-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AMVZ002ixZVIO0sc6jSbdmbR63P5pQL51yZyWfF7Bbnzit7coLgMKXLZ86u9VecU HFwKrpOR3wetmcQdaWy0Ig== 0000931763-01-501464.txt : 20010815 0000931763-01-501464.hdr.sgml : 20010815 ACCESSION NUMBER: 0000931763-01-501464 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIANT SYSTEMS INC CENTRAL INDEX KEY: 0000845818 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 112749765 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22065 FILM NUMBER: 1709456 BUSINESS ADDRESS: STREET 1: 1000 ALDERMAN DR STREET 2: STE A CITY: ALPHARETTA STATE: GA ZIP: 30202 BUSINESS PHONE: 7707723000 MAIL ADDRESS: STREET 1: 1000 ALDERMAN DRIVE STREET 2: STE A CITY: ALPHARETTA STATE: GA ZIP: 30202 10-Q 1 d10q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended Commission File Number: June 30, 2001 0-22065 RADIANT SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter), Georgia 11-2749765 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3925 Brookside Parkway, Alpharetta, Georgia 30022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (770) 576-6000 - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ The number of the registrant's shares outstanding as of August 9, 2001 was 27,941,520. RADIANT SYSTEMS, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION PAGE NO. Item 1: Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 (unaudited) and December 31, 2000............................................................................... 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000 (unaudited)..................................................... 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 (unaudited)................................................................... 5 Notes to Condensed Consolidated Financial Statements (unaudited)....................... 6-9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................................. 10-15 Item 3: Quantitative and Qualitative Disclosures About Market Risks............................ 15 Item 4: Submission of Matters to a Vote of Security Holders.................................... 16 PART II: OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K....................................................... 17-18 Signatures:...................................................................................... 17
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- RADIANT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
June 30, December 31, 2001 2000 -------- ------------ ASSETS Current assets Cash and cash equivalents $ 37,301 $ 49,560 Accounts receivable, net 28,602 22,302 Inventories 18,971 17,172 Other short-term assets 3,923 4,722 --------- --------- Total current assets 88,797 93,756 Property and equipment, net 15,733 14,092 Software development costs, net 12,580 9,358 Other long-term assets 14,844 14,055 --------- --------- $ 131,954 $ 131,261 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 13,525 $ 16,486 Client deposits and unearned revenue 7,581 6,388 Current portion of long-term debt 603 -- --------- --------- Total current liabilities 21,709 22,874 Long-term debt, less current portion 1,384 -- --------- --------- Total liabilities 23,093 22,874 Shareholders' equity Common stock, no par value; 100,000,000 shares authorized; 27,798,344 and 27,647,830 shares issued and outstanding 0 0 Additional paid-in capital 115,656 116,543 Accumulated deficit (6,795) (8,156) --------- --------- Total shareholders' equity 108,861 108,387 --------- --------- $131,954 $131,261 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 RADIANT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
For the three months ended For the six months ended June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000 ------------- ------------- ------------- ------------- Revenues: System sales $19,496 $18,956 $39,995 $40,086 Client support, maintenance and other services 16,953 11,321 30,451 22,607 ------- ------- ------- ------- Total revenues 36,449 30,277 70,446 62,693 Cost of revenues: System sales 10,797 8,596 21,293 18,585 Client support, maintenance and other services 9,585 9,458 18,568 18,170 ------- ------- ------- ------- Total cost of revenues 20,382 18,054 39,861 36,755 ------- ------- ------- ------- Gross profit 16,067 12,223 30,585 25,938 Operating Expenses: Product development 2,791 2,963 5,245 5,154 Sales and marketing 5,322 3,280 10,037 6,181 Depreciation and amortization 2,456 1,802 4,780 3,407 Non-recurring charges -- -- 1,023 -- General and administrative 4,289 4,049 8,287 7,428 ------- ------- ------- ------- Income from operations 1,209 129 1,213 3,768 Interest income, net 435 885 1,008 1,592 ------- ------- ------- ------- Income before income tax provision and extraordinary item 1,644 1,014 2,221 5,360 Income tax provision 658 406 860 2,140 ------- ------- ------- ------- Income before extraordinary item 986 608 1,361 3,220 Extraordinary item: Gain on early extinguishment of debt, net of taxes -- -- -- 1,520 ------- ------- ------- ------- Net income $ 986 $ 608 $ 1,361 $ 4,740 ======= ======= ======= ======= Basic income per share: Income before extraordinary item $ 0.04 $ 0.02 $ 0.05 $ 0.12 Extraordinary income on early extinguishment of debt -- -- -- 0.06 ------- ------- ------- ------- Total basic income per share $ 0.04 $ 0.02 $ 0.05 $ 0.18 ======= ======= ======= ======= Diluted income per share: Income before extraordinary item $ 0.03 $ 0.02 $ 0.05 $ 0.11 Extraordinary income on early extinguishment of debt -- -- -- 0.05 ------- ------- ------- ------- Total diluted income per share $ 0.03 $ 0.02 $ 0.05 $ 0.16 ======= ======= ======= ======= Weighted average shares outstanding: Basic 27,747 27,410 27,716 26,975 ======= ======= ======= ======= Diluted 29,697 29,803 29,406 29,879 ======= ======= ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 RADIANT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
For the six months ended June 30, 2001 2000 ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,361 $ 4,740 Adjustments to reconcile net income to net cash provided by operating activities: Gain on early extinguishment of debt -- (1,518) Amortization of deferred compensation 30 26 Depreciation and amortization 6,364 4,299 Imputed interest on shareholder note -- 57 Changes in assets and liabilities: Accounts receivable (5,957) (779) Inventories (1,644) (444) Other assets 1,708 868 Accounts payable and accrued liabilities (4,422) (4,432) Client deposits and deferred revenue 962 (1,603) --------- -------- Net cash (used in) provided by operating activities (1,598) 1,214 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of acquired entities, net of cash acquired (1,700) (6,000) Purchases of property and equipment (3,483) (7,424) Capitalized software development costs (4,136) (2,233) --------- -------- Net cash used in investing activities (9,319) (15,657) CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of employee stock options 873 1,767 Repurchase of common stock (2,157) -- Issuance of shareholder loans, net -- -- Stock issued under employee stock purchase plan 367 878 Issuance of common stock -- 10,000 Principal payments under capital lease obligations (107) -- Principal payments under long-term debt (318) (304) --------- -------- Net cash (used in) provided by financing activities (1,342) 12,341 --------- -------- (Decrease) increase in cash and cash equivalents (12,259) (2,102) Cash and cash equivalents at beginning of year 49,560 53,435 --------- -------- Cash and cash equivalents at end of period $ 37,301 $ 51,333 ========= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 35 $ -- --------- -------- Income taxes $ 90 $ -- ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of Radiant Systems, Inc. (the "Company") management, these condensed consolidated financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary for fair presentation of the consolidated financial condition and results of operations for these periods. The interim results for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company's consolidated financial statements as filed in its Annual Report on Form 10-K for the year ended December 31, 2000. 2. Net Income Per Share Basic net income per common share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted net income per share includes the dilutive effect of stock options. A reconciliation of the weighted average number of common shares outstanding assuming dilution is as follows (in thousands):
For the three months ended For the six months ended June 30, June 30, --------------------------- ------------------------ 2001 2000 2001 2000 --------------------------- ------------------------ Average common shares outstanding 27,747 27,410 27,716 26,975 Dilutive effect of outstanding stock options 1,950 2,393 1,690 2,904 --------------------------- ------------------------ Average common shares outstanding assuming dilution 29,697 29,803 29,406 29,879 =========================== ========================
For the three and six month periods ended June 30, 2001, options to purchase approximately 958,000 and 801,000 shares of common stock, respectively, were excluded from the above reconciliation, as the options were antidilutive for the periods then ended. For the three and six month periods June 30, 2000, options to purchase approximately 237,000 and 36,000 shares of common stock, respectively, were excluded from the above reconciliation, as the options were antidilutive for the periods then ended. 6 3. Segment Reporting Data The Company provides enterprise technology solutions to businesses that serve the consumer. To date, the Company's product applications have been focused on the convenience store, food service, entertainment and convenient automotive service center markets, as these markets require many of the same product features and functionality. The Company's management evaluates the performance of the segments based on an internal measure of contribution margin, or income and loss from operations, before certain allocated costs of development and corporate overhead. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. The other nonreportable segment includes miscellaneous businesses, certain unallocated corporate operating expenses and the elimination of intersegment sales. The summary of the Company's operating segments is as follows (in thousands):
