1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 10.26
CREDIT AGREEMENT
Dated as of January 29, 1998
among
TRANSACT TECHNOLOGIES INCORPORATED,
MAGNETEC CORPORATION
and
FLEET NATIONAL BANK
CREDIT AGREEMENT dated as of January 29, 1998 among TRANSACT
TECHNOLOGIES INCORPORATED, a Delaware corporation ("TransAct"), MAGNETEC
CORPORATION, a Connecticut corporation ("Magnetec") (collectively, the
"Borrowers" and each, individually a "Borrower"), and FLEET NATIONAL BANK, a
national banking association organized under the laws of the United States of
America (the "Bank").
WHEREAS, the Borrowers desire that the Bank extend credit as
provided herein and the Bank is prepared to extend such credit; and
WHEREAS, the Borrowers are and will be operated on an
integrated basis in connection with their respective financial resources and
each of the Borrowers will receive direct and indirect economic and financial
benefits from the credit to be extended under this Agreement, and each of the
Borrowers acknowledges that the Bank would not provide the financing hereunder
but for the joint and several obligations of each such Borrower hereunder with
respect to all such indebtedness incurred hereunder.
NOW THEREFORE, in consideration of the foregoing, which is
incorporated by reference, and other valuable consideration, receipt of which is
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE 1. 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):
"Acceptable Acquisition" means any Acquisition: (i) which has
been either (A) approved by the Board of Directors of the corporation, or
governing body of any other business entity, which is the subject of such
Acquisition or (B) recommended by such Board or governing body to the
shareholders of such corporation or equity owners of such other business entity;
and (ii) with respect to which the following conditions are satisfied:
(a) no Default or Event of Default exists or
would result from such Acquisition;
(b) the company or assets acquired involve
substantially the same or similar line of business as the Borrowers;
(c) the Borrowers demonstrate that, on a
combined basis with the acquired assets and/or entity, in accordance with GAAP,
they would have been in compliance with the financial covenants contained in
Article 8 on a trailing four quarters pro forma basis as of the end of the
immediately preceding fiscal quarter; and will be in
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such compliance prospectively on a pro forma basis for the next succeeding four
fiscal quarters;
(d) the Borrowers remain as surviving entities;
(e) the total consideration for such Acquisition
(not including reasonable fees and expenses payable by the Borrower in
connection therewith) does not exceed $4,000,000; and
(f) the Bank obtains a perfected security
interest in the acquired assets or in the assets of the acquired company,
subject only to Liens permitted by Section 7.3 hereof.
"Acquisition" means any transaction pursuant to which any
Borrower (a) acquires greater than 5% of the equity securities (or warrants,
options or other rights to acquire such securities) of any Person, (b) causes or
permits any Person to be merged into any Borrower, in any case pursuant to a
merger, purchase of assets or any reorganization providing for the delivery or
issuance to the holders of such Person's then outstanding securities, in
exchange for such securities, of cash or securities of any Borrower, or a
combination thereof, or (c) purchases all or substantially all of the business
or assets of any Person.
"Acquisition Commitment" means the obligation of the Bank to
make the Acquisition Loans under this Agreement in the aggregate principal
amount of up to $10,000,000, as such amount may be reduced or otherwise modified
from time to time.
"Acquisition Loans" shall have the meaning set forth in
Section 2.1(b) herein, and includes both (i) the revolving loans made pursuant
to the Acquisition Commitment during the period prior to the Revolving Credit
Termination Date and (ii) the Term Loan into which such revolving loans are
converted pursuant to Section 2.1(c), thereafter.
"Acquisition Note" means the promissory note of the Borrowers
in the form of Exhibit A1 hereto evidencing the Acquisition Loans made by the
Bank hereunder and all promissory notes delivered in substitution or exchange
therefor, as amended or supplemented from time to time.
"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 their respective 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 of their respective Subsidiaries; (c) five percent or more
of the voting stock of which is directly or indirectly beneficially owned or
held by any Borrower or any of their respective Subsidiaries; or (d) which is a
partnership in which any Borrower or any of their respective Subsidiaries is a
general
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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.
"Amortization Date" means the last day of each calendar
quarter, commencing on the first such day occurring after the Revolving Credit
Termination Date, up to (and including) the Termination Date, provided that if
any such day is not a Banking Day, such day shall be the next succeeding Banking
Day.
"Banking Day" means, a day on which commercial banks settle payments in (i) New
York or London if the payment obligation is calculated by reference to any LIBO
Rate, or (ii) New York, if the payment obligation is calculated by reference to
the Prime Rate.
"Borrowing" means any Loan requested by any Borrower hereunder.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" means any one or more of the following
events:
(a) the failure by ▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇ to
remain active in the day to day senior management of TransAct; or
(b) the stockholders of any Borrower shall approve a
plan or proposal for the acquisition of, merger, liquidation or dissolution of
such Borrower, or a sale of more than 25% of its assets in one or a series of
related transactions; or
(c) a Person or group of Persons acting in concert
(other than the direct or indirect beneficial owners of the capital stock of any
Borrower as of the date of this Agreement) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from
time to time) of securities of such Borrower representing 15% or more of the
combined voting power of the outstanding voting securities for the election of
directors or shall have the right to elect a majority of the board of directors
of such Borrower.
"Closing Date" means the date this Agreement has been executed
by the Borrowers and the Bank.
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"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitments" means the Acquisition Commitment and the Working
Capital Commitment.
"Consolidated Subsidiary" means any Subsidiary whose accounts
are or are required to be consolidated with the accounts of a Person in
accordance with GAAP.
"Current Assets" of any Person at any time means all cash,
Receivables and Inventory of such Person.
"Current Funded Bank Debt" means, with respect to any Person,
all Debt of such Person for money borrowed, other than Subordinated Debt.
"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; (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.
"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 the
Borrowers under this Agreement or the Notes 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 four percentage points above the Prime Rate as
in effect from time to time plus the applicable Margin (provided
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that, if the amount so in default is principal of a LIBOR 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,
4% 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.
"EBIT" means, for any Person, for any period, earnings before
Interest Expense and taxes for such Person determined in accordance with GAAP.
"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.
"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 any 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 any Borrower is a member.
"Event of Default" has the meaning given such term in Section
9.1.
"Facility Documents" means this Agreement, the Notes, the
Subordination Agreement, the Security Agreement and each of the documents,
certificates or other instruments referred to in Article 4 hereof as well as any
other document, instrument or certificate to be delivered by the Borrowers in
connection with this Agreement or in
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connection with the documents, certificates or instruments referred to in
Article 4, including documents delivered in connection with any Borrowing.
"Fixed Charge Coverage Ratio" means, with respect to any
Person, for any period, the ratio of (i) EBITDA minus taxes paid, dividends paid
and any capital expenditures, to (ii) current maturities of long term Debt, plus
Interest Expense, for such period.
"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
(senior and subordinated) of such Person for money borrowed, including Capital
Lease obligations.
"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 Coverage Ratio" means, with respect to any Person,
for any period, the ratio of (i) EBIT to (ii) Interest Expense for such period.
"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 LIBOR 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 the Borrowers may select
pursuant to Section 2.11, on the numerically corresponding day in the first,
second, third, sixth (or if available through the Bank, the ninth or twelfth)
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.
