which gave rise to such Receivable not
shipped or delivered to the account debtor on an absolute sale basis or goods
shipped on a bill and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis, or on the basis of any other similar
understanding, or any part of such goods has been returned or rejected;
(iii) any Receivable evidenced by chattel paper or an instrument
of any kind;
(iv) any Receivable which is owed by an account debtor which (A)
is insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, threatened or pending, which might
have an adverse effect on the business of such account debtor or (B) is, in the
sole discretion of the Bank, deemed ineligible for credit or other reasons;
(v) all Receivables deemed uncollectable by a Borrower or turned
over to collection agencies or attorneys;
(vi) any Receivable arising from the shipment of goods or the
performance of services, such shipment or performance having not been fully
completed or rendered;
(vii) any Receivable which is not a valid, legally enforceable
obligation of the account debtor or is subject to any present or contingent, or
any fact exists which is the basis for any future, offset or counterclaim or
other defense on the part of such account debtor;
(viii) any Receivable not evidenced by an invoice or other
documentation in form acceptable to the Bank;
(ix) any Receivable which arises out of any transaction between
(A) a Borrower and (B) any other Borrower or a Subsidiary of the Parent or any
Affiliate;
(x) any Receivable which is subject to any provision prohibiting
its assignment or requiring notice of or consent to such assignment;
(xi) all Receivables from customers having their place of business
outside of the United States of America, except for such Receivables backed by
either (A) letters of credit denominated in Dollars issued to a Borrower by
banks acceptable to the Bank or (B) credit insurance policies acceptable to the
Bank;
(xii) all Receivables arising out of or in connection with advance
billings of a customer's requirements of supplies over a period of time;
(xiii) all Receivables that do not conform to the representations
and warranties contained in Article 2 of the Security Agreement;
(xiv) all Receivables in which the Bank does not have a first
perfected security interest, subject to no other Lien prior to or on a parity
with such security interest;
(xv) all Receivables not denominated in Dollars;
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(xvi) all Receivables from an account debtor if more than 50% of
the aggregate Dollar amount of invoices billed with respect to such account
debtor is more than 90 days past due according to the original terms of payment;
(xvii) if any account debtor owes greater than 15% of the Dollar
value of total Receivables collectively owed to the Parent and its Subsidiaries
on a consolidated basis, then all Receivables owed by such account debtor in
excess of such 15% limitation shall be ineligible;
(xviii) any Receivable which is owed by an account debtor who has
disputed liability or made any claim with respect to any other account due from
such account debtor to a Borrower, except the foregoing exclusion shall not
apply to any account debtor unless and until such disputed amounts equal or
exceed twenty percent (20%) of the aggregate Dollar amount of accounts due from
such account debtor; and
(xix) any Receivable which is determined by the Bank to be
ineligible for any other reason generally accepted in the commercial finance
business as a reason for ineligibility.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of any group of organizations (i) described in section 414(b) or (c) of
the Code of which a Borrower is a member, or (ii) solely for purposes of
potential liability under section 302(c)(11) of ERISA and section 412(c)(11) of
the Code and the lien created under section 302(f) of ERISA and section 412(n)
of the Code, described in section 414(m) or (o) of the Code of which a Borrower
is a member.
"Event of Default" has the meaning given such term in Section 9.1.
"Excess Cash Flow" means (i) excess cash flow after all sources and
uses of cash as shown on the Borrowers' annual audited statement of cash flows
less (ii) the amount (if any) by which (A) the outstanding principal amount of
Working Capital Loans as at the end of such fiscal year exceeds (B) the
outstanding principal amount of Working Capital Loans as at the end of the
fiscal year immediately preceding such fiscal year (the term "Working Capital
Loans" as used in this clause (B) to have the meaning ascribed to it in the
Existing Credit Agreement for the first such calculation following the Closing
Date).
"F/E Credit" means, at the date of determination, the aggregate Dollar
amount of the risk internally ascribed by the Bank to all obligations under or
pursuant to all Foreign Exchange Transactions. As of the Closing Date, it is the
policy of the Bank to assess the risk by multiplying the aggregate daily market
value of Foreign Exchange Transactions by 0.2, but there can be no assurance
that such internal formula will not change.
"Facility Documents" means this Agreement, the Notes, the Pledge
Agreement, the Cash Bases GB Pledge Agreement, the Security Agreement, the
Interest Rate Protection Agreements and each of the documents, certificates or
other instruments referred to in Article 4 hereof as well as any other document,
instrument or certificate to be delivered by any Borrower in connection with
this Agreement or in connection with the documents, certificates or instruments
referred to in Article 4, including documents delivered in connection with any
Borrowing.
"Federal Funds Rate" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of Boston for such day (or for any day
that is not a Banking Day, for the immediately preceding Banking Day).
"Fixed Rate" means any LIBO Rate or any Offered Rate.
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"Fixed Rate Loan" means any LIBOR Loan or any Offered Loan.
"Foreign Exchange Transaction" means any transaction between any
Borrower and the Bank involving a forward foreign exchange contract.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting the Parent or any of its Subsidiaries or Affiliates before any court,
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or the receipt of notice by any such party that any of them
is a suspect in or a target of any governmental inquiry or investigation, which
may result in an indictment of any of them or the seizure or forfeiture of any
of their property.
"Funded Debt" means, with respect to any Person, all Debt of such
Person for money borrowed.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.5 (except for changes concurred in by the Borrowers' independent
public accountants).
"Interest Expense" shall mean, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP, of (a) all interest on
Debt that is accrued as an expense during such period (including, without
limitation, imputed interest on Capital Lease obligations), plus (b) all amounts
paid, accrued or amortized as an expense during such period in respect of
interest rate protection agreements, minus (c) all amounts received or accrued
as income during such period in respect of interest rate protection agreements.
"Interest Period" means, with respect to any Fixed Rate Loan, the
period commencing on the date such Loan is made, converted from another type of
Loan or renewed, as the case may be, and ending, as a Borrower may select
pursuant to Section 2.14, (i) with respect to any LIBOR Loan, on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, provided that each such Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month; and (ii) with respect to any
Offered Loan, at the end of the period mutually agreed to by the Bank and a
Borrower pursuant to Section 2.15.
"Interest Rate Protection Agreement" means any interest rate protection
agreement entered into with the Bank or one or more of its affiliates whereby
the Borrowers obtain a hedge or cap for the interest rate that will be payable
by the Borrowers on the LIBOR Loans that are outstanding with respect to the
Term Loan.
"Inventory" means all inventory, now or hereafter owned and wherever
located, of the Borrowers, including (without limitation) raw materials,
work-in-process, finished goods, supplies and packaging materials.
"Lending Office" means the lending office of the Bank set forth on the
signature page.
"LIBO Rate" means with respect to any Interest Period for LIBOR Loans,
a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of one
percent) determined by the Bank to be equal to the quotient of (i) the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of one percent) quoted
at approximately 11:00 a.m. London time by the principal London branch of the
Bank two Banking Days prior to the first day of such Interest Period for the
offering to leading banks in the London interbank market of Dollar deposits in
immediately available funds, for a period, and in an amount, comparable to the
Interest Period and principal amount of the LIBOR Loan outstanding during such
Interest Period, divided by (ii) one minus the Reserve Requirement for such
LIBOR Loan for such Interest Period.
"LIBOR Loan" means any Working Capital Loan, or any designated portion
of the principal of the Term Loan, when and to the extent the interest rate
therefor is determined on the basis of the definition "LIBO Rate."
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, negative pledge, charge, conditional
sale, title retention agreement, financing lease or other encumbrance or similar
right of others, or any agreement to give any of the foregoing.
"Loan" or "Loans" means, as the context requires, (i) any loan made by
the Bank pursuant to Section 2.1, whether a Term Loan or a Working Capital Loan
or (ii) one or more designated portion(s) of the principal of the Term Loan
bearing interest at a LIBO Rate, an Offered Rate and/or a Variable Rate.
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"Margin" means (a) for a Variable Rate Loan, (i) with respect to the
Term Loan, 1.25 percentage points, (ii) with respect to the Working Capital
Loans, 1.00 percentage points, and (b) for a LIBOR Loan, the Margin for such
type of Loan that would apply under Section 2.13.
"Maturity Date" means November 30, 2001; provided that if such date is
not a Banking Day, the Maturity Date shall be the next succeeding Banking Day
(or, if such next succeeding Banking Day falls in the next calendar month, the
next preceding Banking Day) or (ii) the earlier date of maturity of the Term
Loan pursuant to Section 9.2.
"Multiemployer Plan" means a Plan defined as such in section 3(37) of
ERISA to which contributions have been made by the Borrowers or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Income" of any Person for any period means the net income (loss)
of such Person for such period determined in accordance with GAAP.
"Notes" means, collectively, the Term Note and the Working Capital
Note, each of which is a "Note."
"Notice of Borrowing" shall mean the notice of each Borrowing required
by Section 4.2.
"Offered Loan" means any designated portion of the principal amount of
the Term Loan when and to the extent the interest rate therefor is determined in
relation to the Offered Rate.
"Offered Loan Request" shall have the meaning set forth in Section
2.15.
"Offered Rate" means an interest rate per annum quoted by the Bank to a
Borrower and agreed to by a Borrower pursuant to Section 2.15.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Parent" means Tridex Corporation, a Connecticut corporation.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrowers or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Pledge Agreement" means the pledge agreement dated June 17, 1994 by
the Parent in favor of the Bank, a photocopy of which is attached hereto as in
the form of Exhibit C, as amended by the Pledge Agreement Amendment.
"Pledge Agreement Amendment" means the Amendment to Pledge Agreement in
the form of Exhibit I to be delivered to the Bank under the terms of this
Agreement.
"Prime Rate" means that rate of interest from time to time announced by
the Bank at the Principal Office as its prime commercial lending rate.
"Principal Office" means the principal office of the Bank, presently
located at One Constitution Plaza, Hartford, Connecticut 06115.
"Receivable" means all accounts owing to a Person arising out of or in
connection with the bona fide sale or lease of goods or services in the ordinary
course of business.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
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"Regulatory Change" means any change after the date of this Agreement
in United States federal, state, municipal or foreign laws or regulations
(including without limitation Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of banks
including the Bank of or under any United States, federal, state, municipal or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" means, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in Boston with deposits exceeding $1,000,000,000 against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the LIBO Rate for LIBOR Loans is to be determined as provided
in the definition of "LIBO Rate" in this Section 1.1 or (ii) any category of
extensions of credit or other assets which include LIBOR Loans.
"Revolving Credit Termination Date" means September 30, 1997; provided
that if such date is not a Banking Day, the Revolving Credit Termination Date
shall be the next succeeding Banking Day (or, if such next succeeding Banking
Day falls in the next calendar month, the next preceding Banking Day) or (ii)
the earlier date of termination of the Working Capital Commitment pursuant to
Section 9.2.
"Security Agreement" means the security agreement dated June 17, 1994
by the Borrowers in favor of the Bank, a photocopy of which is attached hereto
as Exhibit D, as amended by the Security Agreement Amendment.
"Security Agreement Amendment" means the Amendment to Security
Agreement in the form of Exhibit J to be delivered to the Bank under the terms
of this Agreement.
"Senior Liabilities" means for any Person at any time, all Debt, other
than contingent liabilities and Subordinated Debt.
"Subordinated Debt" means Funded Debt of a Person subordinated to the
Loans on terms satisfactory to the Bank.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.
"Tangible Capital Base" means, at any date of determination thereof,
the sum of (a) Subordinated Debt of a Person, plus (b) such Person's
shareholders' equity (excluding the effect of extraordinary or unusual items),
less (c) such Person's goodwill, trademarks, patents, organizational costs,
unamortized debt discounts and expenses and other like intangible assets.
