FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 28, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to:
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Commission file number:
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TRIDEX CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0682273
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
61 Wilton Road, Westport CT 06880
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(Address of principal executive offices)
(Zip Code)
(203) 226-1144
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(Registrant's telephone number, including area code)
Former address:
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(Former name, former address and former fiscal year, if changed
since last report.)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding October 26, 1996
- ------------- ----------------------------
Common stock, 4,009,283
no par value
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 28, 1996 and December 31, 1995 3
Consolidated Statements of Income for
the Quarters and Nine Months Ended
September 28, 1996 and September 30, 1995 4
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 28, 1996 and September 30, 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
the Results of Operations and
Financial Condition 8
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
(Unaudited)
September 28, December 31,
1996 1995
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,714 $ 933
Receivables 11,682 7,406
Inventories 11,283 9,597
Deferred tax assets 1,082 645
Other current assets 502 732
-------- --------
Total current assets 28,263 19,313
-------- --------
Plant and equipment, net 5,970 5,196
Excess of cost over fair value of
net assets acquired 8,956 9,608
Other assets 1,004 1,608
-------- --------
$ 44,193 $ 35,725
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans payable $ 98 $ 396
Current portion of long-term debt 1,282 2,411
Accounts payable 6,303 4,516
Accrued liabilities 5,230 4,264
-------- --------
Total current liabilities 12,913 11,587
-------- --------
Long-term obligations, less current portion:
Term loan payable 4,843
Senior subordinated convertible debentures,
due 1997, net of discount of $7 and $16 2,453 2,714
Subordinated convertible term promissory notes,
due 1997, net of discount of $85 and $186 115 614
Deferred taxes payable 267
Minority interest 2,707
Other 392 405
-------- --------
5,934 8,576
-------- --------
Shareholders' equity:
Common stock, at stated value 1,031 978
Additional paid-in capital 23,086 21,939
Retained earnings (deficit) 2,064 (6,609)
Cumulative valuation adjustments 38 82
Common shares held in treasury, at cost (873) (828)
-------- --------
25,346 15,562
-------- --------
$ 44,193 $ 35,725
======== ========
See notes to consolidated condensed financial statements.
3
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
----------------------------- ------------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 20,851 $ 16,581 $ 55,794 $ 47,024
----------- ---------- --------- --------
Operating costs and expenses:
Cost of sales 14,312 10,901 37,717 31,372
Engineering, design and product
development costs 882 805 2,736 2,204
Selling, administrative and
general expenses 3,649 3,309 10,103 9,801
----------- ---------- --------- --------
18,843 15,015 50,556 43,377
----------- ---------- --------- --------
Operating income 2,008 1,566 5,238 3,647
Other charges (income):
Gain on sale of subsidiary stock (6,200) (6,200)
Interest expense, net 214 340 821 1,008
Other, net 82 (1) (69) 53
----------- ---------- --------- --------
(5,904) 339 (5,448) 1,061
----------- ---------- --------- --------
Income before income taxes and minority
interest 7,912 1,227 10,686 2,586
Provision for income taxes 753 565 1,924 400
----------- ---------- --------- --------
Income before minority interest 7,159 662 8,762 2,186
Minority interest in net earnings of
subsidiary 89 89
----------- ---------- --------- --------
Net income $ 7,070 $ 662 $ 8,673 $ 2,186
=========== ========== ========= ========
Earnings per common and common
equivalent share:
Primary $ 1.67 $ 0.17 $ 2.12 $ 0.56
=========== ========== ========= ========
Fully diluted $ 1.51 $ 1.94
=========== =========
Weighted average common and common
equivalent shares outstanding:
Primary 4,234,140 3,974,451 4,084,896 3,916,273
=========== ========= ========= =========
Fully diluted 4,719,149 4,617,711
=========== =========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
1996 1995
-------------- --------------
Cash flows from operating activities:
Net income $ 8,673 $ 2,186
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Gain on sale of subsidiary stock (6,200)
Depreciation and amortization 2,252 1,910
Deferred income taxes 259 (522)
Gain on sale of marketable securities (285)
Changes in operating assets and
liabilities:
Receivables (4,248) (2,196)
Inventory (1,682) (2,455)
Other current assets (75)
Other assets (167) (106)
Accounts payable, accrued
liabilities and income taxes payable 2,674 665
Other 2 34
-------- --------
Net cash provided by (used in)
operating activities 1,203 (484)
-------- --------
Cash flows from investing activities:
Purchases of plant and equipment (1,962) (2,194)
Proceeds from sale of assets 522
Other (10) 11
-------- --------
Net cash used in investing activities (1,450) (2,183)
-------- --------
Cash flows from financing activities:
Net change in borrowings under line of credit (301) 3,519
Net proceeds from sale of subsidiary stock 8,991
Net proceeds from issuance of long-term debt 120 263
Principal payments on long-term borrowings (5,963) (1,944)
Proceeds from exercise of stock options
and warrants 187 15
Other (12) (22)
-------- --------
Net cash provided by financing activities 3,022 1,831
-------- --------
Effect of exchange rate changes on cash 6 10
-------- --------
Increase (decrease) in cash and cash equivalents 2,781 (826)
Cash and cash equivalents at beginning of period 933 1,494
-------- --------
Cash and cash equivalents at end of period $ 3,714 $ 668
======== ========
Supplemental cash flow information:
Interest paid $ 733 $ 788
Income taxes paid, net of refunds 713 1,155
Supplemental non-cash investing and financing
activities:
Conversion of convertible debentures to
common stock $ 968
See notes to consolidated condensed financial statements.
5
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly its financial
position as of September 28, 1996, the results of its operations for the
quarters and nine months ended September 28, 1996 and September 30, 1995
and changes in its cash flows for the nine months ended September 28, 1996
and September 30, 1995. The December 31, 1995 consolidated condensed
balance sheet has been derived from the Company's audited financial
statements at that date. Certain amounts in the December 31, 1995 balance
sheet have been reclassified to conform to the current period's
presentation. These interim financial statements should be read in
conjunction with the financial statements included in the Company's
Transition Report on Form 10-K for the nine months ended December 31, 1995.
The accompanying consolidated financial statements include the accounts of
the Company and all subsidiaries after elimination of all material
intercompany accounts and transactions. The minority interest represents
the 19.7% public ownership of Transact Technologies Incorporated
("Transact"). (See note 7).
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.
The results of operations for the quarters and nine months ended September
28, 1996 and September 30, 1995 are not necessarily indicative of the
results to be expected for the full year. See note 4 for discussion of the
gain on sale of subsidiary stock.
2. Primary earnings per common share is based on the weighted average number
of shares outstanding during the period after consideration of the dilutive
effect of stock options and warrants. Fully diluted earnings per common
share assume conversion of dilutive securities when the result is dilutive.
3. Inventories:
Components of inventory are:
September 28, 1996 December 31, 1995
------------------ -----------------
(Dollars in Thousands)
Raw materials and
component parts $7,692 $6,704
Work-in-process 999 1,271
Finished goods 2,592 1,622
------- ------
$11,283 $9,597
======= ======
4. Other income, net:
Non-operating income for the third quarter includes the $6,200,000 gain on
the sale of subsidiary stock. Other non-operating charges for the third
quarter include an additional provision for loss on disposal of real
estate held for sale of $58,000 and transactional foreign exchange losses
of approximately $20,000. For the nine months, other non-operating income
includes the gain on the sale of subsidiary stock and a $285,000 gain on
the sale of marketable securities offset by an additional provision for
loss on disposal of real estate held for sale of $113,000 and transactional
foreign exchange losses of approximately $100,000.
6
<PAGE>
5. Commitments and contingencies:
The Company is involved in an environmental matter discussed in the
footnotes to the financial statements included in the Company's Transition
Report on Form 10-K for the nine months ended December 31, 1995. As of
September 28, 1996 and to the date of this report, there has been no
material development in the resolution of this matter.
6. Issuance of Common Stock:
Through the first nine months of 1996, the Company accepted $1,010,000
($968,000 net carrying value) principal amount of the 10.5% Debentures for
conversion into 112,210 shares of common stock. The conversion of these
Debentures into common stock satisfies the Company's otherwise required
sinking fund obligation of $740,000 due on December 15, 1996.
7. Public equity offering by Transact Technologies Incorporated:
Pursuant to a previously announced plan of reorganization, during the third
quarter of 1996, the Company's Transact subsidiary completed an initial
public offering of 1,322,500 shares of its common stock at a price of $8.50
per share. Transact received approximately $8,991,000 of net proceeds from
the offering and used $7,500,000 to repay intercompany indebtedness to
Tridex and the balance was used for Transact's working capital and general
corporate purposes. Of the $7,500,000 received from Transact, Tridex used
approximately $5,254,000 to repay all outstanding indebtedness to Fleet
National Bank.
The Company intends to spin-off its remaining equity interest in Transact,
consisting of 5,400,000 shares of common stock, to all Tridex stockholders
on an approximate one-for-one basis as a tax-free dividend (the
"Distribution"). The Distribution is expected to be made in 1997 and is
subject to certain conditions, including the receipt of a ruling from the
Internal Revenue Service confirming the tax-free nature of the transaction.
Also in conjunction with this plan of reorganization, the Company has
agreed to indemnify Transact against certain future liabilities, including
environmental liability associated with the former Magnetec facility
located on Granby Street, Bloomfield, Connecticut.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Certain statements contained in this report which are not historical facts may
be deemed to contain forward-looking statements with respect to events the
occurrence of which involves risks and uncertainties, including, without
limitation, the Company's results of operations in future periods, the Company's
expectations regarding the distribution and the Company's liquidity and
financial condition after such distribution.
Results of Operations
Quarter Ended September 28, 1996 Compared to Quarter Ended September 30, 1995
Consolidated net sales for the quarter ended September 28, 1996 increased
$4,270,000 (26%) to $20,851,000 from $16,581,000 in the comparable quarter of
the prior year. The Company's 80.3% owned subsidiary, Transact, reported a 23%
increase in sales to $10,794,000 from $8,809,000, primarily as a result of
increased shipments of POS and on-line lottery printers. The increase also
reflects significantly greater volume of shipments of cash drawers and POS
terminals and related products.
Consolidated gross profit increased $859,000 (15%) to $6,539,000 from $5,680,000
in the prior year's quarter, as a result of the higher volume of shipments of
cash drawers and printers. Transact's operations contributed $599,000 to
increased gross profit. The consolidated gross margin percentage was 31.4% of
consolidated net sales compared to 34.3% in the prior year's quarter. The
decline in gross margin percentage is attributable to the start-up of the
standardized product line of cash drawers, the mix of POS terminals and related
products and to the change in sales mix of printers, particularly in the POS
market. The Company expects that Transact's gross profit will increase with
increased net sales, while its gross margin will decrease slightly due to a
growing proportion of sales of printers at lower average selling prices
resulting from volume discount pricing, particularly in the POS market. However,
operating income as a percentage of net sales has increased at Transact, and the
Company expects that gross margin at its other operating units will improve.
Consolidated engineering, design and product development costs increased $77,000
(10%) to $882,000 from $805,000 in the prior year's quarter. The increase
includes $36,000 attributable to Transact related primarily to the development
of new products. Expenditures for the development of POS terminal products also
increased from the prior year's quarter.
Consolidated selling, administrative and general expenses increased $340,000
(10%) to $3,649,000 from $3,309,000 in the prior year's quarter. The increase
includes non-recurring costs, approximating $200,000, related to the amendment
of the Company's bank credit facilities and to the anticipated distribution of
shares of Transact to Tridex shareholders. Transact's selling, general and
administrative expenses increased $92,000 due to operational start-up activities
and to compensation related costs for additional employees. The increase also
reflects expenditures to broaden the geographic sales organization for POS
terminal products.
Consolidated operating income for the current quarter increased $442,000 (28%)
to $2,008,000 from $1,566,000 in the prior year's quarter, primarily due to the
results of increased volume of shipments of printers by Transact. Operating
income from the increased sale of cash drawers was offset by the non-recurring
administrative costs. Consolidated operating income as a percentage of revenue
increased to 9.6% from 9.4% in the prior year's quarter and is primarily the
result of the higher volume of shipments of cash drawers and printers offset in
part by the impact of the mix of POS terminals and related products and of the
increased selling, general and administrative expenses.
Net interest expense decreased $126,000 (37%) to $214,000 from $340,000 in the
prior year's quarter. The decrease in interest expense reflects lower levels of
indebtedness, particularly decreased utilization of the domestic line of credit,
and to the impact of the conversion of debentures to common stock.
Non-operating income for the current quarter is the gain recognized on the sale
of shares of common stock of Transact. Non-operating charges for the current
quarter include an additional provision of $58,000 for real estate held for sale
and approximately $20,000 transactional foreign exchange losses.
Provision for income taxes in the current quarter, exclusive of the gain on sale
of subsidiary stock, reflects an estimated effective tax rate of 44%. The
estimated effective tax rate was approximately 46% in the prior year's quarter.
Net income for the current quarter, exclusive of the one-time gain on the sale
of subsidiary stock, was $870,000 (or $0.20 per share) as compared to $662,000
(or $0.17 per share) in the prior year's quarter. Net income including the
one-time gain was $7,070,000 (or $1.67 per share, $1.51 per share on a fully
diluted basis). The average number of common and common equivalent shares
outstanding increased to 4,234,140 shares from 3,974,451 shares in the prior
year's quarter.
8
<PAGE>
Nine Months Ended September 28, 1996 Compared to Nine Months Ended September 30,
1995
Consolidated net sales for the nine months ended September 28, 1996 increased
$8,770,000 (19%) to $55,794,000 from $47,024,000 in the comparable prior year's
period. Transact's sales increased $6,026,000 (24%) to $31,019,000 from
$24,993,000, primarily as a result of increased shipments of POS and on-line
lottery printers. The increase also reflects significantly greater volume of
shipments of cash drawers and, to a lesser degree, to increased shipments of POS
terminals and related products.
Consolidated gross profit increased $2,425,000 (16%) to $18,077,000 from
$15,652,000 in the prior year's period, primarily as a result of the higher
volume of shipments of cash drawers and printers. Transact contributed
$1,932,000 to the increased gross profit. The consolidated gross margin
percentage was approximately 32.4% of sales compared to 33.3% in the prior
year's period. The decline in gross margin percentage is attributable to the
start-up costs of the standardized product line of cash drawers, to the mix of
POS terminals and related products and to the change in sales mix of printers,
particularly in the POS market.
Consolidated engineering, design and product development costs increased
$532,000 (24%) to $2,736,000 from $2,204,000 in the prior year's period. The
increase includes $431,000 attributable to Transact related primarily to the
development of new products in the POS market. Expenditures for the developement
of POS terminal products also increased from the prior year's quarter.
Consolidated selling, administrative and general expenses increased $302,000
(3%) to $10,103,000 from $9,801,000 in the prior year's period. The increase in
selling expense results from efforts to expand the sales force for POS terminal
and related products. Administrative and general expenses include non-recurring
costs related to the amendment of the Company's bank credit facilities and to
the anticipated distribution of shares of TransAct to Tridex shareholders. The
increase also reflects operational start-up activities of Transact.
Consolidated operating profit for the current period increased $1,591,000 (44%)
to $5,238,000 from $3,647,000 in the prior year's period, primarily due to
increased volume of shipments of printers by Transact. Operating income from the
increased sales of cash drawers was offset by the non-recurring administrative
costs. Consolidated operating income as a percentage of revenue increased to
9.4% from 7.8% in the prior year's period and is primarily the result of a
higher volume of shipments.
Net interest expense decreased $187,000 (19%) to $821,000 from $1,008,000 in the
prior year's period. The decrease in interest expense reflects lower levels of
indebtedness, particularly decreased utilization of the domestic line of credit
and the impact of the conversion of debentures to common stock.
Non-operating income for the current period includes the $6,200,000 gain on the
sale of subsidiary stock and $285,000 gain on the sale of marketable securities
offset by approximately $100,000 transactional foreign exchange losses and an
additional provision of $113,000 for real estate held for sale. Other
non-operating expense in the prior year's period includes provisions of $50,000
for real estate held for sale and $60,000 for estimated clean-up costs
associated with certain environmental matters, offset by transactional foreign
exchange gains.
Provision for income taxes in the current period, exclusive of the gain on the
sale of subsidiary stock, was based upon an estimated effective tax rate of 43%
reflecting an adjustment for certain tax credits. A net tax benefit resulted in
the prior year's period due to the recording of a tax credit of $770,000. Such
credit reflected the final adjustment to the Company's valuation allowance to
recognize federal deferred tax benefits available to be used by the Company.
Net income for the current period, exclusive of the one-time gain on the sale of
subsidiary stock, was $2,473,000 (or $0.60 per share) as compared to $2,186,000
(or $0.56 per share) in the prior year's period. Net income including the gain
was $8,673,000 (or $2.12 per share, $1.94 per share on a fully diluted basis).
The average number of common and common equivalent shares outstanding increased
to 4,084,896 shares from 3,916,273 shares in the prior year's quarter.
9
<PAGE>
Liquidity and Capital Resources
The Company's working capital at September 28, 1996 was $15,350,000 compared
with $7,726,000 at December 31, 1995. The current ratio was 2.2 at September 28,
1996 and 1.7 at December 31, 1995. The increase in working capital reflects the
receipt of the net proceeds from the initial public offering discussed below,
the repayment of bank debt, a higher level of operating activity and the
conversion of $1,010,000 principal amount of debentures to 112,210 shares of
common stock.
During the third quarter, the Company's Transact subsidiary completed the
initial public offering of 1,322,500 shares of its common stock at a price of
$8.50 per share. Transact received net proceeds of the offering of $8,991,000,
of which $7,500,000 was used to repay intercompany indebtedness to Tridex. The
balance was used for Transact's working capital and general corporate purposes.
