[STATE STREET BANK LOGO APPEARS HERE]
August 12, 1998
Mr. William A. Marshall
Chief Financial Officer
Viisage Technology, Inc.
30 Porter Road
Littleton, MA 01460
Dear Bill:
I am pleased to inform you that State Street Bank has approved the following
credit facility. The loan is subject to, but not limited to, the following terms
and conditions:
Borrower: Viisage Technology, Inc.
Type: Revolving line of credit.
Amount: Maximum of $11,000,000 reducing to a maximum of $10,000,000 at
12/31/98. From the time of closing until 12/31/98, the borrower
requires bank's prior approval to borrow in excess of $9,500,000
and prior approval to borrow in excess of $8,000,000 thereafter
until maturity.
Maturity: 6/30/2000
Interest Rate Interest rate options are; floating at State Street Prime + 1/2%,
paid monthly in arrears or Libor plus 325 basis points, paid at
end of respective Libor borrowing period, either 30,60 or 90
days. If company has no covenant violations and shows a company-
wide profit in Q2 99, pricing will adjust to Prime or Libor plus
275 on August 31, 1999. Unless the maturity date is extended, the
borrower is prohibited from choosing the Libor option if the
maturity of the borrowing period exceeds the maturity date of the
facility.
Fees: 1/2% on the unused portion of the revolving credit, quarterly in
arrears. A one Time restructuring fee of $75,000 due at closing.
Term Debt
Repayment: Both existing Tranche A and Tranche B Term Loans are paid off
with facility.
Additional
Equity: Viisage will receive $600,000 in capital injection from Lau
Acquisition Corporation within 30 days.
Mr. William A. Marshall
Chief Financial Officer
Viisage Technology, Inc.
August 12, 1998
Page Two
Additional
Outside Cash: Viisage will commit to raise an additional $3.4MM in outside
cash. $800,000 must be received by 12/31/98 with the remaining
coming into the company on a quarterly basis commensurate with
the biometric expenses of that quarter. The purpose of this cash
is to fund the company's biometric division.
Collateral: The Bank will take a first security interest in the unencumbered
systems integration/identification card contracts and secondary
security interest in contracts currently financed by Sanwa
Business Credit.
Financial Covenants
- -------------------
Minimum Net Income/Maximum Net Loss-
Systems Integration Division
- ----------------------------
6 months ending Q4 98 ($75M)
Q1 99 - $425M
Q2 99 - $850M Rolling 4 Quarters
Q3 99 - $1.425MM Rolling 4 Quarters
Q4 99 - $2.1MM Rolling 4 quarters
Q100 - $2.4MM Rolling 4 Quarters
Q200 - $2.5MM Rolling 4 Quarters
Beginning in 1999, no net loss in systems integration division in any one
individual quarter.
Net income covenant excludes anticipated accounting change relating to writing
off of start up costs. This write off will be added back for calculation
purposes.
Minimum Tangible Capital Funds (TNW+Sub.Debt)
$16,400M for quarters ending through 9/30/98, 12/31/98,3/31/99
$17,000M for quarters ending 6/30/99, 9/30/99
$17,500M for quarters ending 12/31/99,3/31/00,6/30/00
Covenants will be adjusted to reflect write off of start-up costs due to
anticipated accounting change.
Maximum Total Liabilities/Tangible Capital Funds 2.75X:1 for any quarter ending
through 6/30/00.
Mr. William A. Marshall
Chief Financial Officer
Viisage Technology, Inc.
August 12, 1998
Page Three
Quarterly Debt Service Coverage (current quarterly cash flow - EBITDA less
unfinanced capital expenditures plus any outside cash injections made during the
quarter divided by current quarterly total debt service).
1.25x for 6 months ending 12/31/98, 9 months ending 3/31/99 and on a rolling 4
quarter calculation beginning with 2nd quarter 1999. (Previous 4 quarter cash
flow divided by previous 4 quarter debt service)
Other Terms & Conditions:
The bank will be given a 5 year option to purchase 50,000 shares of Viisage
Technology, Inc. common stock at $4 per share.
Viisage will maintain the same financial reporting requirements that currently
exist with the additional requirement of providing the bank with a consolidating
quarterly income statement, balance sheet and cash flow statement that details
the systems integration division, the biometrics division and any outside
sources of cash received for that quarter.
Quarterly field examinations by the bank's internal examiners, at the discretion
of the bank, the cost of which will be borne by the borrower.
Inter-creditor agreement with Sanwa Business Credit satisfactory to the bank.
Participation agreement with BankBoston in the same material form as existing
agreement.
The cost of mutually agreed upon legal documentation would be borne by the
Borrower.
The Bank reserves the right to cancel this commitment if, in the Bank's sole
judgement, there has been a material adverse change in the business, assets,
financial condition or prospects prior to the signing of legal documentation and
there has been no material misstatement or omissions in the information
provided.
Sincerely,
/s/ Michael G. McAuliffe
Michael G. McAuliffe
Vice President