"Tangible Net Worth" means, at any date of determination thereof, the
excess of total assets of a Person over total liabilities of such Person,
excluding, however, from the determination of total assets: goodwill,
trademarks, patents, organizational costs, unamortized debt discounts and
expenses and other like intangible assets as defined by GAAP.
"Term Commitment" means the obligation of the Bank to make the Term
Loan under this Agreement up to the aggregate principal amount of $5,500,000.
"Term Loan" shall have the meaning set forth in Section 2.1(a) herein.
"Term Note" means the amended and restated promissory note of the
Borrowers, in substantially the form of Exhibit A hereto, evidencing the
indebtedness of the Borrowers resulting from the Term Loan.
"Unfunded Benefit Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all benefit liabilities (within
the meaning of section 4001(a)(16) of ERISA) under the Plan exceeds the fair
market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrowers
or any ERISA Affiliate under Title IV of ERISA.
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"Variable Rate" means, for any day, the higher of (a) the Federal Funds
Rate for such day plus one-quarter of one percent and (b) the Prime Rate for
such day.
"Variable Rate Loan" means any Working Capital Loan, or any designated
portion of the principal of the Term Loan, when and to the extent the interest
rate therefor is determined in relation to the Variable Rate.
"Working Capital Commitment" means the obligation of the Bank to make
the Working Capital Loans under this Agreement up to the aggregate principal
amount of $5,000,000, subject to Borrowing Base limitations, and as such amount
may be reduced or otherwise modified from time to time pursuant to Section 2.7
or otherwise.
"Working Capital Loans" shall have the meaning set forth in Section
2.1(b) herein.
"Working Capital Note" means the promissory note of the Borrowers, in
substantially the form of Exhibit B hereto, evidencing the indebtedness of the
Borrowers resulting from the Working Capital Loans.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
Section 1.3. Currency Equivalents. For all purposes of this Agreement,
all amounts denominated in a currency other than Dollars shall be converted into
the Dollar equivalent of such amounts. The equivalent in another currency of an
amount in Dollars shall be determined at the rate of exchange quoted by Fleet
Bank of Massachusetts, N.A. in Boston at 9:00 a.m. (Boston time) on the date of
determination, to prime banks in Boston for the spot purchase in the Boston
foreign exchange market of such amount of Dollars with such other currency.
ARTICLE 2. THE CREDIT
Section 2.1. The Loans.
(a) Subject to the terms and conditions of this Agreement, the
Bank agrees to make a loan (the "Term Loan") to the Parent on, or within five
(5) Banking Days of, the Closing Date in the principal amount of the Term
Commitment. Designated portions of the principal amount of the Term Loan may be
outstanding as Variable Rate Loans, LIBOR Loans or Offered Loans (each a "type"
of Loan).
(b) The Term Loan shall be due and payable in installments, as
nearly equal as possible, on each Amortization Date, provided that all amounts
outstanding on the Maturity Date shall be paid in full on the Maturity Date.
(c) Subject to the terms and conditions of this Agreement, the
Bank agrees to make loans (the "Working Capital Loans") to the Borrowers from
time to time from and including the date hereof to and including the Revolving
Credit Termination Date, up to but not exceeding in the aggregate principal
amount at any one time outstanding the amount by which the Borrowing Base
exceeds the aggregate amount of outstanding F/E Credits; provided, however, that
direct borrowings by Cash Bases USA shall not exceed $100,000 in the aggregate
outstanding at any time. The Working Capital Loans may be outstanding as
Variable Rate Loans or LIBOR Loans (each a "type" of Loan).
(d) The Working Capital Loans shall be due and payable on the
Revolving Credit Termination Date.
(e) Foreign Exchange Transactions. The Bank may in its
discretion, upon the request of a Borrower, enter into Foreign Exchange
Transactions for the account of such Borrower so long as the F/E Credits at any
time outstanding do not exceed the lesser of (i) the amount by which the
Borrowing Base exceeds the aggregate outstanding principal amount of Working
Capital Loans and (ii) $500,000. Such Foreign Exchange Transactions shall be
subject to the Bank's normal policies and procedures for such transactions,
including its underwriting requirements and the payment by the Borrowers of the
Bank's customary fees and charges for such transactions, and shall be
accomplished pursuant to documentation satisfactory in all respects to the Bank.
Such documentation shall be deemed to be Facility Documents hereunder and under
the terms and provision of the other Facility Documents, including the Security
Agreement and the Pledge Agreement.
Notwithstanding anything to the contrary herein, (i) no single Foreign
Exchange Transaction may have a daily market value in excess of $500,000, (ii)
no two Foreign Exchange Transactions can settle on the same day, and (iii) no
Foreign Exchange Transaction shall have a settlement date later than the
Revolving Credit Termination Date.
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Section 2.2. The Notes. The Term Loan shall be evidenced by a
promissory note in favor of the Bank in the form of Exhibit A, dated the date of
this Agreement, duly completed and executed by the Borrowers. The Working
Capital Loans shall be evidenced by a single promissory note in favor of the
Bank in the form of Exhibit B, dated the date of this Agreement, duly completed
and executed by the Borrowers.
Section 2.3. Purpose. The Parent shall use the proceeds of the Term
Loan to refinance the entire "Acquisition Loan" under the Existing Credit
Agreement and to refinance all or a portion of the outstanding principal amount
of "Working Capital Loans" under the Existing Credit Facility. The Borrowers
shall use the proceeds of the Working Capital Loans for working capital and
general corporate needs of the Borrowers and to refinance the remaining
outstanding principal amount of "Working Capital Loans" under the Existing
Credit Agreement. No proceeds of the Working Capital Loans shall be used to
directly or indirectly fund the needs of any Subsidiary of any Borrower if such
Subsidiary is not also a Borrower hereunder. No proceeds of the Loans shall be
used for the purpose, whether immediate, incidental or ultimate, of buying or
carrying "margin stock" within the meaning of Regulation U.
Section 2.4. Borrowing Procedures. The Borrowers shall give the Bank
notice of each Borrowing to be made hereunder as provided in Section 2.8. Not
later than 1:00 p.m. Hartford, Connecticut time on the date of such Borrowing,
the Bank shall, subject to the conditions of this Agreement, make the amount of
the Loan to be made by it on such day available to the Borrowers, in immediately
available funds, by the Bank crediting an account of a Borrower designated by
the Borrowers and maintained with the Bank at the Lending Office.
Section 2.5. Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Borrowers shall
have the right to make prepayments of principal, or to convert one type of Loans
into another type of Loans, at any time or from time to time; provided that: (i)
the Borrowers shall give the Bank notice of each such prepayment or conversion
as provided in Section 2.8; (ii) Fixed Rate Loans may be prepaid or converted
only on the last day of an Interest Period for such Loans; (iii) prepayments of
the Term Loan shall be applied to the installments of principal in the inverse
order of their maturities; and (iv) prepayments of the Term Loan may not be
reborrowed.
(b) Mandatory Prepayments.
(i) The Borrowers must prepay no later than one Banking
Day after delivery of any Borrowing Base Certificate an amount by which the sum
of (A) the aggregate principal amount of all outstanding Working Capital Loans
and (B) the aggregate outstanding amount of all F/E Credits exceeds the
Borrowing Base, together with accrued interest to the date of such prepayment on
the principal amount prepaid. Similarly, if, at any time, the Bank determines
that the sum of the aggregate principal amount of outstanding Working Capital
Loans and the aggregate outstanding amount of all F/E Credits exceeds the
Borrowing Base, the Borrowers shall, upon demand, immediately prepay an amount
equal to such excess, together with accrued interest to the date of such
prepayment on the principal amount prepaid.
(ii) The Borrowers must prepay the Term Loan as soon as
possible, but not later than 60 days after delivery of the annual audited
financial statements furnished pursuant to Section 6.8(a), by an amount equal to
50% of Excess Cash Flow for each fiscal year of the Borrowers.
(iii) Each such prepayment in accordance with paragraphs
(i) and (ii) above shall be applied first to any expenses incurred by the Bank,
second to any interest due on the amount prepaid, and last to the outstanding
principal amount of the Loans prepaid, in each case in such manner as the Bank
in its discretion shall determine.
Section 2.6. Late Charges. Payments not received within 10 days of the
due date therefor (including payments which are incomplete because there are
insufficient funds in the Parent's account located at the Bank) will be subject
to a one-time charge equal to 5% of the amount overdue.
Section 2.7. Changes of Commitment.
(a) The Borrowers shall have the right to reduce or terminate
the amount of unused Working Capital Commitment at any time or from time to
time, provided that: (i) the Borrowers shall give notice of each such reduction
or termination to the Bank as provided in Section 2.8; and (ii) each partial
reduction shall be in an aggregate amount at least equal to $500,000. The
Working Capital Commitment once reduced or terminated may not be reinstated.
(b) At any time that the Working Capital Commitment is
terminated pursuant to subsection (a) of this Section 2.7, the Borrowers shall
furnish the Bank for deposit in a cash collateral account maintained at the Bank
adequate cash reserves for the benefit of the Bank on the Revolving Credit
Termination Date in the amount of any F/E
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Credits for any Foreign Exchange Transaction which remain outstanding on the
Revolving Credit Termination Date, or must otherwise provide for a financial
institution acceptable to the Bank to indemnify the Bank against loss in
connection with outstanding Foreign Exchange Transactions, pursuant to
indemnification documentation in form and substance satisfactory to the Bank.
Section 2.8. Certain Notices. Notices by the Borrowers to the Bank of
each Borrowing pursuant to Section 2.4, and each prepayment or conversion
pursuant to Section 2.5(a), and each reduction or termination of the Working
Capital Commitment pursuant to Section 2.7 shall be irrevocable and shall be
effective only if received by the Bank not later than 12:00 noon Hartford,
Connecticut time, and (a) in the case of Borrowings and prepayments of,
conversions into and (in the case of LIBOR Loans) renewals of (i) Variable Rate
Loans, given one Banking Day prior thereto;(ii) LIBOR Loans, given two Banking
Days prior thereto; (iii) Offered Loans, given two Banking Days prior thereto;
and (b) in the case of reductions or termination of the Working Capital
Commitment, given three Banking Days prior thereto. Each such notice shall
specify the Loans to be borrowed, prepaid, converted or renewed and the amount
(subject to Section 2.9) and type of the Loans to be borrowed, or converted, or
renewed or prepaid and the date of the Borrowing or prepayment, or conversion or
renewal (which shall be a Banking Day). Each such notice of reduction or
termination shall specify the amount of the Working Capital Commitment to be
reduced or terminated. Each Notice of Borrowing for a Foreign Exchange
Transaction shall be accompanied by the customary application and other
documentation for such transaction.
Section 2.9. Minimum Amounts. Except for Borrowings which exhaust the
full remaining amount of the Borrowing Base or prepayments or conversions which
result in the prepayment or conversion of all Term Loans or Working Capital
Loans, as the case may be, of a particular type, each Borrowing, optional
prepayment, conversion and renewal of principal of Loans of a particular type
shall be in an amount at least equal to (a) $25,000 with respect to Variable
Rate Loans, and (b) $500,000 and integral multiples of $100,000 in excess
thereof with respect to Fixed Rate Loans (borrowings, prepayments, conversions
or renewals of or into Loans of different types or, in the case of Fixed Rate
Loans, having different Interest Periods at the same time hereunder to be deemed
separate borrowings, prepayments, conversions and renewals for the purposes of
the foregoing, one for each type of Interest Period).
Section 2.10. Interest.