Of the $7,500,000 received from TransAct, the Company used approximately
$5,254,000 to repay all outstanding indebtedness to Fleet National Bank.
The Company has a $2,000,000 Working Capital Facility (the "Working Capital
Facility") with Fleet National Bank ("Fleet"), which provides 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 presently conducted. The Company is required to comply
with certain financial covenants, including a minimum tangible capital base, a
maximum leverage ratio, a minimum interest coverage ratio, and a minimum current
ratio, otherwise Fleet may withdraw its commitment. The Company was in
compliance with these covenants at September 28, 1996 and expects to be in
compliance with these covenants for the foreseeable future.
During the first nine months of 1996, the Company's operating cash requirements
were satisfied by cash flow from operations, borrowings under its lines of
credit and by the proceeds from the sale of marketable securities. At September
28, 1996, the Company had availability of $2,000,000 under the Working Capital
Facility. During the first nine months of 1996, $1,010,000 principal amount of
debentures were converted into 112,210 shares of common stock. The conversion
satisfies the otherwise required $740,000 sinking fund payment due on December
15, 1996. During the remainder of 1996, the Company expects that its cash
balances and funds generated from operations will be sufficient to satisfy its
cash needs for working capital, scheduled debt retirements and capital
expenditures, primarily tooling for new products.
The Company believes that funds generated from operations, its cash balances and
borrowings under the Working Capital Facility, if necessary, will continue to
satisfy its working capital needs, support a certain level of growth and meet
scheduled debt retirements.
In June 1996, the Company filed with the Internal Revenue Service (the "IRS") an
application for a ruling that the Distribution will constitute a tax free
reorganization for purposes of the Internal Revenue Code of 1986, as amended
(the "Code"). If the Company receives a favorable ruling from the IRS, it
intends to complete the Distribution as early as practicable on 1997. However,
no assurance can be given as to whether or when the IRS will issue a favorable
ruling or that the Distribution will occur.
If the IRS issues a favorable ruling and certain other conditions are satisfied,
the Company will proceed with the Distribution, after which the 5,400,000 shares
of Transact common stock owned by the Company prior to the Distribution will be
owned by the holders of Tridex common stock as of the record date for the
Distribution (the "Record Date"), and Transact will no longer be a subsidiary of
Tridex. If the IRS does not issue a favorable ruling, the Company may either
request reconsideration, resubmit its request based on changes in facts and
circumstances, if any, or abandon the Distribution. If the Company adandons the
Distribution, it may either maintain ownership of Transact as a consolidated
subsidiary or sell shares of Transact common stock in subsequent public
offerings or private sales. Although the Company expects to effect the
Distribution, it is possible that the Distribution will not occur within the
time frame contemplated, or at all.
Assuming that the Distribution occurs, the Company would be comprised of its
wholly-owned subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash
Bases GB Limited ("Cash Bases") and its Tridex Ribbons division. Assuming that
the Distribution occurred as of September 28, 1996, that all 910,206 options and
warrants outstanding as of that date were exercised (with a weighted average
exercise price of $7.38), all $2,460,000 of the senior subordinated convertible
debentures (which are convertible at $9.00 per share) and all $1,299,000 of the
subordinated convertible term promissory notes (which are convertible at $12.00
per share) outstanding as of that date were converted in accordance with their
respective terms, and that Transact repaid its $1.0 million subordinated note to
the Company due March 1, 1998, the Company would have minimal, if any, debt
and approximately $10 million in cash and cash equivalents. Also, the Company's
management expects that Ultimate, Cash Bases and the Tridex Ribbons division
will have total revenue of approximately $35 million for 1996 and will be
profitable for the foreseeable future. However, no assurance can be given that
all outstanding options and warrants will be exercised or that all the
debentures and notes will be converted, and no assurance can be given regarding
the future results of operations or financial condition of the Company. After
the Distribution, the Company will have fewer product lines and, therefore, will
be more susceptible to the adverse effects of a downturn or disruption in the
demand for any single product line.
As part of its business strategy, the Company intends (i) to focus on internal
growth through the development of products that broaden and extend the business
of providing integrated systems and peripheral devices to the point-of-sale
("POS"), financial services and other transaction based markets and (ii) to
pursue joint ventures, strategic alliances or other transactions, including
transactions to complement its existing products and markets, acquire new
product lines or enter new markets. Implementation of this strategy may require
substantial capital expenditures. There can be no assurance that the Company
will be able to successfully implement its strategy, or that the Company can
successfully manage any new operations.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 10.1 Plan of Reorganization dated as of June 24, 1996
among Tridex Corporation ("Tridex"), Magnetec
Corporation ("Magnetec"), Transact Technologies
Incorporated ("Transact") and Ithaca Peripherals
Incorporated ("Ithaca").
Exhibit 10.2 Amendment to Plan of Reorganization dated as of
August 30, 1996 among Tridex, Magnetec, Transact
and Ithaca.
Exhibit 10.3 Agreement and Plan of Merger dated as of July 16,
1996 between Magnetec and Ithaca.
Exhibit 10.4 Asset Transfer Agreement dated as of July 31, 1996
between Magnetec and Trident.
Exhibit 10.5 Manufacturing Support Services Agreement dated as of
September 28, 1996 between Magnetec and Trident.
Exhibit 10.6 Corporate Services Agreement dated as of July 30,
1996 between Tridex and Transact.
Exhibit 10.7 Printer Supply Agreement dated as of July 31, 1996
between Magnetec and Ultimate Technology Corporation.
Exhibit 10.8 Tax Sharing Agreement dated as of July 31, 1996
between Tridex and Transact.
Exhibit 10.9 Amendment No. 2, dated as of August 30, 1996 to
Amended and Restated Credit Agreement, dated as of
December 14, 1995, among Tridex Corporation, Ithaca
Peripherals Incorporated, Ultimate Technology
Corporation, Magnetec Corporation, Cash Bases
Incorporated and Fleet National Bank.
Exhibit 11 Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
covered by this report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIDEX CORPORATION
(Registrant)
November 11, 1996 /s/Seth M. Lukash
-----------------
Seth M. Lukash
Chairman of the Board, President, Chief Executive
Officer, and Chief Operating Officer
(Principal Executive Officer)
November 11, 1996 /s/George T. Crandall
---------------------
George T. Crandall
Vice President and Treasurer
(Principal Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit 10.1 Plan of Reorganization dated as of June 24, 1996
among Tridex Corporation ("Tridex"), Magnetec
Corporation ("Magnetec"), Transact Technologies
Incorporated ("Transact") and Ithaca Peripherals
Incorporated ("Ithaca").
Exhibit 10.2 Amendment to Plan of Reorganization dated as of
August 30, 1996 among Tridex, Magnetec, Transact
and Ithaca.
Exhibit 10.3 Agreement and Plan of Merger dated as of July 16,
1996 between Magnetec and Ithaca.
Exhibit 10.4 Asset Transfer Agreement dated as of July 31,
1996 between Magnetec and Tridex.
Exhibit 10.5 Manufacturing Support Services Agreement dated as
of September 28, 1996 between Magnetec and Tridex.
Exhibit 10.6 Corporate Services Agreement dated as of June 24,
1996 between Tridex and Transact.
Exhibit 10.7 Printer Supply Agreement dated as of July 30,
1996 between Magnetec and Ultimate Technology
Corporation.
Exhibit 10.8 Tax Sharing Agreement dated as of July 31, 1996
between Tridex and Transact.
Exhibit 10.9 Amendment No. 2, dated as of August 30, 1996 to
Amended and Restated Credit Agreement, dated as
of December 14, 1995, among Tridex Corporation,
Ithaca Peripherals Incorporated, Ultimate
Technology Corporation, Magnetec Corporation,
Cash Bases Incorporated and Fleet National Bank.
Exhibit 11 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION dated as of June 24, 1996 by and among Tridex
Corporation, a Connecticut corporation ("Tridex"), with executive offices at 61
Wilton Road, Westport, Connecticut, 06880, Magnetec Corporation, a Connecticut
corporation ("Magnetec"), and TransAct Technologies Incorporated, a Delaware
corporation ("Transact") each with executive offices located at 7 Laser Lane,
Wallingford, CT 06492 and Ithaca Peripherals Incorporated ("Ithaca"), a Delaware
corporation, with executive offices at 20 Bomax Drive, Ithaca, New York 14850;
WHEREAS, Magnetec, TransAct and Ithaca are wholly-owned, direct
subsidiaries of Tridex;
WHEREAS, Tridex believes it to be in its best interest if the business,
operations and related assets used and useful in the printer business and
related activities conducted by Tridex through its subsidiaries, Magnetec and
Ithaca, be contained within a single corporation, its subsidiary, TransAct,
separate and apart from Tridex; and
WHEREAS, after the execution and delivery of this Agreement, up to
1,322,500 shares of TransAct Common Stock (or such other number as shall equal
approximately 19.7% of the outstanding shares of the Common Stock of TransAct on
a pro forma basis after giving effect to the Exchange and the Offering, as
defined herein) shall be registered under the Securities Act of 1933, as amended
(the "Securities Act") for sale in a firm commitment underwritten public
offering.
WHEREAS, on or about the date hereof, Tridex has filed or will file an
application with the United States Internal Revenue Service (the "IRS") seeking
a ruling (the "Ruling") that a pro rata distribution by Tridex of all shares of
TransAct Common Stock held by Tridex to its stockholders (the "Distribution")
would not be treated as taxable for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
I. TRANSFERS OF ASSETS; ISSUANCE OF SECURITIES.
1.1 Ithaca Merged Into Magnetec. Subject to the terms and conditions set
forth herein, and as soon as practicable after the date hereof, Tridex, as sole
shareholder of Magnetec and Ithaca, and the Boards of Directors of Ithaca and
Magnetec, respectively, agree to take all steps necessary to effectuate the
merger of Ithaca with and into Magnetec (the "Merger"), such merger to be
effective no later than the day before the Effective Date (as defined below),
including but not limited to the execution of agreements, plans and certificates
of merger pursuant to the laws of the states of organization of the merging
entities, Delaware and Connecticut, respectively.
1.2 Issuance of TransAct Common Stock. Subject to the terms and conditions
set forth herein, as soon as practicable, but in no event later than the day
before the Effective Date, TransAct shall issue to Tridex, and Tridex shall
acquire from TransAct, 5,400,000 shares of TransAct Common Stock, par value $.01
<PAGE>
per share ("TransAct Common Stock") (or such other number as shall equal no less
than approximately 80.3% of the outstanding TransAct Common Stock after giving
effect to such issuance and the Offering) constituting all of the then
outstanding capital stock of TransAct, in exchange for the tender and delivery
by Tridex of all of the outstanding shares of common stock, par value $.01 per
share, of Magnetec (the "Magnetec Shares") (the "Exchange"). It is the intent of
the parties hereto that, upon the completion of the Offering by TransAct
contemplated under 1.3 below, that Tridex will own no less than approximately
80.3% of the outstanding shares of TransAct Common Stock.
1.3 Offer of TransAct Shares. TransAct shall use its commercially
reasonably best efforts to issue and sell, in a firm commitment underwritten
public offering pursuant to a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act, up to 1,322,500 shares of
TransAct Common Stock, par value $.01 per share (the "Offering"). TransAct shall
prepare and file with the Securities and Exchange Commission (the "SEC") a
Registration Statement, and any amendments thereto necessary or advisable for
purposes of this Plan of Reorganization. The "Effective Date" shall be the date
on which the SEC declares the Registration Statement on Form S-1 to be
effective.
1.4 Payment of Intercompany Indebtedness. Subject to the terms and
conditions set forth herein and the completion of the Offering contemplated
under 1.3 above, TransAct hereby agrees to advance to Magnetec, from the
proceeds of the Offering, sufficient funds to enable Magnetec to pay to Tridex
$8,500,000 of intercompany indebtedness. Magnetec shall pay at least $7,500,000
of such intercompany indebtedness at, or as soon as practicable after the
closing of the Offering and, at its option, may pay the balance either at such
closing or by issuance of a promissory note for $1,000,000. If TransAct elects
to issue such note, (i) it shall be payable one year after issuance, bear
interest at a rate equal to the rate paid by Tridex under its revolving credit
agreement with Fleet Bank, National Association, and provide for prepayment
without penalty and (ii) TransAct's obligation to advance funds to Magnetec from
the proceeds of the Offering shall be reduced by the amount of the Note. Tridex
shall furnish to Magnetec and TransAct a written acknowledgment that payment of
such $8,500,000 satisfies any and all intercompany indebtedness owed by Magnetec
or TransAct to Tridex.
1.5 Related Agreements. TransAct and Tridex hereby agree that, no later
than the day before the Effective Date, they shall enter into certain agreements
relating to the allocation of taxes and tax attributes, provision of certain
corporate and administrative services and the sale of printers by TransAct to
Ultimate Technology Corporation, a wholly-owned subsidiary of Tridex. Forms of a
Corporate Services Agreement, Tax Sharing Agreement and Printer Supply Agreement
between TransAct and Tridex are attached hereto as Exhibits A, B and C,
respectively.
1.6 Application for Internal Revenue Service Ruling. Tridex hereby agrees
that it will use its commercially reasonable best efforts to prosecute the
Ruling and to obtain a favorable result from the IRS so that the distribution on
a pro rata basis of all of the shares of TransAct Common Stock owned by Tridex
after the Exchange and Offering (constituting at least 80.3% of the shares of
TransAct Common Stock outstanding after the completion of the Offering) would be
a tax-free distribution to Tridex stockholders for federal income tax purposes.
1.7 Pro Rata Distribution. Tridex hereby agrees that, upon the successful
completion of the Offering and the receipt of a favorable Ruling from the IRS as
contemplated under 1.6 above, it shall distribute on a pro rata basis, to
stockholders of record of Tridex common stock all shares of TransAct Common
Stock owned by Tridex; in no case shall Tridex have any obligation to complete
such distribution before receipt of a favorable Ruling.
<PAGE>
1.8 Granby Street Liability. Tridex hereby agrees that, upon completion of
the Merger and Exchange contemplated under 1.1 and 1.2 above, respectively, it
shall indemnify and hold harmless Magnetec and TransAct from any and all
liabilities (as former occupant, operator or otherwise), including but not
limited to liabilities with respect to environmental matters, concerning the
real property located at 96 Granby Street, Bloomfield, CT.
1.9 Release from Guarantees. Upon completion of the Merger and Exchange,
TransAct hereby agrees to use commercially reasonable efforts to obtain the
release of Tridex from any and all of Tridex's obligations and liabilities under
guarantees of leases of real property or equipment used by TransAct.
1.10 Release of Magnetec and Ithaca from Fleet Lien. Upon completion of the
Offering, Tridex shall obtain the release of Magnetec, the Magnetec Shares and
Ithaca from any and all obligations under the Fleet loan documents.
1.11 27-Wire Printhead. Tridex hereby acknowledges and confirms that it has
no right, title or interest in or to any form of intellectual property or other
rights of ownership in the 27-wire printhead manufactured and sold by Magnetec
to GTECH Holdings Corporation and to the extent it may have any basis to assert
or claim such right, title or interest, Tridex (intending to confirm Magnetec's
exclusive ownership of such technology) hereby unconditionally releases and
forever discharges Magnetec from any and all claims related thereto.
1.12 Assignment of Okidata Agreements. Upon completion of the Merger and
Exchange, Tridex hereby agrees to assign, transfer, convey and deliver its
rights under a Strategic Agreement by and between it and Okidata, a Division of
Oki America, Inc. dated as of May9, 1996 pursuant to which Tridex has entered
into an exclusive Sales Agreement with Oki Europe Limited dated as of May10,
1996 to sell POS and kiosk products in Europe, the Middle East and North Africa.
Upon completion of the Merger and Exchange, TransAct hereby agrees to assume
from Tridex any and all liabilities under the Strategic Agreement and Exclusive
Sales Agreement.
II. REPRESENTATIONS AND WARRANTIES OF TRIDEX, MAGNETEC AND ITHACA.
Tridex, Magnetec and Ithaca hereby represent and warrant to TransAct as
follows:
2.1 Organization; Good Standing; Subsidiaries. Tridex, Magnetec and Ithaca
are corporations duly organized, validly existing and in good standing under the
laws of the states of Connecticut, Connecticut and Delaware, respectively. Each
is qualified to do business as a foreign corporation under the laws of all other
states or jurisdictions in which such qualification is required because of the
properties owned, leased or operated by it or the nature of the business
currently conducted by it. Each has corporate power and authority to own its
properties and to conduct its businesses as presently conducted.
2.2 Authorization; Binding Effect. The execution and delivery of this Plan
of Reorganization by each of Tridex, Magnetec and Ithaca and the performance of
its respective obligations thereunder (a) have been duly authorized by all
necessary corporate action, (b) do not conflict with any of the provisions
contained in the Certificate of Incorporation or by-laws of any of Tridex,
Magnetec or Ithaca, or in any agreement, indenture or other instrument to which
any of them is a party, or by which any of its respective assets may be bound,
(c) do not violate any law, regulation, order or decree, and (d) will not result
in the creation of any lien or encumbrance upon any of the assets being
transferred except as contemplated hereby.
<PAGE>
This Plan of Reorganization and the other instruments to be executed and
delivered by each of Tridex, Magnetec and Ithaca hereunder will constitute valid
and binding obligations.
2.3 Magnetec Shares. The Magnetec Shares have been duly authorized and are
fully paid and non-assessable shares of capital stock of Magnetec, free and
clear of all liens and encumbrances, except for the lien in favor of Fleet Bank,
National Association.