For the three months ended June 30, 2001 ----------------------------------------------------------------------------------------- Petroleum/ Hospitality Convenience And Food Store Service Entertainment Other Consolidation ----------------------------------------------------------------------------------------- Revenues $18,031 $9,076 $7,551 $ 1,791 $36,449 Contribution margin 4,971 966 2,189 (238) 7,888 Operating income (loss) 1,701 (415) 964 (1,041) 1,209 For the three months ended June 30, 2000 ----------------------------------------------------------------------------------------- Petroleum/ Hospitality Convenience And Food Store Service Entertainment Other Consolidation ----------------------------------------------------------------------------------------- Revenues $18,150 $ 6,406 $5,721 -- $30,277 Contribution margin 7,129 (1,198) 1,392 (16) 7,307 Operating income (loss) 2,609 (2,575) 111 (16) 129 For the six months ended June 30, 2001 ----------------------------------------------------------------------------------------- Petroleum/ Hospitality Convenience And Food Store Service Entertainment Other Consolidation ----------------------------------------------------------------------------------------- Revenues $34,941 $19,587 $13,875 $ 2,043 $70,446 Contribution margin 10,713 245 5,425 (1,148) 15,235 Acquisition and other non-recurring charges -- 1,023 -- -- 1,023 Operating income (loss) 4,240 (3,395) 2,346 (1,978) 1,213 For the six months ended June 30, 2000 ----------------------------------------------------------------------------------------- Petroleum/ Hospitality Convenience And Food Store Service Entertainment Other Consolidation ----------------------------------------------------------------------------------------- Revenues $34,805 $14,267 $13,621 -- $62,693 Contribution margin 12,796 (226) 4,238 (2,375) 14,433 Operating income (loss) 6,588 (2,557) 2,112 (2,375) 3,768
7 The Company distributes it's technology both within the United States and internationally, however, to date, international sales have not been material. 4. Acquisitions On May 9, 2001, the Company acquired all the common stock of Breeze Software Proprietary Limited, a leading provider of software applications for retailers in the Australian and Asia-Pacific marketplaces. The purchase price consisted of $1.7 million in cash and assumption of net liabilities of approximately $700,000. Total consideration, including approximately $400,000 in transaction costs, was $2.8 million. Intangibles of approximately $2.8 million were recorded, which are being amortized over four to ten years (See Note 7). The Company may pay additional consideration of cash and stock if certain earnings milestones are obtained. In connection with the acquisition, the Company entered into employment agreements with three employees for terms expiring no later than December 31, 2003. On June 22, 2000, the Company consummated the acquisition of TimeCorp, Inc. ("TimeCorp"), a workforce management and planning software business operation owned by VeriFone, Inc., a subsidiary of Hewlett-Packard, Inc. The purchase price consisted of $6.0 million and included substantially all the assets of TimeCorp, including software products, intellectual property and client contracts. Intangibles of approximately $6.4 million were recorded, which are being amortized over four to ten years (See Note 7). 5. Significant Events On March 3, 2000, the Company entered into an agreement with America Online, Inc. and Moviefone, Inc. (collectively "AOL"), whereby AOL agreed, among other items, to invest $25.0 million in a to-be-formed subsidiary of the Company to engage in consumer interactive businesses other than in the entertainment industry (e.g., interactive fuel and dispenser business and interactive restaurant self-ordering business), with any amount not invested by AOL to be callable by the Company into common shares of the Company. On March 19, 2001, the Company and AOL amended this strategic relationship. Based on the new agreement, the Company's theater exhibition point-of-sale and management systems solution will become AOL Moviefone's preferred offering in the cinema and entertainment industry. In addition, the Company will support AOL Moviefone clients operating the MARS point of sale product. Additionally, both companies have agreed not to pursue forming a subsidiary to address potential business-to- consumer applications over the Internet. Alternatively, AOL, as part of the amended agreement, has agreed to fund an amount of money to enable current MARS clients to upgrade to the Company's systems and for the Company to perform certain professional services for AOL and certain MARS' clients. On January 23 and 26, 2001, respectively, the Company announced the permanent closure of its facilities in Hillsboro, Oregon and Pleasanton, California. The decision was made to reduce costs and consolidate operations at the Company's headquarters in Alpharetta, Georgia. The Hillsboro office had served primarily as a sales office for the Company's small business food products, while the Pleasanton office had served primarily as a sales office for hospitality and food service products. The office closure costs related to these two offices are comprised primarily of severance benefits and lease reserves. As part of the closings, the Company terminated 25 of the 34 employees. As a result, the Company recorded a non-recurring charge of approximately $1.0 million associated with this action during its first quarter of 2001. During the six months ended June 30, 2001, the Company paid or incurred approximately $600,000 in severance, lease payments and other exit costs related to this action. Furthermore, at June 30, 2001, the Company had approximately $400,000 remaining in accrued liabilities related to the remaining exit costs, which the Company expects to be paid by the end of the first quarter of 2002. 8 On March 30, 2000 the Company and the former sole shareholder of RapidFire reached an agreement whereby the Company paid to the former shareholder $200,000 and forgave a $1.5 million note receivable, and in return, was relieved in full of its indebtedness to the shareholder. This indebtedness consisted of a noninterest-bearing note with a lump-sum payment of $6.0 million due October 31, 2005 ($4.3 million at December 31, 1999) and was issued October 31, 1997 as part of the Company's acquisition of RapidFire. As a result of this early extinguishment of debt, the Company recorded an extraordinary gain of approximately $1.5 million, net of tax, during the first quarter ended March 31, 2000. 6. Subsequent Event On July 26, 2001, the Company announced its purchase of certain assets from HotelTools, Inc., an emerging provider of enterprise software solutions for the hospitality industry including solutions to centralize all aspects of multi- property hotel operations, including hotel management, rate management, reservations and procurement. The transaction included the purchase of certain intellectual property rights, fixed assets and pending patents. In addition, approximately thirty former employees of HotelTools, Inc. joined the Company. 7. Accounting Pronouncements In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 141, "Business Combinations" ("SFAS No.141"), and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). SFAS No. 141 supersedes Accounting Principles Board ("APB") Opinion No. 16 "Business Combinations", and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises". This Statement prescribes the accounting principles for business combinations and requires that all business combinations be accounted for using the purchase method of accounting. This Statement is effective for all business combinations after June 30, 2001. SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets". This Statement prescribes the accounting practices for acquired goodwill and other intangible assets. Under this Statement, goodwill will no longer be amortized to earnings, but instead will be reviewed periodically (at least annually) for impairment. The Company will adopt this Statement on January 1, 2002. Goodwill and certain other intangible assets related to acquisitions subsequent to June 30, 2001 will not be amortized. As of June 30, 2001 the Company had approximately $11.5 million of recorded net goodwill, which will be subject to this new Statement. During 2001, the Company expects to record approximately $1.4 million of goodwill amortization expense, net of taxes. The Company is currently evaluating this new pronouncement and has not yet determined the impact on its financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Company adopted FAS 133 effective January 1, 2001. The adoption did not have a material impact on the Company's results of operations. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations - ------------- Overview The Company derives its revenues primarily from the sale of integrated systems, including software, hardware and related support and professional services. As discussed below, during the second quarter of 2000, the Company announced and began offering these products pursuant to a new subscription-based pricing model. In addition, the Company offers implementation and integration services which are billed on a per diem basis. The Company's revenues from its various technology solutions are, for the most part, dependent on the number of installed sites for a client. Accordingly, while the typical sale is the result of a long, complex process, the Company's clients usually continue installing additional sites over an extended period of time. Revenues from software and systems sales are recognized as products are shipped, provided that collection is probable and no significant post shipment vendor obligations remain. Revenues from client support, maintenance and other services are generally recognized as the service is performed. In 1999, the Company began developing its new generation of management systems products -- WAVE. This product architecture is designed to combine and expand the functionality of its Site Management Systems and Headquarter-Based Management Systems. The Company's architecture and platforms for these products are entirely web-based, which the Company believes will enable it to increase the functionality while decreasing the costs of implementing and maintaining technology solutions for retailers. Management believes that these products will strengthen its product offerings by providing integrated, end-to-end solutions that span from the consumer to the supply chain. The Company intends to offer its WAVE software primarily through the application service provider, or "ASP," delivery model. In the ASP delivery model, the Company would remotely host applications from an off-site central server that users can access over dedicated lines, virtual private networks or the Internet. Additionally, the Company plans to offer the product through installations directly in client locations as "client-hosted" systems. The Company also intends to offer Internet solutions that will allow clients to utilize the Internet to enhance site management and conduct business-to-business e-commerce. In connection with its strategy to develop ASP-delivered products, in April 2000 the Company began converting