(a) Interest shall accrue on the outstanding and unpaid
principal amount of each Loan for the period from and including the date of such
Loan to but excluding the date such Loan is due at the following rates per
annum: (i) for Variable Rate Loans, at a variable rate per annum equal to the
Variable Rate plus the Margin; (ii) for LIBOR Loans, at a fixed rate equal to
the LIBO Rate plus the Margin for the period from and including the first day of
the Interest Period therefor to but excluding the last day of such Interest
Period; and (iii) for an Offered Loan, at a fixed rate equal to the Offered Rate
for the period from and including the first day of the Interest Period therefor
to but excluding the last day of such Interest Period. If the principal amount
of any Loan and any other amount payable by any Borrower hereunder or under
either Note shall not be paid when due (at stated maturity, by acceleration or
otherwise), interest shall accrue on such amount to the fullest extent permitted
by law from and including such due date to but excluding the date such amount is
paid in full at the Default Rate for such type of Loan.
(b) The interest rate on Variable Rate Loans shall change when
the Variable Rate changes and interest on each such Loan shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Interest
on each Fixed Rate Loan shall be calculated on the basis of a year of 360 days
for the actual number of days elapsed.
(c) Accrued interest on all types of Loans shall be due and
payable in arrears upon any payment of principal and on the last day of each
calendar month, commencing December 31, 1995, and on the Revolving Credit
Termination Date with respect to the Working Capital Loans and on the Maturity
Date with respect to the Term Loan; provided that interest accruing at the
Default Rate shall be due and payable from time to time on demand of the Bank.
Section 2.11. Fees.
(a) Commitment Fee. The Borrowers shall pay to the Bank a
commitment fee on the daily average unused Working Capital Commitment (without
giving effect to Borrowing Base limitations) for the period from and including
the date hereof to the Revolving Credit Termination Date at a rate per annum
equal to one-half of one percent (1/2 of 1%), calculated on the basis of a year
of 360 days for the actual number of days elapsed. The accrued commitment fee
shall be due and payable in arrears upon any reduction or termination of the
Working Capital Commitment and on the last day of each March, June, September
and December, commencing on the first such date after the Closing Date.
(b) Advisory Fee. The Borrowers shall pay to the Bank an
advisory fee in the amount of $69,793.34. The first nonrefundable installment of
the advisory fee in the amount of $15,000 was received by the Bank upon
acceptance by the Borrowers of the commitment letter. The second nonrefundable
installment of the advisory fee in the amount of $54,793.34 shall be fully
earned by the Bank on the Closing Date and shall be due and payable by the
Borrowers to the Bank on the Closing Date.
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Section 2.12. Payments Generally. All payments under this Agreement or
the Notes shall be made in Dollars in immediately available funds not later than
1:00 p.m. Hartford, Connecticut, time on the relevant dates specified above
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Banking Day) at the Lending Office of the Bank.
The Bank may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of any
Borrower with the Bank. Until the Bank and the Borrowers otherwise agree, the
Bank shall debit the Parent's account number 9361886549 with the Bank for the
amount of any payment required hereunder, but the Bank may also debit any
ordinary deposit account of any Borrower if the amount in account number
9361886549 is insufficient to make any required payment. The Borrowers shall, at
the time of making each payment under this Agreement or any Note, specify to the
Bank the principal or other amount payable by the Borrowers under this Agreement
or such Note to which such payment is to be applied (and in the event that it
fails to so specify, or if a Default or Event of Default has occurred and is
continuing, the Bank may apply such payment as it may elect in its sole
discretion). If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
Section 2.13. LIBOR Margins. The Margin that will apply to LIBOR Loans
is set forth below and is based upon the Borrowers' Adjusted Leverage Ratio as
at the end of the Borrowers' most recent fiscal quarter, as reported in
accordance with Section 6.8:
LIBOR MARGINS
Working Capital Loans Term Loan
Adjusted Leverage Ratio (Percentage Points) (Percentage Points)
- ----------------------- ------------------- -------------------
Greater than or equal to 1.25 3.00 3.25
Greater than or equal to 1.00, but less than 1.25 2.50 2.75
Greater than or equal to 0.75, but less than 1.00 2.00 2.25
Less than 0.75 1.50 1.75
Margin adjustments resulting from such calculations will become effective on the
Banking Day following the date that such calculations are received by the Bank
after delivery in accordance with Section 6.8.
Section 2.14. Interest Periods; Renewals.
(a) In the case of each Fixed Rate Loan, the Borrowers shall
select an Interest Period of any duration in accordance with the definition of
Interest Period in Section 1.1, subject to the following limitations: (i) no
Interest Period may extend beyond an Amortization Date unless, after giving
effect thereto, the aggregate principal amount of the Fixed Rate Loans having
Interest Periods which end after such Amortization Date shall be equal to or
less than the principal amount to be outstanding hereunder after such
Amortization Date; (ii) notwithstanding clause (i) above, no Interest Period
shall have a duration less than one month (in the case of a LIBOR Loan) or one
year (in the case of an Offered Loan), and if any such proposed Interest Period
would otherwise be for a shorter period, such Interest Period shall not be
available; (iii) if an Interest Period would end on a day which is not a Banking
Day, such Interest Period shall be extended to the next Banking Day, unless, in
the case of a LIBOR Loan, such Banking Day would fall in the next calendar month
in which event such Interest Period shall end on the immediately preceding
Banking Day; (iv) no more than five Interest Periods may be outstanding at any
one time.
(b) Upon notice to the Bank as provided in Section 2.8, the
Borrowers may renew any LIBOR Loan on the last day of the Interest Period
therefor as the same type of Loan with an Interest Period of the same or
different duration in accordance with the limitations provided above. If the
Borrowers shall fail to give notice to the Bank of such a renewal, such LIBOR
Loan shall automatically become a Variable Rate Loan on the last day of the
current Interest Period; provided that the foregoing shall not prevent the
conversion of any type of LIBOR Loan into another type of Loan in accordance
with Section 2.5.
Section 2.15. Offered Loans. From time to time, upon request of a
Borrower, the Bank may quote (orally or in writing) a fixed rate of interest (an
"Offered Rate") that would be applicable to designated principal amounts of the
Term Loan specified by such Borrower and for an Interest Period of a duration
specified by such Borrower. On the date of such quotation (or within such period
as shall be agreed upon by a Borrower and the Bank) a Borrower may deliver to
the Bank a written request (the "Offered Loan Request") in accordance with
Section 2.8 (which may be sent by facsimile),
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stating each Offered Loan and its amount, the Offered Rate quoted by the Bank
and the duration and first day of the Interest Period for such Offered Loan,
which day shall be the Banking Day on which such Offered Rate was quoted by the
Bank (or such other day as the Bank shall specify in making its quotation). If
such Offered Loan Request is timely and in accordance with the Bank's quotation,
the Bank will indicate its acceptance of and agreement to such Offered Loan
Request by signing a copy thereof and will send such copy to the Borrowers,
whereupon the designated principal amount referred to in such Offered Loan
Request shall become an Offered Loan on the date specified in such request and
the Borrowers shall pay interest on the principal amount of such designated
principal amount during the Interest Period specified in such Offered Loan
Request, at the Offered Rate specified in such Offered Loan Request. If,
however, the Bank does not sign and return to a Borrower a copy of such Offered
Loan Request within one Banking Day of the date of delivery thereof by a
Borrower to the Bank, then no such designated principal amount will become an
Offered Loan.
Section 2.16. Interest Rate Protection. The Borrowers may enter into
Interest Rate Protection Agreements mutually satisfactory to the Borrowers and
the Bank. The obligations of the Borrowers to the Bank or one or more of its
affiliates under such Interest Rate Protection Agreements will automatically
constitute obligations of the Borrowers under this Agreement and will be secured
by any Lien granted under the Facility Documents pari passu with the other
obligations of the Borrowers under this Agreement.
Section 2.17. Cash Bases GB Pledge Agreement. The Borrowers have
requested that the Cash Bases GB Pledge Agreement be amended within the
six-month period following the Closing Date to reduce the percentage of stock
pledged by the Parent to the Bank from 100% to 66%. The Bank is willing to enter
into such an amendment, in form and substance satisfactory to the Bank, provided
that no Default or Event of Default then exists and the Bank receives an opinion
of British counsel in form and substance satisfactory to the Bank and such other
certificates as it may reasonably require.
ARTICLE 2. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1. Additional Costs.
(a) The Borrowers shall pay to the Bank from time to time on
demand such amounts as the Bank may determine to be necessary to compensate it
for any costs which the Bank determines are attributable to its making or
maintaining any Fixed Rate Loans under this Agreement or the Notes or its
obligation to make any such Loans hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any such Loans or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to the Bank under this
Agreement or the Notes in respect of any of such Loans (other than taxes imposed
on the overall net income of the Bank or of its Lending Office for any of such
Loans by the jurisdiction in which the Principal Office or such Lending Office
is located); or (ii) imposes or modifies any reserve, special deposit, deposit
insurance or assessment, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, the Bank (including any of such Loans or any deposits
referred to in the definition of "LIBO Rate" in Section 1.1); or (iii) imposes
any other condition affecting this Agreement or the Notes (or any of such
extensions of credit or liabilities). The Bank will notify the Borrowers of any
event occurring after the date of this Agreement which will entitle the Bank to
compensation pursuant to this Section 3.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 3.1, in the event that, by reason of any Regulatory Change, the
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of the Bank which includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of the Bank which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if the Bank so elects by notice
to the Borrowers, the obligation of the Bank to make or renew, and to convert
Loans of any other type into, Loans of such type hereunder shall be suspended
until the date such Regulatory Change ceases to be in effect, and the Borrowers
shall on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of such type, either prepay such Loans or convert such Loans
into another type of Loan in accordance with Section 2.5.
(c) Without limiting the effect of the foregoing provisions of
this Section 3.1 (but without duplication), the Borrowers shall pay to the Bank
from time to time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which it determines are
attributable to the maintenance by it or any of its affiliates pursuant to any
law or regulation of any jurisdiction or any interpretation, directive or
request (whether or not having the force of law and whether in effect on the
date of this Agreement or thereafter) of any court or governmental or monetary
authority of capital in respect of its Loans hereunder or its obligation to make
Loans hereunder (such compensation to include, without limitation, an amount
equal to any reduction in return on assets or equity of the Bank to a level
below that
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which it could have achieved but for such law, regulation, interpretation,
directive or request). The Bank will notify the Borrowers if it is entitled to
compensation pursuant to this Section 3.1(c) as promptly as practicable after it
determines to request such compensation.
(d) Determinations and allocations by the Bank for purposes of
this Section 3.1 of the effect of any Regulatory Change pursuant to subsections
(a) or (b), or of the effect of capital maintained pursuant to subsection (c),
on its costs of making or maintaining Loans or its obligation to make Loans, or
on amounts receivable by, or the rate of return to, it in respect of Loans or
such obligation, and of the additional amounts required to compensate the Bank
under this Section 3.1, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis; provided, however, that the Bank
shall provide ninety days' notice of any additional amounts required to
compensate the Bank under this Section 3.1 (the "Adjustment"), and the Borrowers
may thereafter attempt to negotiate the amount of the Adjustment in good faith
with the Bank within ninety days of the day on which the Borrowers are so
notified. If the Borrowers and the Bank are unable to agree on the amount of the
Adjustment within such ninety-day period, then the amount of the Adjustment
shall be the amount set forth in the aforementioned notice from the Bank to the
Borrowers. Whatever the final Adjustment may be, if the Bank shall still have
any Loans outstanding to the Borrowers upon the expiration of such ninety-day
period, then the Adjustment shall be effective retroactive to the date on which
the Borrowers first received notice of the Adjustment. The Bank shall not be
obligated to offer LIBO Rates with respect to Interest Periods commencing during
the period following any such notice and prior to agreement by the Bank and the
Borrowers as to the amount of the Adjustment.
