UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
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FORM 10-K
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(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required] For the fiscal year ended: December 31, 1996
or
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ___________________ to _______________.
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Commission File Number: 1-5513
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TRIDEX CORPORATION
(Exact name of registrant as specified in its charter)
Connecticut 06-0682273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
61 Wilton Road
Westport, CT 06880
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 226-1144
Securities registered pursuant to Section 12 (b)of the Act:
Title of each class Name of each exchange on which registered
- -------------------------------- -----------------------------------------
Common Stock, Without Par Value NASDAQ
Securities registered pursuant to Section 12 (g) of the Act: None
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any other amendment
to this Form 10-K. [_]
As of March 14, 1997 the aggregate market value of the registrant's issued and
outstanding voting stock held by non-affiliates of the registrant was
$72,500,000.
As of March 14, 1997 the registrant had outstanding 5,373,310 shares of common
stock, without par value.
Exhibit Index appears on page 33
<PAGE>
PART I
ITEM 1. BUSINESS
General
Tridex Corporation ("Tridex" or the "Company"), through its wholly-owned
subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash Bases GB
Limited ("Cash Bases") and its Tridex Ribbons Division, is primarily engaged in
the design, development, manufacture, integration and sale of custom-designed
terminal devices, customer displays, keyboards, cash drawers and other
peripheral devices used in a variety of transactions at the retail point-of-sale
("POS") and ribbon cartridges for specialty dot matrix printers. See Note 2 to
the Company's 1996 Consolidated Financial Statements for a discussion of
discontinued operations. All amounts within this report, unless otherwise
indicated, exclude any results of discontinued operations.
(A) General Development of Business since December 31, 1996
As of the date of this report, Tridex owns 5,400,000 shares, or
approximately 80.3%, of the outstanding common stock of TransAct
Technologies Incorporated ("TransAct"). Tridex has announced that on
March 31, 1997 it intends to distribute those shares pro rata to persons
who were Tridex stockholders of record on March 14, 1997.
In November 1995, the Board of Directors of Tridex approved a plan to
combine the business operations of two wholly-owned subsidiaries,
Magnetec Corporation ("Magnetec") and Ithaca Peripherals Incorporated
("Ithaca"), under unified management. TransAct was incorporated in
Delaware on June 17, 1996 as a wholly-owned subsidiary of Tridex.
Following the incorporation, Tridex, TransAct, Magnetec and Ithaca
entered into a Plan of Reorganization, pursuant to which: (i) Ithaca
merged into Magnetec; (ii) TransAct transferred to Tridex certain assets
of Magnetec used in the Tridex Ribbons Division; (iii) TransAct issued
5,400,000 shares of its common stock to Tridex in exchange for all the
outstanding shares of Magnetec; (iv) TransAct sold in an initial public
offering 1,322,500 shares, or approximately 19.7%, of its outstanding
common stock; (v) TransAct repaid $8,500,000 of intercompany indebtedness
to Tridex; (vi) Tridex applied to the Internal Revenue Service (the
"IRS") for a ruling that the pro rata distribution of the 5,400,000
shares of TransAct owned by Tridex to Tridex stockholders (the
"Distribution") would constitute a tax-free reorganization for federal
income tax purposes; and (vii) Tridex agreed to effect the Distribution
promptly after receipt of a favorable ruling from the IRS and the
satisfaction of certain other conditions.
Net proceeds from the TransAct's initial public offering were
approximately $9 million after payment of approximately $2.3 million of
offering expenses. TransAct repaid Tridex $7.5 million of the $8.5
million of intercompany indebtedness in August 1996 and, in February
1997, repaid the balance, plus interest at the rate charged by Tridex's
bank under its revolving credit agreement (8.25% at December 31, 1996).
On February 12, 1997, Tridex received a favorable ruling from the IRS
confirming the tax-free nature of the Distribution and announced that it
would effect the Distribution on March 31, 1997. The financial
information included in this report consists of, or is derived from,
historical financial statements which have been restated to reflect the
fact that, upon completion of the Distribution, Tridex will no longer own
any of the capital stock of TransAct. See Note 2 to the Company's
Consolidated Financial Statement.
(B) Financial Information about Industry Segments
Tridex operates in one industry segment, the design, development,
manufacture, integration and sale of terminal devices, cash drawers,
customer displays, keyboards, and other peripheral devices, and ribbon
cartridges for specialty dot matrix printers.