certain new and existing products to a subscription-based pricing model. Under this subscription-pricing model, clients will pay a fixed, monthly fee for use of WAVE and the necessary hosting services to utilize those applications and solutions. This represents a change in the Company's historical pricing model in which clients were charged an initial licensing fee for use of the Company's products and continuing maintenance and support during the license period. The Company began offering its products and services on the subscription-pricing model in the second quarter of 2000. The Company continues to derive a majority of its revenue from its traditional sales model of one-time software license revenues, hardware sales and software maintenance and support fees that will be paid by existing clients. However, as a result of the transition to the subscription-pricing model and the decline of revenues from legacy site management and headquarters solutions, the Company expects to see a decline in the one-time revenues from software license fees and hardware sales, replaced over time by monthly subscription fees. In addition, the Company expects revenue from maintenance and support from existing clients to decline and to be replaced by subscription fees as existing clients convert to the subscription-pricing model. Although the Company's subscription-based revenues to date have been immaterial to total revenues; the Company expects the percentage of revenue that is recurring in nature to increase substantially as a result of the change to a subscription- pricing model. This change in the Company's product strategy to develop and offer ASP-delivered and Internet solutions and the transition to a subscription-pricing model involve certain risks and assumptions. There can be no 10 assurance that the Company will successfully implement these changes in its organization, product strategy or pricing model or that the changes will not have a material adverse effect on the Company's business, financial condition or results of operations. On April 1, 2000 the Company effected a 3-for-2 stock split. All historical share data and weighted average shares have been restated to account for this split. Results of Operations Three and six months ended June 30, 2001 compared to three and six months ended June 30, 2000 System Sales. The Company derives the majority of its revenues from sales and licensing fees of its headquarters-based, back office management, and point of sale solutions. System sales increased 2.8% to $19.5 million for the quarter ended June 30, 2001 (the "second quarter 2001"), compared to $19.0 million for the quarter ended June 30, 2000 (the "second quarter 2000"). This increase was primarily the result of increased sales to new and existing clients, offset by the Company's strategy to begin converting certain new and existing products and clients to the subscription-pricing model during the second quarter 2000. System sales remained relatively flat for the six months ended June 30, 2001 (the "fiscal period 2001"), decreasing 0.2% to $40.0 million compared to $40.1 for the six months ended June 30, 2000 (the "fiscal period 2000"). This decrease was primarily the result of the Company's strategy to begin converting certain new and existing products and clients to the subscription-pricing model, as well as declining sales of the Company's legacy back-office and headquarters products in advance of the Company's general release of its WAVE software scheduled for early 2002. Client Support, Maintenance and Other Services. The Company also derives revenues from client support, maintenance and other services. Client support, maintenance and other services increased 49.7% to $17.0 million for the second quarter 2001, compared to $11.3 million for the second quarter 2000 and increased 34.7% to $30.5 million for the fiscal period 2001, compared to $22.6 million for the fiscal period 2000. These increases were due to increased client demand for professional services such as training, custom software development, project management and implementation services and from an increased installed base within existing markets. Cost of System Sales. Cost of system sales consists primarily of hardware and peripherals for site-based systems and labor. These costs are expensed as products are shipped. Cost of system sales increased 25.6% to $10.8 million for the second quarter 2001, compared to $8.6 million for the second quarter 2000. Cost of system sales increased 14.6% to $21.3 million for the fiscal period 2001 from $18.6 million for the fiscal period 2000. Cost of system sales as a percentage of system sales increased to 55.4% for the second quarter 2001 from 45.3% for the second quarter 2000, and to 53.2% during fiscal period 2001 from 46.4% for fiscal period 2000. These increases were due primarily to lower hardware margins and changes in product sales mix in both the second quarter 2001 and fiscal period 2001. Additionally, amortization of capitalized software development costs was approximately $637,000 and $452,000 for the second quarter 2001 and 2000, respectively, and approximately $1.2 million and $922,000 for fiscal periods 2001 and 2000, respectively. Cost of Client Support, Maintenance and Other Services. Cost of client support, maintenance and other services consists primarily of personnel and other costs associated with the Company's services operations. Cost of client support, maintenance and other services increased 1.3% to $9.6 million for the second quarter 2001 from $9.5 million for the second quarter 2000 and increased 2.2% to $18.6 million for fiscal period 2001 from $18.2 million for fiscal period 2000. These increases were due primarily to the Company's expansion of its professional service offerings and the related increase in wages associated with this effort. Cost of client support, maintenance and other services as a percentage of client support, maintenance and other services revenues decreased to 56.5% for the second quarter 2001 from 83.5% for the second quarter 2000 and to 61.0% for fiscal period 2001 from 80.4% for fiscal period 2000 due to increased efficiencies and staff utilization as well as the creation of a new Client Management Services 11 group on January 1, 2001. In order to provide clients improved service as well as provide more leverage to its sales people, certain resources previously included in costs of client support, maintenance and other services were reallocated to a new account management and client logistics function within the sales and marketing group. As a result of this change in their responsibility, approximately 44 people, or approximately $1.0 million and $2.0 million of expense are included in sales and marketing expenses for the second quarter 2001 and fiscal period 2001, respectively. Product Development Expenses. Product development expenses consist primarily of wages and materials expended on product development efforts. Product development expenses decreased 5.8% to $2.8 million for the second quarter 2001, compared to $3.0 million for the second quarter 2000. This decrease was due to higher capitalization of software costs associated with the Company's development of its WAVE and Lighthouse generation of products over the same period a year ago. In the second quarter 2001, the Company capitalized software development costs of $2.1 million, or 42.4% of its total product development costs, compared to $1.2 million or 29.4% during the second quarter 2000. Product development expenses remained flat at $5.2 million for fiscal period 2001 and fiscal period 2000. Although the Company's total product development spending increased during the fiscal period 2001, this increase was offset by higher capitalization of software costs associated with the Company's development of its WAVE and Lighthouse generation of products. For fiscal period 2001, the Company capitalized software development costs of $4.1 million, or 44.0% of its total product development costs, compared to $2.2 million or 30.2% for the fiscal period 2000. Product development expenses as a percentage of total revenues decreased to 7.7% during the second quarter 2001 from 9.8% during the second quarter 2000 and to 7.4% for the fiscal period 2001 from 8.2% for the fiscal period 2000 as revenues increased at a pace higher than product development expenses. Sales and Marketing Expenses. Sales and marketing expenses increased 62.3% to $5.3 million during the second quarter 2001, compared to $3.3 million in the second quarter 2000 and increased 62.4% to $10.0 million during fiscal period 2001, compared to $6.2 million for fiscal period 2000. These increases were associated primarily to the creation of the new Client Management Services group on January 1, 2001 and associated costs previously included in cost of client support, maintenance and other services as noted above. As a result of this change in their responsibility, approximately 44 people, or approximately $1.0 million and $2.0 million of expense are included in sales and marketing expenses for the second quarter and fiscal period 2001, respectively. Additionally, the Company's continued expansion of its sales activities, including new hires and increased commission expense, attributed to these increases. Sales and marketing expenses as a percentage of total revenues were 14.6% and 10.8% for the second quarter 2001 and 2000, respectively, and were 14.2% and 9.9% for fiscal period 2001 and 2000, respectively as sales and marketing expenses increased during these periods at a pace higher than revenues. Depreciation and Amortization. Depreciation and amortization expenses increased 36.3% to $2.5 million for the second quarter 2001, compared to $1.8 million for the second quarter 2000 and increased 40.3% to $4.8 million for fiscal period 2001, compared to $3.4 million for fiscal period 2000. The increases resulted from an increase in computer equipment, leasehold improvements and other assets required to support an increased number of employees and locations. Depreciation and amortization as a percentage of total revenues was 6.7% and 6.0% for the second quarter 2001 and 2000, respectively, and 6.8% and 5.4% for fiscal periods 2001 and 2000, respectively. These increases were primarily due to associated personnel support costs increasing at a pace higher than revenues. Non-recurring charges. On January 23 and 26, 2001, respectively, the Company announced the permanent closure of its facilities in Hillsboro, Oregon and Pleasanton, California. The decision was made to reduce costs and consolidate operations at the Company's headquarters in Alpharetta, Georgia. The Hillsboro office had served primarily as a sales office for the Company's small business food products, while the Pleasanton office had served primarily as a sales office for hospitality