III. REPRESENTATIONS AND WARRANTIES OF TRANSACT
TransAct represents and warrants to Tridex, Magnetec and Ithaca as follows:
3.1 Organization and Good Standing. TransAct is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and will have by the Effective Date registered as a foreign corporation
under the laws of Connecticut and New York. TransAct has the corporate power and
authority to conduct its business as presently proposed.
3.2 Authorization. The execution, delivery and performance of this and the
other agreements and instruments to be executed and delivered by TransAct in
accordance herewith (a) have been duly authorized by all necessary corporate
action, (b) do not conflict with any of the provisions contained in the
Certificate of Incorporation or By-laws of TransAct, or in any other agreement,
indenture or instrument to which TransAct is a party or by agreement, indenture
or instrument to which TransAct is a party or by which Transact or its assets
may be bound and (c) do not violate any law, regulation, order or decree. This
Plan of Reorganization and the other instruments to be executed and delivered by
TransAct hereunder will constitute valid and binding obligations of TransAct.
3.3 Shares of TransAct Capital Stock. Upon the completion of the Exchange,
the 5,400,000 shares of Common Stock issued to Tridex shall be duly authorized
and validly issued shares of capital stock of TransAct, fully paid and
non-assessable.
IV. CONDITIONS TO CLOSING
4.1 Conditions to Obligations of TransAct and Tridex. The obligations of
TransAct and Tridex to complete the transactions provided for herein are subject
to the satisfaction or waiver of the following conditions:
(a) There shall not be any pending or threatened governmental action or
proceeding by or before any court or governmental body or agency which shall
seek to restrain, prohibit or invalidate the transactions contemplated by this
Plan or Reorganization.
(b) TransAct shall have filed the Registration Statement with the SEC.
(c) Prior to the Effective Date, Tridex and TransAct shall have entered
into an agreement regarding the disposition of the ribbon business.
(d) The Merger shall have been completed.
V. CLOSING OF EXCHANGE
<PAGE>
The closing of the transactions in connection with the Exchange shall be
held at the offices of Hinckley, Allen & Snyder, One Financial Center, Boston,
MA 02111 at the close of business no later than the day before the Effective
Date (the "Closing").
5.1 Obligations of Tridex.
At the Closing, Tridex shall deliver to TransAct:
(a) A certificate representing the Magnetec Shares, duly endorsed for
transfer to TransAct;
(b) Proof of filing of the Ruling;
(c) A Good Standing Certificate from the Secretary of State of the State of
Connecticut;
(d) Certificates of Merger certified by the Secretaries of the States of
Delaware and Connecticut;
(e) All books and records of Magnetec and Ithaca; and
(f) Executed Corporate Services Agreement, Tax Sharing Agreement and
Printer Supply Agreement.
5.2 Obligations of TransAct.
At the Closing, TransAct shall deliver to Tridex:
(a) A certificate representing 5,400,000 shares of the Common Stock of
TransAct, issued to Tridex;
(b) Executed Corporate Services Agreement, Tax Sharing Agreement and
Printer Supply Agreement; and
(c) A good standing certificate from the Secretary of the State of
Delaware;
VI. COVENANT NOT TO COMPETE; CONFIDENTIALITY
6.1 Covenant Not to Compete. For a period of five (5) years from the date
of the pro rata distribution of the capital stock of TransAct to Tridex
shareholders contemplated under 1.7 above, Tridex shall not, whether as owner,
part owner, partner, director, officer, trustee, employee, consultant, agent or
in any other capacity, directly or indirectly, engage or participate in any
business, organization or entity located in or doing business in any geographic
market in which TransAct is then doing business, in the design, manufacture,
sale or distribution of printers or printer goods, for use in point-of-sales,
gaming and wagering, financial services and kiosk markets. The foregoing shall
not prohibit Tridex from holding five percent (5%) or less of the outstanding
equity securities of any corporation whose equity securities are regularly
traded on any national stock exchange or recognized "over-the-counter" market.
6.2 Remedies. Any breach of Section 6.1 of this Plan of Reorganization may
not be adequately compensated by damages at law, and TransAct shall be entitled,
in addition to any other available
<PAGE>
remedies, to equitable relief in a court of equity by injunction or otherwise,
without the necessity or proving actual damages for breach of such Section 6.
6.3 Confidentiality. Each party to this Plan of Reorganization shall hold,
and shall cause its officers, directors, employees, agents, affiliates,
consultants and authorized representatives to hold in strict confidence all
information concerning the other party in its possession or furnished by the
other or the other's representatives pursuant to this Plan of Reorganization
(except to the extent that such information can be shown to have been (a)in the
public domain through no fault of such party, or (b)later lawfully acquired from
other sources by such party) and neither party shall disclose or release such
information to any other person except its authorized representatives unless
compelled to by judicial or administrative process, as advised by counsel or by
other requirement of law. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied by the other
party if it exercises the same care as it takes to preserve the confidentiality
of its own information.
VII. MISCELLANEOUS
7.1 Waivers and Amendments.
(a) This Plan of Reorganization may be amended, modified or supplemented,
and any obligation hereunder may be waived, only by a written instrument
executed by the parties hereto. The waiver by any party hereto of a breach of
any provision of this Plan of Reorganization shall not operate as a waiver of
any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy by such party
preclude any right or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
7.2 Notices. All notices, requests, demands and other communications which
are required or may be given under this Plan of Reorganization shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail, return receipt requested, postage prepaid
(a) if to Tridex, to Tridex Corporation, with executive offices at 61 Wilton
Road, Westport, CT 06880, Attention: Seth M. Lukash, Chairman and Chief
Executive Officer; (b) if to Magnetec, Ithaca or TransAct, to TransAct
Technologies Incorporated, 7 Laser Lane, Wallingford, CT 06492, Attention: Bart
C. Shuldman, President and Chief Executive Officer, or to such other address as
the parties shall have specified by notice in writing to the other.
7.3 Expenses; Further Assurances. All expenses associated with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall be paid by Tridex. At the request of any
party, on or after the Effective Date, Tridex, Magnetec, Ithaca and TransAct
shall cause to be executed and delivered, such documents or instruments in
addition to those required by this Plan of Reorganization, as may reasonably be
necessary or desirable to carry out or implement any provision of this Plan of
Reorganization.
7.4 Access to and Information Concerning Properties, Records, Etc. of
TransAct After Closing. After the Closing, TransAct agrees to maintain any
records and files of Magnetec and Ithaca acquired at the Closing and, upon
reasonable notice, to provide Tridex and its authorized representatives during
normal business hours, with such access to the books, records, and files of
TransAct for purposes of copying by Tridex as may reasonably be required in
connection with its tax, financial reporting and legal obligations for a period
of
<PAGE>
six (6) years from the Effective Date. After the Closing, Tridex agrees to
provide access to TransAct and its authorized representatives reasonable notice
and during normal business hours to any and all records which may be deemed
necessary to its tax, financial reporting and legal obligations for the same
period.
7.5 Miscellaneous. This Plan of Reorganization and the Exhibits hereto
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior correspondence and other writing
between the parties in connection with the subject matter of this Agreement, and
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of [Connecticut]
without regard to its principles of choice of law. Any provision of this Plan of
Reorganization which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. All Exhibits mentioned in this Plan of Reorganization shall be
attached to this Plan of Reorganization, and shall form an integral part
thereof. All terms defined in this Plan of Reorganization which are used in any
Exhibit shall, unless the context otherwise requires, have the same meaning
therein as given herein. This Plan of Reorganization may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first above written.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
------------------------------
Title: Seth M. Lukash,
Chairman and Chief
Executive Officer
MAGNETEC CORPORATION
By: /s/ Bart C. Shuldman
------------------------------
Title: Bart C. Shuldman
President
ITHACA PERIPHERALS INCORPORATED
By: /s/ Richard L. Cote
------------------------------
Title: Vice President
<PAGE>
TRANSACT TECHNOLOGIES, INC.
By: /s/ Bart C. Shuldman
------------------------------
Title: Bart C. Shuldman
President and Chief
Executive Officer
<PAGE>
LIST OF SCHEDULES/EXHIBITS
Exhibit A - Corporate Services Agreement
Exhibit B - Tax Sharing Agreement
Exhibit C - Printer Supply Agreement
AMENDMENT TO PLAN OF REORGANIZATION
THIS AMENDMENT (the "Amendment) is entered into by and among Tridex
Corporation, a Connecticut corporation with executive offices at 61 Wilton Road,
Westport, CT 06880 ("Tridex"), Magnetec Corporation, a Connecticut corporation
("Magnetec") and TransAct Technologies Incorporated, a Delaware corporation
("TransAct") each with executive offices at 7 Laser Lane, Wallingford, CT 06492;
WHEREAS, the parties hereto and Ithaca Peripherals Incorporated ("Ithaca"),
formerly a Delaware corporation, entered into a Plan of Reorganization dated as
of June 25, 1996 (the "Plan of Reorganization");
WHEREAS, as contemplated under the Plan of Reorganization, Ithaca merged
with and into Magnetec on July 29, 1996;
WHEREAS, the parties hereto wish to amend Section 6.1 of the Plan of
Reorganization, which contains a non-competition covenant.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree with as
follows:
The last sentence of Section 6.1 of the Plan of Reorganization is hereby
deleted in its entirety and replaced with the following:
The foregoing shall not prohibit Tridex from: (i) holding five percent (5%) or
less of the outstanding equity securities of any corporation whose equity
securities are regularly traded on any national stock exchange or recognized
"over-the-counter" market; or (ii) manufacturing custom keyboards and pole
displays and selling point-of-sale systems and components, including printers or
printer goods, through its wholly-owned subsidiary, Ultimate Technology
Corporation.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment this 30th day
of August, 1996.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Title: Seth M. Lukash, Chairman and Chief
Executive Officer
MAGNETEC CORPORATION
By: /s/ Bart C. Shuldman
-------------------------------------
Title: Bart C. Shuldman
President
TRANSACT TECHNOLOGIES INCORPORATED
By: /s/ Bart C. Shuldman
-------------------------------------
Title: Bart C. Shuldman
President and Chief
Executive Officer
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made and entered into as of the 16th
day of July, 1996, by and between Magnetec Corporation, a Connecticut
corporation (hereinafter called "Magnetec"), and Ithaca Peripherals
Incorporated, a Delaware corporation (hereinafter called "Ithaca"), pursuant to
33-371 of the Connecticut General Statutes and 252 of the General Corporation
Law of Delaware.
WHEREAS, the authorized capital stock of Ithaca consists of 4,000,000
shares of common stock, par value $.10 per share, of which 100 shares were
issued and outstanding as of July 8, 1996 and owned of record by Tridex
Corporation, a Connecticut corporation ("Tridex") on such date, and 2,000,000
shares of preferred stock, par value $1.50 per share, of which none were issued
and outstanding as of July 8, 1996;
WHEREAS, the authorized capital stock of Magnetec consists of 5,000 shares
of common stock, no par value per share, of which 1,000 shares were issued and
outstanding as of July 8, 1996 and owned of record by Tridex;
WHEREAS, the respective Boards of Directors and shareholders of Magnetec
and Ithaca have deemed it advisable and to the advantage of the two corporations
that Ithaca merge into Magnetec upon the terms and conditions herein provided;
WHEREAS, Magnetec and Ithaca intend that the merger contemplated hereby
qualify as a tax-free reorganization within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended; and
WHEREAS, the Boards of Directors and shareholders of Magnetec and Ithaca
approved this Agreement and Plan of Merger on July __, 1996.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Magnetec and Ithaca hereby agree to merge in accordance with the
following plan:
1. Merger. Ithaca shall be merged with and into Magnetec and Magnetec shall
survive the merger. As required under 33-371 of the Connecticut General Statutes
and 252 of the Delaware General Corporation Law (a) an appropriate Certificate
of Merger shall be signed, verified and delivered for filing with the Secretary
of the State of Connecticut, and (b) an appropriate Certificate of Merger and
Secretary's Certificate shall be signed, verified and delivered for filing with
the Secretary of the State of Delaware.
2. Effective Time. The Agreement and Plan of Merger shall become effective
for purposes of Delaware and Connecticut law, respectively, at the date and time
of the completion of the filing of the Certificate of Merger in such states
(hereinafter referred to as the "Effective Time").
3. Directors and Officers and Governing Documents.
(a) The directors and officers of Magnetec shall be the same upon the
Effective Time as they are for Magnetec immediately prior thereto.
<PAGE>
(b) The by-laws of Magnetec, as in effect at the Effective Time, are the
same as those of the surviving corporation.
(c) The Agreement and Plan of Merger effects no change in the Certificate
of Incorporation of the surviving corporation, Magnetec, and said Certificate of
Incorporation shall continue in full force and effect as the Certificate of
Incorporation of the corporation surviving the merger.
(d) The Certificate of Incorporation of Magnetec was filed with the
Secretary of the State of Connecticut on September7, 1973.
3. Rights and Liabilities of Magnetec. At and after the Effective Time,
Magnetec shall possess all the rights, privileges, immunities and franchises, as
well as of a public and private nature of each of the merging corporations; and
property, real, personal and mixed, and all debts due Ithaca on whatever
account, and all other choses in action, and all and every other interest of, or
belonging to or due to each of the corporations so merged, shall be taken and
transferred to and vested in Magnetec without further act or deed; and the title
to any real estate, or any interest therein, vested in either of such
corporations shall not prevent or be in any way impaired by reason of the
merger.
4. Further Assurances. From time to time, as and when required by Magnetec,
there shall be executed and delivered on behalf of Ithaca such deeds and other
instruments, and there shall be taken or caused to be taken by it all such
further and other action, as shall be appropriate or necessary in order to vest,
perfect or confirm, of record or otherwise, in Magnetec the title to and
possession of all property, interest, assets, rights, privileges, immunities,
powers, franchises and authority of Ithaca, and otherwise carry out the purposes
of this Agreement and Plan of Merger, and the officers and directors of Magnetec
are fully authorized in the name and on behalf of Ithaca or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
5. Stock of Magnetec and Ithaca. No shares of Magnetec shall be issued as a
result of the merger. The 100 shares of common stock of Ithaca issued and
outstanding immediately prior to the Effective Time owned by Magnetec shall
automatically be cancelled without any conversion thereof into any other
security or right to receive any form of compensation and no payment shall be
made with respect thereto.
6. Appointment of Agent. Magnetec hereby consents to service of process in
the State of Delaware in any action or special proceeding for the enforcement of
any liability or obligation of Ithaca and for the enforcement of the right of
holders of Common Stock of Ithaca to receive payment for the shares owned by
such holders, and hereby irrevocably appoints the Secretary of State of Delaware
as its agent to accept service of process in any action or special proceeding
for the enforcement of any such liability or obligation. The address to which a
copy of such process shall be mailed by the Secretary of State to Ithaca is: c/o
Magnetec Corporation, 7 Laser Lane, Wallingford, CT 06492 Attention: Corporate
Secretary.
7. Amendment. At any time prior to the Effective Time this Agreement and
Plan of Merger may be amended in any manner as may be determined in the judgment
of the respective Boards of Directors of Magnetec and Ithaca, to be necessary,
desirable or expedient.
13. Abandonment. At any time before the Effective Time, this Agreement and
Plan of Merger may be terminated and the merger may be abandoned by the Board of
Directors and shareholders of either Magnetec or Ithaca or both.
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14. Counterparts. In order to facilitate the filing and recording of this
Agreement and Plan of Merger, the same may be executed in two or more
counterparts, each of which shall be deemed to be an original and the same
agreement.
<PAGE>
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant to
authority granted by the Boards of Directors of Magnetec and Ithaca, has caused
this Agreement and Plan of Merger to be executed by its President and attested
to by its Secretary and its corporate seal to be affixed hereto, as of the date
first above written.
ATTEST: MAGNETEC CORPORATION
/s/ George T. Crandall By: /s/ Bart C. Shuldman
- ------------------------- -------------------------------
Secretary Bart C. Shuldman, President
ATTEST: ITHACA PERIPHERALS INCORPORATED
/s/ George T. Crandall By: /s/ Richard L. Cote
- ------------------------- -------------------------------
Secretary Richard L. Cote, Vice President
4
ASSET TRANSFER AGREEMENT
THIS ASSET TRANSFER AGREEMENT (the "Agreement") is entered into by and
between MAGNETEC CORPORATION, a Connecticut corporation ("Magnetec"), and TRIDEX
CORPORATION, a Connecticut corporation ("Tridex").
WHEREAS, Magnetec desires to transfer to Tridex and Tridex desires to
acquire from Magnetec all of the assets owned and used by Magnetec in Magnetec's
ribbon business (the "Ribbon Business").
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Transfer of Assets.
(a) Magnetec hereby agrees to transfer to Tridex, at the Closing (as
defined in Section 7.1) all of Magnetec's right, title and interest in and to
the assets of Magnetec listed on Schedule 1 attached hereto, which constitute
all of the equipment, inventory (whether components, work-in progress or
finished goods), unfilled customer purchase orders, accounts receivable,
packaging, sales literature and other supplies used by Magnetec exclusively in
the conduct of the Ribbon Business (the "Assets").
(b) The Assets are being transferred to Tridex "as is" and "where is"
without any warranties of quality or fitness except as hereinafter set forth.
2. Assumption of Liabilities. Tridex hereby agrees to assume all
liabilities and obligations of Magnetec (a)for accrued but unused vacation days
as set forth on Schedule 2(a) attached hereto, due to employees engaged in the
Ribbon Business who, in connection with the Closing, cease to be employees of
Magnetec and become employed by Tridex and (b)under any purchase orders
submitted by customers of Magnetec as set forth on Schedule 2(b)
<PAGE>
attached hereto which remain unperformed or unfilled at the time of the Closing
and are assigned to Tridex by Magnetec.