(C) Narrative Description of Business
(i) Principal Products and Services
Tridex designs, manufactures and sells customer displays,
keyboards, terminal devices and custom cash drawers for POS
applications. Tridex manufactures and markets POS customer
displays, keyboards and terminal devices for use in Twinax,
Unix/Aix and PC-based POS applications. Tridex's terminals and
other peripheral products are sold to system integrators, original
equipment manufacturers and directly to end users by a direct
sales force located in New York, New Hampshire, Illinois, Texas,
the United Kingdom, Germany, France, and Spain. The Company's cash
drawers,
2
<PAGE>
constructed of metal, are high quality, custom products, for use
with POS terminals primarily in supermarkets, specialty stores and
convenience stores. Cash drawers are fabricated in the United
Kingdom and are sold primarily in Western Europe through a direct
sales force. Sales by major product line, exclusive of
discontinued operations, were:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
---------------------------------------- ----------------------------------
December 31, 1996 December 31, 1995 December 31, 1995 April 1, 1995
----------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
POS Related 58% 58% 60% 53%
Cash Drawers 40 39 37 44
Other 2 3 3 3
----------------- ----------------- ----------------- -------------
100% 100% 100% 100%
================= ================= ================= =============
</TABLE>
(ii) Sources and Availability of Raw Materials
The principal raw materials used in the manufacture of custom
keyboards and customer displays are injection molded plastic
parts, formed metal parts and electronic subassemblies, all of
which are readily available from a number of sources. The assembly
of POS terminals combines the keyboard and customer display
manufactured by the Company with a printer, monitor, cash drawer
and other peripheral devices purchased from various suppliers, all
of which are readily available from a number of sources. The
principal raw materials used in the manufacture of cash drawers
are sheet metal, molded plastic parts, fabricated drawer slides,
locking mechanisms, wiring harnesses and electronic subassemblies,
which are available from several sources.
(iii) Patents
The Company regards certain hardware designs and software
incorporated into its products as proprietary and attempts to
protect them with a combination of copyright, trademark and trade
secret laws, employee and third party nondisclosure agreements and
similar means. It may be possible for unauthorized third parties
to copy certain portions of the Company's products or to reverse
engineer or otherwise obtain and use, to the Company's detriment,
information that the Company regards as proprietary. Moreover, the
laws of some foreign countries do not afford the same protection
to the Company's proprietary rights as do United States laws.
There can be no assurance that legal protections relied upon by
the Company to protect its proprietary rights will be adequate or
that the Company's competitors will not independently develop
products that are substantially equivalent or superior to the
Company's. In addition, some of the intellectual property used by
Ultimate is not proprietary. No assurance can be given that such
intellectual property will not be used by Ultimate's competitors.
(iv) Seasonality and Practices Relating to Working Capital Items
Sales of the Company's products are not subject to material
seasonal variations. As a result, the Company has not historically
been required to maintain significant inventories of raw materials
or finished goods in order to fill customer orders.
(v) Certain Customers
Sales to Lowes Companies, Inc. accounted for approximately 13% of
net sales for the year ended December 31, 1996. Sales to Advance
Stores Company Inc. ("Advance Auto") accounted for approximately
12% of net sales for the nine months ended December 31, 1995.
(vi) Backlog
The Company's backlog of firm orders was approximately $4,600,000
as of March 14, 1997, approximately $3,100,000 as of February 24,
1996 and approximately $5,200,000 as of May 27, 1995. Tridex
expects to fill all of its backlog within the current fiscal year.
(vii) Competition
Competition is intense in all of the Company's markets. Many of
the Company's current and potential competitors are large
multi-national enterprises with extensive experience and resources
in designing, manufacturing and marketing a wide range of
peripheral devices and systems. Ultimate competes with other POS
manufacturers and system integrators, including NCR and IBM, as
well as distributors
3
<PAGE>
of terminals, keyboards and customer pole displays. Cash Bases
competes with other manufacturers of cash drawers, primarily in
Europe.
In certain markets, the Company's competitors can sometimes offer
lower prices than the Company because of lower overhead,
attributable to higher volume production and off-shore
manufacturing locations, which enjoy cheaper sources of labor and
raw materials. Many of the Company's domestic competitors,
particularly those that are divisions of substantially larger
companies, have greater financial and other resources than Tridex.
(viii) Research and Development Activities
The Company spent approximately $1,040,000 in 1996, $777,000
during the nine months ended December 31, 1995, and $651,000 in
fiscal year 1995, on engineering, design and product development
efforts in connection with specialized engineering and design to
introduce a number of new products and to customize products for
the Company's customers.
(ix) Environment
Allu Realty Trust ("Allu"), a Massachusetts business trust with
transferable shares, all of which are owned by Tridex, is the
former owner of land improved with a manufacturing-warehouse
building located at 100 Foley Street, Somerville, Massachusetts
(the "Site"). Although Allu has sold the property to 100 Foley
Street Incorporated ("Foley"), an unrelated entity, Allu and
Tridex remain responsible for certain environmental problems
associated with the Site.
During July 1984, Allu and Tridex disclosed to the Massachusetts
Department of the Attorney General the existence of chromium, oil
and grease at the Site. As a result, the Environmental Protection
Division of the Department of the Attorney General and the
Massachusetts Department of Environmental Protection ("MDEP")
conducted an investigation of the Site. At MDEP's request, the
Company retained an environmental engineering firm, which
completed a Phase II investigation study of the Site. The Company
has conducted further studies to more specifically characterize
and assess the Site and to determine appropriate long term
clean-up.
