<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-K
(Mark One)
( ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year (____ weeks) ended__________________________________________
or
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from APRIL 2, 1995 to DECEMBER 31, 1995.
Commission file number: 1-5513
TRIDEX CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0682273
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
61 WILTON ROAD, WESTPORT, CT 06880
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-226-1144
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, WITHOUT PAR VALUE NASDAQ
Securities registered pursuant to Section 12 (g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any other amendment
to this Form 10-K. [ ]
As of FEBRUARY 24, 1996 the aggregate market value of the registrant's issued
and outstanding voting stock held by non-affiliates of the registrant was
$23,300,000.
As of FEBRUARY 24, 1996 the registrant had outstanding 3,809,231 shares of
common stock, without par value.
Exhibit Index appears on page 33
1 of 85
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PART I
GENERAL
Tridex Corporation ("Tridex" or the "Company"), through its
wholly-owned subsidiaries Magnetec Corporation ("Magnetec"), Ithaca Peripherals
Incorporated ("Ithaca"), Ultimate Technology Corporation ("Ultimate") and Cash
Bases GB Limited ("Cash Bases"), is primarily engaged in the design,
development, manufacture and sale of specialty printers, terminal devices and
other peripheral products. The Company's market is the interface between the
consumer and the retailer or other service provider in a variety of transactions
- - at the retail point-of-sale ("POS"), an automated teller machine ("ATM"), a
kiosk, or a lottery terminal. The Company's products include custom-designed dot
matrix and thermal printer mechanisms used to print receipts, coupons, event and
lottery tickets, bank statements and product or service information; optical
mark-sense readers and document transport systems used for automated data entry
to lottery terminals, educational test scoring and vote tally systems; and POS
printers, POS customer displays, POS keyboards and terminal devices, and cash
drawers used in the retail industry.
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS SINCE APRIL 1, 1995
In December 1995, the Company reorganized its printer business by
combining Magnetec and Ithaca into a new Printer Group. The combination provides
a strong and highly focused engineering organization to rapidly develop new
products and an integrated marketing force. In connection with this
reorganization and with reductions in the level of employment in other areas of
the Company, a restructuring provision of $425,000 was recorded in December
1995.
In December 1995, the Company changed its fiscal year to end on
December 31. Previously, the Company's fiscal year ended on the Saturday closest
to March 31. This report includes the nine months ended December 31, 1995 as a
transitional fiscal year.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Tridex presently operates in one industry segment, the design,
manufacture and sale of specialty printers, terminal devices and other
peripheral products.
(C) NARRATIVE DESCRIPTION OF BUSINESS
(i) PRINCIPAL PRODUCTS AND SERVICES
Tridex designs, manufactures and sells specialty dot matrix impact
printers, thermal printers, printer mechanisms and optical mark-sense readers
for OEM applications, and dot matrix impact printers, customer displays,
keyboards, terminal devices and custom cash drawers for POS applications.
Tridex's printers and printer mechanisms are high performance,
full-featured peripherals that utilize the Company's electromechanical printing
components and subassemblies. Tridex designs and manufactures a wide variety of
printer products, including printers for automated applications such as
interactive kiosks and ATMs, printers for lottery and pari-mutuel terminals and
other gaming applications and standalone printers for POS and industrial
applications. In addition to designing its own printer products, Tridex also
provides mechanical design services to customers who integrate printers
into specialty applications. The Company's optical mark-sense readers
and document transport systems may be used in, or in connection with, products
that feature the Company's printer mechanisms and printheads. The Company's
cash drawers, constructed of metal, are high quality, custom products, for use
with POS terminals primarily in supermarkets, specialty stores and convenience
stores. Cash drawers are fabricated in the United Kingdom and are sold
primarily in Western Europe through a direct sales force.
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Tridex manufactures and markets POS customer displays, keyboards
and terminal devices for use in Twinax, Unix/Aix and PC-based POS applications.
Tridex's specialty printers, printer components, terminals and other peripheral
products are sold to systems integrators, original equipment manufacturers and
directly to end users by a direct sales force comprised of 20 people located in
Connecticut, New York, New Hampshire, Illinois, California, Georgia, the United
Kingdom, Germany, France and Spain.
Sales of printers, including POS printers, and printer components
accounted for 52% of the Company's net sales for the nine months ended December
31, 1995, and 58% and 71% of net sales for the fiscal years ended April 1, 1995
("fiscal 1995") and April 2, 1994 ("fiscal 1994"), respectively. Sales of POS
printers accounted for 32% of such net sales in the nine months ended December
31, 1995 and 36% and 45% of such net sales in those same periods. Sales of POS
customer displays, keyboards, terminals and related products accounted for 30%
of net sales in the nine months ended December 31, 1995 and 23% and 27% of such
net sales for the fiscal years ended April 1, 1995 and April 2, 1994,
respectively. Solenoid sales were less than 2% of total sales in fiscal 1994
with none in fiscal 1995 as the product line was sold on October 1, 1993. Sales
of custom cash drawers accounted for 18% of net sales in the nine months ended
December 31, 1995 and 19% of the net sales for the fiscal year ended April 1,
1995, the first fiscal year to include such sales. Cash Bases had consolidated
revenues of pounds sterling 6.4 million (approximately $9.6 million) for its
fiscal year ended April 30, 1994.
(ii) SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal materials used by Magnetec are copper wire, magnetic
metals, injection molded plastic parts, formed metal parts and electronic
subassemblies, all of which are readily available from a number of sources.
Ithaca is dependent upon a single source of supply for printer mechanisms for
its POS printers. The loss of this supply source would have a material adverse
effect on Tridex and its subsidiaries taken as a whole. Ithaca has a contract
with this source of supply to provide a sufficient quantity of printer
mechanisms until March, 1998. Ithaca enjoys good relations with this source of
supply and has received no indication that the supply agreement will not be
renewed beyond the expiration of the current contract. Ithaca cannot be
certain, however, that the supply agreement will be renewed, or if renewed,
that the renewal terms will be as favorable as those under the current
contract. The principal raw materials for cash drawers are sheet metal and
molded plastic parts which are available from several sources.
(iii) PATENTS
Tridex considers one of its patents to be material to the conduct
of its business. The Company has rights to a patent expiring in 2008 involving a
unique automated cut-off device which is an option offered in certain of its POS
printers. Tridex considers certain of its other patents, manufacturing processes
and designs to be proprietary in nature, and, therefore, valuable assets.
(iv) SEASONALITY AND PRACTICES RELATING TO WORKING CAPITAL ITEMS
Sales of the Company's products are not subject to material
seasonal variations. As a result, the Company has not historically been required
to maintain significant inventories of raw materials or finished goods in order
to fill customer orders.
(v) CERTAIN CUSTOMERS
During the nine months ended December 31, 1995, no one customer
accounted for more than 10% of consolidated net sales. Sales to Indiana Cash
Drawer Company, an unrelated distributor of POS products, accounted for 4.7% of
consolidated net sales during the nine months ended December 31, 1995, and 8.3%
and 10.5% of net sales in fiscal years 1995 and 1994, respectively.
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(vi) BACKLOG
The Company's backlog of firm orders was approximately $10,138,000
as of February 24, 1996 and $11,852,000 as of May 27, 1995 compared to a backlog
of approximately $7,800,000 as of May 28, 1994. Tridex expects to fill all of
its backlog within the current fiscal year.
(vii) COMPETITION
The markets for the Company's products are highly competitive.
Through its operating subsidiaries the Company competes with approximately 2
domestic and 5 foreign manufacturers for sales of printer mechanisms and
components, with approximately 3 domestic and 2 foreign manufacturers for sales
of optical mark-sense readers and POS printers, with approximately 3 domestic
manufacturers for sales of POS terminal devices, with approximately 3 domestic
and 4 foreign manufacturers for sales of POS customer displays, and with 4
manufacturers of high quality cash drawers. In the market for POS printers, the
Company competes with Epson America, Inc., which holds a dominant market
position.
All of the Company's products compete on the basis of price,
performance, quality and reliability. Some of the Company's lower production
volume products sold to the lottery, interactive kiosk, general gaming and
automatic teller machine industries compete based upon the Company's ability to
provide highly specialized and custom engineering and continuous technical
support. In the kiosk industry, Tridex has established itself as a major
independent supplier of printer mechanisms to a number of major interactive
kiosk manufacturers. With respect to its higher volume products, the Company
competes based on its product design, quality, and reliability, customer support
and in some cases based upon the uniqueness of its products. The Company also
competes on the basis of its design capabilities and quality control procedures.
In certain markets, the Company's competitors can sometimes offer
lower prices than the Company because of lower overhead, attributable to higher
volume production and off-shore manufacturing locations, which enjoy cheaper
sources of labor and raw materials. Many of the Company's domestic competitors,
particularly those that are divisions of substantially larger companies, have
greater financial and other resources than Tridex.
(viii) RESEARCH AND DEVELOPMENT ACTIVITIES
The Company spent approximately $2.3 in the nine months ended
December 31, 1995 and $2.4 and $2.0 million in the fiscal years 1995 and 1994,
respectively, on engineering, design and product development efforts in
connection with specialized engineering and design to introduce a number of new
products and to custom-tailor products for the Company's customers.
(ix) ENVIRONMENT
Somerville, Massachusetts - Allu Realty Trust ("Allu"), a
Massachusetts business trust, with transferable shares, all of which are owned
by Tridex, is the former owner of land improved with a manufacturing-warehouse
building located at 100 Foley Street, Somerville, Massachusetts (the "Site").
Although Allu has sold the property to 100 Foley Street Incorporated ("Foley"),
an unrelated entity, Allu and Tridex remain responsible for certain
environmental problems associated with the Site.
During July 1984, Allu and Tridex disclosed to the
Massachusetts Department of the Attorney General the existence of chromium, oil
and grease at the Site. As a result, the Environmental Protection Division of
the Department of the Attorney General and the Massachusetts Department of
Environmental Protection ("MDEP") conducted an investigation of the Site. At
MDEP's request, the Company retained an environmental engineering firm, which
completed a Phase II investigation study of the Site. The Company has conducted
further studies to more specifically characterize and assess the Site and to
determine appropriate long term clean-up. In January 1993, the Company entered
into an agreement with Foley pursuant to which Tridex and Foley agreed to pay
75% and 25%, respectively, of the costs incurred after January 1, 1992 in
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connection with the investigation and remediation of the Site (the "Site
Participation Agreement"). The Site Participation Agreement also provides that,
to the extent there are available proceeds from the sale of the Site or, if not
sold, from the operation of the Site after January 1, 1997, Tridex shall be
reimbursed for all or a portion of the $260,000 it expended in connection with
the Site prior to January 1, 1992. Under the terms of an Escrow Agreement
entered into by Tridex and Foley simultaneously with the Site Participation
Agreement (the "Escrow Agreement"), Tridex and Foley each placed $125,000 into
escrow to fund the payment of their obligations under the Site Participation
Agreement. Under the terms of the Escrow Agreement, Tridex must place an
additional $100,000 in escrow at the request of the Escrow Agent and thereafter
the amount of any additional funds required by the Escrow Agent to be placed in
escrow shall be contributed 75% by Tridex and 25% by Foley. Approximately $3,000
was being held in escrow as of December 31, 1995, all of which was contributed
by Foley.
As of December 31, 1995, the Company had spent approximately
$639,000 in connection with the Site. Of this amount, approximately $468,000
relates to investigation or remediation costs incurred at the Site. Although it
is difficult to distinguish between amounts spent for investigation and
remediation, the Company estimates that approximately $370,000 has been spent in
connection with investigation and approximately $98,000 has been spent in
connection with remediation of the Site. The Company estimates that it will
spend approximately $150,000 to $300,000 in connection with the Site during
1996, including expenditures from the escrow account. Based upon preliminary
estimates provided by a consulting environmental engineer and based upon the
likely future uses of the property, as of December 31, 1995, the Company had
accrued $347,000 for the estimated liability associated with the site, which
represents the currently estimated minimum cost of remediation, after
considering the cost sharing arrangement discussed above. Accordingly, although
no assurances can be given regarding the materiality of the total costs which
may be incurred, the Company does not believe at this time that the remediation
of the Site is reasonably likely to have a material effect on the Company's
financial condition, results of operations or liquidity. The implementation of
clean-up measures may commence, and may be completed, in 1996, in which case
the entire amount of remediation costs to be borne by the Company would be
incurred and paid in 1996. The precise scope and timing of remediation is
dependent upon a proposed sale of the property, which is subject to
negotiations to which the Company is not a party. The Company expects that, as
in the past, funds being held in escrow, cash from operations and the Company's
credit facilities will be sufficient to pay the costs of remediation without a
material effect on the Company's operations.
The Company has also been notified by an adjacent property owner,
Cooper Industries ("Cooper"), that certain petroleum products that may have
migrated from the Site have been detected in a monitoring well located on
Cooper's property. The Company and Foley are investigating possible oil
contamination along the border between the Site and the property owned by
Cooper.
(x) EMPLOYEES
As of February 24, 1996, Tridex and its subsidiaries employed
approximately 452 persons.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Prior to fiscal 1995, the Company had no foreign operations and
export sales were minimal. Primarily as a result of the acquisition of Cash
Bases in June 1994, the Company had approximately $8.8 million of sales which
originated outside the United States during the nine months ended December 31,
1995 ($10.9 million in fiscal 1995). For the amounts of revenue, operating
profit or loss and identifiable assets by geographic area, see Note 14 to the
Consolidated Financial Statements included in this report. In addition, the
Company had export sales from the United States of approximately $1.6
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million in the nine months ended December 31, 1995 and $4.0 million in fiscal
1995, of which $2.4 million was to Canada and the majority of the balance to
Europe.
(E) DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(i) DIRECTORS OF THE REGISTRANT
<TABLE>
<CAPTION>
Principal Business
Director Name Principal Occupation Employer Name of Employer
- ------------- -------------------- ------------- ------------------
<S> <C> <C> <C>
Seth M. Lukash Chairman of the Board, Tridex Corporation Manufacturer of computer
President, Chief peripheral equipment
Executive Officer and
Chief Operating Officer
Richard T. Bueschel Chairman Northern Equities, Inc. Investments and corporate
development
Paul J. Dunphy Management Consultant Self-employed Management consulting
C. Alan Peyser President Country Long Distance Communications Service
Thomas R. Schwarz Retired Investments
Richard W. Sonnenfeldt Senior Advisor NAPP Systems, Inc. Manufacturer of printing plates
Graham Y. Tanaka President Tanaka Capital Investment advising
Management, Inc.
</TABLE>
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Seth M. Lukash 49 Chairman of the Board of Directors,
President, Chief Executive Officer, Chief
Operating Officer and Director
Richard L. Cote 54 Senior Vice President and Chief
Financial Officer
George T. Crandall 49 Vice President, Treasurer, Controller
and Assistant Secretary
Dennis J. Lewis 41 President, Ultimate Technology
Corporation, a wholly- owned subsidiary
of the Company
Bart C. Shuldman 38 President, Printer Group and Magnetec
Corporation, a wholly-owned subsidiary
of the Company
Hugh T. Burnett 56 Managing Director, Cash Bases GB
Limited, a wholly-owned subsidiary of
</TABLE>
Seth M. Lukash has been a senior Executive Officer of the Company
since 1977 and has been a Director since 1979. He has served as Chairman of the
Board of Directors of the Company since November 1988, Chief Executive Officer
since August 1987, and President and Chief Operating Officer since June 1989.
Mr. Lukash previously served as President of the Company from September 1983 to
August 1988 and as Chief Operating Officer from September 1983 to August 1987.
Mr. Lukash is the son of Alvin Lukash, a Director Emeritus of the Company.
Richard L. Cote joined the Company in March 1993, and has been a
Vice President since June 1993 and Senior Vice President and Chief Financial
Officer since September 15, 1993. Mr. Cote was a self-employed management
consultant from October 1991 to March 1993; Vice President and Corporate
Controller of Wang Laboratories, Inc. from January 1991 to September 1991; and
Executive Vice President of Capital Resources Management, Inc. from November
1989 to December 1990. Previously, Mr. Cote had been employed by Emhart
Corporation, Xerox Corporation and Price Waterhouse LLP.
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George T. Crandall has been a Vice President of the Company since
September 1992, Treasurer since November 1990 and Corporate Controller since
March 1989. Prior to joining Tridex in November 1988, Mr. Crandall was a
consultant to Northeast Manufacturing Companies, Inc. and was previously
employed by Revere Copper and Brass Incorporated.
Dennis J. Lewis has been President of Ultimate since its
acquisition by the Company on January 20, 1993. Prior to the acquisition, Mr.
Lewis had served as Ultimate's President, Chief Executive Officer and a Director
since founding Ultimate in 1988. Prior to 1988, Mr. Lewis held senior management
positions related to the sales, engineering and service of computer peripherals
with Digital Equipment Corporation, Naum Brothers, RS Engineering, Serv Tech and
Add Electronics.
Bart C. Shuldman was appointed President of the Printer Group in
December 1995 and President of Magnetec in July 1993. From 1989 to 1993 he was
employed by Mars Electronics International, a division of Mars, Incorporated,
in several management positions, most recently as Business Manager for the
North American Amusement, Gaming and Lottery operations. Mr. Shuldman
previously held manufacturing and sales management positions with General
Electric Company from 1979 to 1989.
Hugh T. Burnett was appointed Managing Director of Cash Bases
simultaneously with its acquisition by Tridex on June 20, 1994. Prior to the
acquisition and since 1991, he was senior marketing executive with Cash Bases.
Mr. Burnett previously was Managing Director of Omron Systems UK Ltd. from 1983
to 1991.
ITEM 2. PROPERTIES.
The Company's operations are currently conducted at the six
facilities described below: the Company
<TABLE>
<CAPTION>
Size Owned or Lease Expiration
Location Operations Conducted (Approx. Sq. Ft.) Leased Date
- -------- -------------------- ----------------- -------- ----------------
<S> <C> <C> <C> <C>
Westport, Connecticut Principal executive offices 5,000 Leased July 31, 2001
Wallingford, Connecticut Manufacturing facility 44,000 Leased March 31, 2005
Ithaca, New York Manufacturing facility 36,000 Leased November 21, 2002
Victor, New York Manufacturing facility 18,000 Leased May 30, 1997
Newhaven, England Manufacturing facility 28,000 Leased March 25, 2000
Bloomfield, Connecticut Non-operating 23,000 Owned N/A
facility held for sale
</TABLE>
The Company believes that its facilities generally are in good
condition, adequately maintained and suitable for their present and currently
contemplated uses.
ITEM 3. LEGAL PROCEEDINGS.
See Item 1(C)(ix) "Environment" set forth above and Note 8(c) of
the Notes to Consolidated Financial Statements included in this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
last quarter of the transition year covered by this report.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The Company's common stock is traded on the NASDAQ National Market
System. Prior to August 9, 1995, the Company's common stock was traded on the
American Stock Exchange. As of February 24, 1996 there were 1,311 holders of
record of the common stock. The high and low sales prices of the common stock
reported during the nine months ended December 31, 1995 and fiscal years 1995
and 1994, by quarter, were as follows:
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
----------------- -------------------------------------
December 31, 1995 April 1, 1995 April 2, 1994
----------------- -------------- ---------------
High Low High Low High Low
------- ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
April - June 6-7/8 5-1/2 7-3/4 5-3/8 10-1/2 7-5/8
July - September 10-1/4 6-1/4 8-1/8 5 11-3/4 9
October - December 9 6-3/4 7-1/2 5-3/8 10-3/4 6-7/8
January - March N/A N/A 7-1/2 5-5/8 10-1/8 7
</TABLE>
No dividends on the common stock have been declared in more than
five years. The Company does not anticipate declaring dividends in the
foreseeable future. The Company's agreement with Fleet Bank, N.A. prohibits the
payment of cash dividends for the term of the agreement. The indenture covering
the Company's 10.5% Debentures limits the payment of cash dividends to 50% of
aggregate consolidated net income earned after December 27, 1992 for so long as
any of the debentures are outstanding. The Company is permitted by the indenture
to pay dividends in common stock.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Nine Months Ended Fiscal Years Ended
-------------------------- ------------------------------------------------
December 31, December 31, April 1, April 2, April 3, March 28,
1995 1994 1995 1994 1993 1992
-------------------------- 52 Weeks 52 Weeks 53 Weeks 52 Weeks
-------- -------- -------- ---------
(A) (B)
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net sales $ 46,029 $39,347 $54,677 $33,688 $28,477 $ 20,345
======== ======= ======= ======= ======= ========
Income (loss) $ (997) $ 1,475 $ 2,686 $ 1,613 $ 1,368 $ (507)
======== ======= ======= ======= ======= ========
Income (loss) per
common and
common equivalent
share $ (0.27) $ 0.38 $ 0.69 $ 0.44 $ 0.46 $ (0.23)
======== ======= ======= ======= ======= ========
Cash dividends per
common share None None None None None None
======== ======= ======= ======= ======= ========
</TABLE>
(A) Includes the results of operations of Cash Bases GB Limited since June 20,
1994.
(B) Includes the results of operations of Ultimate Technology Corporation since
January 20, 1993.
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<TABLE>
<CAPTION>
As of
====================================================================================
December 31, December 31, April 1, April 2, April 3, March 28,
1995 1994 1995 1994 1993 1992
------------ ------------ -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $35,725 $33,055 $36,362 $24,461 $23,521 $14,646
======= ======= ======= ======= ======= =======
Long-term
obligations $ 8,324 $ 6,892 $ 6,185 $ 5,307 $ 8,248 $ 5,980
======= ======= ======= ======= ======= =======
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION.
(A) RESULTS OF OPERATIONS
(i) NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1994
Consolidated net sales for the nine months ended December 31, 1995
increased $6,682,000 (17%) to $46,029,000 from $39,347,000 in the comparable
period of the prior year. The increase is due to greater volume of shipments of
point-of-sale (POS) terminals, pole displays and other peripherals and to the
sales of Cash Bases, which was acquired on June 20, 1994 and included in only
six and one third months of the nine months ended December 31, 1994.
Consolidated gross profit increased $830,000 (6%) to $13,997,000 from
$13,167,000 in the prior year's period, primarily due to the greater volume of
shipments of POS terminals and POS printers and to the effect of the Cash Bases
acquisition. Gross profit in the current period was adversely impacted by the
production inefficiencies experienced at Cash Bases and by the relocation of
Magnetec. In addition, certain production start-up costs associated with the
Company's new on-line lottery printer negatively affected margin. Consolidated
gross profit percentage decreased to 30.4% of sales from 33.5% of sales in the
prior year's period. The decrease in gross margin percentage reflects a change
in sales mix of products into the POS markets and the non-recurring costs and
unfavorable variances discussed above.
Consolidated engineering, design and product development costs
increased $630,000 (38%) to $2,310,000 from $1,680,000 in the prior year's
period. The increase is primarily the result of the inclusion of such costs for
Cash Bases, as well as the cost of developing new products and enhancing
existing products, particularly for the POS market.
Consolidated selling, administrative and general expenses increased
$3,019,000 (37%) to $11,097,000 from $8,078,000 in the prior year's period. The
increase in selling expenses is primarily the result of the inclusion of such
costs for Cash Bases and the increased staff to support a greater selling
effort, in both the United States and the European markets. The increase in
general and administrative expenses is primarily the result of the inclusion of
such costs for Cash Bases and certain non-recurring charges. Such non-recurring
charges include a provision for damages of $680,000 awarded in a lawsuit with a
former landlord, the cost of establishing an unfunded pension arrangement of
$339,000, and other non-recurring charges totaling approximately $246,000.
During the quarter ended December 31, 1995, the Company recorded a
provision for restructuring of $425,000 to cover the costs associated with the
formation of the printer group, reductions of levels of employment in other
areas of the Company and the discontinuance of certain products. A substantial
portion of the provision relates to employee severance costs.
Consolidated operating profit for the current period decreased to
$165,000 from $3,409,000 in the prior year's period, primarily as a result of
the non-recurring charges discussed above and unfavorable results at Cash Bases.
Operating profit was adversely impacted by production inefficiencies, increased
operating costs at Cash Bases and temporary softness in the European cash drawer
market. Consolidated operating profit as a percentage of revenue was 8.7% in the
prior year's period.
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Net interest expense increased $172,000 (20%) to $1,035,000 from
$863,000 in the prior year's period. The increase in interest expense was due
primarily to additional borrowings under working capital facilities and to the
indebtedness incurred to acquire Cash Bases.
Other non-operating expense, net for the current period includes a
provision of $75,000 for environmental matters, $42,000 for loss on the
anticipated disposal of unused real estate, and $29,000 for net realized
transactional foreign exchange gains. The prior year's period includes an
additional gain of $115,000 related to the October 1993 sale of the Company's
solenoid product line and net realized gains on foreign exchange of $15,000,
offset by an additional provision of $120,000 for loss on the anticipated
disposal of unused real estate.
The provision for taxes for the nine-month period ended December 31,
1995 is $17,000. The provision amount is low relative to the pre-tax loss due to
the accrual for state income taxes and non-deductible amortization of goodwill.
The effective tax rate in the prior period was 42.5%.
Net loss for the current period was $997,000 (or $0.27 per share) as
compared to net income of $1,475,000 (or $0.38 per share) in the prior year's
period. The average number of common shares outstanding during the nine months
ended December 31, 1995 was 3,721,513. Common equivalent shares are not
considered in net loss per share calculations as the incremental shares are
non-dilutive. The average number of common and common equivalent shares
outstanding during fiscal 1995 was 3,860,106 shares.
(ii) FISCAL 1995 COMPARED TO FISCAL 1994
Consolidated net sales for the fiscal year (52 weeks) ended April 1,
1995 increased $20,989,000 (62%) to $54,677,000 from $33,688,000 in the prior
year (52 weeks) ended April 2, 1994. Sales of all printers and printer
components accounted for 58% and 71% of total sales in fiscal 1995 and 1994,
respectively. Terminal devices and customer displays represented 23% and 27%,
respectively, of total sales in fiscal 1995 and 1994. Cash drawers represented
19% of total sales in fiscal 1995. The inclusion of Cash Bases' operations from
the date of acquisition on June 20, 1994 contributed $10,528,000 of the revenue
increase over the prior year. The remainder of the period-to-period increase
primarily was the result of increased unit shipments of printers into the POS
market, as well as increased shipments of printer products into the gaming and
wagering and financial services markets, and increased sales of terminal
devices.