Section 3.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if the Bank determines (which determination shall be
conclusive) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "LIBO Rate" in Section 1.1 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any LIBOR Loans as provided in this
Agreement; or
(b) the relevant rates of interest referred to in the
definition of "LIBO Rate" in Section 1.1 upon the basis of which the rate of
interest for any LIBOR Loans is to be determined do not adequately cover the
cost to the Bank of making or maintaining such Loans; then the Bank shall give
the Borrowers prompt notice thereof, and so long as such condition remains in
effect, the Bank shall be under no obligation to make or renew Loans of such
type or to convert Loans of any other type into Loans of such type and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of the affected type, either prepay such Loans or convert
such Loans into another type of Loans in accordance with Section 2.5.
Section 3.3. Illegality. Notwithstanding any other provision in this
Agreement, in the event that it becomes unlawful for the Bank or its Lending
Office to (a) honor its obligation to make or renew LIBOR Loans hereunder or
convert Loans of any type into Loans of such type, or (b) maintain LIBOR Loans
hereunder, then the Bank shall promptly notify the Borrowers thereof and the
Bank's obligation to make or renew LIBOR Loans and to convert other types of
Loans into Loans of such type hereunder shall be suspended until such time as
the Bank may again make, renew or convert and maintain such affected Loans and
the Borrowers shall, on the last day(s) of the then current Interest Period for
the outstanding LIBOR Loans, as the case may be (or on such earlier date as the
Bank may specify to the Borrowers), either prepay such Loans or convert such
Loans into another type of Loans in accordance with Section 2.5.
Section 3.4. Certain Compensation. The Borrowers shall pay to the Bank,
upon the request of the Bank, such amount or amounts as shall be sufficient (in
the reasonable opinion of the Bank) to compensate it for any loss, cost or
expense which the Bank determines is attributable to:
(a) any payment, prepayment, conversion or renewal of a Fixed
Rate Loan on a date other than the last day of an Interest Period for such Loan
(whether by reason of acceleration or otherwise); or
(b) any failure by the Borrowers to borrow, convert into or
renew a Fixed Rate Loan to be made, converted into or renewed by the Bank on the
date specified therefor in the relevant notice under Section 2.4, 2.5 or 2.14,
as the case may be.
Without limiting the foregoing, such compensation shall include an
amount equal to the excess, if any, of: (i) the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, converted
or renewed or not borrowed, converted or renewed for the period from and
including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for such Loan provided for herein;
over (ii) with respect to a LIBOR Loan, the amount of interest (as reasonably
determined by the Bank) the Bank would have bid in the London interbank market
for Dollar deposits for amounts comparable to such principal amount and
maturities comparable to such period, and with respect to an Offered Loan, the
rate determined by the Bank to be its marginal cost of funds for commonly
available liabilities issued by it on the date of such Loan for a term
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comparable to such Interest Period. A determination of the Bank as to the
amounts payable pursuant to this Section 3.4 shall be conclusive absent manifest
error.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1. Documentary Conditions Precedent. The obligation of the
Bank to make the Loan or enter into the Foreign Exchange Transaction
constituting the initial Borrowing is subject to the condition precedent that
the Bank shall have received on or before the date of such Borrowing each of the
following, in form and substance satisfactory to the Bank and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) the Pledge Agreement and the Pledge Agreement Amendment
duly executed by the Parent together with (i) certificates representing the
Pledged Shares referred to therein accompanied by undated stock powers executed
in blank, and (ii) evidence that all other actions necessary or, in the opinion
of the Bank, desirable to perfect and protect the security interests created by
the Pledge Agreement have been taken;
(c) the Cash Bases GB Pledge Agreement duly executed by the
Parent and such other items as are necessary or, in the opinion of the Bank,
desirable to perfect its security interest in the stock of Cash Bases GB;
(d) the Security Agreement and the Security Agreement
Amendment duly executed by the Borrowers, together with (i) acknowledgment
copies of the financing statements (UCC-1) duly filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of the Bank,
desirable to perfect the security interest created by the Security Agreement;
(ii) certified copies of requests for information (Form UCC-11) identifying all
of the financing statements on file with respect to any Borrower in all
jurisdictions referred to under (i), including the financing statements filed by
the Bank against the Borrowers, indicating that no party claims an interest in
any of the Collateral (as defined in the Security Agreement);
(e) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, attesting to all corporate action taken
by such Borrower, including resolutions of its Board of Directors authorizing
the execution, delivery and performance of the Facility Documents to which it is
a party and each other document to be delivered pursuant to this Agreement and
certifying copies of the Certificate of Incorporation and by-laws of such
Borrower;
(f) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, certifying the names and true signatures
of the officers of such Borrower authorized to sign the Facility Documents to
which it is a party and the other documents to be delivered by such Borrower
under this Agreement;
(g) a certificate of a duly authorized officer of each
Borrower, dated the Closing Date, stating that the representations and
warranties in Article 5 of this Agreement, and Article 2 of the Security
Agreement, and in each other Facility Document, are true and correct on such
date as though made on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(h) an Environmental Indemnification Agreement duly signed by
the Borrowers in form and substance satisfactory to the Bank;
(i) a certificate of good standing for each Borrower from the
Secretary of the State of the state in which such Borrower is incorporated and
each other jurisdiction in which each Borrower is qualified to do business and
equivalent certificates for Cash Bases GB;
(j) payment by the Borrowers to the Bank of the advisory fee
and all other expenses and fees incurred by the Bank;
(k) a Borrowing Base Certificate setting forth the Borrowing
Base within 5 days prior to closing;
(l) a favorable opinion of counsel for the Borrowers, dated
the Closing Date, in substantially the form of Exhibit E and as to such other
matters as the Bank may reasonably request;
(m) evidence of satisfactory capitalization of the Borrowers
and Cash Bases GB, solvency of each Borrower and Cash Bases GB, and certified
fair value balance sheets demonstrating the solvency of each Borrower;
(n) copies of all Subordinated Debt of any Borrower and a
satisfactory review of the same;
(o) an intercreditor agreement between IBM Credit Corporation
and the Bank regarding Liens on assets of Ultimate Technology Corporation, in
form and substance satisfactory to the Bank;
(p) evidence of no material adverse change in the business,
management, operations, properties, prospects or condition (financial or
otherwise) of any Borrower, Cash Bases GB or any of their respective
Subsidiaries since the date of the commitment letter; and
(q) evidence of the absence of any change in market conditions
which, in the Bank's opinion, would materially impair a financial institution's
ability to fund Loans of this type.
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Section 4.2. Additional Conditions Precedent. The obligation of the
Bank to make the Loans or enter into a Foreign Exchange Transaction pursuant to
a Borrowing which increases the amount outstanding hereunder (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing:
(a) the following statements shall be true:
(i) the representations and warranties contained in
Article 5 herein, and in Article 2 of the Security Agreement, and in each other
Facility Document, are true and correct on and as of the date of such Loan as
though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(iii) there has been no material adverse change in the
business, management, operations, properties, prospects or condition (financial
or otherwise) of any Borrower, Cash Bases GB or any of their respective
Subsidiaries since the Closing Date;
(b) the Borrowers shall be current in the delivery of the most
recent Borrowing Base Certificate required to be delivered pursuant to this
Agreement;
(c) a Borrower shall have delivered to the Bank a Notice of
Borrowing in substantially the form of Exhibit F, which shall include a
Borrowing Base Certificate setting forth the Borrowing Base as of the Banking
Day immediately preceding the date of the Notice of Borrowing; and
(d) the Bank shall have received such approvals, opinions or
documents as the Bank may reasonably request.
Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder
and acceptance by any Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty that the statements contained in
Section 4.2(a) are true and correct both on the date of such notice and, unless
any Borrower otherwise notifies the Bank prior to such Borrowing, as of the date
of such Borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants that:
Section 5.1. Incorporation, Good Standing and Due Qualification. Each
of such Borrower and its Subsidiaries is duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
Section 5.2. Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by such Borrower of the Facility Documents
to which it is a party have been duly authorized by all necessary corporate
action and do not and will not: (a) require any consent or approval of its
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing (other than the filing of the financing statements
contemplated by the Security Agreement), registration, consent or approval
under, any law, rule, regulation (including, without limitation, Regulation U),
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to such Borrower or any of its Subsidiaries or
Affiliates; (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which such Borrower is a party or by which it or its
properties may be bound or affected; (e) result in, or require, the creation or
imposition of any Lien (other than as created under the Security Agreement),
upon or with respect to any of the properties now owned or hereafter acquired by
such Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as
the case may be) to be in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
Section 5.3. Legally Enforceable Agreements. Each Facility Document to
which such Borrower is a party is, or when delivered under this Agreement will
be, a legal, valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
Section 5.4. Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of such Borrower, threatened, against or affecting
such Borrower or any of its Subsidiaries before any court, governmental
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agency or arbitrator, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties or business of
such Borrower or any such Subsidiary or of or the ability of such Borrower to
perform its obligation under the Facility Documents to which it is a party.
Section 5.5. Financial Statements. The consolidated and consolidating
balance sheet of the Borrowers and their Consolidated Subsidiaries as at April
1, 1995, and the related consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity of the Borrowers
and their Consolidated Subsidiaries for the fiscal year then ended, and the
accompanying footnotes, together with the opinion thereon as to the consolidated
statements, of Price Waterhouse, independent certified public accountants, and
the interim consolidated and consolidating balance sheet of the Borrowers and
their Consolidated Subsidiaries as at September 30, 1995, and the related
consolidated and consolidating income statement and statements of cash flows and
changes in stockholders' equity for the six-month period then ended, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of the Borrowers and their Consolidated
Subsidiaries as at such dates and the results of the operations of the Borrowers
and their Consolidated Subsidiaries for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements). There are no
liabilities of the Borrowers or any of their Consolidated Subsidiaries, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business since April 1, 1995. No information, exhibit or report furnished by
the Borrowers to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading. Since April 1, 1995, there has been no material adverse change in
the condition (financial or otherwise), business, operations or prospects of any
Borrower or any of their Subsidiaries.
Section 5.6. Ownership and Liens. Such Borrower and each of its
Consolidated Subsidiaries has title to, or valid leasehold interests in, all of
its properties and assets, real and personal, including the properties and
assets, and leasehold interests reflected in the financial statements referred
to in Section 5.5 (other than any properties or assets disposed of in the
ordinary course of business), and none of the properties and assets owned by
such Borrower or any of its Subsidiaries and none of its leasehold interests is
subject to any Lien, except as disclosed in such financial statements or as may
be permitted hereunder and except for the Lien created by the Security
Agreement.
Section 5.7. Taxes. Such Borrower and each of its Subsidiaries has
filed all tax returns (federal, state and local) required to be filed and has
paid all taxes, assessments and governmental charges and levies thereon to be
due, including interests and penalties. Absent fraud, the years still subject to
audit by the Internal Revenue Service are the taxable years ending 1991, 1992,
1993 and 1994.
Section 5.8. ERISA. Each Plan, and, to the best knowledge of such
Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable federal or
state law, and no event or condition is occurring or exists concerning which
such Borrower would be under an obligation to furnish a report to the Bank in
accordance with Section 6.8(k) hereof. As of the most recent valuation date for
each Plan, each Plan was "fully funded," which for purposes of this Section 5.8
shall mean that the fair market value of the assets of the Plan is not less than
the present value of the accrued benefits of all participants in the Plan,
computed on a Plan termination basis. To the best knowledge of such Borrower, no
Plan has ceased being fully funded as of the date these representations are made
with respect to any Loan under this Agreement.
Section 5.9. Subsidiaries and Ownership of Stock. Schedule 5.9 is a
complete and accurate list of the Subsidiaries of such Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and showing the
percentage of such Borrower's ownership of the outstanding stock or other
interest of each such Subsidiary. All of the outstanding capital stock or other
interest of each such Subsidiary has been validly issued, is fully paid and
nonassessable and is owned by such Borrower free and clear of all Liens.