3. Consideration for Transfer of Assets. Tridex and Magnetec agree that, at
Closing, Magnetec shall accept, in consideration for the transfer of the Assets,
cancellation of intercompany indebtedness, owed by Magnetec to Tridex, in an
amount equal to the book value of the Assets at the date of the closing. Tridex
and Magnetec acknowledge that such book value was approximately $228,000 at June
29, 1995.
4. Representations and Warranties of Magnetec. Magnetec represents and
warrants to Tridex as follows:
4.1 Corporate Status. Magnetec is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut.
4.2 Due Authorization. The entry by Magnetec into this Agreement and
the transfer of the Assets to Tridex hereunder have been duly authorized by all
requisite corporate action.
4.3 Title to Assets. Magnetec has good and marketable title to the
Assets free and clear of all liens and encumbrances (except for a lien on the
Assets held by Fleet Bank, National Association pursuant to an Amended and
Restated Credit Agreement dated as of December 15, 1995 and last amended on
March 15, 1996 (the "Credit Agreement")).
4.4 Condition of Assets. The inventory included in the Assets is of a
quality useable and saleable in the ordinary course of business. All other
tangible personal property, including manufacturing equipment, transferred
hereunder is in reasonably good operating condition and repair, subject to
normal wear.
4.5 Sufficiency of Assets. The Assets transferred by Magnetec to
Tridex pursuant to this Agreement constitute all of the assets used by Magnetec
exclusively in the conduct of the Ribbon Business and, in combination with the
services to be provided by Magnetec to Tridex pursuant to a Manufacturing
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Services Agreement, in the form attached hereto as Exhibit 7.2(b) (the
"Manufacturing Services Agreement"), are sufficient to conduct the Ribbon
Business as presently conducted by Magnetec.
5. Representations and Warranties of Tridex.
5.1 Corporate Status. Tridex is a corporation duly organized, validly
existing and in good standing under the laws of the State of Connecticut.
5.2 Due Authorization. The entry by Tridex into this Agreement and the
transfer of the assets from Magnetec to Tridex hereunder has been duly
authorized by all requisite corporate action.
6. Conditions Precedent to Closing.
6.1 Conditions Precedent to Tridex's Closing.
The obligations of Tridex under this Agreement are subject to the
satisfaction, at or before the Closing, of the conditions set out below.
(a) Accuracy of Representations. All representations and warranties
made by Magnetec in this Agreement will be true as of the Closing as though made
at that time.
(b) Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or its consummation, will have been instituted or
threatened as of the Closing.
(c) Bank Consent. Fleet Bank, National Association shall have
consented to the transactions contemplated by this Agreement, including but not
limited to the transactions under the Manufacturing Services Agreement.
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6.2 Conditions Precedent to Magnetec's Closing.
The obligations of Magnetec under this Agreement are subject to the
satisfaction, at or before the Closing, of the conditions set out below.
(a) Accuracy of Representations. All representations and warranties
made by Tridex in this Agreement will be true as of the Closing as though made
at that time.
(b) Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or its consummation, will have been instituted or
threatened as of the Closing.
(c) Bank Consent. Fleet Bank, National Association shall have
consented to the transactions contemplated by this Agreement, including but not
limited to the transactions under the Manufacturing Services Agreement.
7. Closing.
7.1 Time and Place.
The transfer of the Assets by Magnetec to Tridex (the "Closing") shall
take place on September 27, 1996 at the offices of Magnetec, 7 Laser Lane,
Wallingford, Connecticut at 10:00 a.m., or at such other time and place as the
parties shall mutually agree, but in no event later than December 31, 1996.
7.2 Magnetec's Obligations at Closing.
At the Closing, Magnetec will deliver to Tridex the following
documents:
(a) An Assignment and Assumption Agreement, in substantially the form
attached hereto as Exhibit 7.2(a) (the "Assignment and Assumption Agreement"),
duly executed by Magnetec, assigning and transferring to Tridex all of
Magnetec's right, title and interest in and to the customer purchase orders
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<PAGE>
which remain unfilled or unperformed as of the date of the Closing.
(b) The Manufacturing Services Agreement, in substantially the form
attached hereto as Exhibit 7.2(b), duly executed by Magnetec, regarding the
provision of services to Tridex by Magnetec with respect to the operation of the
Ribbon Business.
(c) An Instrument of Transfer, in substantially the form attached
hereto as Exhibit 7.2(c), transferring the Assets from Magnetec to Tridex.
7.3 Tridex's Obligation at Closing.
At the Closing, Tridex will deliver to Magnetec the following:
(a) The Assignment and Assumption Agreement, duly executed by Tridex.
(b) The Manufacturing Services Agreement, duly executed by Tridex.
(c) Proof of cancellation of indebtedness by Tridex.
8. Further Assurances. Magnetec and Tridex will execute and deliver such
additional documents and take such additional actions as may be necessary to
carry out the transactions contemplated by this Agreement.
9. Titles. The title of this Agreement and the titles of sections and
subsections, and of exhibits, are for convenience of reference only and will not
be considered in the construction or interpretation hereof.
10. Survival. All representations, warranties and agreements contained in
this Agreement will survive for six (6) months from the date of the Closing.
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11. Entire Agreement. This Agreement and the schedules hereto constitute
the entire agreement and understanding between the parties in respect of the
subject matter hereof and supersede any prior or contemporaneous agreement or
understanding between the parties, written or oral, which relates to the subject
matter hereof.
12. Successors and Assigns. References in this Agreement to the parties
hereto will be deemed to include their successors and permitted assigns and this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their successors and permitted assigns.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
15. Amendments. This Agreement may be amended or modified only by a written
instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 31st
day of July, 1996.
MAGNETEC CORPORATION
By: /s/ Bart C. Shuldman
-------------------------------------
Title: President
----------------------------------
TRIDEX CORPORATION
By: /s/ Richard L. Cote
-------------------------------------
Title: Senior Vice President and Chief
Financial Officer
----------------------------------
6
MANUFACTURING SUPPORT SERVICES AGREEMENT
THIS MANUFACTURING AND SERVICES AGREEMENT (the "Agreement") is dated as of
September 28, 1996 by and between Tridex Corporation, a Connecticut corporation
("Tridex"), and Magnetec Corporation, a Connecticut corporation ("Magnetec").
WHEREAS, Magnetec and Tridex have entered into an Asset Transfer Agreement
dated as of July 31, 1996 under which Magnetec has agreed to transfer to Tridex
all of the assets used exclusively in the conduct of the ribbon business (the
"Ribbon Business"); and
WHEREAS, Tridex has not yet obtained a facility separate from the Magnetec
facility suitable for the conduct of the Ribbon Business, and Magnetec, with its
existing manufacturing facility and shipping, receiving, accounting and related
support capability at that facility, can provide the space and support services
required by Tridex, as the owner of the Ribbon Business assets, for the
operation of the Ribbon Business; and
WHEREAS, upon completing the acquisition of the Ribbon Business assets,
Tridex will employ the individuals now employed by Magnetec who are directly
involved in the manufacturing of the Ribbon Business products and the individual
who supervises Ribbon Business manufacturing and related operations; and
WHEREAS, Tridex desires to obtain space within Magnetec's facility and
manufacturing support and related services necessary for the conduct of the
Ribbon Business, and Magnetec is willing to furnish or make such services and
space available to Tridex in connection with the transfer of the Ribbon Business
assets;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
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1. Staffing; Management Supervision and Control by Tridex.
(a) After the date of this Agreement, no Magnetec employees will
engage directly in the manufacturing operations of the Ribbon Business. As of
the date of this Agreement, Tridex shall offer full time employment to the
individuals listed on Schedule 4(a), and such individuals shall cease to be
employed by Magnetec. Tridex shall offer such individuals cash compensation
equal to their cash compensation paid by Magnetec and benefits substantially
equivalent to their benefits provided by Magnetec. Only these individuals
employed by Tridex for the Ribbon Business shall be permitted to operate Ribbon
Business equipment.
(b) Tridex shall maintain managerial supervision and control of the
Ribbon Business manufacturing operations and shall exercise final approval
authority over all Tridex purchase orders and Tridex checks prepared by Magnetec
in connection with the manufacturing support services rendered hereunder. The
Ribbon Line Supervisor will supervise the Ribbon Business manufacturing line
employees and serve as day-to-day on-site representative of Tridex for Ribbon
Business matters.
(c) The Ribbon Line Supervisor, or another Tridex employee (as
designated by Tridex in writing to Magnetec), shall: (i)forecast annual
materials requirements; (ii)develop material requirements planning ("MRP") data
for input to Magnetec's automated manufacturing and inventory control systems;
(iii) develop a production schedule and determine quantities and delivery dates
required for periodic materials requirements; (iv) issue Tridex purchase orders
for delivery of such materials in the appropriate quantities on the delivery
dates; (v)supervise Tridex employees engaged in the manufacturing operations of
the Ribbon Business; (vi)collect Ribbon Business receivables; (vii) authorize
payment of invoices; and (viii)supervise third-party payroll service and provide
Tridex federal taxpayer identification number for payroll purposes.
2. Insurance. Tridex agrees to obtain and maintain all necessary insurance,
including but not limited to, property, casualty, liability and workers'
compensation with respect to the Ribbon Business and the Tridex employees
engaged in Ribbon
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Business operations at Magnetec's facility. Tridex shall provide proof of
coverage upon request by Magnetec.
3. Space Provided. Magnetec hereby agrees to provide Tridex approximately
2,200 square feet of floor space including, to the extent practicable,
manufacturing, stockroom, finished goods warehouse, and shipping and receiving
space. Space provided to Tridex shall, to the extent practicable, be clearly
marked as separate areas designated for the Ribbon Business.
4. Ribbon Business Products Sold to Magnetec. Tridex agrees to sell Ribbon
Business products to Magnetec at prices no higher than ten percent (10%) below
the lowest price paid by any other customer of Tridex for the same products.
This price is subject to annual adjustment upon the mutual agreement of the
parties hereto, with annual increases not to exceed five percent (5%) of then
current prices.
5. Tridex Manufacturing Facility. Tridex agrees to use commercially
reasonable efforts to obtain its own manufacturing facility suitable for the
conduct of the Ribbon Business and to relocate the Ribbon Business assets to
such facility.
6. Manufacturing Support Services Provided by Magnetec.
Effective upon the date first written above (the "Effective Date"),
Magnetec will provide the following services to Tridex for the conduct of the
Ribbon Business:
(a) Purchasing and Manufacturing Processing Services: receive at the
Magnetec receiving dock materials ordered by Tridex for Ribbon Business
operations; generate list of goods received and cross-check against vendor's
packing list and Tridex purchase order; spot inspect such materials upon
receipt; store materials in the Magnetec stockroom in a separate area designated
for the Ribbon Business; move materials to manufacturing area according to
manufacturing schedule; and move finished goods to a separate area designated
for Ribbon Business finished goods.
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(b) Sales Order Processing and Customer Billing Services: promptly
after the date hereof, notify all Ribbon Business customers to submit orders to
Tridex in care of Magnetec Sales Department; receive and, after acceptance of
order by Ribbon Line Supervisor (as defined below), enter customer orders into
order processing system, including scheduling shipment date; generate shipping
documents; package and prepare finished goods for shipment; ship finished goods
and generate invoice on Tridex form.
(c) Accounts Payable Processing Services: promptly after the date
hereof, notify Ribbon Business suppliers to submit invoices to Tridex in care of
Magnetec Accounts Payable; match suppliers invoices with Tridex purchase orders
and receiving department records and enter verified invoices onto accounts
payable system; and prepare Tridex checks to suppliers for signature by Tridex
authorized signatory. (Tridex will in all cases make the final decision
regarding payment of any invoice submitted by a Ribbon Business supplier.)
(d) Payroll Processing Services: maintain Ribbon Business employee
files, including hours worked and payroll records. (Using the Tridex employer
identification number, Tridex will establish with a third party payroll service
provider a separate payroll for all Ribbon Business employees, including the
Ribbon Line Supervisor. Tridex will be solely responsible for all Ribbon
Business wages, salaries, insurance and other benefits, and all withholding or
other taxes due thereon.)
(e) Accounting and Data Processing Services: establish within the
Magnetec accounting system separate accounts for all activity of the Ribbon
Business; provide Tridex with a monthly trial balance, detailed general ledger
and subledgers for all transactions. (All general ledger accounts will be
controlled by Tridex. Tridex will provide a Ribbon Business cash receipt journal
to Magnetec on a monthly basis to update the accounts receivable on the Ribbon
Business records maintained by Magnetec.)
7. Tridex Payments to Magnetec. Magnetec shall bill Tridex in arrears, as
of the last day of Magnetec's accounting month, for manufacturing support
services provided, and Tridex shall pay
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Magnetec no later than thirty (30) days after the date of the invoice, the
following amounts:
(a) For Magnetec's occupancy costs, Tridex shall pay Magnetec a flat
fee of $3,300 per month, and for Magnetec's overhead directly attributable to
manufacturing, Tridex shall pay Magnetec 9.6% of the monthly revenue of the
Ribbon Business, subject to annual adjustment upon the agreement of both
parties;
(b) For Magnetec's overhead attributable to general and administrative
expenses (e.g., expenses incurred to provide order processing, customer billing
and accounting services), Tridex shall pay Magnetec a flat fee of $8,509 per
month, subject to annual adjustment upon the agreement of both parties;
(c) For Magnetec's fixed employment costs for sales employees, Tridex
shall pay Magnetec 2.4% of the monthly revenue of the Ribbon Business; and
(d) For other costs incurred and paid by Magnetec on behalf of Tridex
which are not included in Section 7(a) - (c) but are directly related to the
conduct of the Ribbon Business, including but not limited to sales commissions
paid on Ribbon Business sales, temporary labor, the direct cost of engineering
labor costs, benefits, and manufacturing equipment maintenance and repair,
Tridex shall reimburse Magnetec for the actual cost of such services. Tridex
shall reimburse Magnetec for the full cost of such goods or services, when all
such goods or services have been or will be used for the Ribbon Business.
8. Magnetec Payments to Tridex. During the term of this Agreement, Magnetec
may request and Tridex may, to the extent available, provide the services of the
Tridex employee filling the position of Ribbon Line Supervisor (the "Ribbon Line
Supervisor"). Magnetec shall pay Tridex for the services of the Ribbon Line
Supervisor, to the extent they are requested by and provided to Magnetec, at an
hourly rate calculated by dividing the weekly salary paid to the Ribbon Line
supervisor by forty (40).
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9. Goodwill of Common Customers. Magnetec has invested substantial time,
effort and expense in developing its goodwill and reputation for providing to
its customers quality printer products, including Ribbon Business products, at
competitive prices. Magnetec will continue to sell printers to such customers,
many of whom are and will be Ribbon Business customers. As a material inducement
to Magnetec to enter into this Agreement, Tridex agrees not to take any action
during the term of this Agreement which is intended to have, or which would have
a reasonable likelihood of having, a material adverse effect on the relationship
of Magnetec with its customers or end users of its products.
10. Liabilities; Disclaimer. In furnishing the other party with services as
herein provided, Tridex, Magnetec and their respective officers, directors,
employees or agents (collectively, "Representatives") shall not be liable to the
other party or its respective Representatives, creditors or shareholders for any
action or failure to act except willful malfeasance, bad faith or gross
negligence in the performance of their duties or reckless disregard of their
obligations and duties under the terms of this Agreement. The provisions of this
Agreement are for the sole benefit of Tridex, Magnetec and their respective
Representatives and will not, except to the extent otherwise expressly stated
herein, inure to the benefit of any third party. Neither Tridex nor Magnetec
makes any express or implied warranty or representation with respect to the
quality of the services provided hereunder.
11. Term. The term of this Agreement shall begin on the date hereof and
continue for two (2) years, unless terminated sooner by the mutual agreement of
the parties.
12. Status of Relationship. Magnetec shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this Agreement,
shall have no authority to act for or bind Tridex.
13. Notices. All notices, billings, requests, demands, approvals, consents,
and other communications which are required or may be given under this Agreement
will be in writing and will
6
<PAGE>
be deemed to have been duly given if delivered personally or sent by registered
or certified mail, return receipt requested, postage prepaid to the parties at
their respective addresses set forth below:
If to Magnetec:
Magnetec Corporation
7 Laser Lane
Wallingford, CT 06492
Attention: President
If to Tridex:
Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: Chief Executive Officer
14. Confidentiality. Tridex and Magnetec hereby agree to hold, and cause
their respective employees, agents and authorized representatives to hold, in
strict confidence, all information concerning the other party furnished pursuant
to this Agreement.
15. No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and shall not be deemed to confer upon any third party and
right, remedy or claim in excess of those existing without reference to this
Agreement.
16. Access to Information. During the term of this Agreement and for one
(1) year thereafter, Tridex shall afford to Magnetec and its authorized
representatives, agents and employees, and Magnetec shall afford to Tridex and
its authorized representatives, agents and employees, access during normal
business hours to all records, books, contracts and other data, including but
not limited to corporate, financial, accounting, personnel and other business
records, related to the Ribbon Business.
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17. No Assignment. This Agreement shall not be assignable except with the
prior written consent of the other party to this Agreement.
18. Applicable Law. This Agreement shall be governed by and construed under
the laws of the State of Connecticut applicable to contracts made and to be
performed therein.
19. Section Headings. The section headings used in his Agreement are for
convenience of reference only and will not be considered in the interpretation
of construction of any of the provisions thereof.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
21. Amendments. This Agreement may be amended or modified only by a written
instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument by their duly authorized officers as of the date first
above written.