Consolidated gross profit increased $6,168,000 (51%) to $18,249,000
from $12,081,000 in the prior year, primarily as a result of the contribution of
Cash Bases and the increased sales in the gaming and wagering market and in the
POS market. Consolidated gross profit as a percentage of net sales decreased to
33% of sales from 36% of sales in the prior year. The decrease in gross margin
primarily reflects the sales of lower margin products into the POS and gaming
and wagering markets, and to a lesser degree, the inclusion of Cash Bases.
Consolidated engineering, design and product development costs
increased $382,000 (19%) to $2,359,000 from $1,977,000 in the prior year. The
increase reflects the inclusion of such costs for Cash Bases, as well as the
cost of developing new products and enhancing existing products.
Consolidated selling, administrative and general expenses increased
$3,319,000 (41%) to $11,350,000 from $8,031,000 in the prior year. The increase
in selling expenses is the result of the inclusion of such costs for Cash Bases,
increased sales commissions and the increased staff to support a greater selling
effort in both the United States and European markets. The increase in general
and administrative expenses is the result of additional employee costs and
professional services to support business growth.
10
<PAGE> 11
Consolidated operating profit for the 1995 fiscal year increased
$2,467,000 (119%) to $4,540,000 from $2,073,000 in the prior year, primarily as
a result of the contribution of Cash Bases and increased sales in the gaming and
wagering market and in the POS market. Consolidated operating profit as a
percentage of net sales increased to 8% from 6% in the prior year.
Net interest expense increased $151,000 (15%) to $1,171,000 from
$1,020,000 in the prior year. The increase in interest expense was due primarily
to the additional indebtedness incurred to acquire Cash Bases offset by the
effect of the conversion of debt securities to common stock in the prior year.
Other non-operating expense (net) for the 1995 fiscal year includes
provisions for estimated loss on the disposal of non-productive property of
$170,000 and estimated clean-up costs associated with certain environmental
matters of $60,000, offset by an additional gain of $115,000 from a contingent
payment related to the October 1993 sale of the Magnetec solenoid product line
and net realized gains on foreign exchange of $84,000.
The provision for income taxes for fiscal 1995 reflects an effective
tax rate of 19.7%. The provision is net of a tax credit of $770,000 recorded in
the fourth quarter which reflects an adjustment to the Company's valuation
allowance to recognize federal deferred tax benefits available to be used by the
Company.
Net income for the 1995 fiscal year was $2,686,000 (or $.69 per share)
as compared to $1,613,000 (or $.44 per share) in the prior year. The average
number of common and common equivalent shares outstanding increased to 3,867,827
shares from 3,661,278 shares in the prior year due primarily to the issuance of
common stock to acquire Cash Bases, the exercise of options and warrants, and
the effect of conversion of various debt securities to common stock at the end
of the prior year.
(iii) LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1995 was $7,474,000
compared with $5,963,000 at April 1, 1995. The current ratio was 1.6 to 1.0 at
December 31, 1995 compared with 1.4 to 1.0 at April 1, 1995. The increase in
working capital and current ratio are due primarily to the effect of the amended
Fleet Credit Agreement discussed below.
On December 15, 1995, the Company and Fleet Bank, N.A. entered into an
amended and restated credit agreement (the "Fleet Credit Agreement") to
significantly increase the Company's borrowing capacity at more favorable rates
and terms than provided for in their 1994 credit agreement. The Fleet Credit
Agreement provided the Company with a working capital facility of $5,000,000
(the "Working Capital Facility") and a term facility of $5,500,000 (the "Term
Loan Facility"). The Working Capital Facility expries June 30, 1997, bears
interest payable monthly at a rate one percentage point above Fleet's prime
rate and bears a non-utilization fee of .25% of the unused balance. The Term
Loan Facility is for a term of six years, bears interest payable monthly at a
rate 1.25 percentage points above Fleet's prime rate and requires principal to
be paid in monthly installments of approximately $82,000 beginning May 31,
1996. The Fleet Credit Agreement also permitted the Company to designate a
LIBOR rate on outstanding debt with a maximum margin of 3.25 percentage
points over the market rate. The Company used the proceeds of the Term Loan
Facility to refinance amounts outstanding under the 1994 credit agreement with
Fleet, which consisted of $2,041,000 under an acquisition term loan facility
and $3,250,000 under a working capital facility.
The Working Capital Facility provides critical capital for the Company.
If for any reason this or comparable financing is not available to the Company,
it would have an adverse effect on the Company and its ability to conduct its
operations as previously conducted. The Company is required to comply with
certain financial covenants, including a minimum tangible net worth, a maximum
leverage ratio, a minimum debt service coverage ratio and a minimum current
ratio, otherwise the lender may withdraw its commitment. As of December 31,
1995, the Company did not satisfy the minimum tangible net worth, minimum debt
service coverage ratio or positive net income covenants. On March 15, 1996,
Fleet agreed to waive compliance with those covenants for the period ended
December 31, 1995 and to amend the Working Capital Facility to reduce the
minimum tangible net worth requirement for the quarter ended March 31, 1996.
Fleet also has adjusted the maximum amount available
11
<PAGE> 12
under the Working Capital Facility to $3,000,000 and has eliminated the LIBOR
interest rate option. The adjusted Working Capital Facility is sufficient for
the Company's anticipated working capital requirements in 1996. The Company
expects to be in full compliance with all covenants under the Fleet Credit
Agreement during 1996. Other than as described above and in February and May
of 1993, when it obtained waivers under its previous loan agreement of a
covenant regarding the quick ratio, the Company has been in compliance with the
covenants in its loan agreements during the past three years.
On June 20, 1994 the Company completed the acquisition of Cash Bases.
The purchase price of pounds sterling 3,500,000 (approximately $5.330 million)
was paid pounds sterling 3,067,000 (approximately $4.672 million) in cash and
pounds sterling 433,000 (approximately $658,000) by delivery of 96,788 shares
of Tridex common stock, of which 72,647 shares were placed in escrow to secure
the accuracy of certain representations and warranties made by the sellers. The
escrowed shares were released as scheduled, since the Company made no claims
against the sellers for breach of representations and warranties prior to the
scheduled release dates. In addition, the Company guaranteed for approximately
eighteen months that the sales price of all such shares sold by sellers would
not be less than the average market price of Tridex common stock at the time of
the acquisition ($6.80 per share). During the nine months ended December 31,
1995, the Company reimbursed the sellers an aggregate of $29,000 on the sale of
27,942 shares of common stock including losses on foreign exchange. No further
payments are required. The Company financed the cash portion of the purchase
price through its 1994 credit agreement with Fleet.
During the nine months ended December 31, 1995, the Company's operating
cash needs were satisfied with cash generated from operations and borrowings
under its credit facilities. At December 31, 1995, the Company had approximately
$700,000 in commitments for capital expenditures and had availability of
$5,000,000 remaining under the Working Capital Facility. The Company expects
that funds generated from operations, supplemented by borrowings under the
Working Capital Facility, will be sufficient to satisfy its cash needs for
working capital, scheduled debt retirements and capital expenditures, including
tooling for new products during 1996.
Over the long term, the Company believes that funds generated from
operations and borrowings under the Working Capital Facility, if necessary, will
continue to satisfy its working capital needs, support growth and meet scheduled
debt retirements.
(B) IMPACT OF INFLATION
Tridex believes that its business has not been affected to a
significant degree by inflationary trends because of the low rate of inflation
during the past three years and cost reduction programs at each of its
operations. Tridex believes that any increase in cost due to inflation can be
recovered by price increases or offset by cost reductions and productivity
improvements.
12
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. PAGE
NUMBER
Report of Independent Accountants 14
Tridex Corporation and Subsidiaries consolidated
financial statements:
Consolidated balance sheets as of December 31,
1995 and April 1, 1995. 15
Consolidated statements of operations for the
nine months ended December 31, 1995 and December
31, 1994 (unaudited), and fiscal years ended
April 1, 1995 and April 2, 1994. 17
Consolidated statements of shareholders' equity
for the nine months ended December 31, 1995, and
fiscal year ended April 1, 1995. 18
Consolidated statements of cash flows for the
nine months ended December 31, 1995 and December
31, 1994 (unaudited), and fiscal years ended
April 1, 1995 and April 2, 1994. 19
Notes to consolidated financial statements. 20
Financial Statement Schedules - All schedules
are omitted since the required information is
either (a) not present or not present in amounts
sufficient to require submission of the schedule
or (b) included in the financial statements or
notes thereto.
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
March 15 , 1996
To the Board of Directors and Shareholders
of Tridex Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Tridex
Corporation and its subsidiaries at December 31, 1995 and April 1, 1995, and the
results of their operations and their cash flows for the nine months ended
December 31, 1995 and for each of the two years in the period ended April 1,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Hartford, Connecticut
14
<PAGE> 15
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 April 1, 1995
----------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 933,000 $ 347,000
Receivables (Note 3) 7,406,000 9,635,000
Inventories (Note 4) 9,597,000 8,238,000
Other current assets 732,000 601,000
Deferred tax assets (Note 10) 645,000 742,000
----------- -----------
Total current assets 19,313,000 19,563,000
----------- -----------
Plant and equipment:
Machinery, furniture and equipment 10,963,000 10,854,000
Leasehold improvements 710,000 360,000
----------- -----------
11,673,000 11,214,000
Less accumulated depreciation 6,477,000 6,791,000
----------- -----------
5,196,000 4,423,000
----------- -----------
Excess of cost over fair value of net assets acquired 9,608,000 10,260,000
Other assets 1,483,000 1,977,000
Loans receivable, officers 125,000 139,000
----------- -----------
$35,725,000 $36,362,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 16
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995 April 1, 1995
<S> <C> <C>
Current liabilities:
Bank loans payable (Note 6) $ 396,000 $ 2,400,000
Current portion of long term debt (Note 6) 2,411,000 2,346,000
Accounts payable 4,516,000 4,877,000
Accrued liabilities (Note 5) 4,452,000 3,343,000
Income taxes payable 64,000 634,000
----------- -----------
Total current liabilities 11,839,000 13,600,000
----------- -----------
Long term debt, less current portion (Note 6) 8,324,000 6,185,000
----------- -----------
Commitments and contingencies (Note 8)
Shareholders' equity (Notes 2 and 9):
Preferred stock, $1 par value;
authorized 2,000,000 shares;
issued none
Common stock, no par value, stated value $.25;
authorized 10,000,000 shares;
issued 3,900,807 and 3,789,682 shares 978,000 950,000
Additional paid-in capital 21,939,000 21,853,000
Accumulated deficit (6,609,000) (5,612,000)
Cumulative valuation adjustments 82,000 124,000
Common stock held in treasury,
at cost, 119,996 and 109,996 shares (828,000) (738,000)
----------- -----------
15,562,000 16,577,000
----------- -----------
$35,725,000 $36,362,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 17
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
---------------------------- --------------------------
DECEMBER 31, December 31, April 1, April 2,
1995 1994 1995 1994
------------ ------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 46,029,000 $ 39,347,000 $54,677,000 $ 33,688,000
------------ ------------ ----------- ------------
Operating costs and expenses:
Cost of sales 32,032,000 26,180,000 36,428,000 21,607,000
Engineering, design and product
development costs 2,310,000 1,680,000 2,359,000 1,977,000
Selling, administrative and
general expenses 11,097,000 8,078,000 11,350,000 8,031,000
Provision for restructuring (Note 13) 425,000
------------ ------------ ----------- ------------
45,864,000 35,938,000 50,137,000 31,615,000
------------ ------------ ----------- ------------
Operating profit (loss) 165,000 3,409,000 4,540,000 2,073,000
------------ ------------ ----------- ------------
Other charges:
Interest, net (Note 6) 1,035,000 863,000 1,171,000 1,020,000
Other, net 110,000 (19,000) 24,000 318,000
------------ ------------ ----------- ------------
1,145,000 844,000 1,195,000 1,338,000
------------ ------------ ----------- ------------
Profit (loss) before income taxes (980,000) 2,565,000 3,345,000 735,000
Income tax provision (benefit) (Note 10) 17,000 1,090,000 659,000 (878,000)
------------ ------------ ----------- ------------
Net income (loss) $ (997,000) $ 1,475,000 $ 2,686,000 $ 1,613,000
============ ============ =========== ============
Earnings (loss) per common and
common equivalent share: $ (0.27) $ 0.38 $ 0.69 $ 0.44
============ ============ =========== ============
Average common and common
equivalent shares outstanding: 3,721,513 3,860,106 3,867,827 3,661,278
============ ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 18
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995,
AND FISCAL YEAR ENDED APRIL 1, 1995
<TABLE>
<CAPTION>
Common stock
Common stock held in treasury Additional Cumulative
--------------------- ------------------ paid-in Accumulated Valuation
Shares Amount Shares Amount capital deficit Adjustments
--------- -------- ------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 2, 1994 3,643,454 $913,000 109,996 $738,000 $21,228,000 $(8,298,000)
Issuance of acquisition
shares 96,788 24,000 589,000
Exercise of warrants and
stock options 49,440 13,000 36,000
Translation
adjustment $ 124,000
Net income 2,686,000
--------- -------- ------- -------- ----------- ----------- ----------
Balance, April 1, 1995 3,789,682 950,000 109,996 738,000 21,853,000 (5,612,000) 124,000
EXERCISE OF WARRANTS AND
STOCK OPTIONS 111,125 28,000 86,000
PURCHASE OF
TREASURY STOCK 10,000 90,000
TRANSLATION ADJUSTMENT (99,000)
APPRECIATION OF MARKETABLE
SECURITIES AVAILABLE FOR
SALE 57,000
NET LOSS (997,000)
--------- -------- ------- -------- ----------- ----------- ----------
BALANCE, DECEMBER 31, 1995 3,900,807 $978,000 119,996 $828,000 $21,939,000 $(6,609,000) $ 82,000
========= ======== ======= ======== =========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 19
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
--------------------------- -----------------------
DECEMBER 31, December 31, April 1, April 2,
1995 1994 1995 1994
------------ ------------ -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (997,000) $ 1,475,000 $ 2,686,000 $ 1,613,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,994,000 1,643,000 2,264,000 1,796,000
Deferred income taxes 2,000 (522,000) (1,020,000)
Loss (gain) on disposal of assets 11,000 (3,000) (5,000) (166,000)
Changes in operating assets and liabilities:
Receivables 2,124,000 1,543,000 (683,000) (2,065,000)
Inventory and prepaid expenses (1,246,000) (499,000) (1,728,000) 602,000
Other assets 122,000 61,000 (83,000) 55,000
Accounts payable, accrued liabilities
and income taxes payable 320,000 496,000 1,390,000 69,000
Other 36,000 132,000
----------- ----------- ----------- -----------
Net cash provided by operating activities 2,330,000 4,716,000 3,355,000 1,016,000
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of plant and equipment (1,773,000) (1,713,000) (2,485,000) (950,000)
Proceeds from sale of assets 7,000 121,000 121,000 608,000
Acquired net assets and acquisition costs, net of cash (5,508,000) (5,576,000)
Other 31,000 (64,000) 15,000 139,000
----------- ----------- ----------- -----------
Net cash used in investing activities (1,735,000) (7,164,000) (7,925,000) (203,000)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Net change in borrowings under line of credit (1,993,000) 750,000 2,400,000
Net proceeds from issuance of long-term debt 5,676,000 3,500,000 3,606,000
Debt issuance costs paid (134,000) (155,000) (156,000) (67,000)
Principal payments on long term borrowings (3,573,000) (882,000) (1,666,000) (1,294,000)
Issuance of capital stock and warrants 644,000 614,000
Proceeds from capital stock transactions 24,000 47,000 48,000 319,000
Other 24,000
----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities (0) 3,904,000 4,870,000 (1,042,000)
----------- ----------- ----------- -----------
Effect of exchange rate changes on cash (9,000) (1,000) 8,000
Increase (decrease) in cash and cash equivalents 586,000 1,455,000 308,000 (229,000)
Cash and cash equivalents at beginning of year 347,000 39,000 39,000 268,000
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year $ 933,000 $ 1,494,000 $ 347,000 $ 39,000
=========== =========== =========== ===========
Supplemental cash flow information:
Interest paid $ 873,000 $ 851,000 $ 1,018,000 $ 1,064,000
Income taxes paid 552,000 435,000 1,092,000 310,000
Supplemental non-cash investing and financing
activities:
Conversion of convertible debentures to common
common stock $ 2,169,000
Acquisitions:
Fair market value of assets acquired,
excluding cash acquired $ 3,881,000 $ 3,957,000
Goodwill 3,978,000 3,985,000
Debt incurred (4,800,000) (4,800,000)
Liabilities assumed (2,351,000) (2,366,000)
Issuance of warrants (644,000) (614,000)
----------- -----------
Net cash used $ 64,000 $ 162,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 20
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS: Tridex Corporation (the "Company"), through its
wholly-owned subsidiaries Magnetec Corporation ("Magnetec"), Ithaca
Peripherals Incorporated ("Ithaca"), Ultimate Technology Corporation
("Ultimate") and Cash Bases GB Limited ("Cash Bases"), (collectively
the "Company"), operates in one industry segment, computer peripheral
equipment. Operations in this segment include the design, development,
manufacture and sale of specialty dot matrix impact printers, thermal
printers, printer mechanisms, and optical mark-sense readers for OEM
applications, and dot matrix impact printers, customer displays,
terminal device, keyboards and cash drawers for POS applications.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated
financial statements include the accounts of the Company after
elimination of all material intercompany accounts and transactions. All
material subsidiaries are wholly-owned.
CHANGE IN FISCAL YEAR END: In December 1995, the Company changed
its fiscal year to end on December 31. Previously, the Company's fiscal
year ended on the Saturday closest to March 31.
CASH AND CASH EQUIVALENTS: Cash equivalents consist primarily of
certificates of deposit with maturities of less than ninety days and
are carried at cost which approximates market value.
USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FOREIGN CURRENCY: The financial position and results of operations
of the Company's foreign subsidiaries are measured using local currency
as the functional currency. Assets and liabilities of such subsidiaries
have been translated at current exchange rates, and related revenues
and expenses have been translated at weighted average exchange rates.
The aggregate effect of translation adjustments so calculated is
included as a separate component of shareholders' equity. Transaction
gains and losses are included in other income.
INVENTORIES: Inventories are stated at the lower of cost
(principally first-in, first-out) or market.
PLANT AND EQUIPMENT AND DEPRECIATION: Plant and equipment and
leasehold improvements are stated at cost. Depreciation is provided for
primarily by the straight-line method over the estimated useful lives.
The estimated useful life of machinery, furniture and equipment is five
to ten years. Leasehold improvements are amortized over the shorter of
the term of the lease or the useful life of the asset.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED: The excess
of cost over fair value of net assets acquired (goodwill) resulted from
the acquisitions of Cash Bases in fiscal year 1995, Ultimate in 1993
and Ithaca in 1991. The amount applicable to these acquisitions totaled
$9,608,000 at December 31, 1995, and is being amortized on the straight
line method between ten and twenty years. Accumulated amortization of
the excess of cost over fair value of net assets acquired was
$2,890,000 and $2,238,000 at December 31, 1995 and April 1, 1995,
respectively. The Company periodically reviews goodwill to assess
recoverability based upon expectations of non-discounted cash flows
from operations for each subsidiary having a material goodwill balance.
The Company believes that no material impairment of goodwill exists at
December 31, 1995 or April 1, 1995.
OTHER ASSETS: Other current assets includes marketable securities
available for sale, accounted for at market value of $309,000, with an
unrealized gain of $86,000, net of related tax effect of $29,000,
recorded as a component of shareholders' equity. The market value of
such securities approximated carrying value at April 1, 1995. Included
in other assets are deferred tax assets of $860,000 (see Note 10) and
the net book value of real estate held for sale in the amount of
$196,000. Also included in other assets are bond issue costs (see Note
6) which are being amortized over the term of the bond. Accumulated
amortization of other assets was $479,000, and $637,000 at December 31,
1995, and April 1, 1995, respectively.
REVENUE RECOGNITION: Sales are recognized when the product is
shipped. In the nine months ended December 31, 1995 and the year ended
April 1, 1995, no one customer accounted for more than 10% of
consolidated net sales. In the year ended April 2, 1994, one customer
accounted for 10% of consolidated net sales.
INCOME TAXES: Income tax expense is based on estimated taxes
payable or refundable on a tax return basis for the current year and
changes in the amount of deferred tax assets and liabilities during the
year. Deferred income taxes are provided for revenue and expenses which
are recognized in different periods for income tax and financial
statement purposes. Effective April 4, 1993, the Company adopted FAS
109 "Accounting for Income Taxes," which mandates the liability method
for computing deferred income taxes. The objective of the liability
method is to recognize the amount of current and deferred taxes payable
or refundable at the financial statement date resulting from all events
that have been recognized in the financial statement based upon the
provisions of enacted tax laws. See Note 10 for a further discussion.
20
<PAGE> 21
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EARNINGS (LOSS) PER SHARE: Primary earnings (loss) per common and
common equivalent share are based on the weighted average number of
common shares outstanding during the period, including stock options
and warrants when the result is dilutive. Fully diluted earnings per
common share assumes conversion of dilutive securities, when the result
is dilutive.
2. BUSINESS COMBINATIONS:
On June 20, 1994 the Company completed the acquisition of Cash
Bases, of Newhaven, England. The purchase price of pounds sterling
3,500,000 (approximately $5.330 million) was paid pounds sterling
3,067,000 (approximately $4.672 million) in cash and pounds sterling
433,000 (approximately $658,000) by delivery of 96,788 shares of Tridex
common stock, of which 72,647 shares were placed in escrow to secure
the accuracy of certain representations and warranties made by the
sellers. The escrowed shares were released as scheduled since the
Company made no claim against the sellers for breach of representations
and warranties prior to scheduled release dates. In addition, the
Company guaranteed for approximately eighteen months the sellers that
the sales price of all such shares sold by sellers would not be less
than the average market price of Tridex common stock at the time of the
acquisition ($6.80 per share). During the nine months ended December
31, 1995, the Company reimbursed the sellers an aggregate of $29,000 on
the sale of 27,942 shares of common stock including losses on foreign
exchange. No further payments are required.
The acquisition has been accounted for using the purchase method of
accounting. The acquired company's assets and liabilities have been
recorded in the Company's financial statements at their estimated fair
values at the acquisition date. The Consolidated Statements of
Operations include the results of operations of the acquired company
from the acquisition date.
The following pro forma data (unaudited) reflect the fiscal 1995
acquisition of Cash Bases as if the acquisition had occurred at the
beginning of fiscal 1995 and fiscal 1994; such data does not purport to
be indicative of what would have occurred had these transactions been
made on that date:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- ---------------------------------
DECEMBER 31, 1994 APRIL 1, 1995 APRIL 2, 1994
----------------- ------------- -------------
(In thousands except per share amounts
<S> <C> <C> <C>
REVENUE $41,972 $57,302 $43,321
OPERATING PROFIT 3,616 4,747 3,274
NET INCOME 1,538 2,749 1,922
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 0.39 $ 0.70 $ 0.51
</TABLE>
3. RECEIVABLES:
Receivables are net of the allowance for doubtful accounts. The
reconciliation of the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -----------------------------------
DECEMBER 31, 1995 APRIL 1, 1995 APRIL 2, 1994
----------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 42 $ 85 $ 44
PROVISION FOR DOUBTFUL ACCOUNTS 71 74 85
ACCOUNTS WRITTEN OFF, NET OF RECOVERIES (43) (117) (44)
---- ----- ----
BALANCE AT END OF YEAR $ 70 $ 42 $ 85
==== ===== ====
</TABLE>
21
<PAGE> 22
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVENTORIES:
The components of inventories are:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
----------------- -------------
DECEMBER 31, 1995 APRIL 1, 1995
----------------- -------------
(In thousands)
<S> <C> <C>
RAW MATERIALS AND COMPONENT PARTS $6,704 $6,232
WORK-IN-PROCESS 1,271 869
FINISHED GOODS 1,622 1,137
------ ------
$9,597 $8,238
====== ======
</TABLE>
5. ACCRUED LIABILITIES:
The components of accrued liabilities are:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
----------------- -------------
DECEMBER 31, 1995 APRIL 1, 1995
----------------- -------------
(In thousands)
<S> <C> <C>
PAYROLL, FRINGE BENEFITS AND COMMISSIONS $1,230 $1,803
UNFUNDED PENSION OBLIGATION 318 --
INTEREST AND TAXES OTHER THAN INCOME TAXES 150 98
CUSTOMER ADVANCES, DEFERRED REVENUE AND
WARRANTY 475 346
ENVIRONMENTAL MATTERS 347 333
PROFESSIONAL SERVICES AND INSURANCE 181 199
RESTRUCTURE 326 --
LITIGATION 776 142
OTHER 649 422
------ ------
$4,452 $3,343
====== ======
</TABLE>
6. BANK CREDIT AGREEMENT AND LONG TERM DEBT:
On December 15, 1995, the Company and Fleet Bank, N.A. ("Fleet"),
entered into an amended agreement (the "Fleet Credit Agreement") to
provide the Company with a $5,000,000 working capital revolving credit
facility (the "Working Capital Facility") and a $5,500,000 term loan
facility (the "Term Loan Facility"). The Working Capital Facility,
included on the accompanying balance sheet as "Bank loans payable",
expires on June 30, 1997, bears interest payable monthly at a rate one
percentage point above Fleet's prime rate or 9.5% at December 31,
1995, and bears a non-utilization fee of .25% of the unused facility.
Availability under the Working Capital Facility is limited to 80% of
the Company's eligible accounts receivable and 25% of eligible
inventory (not to exceed $1,500,000). The Term Loan Facility, included
in the accompanying table as "Term loan payable", is for a term of six
years, bears interest payable monthly at a rate of 1.25 percentage
points above Fleet's prime rate, or 9.75% on December 31, 1995, and
requires principal to be paid in monthly installments of approximately
$82,000 commencing in May, 1996. The Fleet Credit Agreement permitted
the Company to designate a LIBOR rate on outstanding debt with a
maximum margin of 3.25 percentage points over the market rate. The
Fleet Credit Agreement is secured by a first priority security
interest in certain assets, imposes certain covenants (including a
minimum tangible net worth, a maximum leverage ratio, a minimum debt
service coverage ratio and a minimum current ratio) and restricts the
amount available for payment in cash dividends and capital stock
distributions. As of December 31, 1995, the Company did not satisfy
the minimum tangible net worth, minimum debt service coverage ratio or
positive net income covenants. On March 15, 1996, Fleet agreed to
waive compliance with those covenants for the period ended December
31, 1995, and to amend the Working Capital Facility to reduce the
minimum tangible net worth requirement for the quarter ended March 30,
1996. Fleet also has adjusted the maximum amount available under the
Working Capital Facility to $3,000,000 and has eliminated the LIBOR
interest rate option. The adjusted Working Capital Facility is
sufficient for the Company's anticipated working capital requirements
in 1996.