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and
correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which such Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or
indicated in such Schedule.
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Section 5.11. Operation of Business. Such Borrower and each of its
Subsidiaries possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither such Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing.
Section 5.12. Hazardous Materials. Such Borrower and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the consolidated financial condition, operations, business or
prospects of the Borrowers and their Consolidated Subsidiaries. Such Borrower
and each of its Subsidiaries are in compliance with the terms and conditions of
all such permits, licenses and authorizations, and are also in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the consolidated financial condition, operations, business or
prospects of the Borrowers and their Consolidated Subsidiaries.
In addition, except as set forth in Schedule 5.12 hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by such Borrower or any of its Subsidiaries to have any permit, license
or authorization required in connection with the conduct of the business of such
Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. s/s 9601(22) ("Release") of any substance
regulated under Environmental Laws ("Hazardous Materials") generated by such
Borrower or any of its Subsidiaries.
(b) Neither such Borrower nor any of its Subsidiaries has
handled any Hazardous Material, other than as a generator, on any property now
or previously owned or leased by such Borrower or any of its Subsidiaries to an
extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrowers and their Consolidated Subsidiaries;
and
(i) to the best of its knowledge, no PCB is or has been
present at any property now or previously owned or leased by such Borrower or
any of its Subsidiaries;
(ii) to the best of its knowledge, no asbestos is or has
been present at any property now or previously owned or leased by such Borrower
or any of its Subsidiaries;
(iii) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously owned or
leased by such Borrower or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any property now or
previously owned by such Borrower or any of its Subsidiaries.
(c) Neither such Borrower nor any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous Material to any
location which is listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLIS") or on any similar state or
foreign list or which is the subject of federal, state, foreign or local
enforcement actions or other investigations which may lead to claims against
such Borrower or any of its Subsidiaries for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA.
(d) No Hazardous Material generated by such Borrower or any of
its Subsidiaries has been recycled, treated, stored, disposed of or Released by
such Borrower or any of its Subsidiaries at any location other than those listed
in Schedule 5.12 hereto.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of such Borrower or any of its
Subsidiaries and no property now or previously owned or leased by such Borrower
or any of its Subsidiaries is listed or proposed for listing on the National
Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state
or foreign list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
such Borrower or any of its Subsidiaries, and no government actions have been
taken or are in process which could subject any of such properties to such Liens
and neither such Borrower nor any of
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its Subsidiaries would be required to place any notice or restriction relating
to the presence of Hazardous Materials at any property owned by it in any deed
to such property.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of such Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by such Borrower or any
of its Subsidiaries which have not been made available to the Bank.
Section 5.13. No Default on Outstanding Judgments or Orders. Such
Borrower and each of its Subsidiaries has satisfied all judgments and neither
such Borrower nor any of its Subsidiaries is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Section 5.14. No Defaults on Other Agreements. Neither such Borrower
nor any of its Subsidiaries is a party to any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which could have a material adverse effect on
the business, properties, assets, operations or conditions, financial or
otherwise, of such Borrower or any of its Subsidiaries, or the ability of such
Borrower to carry out its obligations under the Facility Documents to which it
is a party. Neither such Borrower nor any of its Subsidiaries is in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
Section 5.15. Labor Disputes and Acts of God. Neither the business nor
the properties of such Borrower or of any of its Subsidiaries are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of such Borrower or such
Subsidiary.
Section 5.16. Governmental Regulation. Neither such Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Power Act or any statute or regulation limiting its ability to
incur indebtedness for money borrower as contemplated hereby.
Section 5.17. Partnerships. Neither such Borrower nor any of its
Subsidiaries is a partner in any partnership.
Section 5.18. No Forfeiture. Neither such Borrower nor any of its
Subsidiaries or Affiliates is engaged in or proposes to be engaged in the
conduct of any business or activity which could result in a Forfeiture
Proceeding and no Forfeiture Proceeding against any of them is pending or
threatened.
Section 5.19. Solvency.
(a) The present fair salable value of the assets of such
Borrower after giving effect to all the transactions contemplated by the
Facility Documents and the funding of all Commitments hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such Borrower and
its Subsidiaries as they mature.
(b) The property of such Borrower does not constitute
unreasonably small capital for such Borrower to carry out its business as now
conducted and as proposed to be conducted, including the capital needs of such
Borrower.
(c) Such Borrower does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by such Borrower, and
of amounts to be payable on or in respect of debt of such Borrower). The cash
available to such Borrower, after taking into account all other anticipated uses
of the cash of such Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of such Borrower when such amounts are required
to be paid.
(d) Such Borrower does not believe that final judgments
against it in actions for money damages will be rendered at a time when, or in
an amount such that, such Borrower will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash available
to such Borrower after taking into account all other anticipated uses of the
cash of such Borrower (including the payments on or in respect of debt referred
to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to
pay all such judgments promptly in accordance with their terms.
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Section 5.20. Subordinated Debt. The Subordinated Debt of such Borrower
now outstanding, true and complete copies of instruments evidencing which have
been furnished to the Bank, has been duly authorized by such Borrower, has not
been amended or otherwise modified, and constitutes the legal, valid and binding
obligation of such Borrower enforceable against such Borrower in accordance with
its terms. There exists no default in respect of any such Subordinated Debt.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers shall:
Section 6.1. Maintenance of Existence. Preserve and maintain, and cause
each of their respective Subsidiaries to preserve and maintain, their corporate
existence and good standing in the jurisdiction of their incorporation, and
qualify and remain qualified, and cause each of their respective Subsidiaries to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is required.
Section 6.2. Conduct of Business. Continue, and cause each of their
respective Subsidiaries to continue, to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the date of
this Agreement.
Section 6.3. Maintenance of Properties. Maintain, keep and preserve,
and cause each of their respective Subsidiaries to maintain, keep and preserve,
all of its properties (tangible and intangible), necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
Section 6.4. Maintenance of Records. Keep, and cause each of their
respective Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrowers and their respective Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain, and cause each of
their respective Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
Section 6.6. Compliance with Laws. Comply, and cause each of their
respective Subsidiaries to comply, in all respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
Section 6.7. Right of Inspection. At any reasonable time and from time
to time, permit the Bank or any agent or representative thereof, to examine and
make copies and abstracts from the records and books of account of, and visit
the properties of, the Borrowers and any of their respective Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrowers and any such
Subsidiary with any of their respective officers and directors and the
Borrowers' independent accountants. The Bank shall perform an annual field audit
of the Borrowers at the Borrowers' expense; provided that such expenses shall
not exceed $4,000 per annum.
Section 6.8. Reporting Requirements. Furnish to the Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, a consolidated and consolidating
balance sheet of the Borrowers and their Consolidated Subsidiaries as of the end
of such fiscal year and a consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity and working capital
of the Borrowers and their Consolidated Subsidiaries for such fiscal year and
computations of Excess Cash Flow and Cash Bases GB Excess Cash Flow for such
fiscal year, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP and as
to the consolidated statements accompanied by an opinion thereon acceptable to
the Bank by Price Waterhouse or other independent accountants of national
standing selected by the Borrowers;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Borrowers, a true and complete copy of the
Parent's Form 10-Q;
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(c) as soon as available and in any event within 25 days after
the end of each fiscal month, a consolidating balance sheet of the Borrowers and
their Consolidated Subsidiaries as of the end of such month and a consolidating
income statement and statements of cash flows and changes in stockholders'
equity and working capital, of the Borrowers and their Consolidated Subsidiaries
for the period commencing at the end of the previous fiscal year and ending with
the end of such month, all in reasonable detail and stating in comparative form
the consolidating figures for the corresponding date and period in the previous
fiscal year and all prepared in accordance with GAAP and certified by the
Chairman or Chief Financial Officer of each Borrower (subject to year-end
adjustments);
(d) promptly upon receipt thereof, copies of any reports,
inclusive of any management letters, submitted to any Borrower or any of its
Subsidiaries by independent certified public accountants in connection with
examination of the financial statements of such Borrower or any such Subsidiary
made by such accountants;
(e) simultaneously with the delivery of the Form 10-Q referred
to above, a certificate of the Chairman or Chief Financial Officer of each
Borrower (i) certifying that to the best of his knowledge no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto, and (ii) with computations
demonstrating compliance with the covenants contained in Articles 7 and 8, and
setting forth the Borrowers' Adjusted Leverage Ratio;
(f) as soon as available and in any event within 90 days after
the end of each fiscal year of the Parent, a true and complete copy of the
Parent's Form 10-K;
(g) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, management's projected financial
statements inclusive of a balance sheet, an income statement and a statement of
cash flow (supported by key assumptions) for each upcoming fiscal year, prepared
on a quarter-by-quarter basis;
(h) simultaneously with the delivery of the annual financial
statements referred to in Section 6.8(a), a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default or Event of
Default, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(i) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Borrower or any of its Subsidiaries which, if determined adversely
to such Borrower or such Subsidiary, could have a material adverse effect on the
financial condition, properties or operations of such Borrower or such
Subsidiary;
(j) as soon as possible and in any event within five days
after the occurrence of each Default or Event of Default a written notice
setting forth the details of such Default or Event of Default and the action
which is proposed to be taken by the Borrowers with respect thereto;
(k) as soon as possible, and in any event within ten days
after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in section 4043(b) of
ERISA, with respect to a Plan, as to which PBGC has not by regulation waived the
requirement of section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event (provided that a failure to meet the minimum
funding standard of section 412 of the Code or section 302 of ERISA including,
without limitation, the failure to make on or before its due date a required
installment under section 412(m) of the Code or section 302(e) of ERISA, shall
be a reportable event regardless of the issuance of any waivers in accordance
with section 412(d) of the Code) and any request for a waiver under section
412(d) of the Code for any Plan;
(ii) the distribution under section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by such Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Borrower or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(vi) the complete or partial withdrawal from a
Multiemployer Plan by such Borrower or any ERISA Affiliate that results in
liability under section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
of such Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under section 4041A of ERISA;
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(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against such Borrower or any ERISA Affiliate to enforce
section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that
pursuant to section 401(a)(29) of the Code or section 307 of ERISA would result
in the loss of tax-exempt status of the trust of which such Plan is a part if
such Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which may
reasonably be expected to constitute grounds for such Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of one or more
Plans increase after the date of this Agreement in an amount which is material
in relation to the financial condition of such Borrower and its Subsidiaries, on
a consolidated basis; provided, however, that such increase shall not be deemed
to be material so long as it does not exceed during any consecutive 2-year
period $200,000;
(l) promptly after the request of the Bank, copies of each
annual report filed pursuant to section 104 of ERISA with respect to each Plan
(including, to the extent required by section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in section 103) and each
annual report filed with respect to each Plan under section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to such Borrower or an ERISA
Affiliate;
(m) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Bank pursuant to any other clause of this Section 6.8;
(n) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which any Borrower or any
of its Subsidiaries sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements which any Borrower
or any such Subsidiary files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any national
securities exchange;
(o) as soon as available, and in any event within 10 days of
the end of each fiscal month, a Borrowing Base Certificate and an aging schedule
with respect to Receivables with names of all account debtors, each as of the
end of such calendar month and each certified by the Chairman or Chief Financial
Officer of each Borrower;
(p) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding;
(q) and such other information respecting the condition or
operations, financial or otherwise, of any Borrower or any of its Subsidiaries
as the Bank may from time to time reasonably request.
Section 6.9. Operating Accounts. Maintain, and cause all of their
respective Subsidiaries to maintain, all United States operating accounts at the
Bank.