TRIDEX CORPORATION
By:______________________________________
Title:___________________________________
MAGNETEC CORPORATION
By:______________________________________
Title:___________________________________
8
CORPORATE SERVICES AGREEMENT
THIS CORPORATE SERVICES AGREEMENT (the "Agreement") is dated as of June 24,
1996 by and between Tridex Corporation, a Connecticut corporation ("Tridex"),
and TransAct Technologies Incorporated, a Delaware corporation ("TransAct").
WHEREAS, TransAct and its subsidiary Magnetec Corporation (collectively,
the "TransAct Group") desire to obtain administrative and other services from
Tridex and Tridex is willing to furnish or make such services available to
Transact; and
WHEREAS, Tridex and its subsidiaries Ultimate Technology Corporation and
Cash Bases GB Ltd. (collectively the "Tridex Group") desire to obtain certain
financial services from TransAct and TransAct is willing to furnish or make such
services available to Tridex;
WHEREAS, Tridex and TransAct desire to set forth the basis for the
provision of services of the type referred to herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. Services.
1.1 Beginning on the effective date of the Registration Statement on Form
S-1 (the "Registration Statement") filed in connection with the public offering
of TransAct common stock ( the "Effective Date"), Tridex will provide or
otherwise make available to the TransAct Group certain general corporate
services provided by Tridex's corporate staff, including but not limited to
certain human resources, employee benefit administration, financial reporting,
insurance, risk management and general administrative services. The services
will include the following:
(a) Human resources and employee benefit related services - General human
resources services (including but not limited to administration of all employee
matters), administration of TransAct's employee participation in employee
benefit plans and insurance programs sponsored by Tridex such as the following:
401(k) plan, group medical insurance, group life insurance, employee stock
option plans and filing of all required reports under ERISA for employee benefit
plans sponsored by Tridex.
(b) Financial reporting and securities compliance related services -
Maintenance of corporate records, assistance, if and when necessary, in
preparation of Securities and Exchange Commission filings, including without
limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the
preparation of Proxies and Proxy Statements and the solicitation of proxies, and
assistance in the preparation of the Annual and Quarterly Reports to
Stockholders.
(c) Risk management and insurance related services - Provision of risk
management (including, but not limited to premiums attributable to TransAct) and
related services and maintenance of all policies of liability, fire, workers'
compensation and other forms of insurance for the benefit of TransAct, its
employees, assets and facilities.
-1-
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(d) Services in addition to those enumerated in subsections 1.1(a) through
1.1(c) above to include, but not be limited to, corporate recordkeeping, other
general administrative activities and financial services as reasonably requested
from time to time by TransAct or as provided by Tridex.
1.2 For performing the services described above in Section 1.1, TransAct
shall pay Tridex in accordance with the following schedule:
(a) TransAct shall reimburse Tridex for one-half (50%) of total cash
compensation (consisting of salary, a pro-rated portion of annual bonus actually
paid and other out-of-pocket expenditures for medical, life insurance and other
benefits) paid by Tridex to or on behalf of Mr. Thomas Curtin, Tridex's Vice
President of Human Resources, for the period from the Effective Date until
December 31, 1997. Mr. Curtin, Tridex and TransAct shall cooperate to make Mr.
Curtin available to TransAct for one half (50%) of his total working time for
the provision of services to TransAct for this period.
(b) TransAct shall reimburse Tridex for one-half (50%) of the total cash
compensation (consisting of salary, a pro-rated portion of annual bonus actually
paid and other out-of-pocket expenditures for medical, life insurance and other
benefits) paid by Tridex to or on behalf of Mr. George Crandall, Tridex's Vice
President, Secretary and Comptroller, for the period from the Effective Date
until March 31, 1997. Mr. Crandall, Tridex and TransAct shall cooperate to make
Mr. Crandall available to TransAct for one half (50%) of his total working time
for the provision of services for this period.
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1.3 TransAct will reimburse Tridex for expenses incurred for insurance
(including but not limited to property, casualty, group life and health and
Workers Compensation), accounting and legal services in accordance with the
Company's historical allocation methods.
In addition, TransAct will reimburse Tridex for other expenses incurred to
provide specific services requested by TransAct, as agreed by TransAct and
Tridex when such services are requested.
1.4 Beginning on the Effective Date, TransAct will provide or otherwise
make available to the Tridex Group certain financial services customarily
provided by a chief financial officer, including but not limited to management
of corporate finance and accounting matters. For performing the services
described herein, Tridex shall reimburse TransAct for fifteen percent (15%) of
the total cash compensation (consisting of salary, a pro-rated portion of annual
bonus actually paid and other out-of-pocket expenditures for medical, life
insurance and other benefits) paid by TransAct to or on behalf of Mr. Richard L.
Cote, TransAct's Executive Vice President, Chief Financial Officer and
Treasurer, for the period of the Effective Date, until March 31, 1997. Mr. Cote,
TransAct and Tridex shall cooperate to make Mr. Cote available to Tridex for
fifteen percent (15%) of his total working time for the provision of services to
Tridex during this period. Upon the Effective Date, Mr. Cote will become a
full-time employee of TransAct, and his office will be relocated to TransAct's
Wallingford, Connecticut facility.
1.5 The charges for services pursuant to Sections 1.2, 1.3 and 1.4 above
will be determined and payable no less frequently than on a monthly basis;
provided that reimbursement of a pro-rated portion of bonuses shall be payable
after such bonuses are paid by Tridex or TransAct. The charges will be due when
billed and shall be paid no later than ten (10) business days from the date of
billing.
1.6 When services of the type described in this Agreement are provided by
outside vendors to Tridex, TransAct or, in connection with the provision of such
services, out-of-pocket costs such as travel are incurred, the cost thereof will
be paid directly by the party receiving the service. If either party to this
Agreement is billed for services provided to the other party, the billed party
may pay the bill and charge the party receiving the services the amount of the
bill or forward the bill to the party receiving the services for payment.
2. TransAct's Directors and Officers. Nothing contained herein will be
construed to relieve the directors or officers of TransAct from the performance
of their respective duties or to limit the exercise of their powers in
accordance with the charter or By-Laws of TransAct or in accordance with any
applicable statute or regulation.
3. Liabilities; Disclaimer. In furnishing the other party with services as
herein provided, neither Tridex nor TransAct, any member of the respective
Groups nor any of their respective officers, directors employees or agents shall
be liable to any member of the other party or their respective creditors or
shareholders for errors of judgment or for anything except willful malfeasance,
bad faith or gross negligence in the performance of their duties or reckless
disregard of their obligations and duties under the terms of this Agreement. The
provisions of this Agreement are for the sole benefit of the Tridex Group and
the TransAct Group and will not, except to the extent otherwise expressly stated
herein, inure to the benefit of any third party. Neither Tridex nor TransAct
makes any express or implied warranty or representation with respect to the
quality of the services provided hereunder.
4. Term.
(a) Term. The initial term of this Agreement shall begin on the Effective
Date and continue until December 31, 1997.
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<PAGE>
(b) Termination. This Agreement may be terminated by either party at any
time on ninety (90) days' prior notice to the other; provided, however, that the
provisions of Section 1.2(a) and (b) and Section 1.4 shall survive any such
termination.
5. Status. Each member of the Tridex Group shall be deemed to be an
independent contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act or represent any member of TransAct.
6. Employment Changes.
(a) With respect to the employment and compensation levels of Mr. Curtain
and Mr. Crandall, Tridex shall advise TransAct in writing ten (10) days prior to
any change in Mr. Curtain's or Mr. Crandall's compensation level or employment
status initiated by Tridex. Tridex agrees to consult with TransAct regarding any
such change in Mr. Curtain's or Mr. Crandall's compensation level or employment
status prior to such change.
(b) With respect to the employment of Mr. Curtain, Tridex shall notify
TransAct whether it intends to continue Mr. Curtain's employment beyond
December31, 1997. If Tridex notifies TransAct that it does not intend to employ
Mr. Curtain beyond December31, 1997, TransAct shall, within fifteen (15) days
from the date of Tridex's notice to TransAct, notify Tridex of its intent to
employ Mr. Curtain beyond December31, 1997.
7. Notices. All notices, billings, requests, demands, approvals, consents,
and other communications which are required or may be given under this Agreement
will be in writing and will be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid to the parties at their respective addresses set forth below:
If to TransAct:
TransAct Technologies, Inc.
7 Laser Lane
Wallingford, CT 06492
Attention: President
If to Tridex:
Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: President
8. Confidentiality. Tridex and TransAct hereby agree to hold, and cause its
respective employees, agents and authorized representatives to hold, in strict
confidence, all information concerning the other party furnished pursuant to
this Agreement.
9. No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and should not be deemed to confer upon any third party
and right, remedy or claim in excess of those existing without reference to this
Agreement.
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<PAGE>
10. Access to Information. Tridex shall afford to TransAct and its
authorized representatives, agents and employees, and TransAct shall afford to
Tridex and its authorized representatives, agents and employees, access during
normal business hours to all records, books, contracts and other data, including
but not limited to corporate, financial, accounting, personnel and other
business records, for a period of six (6) years following the termination of
this Agreement.
11. No Assignment. This Agreement shall not be assignable except with the
prior written consent of the other party to this Agreement.
12. Applicable Law. This Agreement shall be governed by and construed under
the laws of the State of Connecticut applicable to contracts made and to be
performed therein.
13. Section Headings. The section headings used in his Agreement are for
convenience of reference only and will not be considered in the interpretation
of construction of any of the provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument by their duly authorized officers as of the date first
above written.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Title: Chairman and Chief Executive
Officer
TRANSACT TECHNOLOGIES INCORPORATED
By: /s/ Bart C. Shuldman
-------------------------------------
Title: Chief Executive Officer
-5-
PRINTER SUPPLY AGREEMENT
THIS MANUFACTURE AND SUPPLY AGREEMENT (the "Agreement") is made by and
between Ithaca Peripherals ("Ithaca"), a division of Magnetec Corporation, a
Connecticut corporation and a wholly owned subsidiary of TransAct Technologies
Incorporated, a Delaware corporation ("TransAct"), and Ultimate Technology
Incorporated, a New York corporation ("Ultimate").
WHEREAS, Ithaca manufactures POS printers and Ultimate wishes to purchase
POS printers from Ithaca, and Ithaca wishes to provide the POS printers to
Ultimate, all on the terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto hereby agree as follows:
1. Manufacture and Supply of Product.
During the term of this Agreement, Ithaca will manufacture and sell to
Ultimate and Ultimate will purchase from Ithaca, subject to the terms and
conditions contained herein, no less than 75% of Ultimate's total requirements
for POS printers, calculated on a unit basis (the "Required Percentage"). The
POS printers will be manufactured and supplied to Ultimate pursuant to written
purchase orders submitted by Ultimate to Ithaca from time to time which,
promptly upon receipt, will be acknowledged and accepted or rejected by Ithaca
pursuant to article 4.2 of this Agreement.
2. List Price Discount; Verification of Minimum Percentage.
2.1 In consideration for Ultimate's purchase of the Required
Percentage, Ithaca shall sell POS printers to Ultimate at prices equal to the
discount from Ithaca's published list prices as set forth on Exhibit 2.1
attached hereto. Ithaca will sell to Ultimate options, accessories and supplies
at Ithaca's published maximum discounts and will sell spare parts at a 20%
discount from Ithaca's list prices for spare parts, subject to adjustment by
mutual agreement on a case by case basis. Ithaca retains the right to increase
its list prices from time to time in its sole discretion, but agrees that during
the term of this Agreement no other distributor of Ithaca products whose volume
of POS printer purchases is greater than 1,000 units per year will receive
discounts greater than the discounts provided to Ultimate.
<PAGE>
2.2 Ultimate shall provide to Ithaca, no more than thirty (30) days
after the end of a quarter, a quarterly report of all POS printers purchased by
Ultimate from all sources in the quarter just ended. In order to confirm that
Ultimate is fulfilling its obligations under this Agreement, Ithaca and its
representatives shall have the right, upon reasonable notice and during normal
business hours, to have access to Ultimate's purchasing and related records and
to otherwise conduct a reasonable audit of Ultimate's purchases of POS printers.
The cost of any such audit shall be paid by Ithaca unless an audit reveals that
Ultimate is not purchasing the Minimum Percentage, in which case Ultimate shall
reimburse Ithaca for the full cost of such audit.
3. Effective Date and Term.
The term of this Agreement shall commence as of the effective date of
the Registration Statement on Form S-1 of TransAct Technologies Incorporated
(Registration No. 333-06895) and ending on December 31, 1999.
4. Estimates; Ordering; Shipment.
4.1 Beginning on September 28, 1996 and thereafter on or before the
last day of every accounting month, Ultimate shall provide Ithaca with a written
estimate in the form attached hereto as Exhibit 4.1.
4.2 Purchase orders for POS printers shall reference this Agreement
and be submitted by Ultimate on its regular purchase order forms. Purchase
orders will be deemed accepted by Ithaca unless rejected in writing by Ithaca
specifying the reasons for rejection within fourteen (14) calender days after
receipt of the purchase order. Purchase orders may be rejected by Ithaca if a
purchase order (i) does not comply with the terms and conditions of this
Agreement, or (ii) proposes new or additional terms that are not acceptable to
Ithaca or requires modifications to the POS printers which Ithaca, in its sole
discretion, is unwilling to make. The delivery date, quantity, payment terms and
other terms and conditions of sale set forth in any such purchase order shall,
to the extent not inconsistent with this Agreement, govern.
4.3 Unless otherwise agreed, purchase orders shall specify a delivery
date with the normal lead time of forty-five (45) days. If no lead time is
specified, the POS Printers will be delivered within forty-five (45) days of
Ithaca's receipt of the purchase order.
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<PAGE>
4.4 Expedited delivery will be available for an additional charge to
be agreed to by Ithaca and Ultimate on a case by case basis.
4.5 Title to the equipment shall pass to Ultimate only upon Ithaca's
receipt of payment of the full purchase price. Ithaca warrants title to be
clear, free and unencumbered. Ithaca reserves, and Ultimate hereby grants to
Ithaca, a purchase money security interest in each unit of the equipment in the
amount of its purchase price, and such security interest shall be satisfied by
payment in full of the purchase price. Ithaca may file a financing statement
with any appropriate state or local authorities in order to perfect Ithaca's
security interest. Ultimate hereby appoints Ithaca as its agent and attorney in
fact with full power to sign in Ultimate's name any financing statements. No
authorization is given to resell any unit of equipment or sublicense any program
unless the price, charge or fee shall have been paid to Ithaca, or unless
Ultimate has protected Ithaca's security interest by the appropriate filings
otherwise.
4.6 In the event Ultimate (a) cancels any order or portion thereof,
(b) fails to meet any obligation hereunder, causing cancellation or rescheduling
of any order or portion thereof, or (c) requests a rescheduling of scheduled
orders and such request is accepted by Ithaca, Ultimate agrees to pay to Ithaca
cancellation or rescheduling charges based on a percentage of the current price
to Ultimate of the cancelled or rescheduled POS printers. Such changes are as
follows:
Cancellation or Reschedule Reschedule Cancellation
Notice Received Charge Charge
- -------------------------- ---------- ------------
61-90 days prior to 5% 10% or $200 whichever
scheduled delivery month is greater
31-60 days prior to 10% 15% or $200 whichever
scheduled delivery month is greater
30 days or less prior to 15% Non-cancelable
scheduled delivery month
During scheduled delivery Non-reschedulable Non-cancelable
month
The third request for rescheduling an order constitutes an automatic
cancellation of that order. Ultimate may not cancel or reschedule any order or
portion thereof after delivery.
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<PAGE>
5. Payment.
Ithaca may issue invoices no earlier than the shipping date of the POS
printers. Payment will be made within thirty (30) calender days of the date of
shipment.
6. POS printers Warranty.
Ithaca shall provide warranties on the POS printers as set forth in
its warranty policy, as in effect from time to time. A copy of Ithaca's current
warranty policy is attached as Schedule 6 hereto. Ithaca reserves the right to
revise its warranty policy from time to time, and shall promptly provide any
revisions to Ultimate.
7. Corporate Authorization. Ithaca and Ultimate each represent to the other
that: (a) it has the right to enter into this Agreement; (b) all necessary
actions, corporate and otherwise, have been taken to authorize the execution and
delivery of this Agreement and the same is a valid and binding obligation of
such party; (c) all licenses, consents and approvals necessary to carry out all
of the transactions contemplated in this Agreement have been obtained by such
party; and (d) such party's performance of this Agreement will not violate the
terms of any license, contract, note or other obligation to which such party is
a party.
8. Changes, Amendments and Waivers.
This Agreement may not be amended or modified, nor any of its terms
waived, except by a written instrument duly executed by the parties hereto. When
used herein, the term "Agreement" will include any amendments or modifications
made in accordance herewith. A waiver by either party of a breach of any
provision of this Agreement by the other party, or any right hereunder, will not
operate to waive or excuse any subsequent breach or waive any other right.
9. No Assignment.
This Agreement may not be assigned or transferred by either Party
hereunder without prior written consent of the non-assigning party.