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"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, as applicable to any LIBOR Loan, the rate
per annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S. dollars, for a
period of time comparable to such LIBOR Loan which appears on the Telerate page
3750 as of 11:00 a.m. London time on the day that is two London Banking Days
preceding the first day of such LIBOR Loan; provided, however, if the rate
described above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR rate shall be the rate (rounded upwards
as described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is two
(2) London Banking Days prior to the beginning of such interest period.
If both the Telerate and Reuters system are unavailable, then
the rate for that date will be determined on the basis of the offered rates for
deposits in U.S. dollars for a period of time comparable to such LIBOR Loan
which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of such LIBOR Loan as selected by the Bank. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
such LIBOR Loan offered by major banks in New York City at approximately 11:00
a.m. New York City time, on the day that its two London Banking Days preceding
the first day of such LIBOR Loan. In the event that Bank is unable to obtain any
such quotation as provided above, it will be deemed that LIBOR pursuant to a
LIBOR Loan cannot be determined.
In the event that the Board of Governors of the Federal
Reserve System shall impose a Reserve Requirement with respect to LIBOR deposits
of the Bank then for any period during which such Reserve Requirement shall
apply, LIBO Rate shall be equal to the amount determined above divided by an
amount equal to 1 minus the Reserve Requirement.
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"LIBOR Loan" means any 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" means any of the Acquisition Loans or the Working
Capital Loans, and "Loans" means the Acquisition Loans and the Working Capital
Loans.
"Margin" means the percentage points to be added to the Bank's
Prime Rate or the then applicable LIBOR Rate, in each case based upon the
following performance criteria:
Total Consolidated Funded Debt/EBITDA LIBOR Margin Prime Rate Margin
of the Borrowers (Percentage Points) (Percentage Points)
Greater than 2.00 1.75 0.00
Greater than 1.00, but less than or equal to 2.00 1.50 0.00
Less than or equal to 1.00 1.25 0.00
"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 (Loss)" of any Person for any period means the net
income (loss) of such Person for such period determined in accordance with GAAP.
"Net Income Increase" means, for any period, the aggregate of
fifty percent (50%) of the Borrowers' Net Income, on a consolidated basis, in
respect of such period.
"Notes" means the Acquisition Note and the Working Capital
Note.
"Notice of Borrowing" shall mean the notice of each Borrowing
described in Section 2.8 and in the form of Exhibit E hereto.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
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"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 any Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Prime Rate" means that rate of interest from time to time
announced by the Bank at its office located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, which rate may not be the Bank's lowest or best
rate.
"Prime Rate Loan" means any Loan when and to the extent the
interest rate therefor is determined in relation to the Prime Rate.
"Receivables" 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.
"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.
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"Revolving Credit Termination Date" means June 30, 1999;
provided that if such date is not a Banking Day, the Revolving Credit
Termination Date shall be the next succeeding Banking Day (or, if such next
succeeding Banking Day falls in the next calendar month, the next preceding
Banking Day) or (b) the earlier date of termination of the Commitments pursuant
to Section 9.2.
"Revolving Loan" means any loan made by the Bank pursuant to
Sections 2.1(a) or 2.1(b).
"Security Agreement" means the security agreement dated as of
the Closing Date by the Borrowers in favor of the Bank, in substantially the
form of Exhibit C.
"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 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: loans and
advances to officers and non-consolidated Affiliates, goodwill, trademarks,
patents, organizational costs, unamortized debt discounts and expenses and other
like intangible assets as defined by GAAP.
"Term Loan" shall have the meaning set forth in Section
2.1(c).
"Termination Date" means June 30, 2003; provided that if such
date is not a Banking Day, the Termination Date shall be the next succeeding
Banking Date.
"Total Liabilities" means all liabilities of a Person which
would be classified as such on a balance sheet in accordance with GAAP.
"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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"Working Capital Commitment" means the obligation of the Bank
to make the Working Capital Loans under this Agreement in the aggregate
principal amount of up to $5,000,000, as such amount may be limited or reduced
pursuant to Article 2 or otherwise modified from time.
"Working Capital Loans" shall have the meaning set forth in
Section 2.1(a) herein.
"Working Capital Note" means the promissory note of the
Borrowers in the form of Exhibit A2 hereto evidencing the Working Capital Loans
made by the Bank hereunder and all promissory notes delivered in substitution or
exchange therefor, as amended or supplemented from time to time.
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
National Bank 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 revolving loans (the "Working Capital Loans")
to the Borrowers from time to time from and including the date hereof to and
including the Revolving Credit Termination Date, up to but not exceeding in the
aggregate principal amount at any one time outstanding the amount of the Working
Capital Commitment. The Working Capital Loans may be outstanding as Prime Rate
Loans or LIBOR Loans (each a "type" of Loan). The Working Capital Loans shall be
due and payable on the Revolving Credit Termination Date. Each type of Loan
shall be made and maintained at the Bank's Lending Office for such type of Loan.
(b) Subject to the terms and conditions of this
Agreement, the Bank agrees to make revolving loans (the "Acquisition Loans") to
the Borrowers from time to time from and including the date hereof to and
including the Revolving Credit Termination Date, up to but not exceeding in the
aggregate principal amount at any one time outstanding the amount of the
Acquisition Commitment. The Acquisition Loans may
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be outstanding as Prime Rate Loans or LIBOR Loans (each a "type" of Loan). The
Acquisition Loans will be due and payable on the Revolving Credit Termination
Date unless the Borrowers exercise their option under Section 2.1(c) herein.
Each type of Loan shall be made and maintained at the Bank's Lending Office for
such type of Loan.
(c) At the option of the Borrowers, to be
exercised by giving written notice to the Bank not later than 30 days prior to
the Revolving Credit Termination Date, the Borrower shall have the right to
convert the revolving Acquisition Loans to a term loan (the "Term Loan") which
shall then be payable in equal consecutive quarterly principal payments, plus
accrued interest thereon, on each Amortization Date, commencing September 30,
1999, calculated to amortize the loan over a four year period, with a final
payment due on the Termination Date.
Section 2.2. The Notes. The Working Capital Loans shall be evidenced by a
promissory note in favor of the Bank in the form of Exhibit A-2, dated the date
of this Agreement, duly completed and executed by the Borrowers. The Acquisition
Loans shall be evidenced by a promissory note in favor of the Bank in the form
of Exhibit A-1, dated the date of this Agreement, duly completed and executed by
the Borrowers.
Section 2.3. Purpose. The Borrowers shall use the proceeds of the Working
Capital Loans for general corporate purposes, including working capital,
leasehold improvements and equipment needs, but not for any Acquisitions. The
Borrowers shall use the proceeds of the Acquisition Loans for Acceptable
Acquisitions and to repurchase shares of the common stock of TransAct in
open-market transactions. No proceeds of the 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 the Borrowers 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 Loan into another type of Loan, 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; and (ii) LIBOR Loans may be
prepaid or converted only on the last day of an Interest Period
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for such Loans, and (iii) prepayments made after the Revolving Credit
Termination Date in respect of the Term Loan shall be applied to the
installments of principal in the inverse order of their maturities. Amounts
prepaid after the Revolving Credit Termination Date may not be reborrowed.