Section 6.10. Cash Bases GB Guaranty. If requested by the Bank at any
time that the Bank, based upon an opinion of a mutually acceptable law firm in
the United Kingdom, reasonably determines that a guaranty of all or any part of
the Loans by Cash Bases GB would not violate the laws of the United Kingdom,
cause Cash Bases GB to timely provide a guaranty in form and substance
reasonably satisfactory to the Bank at the Borrowers' cost and expense. In
determining whether or not a guaranty by Cash Bases GB would be lawful, the Bank
shall take into consideration the items that would need to be provided by
accountants, auditors or other similar professionals and whether or not the
professional standards of such Persons would permit such items to be provided in
connection with such a guaranty.
ARTICLE 7. NEGATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers shall not:
Section 7.1. Debt. Create, incur, assume or suffer to exist, or permit
any of their respective Subsidiaries to create, incur, assume or suffer to exist
any Debt, except:
(a) Debt of the Borrowers under this Agreement or the Notes;
(b) Debt described in Schedule 5.10, including renewals,
extensions or refinancings thereof, provided that the principal amount thereof
does not increase;
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(c) Debt of any Borrower to any other Borrower;
(d) Debt of the Borrowers pursuant to Interest Rate Protection
Agreements;
(e) Debt of the Borrowers or any such Subsidiary, in the
maximum principal amount of $240,000, arising in connection with that certain
Assistance Agreement by and between the State of Connecticut acting by the
Department of Economic Development and Tridex Corporation pursuant to which the
State of Connecticut has agreed to make available to the Parent up to $240,000,
in the form of loans or grants, for asset acquisitions (the "Assistance
Agreement"); and
(f) Debt of the Borrowers or any such Subsidiary secured by
purchase money Liens permitted by Section 7.3.
Section 7.2. Guaranties, Etc. Assume, guaranty, endorse or otherwise be
or become directly or contingently responsible or liable, or permit any of their
respective Subsidiaries to assume, guarantee, endorse or otherwise be or become
directly or indirectly responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods or services or to
supply or advance any funds, assets, goods or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss) for the
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
Section 7.3. Liens. Create, incur, assume or suffer to exist, or permit
any of their respective Subsidiaries to create, incur, assume or suffer to
exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(a) Liens securing the Loans hereunder and the Borrowers'
obligations under Interest Rate Protection Agreements permitted by Section 2.16;
(b) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(c) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workers' compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(g) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by any Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(h) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary;
(i) Liens set forth on Schedule 7.3, provided the Debt secured
by such Liens is permitted by Section 7.1;
(j) purchase money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(i) any property subject to any of the foregoing is
acquired by a Borrower or any such Subsidiary in the ordinary course of its
business and the Lien on any such property is created contemporaneously with
such acquisition;
(ii) the obligation secured by any Lien so created,
assumed or existing shall not exceed 80 percent of the lesser of cost or fair
market value as of the time of acquisition of the property covered thereby to a
Borrower or such Subsidiary acquiring the same;
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(iii) each such Lien shall attach only to the property so
acquired and fixed improvements thereon; and
(iv) the obligations secured by such Lien are permitted by
the provisions of Section 7.1; and
(k) Liens on assets acquired by a Borrower pursuant to the
Assistance Agreement and securing Debt permitted by Section 7.1(d). The Bank
hereby agrees to execute and deliver to the Borrowers any and all agreements,
instruments and documents reasonably requested by the Borrowers subordinating
the Bank's Lien on any such assets acquired by the Borrowers in connection with
the Assistance Agreement.
Section 7.4. Leases. Create, incur, assume or suffer to exist, or
permit any of their respective Subsidiaries to create, incur, assume or suffer
to exist, any obligation as lessee for the rental or hire of any real or
personal property, except: (a) leases existing on the date of this Agreement and
any extensions or renewals thereof; (b) leases (other than Capital Leases) which
do not in the aggregate require the Borrowers and their respective Subsidiaries
on a consolidated basis to make payments (including taxes, insurance,
maintenance and similar expense which any Borrower or any Subsidiary is required
to pay under the terms of any lease) in any fiscal year of the Borrowers in
excess of $250,000; (c) leases between any Borrower and any other Borrower; (d)
Capital Leases permitted by Section 7.3.
Section 7.5. Investments. Make, or permit any of their respective
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any such Subsidiary to purchase or otherwise acquire, any
capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America having
capital and surplus in excess of $500,000,000; (d) for stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to a Borrower or any such Subsidiary; (e) Interest Rate
Protection Agreements permitted by Section 2.16; and (f) the loans from the
Borrowers to officers of the Borrowers as reflected on the Borrowers' audited
financial statements dated April 1, 1995.
Section 7.6. Dividends. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets or in obligations of a Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any of their respective
Subsidiaries to purchase or otherwise acquire for value any stock of a Borrower
or another such Subsidiary, except that: (a) a Borrower may declare and deliver
dividends and make distributions payable solely in common stock of such
Borrower; (b) a Borrower may purchase or otherwise acquire shares of its capital
stock by exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock; and (c) any Subsidiary may
declare and deliver dividends and make distributions to the Parent.
Section 7.7. Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of, or permit any of their respective Subsidiaries to sell, lease,
assign, transfer or otherwise dispose of, any of its now owned or hereafter
acquired assets (including, without limitation, shares of stock and indebtedness
of such Subsidiaries, receivables and leasehold interests); except: (a) for
inventory disposed of in the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (c) that any such Subsidiary may sell, lease, assign or otherwise transfer
its assets to the Parent.
Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise dispose of
any shares of capital stock of any of their respective Subsidiaries or permit
any such Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 7.9. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate or permit any of their respective
Subsidiaries to enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of
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(b) any representation or warranty made or deemed made by any
Borrower or Cash Bases GB in this Agreement or in any other Facility Document or
which is contained in any certificate, document, opinion, financial or other
statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) any Borrower shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.3 or Articles 7 or 8; or (ii)
fail to perform or observe any term, covenant or agreement on its part to be
performed or observed (other than the obligations specifically referred to
elsewhere in this Section 9.1) in any Facility Document and such failure shall
continue for 20 consecutive days;
(d) any Borrower, Cash Bases GB or any of their respective
Subsidiaries shall: (i) fail to pay any indebtedness under any Interest Rate
Protection Agreement or any other indebtedness, including but not limited to
indebtedness for borrowed money (other than the payment obligations described in
(a) above), of such Borrower, Cash Bases GB or such Subsidiary, as the case may
be, or any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or (ii) fail to perform
or observe any term, covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any such Interest Rate
Protection Agreement or other indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time,
or both, the maturity of such indebtedness, whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness; or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(e) any Borrower, Cash Bases GB or any of their respective
Subsidiaries: (i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (ii) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 30 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture (other than a proceeding in respect of a
Lien permitted under Section 7.3(b)); or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (vi)
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 30 days or more;
(f) one or more judgments, decrees or orders for the payment
of money in excess of $250,000 in the aggregate shall be rendered against any
Borrower, Cash Bases GB or any of their respective Subsidiaries and such
judgments, decrees or orders shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal;
(g) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Borrower is under an
obligation to furnish a report to the Bank in accordance with Section 6.8(h)
hereof and as a result of such event or condition, together with all other such
events or conditions, such Borrower or any ERISA Affiliate has incurred or in
the opinion of the Bank is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC or a section 4042 Trustee (or any combination of
the foregoing) which is material in relation to the financial position of such
Borrower and its Subsidiaries, on a consolidated basis; provided, however, that
any such amount shall not be deemed to be material so long as all such amounts
do not exceed in the aggregate during any consecutive 2-year period $200,000;
(h) the Unfunded Benefit Liabilities of one or more Plans have
increased after the date of this Agreement in an amount which is material (as
specified in Section 9.1(g) hereof);
(i) (A) except for Seth M. Lukash and/or Alvin Lukash, any
Person or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rules 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 8 percent or more of
the outstanding shares of voting stock of the Parent; or (B) during any period
of 12 consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 12-month period were directors of the
Parent cease for any reason to constitute a majority of the board of directors
of the Parent;
(j) (A) any Forfeiture Proceeding shall have been commenced or
any Borrower shall have given the Bank written notice of the commencement of any
Forfeiture Proceeding as provided in Section 6.8 or (B) the Bank has a good
faith basis to believe that a Forfeiture Proceeding has been threatened or
commenced;
(k) there shall be any material adverse change in the
condition (financial or otherwise), business, management, operations, properties
or prospects of the Borrowers and their Subsidiaries since the Closing Date; or
(l) the Security Agreement, the Pledge Agreement or the Cash
Bases GB Pledge Agreement shall at any time after its execution and delivery and
for any reason cease: (A) to create a valid and perfected first priority
security interest in and to the property purported to be subject to such
agreement; or (B) to be in full force and effect or shall
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be declared null and void, or the validity or enforceability thereof shall be
contested by the party thereto, or such party shall deny it has further
liability or obligation thereunder or such party shall fail to perform any of
its obligations thereunder.
Section 9.2. Remedies. If any Event of Default shall occur and be
continuing, the Bank may, by notice to the Borrowers, (a) declare the Working
Capital Commitment and the Bank's obligation to enter into Foreign Exchange
Transactions to be terminated, whereupon the same shall forthwith terminate, and
(b) declare the outstanding principal of the Notes or any one of them, all
interest thereon and all other amounts payable under this Agreement and the
Notes or any one of them to be forthwith due and payable, whereupon the Note(s),
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers; provided that, in the
case of an Event of Default referred to in Section 9.1(e) or Section 9.1(j)(A)
above, the Working Capital Commitment and the Bank's obligation to enter into
Foreign Exchange Transactions shall be immediately terminated, and the Notes,
all interest thereon and all other amounts payable under this Agreement shall be
immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
ARTICLE 10. MISCELLANEOUS
Section 10.1. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrowers and the Bank,
and any provision of this Agreement may be waived by the Borrowers and the Bank.
No failure on the part of the Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 10.2. Usury. Anything herein to the contrary notwithstanding,
the obligations of the Borrowers under this Agreement and the Notes shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law applicable to
the Bank limiting rates of interest which may be charged or collected by the
Bank.
Section 10.3. Expenses. The Borrowers shall reimburse the Bank on
demand for all reasonable costs, expenses and charges (including, without
limitation, telephone, telex, courier expenses, printing costs, reasonable fees
and charges of external legal counsel for the Bank and reasonable costs
allocated after the Closing Date by its internal legal department) incurred by
the Bank in connection with the preparation, negotiation, execution, delivery,
filing, recording, performance, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes or any Facility Document. The Borrowers agree to
indemnify the Bank and its directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any actual or
proposed use by the Borrowers or any Subsidiary of the proceeds of the Loans,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
Section 10.4. Survival. The obligations of the Borrowers under Section
10.3 shall survive the repayment of the Loans and the termination of the
Commitments.
Section 10.5. Assignment; Participations. This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrowers, the Bank and
their respective successors and assigns, except that no Borrower may assign or
transfer its rights or obligations hereunder. The Bank may assign, or sell
participations in, all or any part of any Loan to another bank or other entity,
in which event (a) in the case of an assignment, upon notice thereof by the Bank
to the Borrowers, the assignee shall have, to the extent of such assignment
(unless otherwise provided therein), the same rights, benefits and obligations
as it would have if it were the Bank hereunder; and (b) in the case of a
participation, the participant shall have no rights under the Facility
Documents. The agreement executed by the Bank in favor of the participant shall
not give the participant the right to require the Bank to take or omit to take
any action hereunder except action directly relating to (i) the extension of a
payment date with respect to any portion of the principal of or interest on any
amount outstanding hereunder allocated to such participant, (ii) the reduction
of the principal amount outstanding hereunder or (iii) the reduction of the rate
of interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the participant is entitled
to receive under its agreement with the Bank. The Bank may furnish any
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information concerning the Borrowers in the possession of the Bank from time to
time to assignees and participants (including prospective assignees and
participants); provided that the Bank shall require any such prospective
assignee or such participant (prospective or otherwise) to agree in writing to
maintain the confidentiality of such information.