4
<PAGE>
10. Notice.
Any notice or other communication required or permitted hereunder will
be in writing and will be given (i) by delivery in person, (ii) by certified
mail, return receipt requested, (iii) by commercial overnight courier, or (iv)
by facsimile transmission (telecopy) (with telephone confirmation of receipt),
as follows:
(a) If to Ithaca, to:
Ithaca Peripherals, a division of
Magnetec Corporation
20 Bomax Drive
Ithaca, NY 14850
Attention: Lucy H. Staley,
Senior Vice President
Telecopy number: (607) 257-8922
Telephone number: (607) 257-8901
(b) If to Ultimate, to:
Ultimate Technology Corporation
6280 Route 96 East
Victor, NY 14564
Attention: Dennis Lewis, President
Facsimile number: (716) 924-1434
Telephone number: (716) 924-9500
Any such notice or other communication will be deemed to have been given (i) on
the date of delivery in person, (ii) on the fifth day after mailing by certified
mail, provided that receipt of delivery is confirmed in writing, (iii) on the
first Business Day following delivery to a commercial overnight courier, or (iv)
on the day of facsimile transmission (telecopy) provided that telephone
confirmation of receipt is obtained.
11. Governing Law.
This Agreement will be governed by the laws of the State of
Connecticut without reference to its conflict of laws rules.
12. Arbitration; Venue and Jurisdiction.
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or validity thereof will be settled by
arbitration in accordance with the Rules of the American Arbitration
Association. The
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<PAGE>
number of arbitrators will be one. The place of arbitration will be Hartford,
Connecticut, or at such other place as the parties may mutually agree in
writing. The award or determination made by the arbitrators will be final and
binding upon the parties and judgment thereon may be entered in any court of
competent jurisdiction. The parties consent to and accept the jurisdiction of
such courts and waive any objection (including any objection to venue or any
objection based upon the grounds of forum non convenience) which might be
asserted to the entering of the judgment in such courts.
13. Termination.
13.1 This Agreement and the obligations of the parties hereunder will
terminate upon the expiration of the term set forth in Section 3 or earlier, at
the option of the party which is affected adversely by any of the following and
upon the occurrence thereof:
(a) If either party fails to observe or perform or breaches any
material term or obligation contained herein and fails to cure the
non-observance or non-performance or breach within fifteen (15) days after being
given notice by the other party of the existence thereof or, as to failures
which cannot reasonably be cured within fifteen (15) days, fails within fifteen
(15) days to begin the curing thereof and thereafter diligently prosecutes the
same to completion within thirty (30) days after being given the notice. Without
limiting the generality of the foregoing, Ultimate hereby acknowledges and
confirms that its obligation to purchase the Minimum Percentage of its POS
printer requirements from Ithaca is a material obligation of this Agreement.
(b) The dissolution, insolvency (in the sense of being unable to pay
debts as they mature), making of an assignment for the benefit of creditors, the
filing of an involuntary petition under the United States Bankruptcy Code or the
bankruptcy laws of any other country which is not dismissed within sixty (60)
days, or the appointment of a receiver (or similar official) of the assets of,
by or against either party.
13.2 Either party's termination of this Agreement pursuant to Sections
13 hereof will be without prejudice to its legal remedies for non-observance,
non-performance or breach of this Agreement.
14. Sole Understanding.
This Agreement is the entire agreement and understanding of the
parties related to the subject matter hereof
6
<PAGE>
and supersedes all other prior agreements, understandings and communications,
whether oral or written.
15. Headings.
The headings of the sections and subsections of this Agreement have
been added for convenience only and will not be deemed to be a part of this
Agreement.
16. Counterparts.
This Agreement may be executed in any number of counterparts, but all
counterparts hereof will together constitute but one agreement. In proving this
Agreement, it will not be necessary to produce or account for more than one
counterpart signed by both of the parties.
THIS AGREEMENT has been executed by the duly authorized representative of
each of the parties hereto this 30th day of July, 1996.
ITHACA PERIPHERALS, a division of
MAGNETEC CORPORTION
By: /s/ Bart C. Shuldman
-------------------------------------
Print Name:
--------------------------
Title: President
------------------------------
ULTIMATE TECHNOLOGY CORPORATION
By: /s/ Dennis J. Lewis
Print Name:
--------------------------
Title: President
------------------------------
7
TAX SHARING AGREEMENT
THIS AGREEMENT, executed this 31 day of July, 1996, is entered into by
and between Tridex Corporation, a Connecticut corporation ("Tridex") and
TransAct Technologies, Inc., a Delaware corporation ("TransAct").
RECITALS
WHEREAS, Tridex, TransAct, Magnetec Corporation, a Connecticut corporation
and wholly-owned subsidiary of Tridex ("Magnetec"), and Ithaca Peripherals,
Inc., a Delaware corporation and wholly-owned subsidiary of Tridex (Ithaca"),
have entered into a Plan of Reorganization dated as of June 24, 1996 (the
"Plan") pursuant to which, among other things, (i) TransAct is acquiring from
Tridex all of the outstanding capital stock of Magnetec, (ii) TransAct is
issuing [5,400,000] shares of its common stock to Tridex and (iii) TransAct is
issuing up to 1,322,500 of common stock pursuant to an underwritten public
offering registered under the Securities Act of 1933, as amended (the
"Securities Act") on a Registration Statement on Form S-1 (the "Offering");
WHEREAS, as contemplated by the Plan, the shares of outstanding common
stock of TransAct held by Tridex are to be distributed on a pro rata basis to
the record holders of shares of Tridex common stock (the "Distribution") upon
the satisfaction of certain conditions;
WHEREAS, Tridex and its subsidiaries, including Magnetec and Ithaca, have
heretofore: (1) joined in filing consolidated federal income tax returns under
the Internal Revenue Code of 1986, as amended (the "Code"), and the applicable
Treasury Regulations promulgated thereunder by the Treasury Department (the
"Regulations"); (2) joined in filing certain consolidated, combined, and unitary
state income tax returns; and (3) in some cases filed income tax returns on a
separate company basis.
WHEREAS, during the period prior to the consummation of the Distribution,
TransAct is expected to remain within the affiliated group (within the meaning
of Section 1504(a) of the Code) of corporations (the "Tridex Group") of which
Tridex is the common parent;
WHEREAS, the parties hereto desire to allocate their respective federal,
state, local and foreign income tax (or similar tax) liabilities, assessed in
connection with the filing of returns, including but not limited to
consolidated, combined, unitary, or separate returns, among themselves for all
fiscal years thereafter during which TransAct remains a member of the Tridex
Group;
WHEREAS, the parties hereto desire to provide for the compensation and
reimbursement of each other for Tax Deficiencies (as hereinafter defined) or Tax
Refunds (as hereinafter defined) as a result of audits by or applications to the
Internal Revenue Service (the "Service") and other taxing authorities or by
judicial determination, if any, involving consolidated federal, consolidated,
combined or unitary state and local income tax returns and similar aggregate
reporting for certain foreign jurisdictions;
WHEREAS, the parties hereto desire to provide and fix the responsibilities
for: (1) the preparation and filing of tax returns along with the payments of
taxes shown to be due and payable therein (as well as estimated or advance
payments required prior to the filing of said returns) for all periods prior to
and
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<PAGE>
following the Effective Date (as hereinafter defined); (2) the retention and
maintenance of all relevant records necessary to prepare and file appropriate
tax returns, as well as the provision for appropriate access to those records
for all parties to this Agreement; (3) the conduct of audits, examinations, and
proceedings by appropriate governmental authorities which could result in a
redetermination of tax liabilities (for all periods prior to or following the
Effective Date) of any party to this Agreement; and (4) the cooperation of all
parties with one another in order to fulfill their duties and responsibilities
under this Agreement and under applicable laws.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable considerations, the receipt of which is hereby
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(a) "Affiliated Group" shall have the meaning attributed to that term
in Section 1504 of the Code, determined without regard to Section 1504(b) of the
Code.
(b) "Code" shall have the meaning attributed to that term in the
recitals above.
(c) "Common Parent" shall have the meaning attributed to that term in
the Consolidated Return Regulations (Treas. Reg. Section 1.1502-1 et seq.)
promulgated pursuant to Section 1502 of the Code.
(d) "Consolidated Return Regulations" shall have the meaning
attributed to that term in Section 4 hereof.
(e) "Effective Date" shall mean the date on which the Registration
Statement relating to the Offering is declared effective under the Securities
Act.
(f) "IRS" or "Service" shall have the meaning attributed to that term
in the recitals above.
(g) "Joint Contest" shall mean a Tax Contest seeking a redetermination
of Taxes involving one of more Members (determined by reference to the time of
such contest rather than the period for which such return was filed) of the
Tridex Group and one or more Members of the TransAct Group, whether such
corporations joined in the filing of returns on a consolidated, combined, or
unitary basis (including similar aggregate reporting for certain foreign
jurisdictions).
(h) "Member" shall have the meaning attributed to that term in Section
1.1502-1(b) of the Regulations, but without regard to whether a corporation
qualifies to be a Member of an Affiliated Group under Section 1504(b) of the
Code.
(i) "Minimum Tax Credit" shall have the meaning attributed to that
term in Section 5 hereof.
(j) "Offering" shall have the meaning attributed to that term in the
recitals above.
(k) "Plan" shall have the meaning attributed to that term in the
recitals above.
(l) "Regulations" shall have the meaning attributed to that term in
the recitals above.
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<PAGE>
(m) "Separate Contest" shall mean a Tax Contest which involves: (i)
only Members (or their direct and indirect subsidiaries) of the Tridex Group or
(ii) only Members (or their direct and indirect subsidiaries) of the TransAct
Group.
(n) "Separation Date" shall mean the date, if any that TransAct shall
cease to be a member of the Tridex Group.
(o) "Tax" or "Taxes" shall mean (i) all federal income taxes and
state, local, and foreign income and franchise taxes (or taxes in lieu thereof)
plus (ii) any penalties, fines or additions to tax with respect thereto, plus
(iii) any interest with respect to the items contained in (i) and (ii).
(p) "Tax Attributes" shall mean any losses, credits and other tax
attributes that may be carried forward or back by any Member of the Tridex Group
or the TransAct Group on a separate return or consolidated basis to a taxable
year other than the taxable year in which such attribute is recognized,
including, but not limited to, net operating losses, alternative minimum tax
credits, targeted jobs tax credits, investment tax credits, foreign tax credits,
research and development credits, and similar credits under state or local law.
(q) "Tax Contest" shall mean an audit, review, examination or the
like, inclusive of litigation, with the purpose or effect of redetermining Taxes
of any corporation or other entity (without regard to whether such matter was
initiated by an appropriate taxing authority or in response to a claim for a
refund).
(r) "Tax Deficiency" or "Tax Deficiencies" shall mean with respect to
previously filed returns an assessment for Taxes as a result of audits by or
applications to the Service and other taxing authorities or judicial
determination.
(s) "Tax Liability" or "Tax Liabilities" shall mean a liability for
Taxes.
(t) "Tax Refund" or "Tax Refunds" shall mean with respect to
previously filed returns, a refund of Taxes as a result of audits by or
application to the Service and other taxing authorities or judicial
determination.
(u) "TransAct" shall have the meaning attributed to that term in the
preamble hereof.
(v) "TransAct Group" shall mean the group of corporations at any given
time after the Separation Date which would be the Affiliated Group of which
TransAct is the Common Parent if TransAct was a "common parent" within the
meaning of the Consolidated Return Regulations, and where relevant, all other
subsidiaries which are owned directly or indirectly by its Members.
(w) "Tridex" shall have the meaning attributed to such term in the
preamble hereof.
(x) "Tridex Group" shall mean the group of corporations at any given
time (either prior to, or subsequent to, the Effective Date) which would be the
Affiliated Group of which Tridex is the Common Parent if Tridex was a "common
parent" within the meaning of the Consolidated Return Regulations, and where
relevant, all other subsidiaries which are owned directly or indirectly by its
Members.
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<PAGE>
SECTION 2. CONSOLIDATED RETURN ELECTION; ALLOCATION OF TAX OBLIGATIONS;
POST-SEPARATION DATE ALLOCATIONS AND PAYMENTS; TREATMENT OF TAX
CARRYFORWARDS; AND COMPUTATION OF INCOME TAX PROVISIONS.
(a) Consolidated Return Electionx. In determining Tax Liabilities of
the Tridex Group and its Members for Fiscal 1996 and where relevant any
subsequent fiscal year up to the Separation Date, the computations of the tax
liabilities of the Tridex Group and its Members shall, to the extent permitted
by law, be made in accordance with the methods used in the consolidated returns
for the fiscal years ending prior to Fiscal 1996 which include Tridex and
TransAct.
(b) Allocation of Tax Obligations.
(i) Taxes assessed pursuant to the returns described in the preceding
subsection will be allocated among the Members of the Tridex Group
pursuant to the Tridex Group's historic tax allocation method,
described in Section 1552(a)(2) of the Code and Section 1502-33(d)(3)
of the Regulations (applying a fixed percentage of 100 percent).
(ii) With respect to fiscal 1996 and any subsequent fiscal year or
portion thereof up to the Separation Date for which TransAct remains a
Member of the Tridex Group, TransAct shall pay to Tridex an amount
equal to the federal income taxes for such period which the TransAct
Group would have been liable but for the fact of being a Member of the
Tridex Group.
(iii) With respect to Taxes which are determined on a consolidated,
combined or unitary basis, similar principles as those described in
Section 2(b)(i) and (ii) shall govern the allocation of such Tax
Liabilities among the parties hereto.
(c) Post-Separation Date Allocations and Payments. With respect to any
fiscal year or portion thereof when TransAct is no longer a member of the Tridex
Consolidated Group, beginning on the Separation Date, the allocations (to be
made by Tridex and TransAct for any fiscal year) will be made not later than 90
days following the filing of the Federal consolidated income tax return of the
Tridex Group for each such period. Any payments required as a result of the
allocations for any portion of any fiscal year in which the Separation Date
occurs will be made by TransAct or Tridex as the case may be, in federal or
immediately available funds to such bank account as shall be designated by the
recipient. Subject to the provisions of Section 10(c) hereof, such payment shall
be made not later than 95 days after the aforementioned returns are filed.
(d) Treatment of Tax Carryforwards. Magnetec currently has available
for its use certain net operating loss and tax credit carryforwards. If for any
fiscal year beginning after the Effective Date, TransAct uses any net operating
loss or tax credit carryforward of Magnetec's available for use as of the
Effective Date, TransAct will pay to Tridex an amount equal to the net benefit
of the carryforward used in the taxable year. Such payment will be made not
later than 90 days following the filing of the Federal consolidated income tax
return of the Tridex Group for each such period.
(e) Computation of Income Tax Provisions. For financial reporting
purposes, the TransAct Group will compute its income tax accounts as if a
separate return had been filed, using those elements of income and expense as
reported in the consolidated or combined financial statements in accordance with
U.S. Generally Accepted Accounting Principles.
SECTION 3. SEPARATE COMPANY LIABILITIES.
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<PAGE>
Notwithstanding the provisions of Section 2 hereof, for all fiscal years
prior to the Separation Date, Taxes imposed (including refunds owed) upon Tridex
or a Member of the Tridex Group or any of their direct and indirect subsidiaries
and which are determined or assessed on a separate company basis will be the
separate liability (or asset in the case of a refund) of Tridex or such Member
or such subsidiary and not subject to allocation or sharing among other Members
of the Tridex Group.
SECTION 4. ALLOCATION OF TAX ATTRIBUTES.
Except as otherwise provided in Section 5 hereof, all Tax Attributes of the
Tridex Group (other than foreign tax credits) will be allocated among Tridex,
TransAct and their respective subsidiaries, in accordance with the Regulations
promulgated pursuant to Section 1502 of the Code or analogous provisions of
state, local or foreign law (the "Consolidated Return Regulations"). All foreign
tax credits generated by Tridex's investment in subsidiaries other than members
of the TransAct Group shall be allocated to Tridex.
SECTION 5. MINIMUM TAX CREDIT.
(a) Allocation of Credit. The credit against income tax provided by
Section 53 of the Code, as well as analogous credits provided by state, local,
or foreign law, for payment of alternative minimum tax in periods through and
including those ending on the Separation Date (the "Minimum Tax Credit"), shall
be allocated as follows:
(i) For each year or portion of the year in which the Separation Date
occurs, the Minimum Tax Credit for each such year shall be allocated
to TransAct in the amount of such credit multiplied by a fraction
whose numerator is the sum of the alternative minimum taxable income
or loss for such year for all Members of the TransAct Group and whose
denominator is the sum of the alternative minimum taxable income or
loss for such year for all Members of the TransAct and all Members of
the Tridex Group. The remaining portion of such credits shall be
allocated to Tridex.
(ii) In no event shall either Tridex or TransAct be allocated for any
period an amount of Minimum Tax Credit in excess of that available to
the Tridex Group for such period.
(b) Future Regulations. Notwithstanding Section 2(c) hereof, in the
event that regulations are promulgated which do not permit the Minimum Tax
Credit to be allocated among the members of the Tridex Group in the manner set
forth herein, Tridex or TransAct, as the case may be, will be obligated to make
a payment to the other in an amount equal to the excess of the Minimum Tax
Credit that is allocated to it and its Members by such regulations over that
which would be allocated to it pursuant to Subsection 5(a)(i) above.
SECTION 6. CARRYBACKS OF TAX ATTRIBUTES.
(a) TransAct Carrybacks. If for any taxable year beginning on or after
the Separation Date, TransAct or any Member of the TransAct Group recognizes a
Tax Attribute which TransAct or such Member of the TransAct Group, under the
applicable provisions of the Code and Regulations promulgated under Section 1502
thereof, is permitted or required to carry back to a prior taxable year of the
Tridex Group or the prior taxable year of a Member of the Tridex Group (either
on a consolidated, combined, unitary or separate return basis), Tridex (or a
Member of the Tridex Group) shall, at TransAct's cost and expense, file
appropriate
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refund claims within a reasonable period after being requested by TransAct.
Tridex (or the Member of the Tridex Group receiving such refund) shall promptly
remit to TransAct any refunds it receives with respect to any Tax Attribute so
carried back.