22
<PAGE> 23
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. BANK CREDIT AGREEMENT AND LONG TERM DEBT: (CONTINUED)
The Company expects to be in full compliance with all covenants
under the Fleet Credit Agreement during 1996.
The components of long term debt are:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -------------
DECEMBER 31, 1995 APRIL 1, 1995
----------------- -------------
(In thousands)
<S> <C> <C>
TERM LOAN PAYABLE $ 5,500 $2,625
10.5% SENIOR SUBORDINATED CONVERTIBLE
DEBENTURES DUE 1997, NET OF DISCOUNT OF
$16 AND $22 3,454 3,448
8% SUBORDINATED CONVERTIBLE TERM
PROMISSORY NOTES DUE 1997, NET OF
DISCOUNT OF $186 AND $308 1,414 1,742
OTHER 367 716
------- ------
10,735 8,531
CURRENT PORTION 2,411 2,346
------- ------
$ 8,324 $6,185
======= ======
</TABLE>
The 10.5% Senior Subordinated Convertible Debentures due 1997 (the
"10.5% Debentures") were privately placed in 1993 in conjunction with
the acquisition of Ultimate. Interest is payable quarterly on March 15,
June 15, September 15 and December 15. The Company is required to make
a sinking fund payment of $740,000 on December 15, 1996. The 10.5%
Debentures are convertible into Tridex common stock at $9.00 per share.
As of December 31, 1995, the Company has reserved 385,555 shares of
common stock pursuant to the conversion feature. The indenture
restricts the amount available for the payment of cash dividends and
capital stock distributions. In conjunction with the issuance of the
10.5% Debentures, the Company issued to each debenture holder
detachable warrants to purchase common stock of Tridex Corporation (the
"Warrants") at a rate of 10 shares per $1,000 principal amount of
debentures. The Warrants are exercisable for a period of five years at
$9.25 per share. As of December 31, 1995, the Company had reserved
45,500 shares of common stock for the exercise of the Warrants. The
estimated fair market value of the Warrants has been recorded as a
discount to the principal amount of the outstanding debentures and is
being amortized over the term of the debt. Costs incurred in connection
with the issuance of the 10.5% Debentures of approximately $448,000 are
recorded in other assets and are being amortized over the term of the
debentures.
The 8% Subordinated Convertible Term Promissory Notes (the "8%
Notes") were issued in conjunction with the acquisition of Ultimate
from its former shareholders. The 8% Notes are payable in quarterly
installments over five years and are convertible into Tridex common
stock at $12.00 per share. As of December 31, 1995, the Company had
reserved 133,333 shares of common stock pursuant to this conversion
feature. The discount on the 8% Notes represents imputed interest at a
rate of approximately 18%. The discount, recorded as a reduction of the
purchase price of Ultimate, is being amortized over the life of the
notes using the interest rate method.
Cash Bases has an agreement with Barclay's Bank that provides line
of credit, term loan and equipment financing facilities. At December
31, 1995, pounds sterling 255,000 ($396,000) was outstanding under the
line of credit facility with availability of pounds sterling 245,000.
Other long term debt consists of the term notes payable and equipment
financing obligations of Cash Bases. The equipment financing
obligations are collateralized by the underlying equipment.
Maturities of long-term debt, including sinking fund requirements
and scheduled retirement of the 10.5% Debentures and 8% Notes are as
follows: $2,411,000 in 1996, $4,633,000 in 1997, $1,021,000 in 1998,
$985,000 in 1999, $985,000 in 2000 and $902,000 thereafter. Interest
expense is stated net of interest income of $14,000 in the nine months
ended December 31, 1995, $33,000 in fiscal 1995 and $11,000 in fiscal
1994.
23
<PAGE> 24
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PENSION PLAN:
Effective December 31, 1995, the Company established a
non-qualified unfunded pension arrangement for Alvin Lukash, a
significant shareholder and former corporate officer and director. The
pension arrangement which replaces a prior consulting services
agreement, requires the Company to pay an annual benefit of $100,000
payable monthly through the sooner of March 31, 2000 or the death of
Mr. Lukash. The unfunded accumulated benefit obligation at December 31,
1995 of $318,000 is included in Accrued Liabilities in the accompanying
balance sheet. The Company recorded the actuarial present value of the
benefits calculated at a 7.2% discount rate and related fees totaling
$339,000 in the quarter ended December 31, 1995.
8. COMMITMENTS AND CONTINGENCIES:
(a) LEASE OBLIGATIONS:
At December 31, 1995, the Company was lessee on long term operating
leases for equipment and real property. The terms of certain leases
provide for escalating rent payments in later years of the lease as
well as payment of minimum rent and real estate taxes. Rent expense
amounted to approximately $861,000 in the nine months ended December
31, 1995, $997,000 in fiscal 1995, and $676,000 in fiscal 1994. Minimum
aggregate rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess of one year
as of December 31, 1995 are as follows: $1,003,000 in 1996, $947,000 in
1997; $899,000 in 1998; $873,000 in 1999; $810,000 in 2000 and
$1,949,000 thereafter.
(b) ENVIRONMENTAL MATTERS:
The Company is involved in one significant environmental matter:
Allu Realty Trust ("Allu"), a Massachusetts business trust, with
transferable shares, all of which are owned by Tridex, is the former
owner of land improved with a manufacturing-warehouse building located
at 100 Foley Street, Somerville, Massachusetts (the "Site"). Although
Allu has sold the property to 100 Foley Street Incorporated ("Foley"),
an unrelated entity, Allu and Tridex remain responsible for certain
environmental problems associated with the Site.
During July 1984, Allu and Tridex disclosed to the Massachusetts
Department of the Attorney General the existence of chromium, oil and
grease at the Site. As a result, the Environmental Protection Division
of the Department of the Attorney General and the Massachusetts
Department of Environmental Protection ("MDEP") conducted an
investigation of the Site. At MDEP's request, the Company retained an
environmental engineering firm, which completed a Phase II
investigation study of the Site. The Company has conducted further
studies to characterize and assess the Site more specifically and to
determine appropriate long term clean-up measures. In January 1993, the
Company entered into an agreement with Foley pursuant to which Tridex
and Foley agreed to pay 75% and 25%, respectively, of the costs
incurred after January 1, 1992 in connection with the investigation and
remediation of the Site (the "Site Participation Agreement"). The Site
Participation Agreement also provides that, to the extent there are
available proceeds from the sale of the Site or, if not sold, from the
operation of the Site after January 1, 1997, Tridex shall be reimbursed
for all or a portion of the $260,000 it expended in connection with the
Site prior to January 1, 1992. Under the terms of an Escrow Agreement
entered into by Tridex and Foley simultaneously with the Site
Participation Agreement (the "Escrow Agreement"), Tridex and Foley each
placed $125,000 into escrow to fund the payment of their obligations
under the Site Participation Agreement. Under the terms of the Escrow
Agreement, Tridex must place an additional $100,000 in escrow at the
request of the Escrow Agent and thereafter the amount of any additional
funds required by the Escrow Agent to be placed in escrow shall be
contributed 75% by Tridex and 25% by Foley. Approximately $3,000 is
being held in escrow as of December 31, 1995, all of which was
contributed by Foley.
24
<PAGE> 25
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
(b) ENVIRONMENTAL MATTERS: (CONTINUED)
As of December 31, 1995, the Company had spent approximately
$639,000 in connection with the Site. Of this amount, approximately
$468,000 relates to investigation or remediation costs incurred at the
Site. Although it is difficult to distinguish between amounts spent for
investigation and remediation, the Company estimates that approximately
$370,000 has been spent in connection with investigation and
approximately $98,000 has been spent in connection with remediation of
the Site. The Company estimates that approximately $150,000 to $300,000
will be spent in connection with the Site during fiscal 1996, including
expenditures from the escrow account. Based upon preliminary estimates
provided by a consulting environmental engineer and based upon the
likely future uses of the property, as of December 31, 1995, the
Company had accrued $347,000 for the estimated liability associated
with the Site which represents currently estimated minimum cost of
remediation, after considering the cost sharing arrangement discussed
above. Accordingly, although no assurances can be given regarding the
materiality of the total costs which may be incurred, the Company does
not believe at this time that the remediation of the Site is reasonably
likely to have a material effect on the Company's financial condition,
results of operations or liquidity. The implementation of clean-up
measures may commence, and may be completed, in 1996, in which case the
entire amount of remediation costs to be borne by the Company would be
incurred and paid in 1996. The precise scope and timing of remediation
is dependent upon a proposed sale of the property, which is subject to
negotiations to which the Company is not a party. The Company expects
that, as in the past, funds being held in escrow, cash from operations
and the Company's credit facilities will be sufficient to pay the costs
of remediation without a material effect on the Company's operations.
The Company has also been notified by an adjacent property owner,
Cooper Industries ("Cooper"), that certain petroleum products that may
have migrated from the Site have been detected in a monitoring well
located on Cooper's property. The Company and Foley are investigating
possible oil contamination along the border between the Site and the
property owned by Cooper.
(c) LEGAL PROCEEDINGS:
In November, 1990, Tridex filed suit against a former landlord,
Gorham Island Associates ("GIA") seeking monetary damages and
rescission of a lease covering 5,700 square feet of office space in
Westport, Connecticut (the "Lease"). In January, 1991, GIA filed suit
against Tridex seeking payment of all amounts due under the Lease for
the balance of the Lease term (aggregating approximately $1,021,000)
and other damages. In December, 1995, the court rendered a decision
against the Company and awarded damages of $988,000, which includes
back rent charges, interest and attorneys fees. In March 1996 the
Company and GIA agreed to settle the suit for $742,500. The Company has
recorded a provision in the quarter ended December 31, 1995 to provide
for the settlement and related fees.
9. STOCK OPTIONS AND WARRANTS:
1989 LONG TERM INCENTIVE PLAN
The 1989 Long Term Incentive Plan (the "Plan") permits stock-based
incentive compensation in the form of: (a) stock options, (b) stock
appreciation rights, (c) restricted stock, (d) deferred stock, (e)
stock purchase rights and (f) other stock-based compensation. Pursuant
to the Plan, up to 1,250,000 shares of common stock may be distributed
to officers and key employees of the Company. Options granted are at
prices equal to 100% of the fair market value of the common stock at
the date of grant. No charge against income was required with respect
to options. Options granted are exercisable at the discretion of the
Stock Option Committee, but in no event shall the period be for more
than ten years. Ninety days after an employee's termination, the
outstanding options are canceled. At December 31, 1995 the Company had
reserved 1,029,470 shares of common stock for issuance upon the
exercise of options granted under the Plan. The following table
summarizes the activity of the Plan for the nine months ended December
31, 1995 and for the prior two years.
25
<PAGE> 26
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS AND WARRANTS: (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS
EXERCISABLE
SHARES UNDER OPTION PRICE PER SHARE AT YEAR END
------------------- --------------- -----------
<S> <C> <C> <C>
OPTIONS OUTSTANDING 4/3/93 484,235 $0.750 - $ 9.075 116,515
OPTIONS GRANTED 119,000 $7.250 - $10.750 =======
OPTIONS EXERCISED (29,000) $0.750 - $ 5.250
OPTIONS CANCELED (60,380) $0.750 - $ 9.000
-------
OPTIONS OUTSTANDING 4/2/94 513,855 $0.750 - $10.750 173,905
OPTIONS GRANTED 127,150 $6.625 - $ 8.000 =======
OPTIONS EXERCISED (14,440) $0.750 - $ 5.250
OPTIONS CANCELED (14,100) $8.750 - $10.750
-------
OPTIONS OUTSTANDING 4/1/95 612,465 $0.750 - $10.750 255,295
OPTIONS GRANTED 211,800 $6.000 - $ 6.625
OPTIONS EXERCISED (111,125) $0.750 - $ 7.250
OPTIONS CANCELED (43,610) $0.875 - $10.750
-------
OPTIONS OUTSTANDING 12/31/95 669,530 $0.750 - $10.750 213,870
======= =======
</TABLE>
WARRANTS:
As of December 31, 1995, the Company had outstanding stock purchase
warrants for an aggregate of 283,832 shares of common stock. Stock
purchase warrants for 165,000 shares expiring five years from date of
grant are held by directors of the Company, for 73,332 shares expiring
December 31, 1997 are held by Value Investing Partners, Inc., placement
agent for the Company for the 10.5% Debentures, and for 45,500 shares
expiring December 31, 1997 are held by purchasers of the 10.5%
Debentures. The following table summarizes the activity of outstanding
warrants for the nine months ended December 31, 1995 and for the prior
three years.
<TABLE>
<CAPTION>
WARRANTS
EXERCISABLE
SHARES UNDER WARRANT PRICE PER SHARE AT YEAR END
-------------------- --------------- -----------
<S> <C> <C> <C>
OUTSTANDING 4/3/93 329,539 $0.875 - $9.250 329,539
GRANTED TO DIRECTORS 70,000 $7.250 =======
EXERCISED (80,707) $0.875 - $4.250
--------
OUTSTANDING 4/2/94 318,832 $0.875 - $9.250 248,832
=======
EXERCISED (35,000) $0.875
-------
OUTSTANDING 4/1/95 283,832 $0.875 - $9.250 236,932
------- =======
OUTSTANDING 12/31/95 283,832 $0.875 - $9.250 236,932
======= =======
</TABLE>
26
<PAGE> 27
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Income taxes:
The sources of profit (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -----------------------------
DECEMBER 31, 1995 APRIL 1, 1995 APRIL 2, 1994
----------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
UNITED STATES $ (374) $2,114 $735
FOREIGN (606) 1,231 --
------- ------ ----
$ (980) $3,345 $735
======= ====== ====
</TABLE>
The components of the income tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -----------------------------
DECEMBER 31, 1995 APRIL 1, 1995 APRIL 2, 1994
----------------- -----------------------------
(In thousands)
<S> <C> <C> <C>
CURRENT:
FEDERAL $ 50 $ 464 $ (136)
STATE 144 287 278
FOREIGN (141) 430 --
------- ------- -------
53 1,181 142
------- ------- -------
DEFERRED:
FEDERAL (24) (477) (1,020)
STATE -- -- --
FOREIGN (12) (45) --
------- ------- -------
(36) (522) (1,020)
------- ------- -------
TOTAL INCOME TAX PROVISION (BENEFIT) $ 17 $ 659 $ (878)
======= ======= =======
</TABLE>
Deferred income taxes arise from temporary differences between the
tax basis of assets and liabilities and their reported amounts in the
financial statements. The Company's gross deferred tax assets and
liabilities were comprised of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -------------
DECEMBER 31, 1995 APRIL 1, 1995
----------------- -------------
(In thousands)
<S> <C> <C>
GROSS DEFERRED TAX ASSETS:
CURRENTLY NON-DEDUCTIBLE LIABILITIES AND
RESERVES $1,495 $1,048
NET OPERATING LOSS CARRYFORWARDS 582 514
FEDERAL BUSINESS AND FOREIGN TAX CREDIT
CARRYFORWARDS 615 787
FEDERAL MINIMUM TAX CREDIT CARRYFORWARDS 211 211
------ ------
$2,903 $2,560
====== ======
GROSS DEFERRED TAX LIABILITIES:
DEPRECIATION $ 227 $ 135
====== ======
</TABLE>
27
<PAGE> 28
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES: (CONTINUED)
At December 31, 1995, a valuation allowance of $1,171,000 has been
recorded which relates primarily to state net operating loss and
federal foreign tax credit carryforwards, and certain state deferred
tax deductions for which a tax benefit will not likely be realized. The
net change since April 1, 1995 in the valuation allowance for deferred
tax assets was an increase of $282,000 related primarily to foreign tax
credits and deferred state tax benefits which will not likely be
realized. Deferred tax assets and liabilities are offset for
presentation in the consolidated balance sheet.
At December 31, 1995, the Company had $8,100,000 of state net
operating loss carryforwards that expire principally in 1996 through
2000. Federal business and foreign tax credit carryforwards which are
available to offset future federal income taxes total $615,000 and
principally expire in 1997 through 2002. The Company has a federal
minimum tax credit carryforward of approximately $211,000 which will be
available to reduce federal tax in future years.
Differences between the U.S. statutory federal income tax rate and
the company's effective income tax rate are analyzed below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -----------------------------
DECEMBER 31, 1995 APRIL 1, 1995 APRIL 2, 1994
----------------- ------------- -------------
<S> <C> <C> <C>
FEDERAL STATUTORY TAX RATE (34.0)% 34.0% 34.0%
OVERACCRUAL OF PRIOR YEAR INCOME TAXES (41.0)
STATE INCOME TAXES, NET OF FEDERAL
INCOME TAXES 9.7 5.7 24.9
NON-DEDUCTIBLE PURCHASE ACCOUNTING
ADJUSTMENTS 22.6 8.4 31.5
VALUATION ALLOWANCE (33.7) (186.9)
FEDERAL BENEFIT OF ACQUIRED LOSS
CARRYFORWARDS USED TO REDUCE GOODWILL 1.0 20.0
EFFECT OF FOREIGN OPERATIONS 5.3 3.8
OTHER (1.8) .5 (2.5)
----- ----- ------
EFFECTIVE TAX RATE 1.8% 19.7% (120.0)%
===== ===== ======
</TABLE>
11. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash, trade accounts receivable, other
current assets, trade accounts payable, and accrued expenses
approximate fair value because of the short maturity of those
instruments. The carrying value of marketable securities available for
sale is equal to fair value, as discussed in Note 1. The carrying
amount of borrowings under the Working Capital Facility, the Term Loan
Facility and the Barclay's agreement approximate their fair value. The
fair value of the Company's debt is estimated based on the quoted
market prices of the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. The
estimated fair values of the Company's debt instruments are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
<C> <C> <C>
10.5% DEBENTURES $3,454 $4,200
8% NOTES 1,414 1,700
</TABLE>
28
<PAGE> 29
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board (the "FASB") issued
Financial Accounting Standard No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (FAS
121) in March 1995. FAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The entity must estimate the future cash flows expected to
result from the use of the asset and its eventual disposition, and
recognize an impairment loss for any difference between the fair value
of the asset and the carrying amount of the asset. FAS 121 must be
adopted for the year beginning after December 15, 1995. The effect, if
any, on the Company's financial position or results of operations from
adoption of FAS 121 is not expected to be material.
The FASB issued Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation," in October 1995 effective for years
beginning after December 15, 1995. Under provisions of this accounting
standard, the Company is not required to change its method of
accounting for stock-based compensation. Management expects to retain
its current method of accounting.
13. SIGNIFICANT TRANSACTIONS:
During the quarter ended December 31, 1995, the Company recorded
provisions for the following non-recurring operating expenses:
litigation settlement of $680,000, restructuring costs of $425,000,
pension of $339,000 and other non-recurring items totaling $246,000. In
addition, the Company recorded other charges of $42,000 for estimated
loss on disposal of unused real estate and $75,000 for environmental
clean-up. The provision for restructuring covers the costs associated
with the formation of the printer group and the discontinuance of
certain products. A substantial portion of the provision relates to
employee severance costs.
During the fourth quarter of fiscal 1995, the Company recorded an
additional provision for the estimated loss on disposal of unused real
estate of $50,000 and an additional provision for estimated
environmental clean-up costs of $60,000. Also in the fourth quarter,
the Company recorded an adjustment to fully recognize federal deferred
tax benefits as discussed in Note 10.
During the fourth quarter of fiscal 1994, the Company recorded
several non-recurring charges, including: a provision for the estimated
loss on disposal of unused real estate of $132,000; estimated
environmental clean-up costs of $270,000; and a provision for
litigation matters totaling $280,000. Also in the fourth quarter, the
Company recorded one-time tax credits, including the reversal of an
excess income tax accrual of $300,000 and the adjustment to the
valuation allowance discussed in Note 10.
29
<PAGE> 30
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INTERNATIONAL OPERATIONS
Prior to fiscal year 1995, the Company had no foreign operations and
export sales were minimal. As a result of the acquisition of Cash Bases, the
Company acquired manufacturing facilities in the United Kingdom. Amounts
included in the accompanying consolidated financial statements associated
with operations outside the United States consist of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -------------
DECEMBER 31, 1995 APRIL 1, 1995
----------------- -------------
<S> <C> <C>
SALES:
DOMESTIC $ 37,424 $ 44,000
FOREIGN 8,839 10,883
ELIMINATION (234) (206)
--------- ---------
TOTAL $ 46,029 $ 54,677
--------- ---------
OPERATING PROFIT:
DOMESTIC $ 893 $ 3,635
FOREIGN (728) 905
--------- ---------
TOTAL $ 165 $ 4,540
--------- ---------
IDENTIFIABLE ASSETS:
DOMESTIC $ 27,284 $ 27,349
FOREIGN 8,441 9,013
--------- ---------
TOTAL $ 35,725 $ 36,362
========= =========
</TABLE>
Net sales are based on the location of the operation. Transfers between
geographic areas are recorded at amounts generally above cost and in
accordance with the regulations of applicable taxing jurisdictions.
Operating profit consists of total net sales less operating expenses and
corporate expenses, and does not include either interest, other income or
income taxes. Identifiable assets of geographic areas are those assets used
in the Company's operations in each area.
The Company had export sales from its United States operations of
approximately $1,644,000 in the nine months ended December 31, 1995 and
$4,073,000 in fiscal 1995. Such sales were primarily to Canada and were not
material in prior years. Export sales from the Company's foreign operations
totaling approximately $4,900,000 are primarily to European countries. The
Company recorded net foreign exchange transaction gains of approximately
$29,000 in the nine months ended December 31, 1995 and $85,000 in the year
ended April 1, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
30
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(A) DIRECTORS.
The information contained in "Information Concerning Nominees for
Election as Directors and Executive Officers" of the Company's Proxy Statement
(the "Proxy Statement") for its Annual Meeting of Shareholders which is
scheduled to be held on May 30, 1996 is hereby incorporated herein by reference.
Also see Item 1(E)(i) above.
(B) EXECUTIVE OFFICERS.
See Item 1(E)(ii) above.
(C) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information contained in "Compliance with Section 16(a)" of the
Proxy Statement is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained in "Compensation of Directors and Executive
Officers" of the Proxy Statement is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement is hereby incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in "Certain Relationships and Related
Transactions" of the Proxy Statement is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING FINANCIAL STATEMENTS AND EXHIBITS ARE FILED AS PART OF
THIS REPORT:
(i) Financial statements
See Item 8 on page 13.
(ii) Financial statement schedules
See Item 8 on page 13.
(iii) List of Exhibits.
See Exhibit Index on page 33.
(B) REPORTS ON FORM 8-K.
The Company filed a Current Report on Form 8-K on December 26, 1995
to report (a) the decision rendered against the Company in litigation between
the Company and a former landlord, and (b) the change in fiscal year.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
----------------------------------------
Seth M. Lukash
Chairman of the Board, President,
Chief Executive Officer, Chief Operating
Officer and Director
Date: March 28, 1996
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Seth M. Lukash Chairman of the Board, President, Chief March 28, 1996
- ----------------------------- Executive Officer, Chief Operating Officer
Seth M. Lukash and Director
(Principal Executive Officer)
/s/ Richard L. Cote Senior Vice President and March 28, 1996
- ----------------------------- Chief Financial Officer
Richard L. Cote
(Principal Financial Officer)
/s/ George T. Crandall Vice President, Treasurer, March 28, 1996
- ----------------------------- Controller and Assistant Secretary
George T. Crandall
(Principal Accounting Officer)
/s/ Graham Y. Tanaka Director March 28, 1996
- -----------------------------
Graham Y. Tanaka
/s/ Richard T. Bueschel Director March 28, 1996
- -----------------------------
Richard T. Bueschel
/s/ Paul J. Dunphy Director March 28, 1996
- -----------------------------
Paul J. Dunphy
/s/ Richard W. Sonnenfeldt Director March 28, 1996
- ----------------------------
Richard W. Sonnenfeldt
/s/ C. Alan Peyser Director March 28, 1996
- -----------------------------
C. Alan Peyser
/s/ Thomas R. Schwarz Director March 28, 1996
- -----------------------------
Thomas R. Schwarz
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit Index
Page
Number
------
<S> <C>
3.1 Certificate of Incorporation of Tridex, as amended, filed on June 28,
1985 as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 30, 1985, is hereby incorporated herein by
reference.
3.2 Certificate of Amendment of Incorporation of Tridex, dated October 1,
1987, filed on July 18, 1988 as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 2, 1988 is hereby
incorporated herein by reference.
3.3 Certificate of Amendment of Incorporation of Tridex, dated August 15,
1988, filed on June 29, 1989 as Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby
incorporated herein by reference.
3.4 Certificate of Amendment of Incorporation of Tridex, dated March
31,1989 filed on June 29, 1989 as Exhibit 3.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby
incorporated herein by reference.
3.5 Bylaws of Tridex, as amended and restated as of January 22, 1996. 35
4.1 Description of the Company's common stock set forth in the Company's
Registration Statement on Form 8-A filed July 14, 1986, is hereby
incorporated herein by reference.
4.2 The Tridex Corporation 1989 Long Term Incentive Plan (as amended and
restated) filed as Exhibit A to the Company's Proxy Statement for
Annual Meeting of Shareholders filed September 14, 1994 is hereby
incorporated herein by reference.
4.3 Form of 8% Subordinated Convertible Term Promissory Notes dated January
20, 1993, by and among the Company and the shareholders of Ultimate
Technology Corporation, filed as an Exhibit to Current Report on Form
8-K filed February 10, 1993, is hereby incorporated herein by
reference.
4.4 Form of Registration Rights Agreement, dated January 20, 1993, filed as
an Exhibit to Current Report on Form 8-K filed February 10, 1993, is
hereby incorporated herein by reference.
4.5 Indenture dated as of December 31, 1992 by and among the Company and
American Stock Transfer & Trust Company, as Trustee, filed as an
Exhibit to Current Report on Form 8-K filed February 10, 1993, is
hereby incorporated herein by reference.