and food service products. The office closure costs related to these two offices are comprised primarily of severance benefits and lease reserves. As part of the closings, the Company terminated 25 of the 34 12 employees at these facilities. As a result, the Company recorded a non- recurring charge of approximately $1.0 million associated with this action during the first quarter 2001. During the six months ended June 30, 2001, the Company paid or incurred approximately $600,000 in severance, lease payments and other exit costs related to this action. Furthermore, at June 30, 2001, the Company had approximately $400,000 remaining in accrued liabilities related to the remaining exit costs, which the Company expects to pay by the end of the first quarter of 2002. General and Administrative Expenses. General and administrative expenses increased 5.9% to $4.3 million for the second quarter 2001, compared to $4.0 million for the second quarter 2000 and increased 11.6% to $8.3 million for fiscal period 2001, compared to $7.4 million for fiscal period 2000. The increases were due primarily to personnel increases needed to support additional revenues, as well as to support the Company's move to the subscription-pricing model. General and administrative expenses as a percentage of total revenues were 11.8% and 13.4% for the second quarter 2001 and 2000, respectively, as total revenues grew at a pace faster than these expenses. General and administrative expenses as a percentage of total revenues remained flat at 11.8% for fiscal periods 2001 and 2000. Interest Income, Net. Net interest income decreased 50.1% to $435,000 for the second quarter 2001, compared to $885,000 for the second quarter 2000. For fiscal period 2001, net interest income decreased 36.7% to $1.0 million, compared to net interest income of $1.6 million for fiscal period 2000. The Company's interest income is derived from the investment of its cash and cash equivalents. The decreases in net interest income resulted primarily from a decrease in cash and cash equivalents from an average cash balance of $54.5 million during the second quarter 2000 and $52.4 million during the fiscal period 2000 to an average cash balance of $41.8 million during the second quarter 2001 and $43.4 million during the fiscal period 2001. Additionally, the Company's weighted average interest rates it receives on cash balances declined in 2001 over 2000. See "--Liquidity and Capital Resources" and "--Item 3. Quantitative and Qualitative Disclosures About Market Risks." Income Tax Provision. The Company recorded a tax provision of 40.0% in both the second quarter 2001 and the second quarter 2000. The Company recorded a tax provision of 38.7% for fiscal period 2001 and 40.0% in fiscal period 2000. Extraordinary Item. On March 30, 2000, the Company and the former sole shareholder of RapidFire reached an agreement whereby the Company paid to the former shareholder $200,000 and forgave a $1.5 million note receivable, and in return, was relieved in full of its indebtedness to the shareholder. This indebtedness consisted of a noninterest-bearing note with a lump-sum payment of $6.0 million due October 31, 2005 and was issued October 31, 1997 as part of the Company's acquisition of RapidFire. As a result of this early extinguishment of debt, the Company recorded an extraordinary gain of approximately $1.5 million, net of tax, during the first quarter 2000. No such item was recorded during fiscal 2001. Net Income. Net income for the second quarter ended June 30, 2001, was $1.0 million, or $0.03 per diluted share, an increase of $400,000, or $0.01 per diluted share, compared to net income of $600,000, or $0.02 per diluted share, for the same period in 2000. Net income for the six months ended June 30, 2001, was $1.4 million, or $0.05 per diluted share, a decrease of $1.8 million, or $0.06 per diluted share, over net income before extraordinary item of $3.2 million, or $0.11 per diluted share, for the same period last year. Liquidity and Capital Resources As of June 30, 2001, the Company had $37.3 million in cash and cash equivalents and working capital of $67.1 million. 13 Cash used in operating activities in fiscal period 2001 was $1.6 million compared to cash provided by operating activities of $1.2 million in fiscal period 2000. In fiscal period 2001, cash used in operating activities consisted primarily of net income of $1.4 million during the period, offset by increased accounts receivable, and inventory, as well as decreased accounts payable and accrued liabilities due to timing of certain vendor payments. Additionally, client deposits and unearned revenues increased during fiscal period 2001 as the Company received cash from clients in advance of delivered products and/or services. In fiscal period 2000, cash provided by operating activities consisted primarily of net income of $4.7 million during the period, offset by increased accounts receivable, inventory and other assets, as well as decreased accounts payable and accrued liabilities due to timing of certain vendor payments. Additionally, client deposits and unearned revenues decreased during the fiscal period 2000 as the Company delivered products and/or services previously paid for by clients. Cash used in investing activities during fiscal period 2001 and 2000 was $9.3 million and $15.7 million, respectively. The uses of cash in investing activities during fiscal period 2001 consisted primarily of the of the acquisition of Breeze Software Pty Ltd for $1.7 million, as more fully described in Note 4 of the condensed consolidated financial statements, as well as purchases of property and equipment of $3.5 million and capitalized software costs of $4.1 million. The uses of cash in investing activities for fiscal period 2000 consisted primarily of the acquisition of TimeCorp, Inc. for $6.0 million, as more fully described in Note 4 of the condensed consolidated financial statements, and purchases of property and equipment for $7.4 million and capitalized software costs of $2.2 million. Cash of $1.3 million was used in financing activities during fiscal period 2001 due primarily to the Company's purchase of common stock pursuant to its stock repurchase program for approximately $2.2 million, offset by cash received from the exercise of employee stock options as well as cash received from stock issued under the Company's employee stock purchase plan. Cash of $12.3 million was provided by financing activities during fiscal period 2000 due primarily to cash received from AOL's purchase of $10.0 million of the Company's stock at a price of $10 per share, as more fully described in Note 5 of the condensed consolidated financial statements and from the exercise of employee stock options of $1.8 million. In May 2000, the Board of Directors of the Company authorized a stock repurchase program pursuant to which the Company is authorized to repurchase up to 1.0 million shares of common stock of the Company over the next twelve months. During 2000, the Company repurchased and subsequently retired approximately 90,000 shares at prices ranging from $18.25 to $19.94 per share, for total consideration of approximately $1.8 million. During the six months ended June 30, 2001, the Company repurchased and subsequently retired approximately 135,000 shares at prices ranging from $11.25 to $18.67 per share, for total consideration of approximately $2.2 million. As of July 31, 2001, the Company had repurchased in the open market an aggregate of approximately 225,000 shares of its common stock for a total of $3.9 million, under this repurchase plan. On June 30, 2001 the Company and Tricon Global Restaurants, Inc. ("Tricon") signed a contract evidencing a multi-year arrangement to implement WAVE exclusively in Tricon's company-owned restaurants around the world. Tricon's franchisees will also be able to subscribe to WAVE under the same terms as the company-owned restaurants. As part of this agreement, the Company agreed to purchase from Tricon its source code and object code for certain back office software previously developed by Tricon for $16.4 million payable in specified annual installments through December 31, 2003. Costs associated with the purchase of this asset, as well as cash received by the Company, will be deferred and recognized over the five-year subscription term of the arrangement beginning upon installation of the WAVE software at each site. 14 Forward-Looking Statements Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. These statements appear in a number of places in this Annual Report and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the Company's financing plans; (ii) trends affecting the Company's financial condition or results of operations; (iii) the Company's growth strategy and operating strategy (including the development of its products and services); and (iv) the declaration and payment of dividends. The words "may," "would," "could," "will," "expect," "estimate," "anticipate," "believe," "intend," "plans," and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the Company's ability to control. Actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Among the key risks, assumptions and factors that may affect operating results, performance and financial condition are the Company's reliance on a small number of customers for a larger portion of its revenues, fluctuations in its quarterly results, ability to continue and manage its growth, liquidity and other capital resources issues, competition and the other factors discussed in detail in the Company's Form 10-K (as amended) filed with the Securities and Exchange Commission, including the "Risk Factors" therein. Item 3. Quantitative and Qualitative Disclosures About Market Risks - -------------------------------------------------------------------- The Company's financial instruments that are subject to market risks are its cash and cash equivalents. During the second quarter 2001 and fiscal period 2001, the weighted average interest rate on its cash balances was approximately 4.51% and 5.22%, respectively. A 10.0% decrease in this rate would have impacted interest income by approximately $57,000 and $104,000, respectively, during second quarter 2001 and fiscal period 2001. 15 Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- The Company held its 2001 Annual Meeting of Shareholders on June 22, 2001. Of the 27,287,771 shares of common stock outstanding and entitled to vote at the meeting, 26,287,771 shares were represented at the meeting in person or by proxy. The following matters were voted upon: 1. The election to the Board of Directors of the Company of two persons named as nominees for director in the Proxy Statement of the Company, to serve as Class I directors of the Company for a term expiring at the 2004 annual meeting of shareholders of the Company. The voting results were as follows:
Nominee For Withheld/Against ------- --- ---------------- James S. Balloun 25,744,647 543,124 John H. Heyman 21,998,377 4,289,394
The terms of office of the following directors continued after the meeting: Evan O. Grossman, Erez Goren and Alon Goren. 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits. The following exhibit is filed with this Report: 27.1 Asset Purchase and License Agreement dated June 30, 2001 by and between Radiant Systems, Inc. and Tricon Restaurant Services Group. ** ** Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with this rule, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 2001. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RADIANT SYSTEMS, INC Dated: August 13, 2001 By: /s/ John H. Heyman -------------------- ----------------------------------------- John H. Heyman, Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial officer) 17 EXHIBIT INDEX Exhibit Number Description of Exhibit - -------------- ---------------------- 10.1 Asset Purchase and License Agreement dated June 30, 2001 by and between Radiant Systems, Inc. and Tricon Restaurant Services Group. ** ** Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with this rule, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. 18 EX-10.1 3 dex101.txt ASSET PURCHASE AND LICENSE AGREEMENT EXHIBIT 10.1 ASSET PURCHASE AND LICENSE AGREEMENT ------------------------------------ This Asset Purchase and License Agreement (this "Agreement") is made and entered into as of this 30th day of June, 2001 (the "Effective Date"), by and between Tricon Restaurant Services Group, Inc. ("Tricon"), and Radiant Systems, Inc. ("Radiant"). R E C I T A L S : WHEREAS, Tricon has developed the TriYumf Asset and TriYumf Documentation; WHEREAS, Tricon has agreed to transfer to Radiant all of Tricon's right, title, and interest in the TriYumf Asset; WHEREAS, Tricon has agreed to license to Radiant the TriYumf Documentation; and WHEREAS, the parties have concurrently entered into the Alliance and Software Subscription Agreement ("Alliance Agreement") of even date herewith. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows: 1. Definitions. The following terms, when used herein with initial capital ----------- letters, shall have the meanings ascribed in this Section 1. --------- 1.1 "Confidential Information" has the meaning ascribed to it in Article 2 --------- of the Alliance Agreement. 1.2 "Integrated TriYumf Documentation" has the meaning ascribed to it in Section 4.1 of this Agreement. - ----------- 1.3 "Intellectual Property Rights" has the meaning ascribed to it in Article 2 of the Alliance Agreement. - --------- 1.4 "Person" has the meaning ascribed to it in Article 2 of the Alliance --------- Agreement. 1.5 "Purchase Price" means the aggregate purchase price for the TriYumf Asset, as further described in Section 5.1 of this Agreement. ----------- 1.6 "Residuals" has the meaning ascribed to it in Section 4.4 of this ----------- Agreement. 1.7 "SCA Utilities" means those utilities owned by SCA and licensed by Tricon that are delivered and disclosed by Tricon in conjunction with sale of the TriYumf Asset because such utilities are used with the TriYumf Asset. The SCA Utilities are expressly excluded from the definition of the TriYumf Asset. 1.8 "Software" has the meaning ascribed to it in Article 2 of the Alliance --------- Agreement. 1.9 "TriYumf Asset" means the source code and object code for certain back of house software developed by Tricon as more specifically described in Appendix 1 hereto and all right, title and interest, including without - ---------- limitation, all Intellectual Property Rights, associated with the source and object code, but specifically excluding: i) the SCA Utilities and any Intellectual Property Rights therein and ii) any Raw Business Process Information and any Intellectual Property Rights therein. 1.10 "TriYumf Documentation" means all documentation, manuals, specifications, drawings, schematics and flow charts related to the TriYumf Asset that describe the operation, features and functionality of the TriYumf Asset. 1.11 All other capitalized terms used in this Agreement but not defined herein shall have the meaning set forth in the Alliance Agreement. 2. Purchase of TriYumf Asset from Tricon; No Assumed Liabilities. Tricon ------------------------------------------------------------- agrees to transfer, convey, assign and deliver to Radiant, and Radiant agrees to purchase from Tricon, the TriYumf Asset. Except for the obligations of Radiant expressly set forth in this Agreement, Radiant shall not assume by virtue of this Agreement or the transactions described herein, and shall have no liability for, any liabilities or obligations of Tricon, whether absolute, accrued, contingent, fixed or otherwise, of any kind, character or description whatsoever (including without limitation those related to the TriYumf Asset). 3. Radiant's Obligations with Respect to the SCA Utilities. Radiant ------------------------------------------------------- acknowledges and agrees that the SCA Utilities have been disclosed and delivered to it solely because the SCA Utilities are used with the TriYumf Asset. Radiant acknowledges and agrees that: i) Radiant has no rights to use the SCA Utilities for any purpose; and ii) the SCA Utilities are the protected Confidential Information of SCA and that Radiant may not disclose the SCA Utilities to any third party. SCA shall have the right to enforce this obligation as a third party beneficiary. 4. Ownership and License of TriYumf Documentation. ----------------------------------------------- 4.1 TriYumf Documentation shall be owned exclusively by Tricon, and shall be treated as, and is hereby deemed to be, Confidential Information of Tricon. Tricon acknowledges that Radiant will use the TriYumf Documentation to aid in the development of the Software and Documentation, and that Radiant intends to license the 2 Software and Documentation to third parties. Tricon hereby grants to Radiant a limited, non-exclusive, non-assignable (except as permitted by Section 11.3), ------------ non-transferable (except as permitted by Section 11.3) fully paid license to use ------------ modify, know, receive, translate, adapt, create derivative works of and reproduce the TriYumf Documentation solely for Radiant's internal use in developing the Software and Documentation; provided that Radiant removes ("scrubs") all reference to the source of the TriYumf Documentation, including without limitation all references to Tricon, Tricon Affiliates, Franchisees, and JV/Equity Entities. Upon Radiant's removal of such source information, and integration of such "scrubbed" TriYumf Documentation into the Software and/or Documentation created by Radiant in accordance with the Alliance Agreement, such integrated TriYumf Documentation shall be deemed "Integrated TriYumf Documentation". 4.2 Tricon hereby grants to Radiant a perpetual, irrevocable, limited, non-exclusive, non-assignable (except as permitted by Section 11.3), non- ------------ transferable (except as permitted by Section 11.3) fully paid license to use, ------------ distribute, disseminate, produce, reproduce, market, sell, transfer, translate, create derivative works of, modify and adapt the Integrated TriYumf Documentation solely as an integrated part of the Software and/or Documentation. Radiant may not disclose all or any portion of the Integrated TriYumf Documentation to any third party except to the extent that such Integrated TriYumf Documentation is integrated into the Software and/or Documentation. Tricon reserves all rights in the Integrated TriYumf Documentation not expressly granted herein. 4.3 Radiant may not disclose all or any portion of the TriYumf Documentation to any third party, except as expressly permitted herein or under Article 15 of the Alliance Agreement (Confidential Information). All right, - ---------- title and interest including, without limitation, all Intellectual Property Rights, in and to the TriYumf Documentation is reserved by Tricon, and Tricon reserves all rights not expressly granted herein. Radiant agrees to take all reasonable steps to ensure that the TriYumf Documentation is not disclosed to any Person other than its employees, contractors or agents who have a need for access in order to use them; and not to remove the copyright, trade secret or other proprietary protection legends or notices which appear on or in the TriYumf Documentation, if any. If Radiant receives knowledge of any unauthorized use of the TriYumf Documentation, Radiant agrees that it shall promptly notify Tricon of, and shall otherwise cooperate with Tricon in trying to prevent, such unauthorized use or copying of the TriYumf Documentation. Except as expressly set forth in this Agreement, no express or implied license or right of any kind is granted to Radiant regarding the TriYumf Documentation, including, but not limited to, any right to know, use, produce, receive, reproduce, market, sell, distribute, transfer, translate, modify or adapt the TriYumf Documentation, or create derivative works based upon the TriYumf Documentation, or any portions thereof. Radiant's employees, contractors and agents are permitted to use the TriYumf Documentation in accordance with this Agreement; provided, that such employees, contractors and agents are bound to confidentiality terms with Radiant that are no less protective than those in Article 15 of the Alliance Agreement (Confidential Information). - ---------- 3 4.4 Subject to each party's confidentiality obligations under Article 15 ---------- of the Alliance Agreement but notwithstanding any other provision of this Agreement to the contrary, Radiant may use Residuals for any purpose including without limitation use in development, manufacture, promotion, sale and maintenance of its products and services; provided that this right to Residuals does not represent a license under any valid patent, copyright or other intellectual property right of Tricon. The term "Residuals" means any information, ideas, concepts, know-how, inventions or techniques that are retained in the unaided memories of Radiant's employees, representatives and contractors who have had access to Tricon's information, ideas, concepts, know- how, inventions or techniques pursuant to the terms of this Agreement. An employee's, representative's or contractor's memory is unaided if such employee, representative or contractor has not intentionally memorized the information, ideas, concepts, know-how, inventions or techniques for the purpose of retaining and subsequently using or disclosing the information, ideas, concepts, know-how, inventions or techniques. Radiant shall not have any obligation to restrict or limit the assignment of its employees, representatives or contractors or pay any royalties to the other party for any work resulting from the use of Residuals. 