(b) Mandatory Prepayments. The Borrowers shall
immediately repay the excess by which (i) the aggregate principal amount of all
outstanding Working Capital Loans exceeds the Working Capital Commitment, (ii)
the aggregate principal amount of all outstanding Acquisition Loans exceeds the
Acquisition Commitment, and (iii) Current Funded Bank Debt exceeds the amount
otherwise required for compliance with the collateral coverage covenant in
Section 8.6 hereof. In addition, amounts outstanding as Loans will be reduced by
100% of the net cash proceeds from any sale by either of the Borrowers of any
material assets outside of the normal course of business or from any new
issuances of stock otherwise permitted under this Agreement. In addition, upon
the occurrence of any Change of Control, the Borrowers shall immediately, at the
option of and upon demand by the Bank, repay all outstanding amounts under the
Loans. Each such prepayment in accordance with the foregoing provisions shall be
applied first to any expensed 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.
(c) Yield Maintenance Fee. If, at any time (i)
the interest rate on any Loan is a fixed rate, and (ii) the Bank in its sole
discretion should determine that current market conditions can accommodate a
prepayment request, Borrowers shall have the right at any time and from time to
time to prepay the Loan in whole (but not in part), and Borrowers shall pay to
the Bank a yield maintenance fee in an amount computed as follows: The current
rate for United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the maturity
date of the term chosen pursuant to the Fixed Rate Election as to which the
prepayment is made, shall be subtracted from the "cost of funds" component of
the fixed rate in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by the amount
of the principal balance being prepaid. The resulting amount shall be devided by
360 and multiplied by the number of the days remaining in the term chosen
pursuant to the Fixed Rate Election as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury security rate and the number of days remaining in the term chosen shall
be the yield maintenance fee due to the Bank upon prepayment of the fixed rate
Loan. Each reference in this paragraph to "Fixed Rate Election" shall mean the
election by Borrowers pursuant to Section 2.11 hereof.
14
If by reason of an Event of Default the Bank elects
to declare such Loan to be immediately due and payable, then any yield
maintenance fee with respect to the Loan shall become due and payable in the
same manner as though Borrowers had exercised such right of prepayment.
Section 2.6. Late Charges. Payments not received within 10 days of the due date
therefor will be subject to a one-time charge equal to 5% of the amount overdue.
Section 2.7. Changes of Commitment. The Borrowers shall have the right to reduce
or terminate the amount of the unused portion of either of the Commitments 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 (and integral multiples of $100,000 in excess thereof). Once
reduced or terminated, such Commitment may not be reinstated.
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 a 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) Prime Rate Loans, given one Banking Day prior thereto;
and (ii) LIBOR Loans, given two Banking Days prior thereto; and (b) in the case
of reductions or termination of the Commitments, given three Banking Days prior
thereto. Each such Notice of Borrowing shall be in the form of Exhibit E hereto
and 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 Commitment to be
reduced or terminated.
Section 2.9. Minimum Amounts. Except for Borrowings which exhaust the full
remaining amount of the unused portion of either of the Commitments or
prepayments or conversions which result in the prepayment or conversion of all
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) $100,000 with respect to Prime Rate
Loans, and (b) $500,000 and integral multiples of $100,000 in excess thereof
with respect to LIBOR Loans (borrowings, prepayments, conversions or renewals of
or into Loans of different types or, in the case of LIBOR 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).
15
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 Prime Rate Loans, at a variable rate per annum equal to the
Prime Rate plus the Margin and; (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 therefore to but excluding the last day of such Interest
Period. If the principal amount of any Loan and any other amount payable by the
Borrowers hereunder or under the Notes 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 Prime Rate Loans shall
change when the Prime 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 LIBOR 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 February 28, 1998, and on the Revolving Credit
Termination Date, and on the Termination Date; 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. Interest Periods; Renewals.
(a) In the case of each LIBOR 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 the Revolving Credit
Termination Date, except with respect to the Term Loan for which no Interest
Period may extend beyond an Amortization Date unless, after giving effect
thereto, the aggregate principal amount of the LIBOR 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;
(iii) notwithstanding clauses (i) and (ii) above, no Interest Period shall have
a duration less than one month, and if any such proposed Interest Period would
otherwise be for a shorter period, such Interest Period shall not be available;
(iv) 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; and (v) 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
16
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 Prime Rate Loan on the last day of the current Interest Period.
Section 2.12. Fees.
(a) Commitment Fee. During the period ending on the
Revolving Credit Termination Date, there will be a per annum commitment fee
payable on the average unused daily availability under each Commitment, payable
quarterly in arrears on the first Banking Day after the end of each quarter and
calculated on a 360 day year for actual days elapsed. The commitment fee rate
will vary based on the then prevailing ratio of total consolidated Funded Debt
to EBITDA of the Borrowers (the applicable ratio for such quarter will be the
ratio determined as of the last day of the previous quarter for the twelve month
period then ended), as follows:
Total Consolidated Funded Debt/EBITDA
of the Borrowers
Commitment Fee
Greater than 2.00 0.50%
Greater than 1.00, but less than or equal to 2.00 0.375%
Less than or equal to 1.00 0.25%
(b) Facility Fee. The Borrowers shall pay to the
Bank, on the Closing Date, $12,500, representing the unpaid balance of the
$25,000 facility fee in respect of the Acquisition Commitment.
Section 2.13. 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 the Borrowers with the
Bank. Until the Bank and the Borrowers otherwise agree, the Bank shall debit the
Borrowers' account number 9368994710 with the Bank for the amount of any payment
required hereunder, but the Bank may also debit any ordinary deposit account of
the Borrowers if the amount in account number 9368994710 is insufficient to make
any required payment. The Borrowers shall, at the time of making each payment
under this Agreement or the Notes, specify to the Bank the principal or other
amount payable by the Borrowers under this Agreement or the 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
17
such payment as it may elect in its sole discretion). If the due date of any
payment under this Agreement or the Notes 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.
ARTICLE 3. 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 LIBOR 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.
18
(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 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
19
(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 LIBOR 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 LIBOR 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
2.11, 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
20
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. 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 Loans is subject to the conditions 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 Security Agreement 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 the Borrowers 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);
(c) 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;
(d) 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;
(e) 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;
(f) an Environmental Indemnification Agreement duly
signed by the Borrowers in form and substance satisfactory to the Bank;
21
(g) 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 such Borrower is qualified to
do business;
(h) payment by the Borrowers to the Bank of the
balance of the facility fee as required by Section 2.12(b), and all other
expenses and fees incurred by the Bank;
(i) a favorable opinion of counsel for the Borrowers,
dated the Closing Date, in substantially the form of Exhibit D and as to such
other matters as the Bank may reasonably request;
(j) copies of all instruments evidencing any
Subordinated Debt of any Borrower and a satisfactory review of the same;
(k) evidence of no material adverse change in the
business, management, operations, properties, prospects or condition (financial
or otherwise) of any Borrower or any of their respective Subsidiaries since the
date of the commitment letter; and
(l) 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.
Section 4.2. Additional Conditions Precedent. The obligation of the Bank to make
the Loans 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 or any of their respective
Subsidiaries since the Closing Date;
22
(b) 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
Borrowers 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.
23
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 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 such Borrower and its Consolidated Subsidiaries as at December 31,
1996, and the related consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity of such Borrower
and its 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 such Borrower and
its Consolidated Subsidiaries as at September 27, 1997, and the related
consolidated and consolidating income statement and statements of cash flows and
changes in stockholders' equity for the nine-month period then ended, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of such Borrower and its Consolidated
Subsidiaries as at such dates and the results of the operations of such Borrower
and its 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 such Borrower or any of its 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 September 27, 1997. No information, exhibit or report
furnished by such Borrower 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 September 27, 1997, there has been no material
adverse change in the condition (financial or otherwise), business, operations
or prospects of such Borrower or any of its 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.