In January 1993, the Company entered into an agreement with Foley
pursuant to which Tridex and Foley agreed to pay 75% and 25%,
respectively, of the costs incurred after January 1, 1992 in
connection with the investigation and remediation of the Site (the
"Site Participation Agreement"). The Site Participation Agreement
also provides that, to the extent there are available proceeds
from the sale of the Site or, if not sold, from the operation of
the Site after January 1, 1997, Tridex shall be reimbursed for all
or a portion of the $260,000 it expended in connection with the
Site prior to January 1, 1992. Under the terms of an Escrow
Agreement entered into by Tridex and Foley simultaneously with the
Site Participation Agreement (the "Escrow Agreement"), Tridex and
Foley each placed $125,000 in escrow to fund the payment of their
obligations under the Site Participation Agreement. Under the
terms of the Escrow Agreement, Tridex has provided $85,000 and is
obligated to provide an additional $15,000 in escrow at the
request of the Escrow Agent and thereafter the amount of any
additional funds required by the Escrow Agent shall be contributed
75% by Tridex and 25% by Foley. As of December 31, 1996,
approximately $1,000 was being held in escrow, all of which was
contributed by Foley.
As of December 31, 1996, the Company had spent approximately
$664,000 in connection with the Site. Of this amount,
approximately $494,000 relates to investigation and remediation
costs incurred at the Site. Although it is difficult to
distinguish between amounts spent for investigation and
remediation, the Company estimates that approximately $394,000 has
been spent in connection with investigation and approximately
$100,000 has been spent in connection with remediation of the
Site. The Company estimates that it will spend approximately
$100,000 to $300,000 in connection with the Site during 1997,
including expenditures from the escrow account.
Based upon preliminary estimates provided by a consulting
environmental engineer and based upon the likely future uses of
the property, as of December 31, 1996, the Company had accrued
$322,000 for the Site, which represents the currently estimated
minimum cost of remediation, after considering the cost sharing
arrangement discussed above. Accordingly, although no assurances
can be given regarding the materiality of the total costs which
may be incurred, the Company does not believe at
4
<PAGE>
this time that the remediation of the Site is reasonably likely to
have a material effect on the Company's financial condition,
results of operations or liquidity. The implementation of clean-up
measures has commenced, and may be completed in 1997, in which
case the entire amount of remediation costs to be borne by the
Company would be incurred and paid in 1997. The precise scope and
timing of remediation is dependent upon a proposed sale of the
property, which is subject to negotiations to which the Company is
not a party. The Company expects that, as in the past, funds being
held in escrow, cash from operations and the Company's credit
facilities will be sufficient to pay the costs of remediation
without a material effect on the Company's operations.
The Company has also been notified by an adjacent property owner,
Cooper Industries ("Cooper"), that certain petroleum products that
may have migrated from the Site have been detected in a monitoring
well located on Cooper's property. The Company and Foley are
investigating possible oil contamination along the border between
the Site and the property owned by Cooper.
(x) Employees
As of March 14, 1997, Tridex and its subsidiaries employed
approximately 273 persons, of which 265 were full time and 6 were
temporary employees.
(D) Financial Information About Foreign and Domestic Operations and Export
Sales
Prior to fiscal 1995, the Company had no foreign operations and export
sales were minimal. Primarily as a result of the acquisition of Cash
Bases in June 1994, the Company had approximately $14,713,000 of sales
which originated outside the United States during the twelve months ended
December 31, 1996 and approximately $8,486,000 during the nine months
ended December 31, 1995. For the amounts of revenue, operating profit or
loss and identifiable assets by geographic area, see Note 13 to the
Consolidated Financial Statements included in this report. In addition,
the Company had export sales from the United States of approximately
$130,000 in 1996, $100,000 for the nine months ended December 31, 1995,
and $731,000 in fiscal 1995, the majority of which was to Canada.
(E) Directors and Executive Officers of the Registrant
(i) Directors of the Registrant
<TABLE>
<CAPTION>
Director Name Principal Occupation Employer Name Principal Business of Employer
------------- -------------------- ------------- ------------------------------
<S> <C> <C> <C>
Seth M. Lukash Chairman of the Board, Tridex Corporation Manufacturer of computer
President, Chief peripheral equipment for POS
Executive Officer and applications.
Chief Operating Officer
Paul J. Dunphy Management Consultant Self-employed Management consulting
C. Alan Peyser President Country Long Distance Communications Service
Thomas R. Schwarz Retired None Personal Investments
Graham Y. Tanaka President Tanaka Capital Investment advising
Management, Inc.