4.6 Form of 10.5% Senior Subordinated Convertible Debentures due December
31, 1997, filed as an Exhibit to Current Report on Form 8-K filed
February 10, 1993, is hereby incorporated herein by reference.
4.7 Form of Warrant, dated January 20, 1993, to purchase shares of Tridex
common stock, filed as an Exhibit to Current Report on Form 8-K filed
February 10, 1993, is hereby incorporated herein by reference.
4.8 Form of Registration Rights Agreement, filed as an Exhibit to Current
Report on Form 8-K filed February 10, 1993, is hereby incorporated
herein by reference.
4.9 Form of 10% Subordinated Convertible Term Promissory Note due May 10,
1994 filed as an Exhibit to the Company's Current Report on Form 8-K
filed May 25, 1990, is hereby incorporated herein by reference.
4.10 Registration Rights Agreement, dated as of May 10, 1990, by and among
the Company, Ithaca Peripherals Incorporated and Noteholders filed as
an Exhibit of the Company's Current Report on Form 8-K filed May 25,
1990 is hereby incorporated herein by reference.
4.11 Form of Warrant dated January 20, 1993, to purchase common stock of
Tridex Corporation, filed as an exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended April 3, 1993 is hereby
incorporated herein by reference.
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.1 Employment Agreement, dated as of April 16, 1995, between Tridex and
Seth M. Lukash, filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended April 1, 1995, and hereby
incorporated herein by reference.
10.2 Severance Agreement, dated as of April 16, 1990, between Tridex and
Seth M. Lukash filed as an Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1990 is hereby
incorporated by reference.
10.3 First Amendment to Severance Agreement, dated as of April 16, 1992
between Tridex and Seth M. Lukash, filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended March 28, 1992, is
hereby incorporated by reference.
10.4 Second Amendment to Severance Agreement, dated as of June 1, 1995,
between Tridex and Seth M. Lukash, filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended April 1, 1995, and
hereby incorporated herein by reference.
10.5 Severance Agreement, dated as of April 29, 1990, between Tridex and
George T. Crandall filed as an Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 28, 1992, is hereby
incorporated by reference.
10.6 Employment and Non-competition Agreement, dated as of January 20, 1993,
between Ultimate Technology Corporation and Dennis J. Lewis, filed as
an exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended April 3, 1993 is hereby incorporated herein by reference.
10.7 Severance Agreement, dated as of June 1, 1993 between Tridex and
Richard L. Cote, filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended April 3, 1993 is hereby
incorporated herein by reference.
10.8 First Amendment to Severance Agreement, dated as of June 1, 1995,
between Tridex and Richard L. Cote, filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended April 1,
1995, and hereby incorporated herein by reference.
10.9 Letter Agreement, dated as of June 1, 1995, between Tridex and Richard
L. Cote regarding severance, filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended April 1, 1995, and
hereby incorporated herein by reference.
10.10 The Tridex Corporation 1989 Long Term Incentive Plan (as amended and
restated) filed as Exhibit A to the Company's Proxy Statement for
Annual Meeting of Shareholders filed July 23, 1992 is hereby
incorporated herein by reference.
10.11 Employee Performance Compensation Agreement, dated January 20, 1993 by
and among Tridex and the Ultimate shareholders, filed as an exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended
April 3, 1993 is hereby incorporated herein by reference.
10.12 Amended and Restated Credit Agreement dated as of December 15, 1995 among 39
Tridex Corporation, Ithaca Peripherals Incorporated, Ultimate Technology
Corporation, Magnetec Corporation, Cash Bases Incorporated and Fleet Bank,
National Association.
10.13 Amendment No. 1, dated as of March 15, 1996 to amended and restated Credit 72
Agreement dated as of December 15, 1995 among Tridex Corporation, Ithaca
Peripherals Incorporated, Ultimate Technology Corporation, Magnetec
Corporation, Cash Bases Incorporated and Fleet Bank, National Association.
10.14 Service Agreement, dated June 20, 1994, between Cash Bases G.B. Limited
and Hugh T. Burnett filed on June 30, 1994 as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended April 2,
1994 is hereby incorporated by reference.
10.15 Retirement Agreement, dated as of December 31, 1995, between Tridex 79
Corporation and Alvin Lukash
11.1 Statement re: computation of per share earnings. 82
21.1 List of Subsidiaries of Tridex. 83
23.1 Consent of Independent Accountants. 84
23.2 Consent of Independent Accountants. 85
27.1 Financial Data Schedule
</TABLE>
34
<PAGE> 1
Exhibit 3.5
TRIDEX CORPORATION
AMENDED AND RESTATED BY-LAWS
(Amended and Restated as of January 22, 1996)
Article I. Stockholders' Meetings.
Section 1. Annual meetings. The annual meeting of the stockholders for
the election of directors and the transaction of such other business as may
properly come before the meeting shall be held in May or June of each year on
such date and at such time as the Board of Directors shall determine.
Section 2. Special meetings. Special meetings of the stockholders may
be called by the President, the Board of Directors or the Secretary. Upon the
written request of the holders of not less than ten percent (10%) of each class
of the shares entitled to vote at the meeting, the President shall call a
special stockholders' meeting for the purposes specified in such request.
Section 3. Place of meetings. Meetings of the stockholders shall be
held at such place within or without the State of Connecticut as the Board of
Directors shall designate and in the absence of such designation shall be held
at the principal office of the corporation in Connecticut.
Section 4. Notice. Notice of the time, place and purposes of every
stockholders' meeting shall be given by mailing notice of the same at least
seven (7) days before the meeting to each stockholder of record entitled to vote
thereon.
Section 5. Record date. The Board of Directors may fix a record date
for determination of the stockholders entitled to notice of and to participate
in any dividend or other distribution, any vote on any question at any
stockholders' meeting, or any other action, which record date shall not be more
than forty-five (45) days nor less than ten (10) days in advance of the date of
such dividend distribution, meeting or action.
Article II. Board of Directors.
Section 1. Powers, number, term. The management of all the affairs,
property and business of the corporation shall be vested in a Board of Directors
of not less than five nor more than eleven members, who shall be elected at the
annual meeting of the stockholders for a term of one year and until their
successors are elected and qualified. The Board of Directors may exercise all
powers not specifically reserved to the stockholders.
Section 2. Vacancies. Vacancies in the Board of Directors, from
whatever cause, may be filled by vote of a majority of the remaining Directors.
Any Director thus elected shall hold office until his successor is elected and
qualified.
Section 3. Regular meetings. A regular meeting of the Board of
Directors shall be held immediately following each annual meeting of the
stockholders. Other regular meetings shall be held at such times and places as
may be designated by the Board.
Section 4. Special meetings. Special meetings of the Directors may be
called by the President or by any two Directors upon the giving of reasonable
notice thereof.
Article III. Committees.
Section 1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than three Directors which
shall have and may exercise in the intervals between meetings of the Board all
such powers in the management of the business and affairs of the corporation as
may lawfully be delegated to an executive committee and are not expressly or by
reasonable implication reserved to the Board of Directors or conferred upon
other authority. The Executive committee shall keep minutes of its doings and
shall report thereon to the next meeting of the Board.
35
<PAGE> 2
Section 2. Other committees. The Board of Directors may establish other
standing or special committees with such powers and duties, not inconsistent
with law, as the Board may assign.
Section 3. Tenure and vacancies. Membership on any committee shall be
at the pleasure of the Board of Directors. In the absence of any member of any
committee, the members thereof present at any meeting, although less than a
quorum, may appoint a member of the Board of Directors to act in the place of
such absent member.
Article IV. Officers.
Section 1. Election and tenure. The officers of the corporation shall
be a Chairman, a Vice Chairman, a President, one or more Vice Presidents, a
Secretary and a Treasurer, all of whom shall be elected annually by the
Directors at their meeting following the annual stockholders meeting and shall
hold office at the pleasure of the Board of Directors.
Section 2. Chairman, Vice Chairman, President. The Chairman, or in his
absence the President, shall preside at all meetings of stockholders and
directors. The Vice Chairman shall have such duties not inconsistent with these
by-laws as the Chairman may assign. The President shall have general supervision
of the affairs of the corporation and subject to these by-laws shall exercise
all the powers and perform all the duties normally pertaining to the office.
Section 3. Vice President. The Vice President shall, in the order
designated by the Board of Directors, exercise the function of the President
during his absence or disability and shall each have such other powers and
duties as may be assigned from time to time by the Board of Directors or the
President.
Section 4. Secretary. The Secretary shall issue notices of all
stockholders' and directors' meetings, shall keep minutes of the same, and
perform such other duties as normally pertain to the office or are prescribed by
the President or the Board of Directors.
Section 5. Treasurer. The Treasurer shall be the chief financial
officer of the Corporation, shall have custody of all its monies and securities,
shall keep regular books of account and shall perform such other duties as
normally pertain to the office or are prescribed by the President or the Board
of Directors.
Section 6. Vacancies. All vacancies arising in any office of the
Corporation may be filled by the Board of Directors at any of its meetings.
Section 7. Other officers; multiple offices. The Board of Directors may
appoint such other officers as it shall deem necessary, who shall exercise such
powers and perform such duties as it shall determine. Any two or more offices,
except the offices of President and Secretary, may be held by the same person.
Salaries of all officers shall be fixed by the Board of Directors or by a
Compensation Committee established by the Board of Directors.
Article V. Stock Certificates and Records.
Section 1. Certificates. Certificates of stock shall be in the form
approved by the Board of Directors and shall be signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary and sealed with the seal of the corporation. The Board
of Directors shall have power to appoint a transfer agent and/or registrar and
to require the countersignature of such transfer agent or registrar upon stock
certificates. When any certificate shall be signed by a transfer agent or
registrar, the signatures of the aforesaid officers may be facsimile signatures
and the seal of the corporation may be a facsimile seal.
Section 2. Records. In the absence of the appointment of any transfer
agent or registrar the Secretary shall have charge of the stock books of the
corporation and shall cause all issues and transfers of stock of the corporation
to be recorded therein.
Article VI. Indemnification. The following provisions regarding indemnification
are intended to be consistent with 33-320a of the Connecticut Stock Corporation
Act.
Section 1. Definitions. As used in this Article:
"Indemnified Person" includes any person (or such person's legal
representative) who is or was a director, officer, employee, agent or
shareholder of the corporation and any person who is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee or
agent of another enterprise; and any director, officer or employee who is or
36
<PAGE> 3
was serving at the request of the corporation as a fiduciary of an employee
benefit plan or trust maintained for the benefit of employees of the corporation
or employees of any other enterprise;
"Loss" includes judgements, fines (including ERISA excise taxes),
penalties, and expenses (including amounts paid in settlement and reasonable
attorneys' fees and disbursements);
"Party" includes a person who was, is or is threatened to be made, a
defendant or respondent in a Proceeding; and
"Proceeding" means any threatened, pending or completed action, suit or
proceeding, or appeal thereof, whether civil, criminal, administrative or
investigative, involving any person in his capacity as an Indemnified Person.
Section 2. Indemnification.
(a) For actions other than by or in the right of the corporation, the
corporation shall indemnify any Indemnified Person made a Party to any
Proceeding against any Loss actually incurred by the Indemnified Person in
connection with such Proceeding, except as otherwise provided in Section 3(a).
(b) For actions by or in the right of the corporation, the corporation
shall indemnify any Indemnified Person made a Party to any Proceeding against
reasonable expenses actually incurred by the Indemnified Person in connection
with such Proceeding in relation to matters as to which such Indemnified Person
is finally adjudged not to have breached his duty to the corporation, or where
the court, on application as provided in Section 5 below, shall have determined
that such Indemnified Person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. The
corporation shall not so indemnify any Indemnified Person for amounts paid to
the corporation, to a plaintiff or to counsel for a plaintiff in settling or
otherwise disposing of such a Proceeding, with or without court approval; or for
expenses including attorneys' fees incurred in defending such a Proceeding which
is settled or otherwise disposed of without court approval.
Section 3. Exclusions From Indemnification. The indemnification
provided for in Section 2(a) above shall not be provided to any Indemnified
Person unless (a) the Indemnified Person was successful on the merits in the
defense of any such Proceeding, or (b) it shall be concluded under Section 4
below that such Indemnified Person acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation, or, if
applicable, the best interests of the participants and beneficiaries of the
employee benefit plan or trust (and consistent with the provisions of such plan
or trust) and, with respect to any criminal action, that he had no reasonable
cause to believe his conduct was unlawful, or (c) the court, on application as
provided in Section 5 below shall have determined that such Indemnified Person
is fairly and reasonably entitled to be indemnified, and then for such amount as
the court shall determine; provided, however, that if the claim giving rise to
indemnification under Section 2(a) is based upon the Indemnified Person's
purchase or sale of securities of the corporation or of another enterprise, the
corporation shall only indemnify such Indemnified Person upon the determination
of a court as described in Section 3(c) herein.
Section 4. Conclusion of Good Faith. The conclusion of good faith
provided for in Section 3(b) above may be reached by any one of the following:
(a) the board of directors of the corporation by a consent in writing signed by
a majority of those directors who were not parties to such Proceeding; (b)
independent legal counsel selected by a consent in writing signed by a majority
of those directors who were not parties to such Proceeding; (c) in the case of
any employee or agent who is not an officer or director of the corporation, the
corporation's general counsel; or (d) the shareholders of the corporation by the
affirmative vote of at least a majority of the voting power of shares not owned
by parties to such Proceeding. The Indemnified Person may also apply to a court
for such conclusion, upon application as provided in Section 5 below, even
though the conclusion reached under any of the foregoing shall have been adverse
to the Indemnified Person. The termination of any Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the Indemnified Person did not satisfy
the good faith standard of conduct required under Section 3(b).
Section 5. Application to the Court. Where an application for
indemnification or an application for a conclusion of good faith as provided in
this Article is made to a court, it shall be made to the court in which the
Proceeding is pending or to the superior court for the judicial district where
the principal office of the corporation is located. The application shall
conform to the applicable rules of the court. Notice of such application shall
be provided to the corporation, and to any other persons as the court may
designate.
Section 6. Advance Payment of Expenses. The corporation shall pay the
indemnifiable expenses of an Indemnified Person in advance of the final
disposition of any Proceeding except to the extent that the defense of a claim
against the Indemnified Person is undertaken pursuant to any directors' and
officers' liability insurance maintained by the corporation.
37
<PAGE> 4
The advance payment of such expenses will be subject to the Indemnified Person's
first agreeing in writing to repay such advances if it is thereafter determined
that the Indemnified Person was not entitled to indemnification under this
Article.
Section 7. Notices, Insurance. Promptly after receipt by the
Indemnified Person of a notice of or threat of commencement of any Proceeding
for which indemnification may be sought from the corporation under this Article,
the Indemnified Person shall notify the corporation in writing of such notice or
threat. If, at the time of receipt of such notice, the corporation has any
directors' or officers' liability insurance in effect, the corporation will give
prompt notice of the commencement of such Proceeding to the insurer, and take
all necessary and desirable action to cause such insurer to pay any amounts and
expenses which the Indemnified Person is obligated to pay as a result of such
Proceeding, in accordance with the terms of such insurance policies. The
corporation may obtain insurance providing for greater indemnification than that
described in this Article.
Article VII. Miscellaneous.
Section 1. Fiscal Year. The fiscal year of the corporation shall end on
the last calendar day of December.
Section 2. Informal directors or committee action. Except for an
amendment to these by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof, may be taken without
a meeting if written consent thereto is signed by all members of the Board or
such committee, as the case may be, and such consent is filed with the minutes
of proceedings of the Board or Committee.
Section 3. Waivers of notice. Whenever any notice of the time, place or
purposes of any meeting of the stockholders, directors or any committee is
required to be given by law, the Certificate of Incorporation or these By-laws,
a written waiver thereof, signed by any person entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof, or
actual attendance at such meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such person.
Section 4. Amendments. Except as otherwise provided by law or the
Certificate of Incorporation, the Board of Directors shall have power to adopt,
amend or repeal the By-laws of the corporation.
38
<PAGE> 1
Exhibit 10.12
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of December 15, 1995
among
TRIDEX CORPORATION,
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION,
CASH BASES INCORPORATED
and
FLEET BANK, NATIONAL ASSOCIATION
39
<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 15, 1995
among TRIDEX CORPORATION, a corporation organized under the laws of the State of
Connecticut, ITHACA PERIPHERALS INCORPORATED, a corporation organized under the
laws of the State of Delaware, ULTIMATE TECHNOLOGY CORPORATION, a corporation
organized under the laws of the State of New York, MAGNETEC CORPORATION, a
corporation organized under the laws of the State of Connecticut, and CASH BASES
INCORPORATED, a corporation organized and existing under the laws of the State
of Delaware (collectively, all such corporations being the "Borrowers" and each,
individually, a "Borrower"), and FLEET BANK, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States of America
(the "Bank").
PRELIMINARY STATEMENTS.
A. The Borrowers (other than Cash Bases Incorporated) and the Bank have
entered into a Credit Agreement dated as of June 17, 1994. Cash Bases
Incorporated was added as a "Borrower" under said Credit Agreement pursuant to
the terms of a certain Letter Agreement dated as of December 23, 1994 among Cash
Bases Incorporated, the Bank and the other Borrowers. The Credit Agreement was
amended by a Letter Amendment dated as of March 31, 1995, and Amendment No. 1
dated as of June 22, 1995, and the Revolving Credit Termination Date has been
extended pursuant to correspondence between the Bank and the Borrowers (said
Credit Agreement, as so amended and modified, being hereinafter referred to as
the "Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, the Borrowers are
indebted to the Bank in the aggregate principal amount of $5,291,333.32 as of
the Closing Date (the "Indebtedness"), which indebtedness is owed by the
Borrowers to the Bank without offset, defense, counterclaim of any kind, nature
or description. As security for such Indebtedness, the Borrowers have heretofore
granted to the Bank a first priority security interest in all of the Borrowers'
personal property, whether now owned or hereafter acquired, wherever located of
any kind, nature or description, tangible or intangible, including, without
limitation, the Borrowers' accounts receivable, inventory, equipment, and
general intangibles, and such security interests and liens granted by the
Borrowers to the Bank are hereby reacknowledged and reconfirmed by Borrowers.
C. The Borrowers have requested that the Bank increase the principal
amount available under the Existing Credit Agreement, extend certain maturity
dates under the Existing Credit Agreement and otherwise amend certain provisions
of the Existing Credit Agreement, and the Bank has agreed to do so, subject to
the conditions precedent set forth herein.
D. Effective upon compliance with the conditions precedent set forth in
Section 4.1 hereof, the Existing Credit Agreement is amended and restated in its
entirety to read as set forth herein.
ARTICLE DEFINITIONS; ACCOUNTING TERMS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Adjusted Leverage Ratio" means, for the Borrowers, as at any date, on
a consolidated basis, the ratio of Consolidated Funded Debt to EBITDA, as
measured at the end of each fiscal quarter for the twelve month period then
ended (a rolling twelve month calculation measured as of the end of each
successive quarter).
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any Borrower or
any of its Subsidiaries; (b) which directly or indirectly beneficially owns or
holds five percent or more of any class of voting stock of any Borrower or any
such Subsidiary; (c) five percent or more of the voting stock of which is
directly or indirectly beneficially owned or held by any Borrower or such
Subsidiary; or (d) which is a partnership in which any Borrower or any of its
Subsidiaries is a general partner. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
40
<PAGE> 3
"Amortization Date" means the last day of each calendar month,
commencing on May 31, 1996, up to (and including) the Maturity Date, provided
that if any such day is not a Banking Day, such day shall be the next succeeding
Banking Day (or, if such next succeeding Banking Day falls in the next calendar
month, the next preceding Banking Day).
"Banking Day" means any day on which commercial banks are not
authorized or required to close in Hartford, Connecticut, and whenever such day
relates to a LIBOR Loan or notice with respect to any principal amounts bearing
interest at the LIBO Rate, a day on which dealings in Dollar deposits are also
carried out in the London interbank market.
"Borrowing Base" means, as of any date of determination thereof, an
amount equal to the sum of (i) 80% of Eligible Receivables, plus (ii) the lesser
of (A) 25% of Eligible Inventory or (B) $1,500,000. Unless the Bank shall
otherwise determine, the Borrowing Base as of any date shall be the Borrowing
Base set forth on the most current Borrowing Base Certificate certified and
delivered by a Borrower pursuant to either Section 6.8 or Section 4.2. If, at
any time, the Borrowing Base shall exceed the Working Capital Commitment, for
purposes of this Agreement the Borrowing Base shall be deemed to be equal to the
Working Capital Commitment.
"Borrowing Base Certificate" means a certificate substantially in the
form of Exhibit G hereto or such other form agreed to in writing by the Bank and
the Borrowers.
"Borrowing" means any Loan or Foreign Exchange Transaction requested by
any Borrower hereunder.
"Capital Expenditures" means, for any Person for any period, the Dollar
amount of gross expenditures (including obligations under Capital Leases) made
by such Person during such period for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but not
repairs thereof) incurred by such Person during such period.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Cash Bases GB" means Cash Bases GB Limited, a corporation organized
under the laws of the United Kingdom and a Subsidiary of the Parent.
"Cash Bases GB Excess Cash Flow" means (i) excess cash flow after all
sources and uses of cash as shown on Cash Bases GB's annual audited statement of
cash flows less (ii) the amount (if any) by which (A) the outstanding principal
amount of advances under any working capital or overadvance facility provided to
Cash Bases GB or any of its Subsidiaries as at the end of such fiscal year
exceeds (B) the outstanding principal amount of any such advances as at the end
of the fiscal year immediately preceding such fiscal year. If Cash Bases GB has
any Subsidiaries at any time, the foregoing calculation shall be done on a
consolidated basis with its Subsidiaries.
"Cash Bases GB Pledge Agreement" means the Charge Over Shares and
Securities dated June 20, 1994 by and between the Parent and the Bank, a
photocopy of which is attached hereto as Exhibit H.
"Cash Bases USA" means Cash Bases Incorporated, a Delaware corporation.
"Closing Date" means the date this Agreement has been executed by the
Borrowers and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the Term Commitment together with the Working
Capital Commitment.
"Consolidated Capital Expenditures" means Capital Expenditures of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Current Assets" means Current Assets of the Borrowers and
their Consolidated Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Current Liabilities" means Current Liabilities of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
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"Consolidated Funded Debt" means Funded Debt of the Borrowers and their
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means Net Income of the Borrowers and their
Consolidated Subsidiaries, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Senior Liabilities" means Senior Liabilities of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of a Person in accordance with
GAAP.
"Consolidated Tangible Capital Base" means Tangible Capital Base of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Tangible Net Worth" means Tangible Net Worth of the
Borrowers and their Consolidated Subsidiaries, as determined on a consolidated
basis in accordance with GAAP.
"Current Assets" of any Person at any time means all cash, Receivables
and inventory of such Person.
"Current Liabilities" means all liabilities of a Person treated as
current liabilities in accordance with GAAP, including without limitation (a)
all obligations payable on demand or within one year after the date in which the
determination is made and (b) installment and sinking fund payments required to
be made within one year after the date on which determination is made, but
excluding all such liabilities or obligations which are renewable or extendible
at the option of such Person to a date more than one year from the date of
determination.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
property or services (except trade payables in the ordinary course of business);
(c) Unfunded Benefit Liabilities of such Person (if such Person is not the
Parent, determined in a manner analogous to that of determining Unfunded Benefit
Liabilities of the Parent); (d) the face amount of any outstanding letters of
credit issued for the account of such person; (e) obligations arising under
acceptance facilities; (f) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person,
or otherwise to assure a creditor against loss, including any contingent
obligations under swaps, derivatives, currency exchanges and similar
transactions; (g) obligations secured by any Lien on property of such Person;
and (h) obligations of such Person as lessee under Capital Leases.
"Debt Service Coverage Ratio" means, for any Person, as at any date, on
a consolidated basis, the ratio of (a) EBITDA to (b) the sum of (i) the amount
of principal installments and other principal maturities of Consolidated Funded
Debt of such Person for such period, plus (ii) Interest Expense for such period.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and, to
the extent permitted by law, any other amount payable by any Borrower under this
Agreement or any Note that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date, to, but excluding the date on which such amount is paid
in full equal to two percent above the Variable Rate as in effect from time to
time plus the applicable Margin (provided that, if the amount so in default is
principal of a Fixed Rate Loan and the due date thereof is a day other than the
last day of the Interest Period therefor, the "Default Rate" for such principal
shall be, for the period from and including the due date and to but excluding
the last day of the Interest Period therefor, 2% above the interest rate for
such Loan as provided in Section 2.10 hereof and, thereafter, the rate provided
for above in this definition).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, for any Person, for any period, earnings before
Interest Expense, taxes, depreciation, amortization and extraordinary items for
such Person determined in accordance with GAAP.
"Eligible Inventory" means, as of any date of determination thereof,
all Inventory (valued at the lower of the cost or fair market value on a
first-in-first-out basis), but excluding (a) those items that have no use in the
current product line of the Borrowers, (b) obsolete items and used parts, (c)
those finished goods that are not of merchantable quality in the
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ordinary course of business, (d) all Inventory in which the Bank does not have a
first perfected security interest, subject to no other Lien prior to or on a
parity with such security interest, (e) scrap, (f) work-in-process and (g) all
other Inventory which is determined by the Bank to be ineligible for any other
reason generally accepted in the commercial finance business as a reason for
ineligibility. Notwithstanding the preceding sentence, "Eligible Inventory"
shall not include any Inventory not located at premises owned by or leased to a
Borrower unless such Inventory is in transit (and insured) or such Borrower has
made a formal financing statement filing against the consignee of such Inventory
and has given any party claiming of record a security interest in such
consignee's inventory, or other assets that might include such Inventory, notice
of such Borrower's consignment arrangements with such consignee or has taken
equivalent protective steps satisfactory to the Bank.