24
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.
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.
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.
25
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 such
Borrower and its 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
such Borrower and its 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;
26
(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 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
27
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 borrowed 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.
28
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 Commitment 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.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank
shall have either of the Commitments 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.
29
Section 6.3. Maintenance of Properties. Maintain, keep and preserve, and cause
each of their respective Subsidiaries to maintain, keep and preserve, all of
their properties (tangible and intangible), necessary or useful in the proper
conduct of their 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 its officers and directors and the Borrowers' independent
accountants.
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 respective 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 respective Consolidated Subsidiaries
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;
30
(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
TransAct's Report on Form 10-Q;
(c) as soon as available and in any event within 45 days after
the end of each fiscal quarter, a consolidating balance sheet of the Borrowers
and their respective 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 respective
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) promptly at the end of each fiscal quarter, 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;
(f) as soon as available and in any event within 90 days after
the end of each fiscal year of TransAct, a true and complete copy of TransAct's
Report on Form 10-K;
(g) within 30 days after the Closing Date, and thereafter, 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 projected
financial statements referred to in Section 6.8(g), a copy of the Borrowers'
business plan for each upcoming fiscal year;
(i) 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
31
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;
(j) 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;
(k) 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 any Borrower with respect thereto;
(l) 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
32
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) 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;
(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;
(m) 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;
(n) 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
33
or similar agreement and not otherwise required to be furnished to the Bank
pursuant to any other clause of this Section 6.8;
(o) 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 of its Subsidiary files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national securities exchange;
(p) as soon as available, and in any event within 10 days of
the end of each fiscal month, an aging schedule with respect to Receivables of
each Borrower with names of all account debtors, as of the end of such calendar
month and certified by the Chairman or Chief Financial Officer of each Borrower;
(q) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding; and
(r) 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 each of their respective
Subsidiaries to maintain, all United States operating accounts at the Bank.
ARTICLE 7. NEGATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank shall
have either of the Commitments under this Agreement, the Borrowers shall not:
Section 7.1. Debt. Create, incur, assume or suffer to exist, or permit any of
its 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; and
(c) Debt of the Borrowers or any of their respective
Subsidiaries 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
34
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 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;
(b) 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;
(c) Liens under workers' compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(d) 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;
(e) 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;
(f) 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;
35
(g) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary;
(h) Liens set forth on Schedule 7.3, provided the Debt secured
by such Liens is permitted by Section 7.1;
(i) 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 or such property is acquired pursuant to an Acceptable
Acquisition and is subject to a pre-existing purchase money Lien;
(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 any such Subsidiary acquiring the same;
(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
Section 7.4. Leases. Create, incur, assume or suffer to exist, or permit 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) 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
36
acquisition; (b) commercial paper of a domestic issuer rated at least "A-1" by
Standard & Poor's Corporation or "P-1" by ▇▇▇▇▇'▇ 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 and (e)
Acceptable Acquisitions.
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 any 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 any
Borrower or another such Subsidiary, except that: (a) any Borrower may declare
and deliver dividends and make distributions payable solely in common stock of
such Borrower; (b) any 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; (c) TransAct
may make the payments to Tridex as permitted under the Subordination Agreement;
and (d) 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 such Borrower's or such Subsidiary's business
37
and upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary than it would obtain in a comparable arms' length transaction with a
Person not an Affiliate, and except as set forth on Schedule 7.9.
Section 7.10. Mergers, Etc. Merge or consolidate with, or sell, assign, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to, any Person, or acquire all or substantially all of the assets or the
business of any Person (or enter into any agreement to do any of the foregoing),
or permit any of their respective Subsidiaries to do so except that any such
Subsidiary may merge into or transfer assets to a Borrower, and except for
Acceptable Acquisitions.
Section 7.11. No Activities Leading to Forfeiture. Neither the Borrowers nor any
of their respective Subsidiaries or Affiliates shall engage in or propose to be
engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding.
ARTICLE 8. FINANCIAL COVENANTS
So long as either of the Notes shall remain unpaid or the Bank
shall have either of the Commitments under this Agreement:
Section 8.1. Minimum Tangible Net Worth. The Borrowers, on a consolidated basis,
shall maintain at all times, as measured at the end of each fiscal quarter,
commencing March 28, 1998, Tangible Net Worth of not less than $15,000,000, and
such minimum dollar amount shall increase from quarter to quarter by the sum of
(a) 50% of the Borrowers' Net Income for each previous quarter (including the
quarter ending on March 31, 1998) (with no reduction for losses) plus (b) 100%
of net proceeds from the sale of stock or asset sales after January 1, 1998, and
provided further that this minimum dollar amount will be adjusted downward by
100% of the cost of common stock of TransAct repurchased in open-market
transactions by TransAct, but in no event shall such minimum dollar amount fall
below $9,000,000.
Section 8.2. Maximum Leverage Ratio. The Borrowers, on a consolidated basis,
shall maintain at all times, as measured at the end of each fiscal quarter,
commencing March 28, 1998, a ratio of Total Liabilities to Tangible Net Worth of
not greater than 2.75 to 1.0.
Section 8.3. Maximum Debt to Cash Flow Ratio. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998 for the twelve month period then ended (a
rolling twelve month calculation measured as of the end of each successive
quarter), a ratio of total Funded Debt to EBITDA, of not more than 3.0 to 1.0.
38
Section 8.4. Minimum Interest Coverage Ratio. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998 for the twelve month period then ended (a
rolling twelve month calculation measured as of the end of each successive
quarter), an Interest Coverage Ratio of not less than 3.0 to 1.0.
Section 8.5. Minimum Fixed Charge Coverage Ratio. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured at the end of each
fiscal quarter, commencing March 28, 1998 for the twelve month period then ended
(a rolling twelve month calculation measured as of the end of each successive
quarter), a Fixed Charge Coverage Ratio of not less than 1.50 to 1.0.
Section 8.6. Minimum Collateral Coverage. The Borrowers, on a consolidated
basis, shall maintain at all times, as measured at the end of each fiscal
quarter, commencing March 28, 1998, a ratio of (a) the sum of (i) 80% of
Receivables less than 90 days of invoice date plus (ii) 60% of Inventory
adjusted for obsolescence plus (iii) 50% of the net book value of fixed assets,
divided by (b) Current Funded Bank Debt, of not less than 1.0 to 1.0.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1. Events of Default. Any of the following events shall be an "Event
of Default":
(a) the Borrowers shall: (i) fail to pay the principal of any
Note as and when due and payable; or (ii) fail to pay interest on any Note or
any fee or other amount due hereunder as and when due and payable;
(b) any representation or warranty made or deemed made by any
Borrower 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, or any of its 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
39
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;
(e) one or more judgments, decrees or orders for the payment
of money in excess of $100,000 in the aggregate shall be rendered against any
Borrower, or any of its 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;
(f) 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;
(g) 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);
(h) (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;
(i) there shall be any material adverse change in the
condition (financial or otherwise), business, management, operations, properties
or prospects of the Borrowers and their respective Subsidiaries since the
Closing Date; or
40
(j) the Security 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 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 Commitments to be
terminated, whereupon the same shall forthwith terminate, and (b) declare the
outstanding principal of the Notes, 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 Notes, 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(d) or Section 9.1(i)(A) above, the Commitments 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. All agreements between the Borrowers and the Bank are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the indebtedness evidenced by the Notes
or otherwise, shall the amount paid or agreed to be paid to the Bank for the use
or the forbearance of the indebtedness evidenced by the Notes exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however that in the
event there is a change in the law which results in a higher permissible rate of
interest, then the Notes shall be governed by such new law as of its effective
date. In this regard, it is expressly agreed that it is the intent of the
Borrowers and the Bank in the execution, delivery and acceptance of the Notes to
contract in strict
41
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Facility Documents at the time of performance
of such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever the Bank should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between the Borrowers and 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 (subject to a limit of $20,000,
plus disbursements, for the fees of external counsel in preparing the Facility
Documents). 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 of
their respective Subsidiaries 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 minimum amounts
of $5,000,000, 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
42
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 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. The Bank shall have
the right at any time to pledge all or any portion of its rights under the Loans
or this Agreement or the Notes to any of the twelve (12) Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or enforcement thereof shall release the Bank from its obligations
under any of the Facility Documents.