</TABLE>
(ii) Executive Officers of the Registrant
Name Age Position
---- --- --------
Seth M. Lukash 50 Chairman of the Board of
Directors, President, Chief
Executive Officer, Chief
Operating Officer and Director
George T. Crandall 50 Vice President, Treasurer,
Controller and Secretary
Dennis J. Lewis 42 President, Ultimate Technology
Corporation, a wholly-owned
subsidiary of the Company
Hugh T. Burnett 57 Managing Director, Cash Bases
GB Limited, a wholly-owned
subsidiary of the Company
5
<PAGE>
Bart C. Shuldman 39 President, TransAct
Technologies Incorporated, an
80.3% owned subsidiary of the
Company (through March 31,
1997)
Seth M. Lukash has been a senior Executive Officer of the Company
since 1977 and has been a Director since 1979. He has served as
Chairman of the Board of Directors of the Company since November
1988, Chief Executive Officer since August 1987, and President and
Chief Operating Officer since June 1989. Mr. Lukash previously
served as President of the Company from September 1983 to August
1988 and as Chief Operating Officer from September 1983 to August
1987. Mr. Lukash is the son of Alvin Lukash, a Director Emeritus
of the Company.
George T. Crandall has been a Vice President of the Company since
September 1992, Treasurer since November 1990 and Corporate
Controller since March 1989. Prior to joining Tridex in November
1988, Mr. Crandall was a consultant to Northeast Manufacturing
Companies, Inc. and was previously employed by Revere Copper and
Brass Incorporated.
Dennis J. Lewis has been President of Ultimate since its
acquisition by the Company on January 20, 1993. Prior to the
acquisition, Mr. Lewis had served as Ultimate's President, Chief
Executive Officer and a Director since founding Ultimate in 1988.
Prior to 1988, Mr. Lewis held senior management positions related
to the sales, engineering and service of computer peripherals with
Digital Equipment Corporation, Naum Brothers, RS Engineering, Serv
Tech and Add Electronics.
Hugh T. Burnett was appointed Managing Director of Cash Bases
simultaneously with its acquisition by Tridex on June 20, 1994.
Prior to the acquisition and since 1991, he was senior marketing
executive with Cash Bases. Mr. Burnett previously was Managing
Director of Omron Systems UK Ltd. from 1983 to 1991.
Bart C. Shuldman was appointed President of the Printer Group in
December 1995 and President of Magnetec in July 1993. From 1989 to
1993 he was employed by Mars Electronics International, a division
of Mars, Incorporated, in several management positions, most
recently as Business Manager for the North American Amusement,
Gaming and Lottery operations. Mr. Shuldman previously held
manufacturing and sales management positions with General Electric
Company from 1979 to 1989.
ITEM 2. PROPERTIES
The Company's operations are currently conducted at the six facilities described
below:
<TABLE>
<CAPTION>
Owned or
Location Operations Conducted Size - Approx. Sq. Ft. Leased Lease Expiration Date
- -------- -------------------- ---------------------- -------- ---------------------
<S> <C> <C> <C> <C>
Westport, Connecticut Principal executive offices 5,000 Leased July 31, 2001
Victor, New York Manufacturing facility 57,000 Leased January 31, 2002
Newhaven, England Manufacturing facility 28,000 Leased March 25, 2000
Bloomfield, Connecticut Non-operating facility held 23,000 Owned N/A
for sale
Wallingford, Connecticut Manufacturing facility 44,000 Leased March 31, 2005
Ithaca, New York Manufacturing facility 36,000 Leased November 21, 2002
</TABLE>
The Company believes that its facilities generally are in good condition,
adequately maintained and suitable for their present and currently contemplated
uses. The Wallingford and Ithaca facilities, which are in TransAct operations
exclusively, will cease to be Company facilities upon completion of the
Distribution. See Item 1(A).
ITEM 3. LEGAL PROCEEDINGS
See Item 1(C)(ix) "Environment" set forth above and Note 9(b) of the Notes to
Consolidated Financial Statements included in this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
6
<PAGE>
No matters were submitted to a vote of security holders during the last quarter
of the year covered by this report.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded on the NASDAQ National Market System under
the symbol "TRDX." Prior to August 9, 1995, the Company's common stock was
traded on the American Stock Exchange. As of March 14, 1997 there were 1,296
holders of record of the common stock. The high and low sales prices of the
common stock reported during the years ended December 31, 1996, and December 31,
1995, by quarter, were as follows:
Year Ended
------------------------------------------------------
December 31, 1996 December 31, 1995
----------------- -----------------
High Low High Low
---- --- ---- ---
January - March 7 15/16 6 1/4 7 1/2 5 5/8
April - June 12 3/16 7 1/8 6 7/8 5 1/2
July - September 12 1/4 8 1/2 10 1/4 6 1/4
October - December 14 1/8 10 3/4 9 6 3/4
No dividends on the common stock have been declared in more than five years. The
Company does not anticipate declaring dividends in the foreseeable future. The
Company's credit agreement with Fleet National Bank prohibits the payment of
cash dividends for the term of the agreement.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Fiscal Year Ended
-------------------- -------------------- ---------------------------------
December December December December April April April
31, 1996 31, 1995 31, 1995 31, 1994 1, 1995 2, 1994 3, 1993
------- ------- ------- ------- ------- ------- ------
(A) (B)
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net sales from
continuing operations
$37,053 $30,756 $22,872 $16,115 $23,999 $12,516 $3,195
======= ======= ======= ======= ======= ======= ======
Income (loss) from
continuing operations
$ 5,991 $(1,118) $(1,913) $ (408) $ 382 $ 520 $ (264)
======= ======= ======= ======= ======= ======= ======
Income (loss) from
continuing operations
per common and common
equivalent share $ 1.44 $ (0.28) $ (0.52) $ (0.11) $ 0.10 $ 0.14 $(0.09)
======= ======= ======= ======= ======= ======= ======
Cash dividends per
common share None None None None None None None
======= ======= ======= ======= ======= ======= ======
</TABLE>
(A) Includes the results of operations of Cash Bases GB Limited since June
20, 1994.