"Eligible Receivable" means, as of any date of determination thereof,
all Receivables owing to the Borrowers net of the Borrowers' customary reserves,
unearned customer deposits, taxes, trade or other documents, discounts, claims,
credits, returns, rebates, allowances or set-offs, excluding the following:
(i) any Receivable unpaid for 90 or more days from the date of the
original invoice;
(ii) any goods the sale of which gave rise to such Receivable not
shipped or delivered to the account debtor on an absolute sale basis or goods
shipped on a bill and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis, or on the basis of any other similar
understanding, or any part of such goods has been returned or rejected;
(iii) any Receivable evidenced by chattel paper or an instrument
of any kind;
(iv) any Receivable which is owed by an account debtor which (A)
is insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, threatened or pending, which might
have an adverse effect on the business of such account debtor or (B) is, in the
sole discretion of the Bank, deemed ineligible for credit or other reasons;
(v) all Receivables deemed uncollectable by a Borrower or turned
over to collection agencies or attorneys;
(vi) any Receivable arising from the shipment of goods or the
performance of services, such shipment or performance having not been fully
completed or rendered;
(vii) any Receivable which is not a valid, legally enforceable
obligation of the account debtor or is subject to any present or contingent, or
any fact exists which is the basis for any future, offset or counterclaim or
other defense on the part of such account debtor;
(viii) any Receivable not evidenced by an invoice or other
documentation in form acceptable to the Bank;
(ix) any Receivable which arises out of any transaction between
(A) a Borrower and (B) any other Borrower or a Subsidiary of the Parent or any
Affiliate;
(x) any Receivable which is subject to any provision prohibiting
its assignment or requiring notice of or consent to such assignment;
(xi) all Receivables from customers having their place of business
outside of the United States of America, except for such Receivables backed by
either (A) letters of credit denominated in Dollars issued to a Borrower by
banks acceptable to the Bank or (B) credit insurance policies acceptable to the
Bank;
(xii) all Receivables arising out of or in connection with advance
billings of a customer's requirements of supplies over a period of time;
(xiii) all Receivables that do not conform to the representations
and warranties contained in Article 2 of the Security Agreement;
(xiv) all Receivables in which the Bank does not have a first
perfected security interest, subject to no other Lien prior to or on a parity
with such security interest;
(xv) all Receivables not denominated in Dollars;
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<PAGE> 6
(xvi) all Receivables from an account debtor if more than 50% of
the aggregate Dollar amount of invoices billed with respect to such account
debtor is more than 90 days past due according to the original terms of payment;
(xvii) if any account debtor owes greater than 15% of the Dollar
value of total Receivables collectively owed to the Parent and its Subsidiaries
on a consolidated basis, then all Receivables owed by such account debtor in
excess of such 15% limitation shall be ineligible;
(xviii) any Receivable which is owed by an account debtor who has
disputed liability or made any claim with respect to any other account due from
such account debtor to a Borrower, except the foregoing exclusion shall not
apply to any account debtor unless and until such disputed amounts equal or
exceed twenty percent (20%) of the aggregate Dollar amount of accounts due from
such account debtor; and
(xix) any Receivable which is determined by the Bank to be
ineligible for any other reason generally accepted in the commercial finance
business as a reason for ineligibility.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of any group of organizations (i) described in section 414(b) or (c) of
the Code of which a Borrower is a member, or (ii) solely for purposes of
potential liability under section 302(c)(11) of ERISA and section 412(c)(11) of
the Code and the lien created under section 302(f) of ERISA and section 412(n)
of the Code, described in section 414(m) or (o) of the Code of which a Borrower
is a member.
"Event of Default" has the meaning given such term in Section 9.1.
"Excess Cash Flow" means (i) excess cash flow after all sources and
uses of cash as shown on the Borrowers' annual audited statement of cash flows
less (ii) the amount (if any) by which (A) the outstanding principal amount of
Working Capital Loans as at the end of such fiscal year exceeds (B) the
outstanding principal amount of Working Capital Loans as at the end of the
fiscal year immediately preceding such fiscal year (the term "Working Capital
Loans" as used in this clause (B) to have the meaning ascribed to it in the
Existing Credit Agreement for the first such calculation following the Closing
Date).
"F/E Credit" means, at the date of determination, the aggregate Dollar
amount of the risk internally ascribed by the Bank to all obligations under or
pursuant to all Foreign Exchange Transactions. As of the Closing Date, it is the
policy of the Bank to assess the risk by multiplying the aggregate daily market
value of Foreign Exchange Transactions by 0.2, but there can be no assurance
that such internal formula will not change.
"Facility Documents" means this Agreement, the Notes, the Pledge
Agreement, the Cash Bases GB Pledge Agreement, the Security Agreement, the
Interest Rate Protection Agreements and each of the documents, certificates or
other instruments referred to in Article 4 hereof as well as any other document,
instrument or certificate to be delivered by any Borrower in connection with
this Agreement or in connection with the documents, certificates or instruments
referred to in Article 4, including documents delivered in connection with any
Borrowing.
"Federal Funds Rate" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of Boston for such day (or for any day
that is not a Banking Day, for the immediately preceding Banking Day).
"Fixed Rate" means any LIBO Rate or any Offered Rate.
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"Fixed Rate Loan" means any LIBOR Loan or any Offered Loan.
"Foreign Exchange Transaction" means any transaction between any
Borrower and the Bank involving a forward foreign exchange contract.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting the Parent or any of its Subsidiaries or Affiliates before any court,
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or the receipt of notice by any such party that any of them
is a suspect in or a target of any governmental inquiry or investigation, which
may result in an indictment of any of them or the seizure or forfeiture of any
of their property.
"Funded Debt" means, with respect to any Person, all Debt of such
Person for money borrowed.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.5 (except for changes concurred in by the Borrowers' independent
public accountants).
"Interest Expense" shall mean, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP, of (a) all interest on
Debt that is accrued as an expense during such period (including, without
limitation, imputed interest on Capital Lease obligations), plus (b) all amounts
paid, accrued or amortized as an expense during such period in respect of
interest rate protection agreements, minus (c) all amounts received or accrued
as income during such period in respect of interest rate protection agreements.
"Interest Period" means, with respect to any Fixed Rate Loan, the
period commencing on the date such Loan is made, converted from another type of
Loan or renewed, as the case may be, and ending, as a Borrower may select
pursuant to Section 2.14, (i) with respect to any LIBOR Loan, on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, provided that each such Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month; and (ii) with respect to any
Offered Loan, at the end of the period mutually agreed to by the Bank and a
Borrower pursuant to Section 2.15.
"Interest Rate Protection Agreement" means any interest rate protection
agreement entered into with the Bank or one or more of its affiliates whereby
the Borrowers obtain a hedge or cap for the interest rate that will be payable
by the Borrowers on the LIBOR Loans that are outstanding with respect to the
Term Loan.
"Inventory" means all inventory, now or hereafter owned and wherever
located, of the Borrowers, including (without limitation) raw materials,
work-in-process, finished goods, supplies and packaging materials.
"Lending Office" means the lending office of the Bank set forth on the
signature page.
"LIBO Rate" means with respect to any Interest Period for LIBOR Loans,
a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of one
percent) determined by the Bank to be equal to the quotient of (i) the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of one percent) quoted
at approximately 11:00 a.m. London time by the principal London branch of the
Bank two Banking Days prior to the first day of such Interest Period for the
offering to leading banks in the London interbank market of Dollar deposits in
immediately available funds, for a period, and in an amount, comparable to the
Interest Period and principal amount of the LIBOR Loan outstanding during such
Interest Period, divided by (ii) one minus the Reserve Requirement for such
LIBOR Loan for such Interest Period.
"LIBOR Loan" means any Working Capital Loan, or any designated portion
of the principal of the Term Loan, when and to the extent the interest rate
therefor is determined on the basis of the definition "LIBO Rate."
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, negative pledge, charge, conditional
sale, title retention agreement, financing lease or other encumbrance or similar
right of others, or any agreement to give any of the foregoing.
"Loan" or "Loans" means, as the context requires, (i) any loan made by
the Bank pursuant to Section 2.1, whether a Term Loan or a Working Capital Loan
or (ii) one or more designated portion(s) of the principal of the Term Loan
bearing interest at a LIBO Rate, an Offered Rate and/or a Variable Rate.
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"Margin" means (a) for a Variable Rate Loan, (i) with respect to the
Term Loan, 1.25 percentage points, (ii) with respect to the Working Capital
Loans, 1.00 percentage points, and (b) for a LIBOR Loan, the Margin for such
type of Loan that would apply under Section 2.13.
"Maturity Date" means November 30, 2001; provided that if such date is
not a Banking Day, the Maturity Date shall be the next succeeding Banking Day
(or, if such next succeeding Banking Day falls in the next calendar month, the
next preceding Banking Day) or (ii) the earlier date of maturity of the Term
Loan pursuant to Section 9.2.
"Multiemployer Plan" means a Plan defined as such in section 3(37) of
ERISA to which contributions have been made by the Borrowers or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Income" of any Person for any period means the net income (loss)
of such Person for such period determined in accordance with GAAP.
"Notes" means, collectively, the Term Note and the Working Capital
Note, each of which is a "Note."
"Notice of Borrowing" shall mean the notice of each Borrowing required
by Section 4.2.
"Offered Loan" means any designated portion of the principal amount of
the Term Loan when and to the extent the interest rate therefor is determined in
relation to the Offered Rate.
"Offered Loan Request" shall have the meaning set forth in Section
2.15.
"Offered Rate" means an interest rate per annum quoted by the Bank to a
Borrower and agreed to by a Borrower pursuant to Section 2.15.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Parent" means Tridex Corporation, a Connecticut corporation.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrowers or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Pledge Agreement" means the pledge agreement dated June 17, 1994 by
the Parent in favor of the Bank, a photocopy of which is attached hereto as in
the form of Exhibit C, as amended by the Pledge Agreement Amendment.
"Pledge Agreement Amendment" means the Amendment to Pledge Agreement in
the form of Exhibit I to be delivered to the Bank under the terms of this
Agreement.
"Prime Rate" means that rate of interest from time to time announced by
the Bank at the Principal Office as its prime commercial lending rate.
"Principal Office" means the principal office of the Bank, presently
located at One Constitution Plaza, Hartford, Connecticut 06115.
"Receivable" means all accounts owing to a Person arising out of or in
connection with the bona fide sale or lease of goods or services in the ordinary
course of business.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
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<PAGE> 9
"Regulatory Change" means any change after the date of this Agreement
in United States federal, state, municipal or foreign laws or regulations
(including without limitation Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of banks
including the Bank of or under any United States, federal, state, municipal or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" means, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in Boston with deposits exceeding $1,000,000,000 against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the LIBO Rate for LIBOR Loans is to be determined as provided
in the definition of "LIBO Rate" in this Section 1.1 or (ii) any category of
extensions of credit or other assets which include LIBOR Loans.
"Revolving Credit Termination Date" means September 30, 1997; provided
that if such date is not a Banking Day, the Revolving Credit Termination Date
shall be the next succeeding Banking Day (or, if such next succeeding Banking
Day falls in the next calendar month, the next preceding Banking Day) or (ii)
the earlier date of termination of the Working Capital Commitment pursuant to
Section 9.2.
"Security Agreement" means the security agreement dated June 17, 1994
by the Borrowers in favor of the Bank, a photocopy of which is attached hereto
as Exhibit D, as amended by the Security Agreement Amendment.
"Security Agreement Amendment" means the Amendment to Security
Agreement in the form of Exhibit J to be delivered to the Bank under the terms
of this Agreement.
"Senior Liabilities" means for any Person at any time, all Debt, other
than contingent liabilities and Subordinated Debt.
"Subordinated Debt" means Funded Debt of a Person subordinated to the
Loans on terms satisfactory to the Bank.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.
"Tangible Capital Base" means, at any date of determination thereof,
the sum of (a) Subordinated Debt of a Person, plus (b) such Person's
shareholders' equity (excluding the effect of extraordinary or unusual items),
less (c) such Person's goodwill, trademarks, patents, organizational costs,
unamortized debt discounts and expenses and other like intangible assets.
"Tangible Net Worth" means, at any date of determination thereof, the
excess of total assets of a Person over total liabilities of such Person,
excluding, however, from the determination of total assets: goodwill,
trademarks, patents, organizational costs, unamortized debt discounts and
expenses and other like intangible assets as defined by GAAP.
"Term Commitment" means the obligation of the Bank to make the Term
Loan under this Agreement up to the aggregate principal amount of $5,500,000.
"Term Loan" shall have the meaning set forth in Section 2.1(a) herein.
"Term Note" means the amended and restated promissory note of the
Borrowers, in substantially the form of Exhibit A hereto, evidencing the
indebtedness of the Borrowers resulting from the Term Loan.
"Unfunded Benefit Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all benefit liabilities (within
the meaning of section 4001(a)(16) of ERISA) under the Plan exceeds the fair
market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrowers
or any ERISA Affiliate under Title IV of ERISA.
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"Variable Rate" means, for any day, the higher of (a) the Federal Funds
Rate for such day plus one-quarter of one percent and (b) the Prime Rate for
such day.
"Variable Rate Loan" means any Working Capital Loan, or any designated
portion of the principal of the Term Loan, when and to the extent the interest
rate therefor is determined in relation to the Variable Rate.
"Working Capital Commitment" means the obligation of the Bank to make
the Working Capital Loans under this Agreement up to the aggregate principal
amount of $5,000,000, subject to Borrowing Base limitations, and as such amount
may be reduced or otherwise modified from time to time pursuant to Section 2.7
or otherwise.
"Working Capital Loans" shall have the meaning set forth in Section
2.1(b) herein.
"Working Capital Note" means the promissory note of the Borrowers, in
substantially the form of Exhibit B hereto, evidencing the indebtedness of the
Borrowers resulting from the Working Capital Loans.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
Section 1.3. Currency Equivalents. For all purposes of this Agreement,
all amounts denominated in a currency other than Dollars shall be converted into
the Dollar equivalent of such amounts. The equivalent in another currency of an
amount in Dollars shall be determined at the rate of exchange quoted by Fleet
Bank of Massachusetts, N.A. in Boston at 9:00 a.m. (Boston time) on the date of
determination, to prime banks in Boston for the spot purchase in the Boston
foreign exchange market of such amount of Dollars with such other currency.
ARTICLE 2. THE CREDIT
Section 2.1. The Loans.
(a) Subject to the terms and conditions of this Agreement, the
Bank agrees to make a loan (the "Term Loan") to the Parent on, or within five
(5) Banking Days of, the Closing Date in the principal amount of the Term
Commitment. Designated portions of the principal amount of the Term Loan may be
outstanding as Variable Rate Loans, LIBOR Loans or Offered Loans (each a "type"
of Loan).
(b) The Term Loan shall be due and payable in installments, as
nearly equal as possible, on each Amortization Date, provided that all amounts
outstanding on the Maturity Date shall be paid in full on the Maturity Date.
(c) Subject to the terms and conditions of this Agreement, the
Bank agrees to make loans (the "Working Capital Loans") to the Borrowers from
time to time from and including the date hereof to and including the Revolving
Credit Termination Date, up to but not exceeding in the aggregate principal
amount at any one time outstanding the amount by which the Borrowing Base
exceeds the aggregate amount of outstanding F/E Credits; provided, however, that
direct borrowings by Cash Bases USA shall not exceed $100,000 in the aggregate
outstanding at any time. The Working Capital Loans may be outstanding as
Variable Rate Loans or LIBOR Loans (each a "type" of Loan).
(d) The Working Capital Loans shall be due and payable on the
Revolving Credit Termination Date.
(e) Foreign Exchange Transactions. The Bank may in its
discretion, upon the request of a Borrower, enter into Foreign Exchange
Transactions for the account of such Borrower so long as the F/E Credits at any
time outstanding do not exceed the lesser of (i) the amount by which the
Borrowing Base exceeds the aggregate outstanding principal amount of Working
Capital Loans and (ii) $500,000. Such Foreign Exchange Transactions shall be
subject to the Bank's normal policies and procedures for such transactions,
including its underwriting requirements and the payment by the Borrowers of the
Bank's customary fees and charges for such transactions, and shall be
accomplished pursuant to documentation satisfactory in all respects to the Bank.
Such documentation shall be deemed to be Facility Documents hereunder and under
the terms and provision of the other Facility Documents, including the Security
Agreement and the Pledge Agreement.
Notwithstanding anything to the contrary herein, (i) no single Foreign
Exchange Transaction may have a daily market value in excess of $500,000, (ii)
no two Foreign Exchange Transactions can settle on the same day, and (iii) no
Foreign Exchange Transaction shall have a settlement date later than the
Revolving Credit Termination Date.
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<PAGE> 11
Section 2.2. The Notes. The Term Loan shall be evidenced by a
promissory note in favor of the Bank in the form of Exhibit A, dated the date of
this Agreement, duly completed and executed by the Borrowers. The Working
Capital Loans shall be evidenced by a single promissory note in favor of the
Bank in the form of Exhibit B, dated the date of this Agreement, duly completed
and executed by the Borrowers.
Section 2.3. Purpose. The Parent shall use the proceeds of the Term
Loan to refinance the entire "Acquisition Loan" under the Existing Credit
Agreement and to refinance all or a portion of the outstanding principal amount
of "Working Capital Loans" under the Existing Credit Facility. The Borrowers
shall use the proceeds of the Working Capital Loans for working capital and
general corporate needs of the Borrowers and to refinance the remaining
outstanding principal amount of "Working Capital Loans" under the Existing
Credit Agreement. No proceeds of the Working Capital Loans shall be used to
directly or indirectly fund the needs of any Subsidiary of any Borrower if such
Subsidiary is not also a Borrower hereunder. No proceeds of the Loans shall be
used for the purpose, whether immediate, incidental or ultimate, of buying or
carrying "margin stock" within the meaning of Regulation U.
Section 2.4. Borrowing Procedures. The Borrowers shall give the Bank
notice of each Borrowing to be made hereunder as provided in Section 2.8. Not
later than 1:00 p.m. Hartford, Connecticut time on the date of such Borrowing,
the Bank shall, subject to the conditions of this Agreement, make the amount of
the Loan to be made by it on such day available to the Borrowers, in immediately
available funds, by the Bank crediting an account of a Borrower designated by
the Borrowers and maintained with the Bank at the Lending Office.
Section 2.5. Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Borrowers shall
have the right to make prepayments of principal, or to convert one type of Loans
into another type of Loans, at any time or from time to time; provided that: (i)
the Borrowers shall give the Bank notice of each such prepayment or conversion
as provided in Section 2.8; (ii) Fixed Rate Loans may be prepaid or converted
only on the last day of an Interest Period for such Loans; (iii) prepayments of
the Term Loan shall be applied to the installments of principal in the inverse
order of their maturities; and (iv) prepayments of the Term Loan may not be
reborrowed.
(b) Mandatory Prepayments.
(i) The Borrowers must prepay no later than one Banking
Day after delivery of any Borrowing Base Certificate an amount by which the sum
of (A) the aggregate principal amount of all outstanding Working Capital Loans
and (B) the aggregate outstanding amount of all F/E Credits exceeds the
Borrowing Base, together with accrued interest to the date of such prepayment on
the principal amount prepaid. Similarly, if, at any time, the Bank determines
that the sum of the aggregate principal amount of outstanding Working Capital
Loans and the aggregate outstanding amount of all F/E Credits exceeds the
Borrowing Base, the Borrowers shall, upon demand, immediately prepay an amount
equal to such excess, together with accrued interest to the date of such
prepayment on the principal amount prepaid.
(ii) The Borrowers must prepay the Term Loan as soon as
possible, but not later than 60 days after delivery of the annual audited
financial statements furnished pursuant to Section 6.8(a), by an amount equal to
50% of Excess Cash Flow for each fiscal year of the Borrowers.
(iii) Each such prepayment in accordance with paragraphs
(i) and (ii) above shall be applied first to any expenses incurred by the Bank,
second to any interest due on the amount prepaid, and last to the outstanding
principal amount of the Loans prepaid, in each case in such manner as the Bank
in its discretion shall determine.
Section 2.6. Late Charges. Payments not received within 10 days of the
due date therefor (including payments which are incomplete because there are
insufficient funds in the Parent's account located at the Bank) will be subject
to a one-time charge equal to 5% of the amount overdue.
Section 2.7. Changes of Commitment.
(a) The Borrowers shall have the right to reduce or terminate
the amount of unused Working Capital Commitment at any time or from time to
time, provided that: (i) the Borrowers shall give notice of each such reduction
or termination to the Bank as provided in Section 2.8; and (ii) each partial
reduction shall be in an aggregate amount at least equal to $500,000. The
Working Capital Commitment once reduced or terminated may not be reinstated.
(b) At any time that the Working Capital Commitment is
terminated pursuant to subsection (a) of this Section 2.7, the Borrowers shall
furnish the Bank for deposit in a cash collateral account maintained at the Bank
adequate cash reserves for the benefit of the Bank on the Revolving Credit
Termination Date in the amount of any F/E
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<PAGE> 12
Credits for any Foreign Exchange Transaction which remain outstanding on the
Revolving Credit Termination Date, or must otherwise provide for a financial
institution acceptable to the Bank to indemnify the Bank against loss in
connection with outstanding Foreign Exchange Transactions, pursuant to
indemnification documentation in form and substance satisfactory to the Bank.
Section 2.8. Certain Notices. Notices by the Borrowers to the Bank of
each Borrowing pursuant to Section 2.4, and each prepayment or conversion
pursuant to Section 2.5(a), and each reduction or termination of the Working
Capital Commitment pursuant to Section 2.7 shall be irrevocable and shall be
effective only if received by the Bank not later than 12:00 noon Hartford,
Connecticut time, and (a) in the case of Borrowings and prepayments of,
conversions into and (in the case of LIBOR Loans) renewals of (i) Variable Rate
Loans, given one Banking Day prior thereto;(ii) LIBOR Loans, given two Banking
Days prior thereto; (iii) Offered Loans, given two Banking Days prior thereto;
and (b) in the case of reductions or termination of the Working Capital
Commitment, given three Banking Days prior thereto. Each such notice shall
specify the Loans to be borrowed, prepaid, converted or renewed and the amount
(subject to Section 2.9) and type of the Loans to be borrowed, or converted, or
renewed or prepaid and the date of the Borrowing or prepayment, or conversion or
renewal (which shall be a Banking Day). Each such notice of reduction or
termination shall specify the amount of the Working Capital Commitment to be
reduced or terminated. Each Notice of Borrowing for a Foreign Exchange
Transaction shall be accompanied by the customary application and other
documentation for such transaction.
Section 2.9. Minimum Amounts. Except for Borrowings which exhaust the
full remaining amount of the Borrowing Base or prepayments or conversions which
result in the prepayment or conversion of all Term Loans or Working Capital
Loans, as the case may be, of a particular type, each Borrowing, optional
prepayment, conversion and renewal of principal of Loans of a particular type
shall be in an amount at least equal to (a) $25,000 with respect to Variable
Rate Loans, and (b) $500,000 and integral multiples of $100,000 in excess
thereof with respect to Fixed Rate Loans (borrowings, prepayments, conversions
or renewals of or into Loans of different types or, in the case of Fixed Rate
Loans, having different Interest Periods at the same time hereunder to be deemed
separate borrowings, prepayments, conversions and renewals for the purposes of
the foregoing, one for each type of Interest Period).
Section 2.10. Interest.
(a) Interest shall accrue on the outstanding and unpaid
principal amount of each Loan for the period from and including the date of such
Loan to but excluding the date such Loan is due at the following rates per
annum: (i) for Variable Rate Loans, at a variable rate per annum equal to the
Variable Rate plus the Margin; (ii) for LIBOR Loans, at a fixed rate equal to
the LIBO Rate plus the Margin for the period from and including the first day of
the Interest Period therefor to but excluding the last day of such Interest
Period; and (iii) for an Offered Loan, at a fixed rate equal to the Offered Rate
for the period from and including the first day of the Interest Period therefor
to but excluding the last day of such Interest Period. If the principal amount
of any Loan and any other amount payable by any Borrower hereunder or under
either Note shall not be paid when due (at stated maturity, by acceleration or
otherwise), interest shall accrue on such amount to the fullest extent permitted
by law from and including such due date to but excluding the date such amount is
paid in full at the Default Rate for such type of Loan.
(b) The interest rate on Variable Rate Loans shall change when
the Variable Rate changes and interest on each such Loan shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Interest
on each Fixed Rate Loan shall be calculated on the basis of a year of 360 days
for the actual number of days elapsed.
(c) Accrued interest on all types of Loans shall be due and
payable in arrears upon any payment of principal and on the last day of each
calendar month, commencing December 31, 1995, and on the Revolving Credit
Termination Date with respect to the Working Capital Loans and on the Maturity
Date with respect to the Term Loan; provided that interest accruing at the
Default Rate shall be due and payable from time to time on demand of the Bank.
Section 2.11. Fees.
(a) Commitment Fee. The Borrowers shall pay to the Bank a
commitment fee on the daily average unused Working Capital Commitment (without
giving effect to Borrowing Base limitations) for the period from and including
the date hereof to the Revolving Credit Termination Date at a rate per annum
equal to one-half of one percent (1/2 of 1%), calculated on the basis of a year
of 360 days for the actual number of days elapsed. The accrued commitment fee
shall be due and payable in arrears upon any reduction or termination of the
Working Capital Commitment and on the last day of each March, June, September
and December, commencing on the first such date after the Closing Date.
(b) Advisory Fee. The Borrowers shall pay to the Bank an
advisory fee in the amount of $69,793.34. The first nonrefundable installment of
the advisory fee in the amount of $15,000 was received by the Bank upon
acceptance by the Borrowers of the commitment letter. The second nonrefundable
installment of the advisory fee in the amount of $54,793.34 shall be fully
earned by the Bank on the Closing Date and shall be due and payable by the
Borrowers to the Bank on the Closing Date.
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Section 2.12. Payments Generally. All payments under this Agreement or
the Notes shall be made in Dollars in immediately available funds not later than
1:00 p.m. Hartford, Connecticut, time on the relevant dates specified above
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Banking Day) at the Lending Office of the Bank.
The Bank may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of any
Borrower with the Bank. Until the Bank and the Borrowers otherwise agree, the
Bank shall debit the Parent's account number 9361886549 with the Bank for the
amount of any payment required hereunder, but the Bank may also debit any
ordinary deposit account of any Borrower if the amount in account number
9361886549 is insufficient to make any required payment. The Borrowers shall, at
the time of making each payment under this Agreement or any Note, specify to the
Bank the principal or other amount payable by the Borrowers under this Agreement
or such Note to which such payment is to be applied (and in the event that it
fails to so specify, or if a Default or Event of Default has occurred and is
continuing, the Bank may apply such payment as it may elect in its sole
discretion). If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
Section 2.13. LIBOR Margins. The Margin that will apply to LIBOR Loans
is set forth below and is based upon the Borrowers' Adjusted Leverage Ratio as
at the end of the Borrowers' most recent fiscal quarter, as reported in
accordance with Section 6.8:
<TABLE>
<CAPTION>
LIBOR MARGINS
Working Capital Loans Term Loan
Adjusted Leverage Ratio (Percentage Points) (Percentage Points)
- ----------------------- ------------------- -------------------
<S> <C> <C>
Greater than or equal to 1.25 3.00 3.25
Greater than or equal to 1.00, but less than 1.25 2.50 2.75
Greater than or equal to 0.75, but less than 1.00 2.00 2.25
Less than 0.75 1.50 1.75
</TABLE>
Margin adjustments resulting from such calculations will become effective on the
Banking Day following the date that such calculations are received by the Bank
after delivery in accordance with Section 6.8.