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 hereby grant to the Bank, a lien, security
interest and right of setoff as security for all liabilities and obligations to
the Bank, whether now existing or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time, without demand
or notice, the Bank may set off the same or any part thereof and apply the same
to any liability or obligation of the Borrowers even though unmatured and
regardless of the adequacy of any other collateral securing the Loans. ANY AND
ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWERS
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
43
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 THE NOTES, 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 CONSENT TO
THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO EACH 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 Note.
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.
44
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 LAWS 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,
45
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. WAIVER OF JURY TRIAL BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE BORROWERS AND THE BANK WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE BORROWERS
AND THE BANK DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE BORROWERS AND THE BANK HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER FACILITY
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 10.18. 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 any other Borrower or any other action taken by the
Bank with respect to this Section 10.18.
(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
46
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 TransAct 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 TransAct 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 TransAct as attorney for any Borrower or to
TransAct for its own account, in which case TransAct 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, the 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
47
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 10.19. 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 10.20. 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 10.21. 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 Note, shall mean and be a reference to this Credit Agreement as amended and
restated hereby or the Note as amended and restated in connection with the
execution and delivery of this Agreement.
(b) 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.
Section 10.22. Replacement Promissory Note. Upon receipt of an
affidavit of an officer of the Bank as to the loss, theft, destruction or
mutilation of any Note or any other security document which is not of public
record, and, in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such Note or other security document,
Borrower will issue, in lieu thereof, a replacement Note or other security
document in the same principal amount thereof and otherwise of like tenor.
48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
Address for Notices to Borrowers:
▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FLEET NATIONAL BANK
By /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Address for Notices and Lending Office:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
49
EXHIBITS
Exhibit A-1 - Acquisition Note
Exhibit A-2 - Working Capital Note
Exhibit B - Subordination Agreement (Reserved)
Exhibit C - Security Agreement
Exhibit D - Opinion of Counsel for Borrowers*
Exhibit E - Notice of Borrowing*
SCHEDULES*
Schedule 5.9 - Subsidiaries of Borrowers
Schedule 5.10 - Credit Arrangements
Schedule 5.12 - Hazardous Materials
Schedule 7.3 - Liens
Schedule 7.9 - Transactions with Affiliates Outside the Ordinary
Course of Business
* Exhibits D and E and Schedules are not filed herewith as they do not contain
information which is material to an investment decision which is not otherwise
disclosed in the Form 10-K. Any omitted Exhibit or Schedule will be furnished
supplementally to the Commission upon request.
50
EXHIBIT A-1
PROMISSORY NOTE
$10,000,000 Stamford, Connecticut
January 29, 1998
For value received, TRANSACT TECHNOLOGIES INCORPORATED. and MAGNETEC
CORPORATION (the "Borrowers"), hereby jointly and severally promise, to pay to
the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, for the account of the appropriate
Lending Office of the Bank, the principal sum of TEN MILLION DOLLARS
($10,000,000) or, if less, the amount of Acquisition 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 Acquisition 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 Acquisition Note referred to in that certain Credit
Agreement (as amended from time to time the "Credit Agreement") dated of even
date herewith among the Borrowers and the Bank and evidences the Acquisition
Loans made by the Bank thereunder and upon any conversion of the Acquisition
Loans to the Term Loan, this Note will thereafter evidence the Term Loan. 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.
The Borrowers waive presentment, notice of dishonor, protest and any
other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ACCEPT THIS NOTE AND MAKE THE ACQUISITION LOANS.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
51
EXHIBIT A-2
PROMISSORY NOTE
$5,000,000 Stamford, Connecticut
January 29, 1998
For value received, TRANSACT TECHNOLOGIES INCORPORATED. and
MAGNETEC CORPORATION (the "Borrowers"), hereby jointly and severally promise, to
pay to the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank
at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, for the account of the
appropriate Lending Office of the Bank, the principal sum of FIVE MILLION
DOLLARS ($5,000,000) 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
Credit Agreement (as amended from time to time the "Credit Agreement") dated of
even date herewith 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.
The Borrowers waive presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE WORKING CAPITAL LOANS.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
52
EXHIBIT C
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 29, 1998, made by TRANSACT
TECHNOLOGIES INCORPORATED and MAGNETEC CORPORATION (collectively, the "Grantors"
and each, individually, a "Grantor"), to FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States of America (the
"Bank").