5. Consideration For the TriYumf Asset. ----------------------------------- 5.1 Upon the terms and subject to the conditions contained in this Agreement, in consideration for the TriYumf Asset and in full payment therefor, Radiant will pay, or cause to be paid to Tricon, the Purchase Price set forth below. The Purchase Price for the TriYumf Asset shall be the sum of (i) ***Dollars ($***) in cash paid according to the Cash Component Payment Schedule attached as Appendix 2 ("Cash Component") and (ii) *** Dollars ($***) payable ---------- upon Tricon's Acceptance and Rollout of the Software and fulfillment of its Total TCSC, as more fully described in Section 5.2 ("Performance Component"). ----------- The parties acknowledge and agree that the Cash Component Payment Schedule has been structured to yield a net present value ("Net Present Value") of *** Dollars ($***) to Tricon in respect of the Cash Component of the Purchase Price (based on an agreed upon discount rate of *** percent (***%)). Notwithstanding anything contained in this Agreement or on Appendix 2 to the contrary, in the ---------- event that Radiant pre-pays all or any portion of the Cash Component of the Purchase Price, the pre-paid payments (and/or any remaining payments) will be adjusted downward so that the Net Present Value (based upon a *** percent (***%) discount rate) in respect of the Cash Component of the Purchase Price is unchanged. The parties shall cooperate in good faith in connection with any such adjustment to the Cash Component Payment Schedule. 5.2 Radiant agrees to pay Tricon the Performance Component based upon Tricon's Acceptance and Rollout of the Software. Radiant's payment of the Performance Component will be made on a pro rata basis equal to the percentage of the Total TCSC that are committed to pay for the Software pursuant to the Alliance Agreement. Tricon acknowledges and agrees that the payment of the Performance Component, or any portion thereof, is conditioned on Tricon supporting Radiant's marketing and sales - ----------- *** Denotes information that has been omitted from this Exhibit pursuant to a confidential treatment request filed with the Commission. 4 efforts for its Software. This support includes, but is not limited to, Tricon and Tricon Affiliates appearing in Radiant's marketing material, annual reports and advertisements, providing verbal and written references for the Software, and use reasonable efforts to distribute reasonable promotional materials on Radiant's behalf to Eligible Recipients. Additionally, subject to parts (i)- (iii) below, Tricon shall permit Radiant to reference Tricon in one or more press releases highlighting major milestones associated with Tricon's use of the Software. Tricon recognizes that these activities are important for Radiant to achieve the anticipated value associated with the purchase of the TriYumf Asset. Radiant will (i) give Tricon appropriate lead time for these activities, (ii) not create an unreasonable burden upon Tricon, Tricon Affiliates or its or their employees, and (iii) not use any name, logo, service mark, trademark or logotype of Tricon or Tricon Affiliates in any marketing or promotional materials, or in connection with any publicity, without the prior written consent of Tricon. The parties' compliance with the aforementioned obligations, and the parties' dealings with each other in connection therewith, will be assessed by Tricon and Radiant at each quarterly executive meeting between the parties. 5.3 As security for Radiant's obligation to pay the Cash Component of the Purchase Price, Radiant agrees to cause an irrevocable one-year standby letter of credit to be issued in favor of Tricon as beneficiary, in the face amount and on the issuance date set forth on Appendix 2, to be reduced pursuant to the ---------- reduction schedule set forth in Appendix 2 ( "Letter of Credit") and in the form ---------- set forth in Appendix 3 of this Agreement. The Letter of Credit will be issued ---------- by a bank rated single "A" or better. The Letter of Credit will contain draw instructions mutually satisfactory to the parties, which will include the following conditions to Tricon's right to draw on the Letter of Credit: (a) Radiant's failure to pay the Cash Component of the Purchase Price in accordance with the Cash Component Payment Schedule; (b) Tricon's compliance with the notice and cure provisions set forth in this Section 5.3; and (c) such other ----------- conditions as shall be mutually agreed upon by the parties. Tricon agrees that it will not under any circumstances draw or attempt to draw on the Letter of Credit prior to giving Radiant thirty (30) days written notice and an opportunity to cure any failure to pay any portion of the Cash Component of the Purchase Price in accordance with the Cash Component Payment Schedule. 5.4 Notwithstanding anything contained herein or on Appendix 2 to the ---------- contrary, in the event of the termination of the Alliance Agreement for any reason (a "Termination Event"), Radiant's aggregate liability for the unpaid balance of the Purchase Price at the time of termination shall not under any circumstances exceed the face amount of the Letter of Credit. Accordingly, upon the occurrence of a Termination Event, Tricon agrees to forever release and discharge Radiant from any further obligation to pay any further portion of the Purchase Price in excess of the face amount of the then-outstanding Letter of Credit. 6. Tricon's Taxes. Tricon will bear and pay all transaction taxes including -------------- but not limited to sales, use, value added, excise, ad valorem, stamp, transfer, and other similar taxes incurred in connection with the transfer of the TriYumf Asset and shall indemnify and hold Radiant harmless against all such taxes. 5 7. Representations and Warranties. ------------------------------ 7.1 Tricon represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Radiant represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. 7.2 Each party represents and warrants that: i) it has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby; ii) it has taken all necessary corporate action with respect to the execution, delivery and performance of this Agreement; iii) no other corporate proceedings on the part of it are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement constitutes a valid and binding obligation of Tricon, enforceable in accordance with its terms except as enforceability may be limited by bankruptcy and other similar laws and principles of equity. 7.3 Each party represents and warrants that neither the execution and delivery of this Agreement by that party, nor compliance with the terms and provisions hereof, including without limitation, the consummation of the transactions contemplated hereby will conflict with or result in the breach of any term, condition, or provision of that party's Articles or Certificate of Incorporation or Bylaws, as presently in effect. 7.4 Tricon represents and warrants that the TriYumf Asset is, or will be as of the Effective Date, free and clear of all mortgages, liens and security interests held by any entity that provides financing to Tricon. 7.5 EXCEPT AS EXPRESSLY PROVIDED HEREIN, TRICON SHALL DELIVER THE TRIYUMF ASSET AND TRIYUMF DOCUMENTATION TO RADIANT "AS IS". EXCEPT AS EXPRESSLY ----- PROVIDED HEREIN, TRICON MAKES NO WARRANTIES WITH RESPECT TO THE TRIYUMF ASSET OR TRIYUMF DOCUMENTATION, AND TRICON HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 8. Disclaimers. ----------- 8.1 Radiant Customer Claims. Tricon and Tricon Affiliates shall not have ----------------------- any liability whatsoever with respect to any claims, demands, losses, liabilities, damages, costs or expenses incurred or alleged by any of Radiant's any customers or licensees (other than (i) Tricon or Tricon Affiliates, and (ii) Franchisees and JV/Equity Entities (but only with respect to Tricon's agreements with such Franchisees or JV/Equity Entities)) directly or indirectly arising from, related to or in connection with any of Radiant's products, software or services, provided same are not altered, modified, changed or otherwise tampered with by Tricon Affiliates and neither Tricon nor Tricon 6 Affiliates are presently, or have in the past, supported or serviced such customers or licensees in relation to Radiant's products, software or services. 8.2 NO SPECIAL DAMAGES. SUBJECT TO SECTION 8.3 BELOW, IN NO EVENT ------------------ ----------- SHALL EITHER PARTY OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, SHAREHOLDERS, AGENTS OR REPRESENTATIVES BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OR LOSS OF GOODWILL IN ANY WAY RELATED TO THIS AGREEMENT OR RESULTING FROM THE USE OF OR INABILITY TO USE THE TRIYUMF ASSET OR TRIYUMF DOCUMENTATION PROVIDED BY TRICON OR THE PERFORMANCE OR NON-PERFORMANCE OF ANY SERVICES OR OBLIGATIONS TO BE PROVIDED OR PERFORMED BY A PARTY HEREUNDER, INCLUDING THE FAILURE OF ESSENTIAL PURPOSE, EVEN IF SUCH PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES OCCURRING, AND WHETHER SUCH LIABILITY IS BASED ON CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY OR OTHERWISE. 