Section 2.14. Interest Periods; Renewals.
(a) In the case of each Fixed Rate Loan, the Borrowers shall
select an Interest Period of any duration in accordance with the definition of
Interest Period in Section 1.1, subject to the following limitations: (i) no
Interest Period may extend beyond an Amortization Date unless, after giving
effect thereto, the aggregate principal amount of the Fixed Rate Loans having
Interest Periods which end after such Amortization Date shall be equal to or
less than the principal amount to be outstanding hereunder after such
Amortization Date; (ii) notwithstanding clause (i) above, no Interest Period
shall have a duration less than one month (in the case of a LIBOR Loan) or one
year (in the case of an Offered Loan), and if any such proposed Interest Period
would otherwise be for a shorter period, such Interest Period shall not be
available; (iii) if an Interest Period would end on a day which is not a Banking
Day, such Interest Period shall be extended to the next Banking Day, unless, in
the case of a LIBOR Loan, such Banking Day would fall in the next calendar month
in which event such Interest Period shall end on the immediately preceding
Banking Day; (iv) no more than five Interest Periods may be outstanding at any
one time.
(b) Upon notice to the Bank as provided in Section 2.8, the
Borrowers may renew any LIBOR Loan on the last day of the Interest Period
therefor as the same type of Loan with an Interest Period of the same or
different duration in accordance with the limitations provided above. If the
Borrowers shall fail to give notice to the Bank of such a renewal, such LIBOR
Loan shall automatically become a Variable Rate Loan on the last day of the
current Interest Period; provided that the foregoing shall not prevent the
conversion of any type of LIBOR Loan into another type of Loan in accordance
with Section 2.5.
Section 2.15. Offered Loans. From time to time, upon request of a
Borrower, the Bank may quote (orally or in writing) a fixed rate of interest (an
"Offered Rate") that would be applicable to designated principal amounts of the
Term Loan specified by such Borrower and for an Interest Period of a duration
specified by such Borrower. On the date of such quotation (or within such period
as shall be agreed upon by a Borrower and the Bank) a Borrower may deliver to
the Bank a written request (the "Offered Loan Request") in accordance with
Section 2.8 (which may be sent by facsimile),
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<PAGE> 14
stating each Offered Loan and its amount, the Offered Rate quoted by the Bank
and the duration and first day of the Interest Period for such Offered Loan,
which day shall be the Banking Day on which such Offered Rate was quoted by the
Bank (or such other day as the Bank shall specify in making its quotation). If
such Offered Loan Request is timely and in accordance with the Bank's quotation,
the Bank will indicate its acceptance of and agreement to such Offered Loan
Request by signing a copy thereof and will send such copy to the Borrowers,
whereupon the designated principal amount referred to in such Offered Loan
Request shall become an Offered Loan on the date specified in such request and
the Borrowers shall pay interest on the principal amount of such designated
principal amount during the Interest Period specified in such Offered Loan
Request, at the Offered Rate specified in such Offered Loan Request. If,
however, the Bank does not sign and return to a Borrower a copy of such Offered
Loan Request within one Banking Day of the date of delivery thereof by a
Borrower to the Bank, then no such designated principal amount will become an
Offered Loan.
Section 2.16. Interest Rate Protection. The Borrowers may enter into
Interest Rate Protection Agreements mutually satisfactory to the Borrowers and
the Bank. The obligations of the Borrowers to the Bank or one or more of its
affiliates under such Interest Rate Protection Agreements will automatically
constitute obligations of the Borrowers under this Agreement and will be secured
by any Lien granted under the Facility Documents pari passu with the other
obligations of the Borrowers under this Agreement.
Section 2.17. Cash Bases GB Pledge Agreement. The Borrowers have
requested that the Cash Bases GB Pledge Agreement be amended within the
six-month period following the Closing Date to reduce the percentage of stock
pledged by the Parent to the Bank from 100% to 66%. The Bank is willing to enter
into such an amendment, in form and substance satisfactory to the Bank, provided
that no Default or Event of Default then exists and the Bank receives an opinion
of British counsel in form and substance satisfactory to the Bank and such other
certificates as it may reasonably require.
ARTICLE 2. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1. Additional Costs.
(a) The Borrowers shall pay to the Bank from time to time on
demand such amounts as the Bank may determine to be necessary to compensate it
for any costs which the Bank determines are attributable to its making or
maintaining any Fixed Rate Loans under this Agreement or the Notes or its
obligation to make any such Loans hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any such Loans or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to the Bank under this
Agreement or the Notes in respect of any of such Loans (other than taxes imposed
on the overall net income of the Bank or of its Lending Office for any of such
Loans by the jurisdiction in which the Principal Office or such Lending Office
is located); or (ii) imposes or modifies any reserve, special deposit, deposit
insurance or assessment, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, the Bank (including any of such Loans or any deposits
referred to in the definition of "LIBO Rate" in Section 1.1); or (iii) imposes
any other condition affecting this Agreement or the Notes (or any of such
extensions of credit or liabilities). The Bank will notify the Borrowers of any
event occurring after the date of this Agreement which will entitle the Bank to
compensation pursuant to this Section 3.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 3.1, in the event that, by reason of any Regulatory Change, the
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of the Bank which includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of the Bank which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if the Bank so elects by notice
to the Borrowers, the obligation of the Bank to make or renew, and to convert
Loans of any other type into, Loans of such type hereunder shall be suspended
until the date such Regulatory Change ceases to be in effect, and the Borrowers
shall on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of such type, either prepay such Loans or convert such Loans
into another type of Loan in accordance with Section 2.5.
(c) Without limiting the effect of the foregoing provisions of
this Section 3.1 (but without duplication), the Borrowers shall pay to the Bank
from time to time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which it determines are
attributable to the maintenance by it or any of its affiliates pursuant to any
law or regulation of any jurisdiction or any interpretation, directive or
request (whether or not having the force of law and whether in effect on the
date of this Agreement or thereafter) of any court or governmental or monetary
authority of capital in respect of its Loans hereunder or its obligation to make
Loans hereunder (such compensation to include, without limitation, an amount
equal to any reduction in return on assets or equity of the Bank to a level
below that
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<PAGE> 15
which it could have achieved but for such law, regulation, interpretation,
directive or request). The Bank will notify the Borrowers if it is entitled to
compensation pursuant to this Section 3.1(c) as promptly as practicable after it
determines to request such compensation.
(d) Determinations and allocations by the Bank for purposes of
this Section 3.1 of the effect of any Regulatory Change pursuant to subsections
(a) or (b), or of the effect of capital maintained pursuant to subsection (c),
on its costs of making or maintaining Loans or its obligation to make Loans, or
on amounts receivable by, or the rate of return to, it in respect of Loans or
such obligation, and of the additional amounts required to compensate the Bank
under this Section 3.1, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis; provided, however, that the Bank
shall provide ninety days' notice of any additional amounts required to
compensate the Bank under this Section 3.1 (the "Adjustment"), and the Borrowers
may thereafter attempt to negotiate the amount of the Adjustment in good faith
with the Bank within ninety days of the day on which the Borrowers are so
notified. If the Borrowers and the Bank are unable to agree on the amount of the
Adjustment within such ninety-day period, then the amount of the Adjustment
shall be the amount set forth in the aforementioned notice from the Bank to the
Borrowers. Whatever the final Adjustment may be, if the Bank shall still have
any Loans outstanding to the Borrowers upon the expiration of such ninety-day
period, then the Adjustment shall be effective retroactive to the date on which
the Borrowers first received notice of the Adjustment. The Bank shall not be
obligated to offer LIBO Rates with respect to Interest Periods commencing during
the period following any such notice and prior to agreement by the Bank and the
Borrowers as to the amount of the Adjustment.
Section 3.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if the Bank determines (which determination shall be
conclusive) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "LIBO Rate" in Section 1.1 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any LIBOR Loans as provided in this
Agreement; or
(b) the relevant rates of interest referred to in the
definition of "LIBO Rate" in Section 1.1 upon the basis of which the rate of
interest for any LIBOR Loans is to be determined do not adequately cover the
cost to the Bank of making or maintaining such Loans; then the Bank shall give
the Borrowers prompt notice thereof, and so long as such condition remains in
effect, the Bank shall be under no obligation to make or renew Loans of such
type or to convert Loans of any other type into Loans of such type and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of the affected type, either prepay such Loans or convert
such Loans into another type of Loans in accordance with Section 2.5.
Section 3.3. Illegality. Notwithstanding any other provision in this
Agreement, in the event that it becomes unlawful for the Bank or its Lending
Office to (a) honor its obligation to make or renew LIBOR Loans hereunder or
convert Loans of any type into Loans of such type, or (b) maintain LIBOR Loans
hereunder, then the Bank shall promptly notify the Borrowers thereof and the
Bank's obligation to make or renew LIBOR Loans and to convert other types of
Loans into Loans of such type hereunder shall be suspended until such time as
the Bank may again make, renew or convert and maintain such affected Loans and
the Borrowers shall, on the last day(s) of the then current Interest Period for
the outstanding LIBOR Loans, as the case may be (or on such earlier date as the
Bank may specify to the Borrowers), either prepay such Loans or convert such
Loans into another type of Loans in accordance with Section 2.5.
Section 3.4. Certain Compensation. The Borrowers shall pay to the Bank,
upon the request of the Bank, such amount or amounts as shall be sufficient (in
the reasonable opinion of the Bank) to compensate it for any loss, cost or
expense which the Bank determines is attributable to:
(a) any payment, prepayment, conversion or renewal of a Fixed
Rate Loan on a date other than the last day of an Interest Period for such Loan
(whether by reason of acceleration or otherwise); or
(b) any failure by the Borrowers to borrow, convert into or
renew a Fixed Rate Loan to be made, converted into or renewed by the Bank on the
date specified therefor in the relevant notice under Section 2.4, 2.5 or 2.14,
as the case may be.
Without limiting the foregoing, such compensation shall include an
amount equal to the excess, if any, of: (i) the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, converted
or renewed or not borrowed, converted or renewed for the period from and
including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for such Loan provided for herein;
over (ii) with respect to a LIBOR Loan, the amount of interest (as reasonably
determined by the Bank) the Bank would have bid in the London interbank market
for Dollar deposits for amounts comparable to such principal amount and
maturities comparable to such period, and with respect to an Offered Loan, the
rate determined by the Bank to be its marginal cost of funds for commonly
available liabilities issued by it on the date of such Loan for a term
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<PAGE> 16
comparable to such Interest Period. A determination of the Bank as to the
amounts payable pursuant to this Section 3.4 shall be conclusive absent manifest
error.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1. Documentary Conditions Precedent. The obligation of the
Bank to make the Loan or enter into the Foreign Exchange Transaction
constituting the initial Borrowing is subject to the condition precedent that
the Bank shall have received on or before the date of such Borrowing each of the
following, in form and substance satisfactory to the Bank and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) the Pledge Agreement and the Pledge Agreement Amendment
duly executed by the Parent together with (i) certificates representing the
Pledged Shares referred to therein accompanied by undated stock powers executed
in blank, and (ii) evidence that all other actions necessary or, in the opinion
of the Bank, desirable to perfect and protect the security interests created by
the Pledge Agreement have been taken;
(c) the Cash Bases GB Pledge Agreement duly executed by the
Parent and such other items as are necessary or, in the opinion of the Bank,
desirable to perfect its security interest in the stock of Cash Bases GB;
(d) the Security Agreement and the Security Agreement
Amendment duly executed by the Borrowers, together with (i) acknowledgment
copies of the financing statements (UCC-1) duly filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of the Bank,
desirable to perfect the security interest created by the Security Agreement;
(ii) certified copies of requests for information (Form UCC-11) identifying all
of the financing statements on file with respect to any Borrower in all
jurisdictions referred to under (i), including the financing statements filed by
the Bank against the Borrowers, indicating that no party claims an interest in
any of the Collateral (as defined in the Security Agreement);
(e) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, attesting to all corporate action taken
by such Borrower, including resolutions of its Board of Directors authorizing
the execution, delivery and performance of the Facility Documents to which it is
a party and each other document to be delivered pursuant to this Agreement and
certifying copies of the Certificate of Incorporation and by-laws of such
Borrower;
(f) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, certifying the names and true signatures
of the officers of such Borrower authorized to sign the Facility Documents to
which it is a party and the other documents to be delivered by such Borrower
under this Agreement;
(g) a certificate of a duly authorized officer of each
Borrower, dated the Closing Date, stating that the representations and
warranties in Article 5 of this Agreement, and Article 2 of the Security
Agreement, and in each other Facility Document, are true and correct on such
date as though made on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(h) an Environmental Indemnification Agreement duly signed by
the Borrowers in form and substance satisfactory to the Bank;
(i) a certificate of good standing for each Borrower from the
Secretary of the State of the state in which such Borrower is incorporated and
each other jurisdiction in which each Borrower is qualified to do business and
equivalent certificates for Cash Bases GB;
(j) payment by the Borrowers to the Bank of the advisory fee
and all other expenses and fees incurred by the Bank;
(k) a Borrowing Base Certificate setting forth the Borrowing
Base within 5 days prior to closing;
(l) a favorable opinion of counsel for the Borrowers, dated
the Closing Date, in substantially the form of Exhibit E and as to such other
matters as the Bank may reasonably request;
(m) evidence of satisfactory capitalization of the Borrowers
and Cash Bases GB, solvency of each Borrower and Cash Bases GB, and certified
fair value balance sheets demonstrating the solvency of each Borrower;
(n) copies of all Subordinated Debt of any Borrower and a
satisfactory review of the same;
(o) an intercreditor agreement between IBM Credit Corporation
and the Bank regarding Liens on assets of Ultimate Technology Corporation, in
form and substance satisfactory to the Bank;
(p) evidence of no material adverse change in the business,
management, operations, properties, prospects or condition (financial or
otherwise) of any Borrower, Cash Bases GB or any of their respective
Subsidiaries since the date of the commitment letter; and
(q) evidence of the absence of any change in market conditions
which, in the Bank's opinion, would materially impair a financial institution's
ability to fund Loans of this type.
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Section 4.2. Additional Conditions Precedent. The obligation of the
Bank to make the Loans or enter into a Foreign Exchange Transaction pursuant to
a Borrowing which increases the amount outstanding hereunder (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing:
(a) the following statements shall be true:
(i) the representations and warranties contained in
Article 5 herein, and in Article 2 of the Security Agreement, and in each other
Facility Document, are true and correct on and as of the date of such Loan as
though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(iii) there has been no material adverse change in the
business, management, operations, properties, prospects or condition (financial
or otherwise) of any Borrower, Cash Bases GB or any of their respective
Subsidiaries since the Closing Date;
(b) the Borrowers shall be current in the delivery of the most
recent Borrowing Base Certificate required to be delivered pursuant to this
Agreement;
(c) a Borrower shall have delivered to the Bank a Notice of
Borrowing in substantially the form of Exhibit F, which shall include a
Borrowing Base Certificate setting forth the Borrowing Base as of the Banking
Day immediately preceding the date of the Notice of Borrowing; and
(d) the Bank shall have received such approvals, opinions or
documents as the Bank may reasonably request.
Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder
and acceptance by any Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty that the statements contained in
Section 4.2(a) are true and correct both on the date of such notice and, unless
any Borrower otherwise notifies the Bank prior to such Borrowing, as of the date
of such Borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants that:
Section 5.1. Incorporation, Good Standing and Due Qualification. Each
of such Borrower and its Subsidiaries is duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
Section 5.2. Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by such Borrower of the Facility Documents
to which it is a party have been duly authorized by all necessary corporate
action and do not and will not: (a) require any consent or approval of its
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing (other than the filing of the financing statements
contemplated by the Security Agreement), registration, consent or approval
under, any law, rule, regulation (including, without limitation, Regulation U),
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to such Borrower or any of its Subsidiaries or
Affiliates; (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which such Borrower is a party or by which it or its
properties may be bound or affected; (e) result in, or require, the creation or
imposition of any Lien (other than as created under the Security Agreement),
upon or with respect to any of the properties now owned or hereafter acquired by
such Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as
the case may be) to be in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
Section 5.3. Legally Enforceable Agreements. Each Facility Document to
which such Borrower is a party is, or when delivered under this Agreement will
be, a legal, valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
Section 5.4. Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of such Borrower, threatened, against or affecting
such Borrower or any of its Subsidiaries before any court, governmental
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agency or arbitrator, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties or business of
such Borrower or any such Subsidiary or of or the ability of such Borrower to
perform its obligation under the Facility Documents to which it is a party.
Section 5.5. Financial Statements. The consolidated and consolidating
balance sheet of the Borrowers and their Consolidated Subsidiaries as at April
1, 1995, and the related consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity of the Borrowers
and their Consolidated Subsidiaries for the fiscal year then ended, and the
accompanying footnotes, together with the opinion thereon as to the consolidated
statements, of Price Waterhouse, independent certified public accountants, and
the interim consolidated and consolidating balance sheet of the Borrowers and
their Consolidated Subsidiaries as at September 30, 1995, and the related
consolidated and consolidating income statement and statements of cash flows and
changes in stockholders' equity for the six-month period then ended, copies of
which have been furnished to the Bank, are complete and correct and fairly
present the financial condition of the Borrowers and their Consolidated
Subsidiaries as at such dates and the results of the operations of the Borrowers
and their Consolidated Subsidiaries for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements). There are no
liabilities of the Borrowers or any of their Consolidated Subsidiaries, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business since April 1, 1995. No information, exhibit or report furnished by
the Borrowers to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading. Since April 1, 1995, there has been no material adverse change in
the condition (financial or otherwise), business, operations or prospects of any
Borrower or any of their Subsidiaries.
Section 5.6. Ownership and Liens. Such Borrower and each of its
Consolidated Subsidiaries has title to, or valid leasehold interests in, all of
its properties and assets, real and personal, including the properties and
assets, and leasehold interests reflected in the financial statements referred
to in Section 5.5 (other than any properties or assets disposed of in the
ordinary course of business), and none of the properties and assets owned by
such Borrower or any of its Subsidiaries and none of its leasehold interests is
subject to any Lien, except as disclosed in such financial statements or as may
be permitted hereunder and except for the Lien created by the Security
Agreement.
Section 5.7. Taxes. Such Borrower and each of its Subsidiaries has
filed all tax returns (federal, state and local) required to be filed and has
paid all taxes, assessments and governmental charges and levies thereon to be
due, including interests and penalties. Absent fraud, the years still subject to
audit by the Internal Revenue Service are the taxable years ending 1991, 1992,
1993 and 1994.
Section 5.8. ERISA. Each Plan, and, to the best knowledge of such
Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable federal or
state law, and no event or condition is occurring or exists concerning which
such Borrower would be under an obligation to furnish a report to the Bank in
accordance with Section 6.8(k) hereof. As of the most recent valuation date for
each Plan, each Plan was "fully funded," which for purposes of this Section 5.8
shall mean that the fair market value of the assets of the Plan is not less than
the present value of the accrued benefits of all participants in the Plan,
computed on a Plan termination basis. To the best knowledge of such Borrower, no
Plan has ceased being fully funded as of the date these representations are made
with respect to any Loan under this Agreement.
Section 5.9. Subsidiaries and Ownership of Stock. Schedule 5.9 is a
complete and accurate list of the Subsidiaries of such Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and showing the
percentage of such Borrower's ownership of the outstanding stock or other
interest of each such Subsidiary. All of the outstanding capital stock or other
interest of each such Subsidiary has been validly issued, is fully paid and
nonassessable and is owned by such Borrower free and clear of all Liens.
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and
correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which such Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or
indicated in such Schedule.
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Section 5.11. Operation of Business. Such Borrower and each of its
Subsidiaries possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither such Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing.
Section 5.12. Hazardous Materials. Such Borrower and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the consolidated financial condition, operations, business or
prospects of the Borrowers and their Consolidated Subsidiaries. Such Borrower
and each of its Subsidiaries are in compliance with the terms and conditions of
all such permits, licenses and authorizations, and are also in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the consolidated financial condition, operations, business or
prospects of the Borrowers and their Consolidated Subsidiaries.
In addition, except as set forth in Schedule 5.12 hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by such Borrower or any of its Subsidiaries to have any permit, license
or authorization required in connection with the conduct of the business of such
Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. s/s 9601(22) ("Release") of any substance
regulated under Environmental Laws ("Hazardous Materials") generated by such
Borrower or any of its Subsidiaries.
(b) Neither such Borrower nor any of its Subsidiaries has
handled any Hazardous Material, other than as a generator, on any property now
or previously owned or leased by such Borrower or any of its Subsidiaries to an
extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrowers and their Consolidated Subsidiaries;
and
(i) to the best of its knowledge, no PCB is or has been
present at any property now or previously owned or leased by such Borrower or
any of its Subsidiaries;
(ii) to the best of its knowledge, no asbestos is or has
been present at any property now or previously owned or leased by such Borrower
or any of its Subsidiaries;
(iii) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously owned or
leased by such Borrower or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any property now or
previously owned by such Borrower or any of its Subsidiaries.
(c) Neither such Borrower nor any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous Material to any
location which is listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLIS") or on any similar state or
foreign list or which is the subject of federal, state, foreign or local
enforcement actions or other investigations which may lead to claims against
such Borrower or any of its Subsidiaries for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA.
(d) No Hazardous Material generated by such Borrower or any of
its Subsidiaries has been recycled, treated, stored, disposed of or Released by
such Borrower or any of its Subsidiaries at any location other than those listed
in Schedule 5.12 hereto.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of such Borrower or any of its
Subsidiaries and no property now or previously owned or leased by such Borrower
or any of its Subsidiaries is listed or proposed for listing on the National
Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state
or foreign list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
such Borrower or any of its Subsidiaries, and no government actions have been
taken or are in process which could subject any of such properties to such Liens
and neither such Borrower nor any of
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its Subsidiaries would be required to place any notice or restriction relating
to the presence of Hazardous Materials at any property owned by it in any deed
to such property.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of such Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by such Borrower or any
of its Subsidiaries which have not been made available to the Bank.
Section 5.13. No Default on Outstanding Judgments or Orders. Such
Borrower and each of its Subsidiaries has satisfied all judgments and neither
such Borrower nor any of its Subsidiaries is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Section 5.14. No Defaults on Other Agreements. Neither such Borrower
nor any of its Subsidiaries is a party to any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which could have a material adverse effect on
the business, properties, assets, operations or conditions, financial or
otherwise, of such Borrower or any of its Subsidiaries, or the ability of such
Borrower to carry out its obligations under the Facility Documents to which it
is a party. Neither such Borrower nor any of its Subsidiaries is in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
Section 5.15. Labor Disputes and Acts of God. Neither the business nor
the properties of such Borrower or of any of its Subsidiaries are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of such Borrower or such
Subsidiary.
Section 5.16. Governmental Regulation. Neither such Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Power Act or any statute or regulation limiting its ability to
incur indebtedness for money borrower as contemplated hereby.
Section 5.17. Partnerships. Neither such Borrower nor any of its
Subsidiaries is a partner in any partnership.
Section 5.18. No Forfeiture. Neither such Borrower nor any of its
Subsidiaries or Affiliates is engaged in or proposes to be engaged in the
conduct of any business or activity which could result in a Forfeiture
Proceeding and no Forfeiture Proceeding against any of them is pending or
threatened.
Section 5.19. Solvency.
(a) The present fair salable value of the assets of such
Borrower after giving effect to all the transactions contemplated by the
Facility Documents and the funding of all Commitments hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such Borrower and
its Subsidiaries as they mature.
(b) The property of such Borrower does not constitute
unreasonably small capital for such Borrower to carry out its business as now
conducted and as proposed to be conducted, including the capital needs of such
Borrower.
(c) Such Borrower does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by such Borrower, and
of amounts to be payable on or in respect of debt of such Borrower). The cash
available to such Borrower, after taking into account all other anticipated uses
of the cash of such Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of such Borrower when such amounts are required
to be paid.
(d) Such Borrower does not believe that final judgments
against it in actions for money damages will be rendered at a time when, or in
an amount such that, such Borrower will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash available
to such Borrower after taking into account all other anticipated uses of the
cash of such Borrower (including the payments on or in respect of debt referred
to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to
pay all such judgments promptly in accordance with their terms.
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Section 5.20. Subordinated Debt. The Subordinated Debt of such Borrower
now outstanding, true and complete copies of instruments evidencing which have
been furnished to the Bank, has been duly authorized by such Borrower, has not
been amended or otherwise modified, and constitutes the legal, valid and binding
obligation of such Borrower enforceable against such Borrower in accordance with
its terms. There exists no default in respect of any such Subordinated Debt.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers shall:
Section 6.1. Maintenance of Existence. Preserve and maintain, and cause
each of their respective Subsidiaries to preserve and maintain, their corporate
existence and good standing in the jurisdiction of their incorporation, and
qualify and remain qualified, and cause each of their respective Subsidiaries to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is required.
Section 6.2. Conduct of Business. Continue, and cause each of their
respective Subsidiaries to continue, to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the date of
this Agreement.
Section 6.3. Maintenance of Properties. Maintain, keep and preserve,
and cause each of their respective Subsidiaries to maintain, keep and preserve,
all of its properties (tangible and intangible), necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
Section 6.4. Maintenance of Records. Keep, and cause each of their
respective Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrowers and their respective Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain, and cause each of
their respective Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
Section 6.6. Compliance with Laws. Comply, and cause each of their
respective Subsidiaries to comply, in all respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
Section 6.7. Right of Inspection. At any reasonable time and from time
to time, permit the Bank or any agent or representative thereof, to examine and
make copies and abstracts from the records and books of account of, and visit
the properties of, the Borrowers and any of their respective Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrowers and any such
Subsidiary with any of their respective officers and directors and the
Borrowers' independent accountants. The Bank shall perform an annual field audit
of the Borrowers at the Borrowers' expense; provided that such expenses shall
not exceed $4,000 per annum.