PRELIMINARY STATEMENT. The Bank has entered into a Credit Agreement
dated as of even date herewith (said Credit Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Grantors. It is a condition precedent to the making of
Loans by the Bank under the Credit Agreement that the Grantors shall have
granted the security interest contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to make Loans under the Credit Agreement, the Grantors hereby agree for
the benefit of the Bank as follows:
ARTICLE 1. THE COLLATERAL
Section 1.1. Grant of Security. As security for the Obligations (as
defined in Section 1.2 hereof), the Grantors hereby assign and pledge to the
Bank and hereby grant to the Bank a security interest in, general lien upon
and/or right of setoff of all of the Grantors' right, title and interest in and
to all of their personal property (the "Collateral"), including the following:
(a) All equipment in all of its forms, wherever located, now
or hereafter existing (including, but not limited to, any specific items or
types of equipment set forth in the Schedule hereto), and all parts thereof and
all accessions thereto (any and all such equipment, parts and accessions being
the "Equipment");
(b) All inventory in all of its forms, wherever located, now
or hereafter existing (including, but not limited to (i) any specific items or
types of inventory set forth in the Schedule hereto and raw materials and work
in process therefor, finished goods thereof, and materials used or consumed in
the manufacture or production thereof, (ii) goods in which a Grantor has an
interest in mass or a joint or other interest or right of any kind and (iii)
goods which are returned to or repossessed by a Grantor), and all accessions
thereto and products thereof (any and all such inventory, accessions and
products being the "Inventory");
(c) All accounts, contract rights, receivables, chattel paper,
instruments. general intangibles and other obligations of any kind now or
hereafter existing arising out of or in connection with the sale or lease of
goods or the rendering of services, and all rights now or hereafter existing in
and to all security agreements. leases and other
53
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, general intangibles or obligations (any and all such
accounts, contract rights, chattel paper, instruments, general intangibles and
obligations being the "Receivables," and any and all such leases, security
agreements and other contracts being the "Related Contracts");
(d)
(i) all United States or other patents and
applications for patents, including without limitation those listed on Exhibit A
to this Agreement and all licenses thereof (collectively, the "Patents");
(ii) all United States or other trademarks, service
marks, trade names, logos, registrations and applications for trademarks and
service marks, filed and unfiled, including without limitation those listed on
Exhibit B to this Agreement, together with the goodwill of the business
connected with the use of, and symbolized by, all such trademarks, service
marks, trade names, logos, registrations and applications and all licenses of
United States or other trademarks and service marks, including without
limitation those listed on said Exhibit B (collectively, the "Trademarks");
(iii) all United States or other copyrights
(including without limitation those listed as Exhibit C to this Agreement),
registered and unregistered, published and unpublished, under or pursuant to the
domestic law of all countries and any applicable convention or treaty, including
all rights of reproduction, publication, modification, derivation and the like
owned or used by a Grantor (collectively, the "Copyrights"), and good will
relating to the same;
(iv) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part of the items referred to in the
preceding clauses (i), (ii) and (iii);
(v) all licenses, sublicenses or other agreements
granted to a Grantor with respect to any of the items referred to in the
preceding clauses (i), (ii), (iii) and (iv);
(vi) the right to ▇▇▇ for past, present and future
infringements and dilutions of the foregoing; and
(vii) all rights corresponding to all of the
foregoing throughout the world, including utility models, utility patents,
patents of addition confirmation patents, registration patents, ▇▇▇▇▇ patents,
registered designs, and all priority and convention rights in connection with
any of the foregoing;
(e) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used or useful in the
business of a Grantor, all rights in and to any improvements or modifications
thereof, and all licenses, sublicenses or other agreements granted to a Grantor
with respect to any of the foregoing, in each
54
case whether now or hereafter owned, used, or granted, by any party; all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogues, computer and automatic machinery
software and programs, and the like pertaining to present or future operations
by a Grantor in, on or about any of its plants, facilities or warehouses; all
field repair data, sales data and other information relating to sales or service
of products now or hereafter manufactured on or about any of its plants or
facilities; and all accounting information pertaining to operations in, on or
about any of its plants or facilities and all media in which or on which is now
or hereafter recorded or stored any of the foregoing information, knowledge,
records or data and all computer programs used for the compilation or printout
of such information, knowledge, records or data;
(f) all licenses and sublicenses given, granted or conveyed
by a Grantor, to the full extent of and subject to such Grantor's rights
therein; and
(g) all products and proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which constitute property of
the types described in clauses (a)-(f) of this Section 1.1 and proceeds of
infringement suits) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Bank is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral, (ii) license
royalties and (iii) cash.
Section 1.2. Security for Obligations. This Agreement secures the
payment of all obligations of the Grantors now or hereafter existing under the
Facility Documents, whether for principal, interest, fees, expenses or otherwise
(all such obligations being the "Obligations").
Section 1.3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Grantors shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Bank of any of the
rights hereunder shall not release the Grantors from any of their duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Bank shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Bank be obligated to perform any of the obligations or duties of the Bank
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
Section 1.4. Continuing Agreement. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until the indefeasible payment in full of the Obligations and until
the Commitments shall no longer be in effect. Upon the indefeasible payment in
full of the Obligations and when the Commitments shall no longer be in effect,
the security interest granted hereby shall
55
terminate and all rights to the Collateral shall revert to the Grantor. Upon any
such termination, the Bank shall, at the Grantor's expense, execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
Section 1.5. Security Interest Absolute. All rights of the Bank and
security interests hereunder, and all obligations of the Grantors hereunder,
shall be absolute and unconditional, irrespective of any defenses whatsoever
available to the Grantors, including but not limited to the following:
(a) any extension of credit by the Bank to or for the account
of a Grantor other than under the Credit Agreement and Notes;
(b) any lack of validity or enforceability of any Facility
Document;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any Facility Document;
(d) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or
(e) any law, regulation or order of any jurisdiction affecting
or purporting to affect any term of any Obligation or any Facility Document or
the Bank's rights with respect thereto.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
The Grantors represent and warrant as follows:
Section 2.1. Location of Collateral. All of the Equipment and Inventory
are located at the places specified in the Schedule hereto. The chief place of
business and chief executive office of the Grantors and the office where the
Grantors keep their records concerning the Receivables, and all originals of all
chattel paper which evidence Receivables, are located at the address specified
for the Grantors in Section 6.3. None of the Receivables is evidenced by a
promissory note or other instrument.
Section 2.2. Ownership and Liens. The Grantors own the Collateral free
and clear of any Lien, except for the security interest created by this
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Bank relating to this
Agreement.
Section 2.3. Perfection.. This Agreement creates a valid and perfected
first priority security interest in the Collateral, securing the payment of the
Obligations, and
56
all filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
Section 2.4. No Authorization Required. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (a) for the grant by the Grantors of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Grantors or (b) for the perfection of or the exercise
by the Bank of its rights and remedies hereunder.
Section 2.5. Solvency of Account Debtors. Each account debtor, to the
best of the Grantors' knowledge, as of the date each Receivable is created, is
and will be solvent and able to pay all Receivables on which the account debtor
is obligated in full when due or, with respect to such account debtors of the
Grantors who are not solvent, the Grantors have set up on their books and
financial records bad debt reserves adequate to cover such Receivables.
Section 2.6. Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the account debtor therein named, for a fixed sum as set forth in the invoice
relating thereto (provided immaterial or unintentional invoice errors shall not
be deemed to be a breach hereof) with respect to an absolute sale or lease and
delivery of goods upon stated terms of a Grantor, or work, labor and/or services
theretofore rendered by a Grantor and as of the date each Receivable is created,
shall be due and owing in accordance with a Grantor's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by such Grantor to the Bank.
ARTICLE 3. COVENANTS
Section 3.1. Further Assurances.
(a) The Grantors agree that from time to time, at the expense
of the Grantors. the Grantors shall promptly execute and deliver all further
instruments and documents. and take all further action, that may be necessary or
desirable, or that the Bank may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Bank to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the Grantors
shall: (i) ▇▇▇▇ conspicuously each item of chattel paper included in the
Receivables and each Related Contract and, at the request of the Bank, each of
their recordings pertaining to the Collateral with a legend, in form and
substance satisfactory to the Bank, indicating that such chattel paper, Related
Contract or Collateral is subject to the security interest granted hereby; (ii)
if any Receivable shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Bank hereunder such note, instrument or
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Bank; and
(iii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
57
desirable, or as the Bank may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Bank to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Grantor where
permitted by law.
(c) The Grantors shall furnish to the Bank from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Bank may reasonably
request, all in reasonable detail.
Section 3.2. As to Equipment and Inventory. The Grantors shall:
(a) Keep the Equipment and Inventory (other than Inventory
sold in the ordinary course of business) at the places therefore specified in
Section 2.1 or, upon 30 days' prior written notice to the Bank, at such other
places in jurisdictions where all action required by Section 3.1 shall have been
taken with respect to the Equipment and Inventory.
(b) Cause the Equipment to be maintained and preserved in the
same condition. repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual and shall forthwith,
or in the case of any loss or damage to any of the Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other improvements in connection therewith which are necessary
or desirable to such end. The Grantors shall promptly furnish to the Bank a
statement respecting any loss or damage to any of the Equipment.