Section 10.6. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be delivered in person or
sent by overnight courier, facsimile, ordinary mail, cable or telex addressed to
such party at its "Address for Notices" on the signature page of this Agreement.
Notices shall be effective: (a) on the day on which delivered to such party in
person, (b) on the first Banking Day after the day on which sent to such party
by overnight courier, (c) if given by mail, 48 hours after deposit in the mails
with first-class postage prepaid, addressed as aforesaid, and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Bank shall be effective upon receipt.
Section 10.7. Setoff. The Borrowers agree that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
for the account of any Borrower at any of the Bank's offices, in Dollars or in
any other currency, against any amount payable by any Borrower under this
Agreement or any Note which is not paid when due (regardless of whether such
balances are then due to such Borrower), in which case it shall promptly notify
the Borrowers thereof; provided that the Bank's failure to give such notice
shall not affect the validity thereof.
SECTION 10.8. JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED
STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, AND EACH BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CONNECTICUT STATE OR FEDERAL
COURT. EACH BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO
SUCH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 10.6. EACH BORROWER AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH BORROWER FURTHER WAIVES ANY OBJECTION TO VENUE IN
SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE
BASIS OF FORUM NON CONVENIENS. EACH BORROWER FURTHER AGREES THAT ANY ACTION OR
PROCEEDING BROUGHT AGAINST THE BANK SHALL BE BROUGHT ONLY IN CONNECTICUT STATE
OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT. EACH BORROWER WAIVES ANY
RIGHT IT MAY HAVE TO JURY TRIAL.
(a) Nothing in this Section 10.8 shall affect the right of the
Bank to serve legal process in any other manner permitted by law or affect the
right of the Bank to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdictions.
(b) To the extent that any Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
Section 10.9. Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 10.10. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
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Section 10.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 10.12. Integration. The Facility Documents set forth the entire
agreement between the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CONNECTICUT.
Section 10.14. Confidentiality. The Bank agrees (on behalf of itself
and each of its affiliates, directors, officers, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with safe and
sound banking practices, any nonpublic information supplied to it by the
Borrowers pursuant to this Agreement which is identified by the Borrowers as
being confidential at the time the same is delivered to the Bank, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in
connection with any litigation to which the Bank is a party or (v) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) agrees to
maintain the confidentiality of such information; and provided finally that in
no event shall the Bank be obligated or required to return any materials
furnished by the Borrowers.
Section 10.15. Treatment of Certain Information. Each Borrower (a)
acknowledges that services may be offered or provided to it (in connection with
this Agreement or otherwise) by the Bank or by one or more of its subsidiaries
or affiliates and (b) acknowledges that information delivered to the Bank by any
Borrower may be provided to each such subsidiary and affiliate.
SECTION 10.16. COMMERCIAL WAIVER. EACH BORROWER ACKNOWLEDGES THAT THE
LOANS EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY RIGHT TO
NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE CONNECTICUT
GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE ATTORNEY OF THE
BANK, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT REMEDY WITHOUT
COURT ORDER. FURTHER, EACH BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY
LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD, EXEMPTION, STAY,
REDEMPTION AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAWS.
EACH BORROWER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS AND THE WAIVERS CONTAINED
IN SECTION 10.8 KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF
THE RAMIFICATIONS OF THESE WAIVERS WITH ITS ATTORNEYS.
SECTION 10.17. Multiple Borrowers.
(a) It is understood and agreed by each Borrower that the
handling of this credit facility on a joint borrowing basis as set forth in this
Agreement is solely as an accommodation to the Borrowers and at their request,
and that the Bank shall not incur liability to the Borrowers as a result
thereof. To induce the Bank to do so and in consideration thereof, each Borrower
hereby agrees to indemnify the Bank and to hold the Bank harmless from and
against any and all liabilities, expenses, losses, damages and claims of damage
or injury asserted against the Bank by any Borrower or by any other Person
arising from or incurred by reason of the Bank's handling of the financing
arrangements of the Borrowers as provided herein, reliance by the Bank on any
request or instruction from the Parent or any other Borrower or any other action
taken by the Bank with respect to this Section 10.17.
(b) Each Borrower represents and warrants to the Bank that the
request for joint handling of the Loans to be made by the Bank hereunder was
made because the Borrowers are engaged in an integrated operation which required
financing on a basis permitting the availability of credit from time to time to
each Borrower as required for the continued successful operation of each
Borrower of the integrated operation of the Borrowers. Each Borrower expects to
derive benefit, directly or indirectly, from such availability because the
successful operation of the Borrowers is dependent on the continued successful
performance of the functions of the integrated group.
(c) Each Borrower hereby irrevocably designates the Parent as
its attorney to borrow, sign and endorse notes, and execute and deliver all
instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of each Borrower, and does hereby authorize the
Bank to pay over or credit all Loan proceeds hereunder to the Parent as the
Borrowers' attorney in fact, recognizing, however, that Lender is not bound by
such authorization and may elect either to disburse loan proceeds to each
Borrower directly for its use, to the Parent as attorney for
68
30
any Borrower or to the Parent for its own account, in which case the Parent may
advance or lend such proceeds to the other Borrowers. Each Borrower further
agrees that all obligations hereunder or referred to herein or under any other
Facility Document shall be joint and several, and that each Borrower shall make
payment upon any notes issued pursuant hereto and any and all other obligations
hereunder or referred to herein or under any other Facility Document upon their
maturity by acceleration or otherwise, and that such obligation and liability on
the part of each Borrower shall in no way be affected by any extensions,
renewals and forbearances granted by the Bank to any Borrower, failure of the
Bank to give any Borrower notice of borrowing or any other notice, any failure
of the Bank to pursue or preserve its rights against any other Borrower, the
release by the Bank of any collateral now or hereafter acquired from any
Borrower, failure of the Bank to realize upon such collateral in a commercially
reasonable manner, and that such agreement by each Borrower to pay upon any
notice issued pursuant hereto is unconditional and unaffected by prior recourse
by the Bank to the other Borrowers or any collateral for such Borrowers'
obligations or the lack thereof.
(d) Each Borrower hereby grants a right of contribution to
each other Borrower for any amount paid by such other Borrower in satisfaction
of any obligations under this Agreement, any Note or any other Facility
Document; provided, however, that the aggregate of the rights of contribution
against any Borrower hereunder shall not exceed such Borrower's net worth. In
calculating the net worth of any Borrower for purposes of this paragraph, such
Borrower's obligations under the Facility Documents will not be included in its
liabilities and such Borrower's rights of contribution against other Borrowers
for amounts paid under the Facility Documents will not be included in its
assets.
(e) All notices to, or other communications with, the
Borrowers or any one of them shall be sufficient if given to any of the
Borrowers. Although the Bank may require that all of the Borrowers or a
particular Borrower execute any document (including any Notice of Borrowing) in
any matter pertaining to this Agreement or any of the other Facility Documents,
any one of the Borrowers may bind all of the Borrowers and any document
(including any Notice of Borrowing) signed by any Borrower, and any and all
action taken by any Borrower, is sufficient to represent all of the Borrowers.
Without limiting the foregoing, any single Borrower may make representations and
warranties on behalf of all the Borrowers or any other Borrower, and such
representations and warranties shall be of the same force and effect as if made
directly by such other Borrowers.
Section 10.18. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken or condition exists.
Section 10.19. Time of the Essence. Time and punctuality shall be of
the essence with respect to this instrument, but no delay or failure of the Bank
to enforce any of the provisions herein contained and no conduct or statement of
the Bank shall waive or affect any of the Bank's rights hereunder.
Section 10.20. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of this Agreement, on and after the
date hereof each reference in the Facility Documents to the Credit Agreement or
the Notes, shall mean and be a reference to this Credit Agreement as amended and
restated hereby or the Notes as amended and restated in connection with the
execution and delivery of this Agreement.
(b) The Existing Credit Agreement is amended and restated in
its entirety by this Agreement and the "Notes" delivered under the Existing
Credit Agreement are amended and restated in their entirety by the Notes
delivered pursuant to this Agreement. The Bank shall use its best efforts to
deliver to the Borrowers on the Closing Date the Notes issued to the Banks under
the Existing Credit Agreement marked "REPLACED AND REISSUED"; provided, however,
that the failure to deliver said Notes to the Borrowers shall not adversely
affect the replacement of said Notes. All other Facility Documents shall remain
in full force and effect and are hereby ratified and confirmed. Without limiting
the generality of the foregoing, the Security Agreement and all of the
Collateral described therein, the Pledge Agreement and all of the Pledged
Collateral described therein, the Cash Base GB Pledge Agreement and all of the
Charged Property described therein, and each other security document and all of
the collateral described in such security document, do and shall continue to
secure the payment of all Obligations or Secured Liabilities (as therein
defined), in each case as amended hereby and by the separate amendments to such
documents.
(c) The execution, delivery and effectiveness of this
Agreement shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank under any of the Facility Documents, nor
constitute a waiver of any provision of any of the Facility Documents.
69
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TRIDEX CORPORATION
By__________________________________________
Richard L. Cote, Senior Vice President and
Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By__________________________________________
George T. Crandall
Secretary as to each of the above
corporations
CASH BASES INCORPORATED
By__________________________________________
George T. Crandall
Treasurer
Address for Notices to all Borrowers:
61 Wilton Road
Westport, Connecticut 06880
Attention: Richard L. Cote
Facsimile No.: (203) 226-8806
70
32
FLEET BANK, NATIONAL ASSOCIATION
By_____________________________________
Frederick A. Meagher
Vice President
Address for Notices and Lending Office:
One Stamford Plaza
263 Tresser Boulevard
Stamford, Connecticut 06901
Attn: Frederick A. Meagher
Vice President
Facsimile No.: (203) 351-1511
71
1
Exhibit 10.17
AMENDMENT NO. 1
AMENDMENT dated as of March 15, 1996, among TRIDEX CORPORATION,
a corporation organized under the laws of the State of Connecticut, ITHACA
PERIPHERALS INCORPORATED, a corporation organized under the laws of the State
of Delaware, ULTIMATE TECHNOLOGY CORPORATION, a corporation organized under the
laws of the State of New York, MAGNETEC CORPORATION, a corporation organized
under the laws of the State of Connecticut, CASH BASES INCORPORATED, a
corporation organized under the laws of the State of Delaware (collectively,
all such corporations being the "Borrowers" and each, individually, a
"Borrower"), and FLEET BANK, NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States of America (the
"Bank").
Background
A. The Borrowers (other than Cash Bases Incorporated)
and the Bank have entered into the Amended and Restated Credit Agreement dated
as of December 15, 1995 (as amended, modified or supplemented from time to
time, the "Credit Agreement:).
B. The Borrowers have informed the Bank that they did
not meet certain of the financial covenants contained in the Credit Agreement
for the period ended December 31, 1995, and have requested, among other things,
that the Bank waive its compliance with those covenants for that period.
C. The Borrower and the Bank have agreed to amend the
Credit Agreement as hereinafter set forth.
Agreement
In consideration of the Background, which is incorporated by
reference, the parties, intending to be legally bound, agree as follows:
SECTION 1. Defined Terms. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Credit Agreement.
SECTION 2. Amendments to Credit Agreement. The Credit Agreement
is effective as of the date hereof and, subject to the satisfaction of the
conditions precedent set forth in Section 5 hereof, is amended as follows:
(a) The definition of "Revolving Credit Termination Date"
contained in Section 1.1 of the Credit Agreement is deleted and the following
is substituted therefor:
"Revolving Credit Termination Date" means June 30, 1997;
provided that if such date is not a Banking Day, the Revolving
Credit Termination Date shall be the next succeeding Banking
Day (or, if such next succeeding Banking Day falls in the next
calendar month, the next preceding Banking Day) or (ii) the
earlier date of termination of the Working Capital Commitment
pursuant to Section 9.2 hereof.