Section 6.8. Reporting Requirements. Furnish to the Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, a consolidated and consolidating
balance sheet of the Borrowers and their Consolidated Subsidiaries as of the end
of such fiscal year and a consolidated and consolidating income statement and
statements of cash flows and changes in stockholders' equity and working capital
of the Borrowers and their Consolidated Subsidiaries for such fiscal year and
computations of Excess Cash Flow and Cash Bases GB Excess Cash Flow for such
fiscal year, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP and as
to the consolidated statements accompanied by an opinion thereon acceptable to
the Bank by Price Waterhouse or other independent accountants of national
standing selected by the Borrowers;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Borrowers, a true and complete copy of the
Parent's Form 10-Q;
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(c) as soon as available and in any event within 25 days after
the end of each fiscal month, a consolidating balance sheet of the Borrowers and
their Consolidated Subsidiaries as of the end of such month and a consolidating
income statement and statements of cash flows and changes in stockholders'
equity and working capital, of the Borrowers and their Consolidated Subsidiaries
for the period commencing at the end of the previous fiscal year and ending with
the end of such month, all in reasonable detail and stating in comparative form
the consolidating figures for the corresponding date and period in the previous
fiscal year and all prepared in accordance with GAAP and certified by the
Chairman or Chief Financial Officer of each Borrower (subject to year-end
adjustments);
(d) promptly upon receipt thereof, copies of any reports,
inclusive of any management letters, submitted to any Borrower or any of its
Subsidiaries by independent certified public accountants in connection with
examination of the financial statements of such Borrower or any such Subsidiary
made by such accountants;
(e) simultaneously with the delivery of the Form 10-Q referred
to above, a certificate of the Chairman or Chief Financial Officer of each
Borrower (i) certifying that to the best of his knowledge no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto, and (ii) with computations
demonstrating compliance with the covenants contained in Articles 7 and 8, and
setting forth the Borrowers' Adjusted Leverage Ratio;
(f) as soon as available and in any event within 90 days after
the end of each fiscal year of the Parent, a true and complete copy of the
Parent's Form 10-K;
(g) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, management's projected financial
statements inclusive of a balance sheet, an income statement and a statement of
cash flow (supported by key assumptions) for each upcoming fiscal year, prepared
on a quarter-by-quarter basis;
(h) simultaneously with the delivery of the annual financial
statements referred to in Section 6.8(a), a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default or Event of
Default, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(i) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Borrower or any of its Subsidiaries which, if determined adversely
to such Borrower or such Subsidiary, could have a material adverse effect on the
financial condition, properties or operations of such Borrower or such
Subsidiary;
(j) as soon as possible and in any event within five days
after the occurrence of each Default or Event of Default a written notice
setting forth the details of such Default or Event of Default and the action
which is proposed to be taken by the Borrowers with respect thereto;
(k) as soon as possible, and in any event within ten days
after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in section 4043(b) of
ERISA, with respect to a Plan, as to which PBGC has not by regulation waived the
requirement of section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event (provided that a failure to meet the minimum
funding standard of section 412 of the Code or section 302 of ERISA including,
without limitation, the failure to make on or before its due date a required
installment under section 412(m) of the Code or section 302(e) of ERISA, shall
be a reportable event regardless of the issuance of any waivers in accordance
with section 412(d) of the Code) and any request for a waiver under section
412(d) of the Code for any Plan;
(ii) the distribution under section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by such Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Borrower or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(vi) the complete or partial withdrawal from a
Multiemployer Plan by such Borrower or any ERISA Affiliate that results in
liability under section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
of such Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under section 4041A of ERISA;
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(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against such Borrower or any ERISA Affiliate to enforce
section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that
pursuant to section 401(a)(29) of the Code or section 307 of ERISA would result
in the loss of tax-exempt status of the trust of which such Plan is a part if
such Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which may
reasonably be expected to constitute grounds for such Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of one or more
Plans increase after the date of this Agreement in an amount which is material
in relation to the financial condition of such Borrower and its Subsidiaries, on
a consolidated basis; provided, however, that such increase shall not be deemed
to be material so long as it does not exceed during any consecutive 2-year
period $200,000;
(l) promptly after the request of the Bank, copies of each
annual report filed pursuant to section 104 of ERISA with respect to each Plan
(including, to the extent required by section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in section 103) and each
annual report filed with respect to each Plan under section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to such Borrower or an ERISA
Affiliate;
(m) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Bank pursuant to any other clause of this Section 6.8;
(n) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which any Borrower or any
of its Subsidiaries sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements which any Borrower
or any such Subsidiary files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any national
securities exchange;
(o) as soon as available, and in any event within 10 days of
the end of each fiscal month, a Borrowing Base Certificate and an aging schedule
with respect to Receivables with names of all account debtors, each as of the
end of such calendar month and each certified by the Chairman or Chief Financial
Officer of each Borrower;
(p) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding;
(q) and such other information respecting the condition or
operations, financial or otherwise, of any Borrower or any of its Subsidiaries
as the Bank may from time to time reasonably request.
Section 6.9. Operating Accounts. Maintain, and cause all of their
respective Subsidiaries to maintain, all United States operating accounts at the
Bank.
Section 6.10. Cash Bases GB Guaranty. If requested by the Bank at any
time that the Bank, based upon an opinion of a mutually acceptable law firm in
the United Kingdom, reasonably determines that a guaranty of all or any part of
the Loans by Cash Bases GB would not violate the laws of the United Kingdom,
cause Cash Bases GB to timely provide a guaranty in form and substance
reasonably satisfactory to the Bank at the Borrowers' cost and expense. In
determining whether or not a guaranty by Cash Bases GB would be lawful, the Bank
shall take into consideration the items that would need to be provided by
accountants, auditors or other similar professionals and whether or not the
professional standards of such Persons would permit such items to be provided in
connection with such a guaranty.
ARTICLE 7. NEGATIVE COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement, the Borrowers shall not:
Section 7.1. Debt. Create, incur, assume or suffer to exist, or permit
any of their respective Subsidiaries to create, incur, assume or suffer to exist
any Debt, except:
(a) Debt of the Borrowers under this Agreement or the Notes;
(b) Debt described in Schedule 5.10, including renewals,
extensions or refinancings thereof, provided that the principal amount thereof
does not increase;
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(c) Debt of any Borrower to any other Borrower;
(d) Debt of the Borrowers pursuant to Interest Rate Protection
Agreements;
(e) Debt of the Borrowers or any such Subsidiary, in the
maximum principal amount of $240,000, arising in connection with that certain
Assistance Agreement by and between the State of Connecticut acting by the
Department of Economic Development and Tridex Corporation pursuant to which the
State of Connecticut has agreed to make available to the Parent up to $240,000,
in the form of loans or grants, for asset acquisitions (the "Assistance
Agreement"); and
(f) Debt of the Borrowers or any such Subsidiary secured by
purchase money Liens permitted by Section 7.3.
Section 7.2. Guaranties, Etc. Assume, guaranty, endorse or otherwise be
or become directly or contingently responsible or liable, or permit any of their
respective Subsidiaries to assume, guarantee, endorse or otherwise be or become
directly or indirectly responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods or services or to
supply or advance any funds, assets, goods or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss) for the
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
Section 7.3. Liens. Create, incur, assume or suffer to exist, or permit
any of their respective Subsidiaries to create, incur, assume or suffer to
exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(a) Liens securing the Loans hereunder and the Borrowers'
obligations under Interest Rate Protection Agreements permitted by Section 2.16;
(b) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(c) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workers' compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(g) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by any Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(h) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary;
(i) Liens set forth on Schedule 7.3, provided the Debt secured
by such Liens is permitted by Section 7.1;
(j) purchase money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(i) any property subject to any of the foregoing is
acquired by a Borrower or any such Subsidiary in the ordinary course of its
business and the Lien on any such property is created contemporaneously with
such acquisition;
(ii) the obligation secured by any Lien so created,
assumed or existing shall not exceed 80 percent of the lesser of cost or fair
market value as of the time of acquisition of the property covered thereby to a
Borrower or such Subsidiary acquiring the same;
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(iii) each such Lien shall attach only to the property so
acquired and fixed improvements thereon; and
(iv) the obligations secured by such Lien are permitted by
the provisions of Section 7.1; and
(k) Liens on assets acquired by a Borrower pursuant to the
Assistance Agreement and securing Debt permitted by Section 7.1(d). The Bank
hereby agrees to execute and deliver to the Borrowers any and all agreements,
instruments and documents reasonably requested by the Borrowers subordinating
the Bank's Lien on any such assets acquired by the Borrowers in connection with
the Assistance Agreement.
Section 7.4. Leases. Create, incur, assume or suffer to exist, or
permit any of their respective Subsidiaries to create, incur, assume or suffer
to exist, any obligation as lessee for the rental or hire of any real or
personal property, except: (a) leases existing on the date of this Agreement and
any extensions or renewals thereof; (b) leases (other than Capital Leases) which
do not in the aggregate require the Borrowers and their respective Subsidiaries
on a consolidated basis to make payments (including taxes, insurance,
maintenance and similar expense which any Borrower or any Subsidiary is required
to pay under the terms of any lease) in any fiscal year of the Borrowers in
excess of $250,000; (c) leases between any Borrower and any other Borrower; (d)
Capital Leases permitted by Section 7.3.
Section 7.5. Investments. Make, or permit any of their respective
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any such Subsidiary to purchase or otherwise acquire, any
capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America having
capital and surplus in excess of $500,000,000; (d) for stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to a Borrower or any such Subsidiary; (e) Interest Rate
Protection Agreements permitted by Section 2.16; and (f) the loans from the
Borrowers to officers of the Borrowers as reflected on the Borrowers' audited
financial statements dated April 1, 1995.
Section 7.6. Dividends. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets or in obligations of a Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any of their respective
Subsidiaries to purchase or otherwise acquire for value any stock of a Borrower
or another such Subsidiary, except that: (a) a Borrower may declare and deliver
dividends and make distributions payable solely in common stock of such
Borrower; (b) a Borrower may purchase or otherwise acquire shares of its capital
stock by exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock; and (c) any Subsidiary may
declare and deliver dividends and make distributions to the Parent.
Section 7.7. Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of, or permit any of their respective Subsidiaries to sell, lease,
assign, transfer or otherwise dispose of, any of its now owned or hereafter
acquired assets (including, without limitation, shares of stock and indebtedness
of such Subsidiaries, receivables and leasehold interests); except: (a) for
inventory disposed of in the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (c) that any such Subsidiary may sell, lease, assign or otherwise transfer
its assets to the Parent.
Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise dispose of
any shares of capital stock of any of their respective Subsidiaries or permit
any such Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 7.9. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate or permit any of their respective
Subsidiaries to enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of
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such Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to such Borrower or such Subsidiary than it would obtain in a
comparable arms' length transaction with a Person not an Affiliate.
Section 7.10. Mergers, Etc. Merge or consolidate with, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or acquire all or substantially all of the
assets or the business of any Person (or enter into any agreement to do any of
the foregoing), or permit any of their respective Subsidiaries to do so except
that any such Subsidiary may merge into or transfer assets to a Borrower other
than Cash Bases GB.
Section 7.11. No Activities Leading to Forfeiture. Neither the
Borrowers nor any of their respective Subsidiaries or Affiliates shall engage in
or propose to be engaged in the conduct of any business or activity which could
result in a Forfeiture Proceeding.
ARTICLE 8. FINANCIAL COVENANTS
So long as any Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement:
Section 8.1. Minimum Tangible Net Worth. The Borrowers shall maintain
at all times, as measured at the end of each fiscal quarter, a Consolidated
Tangible Net Worth of not less than $5,500,000, as such minimum required amount
shall increase from fiscal year to fiscal year by 50% of Consolidated Net Income
for each immediately preceding fiscal year.
Section 8.2. Maximum Leverage Ratio. The Borrowers shall maintain at
all times, as measured at the end of each fiscal quarter, a ratio of
Consolidated Senior Liabilities to Consolidated Tangible Capital Base of not
greater than (a) 1.75 to 1.0 through fiscal year end 1996 and (b) 1.50 to 1.0
thereafter.
Section 8.3. Debt Service Coverage Ratio. The Borrowers shall maintain
at all times a Debt Service Coverage Ratio, as measured at the end of each
fiscal quarter for the twelve month period then ended (a rolling twelve month
calculation measured as of the end of each successive quarter), of not less than
1.50 to 1.0. For purposes of calculating the Debt Service Coverage Ratio as at
the end of each of the first four fiscal quarters ending after the Closing Date,
EBITDA shall not be reduced by the amount of non-recurring charges (up to a
maximum of $1,000,000 in the aggregate) associated with the following: the
consolidation of Ithaca Peripherals Incorporated and Magnetec Corporation into a
Printer Group, restructuring actions in other operations, the establishment of
an unfunded pension arrangement and certain other non-recurring year-end
adjustments.
Section 8.4. Minimum Current Ratio. The Borrowers shall maintain at all
times, as measured at the end of each fiscal quarter, a ratio of Consolidated
Current Assets to Consolidated Current Liabilities of not less than 1.20 to 1.0.
Section 8.5. Consecutive Losses. The Borrowers shall not suffer two (2)
consecutive fiscal quarters of losses, as determined on a consolidated basis in
accordance with GAAP.
Section 8.6. Annual Loss. The Borrowers shall not suffer an annual
loss, as determined on a consolidated basis in accordance with GAAP.
Section 8.7. Cash Bases GB Excess Cash Flow. The Parent shall cause
Cash Bases GB to declare and distribute to the Parent cash dividends from time
to time as permitted by law in amounts sufficient to keep current the Borrowers'
obligations to make payments under this Agreement and the Notes, such cash
dividends to be at least equal to 75% of Cash Bases GB Excess Cash Flow in each
fiscal year of Cash Bases GB or such lesser percentage as is permitted by law.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1. Events of Default. Any of the following events shall be an
"Event of Default":
(a) the Borrowers shall: (i) fail to pay the principal of any
Note as and when due and payable; or (ii) fail to pay interest on any Note or
any fee or other amount due hereunder as and when due and payable;
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(b) any representation or warranty made or deemed made by any
Borrower or Cash Bases GB in this Agreement or in any other Facility Document or
which is contained in any certificate, document, opinion, financial or other
statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) any Borrower shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.3 or Articles 7 or 8; or (ii)
fail to perform or observe any term, covenant or agreement on its part to be
performed or observed (other than the obligations specifically referred to
elsewhere in this Section 9.1) in any Facility Document and such failure shall
continue for 20 consecutive days;
(d) any Borrower, Cash Bases GB or any of their respective
Subsidiaries shall: (i) fail to pay any indebtedness under any Interest Rate
Protection Agreement or any other indebtedness, including but not limited to
indebtedness for borrowed money (other than the payment obligations described in
(a) above), of such Borrower, Cash Bases GB or such Subsidiary, as the case may
be, or any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or (ii) fail to perform
or observe any term, covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any such Interest Rate
Protection Agreement or other indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time,
or both, the maturity of such indebtedness, whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness; or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(e) any Borrower, Cash Bases GB or any of their respective
Subsidiaries: (i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (ii) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 30 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture (other than a proceeding in respect of a
Lien permitted under Section 7.3(b)); or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (vi)
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 30 days or more;
(f) one or more judgments, decrees or orders for the payment
of money in excess of $250,000 in the aggregate shall be rendered against any
Borrower, Cash Bases GB or any of their respective Subsidiaries and such
judgments, decrees or orders shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal;
(g) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Borrower is under an
obligation to furnish a report to the Bank in accordance with Section 6.8(h)
hereof and as a result of such event or condition, together with all other such
events or conditions, such Borrower or any ERISA Affiliate has incurred or in
the opinion of the Bank is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC or a section 4042 Trustee (or any combination of
the foregoing) which is material in relation to the financial position of such
Borrower and its Subsidiaries, on a consolidated basis; provided, however, that
any such amount shall not be deemed to be material so long as all such amounts
do not exceed in the aggregate during any consecutive 2-year period $200,000;
(h) the Unfunded Benefit Liabilities of one or more Plans have
increased after the date of this Agreement in an amount which is material (as
specified in Section 9.1(g) hereof);
(i) (A) except for Seth M. Lukash and/or Alvin Lukash, any
Person or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rules 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 8 percent or more of
the outstanding shares of voting stock of the Parent; or (B) during any period
of 12 consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 12-month period were directors of the
Parent cease for any reason to constitute a majority of the board of directors
of the Parent;
(j) (A) any Forfeiture Proceeding shall have been commenced or
any Borrower shall have given the Bank written notice of the commencement of any
Forfeiture Proceeding as provided in Section 6.8 or (B) the Bank has a good
faith basis to believe that a Forfeiture Proceeding has been threatened or
commenced;
(k) there shall be any material adverse change in the
condition (financial or otherwise), business, management, operations, properties
or prospects of the Borrowers and their Subsidiaries since the Closing Date; or
(l) the Security Agreement, the Pledge Agreement or the Cash
Bases GB Pledge Agreement shall at any time after its execution and delivery and
for any reason cease: (A) to create a valid and perfected first priority
security interest in and to the property purported to be subject to such
agreement; or (B) to be in full force and effect or shall
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be declared null and void, or the validity or enforceability thereof shall be
contested by the party thereto, or such party shall deny it has further
liability or obligation thereunder or such party shall fail to perform any of
its obligations thereunder.
Section 9.2. Remedies. If any Event of Default shall occur and be
continuing, the Bank may, by notice to the Borrowers, (a) declare the Working
Capital Commitment and the Bank's obligation to enter into Foreign Exchange
Transactions to be terminated, whereupon the same shall forthwith terminate, and
(b) declare the outstanding principal of the Notes or any one of them, all
interest thereon and all other amounts payable under this Agreement and the
Notes or any one of them to be forthwith due and payable, whereupon the Note(s),
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers; provided that, in the
case of an Event of Default referred to in Section 9.1(e) or Section 9.1(j)(A)
above, the Working Capital Commitment and the Bank's obligation to enter into
Foreign Exchange Transactions shall be immediately terminated, and the Notes,
all interest thereon and all other amounts payable under this Agreement shall be
immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
ARTICLE 10. MISCELLANEOUS
Section 10.1. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrowers and the Bank,
and any provision of this Agreement may be waived by the Borrowers and the Bank.
No failure on the part of the Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 10.2. Usury. Anything herein to the contrary notwithstanding,
the obligations of the Borrowers under this Agreement and the Notes shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law applicable to
the Bank limiting rates of interest which may be charged or collected by the
Bank.
Section 10.3. Expenses. The Borrowers shall reimburse the Bank on
demand for all reasonable costs, expenses and charges (including, without
limitation, telephone, telex, courier expenses, printing costs, reasonable fees
and charges of external legal counsel for the Bank and reasonable costs
allocated after the Closing Date by its internal legal department) incurred by
the Bank in connection with the preparation, negotiation, execution, delivery,
filing, recording, performance, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes or any Facility Document. The Borrowers agree to
indemnify the Bank and its directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any actual or
proposed use by the Borrowers or any Subsidiary of the proceeds of the Loans,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
Section 10.4. Survival. The obligations of the Borrowers under Section
10.3 shall survive the repayment of the Loans and the termination of the
Commitments.
Section 10.5. Assignment; Participations. This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrowers, the Bank and
their respective successors and assigns, except that no Borrower may assign or
transfer its rights or obligations hereunder. The Bank may assign, or sell
participations in, all or any part of any Loan to another bank or other entity,
in which event (a) in the case of an assignment, upon notice thereof by the Bank
to the Borrowers, the assignee shall have, to the extent of such assignment
(unless otherwise provided therein), the same rights, benefits and obligations
as it would have if it were the Bank hereunder; and (b) in the case of a
participation, the participant shall have no rights under the Facility
Documents. The agreement executed by the Bank in favor of the participant shall
not give the participant the right to require the Bank to take or omit to take
any action hereunder except action directly relating to (i) the extension of a
payment date with respect to any portion of the principal of or interest on any
amount outstanding hereunder allocated to such participant, (ii) the reduction
of the principal amount outstanding hereunder or (iii) the reduction of the rate
of interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the participant is entitled
to receive under its agreement with the Bank. The Bank may furnish any
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information concerning the Borrowers in the possession of the Bank from time to
time to assignees and participants (including prospective assignees and
participants); provided that the Bank shall require any such prospective
assignee or such participant (prospective or otherwise) to agree in writing to
maintain the confidentiality of such information.
Section 10.6. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be delivered in person or
sent by overnight courier, facsimile, ordinary mail, cable or telex addressed to
such party at its "Address for Notices" on the signature page of this Agreement.
Notices shall be effective: (a) on the day on which delivered to such party in
person, (b) on the first Banking Day after the day on which sent to such party
by overnight courier, (c) if given by mail, 48 hours after deposit in the mails
with first-class postage prepaid, addressed as aforesaid, and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Bank shall be effective upon receipt.
Section 10.7. Setoff. The Borrowers agree that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
for the account of any Borrower at any of the Bank's offices, in Dollars or in
any other currency, against any amount payable by any Borrower under this
Agreement or any Note which is not paid when due (regardless of whether such
balances are then due to such Borrower), in which case it shall promptly notify
the Borrowers thereof; provided that the Bank's failure to give such notice
shall not affect the validity thereof.
SECTION 10.8. JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED
STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, AND EACH BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CONNECTICUT STATE OR FEDERAL
COURT. EACH BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO
SUCH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 10.6. EACH BORROWER AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH BORROWER FURTHER WAIVES ANY OBJECTION TO VENUE IN
SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE
BASIS OF FORUM NON CONVENIENS. EACH BORROWER FURTHER AGREES THAT ANY ACTION OR
PROCEEDING BROUGHT AGAINST THE BANK SHALL BE BROUGHT ONLY IN CONNECTICUT STATE
OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT. EACH BORROWER WAIVES ANY
RIGHT IT MAY HAVE TO JURY TRIAL.
(a) Nothing in this Section 10.8 shall affect the right of the
Bank to serve legal process in any other manner permitted by law or affect the
right of the Bank to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdictions.
(b) To the extent that any Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
Section 10.9. Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 10.10. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
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<PAGE> 30
Section 10.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 10.12. Integration. The Facility Documents set forth the entire
agreement between the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CONNECTICUT.
Section 10.14. Confidentiality. The Bank agrees (on behalf of itself
and each of its affiliates, directors, officers, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with safe and
sound banking practices, any nonpublic information supplied to it by the
Borrowers pursuant to this Agreement which is identified by the Borrowers as
being confidential at the time the same is delivered to the Bank, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in
connection with any litigation to which the Bank is a party or (v) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) agrees to
maintain the confidentiality of such information; and provided finally that in
no event shall the Bank be obligated or required to return any materials
furnished by the Borrowers.
Section 10.15. Treatment of Certain Information. Each Borrower (a)
acknowledges that services may be offered or provided to it (in connection with
this Agreement or otherwise) by the Bank or by one or more of its subsidiaries
or affiliates and (b) acknowledges that information delivered to the Bank by any
Borrower may be provided to each such subsidiary and affiliate.
SECTION 10.16. COMMERCIAL WAIVER. EACH BORROWER ACKNOWLEDGES THAT THE
LOANS EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY RIGHT TO
NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE CONNECTICUT
GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE ATTORNEY OF THE
BANK, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT REMEDY WITHOUT
COURT ORDER. FURTHER, EACH BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY
LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD, EXEMPTION, STAY,
REDEMPTION AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAWS.
EACH BORROWER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS AND THE WAIVERS CONTAINED
IN SECTION 10.8 KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF
THE RAMIFICATIONS OF THESE WAIVERS WITH ITS ATTORNEYS.
SECTION 10.17. Multiple Borrowers.
(a) It is understood and agreed by each Borrower that the
handling of this credit facility on a joint borrowing basis as set forth in this
Agreement is solely as an accommodation to the Borrowers and at their request,
and that the Bank shall not incur liability to the Borrowers as a result
thereof. To induce the Bank to do so and in consideration thereof, each Borrower
hereby agrees to indemnify the Bank and to hold the Bank harmless from and
against any and all liabilities, expenses, losses, damages and claims of damage
or injury asserted against the Bank by any Borrower or by any other Person
arising from or incurred by reason of the Bank's handling of the financing
arrangements of the Borrowers as provided herein, reliance by the Bank on any
request or instruction from the Parent or any other Borrower or any other action
taken by the Bank with respect to this Section 10.17.
(b) Each Borrower represents and warrants to the Bank that the
request for joint handling of the Loans to be made by the Bank hereunder was
made because the Borrowers are engaged in an integrated operation which required
financing on a basis permitting the availability of credit from time to time to
each Borrower as required for the continued successful operation of each
Borrower of the integrated operation of the Borrowers. Each Borrower expects to
derive benefit, directly or indirectly, from such availability because the
successful operation of the Borrowers is dependent on the continued successful
performance of the functions of the integrated group.
(c) Each Borrower hereby irrevocably designates the Parent as
its attorney to borrow, sign and endorse notes, and execute and deliver all
instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of each Borrower, and does hereby authorize the
Bank to pay over or credit all Loan proceeds hereunder to the Parent as the
Borrowers' attorney in fact, recognizing, however, that Lender is not bound by
such authorization and may elect either to disburse loan proceeds to each
Borrower directly for its use, to the Parent as attorney for
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<PAGE> 31
any Borrower or to the Parent for its own account, in which case the Parent may
advance or lend such proceeds to the other Borrowers. Each Borrower further
agrees that all obligations hereunder or referred to herein or under any other
Facility Document shall be joint and several, and that each Borrower shall make
payment upon any notes issued pursuant hereto and any and all other obligations
hereunder or referred to herein or under any other Facility Document upon their
maturity by acceleration or otherwise, and that such obligation and liability on
the part of each Borrower shall in no way be affected by any extensions,
renewals and forbearances granted by the Bank to any Borrower, failure of the
Bank to give any Borrower notice of borrowing or any other notice, any failure
of the Bank to pursue or preserve its rights against any other Borrower, the
release by the Bank of any collateral now or hereafter acquired from any
Borrower, failure of the Bank to realize upon such collateral in a commercially
reasonable manner, and that such agreement by each Borrower to pay upon any
notice issued pursuant hereto is unconditional and unaffected by prior recourse
by the Bank to the other Borrowers or any collateral for such Borrowers'
obligations or the lack thereof.