(c) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment and
Inventory except to the extent the validity thereof is being contested in good
faith.
Section 3.3. Insurance.
(a) The Grantors shall, at their own expense, maintain
insurance with respect to the Equipment and Inventory to such amounts against
such risks, in such form and with such insurers as shall be satisfactory to the
Bank from time to time. Each policy for (i) liability insurance shall provide
for all losses to be paid to the Bank and the Grantors as their respective
interests may appear and (ii) property damage insurance shall provide for all
losses (except for losses of less than $100,000 per occurrence) to be paid
directly to the Bank. Each such policy shall in addition (i) name the Grantors
and the Bank as insured parties thereunder (without any representation or
warranty by or obligation upon the Bank) as their interests may appear, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Bank notwithstanding any action,
58
inaction or breach of representation or warranty by a Grantor, (iii) provide
that there shall be no recourse against the Bank for payment of premiums or
other amounts with respect thereto and (iv) provide that at least ten days'
prior written notice of cancellation or of lapse shall be given to the Bank by
the insurer. The Grantors shall, if so requested by the Bank, deliver to the
Bank original or duplicate policies of such insurance and, as often as the Bank
may reasonably request, a report of a reputable insurance broker with respect to
such insurance. Further, the Grantors shall, at the request of the Bank, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 3.1 and cause the respective insurers to
acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
a Grantor pursuant to this Section 3.3 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section
3.3 is not applicable, the Grantors shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantors pursuant to this Section 3.3 shall be paid
to the Grantors as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any
event which permits or would permit the Bank to declare the entire Loan to be
immediately due and payable, with the giving of notice, if required (any such
event being an "Event of Default"), or (ii) the actual or constructive total
loss (in excess of $100,000 per occurrence) of any Equipment or Inventory, all
insurance payments in respect of such Equipment or Inventory shall be paid to
and applied by the Bank as specified in Section 5.1.
Section 3.4. As to Receivables.
(a) The Grantors shall keep their chief place of business and
chief executive office and the office where they keep their records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, at the location therefor specified in Section 2.1 or, upon 30 days'
prior written notice to the Bank, at such other locations in a jurisdiction
where all action required by Section 3.1 shall have been taken with respect to
the Receivables. The Grantors shall hold and preserve such records and chattel
paper and shall permit representatives of the Bank at any time during normal
business hours to inspect and make abstracts from such records and chattel
paper.
(b) Except as otherwise provided in this subsection (b), the
Grantors shall continue to collect, at their own expense, all amounts due or to
become due the Grantors under the Receivables. In connection with such
collections, the Grantors may take (and, at the Bank's direction, shall take)
such action as the Grantors or the Bank may deem necessary or advisable to
enforce collection of the Receivables; provided, however, that the Bank shall
have the right at any time upon the occurrence and during the continuance
59
of an Event of Default or an event which, with the giving of notice or the lapse
of time, or both, would become an Event of Default and upon written notice to
the Grantors of its intention to do so, to notify the account debtors or
obligors under any Receivables of the assignment of such Receivables to the Bank
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to a Grantor thereunder directly to the Bank and, upon such
notification and at the expense of the Grantors, to enforce collection of any
such Receivables, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as a Grantor might have done.
After receipt by the Grantors of the notice from the Bank referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
instruments) received by a Grantor in respect of the Receivables shall be
received in trust for the benefit of the Bank hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Bank in
the same form as so received (with any necessary endorsement) to be held as cash
collateral and either (A) released to the Grantors so long as no Event of
Default shall have occurred and be continuing or (B) if any Event of Default
shall have occurred and be continuing, applied as provided by Section 5. l(b),
and (ii) no Grantor shall adjust, settle or compromise the amount or payment of
any Receivable, or release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon.
(c) The Grantors shall take all steps necessary to protect the
Bank's interest in the Collateral under the Federal Assignment of Claims Act,
the Social Security Act, or other applicable federal, state, or local statutes,
ordinances or regulations and deliver to the Bank appropriately endorsed, any
instrument or chattel paper connected with any Receivable, arising out of
contracts between any Grantor and the United States, any state or any
department, agency or instrumentality of any of them.
Section 3.5. Transfers and Other Liens. The Grantors shall not:
(a) Except as permitted by the Credit Agreement, sell, assign
(by operation of law or otherwise) or otherwise dispose of any of the
Collateral, except Inventory in the ordinary course of business.
(b) Create or suffer to exist any Lien upon or with respect to
any of the Collateral to secure Debt of any Person, except for Liens permitted
by this Agreement.
ARTICLE IV. THE BANK
Section 4.1. Bank Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Bank such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Bank's discretion, to take any action and
to execute any instrument which the Bank may deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of such Grantor
under Section 3.4), including without limitation:
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(a) to obtain and adjust insurance required to be paid to the
Bank pursuant to Section 3.3,
(b) to ask, demand, collect, ▇▇▇ for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) or (b)
above, and
(d) to file any claims or take any action or institute any
proceedings which the Bank may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Bank with
respect to any of the Collateral.
Section 4.2. Bank May Perform. If a Grantor fails to perform
any agreement contained herein, the Bank may itself perform, or cause
performance of, such agreement and the expenses of the Bank incurred in
connection therewith shall be payable by the Grantors under Section 6.2.
Section 4.3. The Bank's Duties. The powers conferred on the
Bank hereunder are solely to protect the Bank's interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Bank shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
ARTICLE V. DEFAULT
Section 5.1. Remedies. If any Event of Default shall have occurred and
be continuing:
(a) The Bank may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code (the "UCC") (whether or not the UCC applies to the
affected Collateral) and also may (i) require any Grantor to, and each Grantor
hereby agrees that it shall at its expense and upon request of the Bank
forthwith, assemble all or part of the Collateral as directed by the Bank and
make it available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Bank's offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Bank may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to such Grantor of the time and place of any public sale or
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the time after which any private sale is to be made shall constitute reasonable
notification. The Bank shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Bank may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by the Bank in respect of any
sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Bank, be held by the Bank as collateral
for, and/or then or at any time thereafter applied (after payment of any amounts
payable to the Bank pursuant to Section 6.2) in whole or in part by the Bank
against, all or any part of the Obligations in such order as the Bank shall
elect. Any surplus of such cash or cash proceeds held by the Bank and remaining
after payment in full of all the Obligations shall be paid over to the Grantors
or to whomsoever may be lawfully entitled to receive such surplus.
ARTICLE VI. MISCELLANEOUS
Section 6.1. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by any Grantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Bank.
Section 6.2. Expenses; Etc. The Grantors shall reimburse the Bank on
demand for all reasonable costs, expenses and charges (including, without
limitation, reasonable fees and charges of external legal counsel for the Bank
and reasonable costs allocated by its internal legal department) incurred by the
Bank in connection with the preparation, performance or enforcement of this
Agreement. The Grantors agree to indemnify the Bank from and against any and all
claims, losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the Bank's gross negligence or willful
misconduct. The obligations of the Grantors under this Section are joint and
several and shall survive the termination of this Agreement.
Section 6.3. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, notices shall
be delivered in person or sent by overnight courier, facsimile, ordinary mail,
cable or telex, to such party at its address specified in the Credit 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, 72 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 6.4. Transfer of Facility Documents. This Agreement shall (a)
be binding upon the Grantors, their respective successors and assigns and (b)
inure together with the rights and remedies of the Bank hereunder, to the
benefit of the Bank and its
62
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (b), the Bank may assign or otherwise transfer the Facility
Documents held by it, or grant participations therein, to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to the Bank herein or otherwise.