8.3 EXCLUSIONS. THE LIMITATIONS OF LIABILITY IN SECTION 8.2 ABOVE ---------- ----------- SHALL NOT APPLY TO CLAIMS ARISING FROM BREACH OF A PARTY'S CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT, TO CLAIMS ARISING FROM RADIANT'S BREACH OF ITS LICENSE TO THE TRIYUMF DOCUMENTATION OR RADIANT'S UNAUTHORIZED USE OF THE TRIYUMF DOCUMENTATION, OR A PARTY'S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT. 9. Indemnification. ---------------- 9.1 Tricon's Indemnity Obligation. Tricon will defend, indemnify ----------------------------- and hold Radiant, its Affiliates and their respective directors, officers, shareholders, employees and agents (collectively, the "Radiant Parties") harmless from and against any demand, claim, action, cost, penalty, damage, liability, loss or expense (including reasonable attorneys fees) which any Radiant Party may suffer, sustain or become subject to as a result of or relating to: (a) the infringement or alleged infringement by the TriYumf Asset or TriYumf Documentation as delivered by Tricon to Radiant of the patent, copyright, trade secret or other intellectual property rights of any third party; (b) the breach by Tricon of any representation, warranty, covenant or agreement contained in this Agreement; or (c) third party claims asserting that Tricon did not have sufficient rights in the TriYumf Asset or TriYumf Documentation to permit Tricon to transfer or license, respectively, the TriYumf Asset or TriYumf Documentation to Radiant in order to consummate the transaction that is the subject matter of this Agreement. In addition to the indemnification obligations above, should Tricon believe that the TriYumf Asset may become subject to a claim of infringement, Tricon shall, at its option, and without material disruption to Radiant, either: (i) procure for Radiant the right to continue to use the TriYumf Asset; (ii) replace the TriYumf Asset with a system, software or deliverable having substantially the same features and functionality as the item being replaced; (iii) 7 modify the TriYumf Asset to make it non-infringing, provided that such modified TriYumf Asset has substantially the same features and functionality as the TriYumf Asset; or (iv) if after a good faith effort, Tricon is unable to obtain (i)-(iii), require Radiant to cease using and return all copies of the TriYumf Asset to Tricon in return for a full refund of the Cash Component of the Purchase Price and forever release and discharge Radiant from the Letter of Credit. The defense indemnity and hold harmless obligations in this Section 9 --------- shall not apply to the extent that any claim is based upon (i) the modification of the TriYumf Asset or the TriYumf Documentation by Radiant or any third party; (ii) Radiant's combination of the TriYumf Asset or the TriYumf Documentation with other software, hardware or materials; or (iii) use of the TriYumf Asset by Radiant other than in accordance with the TriYumf Documentation. Except for claims based on fraud, this section states Tricon's entire obligation, and is Radiant's sole and exclusive remedy, regarding intellectual property right infringement with respect to the TriYumf Asset and TriYumf Documentation. 9.2 Radiant's Indemnity Obligation. Radiant will defend, indemnify ------------------------------ and hold Tricon, its Affiliates and their respective directors, officers, shareholders, employees and agents (collectively, the "Tricon Parties") harmless from and against any demand, claim, action, cost, penalty, damage, liability, loss or expense (including reasonable attorneys fees) which any Tricon Party may suffer, sustain or become subject to as a result of or relating to the breach by Radiant of any representation, warranty, covenant or agreement contained in this Agreement. 9.3 Survival. The indemnification obligations contained herein shall -------- survive the Effective Date and shall terminate on the third anniversary of the Effective Date (the "Indemnification Period"); provided, that, if a party with an indemnification right under this Section 9 has notified a party with an --------- indemnification obligation under this Section 9 of an indemnification claim --------- prior to the expiration of the Indemnification Period and such claim has not been finally resolved as of such date, the Indemnification Period shall survive with respect to such claim until it has been finally resolved. 10. Closing Procedure. ----------------- 10.1 Deliveries By Tricon. On the Effective Date, Tricon shall -------------------- deliver to Radiant the following: (a) A Bill of Sale for the TriYumf Asset in form and substance mutually satisfactory to the parties; (b) An electronic copy of the TriYumf Documentation; (c) An electronic copy of the TriYumf Asset. 10.2 Deliveries By Radiant. On the Effective Date, Radiant shall --------------------- deliver to Tricon the portion of the Purchase Price required pursuant to Section ------- 5.1, by wire transfer of immediately available funds to an account designated by - --- Tricon. 8 10.3 Further Assurances. At or after the Effective Date, each party ------------------ shall prepare, execute, and deliver such further instruments of conveyance, sale, assignment, or transfer, and shall take or cause to be taken such other or further action, as any may be required at any time or from time to time in order to perfect, confirm, or to consummate, in any other manner, the terms and provisions of this Agreement. 11. General Provisions. ------------------ 11.1 Notices. Any notice or other communication given pursuant to this ------- Agreement shall be in writing and shall be effective either when (a) delivered personally or by express courier service to the party for whom intended; (b) five (5) days following deposit of the same into the United States mail (certified mail, return receipt requested, or first class postage prepaid) or; (c) when transmitted if sent by facsimile, provided a confirmation of transmission is produced by the sending machine and a copy of such facsimile is promptly sent by means specified in this Section 11.1. All notices shall be sent to the other party at its address as set forth below or at such other address as such party may designate by notice to the other given in accordance herewith. In the case of Tricon: With a copy to: Tricon Restaurant Services Group Mayer, Brown & Platt 1900 Colonel Sanders Lane 190 S. LaSalle Street Louisville, Kentucky 40232-4550 Chicago, Illinois 60603-3441 Attn: John Kleban Attn: Rebecca S. Eisner, Esq. Fax: (502) 874-8099 Fax: (312) 706-8131 In the case of Radiant: With a copy to: Radiant Systems, Inc. Smith, Gambrell & Russell, LLP 3925 Brookside Parkway 1230 Peachtree Street, N.E. Alpharetta, Georgia 30022 Suite 3100, Promenade II Attn: Mark Haidet and Atlanta, Georgia 30309 David Schulman, Esq. Attn: Richard G. Greenstein, Esq. Fax: (770) 360-7627 Fax: (404) 685-6923 11.2 Governing Law. This Agreement and the relationship between the ------------- parties hereto including all disputes arising hereunder, shall be governed by, and interpreted in accordance with, the internal laws (and not the law of conflicts) of the State of New York. 11.3 Assignment. Except as specifically permitted in this Agreement, ---------- neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. However, either party may assign this Agreement, in whole or in part, to any Affiliate of such party, provided, that (i) the assigning party provides prior written notice of the assignment to the other party, (ii) the assignee expressly assumes the obligations under this Agreement, 9 and (iii) the assigning party shall remain fully liable for, and shall not be relieved from, the performance of all obligations under this Agreement. In addition, either party shall be permitted to assign this Agreement, and all rights and obligations contained herein, in whole or in part, without the prior approval of other party in the following situations: (x) such party's, or any successor entity's, merger into any Person, or (y) such party's sale of all or substantially all of its assets to another Person; provided, that in the case of Radiant, such Person may not be a competitor of Tricon. The acquiring or surviving Person shall agree in writing to be bound by the terms and conditions of this Agreement. Any purported assignment in violation of this Section 11.3, ------------ shall be null and void. This Agreement shall be binding upon the parties' respective successors and permitted assigns. 11.4 No Strict Construction, Headings. The language used in this -------------------------------- Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent and no rule of strict construction against either party shall apply to any term or condition of this Agreement. The headings of the sections of this Agreement are for convenience only, and are not intended to affect the construction or meaning of the Agreement. 11.5 Entire Agreement, Counterparts. This Agreement and the Appendices ------------------------------ hereto set forth the entire understanding between the parties hereto and supersedes all prior agreements, arrangements, and communications, whether oral or written with respect to the subject matter hereof. No other agreements, representations, warranties or other matters, whether oral or written, shall be deemed to bind the parties hereto with respect to the subject matter hereof. This Agreement and the Appendices shall only be amended in a writing signed by authorized representatives of both parties. Tricon acknowledges that it is entering into this Agreement solely on the basis of the agreements and representations contained herein, and for its own purposes and not for the benefit of any third party. This Agreement may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 11.6 Severability. If any term or provision of this Agreement shall be ------------ found by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable, the same shall not affect the other terms or provisions hereof or the whole of this Agreement, but such term or provision shall be deemed modified to the extent necessary in the court's opinion to render such term or provision enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the original intentions and agreements and economic positions of the parties herein set forth. 12. Arbitration. Any dispute between the parties arising out of or ----------- relating to this Agreement that is not resolved through negotiation and not subject to the litigation exception in Section 13, shall be settled exclusively ---------- by final and binding arbitration in accordance with the following: 10 (a) Except as specified below or otherwise agreed in writing, the arbitration shall be conducted with the then-current Commercial Arbitration Rules of the American Arbitration Association or any successor association including, without limitation, the Optional Rules for Emergency Measures of Protection (such organization, the "AAA" and such rules, the "AAA Rules"); (b) The arbitration shall be conducted in English by a panel of three (3) arbitrators. Unless otherwise agreed in writing to have the dispute resolved by a single arbitrator, Tricon and Radiant shall each select one arbitrator (who is knowledgeable and familiar and has at least ten years of experience with the information technology industry and contract law), who shall then jointly select a third. All arbitrators shall be neutral, impartial and independent. No potential arbitrator may serve on the panel unless he or she has agreed in writing to abide and be bound by the procedures outlined in this Section 12 (the "Procedures"); ---------- (c) Any issue concerning the extent to which any dispute is subject to arbitration, or concerning the applicability, interpretation, or enforceability of the Procedures, including any contention that all or part of the Procedures are invalid or unenforceable, shall be governed by the Federal Arbitration Act and resolved by the arbitrator(s); (d) Any demand for arbitration or any counterclaim shall specify in reasonable detail the facts and legal grounds forming the basis for the claimant's request for relief, and shall include a statement of the total amount of damages claimed, if any, and any other remedy sought by the claimant; (e) upon the request of either party, and in the arbitrator(s) discretion, the parties shall be entitled to limited pre-hearing discovery