(d) Each Borrower hereby grants a right of contribution to
each other Borrower for any amount paid by such other Borrower in satisfaction
of any obligations under this Agreement, any Note or any other Facility
Document; provided, however, that the aggregate of the rights of contribution
against any Borrower hereunder shall not exceed such Borrower's net worth. In
calculating the net worth of any Borrower for purposes of this paragraph, such
Borrower's obligations under the Facility Documents will not be included in its
liabilities and such Borrower's rights of contribution against other Borrowers
for amounts paid under the Facility Documents will not be included in its
assets.
(e) All notices to, or other communications with, the
Borrowers or any one of them shall be sufficient if given to any of the
Borrowers. Although the Bank may require that all of the Borrowers or a
particular Borrower execute any document (including any Notice of Borrowing) in
any matter pertaining to this Agreement or any of the other Facility Documents,
any one of the Borrowers may bind all of the Borrowers and any document
(including any Notice of Borrowing) signed by any Borrower, and any and all
action taken by any Borrower, is sufficient to represent all of the Borrowers.
Without limiting the foregoing, any single Borrower may make representations and
warranties on behalf of all the Borrowers or any other Borrower, and such
representations and warranties shall be of the same force and effect as if made
directly by such other Borrowers.
Section 10.18. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken or condition exists.
Section 10.19. Time of the Essence. Time and punctuality shall be of
the essence with respect to this instrument, but no delay or failure of the Bank
to enforce any of the provisions herein contained and no conduct or statement of
the Bank shall waive or affect any of the Bank's rights hereunder.
Section 10.20. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of this Agreement, on and after the
date hereof each reference in the Facility Documents to the Credit Agreement or
the Notes, shall mean and be a reference to this Credit Agreement as amended and
restated hereby or the Notes as amended and restated in connection with the
execution and delivery of this Agreement.
(b) The Existing Credit Agreement is amended and restated in
its entirety by this Agreement and the "Notes" delivered under the Existing
Credit Agreement are amended and restated in their entirety by the Notes
delivered pursuant to this Agreement. The Bank shall use its best efforts to
deliver to the Borrowers on the Closing Date the Notes issued to the Banks under
the Existing Credit Agreement marked "REPLACED AND REISSUED"; provided, however,
that the failure to deliver said Notes to the Borrowers shall not adversely
affect the replacement of said Notes. All other Facility Documents shall remain
in full force and effect and are hereby ratified and confirmed. Without limiting
the generality of the foregoing, the Security Agreement and all of the
Collateral described therein, the Pledge Agreement and all of the Pledged
Collateral described therein, the Cash Base GB Pledge Agreement and all of the
Charged Property described therein, and each other security document and all of
the collateral described in such security document, do and shall continue to
secure the payment of all Obligations or Secured Liabilities (as therein
defined), in each case as amended hereby and by the separate amendments to such
documents.
(c) The execution, delivery and effectiveness of this
Agreement shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank under any of the Facility Documents, nor
constitute a waiver of any provision of any of the Facility Documents.
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<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TRIDEX CORPORATION
By__________________________________________
Richard L. Cote, Senior Vice President and
Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By__________________________________________
George T. Crandall
Secretary as to each of the above
corporations
CASH BASES INCORPORATED
By__________________________________________
George T. Crandall
Treasurer
Address for Notices to all Borrowers:
61 Wilton Road
Westport, Connecticut 06880
Attention: Richard L. Cote
Facsimile No.: (203) 226-8806
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<PAGE> 33
FLEET BANK, NATIONAL ASSOCIATION
By_____________________________________
Frederick A. Meagher
Vice President
Address for Notices and Lending Office:
One Stamford Plaza
263 Tresser Boulevard
Stamford, Connecticut 06901
Attn: Frederick A. Meagher
Vice President
Facsimile No.: (203) 351-1511
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<PAGE> 1
Exhibit 10.13
AMENDMENT NO. 1
AMENDMENT dated as of March 15, 1996, among TRIDEX CORPORATION,
a corporation organized under the laws of the State of Connecticut, ITHACA
PERIPHERALS INCORPORATED, a corporation organized under the laws of the State
of Delaware, ULTIMATE TECHNOLOGY CORPORATION, a corporation organized under the
laws of the State of New York, MAGNETEC CORPORATION, a corporation organized
under the laws of the State of Connecticut, CASH BASES INCORPORATED, a
corporation organized under the laws of the State of Delaware (collectively,
all such corporations being the "Borrowers" and each, individually, a
"Borrower"), and FLEET BANK, NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States of America (the
"Bank").
Background
A. The Borrowers (other than Cash Bases Incorporated)
and the Bank have entered into the Amended and Restated Credit Agreement dated
as of December 15, 1995 (as amended, modified or supplemented from time to
time, the "Credit Agreement:).
B. The Borrowers have informed the Bank that they did
not meet certain of the financial covenants contained in the Credit Agreement
for the period ended December 31, 1995, and have requested, among other things,
that the Bank waive its compliance with those covenants for that period.
C. The Borrower and the Bank have agreed to amend the
Credit Agreement as hereinafter set forth.
Agreement
In consideration of the Background, which is incorporated by
reference, the parties, intending to be legally bound, agree as follows:
SECTION 1. Defined Terms. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Credit Agreement.
SECTION 2. Amendments to Credit Agreement. The Credit Agreement
is effective as of the date hereof and, subject to the satisfaction of the
conditions precedent set forth in Section 5 hereof, is amended as follows:
(a) The definition of "Revolving Credit Termination Date"
contained in Section 1.1 of the Credit Agreement is deleted and the following
is substituted therefor:
"Revolving Credit Termination Date" means June 30, 1997;
provided that if such date is not a Banking Day, the Revolving
Credit Termination Date shall be the next succeeding Banking
Day (or, if such next succeeding Banking Day falls in the next
calendar month, the next preceding Banking Day) or (ii) the
earlier date of termination of the Working Capital Commitment
pursuant to Section 9.2 hereof.
(b) The figure "$5,000,000" contained in the definition
of Working Capital Commitment in Section 1.1 of the Credit Agreement is
deleted and the figure "$3,000,000" is substituted therefor.
(c) The following is added after the phrase "outstanding
F/E Credits" in the sixth line of Section 2.1 (c) of the Credit Agreement:
but in no event shall Working Capital Loans exceed the
aggregate outstanding amount of $3,000,000 from time to time
(d) Section 8.1 of the Credit Agreement is deleted and
the following is substituted therefor:
Section 8.1. Minimum Tangible Net Worth. The Borrowers
shall maintain at all times, as measured at the end of each fiscal
quarter, a Consolidated Tangible Net Worth of not less than
$5,500,000 (except for the quarter ended March 31, 1996, for which
such Consolidated Tangible Net Worth shall not be less than
$5,250,000), and such minimum
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<PAGE> 2
Consolidated Tangible Net Worth hereunder shall increase from
fiscal year to fiscal year by an amount equal to 50% of
Consolidated Net Income for each immediately preceding fiscal
year end.
SECTION 3. Waiver of Covenants. Subject to the satisfaction of
the conditions precedent set forth in Section 5 below, the Bank hereby waives
compliance by the Borrowers with the provisions of Sections 8.1, 8.3 and 8.6
for the period ended December 31, 1995 only and the provisions of such Sections
shall remain in full force and effect for all other periods.
SECTION 4. Amendments to Other Facility Documents. The Working
Capital Note is amended and restated in its entirety in the form of Schedule 1
hereto.
SECTION 5. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Bank shall have received counterparts
of this Amendment executed by the Borrowers and the Bank, and the following
documents, each document (unless otherwise indicated) being dated the date of
receipt thereof by the Bank (which date shall be the same for all such
documents), in form and substance satisfactory to the Bank:
(a) The executed Amended and Restated Working Capital
Note in the form of Schedule 1 hereto.
(b) A certificate of the Secretary or an Assistant
Secretary of each Borrower certifying the names and true signatures of the
officers of such Borrower authorized to sign this Amendment and the other
documents to be delivered hereunder.
(c) A favorable opinion of Hinckley, Allen & Snyder,
counsel for the Borrowers, to the effect that this Amendment, and the
Amended and Restated Working Capital Note have been duly authorized, executed
and delivered by the Borrowers, and such instruments constitute the legal,
valid and binding obligations of the Borrowers, enforceable against the
Borrowers, in accordance with their respective terms.
(d) A certificate signed by a duly authorized officer of
each Borrower stating that:
(i) The representations and warranties contained in
Section 8 hereof are correct on and as of the date of such
certificate as though made on and as of such date, and
(ii) No event has occurred and is continuing which
constitutes a Default or Event of Default.
SECTION 6. Termination of LIBOR Loans. Notwithstanding anything
contained in the Credit Agreement to the contrary, the Borrowers agree that,
subsequent to the date hereof, they shall not be entitled to request LIBOR
Loans and that upon the expiration of the Interest Period for each LIBOR Loan
outstanding on the date of this Agreement, each such LIBOR Loan shall be deemed
automatically converted to a Loan bearing interest per annum at the Variable
Rate plus the Margin.
SECTION 7. Amendment Fee. In consideration of the execution and
delivery of this Amendment, the Borrowers agree to pay to the Lender in
immediately available funds, the amount of $35,000, which shall be paid by the
Lender's exercise of its rights under Section 2.12 of the Credit Agreement.
SECTION 8. Representations and Warranties of the Borrower. Each
Borrower represents and warrants as follows:
(a) Such Borrower is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required.
(b) The execution, delivery and performance by such
Borrower of this Amendment, the Amended and Restated Working Capital Note and
the Facility Documents, as amended hereby, to which it is a party have been
duly authorized by all necessary corporate action and do not and will not: (a)
require any consent or approval of its
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<PAGE> 3
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing, registration, consent or approval under, any law,
rule, regulation (including, without limitation, Regulation U), order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to such Borrower or any of its Subsidiaries or Affiliates; (d)
result in a breach of or constitute a default or require any consent under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Borrower is a party or by which it or its properties
may be bound or affected; (e) result in, or require, the creation or imposition
of any Lien , upon or with respect to any of the properties now owned or
hereafter acquired by such Borrower; or (f) cause such Borrower (or any
Subsidiary or Affiliate, as the case may be) to be in default under any such
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award or any such indenture, agreement, lease or instrument.
(c) This Amendment, the Amended and Restated Working
Capital Note and each other Facility Document, as amended hereby, to which
such Borrower is a party is, or when delivered under this Amendment will
be, a legal, valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
(d) There are no actions, suits or proceedings pending
or, to the knowledge of such Borrower, threatened, against or affecting
such Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties or business of
such Borrower or any such Subsidiary or of or the ability of such Borrower to
perform its obligation under this Amendment, the Amended and Restated Working
Capital Note or any of the other Facility Documents, as amended hereby.
(e) The Security Agreement constitutes valid and
perfected first priority Liens in and to the Collateral covered thereby
enforceable against all third parties in all jurisdictions and secure the
payment of all obligations of the Borrowers under the Facility Documents, as
amended hereby, including all obligations of the Borrower under the Amended and
Restated Working Capital Note, and the execution, delivery and performance of
this Amendment do not adversely affect the aforesaid Liens of such Security
Agreement.
SECTION 9. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Sections 1 and 2 hereof,
on and after the date hereof each reference in the Credit Agreement to
"this Agreement," "hereunder," "hereof," "herein" or words of like import, and
each reference in the other Facility Documents to the Credit Agreement and
Notes, shall mean and be a reference to the Credit Agreement and Notes as
amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and the Notes, and all other Facility Documents, shall remain in
full force and effect and are hereby ratified and confirmed. Without
limiting the generality of the foregoing, the Pledge Agreement and all of the
Pledged Collateral described therein, the Security Agreement and all of the
Collateral described therein, and the Cash Bases Pledge Agreement and all of
the Charged Property described therein do and shall continue to secure the
payment of all Obligations, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of the Bank under any of the Facility Documents,
nor constitute a waiver of any provision of any of the Facility Documents.
SECTION 10. Costs, Expenses and Taxes. The Borrowers jointly and
severally agree to pay on demand all costs and expenses of the Bank in
connection with the preparation, execution and delivery of this Amendment, the
Amended and Restated Working Capital Note and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Bank with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities hereunder and thereunder. The Borrowers further jointly and
severally agree to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Amendment, the Amended and Restated Working Capital Note and the other
instruments and documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6. In addition, the Borrowers shall
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment, the Amended and
Restated Working Capital Note and the other instruments and documents to be
delivered hereunder, and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
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<PAGE> 4
SECTION 11. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 12. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TRIDEX CORPORATION
By
-------------------------------------
Richard L. Cote
Title: Senior Vice President and
Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By
-------------------------------------
George T. Crandall
Title: Secretary as to each of the
above corporations
CASH BASES INCORPORATED
By
-------------------------------------
George T. Crandall
Title: Treasurer
FLEET BANK, NATIONAL ASSOCIATION
By
-------------------------------------
Frederick A. Meagher
Title: Vice President
75
<PAGE> 5
SCHEDULE 1
Working Capital Note
AMENDED AND RESTATED PROMISSORY NOTE
$3,000,000 Westport, Connecticut
As of March 15, 1996
For value received, TRIDEX CORPORATION, ITHACA PERIPHERALS
INCORPORATED, ULTIMATE TECHNOLOGY CORPORATION, CASH BASES INCORPORATED and
MAGNETEC CORPORATION (each, a "Borrower" and collectively, the "Borrowers"),
hereby promise, jointly and severally, to pay to the order of FLEET BANK,
NATIONAL ASSOCIATION (the "Bank") at the principal office of the Bank, at One
Constitution Plaza, Hartford, Connecticut 06115, for the account of the
appropriate Lending Office of the Bank, the principal sum of THREE MILLION
DOLLARS ($3,000,000) or, if less, the amount of Working Capital Loans made by
the Bank to the Borrowers pursuant to the Credit Agreement referred to below,
in lawful money of the United States of America and in immediately available
funds, on the date(s) and in the manner provided in said Credit Agreement. The
Borrowers also promise to pay interest on the unpaid principal balance hereof,
for the period such balance is outstanding, at said principal office for the
account of said Lending Office, in like money, at the rates of interest as
provided in the Credit Agreement referred to below, on the date(s) and in the
manner provided in said Credit Agreement.
The date and amount of each Working Capital Loan made by the
Bank to the Borrowers under the Credit Agreement referred to below, and each
payment of principal thereof, shall be recorded by the Bank on its books and,
prior to any transfer of this Note (or, at the discretion of the Bank, at any
other time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof.
This is the Working Capital Note referred to in that certain
Amended and Restated Credit Agreement (as amended from time to time the "Credit
Agreement") dated as of December 15, 1995 among the Borrowers and the Bank and
evidences the Working Capital Loans made by the Bank thereunder. All terms not
defined herein shall have the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
Each Borrower waives presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
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<PAGE> 6
2
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of Connecticut.
This Note amends and restates in its entirety the Amended and
Restated Promissory Note, dated as of December 15, 1995, from the Borrowers to
the Bank, in the original principal amount of Five Million Dollars ($5,000,000)
(the "Existing Note"). Upon the execution and delivery of this Note, this Note
shall replace the Existing Note and shall immediately evidence all outstanding
indebtedness under the Existing Note. The Borrowers and the Bank hereby agree
that the indebtedness embodied in and evidenced by this Note is the same
indebtedness embodied in and evidenced by the Existing Note, and that such
indebtedness is a continuing obligation of the Borrowers to the Bank, and has
been and continues to be fully enforceable, absolute and in existence.
TRIDEX CORPORATION
By
-------------------------------------
Richard L. Cote, Senior Vice President
and Chief Financial Officer
ITHACA PERIPHERALS INCORPORATED,
ULTIMATE TECHNOLOGY CORPORATION,
MAGNETEC CORPORATION
By
-------------------------------------
George T. Crandall
Secretary as to each of the above
corporations
CASH BASES INCORPORATED
By
-------------------------------------
George T. Crandall
Treasurer
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<PAGE> 7
3
<TABLE>
<CAPTION>
Amount Amount of Balance Notation
Date of Loan Payment Outstanding By
---- ------- ------- ----------- --
<S> <C> <C> <C> <C>
</TABLE>
78
<PAGE> 1
Exhibit 10.15
RETIREMENT AGREEMENT
This Agreement made and entered into this 31st day of December, 1995,
by and between TRIDEX CORPORATION ("Tridex" or the "Company"), a Connecticut
corporation with a principal place of business at 61 Wilton Road, Westport,
Connecticut 06880, and ALVIN LUKASH ("Lukash"), an individual residing at 805
Cypress Boulevard, Apartment 311, Building 96, Palm Aire, Pompano Beach, Florida
33069, with reference to the following background:
WHEREAS, Lukash is an executive employee of Tridex pursuant to a
Consulting Services Agreement, dated April 16, 1992 as amended by an Agreement
dated April 1, 1995 (the "Consulting Services Agreement");
WHEREAS, Lukash and Tridex desire to terminate in part the Consulting
Services Agreement;
WHEREAS, Lukash has contributed significantly to the growth and success
of Tridex;
WHEREAS, the parties now wish to enter into this Agreement effective as
of December 31, 1995;
NOW, THEREFORE, intending to be legally bound hereby and in
consideration of the mutual agreements contained herein, the parties hereto
agree as follows:
1. Termination of Agreement. Tridex and Lukash agree to terminate those
provisions of the Consulting Services Agreement contained in paragraph 3 and 4
thereof, effective December 31, 1995, the date of Lukash's retirement. The
remainder of covenants, terms and conditions of the Consulting Services
Agreement shall remain in full force and effect as set forth therein.
2. Retirement Benefit. Effective as of January 1, 1996, Tridex shall
pay Lukash, in equal monthly installments, a pension benefit at the rate of
$100,000 per year until his death or until March 31, 2000, whichever shall occur
first.
3. Effect of a Change of Control Transaction. If a Change of Control
Transaction, as hereinafter defined, occurs, Tridex will establish a trust of
which it will be treated as the owner under Section 671-679 of the Internal
Revenue Service Code of 1986, as amended (a "Rabbi Trust") and immediately
deposit funds with the Trustee equal to the then present value of the remaining
retirement benefit provided for in Paragraph 2 above. The Trust shall be
irrevocable, except that the Trust shall provide that any Trust assets remaining
after all retirement payments provided for in Paragraph 2 above have been made
shall revert to Tridex and the Trust shall also provide that prior to Mr.
Lukash's death, the Trust assets shall not be reachable by Tridex or its
creditors except in the case of the insolvency or bankruptcy of Tridex. The
Trust shall be in substantially the form attached hereto as Exhibit A.
As used herein, a "Change of Control Transaction" shall mean a change
in control of Tridex that results other than from a transaction or series of
transactions between or among two or more of Alvin Lukash, Leslie Lukash,
Mildred Lukash, Seth Lukash, Laura Lukash Knee and Samuel Knee (collectively the
"Lukash Group") and is of a nature that would be required to be reported (i) in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), as in effect on the date
of this Agreement, or (ii) on a Form 8-K filed under the Exchange Act or (iii)
in any other filing by Tridex with the Securities and Exchange Commission;
provided that, without limitation, a Change of Control Transaction shall also be
deemed to have occurred if:
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than a member of the Lukash Group, becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Tridex representing 25% or
more of the voting power of the then-outstanding securities of Tridex;
or
(B) during any period of two consecutive calendar years there is a
change of 40% or more in the composition of the Board of Directors of
Tridex in office at the beginning of the period except for changes
approved by at least two-thirds of the directors then in office who
were directors at the beginning of the period; or
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<PAGE> 2
(C) Tridex shall cease to be a publicly-owned corporation whose shares
entitled to vote for the election of directors are listed on the
American Stock Exchange or another national securities exchange.
4. Calculation of Lump Sum Payment. The lump sum payment provided for
in Paragraph 3 above shall be calculated by applying a discount rate equal to
the applicable annual interest rate established by the Pension Benefit Guaranty
Corporation for purposes of determining the present value of an immediate
annuity distributable to a plan participant upon plan termination for the second
month preceding the month in which the Change of Control Transaction occurs.
5. Status Under ERISA. This Agreement is intended to constitute a plan
that is funded and maintained by Tridex primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees within the meaning of Sections 201(2), 301(a)(3) and Section 401(a)(1)
of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and
shall be interpreted and administered accordingly.
6. Plan Administration. This Agreement shall be administered by the
Board of Directors of the Company which shall have full discretionary authority
to interpret the provisions of the plan and which shall, to the extent required
by ERISA, constitute the administrator of the pension benefit plan created
hereby. The Board may establish its own operative and administrative rules and
procedures in connection with this Agreement to the extent that they are
consistent with Section 503 of ERISA and the regulations thereunder.
7. Withholding of Taxes. Tridex may withhold from any payments made
under this Agreement all federal, state, or local taxes as shall be required
pursuant to any law, regulation or ruling.
8. Notices. Any notices or other communications under this Agreement
shall be sufficient if in writing and sent by registered or certified mail to
Lukash at the last address he has filed in writing with Tridex or in the case of
Tridex, at its principal executive offices.
9. Non-alienation. Lukash shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law.
10. Successor Tridex. This Agreement shall bind Tridex, its successors
and assigns. Subject to the provisions of Section 12, Tridex, shall use its best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of Tridex to assume and agree to perform this Agreement in the
same manner and to the same extent that Tridex would be required to perform if
no such succession had taken place. As used in this Agreement, "Tridex" shall
mean Tridex as hereinbefore defined and any successor to or assignee of all or
substantially all of its business and/or assets.
11. Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction or under any circumstances will be ineffective
to the extent of such invalidity or unenforceability only without invalidating
or rendering unenforceable the remaining provisions hereof in such jurisdiction
or under such circumstances, and any such invalidity or unenforceable shall not
invalidate or render unenforceable such provision in any other jurisdiction or
under any other circumstances.
12. No Assignment. This Agreement is personal in nature, and neither
this Agreement nor any rights or obligations hereunder may be assigned (whether
voluntarily or by operation of law) by either party without the prior written
consent of the other, and any purported assignment without such consent shall be
null and void.
13. Modification. This Agreement may not be amended or modified except
in a writing duly signed by each of the parties hereto.
14. Waivers. The failure of either party to require performance of any
term or obligation of the Agreement, and the waiver by either party of any
breach of this Agreement will not be deemed a waiver of such terms or obligation
and will not foreclosure subsequent enforcement of such term or obligation or
deemed a waiver of any subsequent breach.
15. Counterparts, Section Heading. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The section heading
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
80
<PAGE> 3
16. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the substantive laws of the State of
Connecticut, without any reference to the principals governing the conflict
applicable in that or any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TRIDEX CORPORATION
By:
Title:
Alvin Lukash
81
<PAGE> 1
TRIDEX CORPORATION AND SUBSIDIARIES
EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
----------------------------- --------------------------
December 31, December 31, April 1, April 2,
1995 1994 1995 1994
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Net Income $ (997) $ 1,475 $ 2,686 $ 1,613
========== ========== ========== ==========
Shares:
Average common shares outstanding 3,721,513 3,624,870 3,638,340 3,326,561
Dilutive effect of outstanding
options and warrants as determined
by the treasury stock method 235,236 229,487 334,717
---------- ---------- ---------- ----------
3,721,513 3,860,106 3,867,827 3,661,278
========== ========== ========== ==========
Earnings per common and common
equivalent share: $ (0.27) $ 0.38 $ 0.69 $ 0.44
========== ========== ========== ==========
</TABLE>
82
<PAGE> 1
TRIDEX CORPORATION
EXHIBIT 21.1 SUBSIDIARIES OF TRIDEX CORPORATION
<TABLE>
<CAPTION>
Jurisdiction of Percentage
Name Incorporation Owner Owned
- ---- ------------- ----- -----
<S> <C> <C> <C>
Allu Realty Trust * Massachusetts Tridex 100%
Cash Bases Incorporated Delaware Tridex 100%
Cash Bases GB, Ltd. United Kingdom Tridex 100%
Cash Bases (Deutschland) GmbH Germany Cash Bases 100%
Cash Bases Iberica, S.A. Spain Cash Bases 80%
Digital Matrix Corporation* Connecticut Tridex 100%
Hi-G Canada, Ltd.* Canada Tridex 100%
Hi-G Relais Vertriebs GmbH* West Germany Tridex 100%
Hi-G S.A.R.L.* France Tridex 100%
Ithaca Peripherals Incorporated Delaware Tridex 100%
Ithaca Peripherals Limited United Kingdom Ithaca 100%
Magnetec Corporation Connecticut Tridex 100%
RIL Corporation* Connecticut Tridex 100%
TDX Corp.* Connecticut Tridex 100%
Transcom Incorporated* Maryland Tridex 100%
Tritel Corporation* California Tridex 100%
Ultimate Technology Corporation New York Tridex 100%
</TABLE>
*Inactive
83
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of the Tridex Corporation 1989 Long-Term Incentive Plan of
our report dated March 15, 1996 appearing on page 14 of this Form 10-K.
PRICE WATERHOUSE LLP
March 15, 1996
Hartford, Connecticut
84
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Post-Effective Amendment No. 5 to Registration
Statement on Form S-3 (No. 33-58864) of Tridex Corporation of our report dated
March 15, 1996 appearing on page 14 of this Form 10-K.
PRICE WATERHOUSE LLP
March 15, 1996
Hartford, Connecticut
85
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRIDEX
CORPORATION TRANSITION REPORT ON FORM 10-K FOR THE TRANSITION PERIOD FROM APRIL
2, 1995 TO DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 933
<SECURITIES> 0
<RECEIVABLES> 7,476
<ALLOWANCES> 70
<INVENTORY> 9,597
<CURRENT-ASSETS> 19,313
<PP&E> 11,673
<DEPRECIATION> 6,477
<TOTAL-ASSETS> 35,725
<CURRENT-LIABILITIES> 11,839
<BONDS> 8,324
0
0
<COMMON> 978
<OTHER-SE> 14,584
<TOTAL-LIABILITY-AND-EQUITY> 35,725
<SALES> 46,029
<TOTAL-REVENUES> 46,029
<CGS> 32,032
<TOTAL-COSTS> 32,032
<OTHER-EXPENSES> 13,871
<LOSS-PROVISION> 71
<INTEREST-EXPENSE> 1,035
<INCOME-PRETAX> (980)
<INCOME-TAX> 17
<INCOME-CONTINUING> (997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (997)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