Section 6.5. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of Connecticut. Unless
otherwise defined herein or in the Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of Connecticut are used herein as therein
defined.
Section 6.6. COMMERCIAL WAIVER. EACH GRANTOR ACKNOWLEDGES THAT THE
OBLIGATIONS 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 GRANTOR 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
GRANTOR ACKNOWLEDGES THAT IT MAKES THESE WAIVERS KNOWINGLY, VOLUNTARILY AND ONLY
AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE WAIVERS WITH ITS
ATTORNEYS.
Section 6.7. WAIVER OF JURY TRIAL. THE GRANTORS AND THE BANK MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS AGREEMENT AND MAKE
THE LOANS.
ARTICLE VlI. INTELLECTUAL PROPERTY
Section 7.1. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. Each Grantor
represent and warrant that they are the true and lawful exclusive owners of the
Trademarks listed in Exhibit B attached hereto and that said listed Trademarks
constitute all the trademarks registered in the United States Patent and
Trademark Office that the Grantors now own or use in connection with their
business. Each Grantor represents and warrants that it
63
owns or is licensed to use all Trademarks that it uses. Each Grantor further
warrants that it is aware of no third-party claim that any aspect of such
Grantor's present or contemplated business operations infringes or will infringe
any Trademark.
(b) Licenses and Assignments. Each Grantor hereby agrees not
to divest itself of any right under a Trademark absent prior written approval of
the Bank.
(c) Infringements. Each Grantor agrees, promptly upon learning
thereof, to notify the Bank in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of such Grantor's rights
in and to any significant Trademark, or with respect to any party claiming that
such Grantor's use of any significant Trademark violates any property right of
that party.
(d) Preservation of Trademarks. To the extent such Trademarks
are material to its business, each Grantor agrees to use its significant
Trademarks in interstate commerce during the time in which this Agreement is in
effect, sufficiently to preserve such Trademarks as trademarks or service marks
registered under the laws of the United States.
(e) Maintenance of Registration. To the extent such Trademarks
are material to its business, each Grantor shall, at its expense, diligently
process all documents required by the Trademark Act of 1946, 15 U.S.C.
Sections 1051 et seq., to maintain trademark registration, including but
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its Trademarks
pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all
fees and disbursements in connection therewith, and shall not abandon any such
filing of affidavit of use or any such application of renewal prior to the
exhaustion of all administrative and judicial remedies without prior written
consent of the Bank. Each Grantor agrees to notify the Bank six (6) months prior
to the dates on which the affidavits of use or the applications for renewal
registration are due that the affidavit of use or the renewal is being
processed.
(f) Future Registered Trademarks. If any trademark
registration issues hereafter to a Grantor as a result of any application now or
hereafter pending before the United States Patent and Trademark Office, within
thirty (30) days of receipt of such certificate such Grantor shall deliver a
copy of such certificate and an updated Exhibit B to Annex I and, if Annex I has
previously been filed, an agreement in proper form for filing, modifying Annex I
to include such Trademark.
(g) Remedies. If an Event of Default shall occur and be
continuing, the Bank may, by written notice to any Grantor, take any or all of
the following actions: (i) declare the entire right, title and interest of such
Grantor in and to each of the Trademarks, together with all trademark rights and
rights of protection to the same, vested, in which event such rights, title and
interest shall immediately vest, in the Bank, in which case such Grantor agrees
to execute an assignment in form and substance
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satisfactory to the Bank, of all its rights, title and interest in and to the
Trademarks to the Bank; (ii) take and use or sell the Trademarks and the
goodwill of such Grantor's business symbolized by the Trademarks and the right
to carry on the business and use the assets of such Grantor in connection with
which the Trademarks have been used; and (iii) direct such Grantor to refrain,
in which event such Grantor shall refrain, from using the Trademarks in any
manner whatsoever, directly or indirectly, and, if requested by the Bank, change
such Grantor's corporate name to eliminate therefrom any use of any Trademark
and execute such other and further documents that the Bank may request to
further confirm this and to transfer ownership of the Trademarks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Bank.
Section 7.2. Special Provisions Concerning Patents and Copyrights.
(a) Additional Representations and Warranties. The Grantors
represents and warrants that they are the true and lawful exclusive owner or
licensee of all rights in the Patents listed in Exhibit A attached hereto and in
the Copyrights listed in Exhibit C attached hereto, that said Patents constitute
all the United States patents and applications for United States patents that
the Grantors now own and that said Copyrights constitute all the United States
copyrights that the Grantors now own. Each Grantor represents and warrants that
it owns or is licensed to practice under all Patents and Copyrights that it now
owns, uses or practices under. Each Grantor further warrants that it is aware of
no third-party claim that any aspect of such Grantor's present or contemplated
business operations infringes or will infringe any Patent or any Copyright.
(b) Licenses and Assignments. Each Grantor hereby agrees not
to divest itself of any right under a Patent or Copyright absent prior written
approval of the Bank.
(c) Infringements. Each Grantor agrees, promptly upon learning
thereof, to furnish the Bank in writing with all pertinent information available
to such Grantor with respect to any infringement or other violation of such
Grantor's rights in any significant Patent or Copyright, or with respect to any
claim that practice of any significant Patent or Copyright violates any property
right of that party. Each Grantor further agrees, absent direction of the Bank
to the contrary, diligently to prosecute any person infringing any significant
Patent or Copyright.
(d) Maintenance of Patents. At its own expense, to the extent
such Patents are material to its business, the Grantors shall make timely
payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to
maintain in force rights under each Patent.
(e) Prosecution of Patent Application. At its own expense, to
the extent such Patents are material to its business, each Grantor shall
diligently prosecute all applications for United States patents listed on
Exhibit A hereto, and shall not abandon any such application prior to exhaustion
of all administrative and judicial remedies, absent written consent of the Bank.
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(f) Other Patents and Copyrights. Within thirty (30) days of
acquisition of a United States Patent or Copyright, or of filing of an
application for a United States Patent or Copyright, each Grantor shall deliver
to the Bank a copy of said Patent or Copyright, as the case may be, and an
updated Exhibit A or Exhibit C to Annex I and, if Annex I has previously been
filed, an agreement in proper form for filing, modifying Annex I to include such
Patent or Copyright, as the case may be.
(g) Remedies. If an Event of Default shall occur and be
continuing, the Bank may by written notice to any Grantor take any of all of the
following actions: (i) declare the entire right, title and interest of such
Grantor in each of the Patents and Copyrights vested, in which event such right,
title and interest shall immediately vest in the Bank, in which case such
Grantor agrees to execute an assignment in form and substance satisfactory to
the Bank of all its right, title and interest to such Patents and Copyrights to
the Bank; (ii) take and practice or sell the Patents and Copyrights; (iii)
direct such Grantor to refrain, in which event such Grantor shall refrain, from
practicing the Patents and Copyrights directly or indirectly, and such Grantor
shall execute such other and further documents as the Bank may request further
to confirm this and to transfer ownership of the Patents and Copyrights to the
Bank.
IN WITNESS WHEREOF, the Grantors have caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
TRANSACT TECHNOLOGIES INCORPORATED
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
MAGNETEC CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President