(B) Includes the results of operations of Ultimate Technology Corporation
since January 20, 1993.
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------------
December December December April April April
31, 1996 31, 1995 31, 1994 1, 1995 2, 1994 3, 1993
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $38,653 $31,647 $18,663 $21,181 $10,545 $8,611
======= ======= ======= ======= ======= ======
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long term debt $ 809 $ 8,324 $ 6,892 $ 6,185 $ 5,307 $7,298
======= ======= ======= ======= ======= ======
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Certain statements included in this report, including, but not limited to,
statements in this Management's Discussion and Analysis of the Results of
Operations and Financial Condition, which are not historical facts may be deemed
to contain forward looking statements with respect to events the occurrence
which involves risks and uncertainties, including, but not limited to, the
Company's expectations regarding net sales, gross profit, operating income and
financial condition.
(A) Results of Operations
As described in Note 2 of the Notes to Consolidated Financial Statements
included Item 8 of this report, and in "Business - General Development of
Business Since December 31, 1996" in Item 1(A), the Company intends to
distribute on March 31, 1997 all of the 5,400,000 shares of common stock
of TransAct which it owns, pro rata to the holders of record of the
Company's common stock on March 14, 1997. After the Distribution,
TransAct will no longer be a consolidated subsidiary of the Company. The
Selected Financial Data are derived from the Company's Consolidated
Financial Statements, which have been restated from historical financial
statements to present the results of operations of TransAct as
discontinued operations. The Consolidated Financial Statements may not
necessarily reflect what the results of operations or the financial
position of the Company would have been if TransAct had been a separate
entity during the periods presented. The discussion and analysis set
forth below is based upon continuing operations only.
(i) Year ended December 31, 1996 compared to year ended December 31,
1995
Consolidated net sales for the year ended December 31, 1996
increased $6,297,000 (20%) to $37,053,000 from $30,756,000 for the
prior year. Sales of POS terminal systems and related products
into the POS market accounted for approximately $3,500,000 of the
increase. The balance of the increase is attributable to increased
shipments of custom cash drawers.
Consolidated gross profit increased $1,525,000 (18%) to
$10,014,000 from $8,489,000 in the prior year, primarily due to
the increase in the volume of shipments of both POS terminal
systems and custom cash drawers. The gross margin declined
slightly to 27.0% from 27.6% in the prior year due to the sales
mix of POS terminal systems and to start-up costs of a
standardized product line of cash drawers. However, cash drawer
manufacturing operations implemented significant productivity
improvements to correct production inefficiencies experienced in
the prior year.
Consolidated engineering, design and product development costs
increased $48,000 (5%) to $1,040,000 from $992,000 in the prior
year. The increase reflects the ongoing cost of developing new
products and enhancing existing products.
Consolidated selling, administrative and general expenses
decreased $525,000 (6%) to $7,805,000 from $8,330,000 in the prior
year. Such expenses in the prior year included $680,000 for the
settlement of certain litigation, $339,000 for establishing an
unfunded pension arrangement and other non-recurring charges
totaling approximately $246,000. During 1995, the Company also
recorded a $125,000 provision for restructuring to cover the costs
associated with the reduction of levels of employment at Cash
Bases and the discontinuance of certain products. Current year
expenses include a provision of $320,000 to amend the unfunded
pension arrangement established in the prior year.
Operating income for the current period was $1,169,000 compared to
an operating loss of $958,000 in the prior year. The increase in
operating profit reflects increased volume of shipments of POS
terminal systems and custom cash drawers and the correction of
production inefficiencies experienced in the prior year. Operating
profit as a percentage of revenue was 3.2% in 1996 compared to an
operating loss of 3.1% in the prior year.
Net interest expense decreased $464,000 (35%) to $879,000 from
$1,343,000 in the prior year. The decrease in interest expense was
due primarily to lower levels of indebtedness under the working
capital facility, repayment of bank debt and the conversion of
debentures to common stock.
8
<PAGE>
Non-operating income includes the non-taxable gain of $6,200,000
on the sale of subsidiary stock. Other non-operating expense,
(net) for the current period includes a provision of $163,000 for
loss on the anticipated disposal of unused real estate held for
sale, and $79,000 for net realized transactional foreign exchange
losses. The prior year includes a provision of $135,000 for
environmental matters, net realized gains on foreign exchange of
$94,000 and an additional provision of $92,000 for loss on the
anticipated disposal of real estate held for sale.