(b) The figure "$5,000,000" contained in the definition
of Working Capital Commitment in Section 1.1 of the Credit Agreement is
deleted and the figure "$3,000,000" is substituted therefor.
(c) The following is added after the phrase "outstanding
F/E Credits" in the sixth line of Section 2.1 (c) of the Credit Agreement:
but in no event shall Working Capital Loans exceed the
aggregate outstanding amount of $3,000,000 from time to time
(d) Section 8.1 of the Credit Agreement is deleted and
the following is substituted therefor:
Section 8.1. Minimum Tangible Net Worth. The Borrowers
shall maintain at all times, as measured at the end of each fiscal
quarter, a Consolidated Tangible Net Worth of not less than
$5,500,000 (except for the quarter ended March 31, 1996, for which
such Consolidated Tangible Net Worth shall not be less than
$5,250,000), and such minimum
72
2
Consolidated Tangible Net Worth hereunder shall increase from
fiscal year to fiscal year by an amount equal to 50% of
Consolidated Net Income for each immediately preceding fiscal
year end.
SECTION 3. Waiver of Covenants. Subject to the satisfaction of
the conditions precedent set forth in Section 5 below, the Bank hereby waives
compliance by the Borrowers with the provisions of Sections 8.1, 8.3 and 8.6
for the period ended December 31, 1995 only and the provisions of such Sections
shall remain in full force and effect for all other periods.
SECTION 4. Amendments to Other Facility Documents. The Working
Capital Note is amended and restated in its entirety in the form of Schedule 1
hereto.
SECTION 5. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Bank shall have received counterparts
of this Amendment executed by the Borrowers and the Bank, and the following
documents, each document (unless otherwise indicated) being dated the date of
receipt thereof by the Bank (which date shall be the same for all such
documents), in form and substance satisfactory to the Bank:
(a) The executed Amended and Restated Working Capital
Note in the form of Schedule 1 hereto.
(b) A certificate of the Secretary or an Assistant
Secretary of each Borrower certifying the names and true signatures of the
officers of such Borrower authorized to sign this Amendment and the other
documents to be delivered hereunder.
(c) A favorable opinion of Hinckley, Allen & Snyder,
counsel for the Borrowers, to the effect that this Amendment, and the
Amended and Restated Working Capital Note have been duly authorized, executed
and delivered by the Borrowers, and such instruments constitute the legal,
valid and binding obligations of the Borrowers, enforceable against the
Borrowers, in accordance with their respective terms.
(d) A certificate signed by a duly authorized officer of
each Borrower stating that:
(i) The representations and warranties contained in
Section 8 hereof are correct on and as of the date of such
certificate as though made on and as of such date, and
(ii) No event has occurred and is continuing which
constitutes a Default or Event of Default.
SECTION 6. Termination of LIBOR Loans. Notwithstanding anything
contained in the Credit Agreement to the contrary, the Borrowers agree that,
subsequent to the date hereof, they shall not be entitled to request LIBOR
Loans and that upon the expiration of the Interest Period for each LIBOR Loan
outstanding on the date of this Agreement, each such LIBOR Loan shall be deemed
automatically converted to a Loan bearing interest per annum at the Variable
Rate plus the Margin.
SECTION 7. Amendment Fee. In consideration of the execution and
delivery of this Amendment, the Borrowers agree to pay to the Lender in
immediately available funds, the amount of $35,000, which shall be paid by the
Lender's exercise of its rights under Section 2.12 of the Credit Agreement.
SECTION 8. Representations and Warranties of the Borrower. Each
Borrower represents and warrants as follows:
(a) Such Borrower is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required.
(b) The execution, delivery and performance by such
Borrower of this Amendment, the Amended and Restated Working Capital Note and
the Facility Documents, as amended hereby, to which it is a party have been
duly authorized by all necessary corporate action and do not and will not: (a)
require any consent or approval of its
73
3
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing, registration, consent or approval under, any law,
rule, regulation (including, without limitation, Regulation U), order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to such Borrower or any of its Subsidiaries or Affiliates; (d)
result in a breach of or constitute a default or require any consent under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Borrower is a party or by which it or its properties
may be bound or affected; (e) result in, or require, the creation or imposition
of any Lien , upon or with respect to any of the properties now owned or
hereafter acquired by such Borrower; or (f) cause such Borrower (or any
Subsidiary or Affiliate, as the case may be) to be in default under any such
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award or any such indenture, agreement, lease or instrument.
(c) This Amendment, the Amended and Restated Working
Capital Note and each other Facility Document, as amended hereby, to which
such Borrower is a party is, or when delivered under this Amendment will
be, a legal, valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
(d) There are no actions, suits or proceedings pending
or, to the knowledge of such Borrower, threatened, against or affecting
such Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties or business of
such Borrower or any such Subsidiary or of or the ability of such Borrower to
perform its obligation under this Amendment, the Amended and Restated Working
Capital Note or any of the other Facility Documents, as amended hereby.
(e) The Security Agreement constitutes valid and
perfected first priority Liens in and to the Collateral covered thereby
enforceable against all third parties in all jurisdictions and secure the
payment of all obligations of the Borrowers under the Facility Documents, as
amended hereby, including all obligations of the Borrower under the Amended and
Restated Working Capital Note, and the execution, delivery and performance of
this Amendment do not adversely affect the aforesaid Liens of such Security
Agreement.
SECTION 9. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Sections 1 and 2 hereof,
on and after the date hereof each reference in the Credit Agreement to
"this Agreement," "hereunder," "hereof," "herein" or words of like import, and
each reference in the other Facility Documents to the Credit Agreement and
Notes, shall mean and be a reference to the Credit Agreement and Notes as
amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and the Notes, and all other Facility Documents, shall remain in
full force and effect and are hereby ratified and confirmed. Without
limiting the generality of the foregoing, the Pledge Agreement and all of the
Pledged Collateral described therein, the Security Agreement and all of the
Collateral described therein, and the Cash Bases Pledge Agreement and all of
the Charged Property described therein do and shall continue to secure the
payment of all Obligations, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of the Bank under any of the Facility Documents,
nor constitute a waiver of any provision of any of the Facility Documents.
SECTION 10. Costs, Expenses and Taxes. The Borrowers jointly and
severally agree to pay on demand all costs and expenses of the Bank in
connection with the preparation, execution and delivery of this Amendment, the
Amended and Restated Working Capital Note and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Bank with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities hereunder and thereunder. The Borrowers further jointly and
severally agree to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Amendment, the Amended and Restated Working Capital Note and the other
instruments and documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6. In addition, the Borrowers shall
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment, the Amended and
Restated Working Capital Note and the other instruments and documents to be
delivered hereunder, and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
74
4
SECTION 11. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 12. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TRIDEX CORPORATION
By
-------------------------------------
Richard L. Cote
Title: Senior Vice President and
Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By
-------------------------------------
George T. Crandall
Title: Secretary as to each of the
above corporations
CASH BASES INCORPORATED
By
-------------------------------------
George T. Crandall
Title: Treasurer
FLEET BANK, NATIONAL ASSOCIATION
By
-------------------------------------
Frederick A. Meagher
Title: Vice President
75
5
SCHEDULE 1
Working Capital Note
AMENDED AND RESTATED PROMISSORY NOTE
$3,000,000 Westport, Connecticut
As of March 15, 1996
For value received, TRIDEX CORPORATION, ITHACA PERIPHERALS
INCORPORATED, ULTIMATE TECHNOLOGY CORPORATION, CASH BASES INCORPORATED and
MAGNETEC CORPORATION (each, a "Borrower" and collectively, the "Borrowers"),
hereby promise, jointly and severally, to pay to the order of FLEET BANK,
NATIONAL ASSOCIATION (the "Bank") at the principal office of the Bank, at One
Constitution Plaza, Hartford, Connecticut 06115, for the account of the
appropriate Lending Office of the Bank, the principal sum of THREE MILLION
DOLLARS ($3,000,000) or, if less, the amount of Working Capital Loans made by
the Bank to the Borrowers pursuant to the Credit Agreement referred to below,
in lawful money of the United States of America and in immediately available
funds, on the date(s) and in the manner provided in said Credit Agreement. The
Borrowers also promise to pay interest on the unpaid principal balance hereof,
for the period such balance is outstanding, at said principal office for the
account of said Lending Office, in like money, at the rates of interest as
provided in the Credit Agreement referred to below, on the date(s) and in the
manner provided in said Credit Agreement.
The date and amount of each Working Capital Loan made by the
Bank to the Borrowers under the Credit Agreement referred to below, and each
payment of principal thereof, shall be recorded by the Bank on its books and,
prior to any transfer of this Note (or, at the discretion of the Bank, at any
other time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof.
This is the Working Capital Note referred to in that certain
Amended and Restated Credit Agreement (as amended from time to time the "Credit
Agreement") dated as of December 15, 1995 among the Borrowers and the Bank and
evidences the Working Capital Loans made by the Bank thereunder. All terms not
defined herein shall have the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
Each Borrower waives presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
76
6
2
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of Connecticut.
This Note amends and restates in its entirety the Amended and
Restated Promissory Note, dated as of December 15, 1995, from the Borrowers to
the Bank, in the original principal amount of Five Million Dollars ($5,000,000)
(the "Existing Note"). Upon the execution and delivery of this Note, this Note
shall replace the Existing Note and shall immediately evidence all outstanding
indebtedness under the Existing Note. The Borrowers and the Bank hereby agree
that the indebtedness embodied in and evidenced by this Note is the same
indebtedness embodied in and evidenced by the Existing Note, and that such
indebtedness is a continuing obligation of the Borrowers to the Bank, and has
been and continues to be fully enforceable, absolute and in existence.
TRIDEX CORPORATION
By
-------------------------------------
Richard L. Cote, Senior Vice President
and Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By
-------------------------------------
George T. Crandall
Secretary as to each of the above
corporations
CASH BASES INCORPORATED
By
-------------------------------------
George T. Crandall
Treasurer
77
7
3
Amount Amount of Balance Notation
Date of Loan Payment Outstanding By
---- ------- ------- ----------- --
78
1
EXHIBIT 21.1
SUBSIDIARIES OF TRANSACT TECHNOLOGIES INCORPORATED*
SUBSIDIARY STATE OF INCORPORATION % OWNERSHIP
- ------------------------------------------------------------- ---------------------- -----------
Magnetec Corporation......................................... Connecticut 100
Ithaca Peripherals Ltd. ..................................... United Kingdom 100
- ---------------
*After completion of the transactions contemplated by the Plan of Reorganization
dated as of June 24, 1996, by and among Transact Technologies Incorporated,
Tridex Corporation, Magnetec Corporation and Ithaca Peripherals Incorporated.
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 10, 1996, relating
to the combined financial statements of TransAct Technologies Incorporated,
which appears in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Hartford, Connecticut
June 25, 1996
5
1,000
YEAR 3-MOS
DEC-31-1995 DEC-31-1996
APR-02-1995 JAN-01-1996
DEC-31-1995 MAR-30-1996
0 0
0 0
3,286 5,285
40 55
6,353 6,408
10,107 12,347
7,597 7,778
4,556 4,760
15,969 17,961
3,826 3,800
0 0
0 0
0 0
0 0
11,702 13,678
15,969 17,961
25,497 10,463
25,497 10,463
17,529 6,984
23,918 9,192
15 (170)
0 0
0 0
1,564 1,441
648 576
916 865
0 0
0 0
0 0
916 865
0 0
0 0