(b) Tridex Carrybacks. If for any taxable year Tridex or any Member of
the Tridex Group recognizes a Tax Attribute which Tridex or such Member of the
Tridex Group, under the applicable provision of the Code and Consolidated Return
Regulations, carries back to one of its prior taxable years, Tridex or such
Member of the Tridex Group may file appropriate refund claims and shall be
entitled to any refund resulting from such claims.
SECTION 7. CONDUCT OF TAX CONTESTS.
(a) Joint Contests.
(i) Each party shall have the right and obligation to pursue and
defend against any Joint Contest. TransAct shall conduct Joint
Contests, without prejudice to any right or obligation of Tridex
relating to such Joint Contest. Tridex, as the Common Parent of the
Tridex Group or otherwise, agrees to take all such actions and to
cause its subsidiaries to take all such actions as may be necessary to
permit TransAct to conduct such Joint Contests. Each party shall
cooperate fully with the other during the course of a Joint Contest as
provided in Section 7(c) herein, and shall bear its own costs in so
doing except as otherwise provided in clause (iv) or clause (v) of
this Section 7(a).
(ii) Each party hereto shall have the right to extend the statute of
limitations on assessments with respect to any Taxes of such party
without regard to whether the extension leads to the initiation or the
continuation of a Joint Contest; the other party hereto shall
cooperate fully with the requesting party in accordance with Section
7(c), and shall execute such documentation as may be required to
extend the statute if extension is not otherwise within the legal
power of the requesting party. Similarly, each party hereto shall have
the right to file a claim for a Tax Refund without regard to whether
such claim leads to the initiation or the continuation of a Joint
Contest; the other party hereto shall cooperate fully with the
requesting party in accordance with Section 7(c), and shall execute
such documentation as may be required to claim the Tax Refund if it is
not otherwise within the legal power of the requesting party to file
such claim. Neither the extension of the statute nor the filing of a
claim for Tax Refund in accordance with this paragraph shall entitle
either party to any indemnity from the other, except as provided in
clause (v) of this Section 7(a).
(iii) The party hereto that receives the first information that a
taxing authority is conducting an examination of a Tax return which
included the other party hereto and/or its subsidiaries shall
immediately notify the other that a possible Joint Contest exists and
shall afford such other party the opportunity to participate, at its
own expense, in contesting in administrative and judicial proceedings
all relevant items that affect the Tax Liability or Tax Attributes of
such entities. TransAct and Tridex shall share jointly in any
decisions involved in connection with settlements of Joint Contests to
the extent that items are involved that affect the Taxes or Tax
Attributes of both parties or subsidiaries of both parties. Neither
party may agree to settle such a dispute without the consent of the
other, which shall not be unreasonably withheld. If both parties agree
to pursue or defend a Joint Contest, then each party shall bear its
own costs of contesting the matter. Notwithstanding the preceding
sentence, if the parties agree on the use
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of third party advisors or experts, the costs thereof shall be shared
equally between both parties. If one party acting reasonably and in
good faith declines to pursue or defend a Joint Contest, such
declining party nevertheless shall cooperate fully with the contesting
party in accordance with Section 7(c) herein, and shall bear its own
associated costs and expenses, if any, and shall not be entitled to
any indemnity from the contesting party except as provided in clause
(v) of this Section 7(a); provided however, that the declining party
shall not be required to incur any costs of any third party advisors
or experts to whose engagement it has not agreed. Each party shall be
liable for its share of any redetermined liability for Taxes in
accordance with Section 8 herein.
(iv) Each party hereto shall act reasonably and in good faith in
exercising its right to share jointly in any decisions involved in
connection with Joint Contests affecting its Taxes or Tax Attributes.
A determination of whether a party is acting reasonably and in good
faith shall be made taking into account all relevant facts and
circumstances; provided however, that it shall not be considered to be
acting reasonably and in good faith for purposes of this Section 7(a)
if a party declines a reasonable, good faith request by the other
party to facilitate the extension of the statute of limitations or the
claim of a Tax Refund (as described in clause (ii) of this Section
8(a)).
(v) Neither party shall be required to indemnify or hold harmless the
other for any cost or expense incurred in connection with this
Agreement. Notwithstanding the preceding sentence, one party shall
indemnify the other to the extent of costs (other than Taxes and
interest assessed by any taxing authority with respect thereto)
incurred by the indemnitee that would not have been incurred but for
the failure of the indemnifying party to act reasonably and in good
faith in accordance with this Section 7(a). In addition, one party
shall indemnify and hold harmless the other from any costs or claims
of third party advisors or experts engaged in connection with a Tax
Contest and to whose engagement the indemnitee has not agreed.
(b) Separate Contests. Any Separate Contests with respect to tax
returns filed by any Member of either the Tridex Group or the TransAct Group on
a separate company basis shall be conducted by the entity which filed such tax
return (or the Common Parent of the Affiliated Group of which such entity is a
Member at the time of such contest), and such entity shall have sole and
complete authority to conduct such Tax Contest, including the authority to
negotiate with and enter into settlements with any taxing authority. If at any
point of the proceedings of a Separate Contest, it becomes a Joint Contest, then
the Tax Contest shall thereafter be conducted as a Joint Contest.
(c) Cooperation. Tridex (and the Members of the Tridex Group) and
TransAct (and the Members of the TransAct Group) shall each provide the
assistance reasonably requested by the other with respect to conducting any Tax
Contest, including without limitation providing access to or furnishing books,
records, tax returns and supporting work papers, executing any powers of
attorney or other appropriate documentation required to pursue or defend any Tax
Contest, attending administrative or judicial proceedings in connection with
Joint Contests as necessary, performing necessary computations, and other
functions necessary or helpful to the pursuit or defense of any Tax Contest.
SECTION 8. REDETERMINED TAX LIABILITIES.
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In the event of a redetermination of Taxes as a result of audits by
the Service or other taxing authority and/or judicial determinations, payments
in connection therewith, if any, made or received by or among Tridex, TransAct,
and their respective subsidiaries, shall be governed by the following
principles:
(a) Separate Contests. In the case of matters arising out of Separate
Contests, the redetermined liability will be borne (that is, any increases in
Tax Liability will be paid by, and any decreases in Tax Liability will be
received by) the applicable entity.
(b) Joint Contests. In the case of matters arising out of any Joint
Contest, a Tax Deficiency shall be paid to the relevant taxing authority by, and
a Tax Refund received from the relevant taxing authority shall be paid to,
Tridex and/or its subsidiaries; provided, however, that whether or not a payment
is required to or from a relevant taxing jurisdiction and subject to the
provisions of Section 8(c) hereof, TransAct and/or its subsidiaries shall make
payments to Tridex and/or its subsidiaries, or receive payments from Tridex
and/or its subsidiaries, based on the following principles:
(i) in the case of adjustments which increase the taxable income of
Members of the TransAct Group, TransAct shall make a payment equal to
the amount of the adjustment multiplied by the highest applicable
marginal rate of taxation in effect for the period for which the
adjustment is made; or
(ii) in the case of adjustments which decrease taxable income of
Members of the TransAct Group, Tridex shall make a payment equal to
the amount of the adjustment multiplied by the highest applicable
marginal rate of taxation in effect for the period for which the
adjustment is made;
(iii) in the case of adjustments which decrease current year credits
(exclusive of credits carried back or forward into such year) of
Members of the TransAct Group, TransAct shall make a payment to Tridex
in the amount of such decrease; or
(iv) in the case of adjustments which increase current year credits
(exclusive of credits carried back or forward into such year) of
Members of the TransAct Group, Tridex shall make a payment to TransAct
in the amount of such increase.
Notwithstanding the provisions of Section 8(b)(iii)(iv), no payment will be
required under this Section 8(b) in the case of increases or decreases to the
amount of Alternative Minimum Tax Credit. Changes in the amount of Alternative
Minimum Tax Credit will be controlled by the provisions of Section 8(c) below.
(c) Tax Attribute Reallocations. If there is a redetermination of Tax
Liabilities in connection with either a Joint Contest or a Separate Contest, or
for purposes of this Section 8(c) only, as a result of carrybacks or
carryforwards of Tax Attributes, and as a result thereof there is an adjustment
to Tax Attributes (inclusive of Minimum Tax Credits) allocated among the parties
pursuant to Section 4 and 5 hereof:
(i) Tridex shall, in the case of credits, make a payment to TransAct
equal to the amount of any resulting reduction in items allocated to
Members of the TransAct Group, or in the case of income items
(including but not limited to net operating losses) Tridex shall make
a payment to TransAct equal to the amount of the reduction multiplied
by the highest applicable marginal rate of taxation in effect for the
period in which the adjustment is made; and
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(ii) TransAct shall, in the case of credits, make a payment to Tridex
equal to the amount of any resulting increase in items allocated to
Members of the TransAct Group, or in the case of income items
(including but not limited to net operating losses) TransAct shall
make a payment to Tridex equal to the amount of the increase
multiplied by the highest applicable marginal rate of taxation in
effect for the period in which the adjustment is made.
(d) Certain Reorganization-Related Redeterminations. Any Tax Liability
arising from adjustments to income in connection with the transactions
contemplated by and effected under the Plan shall be borne entirely by Tridex.
(e) Timing of Payments. Any payments required by Section 8(b) or (c)
hereof shall be made within 15 days of such adjustments becoming final.
(f) Interest. Payments, if any pursuant to this Section 8 shall bear
interest determined by applying similar principles as those described herein.
SECTION 9. RETENTION OF RECORDS; ACCESS TO RECORDS; COOPERATION & ASSISTANCE.
(a) Retention of Records.
(i) Duties of TransAct. TransAct shall retain all tax returns, tax
reports, related work papers and all schedule (along with all
documents that pertain to any such tax returns, reports, work papers
or schedules) which relate to a tax period ending on or before the
Separation Date. TransAct shall make such documents available at no
cost to Tridex and/or its subsidiaries at Tridex's request. TransAct
shall not dispose of such documents without the permission of Tridex.
(ii) Duties of Tridex. Tridex shall retain all tax returns, tax
reports, related work papers and all schedules (along with all
documents that pertain to any such tax returns, reports, work papers
or schedules) which relate to any tax period ending on or before the
Separation Date. Tridex shall make such documents available at no cost
to TransAct and/or its subsidiaries at TransAct's request. Tridex
shall not dispose of such documents without the permission of
TransAct.
(b) Access to Records.
(i) Duties of TransAct. TransAct shall permit Tridex or any Members of
the Tridex Group (or their direct and indirect subsidiaries), or their
designated representative, to have access at any reasonable time and
from time to time, after the Separation Date, to all relevant tax
returns and supporting papers therefor in respect of periods ending on
or before the Separation Date, wherever located, and shall furnish,
and request that the independent accountants of TransAct or any of the
members of the TransAct Group furnish, to Tridex and its subsidiaries,
as the case may be, such additional tax and other information and
documents with respect to consolidated federal and state income tax
returns filed in respect of periods ending on or before the Separation
Date, as Tridex or any of its subsidiaries may from time to time
reasonably request.
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(ii) Duties of Tridex. Tridex shall permit TransAct or any Members of
the TransAct Group (or their direct and indirect subsidiaries), or
their designated representative, to have access at any reasonable time
and from time to time, after the Separation Date, to all relevant tax
returns and supporting papers therefor of Tridex and the other members
of the Tridex Group in respect of periods ending on or before the
Separation Date, wherever located, and shall furnish, and request that
the independent accountants of Tridex or any of the members of the
Tridex Group furnish, to TransAct and its subsidiaries, as the case
may be, such additional tax and other information and documents with
respect to consolidated federal and state income tax returns filed in
respect of periods ending on or before the Separation Date, as
TransAct or any of its subsidiaries may from time to time reasonably
request.
(c) Assistance and Cooperation. Tridex (and Members of the Tridex
Group) and TransAct (and Members of the TransAct Group) will provide
each other with such cooperation, assistance and information as either
of them reasonably may request of the other with respect to the filing
of any tax return, amended return, claim for refund or other document
with any taxing authority. With respect to the federal consolidated
tax return or any consolidated, combined, or unitary state or local
tax return (or similar aggregate reporting for foreign tax purposes)
filed by Tridex for tax periods which begin before the Separation Date
and end after the Separation Date, such assistance shall include the
timely submission by TransAct to Tridex of proforma tax returns for
TransAct and each Member of the TransAct Group, prepared on the basis
that each such Member's tax period ended on the Separation Date.
SECTION 10. PREPARATION OF TAX RETURNS; ESTIMATED PAYMENTS.
(a) FY 1996 and all Pre-Separation Date Taxable Years. Tridex shall prepare
and timely file the Tridex Group consolidated returns for fiscal 1996 and all
taxable periods prior to the Separation Date. In connection therewith, TransAct
shall (1) permit Tridex to have access at any reasonable time and from time to
time, after the Separation Date, to all tax returns and supporting papers
therefor of TransAct and its subsidiaries, wherever located; and (2) furnish to
Tridex such additional tax and other information and documents in the possession
of such companies, with respect to consolidated federal and state income tax
returns filed in respect of periods including or ending before the Separation
Date, as Tridex may from time to time reasonably request. TransAct shall, and
shall cause its subsidiaries to, cooperate in connection with the preparation of
the consolidated federal and state income tax returns of the Tridex Group for
fiscal 1996. It shall be the responsibility of Tridex to make any payments
required in connection therewith to the applicable taxing authorities.
(b) Post-Separation Date Taxable Years.
(i) TransAct's Separate Returns. All tax returns of the TransAct Group
which are filed on a consolidated or combined basis for tax periods
beginning after the Separation Date shall be prepared and filed by
TransAct. TransAct shall be solely responsible for the payment of all
Taxes due with respect to such tax returns for such tax periods.
(ii) Tridex's Separate Returns. All tax returns of the Tridex Group
which are filed on a consolidated or combined basis for tax periods
beginning after the Separation Date shall be
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prepared and filed by Tridex. Tridex shall be solely responsible for
the payment of all Taxes due with respect to such tax returns for such
tax periods.
(c) Estimated Payments. All payments (including estimated payments or
payments made in connection with requests for extensions of time to file such
returns) made subsequent to the date hereof with respect to consolidated,
combined, or unitary income tax liabilities of the Tridex Group and its Members
for any and all tax years prior to the Separation Date shall be made by Tridex.
Tridex shall promptly thereafter notify TransAct of the portion, if any, of such
payment which it in good faith believes to be attributable to TransAct's share
of the liability, as determined under the provisions of Section 2 hereof.
TransAct shall, within five (5) business days of the due date for such estimated
payments, pay such amount to Tridex or advise Tridex of the basis for its
disagreement.
SECTION 11. INDEMNIFICATION.
With respect to all consolidated federal and state income tax returns filed
by the Tridex Group:
(a) Self-Assessments. Tridex shall indemnify and hold harmless
TransAct and its subsidiaries, and TransAct shall indemnify and hold
harmless Tridex and its subsidiaries, from and against any liability,
cost, or expense, including, without limitation, any fine, penalty
(including interest on penalties or penalty increments to interest) or
accountants' or attorneys' fees, arising out of fraudulent or
negligently prepared information, workpapers, documents, and other
items used in the preparation of, or presented in, any return, amended
return, or claim for refund filed for the Tridex Group for the tax
years in which a Separation Date occurs, and which information,
workpapers, documents, or other items originated with and/or were
prepared by such indemnifying party.
(b) Redeterminations. Except as otherwise provided in Section 11(a)
hereof:
(i) Tridex shall indemnify and hold harmless TransAct from and against
any liability, cost, or expense incurred or paid by TransAct in excess
of its share thereof as allocated pursuant to Section 8 hereof,
including any amount paid by TransAct in connection with an assessment
by the Service or other taxing authority; and
(ii) TransAct shall indemnify and hold harmless Tridex from and
against any liability, cost, or expense incurred or paid by Tridex in
excess of its share thereof as allocated pursuant to Section 8 hereof,
including any amount paid by Tridex in connection with an assessment
by the Service or other taxing authority.
SECTION 12. RESOLUTION OF DISPUTES.
Any disputes between the parties with respect to this Agreement that
cannot be resolved by the parties shall be resolved by a public accounting firm
or a law firm reasonably satisfactory to Tridex and TransAct, the determination
of which shall be final and binding on both parties. The fees and expenses of
such firm shall be borne equally by Tridex and TransAct.
SECTION 13. SUBSIDIARIES.
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Any reference herein to a subsidiary or subsidiaries includes Members
(and their direct and indirect subsidiaries) of the Tridex Group and the
TransAct Group. To the extent that the provisions of the Agreement pertain to a
subsidiary or subsidiaries of Tridex or TransAct, Tridex and TransAct
respectively agree that it will cause the respective subsidiary or subsidiaries
to carry out the terms of this Agreement.
SECTION 14. SURVIVABILITY/ASSIGNABILITY.
This Agreement and each of its provisions shall be binding upon and
inure to the benefit of the parties and their respective heirs and successors.
Nothing in this Agreement is intended or shall be construed to give any person
or entity other than the parties and their respective heirs or successors any
rights or remedies under or by reason of the Agreement and neither party shall
assign its rights and obligations hereunder without the express written consent
of the other party, which consent each party reserves the right to withhold in
its sole and absolute discretion.
SECTION 15. NOTICES.
All notices and other communications required or permitted under this
Agreement shall be in writing, shall be deemed delivered upon receipt, and shall
be delivered in person or by courier or sent by certified or registered mail,
return receipt requested, first class, postage prepaid, to the parties at their
respective addresses set forth below, or as to any party at such other address
as shall be designated by such party in a written notice to the other party:
To TransAct: TransAct Technologies Inc.
7 Laser Lane
Wallingford, CT 06492
Attention: President
To Tridex: Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: President
SECTION 16. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Connecticut.