The provision for taxes for 1996 is $232,000. The effective tax
rate for 1996 was 4% compared to a benefit of 54% in 1995. The
1996 provision was benefited by a $6,200,000 non-taxable gain
recognized upon the sale of subsidiary stock. The remaining
provision is related to state income taxes and non-deductible
amortization of goodwill.
Income from continuing operations for the current period was
$5,991,000 (or $1.44 per share). Exclusive of the one-time gain on
the sale of subsidiary stock, the loss from continuing operations
was $209,000 (or $.05 per share) compared to a loss of $1,118,000
(or $.28 per share) in the prior year. Discontinued operations
reflect the equity in the income of TransAct. Spin-off related
expenses consist of professional services and other costs related
to the spin-off of TransAct.
Net income for the current period was $8,848,000 (or $2.13 per
share, $1.98 on a fully diluted basis) as compared to net income
of $214,000 (or $.05 per share) in the prior year's period. The
average number of common and common equivalent shares outstanding
during 1996 was 4,154,000. The average number of common and common
equivalent shares outstanding during 1995 was 3,930,000 shares.
(ii) Nine months ended December 31, 1995 compared to nine months ended
December 31, 1994
Consolidated net sales for the nine months ended December 31, 1995
increased $6,757,000 (42%) to $22,872,000 from $16,115,000 in the
comparable period of the prior year. The increase is due to
greater volume of shipments of POS terminals, customer displays
and other peripherals and to the sales of custom cash drawers by
Cash Bases, which was acquired on June 20, 1994 and included in
only six and one third months of the nine months ended December
31, 1994.
Consolidated gross profit increased $1,253,000 (26%) to $6,029,000
from $4,776,000 in the prior year's period, primarily due to the
greater volume of shipments of POS terminals and to the effect of
the Cash Bases acquisition. Gross profit in the current period was
adversely impacted by the production inefficiencies experienced at
Cash Bases. Consolidated gross margin decreased to 26.4% from
29.6% in the prior year's period. The decrease in gross margin
reflects a change in sales mix of products and the production
inefficiencies.
Consolidated engineering, design and product development costs
increased $341,000 (78%) to $777,000 from $436,000 in the prior
year's period. The increase is primarily the result of the
inclusion of such costs for Cash Bases, as well as the cost of
developing new products and enhancing existing products,
particularly for the POS market.
Consolidated selling, administrative and general expenses
increased $2,580,000 (65%) to $6,541,000 from $3,961,000 in the
prior year's period. The increase in selling expenses is primarily
the result of the inclusion of such costs for Cash Bases and the
increased staff to support a greater selling effort, in both the
United States and the European markets. The increase in general
and administrative expenses is primarily the result of the
inclusion of such costs for Cash Bases and certain non-recurring
charges. Such non-recurring charges include a provision for
damages of $680,000 awarded in a lawsuit with a former landlord,
the cost of establishing an unfunded pension arrangement of
$339,000, and other non-recurring charges totaling approximately
$246,000.
During the quarter ended December 31, 1995, the Company recorded a
provision for restructuring of $125,000 to cover reductions of
levels of employment at Cash Bases and the discontinuance of
certain products. A substantial portion of the provision relates
to employee severance costs.
Operating loss for the nine months ended December 31, 1995 was
$1,414,000 compared to operating profit of $379,000 in the prior
year's period, primarily as a result of the non-recurring charges
9
<PAGE>
discussed above and unfavorable results at Cash Bases. Operating
profit was adversely impacted by production inefficiencies,
increased operating costs at Cash Bases, and temporary softness in
the European cash drawer market. Operating income as a percentage
of revenue was 2.4% in the prior year's period.
Net interest expense increased $176,000 (20%) to $1,035,000 from
$859,000 in the prior year's period. The increase in interest
expense was due primarily to additional borrowings under working
capital facilities and to the indebtedness incurred to acquire
Cash Bases.
Other non-operating expense, (net) includes a provision of $75,000
for environmental matters, $42,000 for loss on the anticipated
disposal of real estate held for sale, and $29,000 for net
realized transactional foreign exchange gains. The prior year's
period includes realized gains on foreign exchange of $15,000,
offset by an additional provision of $120,000 for loss on the
anticipated disposal of real estate held for sale.
The provision for taxes for the nine-month period ended December
31, 1995 was a credit of $631,000. The effective rate is 24.8%.
The provision amount is low relative to the pre-tax loss due to
minimum state income taxes and non-deductible amortization of
goodwill. The effective tax rate in the prior period was 28.8 %.
The loss from continuing operations for the 1995 period was
$1,913,000 (or $.52 per share) compared with a loss of $408,000
(or $.11 per share) in the 1994 period. Discontinued operations
reflects the equity in the income of TransAct.
Net loss for the 1995 period was $997,000 (or $0.27 per share) as
compared to net income of $1,475,000 (or $0.38 per share) in the
1994 period. The average number of common shares outstanding
during the nine months ended December 31, 1995 was 3,722,000.