including depositions of testifying witnesses, exchanges of documents and lists of testifying witnesses, and written interrogatories. The arbitrator(s) shall conduct a hearing within thirty (30) days (or such longer time period as the parties may mutually agree) after the end of discovery and shall issue an award, supported by written opinion, within thirty (30) days after the end of the hearing (or such longer time period as the parties may mutually agree); (f) Any award made shall be accompanied by findings of fact and a statement of reasons for the decision. The arbitrator(s) shall not be authorized to award damages or relief of a type not consistent with the terms of this Agreement or in amounts that exceed the limitation of liability in Section 12.2 of the Alliance Agreement. In no event, even if ------------ any other portion of these provisions is held to be invalid or unenforceable, shall the arbitrators have power to make an award or impose a remedy that could not be made or imposed by a court deciding the matter in the same jurisdiction. Subject to the preceding sentence, the arbitrator(s) shall have the power to award relief based on their application of the parties' rights and remedies set forth in this Agreement, including, without limitation, requiring a party to comply with the terms of this Agreement and including all remedies available at law as limited by this Agreement; provided, 11 however, such damage award or other relief is not inconsistent with the terms of this Agreement and provided further, that the arbitrator(s) shall not have the power to award equitable relief of any sort (except to require compliance with the terms of this Agreement); (g) All parties will use their best efforts to conclude the arbitration within thirty (30) days from the commencement of arbitration. In the event that any party fails to appear at any properly noticed arbitration proceeding, an award may be entered against such party by default or otherwise, notwithstanding that failure to appear; (h) Each party shall bear the cost of securing its selected arbitrator (or shall share the cost of a single arbitrator equally), with the costs of the third arbitrator and the proceeding itself shared equally between the parties; (i) All aspects of the arbitration shall be treated as confidential. Neither the parties nor the arbitrator(s) may disclose the existence, content or results of the arbitration, except as necessary to comply with legal or regulatory requirements. Before making any such disclosure, a party shall give written notice to all other parties and shall afford such parties a reasonable opportunity to protect their interests; (j) The result of the arbitration will be binding on the parties, and judgment on the arbitrator(s)' award may be entered in any court of competent jurisdiction; (k) The arbitrator(s) will charge the reasonable attorneys' fees, and costs, of the substantially prevailing party to the other party, but in an amount not to exceed one-half the value of the judgment; and (l) Each party is required to continue to perform its obligations (including payment of the Purchase Price by Radiant, and provision of the TriYumf Asset by Tricon) under this Agreement pending final resolution of any dispute arising out of or connected to this Agreement. 13. Injunctive Relief. Notwithstanding Section 12, any party may seek ----------------- ---------- temporary injunctive relief against the other party in any court of competent jurisdiction with respect to any and all temporary or preliminary or injunctive or restraining procedures in connection with this Agreement. 14. Return of TriYumf Asset and TriYumf Documentation. In the event Tricon ------------------------------------------------- pays Radiant the Termination Fee pursuant to Section 18.9 of the Alliance ------------ Agreement, Radiant shall promptly thereafter return the TriYumf Asset and TriYumf Documentation and all copies thereof to Tricon. Tricon acknowledges and understands that the return of the TriYumf Asset does not alter, modify or otherwise affect Radiant's rights in and to the Integrated TriYumf Documentation or any and all Residuals relating to the TriYumf Asset retained by any employee, contractor or agent of Radiant. 12 IN WITNESS WHEREOF, the undersigned have executed this Assignment Agreement as of the date first set forth above. TRICON RESTAURANT SERVICES GROUP, INC. By: /s/ Neal A. Bronzo --------------------- Name: Neal A. Bronzo --------------------- Title: Vice President --------------------- Date: June 30, 2001 --------------------- RADIANT SYSTEMS, INC. By: /s/ Mark E. Haidet --------------------- Name: Mark E. Haidet --------------------- Title: Vice President --------------------- Date: June 30, 2001 --------------------- 13 APPENDIX 1 ---------- Description of the TriYumf Asset -------------------------------- To Be Supplied 14 APPENDIX 2 ---------- Cash Component Payment Schedule ------------------------------- Date of Payment: Amount of Payment: - --------------- ----------------- Effective Date $*** December 31, 2001 $*** December 31, 2002 $*** December 31, 2003 $*** Letter of Credit Schedule ------------------------- Date: Face Amounts: - ---- ------------ Effective Date $*** February 28, 2002 $*** February 28, 2003 $*** February 28, 2004 $0 - -------------- *** Denotes information that has been omitted from this Exhibit pursuant to a confidential treatment request filed with the Commission. 15 APPENDIX 3 ---------- Form Letter of Credit --------------------- 16 Bank of America Irrevocable Standby Letter of Credit No. 3038947 Issue Date: June 29, 2001 BENEFICIARY: APPLICANT: Tricon Restaurant Services Group, Inc. Radiant Systems, Inc. 1900 Colonel Sanders Lane 3925 Brookside Parkway Louisville, Kentucky 40232-4550 Alpharetta, Georgia 30022 PLACE AND DATE OF EXPIRY: Los Angeles, California February 28, 2004 AMOUNT: USD $*** (***) At the request and on the instructions of Radiant Systems, Inc., we hereby establish our irrevocable Standby Letter of Credit in favor of the beneficiary in the amount of $*** (*** USD), expiring on February 28, 2004. Funds under this Letter of Credit will be made available to you against receipt by us of a sight draft in the form attached hereto as Annex A accompanied by your drawing certificate in the form of Annex B, presented for payment on a Business Day (as hereinafter defined), with all blanks appropriately completed and signed by a person purporting to be an authorized officer. We engage with you that all draft(s) drawn under and in compliance with the terms and conditions of this letter of credit shall be duly honored on presentation to us at our office at 333 S. Beaudry Avenue, 19th Floor, Los Angeles, California 90017, Attn.: Standby Letter of Credit Department. As used herein, "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in the city in which the office designated by us as the location for presentation of a drawing is located are authorized or required to be closed. Partial and multiple drawings are permitted under this Letter of Credit. It is a condition to this Letter of Credit that the amount available for drawing shall be in accordance with the following schedule: - -------------- *** Denotes information that has been omitted from this Exhibit pursuant to a confidential treatment request filed with the Commission. Bank of America Reduction Date Available Amount February 28, 2002 $*** February 28, 2003 $*** This Letter of Credit sets forth in full the terms of our obligations to you, and our undertaking shall not in any way be amended or amplified by reference to any documents, instruments or any agreement referred to herein or to which this letter of credit relates, and such reference, if any, shall not in any way be deemed to incorporate herein by reference any document, instrument or agreement. This Letter of Credit shall be governed by the International Standby Practices (ISP98) International Chamber of Commerce, Publication 590. /s/ Narongson M. Boriboon /s/ Lawrence Banales - -------------------------- --------------------- Authorized Signature Authorized Signature Narongson M. Boriboon Lawrence Banales - -------------- *** Denotes information that has been omitted from this Exhibit pursuant to a confidential treatment request filed with the Commission. Bank of America ANNEX A to BANK OF AMERICA, N.A. LETTER OF CREDIT No. 3038947 SIGHT DRAFT [Date] At Sight Pay to the order of Tricon Restaurant Services Group, Inc. the sum of _____________________ and ____/100 Dollars ($__________) drawn on BANK OF AMERICA, N.A., as issuer of its Irrevocable Standby Letter of Credit No. __________ dated June 29, 2001. Tricon By: ---------------------------- Name: -------------------------- Title: ------------------------- Bank of America ANNEX B to BANK OF AMERICA, N.A. LETTER OF CREDIT No. 3038947 DRAWING CERTIFICATE Bank of America, N.A. 333 South Beaudry 19th Floor Los Angeles, CA 90017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. 3038947 Ladies and Gentlemen: The undersigned individual, a duly authorized officer of Tricon (the "Beneficiary"), hereby CERTIFIES on behalf of the Beneficiary as follows with respect to that certain Irrevocable Standby Letter of Credit No. 3038947 dated June 29, 2001 (the "Letter of Credit"), issued by Bank of America, N.A. (the "Bank"), in favor of the Beneficiary: 1. The Beneficiary is entitled to make this drawing in the aggregate amount of $__________ under the Letter of Credit pursuant to the Agreement dated _______________, by and between Radiant Systems, Inc. ("Radiant") and Tricon (the "Agreement"). 2. The amount of the drawing is equal to the amount that remains unpaid pursuant to the Agreement. 3. The undersigned certifies the following: a. Radiant has failed to pay the Cash Component Purchase Price in accordance with the Cash Component Schedule, as such terms are defined in the Agreement. b. Tricon has complied with the notice and cure provisions set forth in Section 5.2 of the Agreement, including providing Radiant with thirty (30) days written notice and an opportunity to cure Radiant's failure to pay the Cash Component of the Purchase Price in accordance with the Cash Component Payment Schedule. c. Tricon has not exercised its rights under sub-section 9.1(iv) of the Agreement and has not required Radiant to cease using and return all copies of the TriYumf Asset (as defined in the Agreement) to Tricon." Bank of America 4. The amount of the drawing being made by this Certificate when added to the amount of any other drawings made does not exceed the amount available under the Letter of Credit as presently in effect. IN WITNESS WHEREOF, this Certificate has been executed this ____ day of _______________, ____. Tricon By: ----------------------------- [Title of Authorized Officer] -----END PRIVACY-ENHANCED MESSAGE-----