SECTION 17. COSTS AND EXPENSES.
In any action brought to enforce or interpret this Agreement, each
party shall pay its own costs and expenses of maintaining or defending such
action.
SECTION 18. REMEDIES CUMULATIVE.
The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law.
SECTION 19. COUNTERPARTS.
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This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute one and the same Agreement.
SECTION 20. SEVERABILITY.
In the event that any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court or governmental agency having
jurisdiction, this Agreement shall be construed as if such portion had not been
inserted herein, except when such construction would operate as an undue
hardship on any party to this Agreement or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this
Agreement.
SECTION 21. AMENDMENTS; WAIVER.
This Agreement may be amended, and the observance of any terms of this
Agreement may be waived, only in a written document signed by Tridex and
TransAct.
SECTION 22. EFFECTIVENESS OF AGREEMENT.
This Agreement shall become effective upon the Effective Date and
shall continue in effect until otherwise agreed in writing by Tridex and
TransAct, or their successors.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
TRIDEX CORPORATION
By:
Title:
TRANSACT TECHNOLOGIES INCORPORATED
By:
Title:
AMENDMENT NO. 2
AMENDMENT dated as of August 30, 1996, among TRIDEX CORPORATION, a
Connecticut corporation, ULTIMATE TECHNOLOGY CORPORATION, a New York
corporation, CASH BASES INCORPORATED, a Delaware corporation, and FLEET NATIONAL
BANK, a national banking association organized under the laws of the United
States of America.
Background
A. Tridex Corporation ("Tridex"), Ultimate Technology Corporation, Cash
Bases Icorporated, Ithaca Peripherals Incorporated ("Ithaca"), Magnetec
Corporation ("Magnetec") (collectively, the "Original Borrowers"), and the
Bank are parties to the Amended and Related Credit Agreement dated as of
December 15, 1995 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), under which the Bank extended to the Original Borrowers a
$5,500,000 term loan facility (the "Term Loan") and a $3,000.000 revolving loan
facility (the "Revolver").
B. On July 28, 1996, Tridex caused Ithaca to be merged into Magnetec, with
Magnetec being the surviving entity. Contemporaneously therewith, Tridex formed
a new wholly-owned subsidiary, TransAct Technologies Incorporated ("TransAct"),
to which it contributed all Magnetec stock owned by Tridex in return for the
issuance by TransAct to Tridex of 5,400,000 shares of common stock of TransAct.
C. On or about the date hereof, TransAct intends to conduct an initial
public offering (the "Initial Public Offering") of up to 19.7% of its
authorized common stock. TransAct intends to utilize a portion of the net
proceeds realized from the Initial Public Offering to satisfy certain
indebtedness of TransAct to Tridex, and, simultaneously therewith, Tridex
intends to satisfy in full the indebtedness outstanding under the Term Loan and
to reduce the Working Capital Commitment from $3,060,000 to $2,000,000.
D. The Original Borrowers have requested that the Bank (i) consent to the
actions contemplated under the Plan of Reorganization dated as of June 25, 1996,
among Tridex, TransAct, Magnetec and Ithaca, (ii) release from the lien created
by the Pledge Agreement, the shares of stock owed by Tridex in Ithaca and
Magnetec, (iii) release Magnetec from its obligations under the Credit
Agreement, the Amended and Restated Working Capital Note dated as of March 15,
1996 (the "First Restated Note") and all other Facility Documents, (iv) reduce
the Working Capital Commitment from $3,000,000 to $2,000,000, (v) extend the
Revolving Credit Termination Date, and (vi) amend certain financial covenants.
E. The Bank has agreed to the Original Borrowers' requests subject to the
terms and conditions of this Agreement.
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2
Agreement
In consideration of the Background, which is incorporated by reference, the
parties, intending to be legally bound, agree as follows:
SECTION 1. Capitalized terms not otherwise deemed herein shall have the
meaning ascribed to them in the Credit Agreement.
SECTION 2. Amendments to Credit Agreement. All of the terms and conditions
of the Facility Documents remain in full force and effect as follows:
(a) All references to "Borrowers" and "Borrower" in the Credit
Agreement shall be deemed to exclude Ithaca and Magnetec.
(b) The following definitions are added to Section 1.1 of the Credit
Agreement:
"Distribution" means the tax free distribution by Tridex, subsequent
to the Initial Public Offering, of all TransAct stock held by Tridex to
each shareholder of record at tile time of the distribution.
"Clean-Down Period" shall mean any 30-day period of each one year
period commencing on the date hereof, or fraction thereof, provided that no
such period shall commence sooner than 30 days after the date hereof or
later than 30 days prior to the Revolving Credit Termination Date, during
which the aggregate outstanding principal amount of Working Capital Loans
must be reduced to $0.
"Interest Coverage Ratio" means, with respect to any Person, for any
period, the ratio of (i) EBITDA to (ii) Interest Expense for such period.
(c) The definition of "Margin" contained in Section 1.1 of the Credit
Agreement is deleted and the following is substituted therefor:
"Margin" means (a) for Variable Rate Loans, 0 basis points and (b) for
LIBOR Loans, 150 basis points (1.50%).
(d) 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, 1998; provided that
if such date is not a Banking Day, the Revolving Credit
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3
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.
(e) The definition of "Variable Rate" contained in Section 1.1 of the
Credit Agreement is deleted and the following is substituted therefor:
"Variable Rate" means, for any day, the Prime Rate for such day.
(f) The amount "$5,000,000" contained in the definition of Working
Capital Commitment in Section 1.1 of the Credit Agreement is deleted and the
amount "$2,000,000" is substituted therefor.
(g) 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 $2,000,000 from time to time
(h) Section 2.5(b)(iii) of the Credit Agreement is deleted and the
following is substituted therefor:
(iv) During each Clean-Down Period the Borrowers shall satisfy in full
all amounts then outstanding with the Working Capital Loans.
(i) The following Section 2.5(b)(iv) is added to the Credit Agreement:
(v) Each such prepayment in accordance with paragraphs (i), (ii) (iii)
and (iv) 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.
(j) Section 2.11 of tile Credit Agreement is deleted and the following
is substituted therefor:
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 for the period
from and including the date hereof to the Revolving Credit Termination Date
at a rate per annum equal to one-
<PAGE>
4
quarter of one percent (1/4 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) Closing Fee. The Borrowers shall pay to the Bank, on the Closing
Date, a closing fee in an amount equal to one-quarter of one percent (1/4
of 1%) of the Working Capital Commitment.
(k) Section 2.13 of the Credit Agreement is hereby deleted in its
entirety.
(1) Section 7.6 of the Credit Agreement is deleted and the following
is substituted therefor:
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 with respect to the Distribution and 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.
(m) Sections 8.1, 8.2, 8.3, and 8.4 of the Credit Agreement are
deleted and the following are 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 commencing with
the fiscal quarter succeeding the fiscal quarter in which the Distribution
occurs, a Consolidated Tangible
<PAGE>
5
Net Worth of not less than $17,000,000 an such minimum 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 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 1.0 to 1.0.
Section 8.3 Minimum Interest Coverage Ratio. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured at the end of
each fiscal quarter, for each fiscal quarter through and including the
fiscal quarter in which the Distribution occurs, an Interest Coverage Ratio
of not less than 1.5 to 1.0, for such fiscal quarter and the three
consecutive immediately preceding fiscal quarters and for each succeeding
fiscal quarter, an Interest Coverage Ratio of not less than 2.0 to 1.0, for
such fiscal quarter and the three consecutive immediately preceding fiscal
quarters.
Section 8.4 Minimum Current Ratio. The Borrowers shall maintain at all
times, as measured at the end of each fiscal quarter, for each fiscal
quarter through and including the fiscal quarter in which the Distribution
occurs, a ratio of Consolidated Current Assets to Consolidated Current
Liabilities of not less than 1.5 to 1.0, and for each succeeding fiscal
quarter, a ratio of Consolidated Current Assets to Consolidated Current
Liabilities of not less than 2.0 to 1.0.
(n) The following Section 8.8 is added to the Credit Agreement:
Section 8.8 Minimum Tangible Capital Base. The Borrowers shall
maintain at all times, as measured at the end of each fiscal quarter, a
Consolidated Tangible Capital Base of not less than $13,500,000, as such
minimum required amount shall increase from quarter to quarter by 50% of
Consolidated Net Income for each fiscal quarter beginning with the fiscal
year ending December 31, 1997.
(o) The following Section 10.20 is added to The Credit Agreement:
<PAGE>
6
SECTION 10.20 JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED
STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE 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 EACH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 10.6. EACH
BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH BORROWER FURTHER
WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJBCTION 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 10.20 shall affect the right of the Bank
to serve legal process in any other manner permitted by, law or affect the
right of the Bank to bring any action or proceeding against any Borrower or
its property in the courts of any other jurisdictions.
(b) To the extent that any Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
from service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Note.
<PAGE>
7
(p) Schedule 5.9 to the Credit Agreement is deleted and the attached
Schedule 5.9 is substituted therefor.
(q) The information with respect to notices on page 55 of the Credit
Agreement is deleted and the following is substituted therefor:
Address for Notices and Lending office:
One Landmark Square
Stamford, CT 06901
Attention: Frederick A. Meagher, Vice President
Facsimile No.: (203) 964-4850
(r) The First Restated Note is amended and restated in its entirety in
the form of the Second Amended and Restated Promissory Note dated the date
hereof In the form of the attached Exhibit B (the "Second Restated Note").
(s) Schedule I to the Pledge Agreement is deleted and the attached
Schedule I is substituted therefor.
(t) All references in the Facility Documents to "Fleet Bank, N.A." are
deleted and "Fleet National Bank" is substituted therefor.
SECTION 3. Release. The Bank (a) releases Ithaca and Magnetec from their
respective obligations under the Credit Agreement, the First Restated Note and
all other Facility Documents, and (b) releases from the lien of the Pledge
Agreement the shares of capital stock of Ithaca and Magnetec owned by Tridex and
the original stock certificates with respect thereto.
SECTION 4. Consent of Bank. The Bank hereby consents to (a) the creation of
TransAct, (b) the merger of Ithaca with and into Magnetec, (c) the issuance by
TransAct to Tridex of 5,400,000 shares of TransAct common stock in exchange for
1,000 shares of the common stock of Magnetec, (d) the transfer from Magnetec to
Tridex of all of the assets used to conduct the ribbon business as presently
conducted by Magnetec, (e) the Initial Public Offering, and (f) the proposed pro
rata distribution in 1997 by Tridex to its stockholders of the common stock of
TransAct owned by Tridex subsequent to the Initial Public Offering in connection
with a tax free reorganization of Tridex and its Subsidiaries.
SECTION 5. Conditions of Effectiveness. This Amendment shall become
effective when the Bank shall have received counterparts of this Amendment
executed by the Borrowers and the Bank. and the fol1owing documents or evidence
of the following actions, 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:
<PAGE>
8
(a) Evidence that all indebtedness outstanding under the Term Note has
been satisfied in full;
(b) The Second Restated Note duly drawn to the order of the Bank;
(c) A certificate of the Secretary or an Assistant Secretary of each
Borrower certifying the names and the signatures of the officers of such
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder;
(d) A favorable opinion of Hinckley, Allen & Snyder, counsel for the
Borrowers, to the effect that this Amendment, and the Second Restated 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; and
(e) 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. Representations and Warranties of Borrowers. 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 Second Restated 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 stockholders; (b) contravene its charter or by-laws; (c) violate any
provision of; or require any filing, registration, consent or approval wider,
any law, rule, regulation (including, without limitation, Regulation U), order,
writ, judgment, injunction, decree, determination or award
<PAGE>
9
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 wider 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 Second Restated 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, Second Restated Amendment 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 Second Restated Amendment, and the
execution, delivery and performance of this Amendment do not adversely affect
the aforesaid Liens of such Security Agreement.
SECTION 7. Reference to and Effect on the Facility Documents.
(a) This Amendment and the Second Restated Note shall be deemed
"Facility Documents".
(b) 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 Second Restated Note as amended
hereby.
<PAGE>
10
(c) Except as specifically amended above, the Credit Agreement and the
Second Restated Note, 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.
(d) 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 8. 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 Second Restated 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 Second Restated 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 10; In addition, the Borrowers agree to
pay jointly and severally any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Amendment. the Second Restated 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.
SECTION 9. 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 10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
<PAGE>
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 /s/ Seth M. Lukash
-------------------------------
Seth M. Lukash
Title: Chairman and
Chief Executive Officer
ULTIMATE TECHNOLOGY CORPORATION
By /s/ George T. Crandall
-------------------------------
George T. Crandall
Title: Treasurer
CASH BASES INCORPORATED
By /s/ George T. Crandall
-------------------------------
George T. Crandall
Title: Treasurer
FLEET NATIONAL BANK
By /s/ Frederick A. Meagher
-------------------------------
Frederick A. Meagher
Title: Vice President
<PAGE>
Schedule I
Attached to and forming a part of the
Amendment to Pledge Agreement
dated December 15, 1995, by Tridex
Corporation to Fleet Bank, N.A.
Stock Issuer Class of Stock Par Value Number of Percentage of
Stock Certificate Shares Outstanding
No(s) Shares
- --------------------------------------------------------------------------------
Ultimate Class A A-8 $0.01 500,000 100%
Technology Common
Corporation
Ultimate Class B B-8 $0.01 497,000 100%
Technology Common
Corporation
Cash Bases Common 1 $0.01 1,000 100%
Incorporated
<PAGE>
Exhibit B
Working Capital Note
SECOND AMENDED AND RESTATED PROMISSORY NOTE
$2,000,000 Stamford, Connecticut
August 30, 1996
For value received, TRIDEX CORPORATION, ULTIMATE TECHNOLOGY
CORPORATION and CASH BASES INCORPORATED (each, a "Borrower" and collectively,
the "Borrowers"), hereby promise, jointly and severally, to pay to the order of
FLEET NATIONAL BANK ("the Bank") at the office of the Bank, at 777 Main Street,
Hartford, Connecticut 06115, for the account of the appropriate Lending Office
of the Bank, the principal sum of TWO MILLION DOLLARS ($2,000,000) 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 dated as of December 15, 1995 among the Borrowers
and the Bank (as amended, modified or supplemented from time to time the "Credit
Agreement") 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.
<PAGE>
2
Each Borrower waives presentment, notice of dishonor, protest and any
other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
This Note amends and restates in its entirety the Amended and Restated
Promissory Note, dated as of March 15, 1996, from the Borrowers to the Bank, in
the original principal amount of Three Million Dollars ($3,000,000) (the "First
Restated Note") Upon the execution and delivery of this Note, this Note shall
replace the First Restated Note and shall immediately evidence all outstanding
indebtedness under the First Restated 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 First Restated 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 /s/ Seth M. Lukash
--------------------------------------------
Seth M. Lukash
Title: Chairman and Chief Executive Officer
ULTIMATE TECHNOLOGY CORPORATION
By /s/ George T. Crandall
--------------------------------------------
George T. Crandall
Title: Treasurer
CASH BASES INCORPORATED
By /s/ George T. Crandall
--------------------------------------------
George T. Crandall
Title: Treasurer
<PAGE>
3
Amount Amount of Balance Notation
Date of Loan Payment Outstanding By
- ---- ------- --------- ----------- --------
<PAGE>
4
SCHEDULE 5.9
to
Amended and Restated Credit Agreement
dated as of December 15,1995
Subsidiaries of Tridex
Ultimate Technology Corporation
Cash Bases Incorporated
TransAct Technologies Incorporated
TRIDEX CORPORATION AND SUBSIDIARIES
Exhibit 11 Computation of Per Share Earnings
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PRIMARY:
EARNINGS:
Net income $ 7,070 $ 662 $ 8,673 $ 2,186
============= ============= ============= =============
SHARES:
Average common shares outstanding 3,987,905 3,707,136 3,878,058 3,687,891
Dilutive effect of outstanding options
and warrants as determinded by
the treasury stock method 246,235 267,315 206,838 228,382
------------- ------------- ------------- -------------
4,234,140 3,974,451 4,084,896 3,916,273
============= ============= ============= =============
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 1.67 $ 0.17 $ 2.12 $ 0.56
============= ============= ============= =============
FULLY DILUTED:
EARNINGS:
Net Income $ 7,070 $ 8,673
Add: after-tax interest on
convertible debt 78 275
------------- -------------
Adjusted net income $ 7,148 $ 8,948
------------- -------------
SHARES:
Average common shares outstanding 3,987,905 3,878,058
Dilutive effect of outstanding options
and warrants as determined by
the treasury stock method 344,919 273,161
Dilutive effect of convertible debt
assumed converted at the beginning
of the year 386,325 466,492
------------- -------------
4,719,149 4,617,711
------------- -------------
FULLY DILUTED EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE $ 1.51 $ 1.94
============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 3,714
<SECURITIES> 0
<RECEIVABLES> 11,884
<ALLOWANCES> 202
<INVENTORY> 11,283
<CURRENT-ASSETS> 28,263
<PP&E> 13,477
<DEPRECIATION> 7,507
<TOTAL-ASSETS> 44,193
<CURRENT-LIABILITIES> 12,913
<BONDS> 5,934
0
0
<COMMON> 1,031
<OTHER-SE> 24,315
<TOTAL-LIABILITY-AND-EQUITY> 44,193
<SALES> 55,794
<TOTAL-REVENUES> 55,794
<CGS> 37,717
<TOTAL-COSTS> 50,556
<OTHER-EXPENSES> (6,269)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 821
<INCOME-PRETAX> 10,686
<INCOME-TAX> 1,924
<INCOME-CONTINUING> 8,762
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,673
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 1.94
</TABLE>