Common equivalent shares are not considered in net loss per share
calculations as the incremental shares are non-dilutive. The
average number of common and common equivalent shares outstanding
during the 1994 period was 3,860,000 shares.
(iii) Liquidity and Capital Resources
The Company's working capital at December 31, 1996 was $3,300,000
compared with $1,136,000 at December 31, 1995. The current ratio
was 1.3 : 1 at December 31, 1996 compared with 1.1 : 1 at December
31, 1995. The increase in working capital and current ratio
reflects the repayment of intercompany debt from TransAct, the
repayment of bank debt by the Company, a higher level of operating
activity and the conversion of $1,010,000 principal amount of
debentures into 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 from the offering of $8,991,000, and used $7,500,000 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").
Under this facility, the Company is required to comply with
certain financial covenants, including a minimum tangible net
worth, a maximum leverage ratio, a minimum interest coverage
ratio, and a minimum current ratio, or Fleet may withdraw its
commitment. The Company was in compliance with these covenants at
December 31, 1996 and expects to be in compliance with these
covenants for the foreseeable future.
During 1996, the Company's cash requirements were satisfied by
cash flow from operations, borrowings under its lines of credit
and by the repayment of intercompany indebtedness from TransAct.
At December 31, 1996, the Company had availability of $2,000,000
under the Working Capital Facility. During 1996, $1,010,000
principal amount of debentures were converted into 112,210
10
<PAGE>
shares of common stock. The conversion satisfied a $740,000
sinking fund payment due on December 15, 1996.
In June 1996, the Company filed with the IRS an application for a
ruling that the pro-rata Distribution of the 5,400,000 shares of
TransAct common stock owned by the Company would constitute a tax
free reorganization for purposes of the Internal Revenue Code of
1986, as amended (the "Code"). On February 12, 1997, the Company
received a favorable ruling from the IRS confirming the tax-free
nature of the Distribution and announced that it will effect the
Distribution on March 31, 1997 to Tridex stockholders of record on
March 14, 1997. At March 14, 1997, the Company had outstanding
5,373,310 shares of common stock. Therefore, the ratio for the
Distribution is 1.005 shares of TransAct common stock for each
share of Tridex. Tridex will distribute cash in lieu of fractional
shares. After the Distribution, 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, Tridex and
TransAct will be separate publicly traded companies.
In connection with the Distribution, the Board of Directors
accelerated the vesting of outstanding options, including options
under the Plan, and issued notices of redemption of convertible
debentures.
During the period January 1, 1997 through March 14, 1997, the
Company issued common stock as follows: (a) 599,300 shares to
optionees under the Plan upon payment of $4,185,000 exercise
price, (b) 260,632 shares to holders of warrants upon payment of
$2,211,000 exercise price, (c) 273,318 shares to holder of 10.5%
Debentures upon conversion of $2,460,000 principal amount of
debentures, (d) 104,127 shares to holders of 8% Notes upon
conversion of $1,250,000 aggregate principal amount, and (e)
100,000 shares to certain officers of Ultimate in accordance with
the Stock Incentive Compensation Agreement.
In connection with the exercise of options under the Plan, the
Company offered loans to all employees whose total exercise price
of options under the Plan exceeded $50,000. The loans, which total
$893,000, are full recourse loans due in May 1998, bear interest
at the rate of 6.08% and are secured by pledges of the shares
acquired by the employees through the exercise of Plan options.
Certain items on the Company's Consolidated Balance Sheet at
December 31, 1996 would, on a pro forma basis giving effect to
these exercises and conversions, change as follows: cash and cash
equivalents would increase from $3,354,000 to $8,857,000; current
portion of long term debt would decrease from $3,997,000 to
$362,000; and shareholders' equity would increase from $26,015,000
to $37,638,000.
After giving effect to the Distribution, the Company consists of
its wholly-owned subsidiaries Ultimate Technology Corporation
("Ultimate") and Cash Bases GB Limited ("Cash Bases") and its
Tridex Ribbons Division. The Company's management expects that
Ultimate, Cash Bases and the Tridex Ribbons Division will have net
sales in 1997 greater than 1996 levels and will be profitable for
the foreseeable future. However, 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 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.
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.
(B) Impact of Inflation
Tridex believes that its business has not been affected to a significant
degree by inflationary trends because of the low rate of inflation during
the past three years and cost reduction programs at each of its
operations. Tridex believes that any increase in cost due to inflation
can be recovered by price increases or offset by cost reductions and
productivity improvements.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Number
Report of Independent Accountants 13
Tridex Corporation and Subsidiaries consolidated financial
statements:
Consolidated balance sheets as of December 31, 1996
and December 31, 1995. 14
Consolidated statements of operations for the years 16
ended December 31, 1996 and December 31, 1995
(unaudited), the nine months ended December 31,
1995 and December 31, 1994 (unaudited), and the
year ended April 1, 1995.
Consolidated statements of shareholders' equity for 17
the year ended December 31, 1996 and the nine
months ended December 31, 1995.
Consolidated statements of cash flows for the years 18
ended December 31, 1996 and December 31, 1995
(unaudited), the nine months ended December 31,
1995 and December 31, 1994 (unaudited), and the
year ended April 1, 1995.
Notes to consolidated financial statements. 19
Financial Statement Schedules - All schedules are omitted
since the required information is either (a) not present
or not present in amounts sufficient to require submission
of the schedule or (b) included in the financial
statements or notes thereto.
12
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Tridex Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Tridex
Corporation and its subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for the year ended December 31, 1996,
the nine months ended December 31, 1995 and the year ended April 1, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Hartford, Connecticut
February 13, 1997,
except as to Note 15
which is as of March 14, 1997
13
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
December 31, 1996 December 31, 1995
----------------- -----------------
Current Assets:
Cash and cash equivalents $ 3,354 $ 933
Receivables (Note 4) 5,681 4,160
Inventories (Note 5) 5,609 3,244
Deferred tax assets (Note 11) 140 271
Other current assets 345 289
----------------- -----------------
Total current assets 15,129 8,897
----------------- -----------------
Plant and equipment:
Machinery, furniture and equipment 5,608 3,794
Leasehold improvements 308 282
----------------- -----------------
5,916 4,076
Less accumulated depreciation (2,381) (1,921)
----------------- -----------------
3,535 2,155
Excess of cost over fair value of net
assets acquired 6,493 7,190
Other assets 1,923 1,703
Investment in net assets of discontinued
TransAct operations (Note 2) 11,573 11,702
----------------- -----------------
$38,653 $31,647
================= =================
See notes to consolidated financial statements.
14
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Current liabilities:
Bank loans payable (Note 7) $740 $396
Current portion of long term debt (Note 7) 3,997 2,411
Accounts payable 3,859 1,805
Accrued liabilities (Note 6) 3,018 3,085
Income taxes payable 215 64
----------------- -----------------
Total current liabilities 11,829 7,761
----------------- -----------------
Long term debt, less current portion (Note 7) 809 8,324
----------------- -----------------
Commitments and contingencies (Note 9)
Shareholders' equity (Notes 1 and 10):
Preferred stock, $1 par value; authorized
2,000,000 shares; issued none
Common stock, no par value, stated value
$.25; authorized 10,000,000 shares; issued
4,160,431 and 3,900,807 shares 1,043 978
Additional paid-in capital 23,361 21,939
Retained earnings (accumulated deficit) 2,239 (6,609)
Cumulative valuation adjustments 245 82
Common stock held in treasury, at cost,
124,498 and 119,996 shares (873) (828)
----------------- -----------------
26,015 15,562
----------------- -----------------
$38,653 $31,647
================= =================
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------- ----------------------- ----------
Year Ended Nine Months Ended Year Ended
---------------------- ----------------------- ----------
December December December December April
31, 1996 31, 1995 31, 1995 31, 1994 1, 1995
-------- -------- -------- -------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $37,053 $30,756 $22,872 $16,115 $23,999
-------- -------- -------- -------- -------
Operating costs and expenses:
Cost of sales 27,039 22,267 16,843 11,339 16,763
Engineering, design and product
development costs 1,040 992 777 436 651
Selling, administrative and general expenses 7,805 8,330 6,541 3,961 5,750
Provision for restructuring (Note14) -- 125 125
-------- -------- -------- -------- -------
35,884 31,714 24,286 15,736 23,164
-------- -------- -------- -------- -------
Operating income (loss) 1,169 (958) (1,414) 379 835
Other charges (income):
Gain on sale of subsidiary stock (Note 2) (6,200)
Interest expense, net 879 1,343 1,035 859 1,168
Other, net 267 156 95 93 154
-------- -------- -------- -------- -------
(5,054) 1,499 1,130 952 1,322
-------- -------- -------- -------- -------
Income (loss) from continuing operations
before income taxes 6,223 (2,457) (2,544) (573) (487)
Provision (benefit) for income taxes 232 (1,339) (631) (165) (869)
-------- -------- -------- -------- -------
Income (loss) from continuing operations 5,991 (1,118) (1,913) (408) 382
Discontinued operations (Note 2):
Equity in subsidiary's income from
discontinued operations 3,109 1,332 916 1,883 2,304
Spin-off related expenses, net of
taxes of $68 252
-------- -------- -------- -------- -------
Net income (loss) $ 8,848 $ 214 $ (997) $ 1,475 $ 2,686
======== ======== ======== ======== =======
Earnings (loss) per common and common
equivalent share:
Primary:
Income (loss) from continuing operations $ 1.43 $ (0.28) $ (0.52) $ (0.11) $ 0.10
Income from discontinued operations 0.70 0.33 0.25 0.49 0.59
-------- -------- -------- -------- -------
$ 2.13 $0.05 $ (0.27) $ 0.38 $0.69
======== ======== ======== ======== =======
Fully diluted:
Income from continuing operations $ 1.35
Income from discontinued operations 0.63
--------
$ 1.98
========
Weighted average common and common
equivalent shares outstanding:
Primary 4,154,000 3,930,000 3,722,000 3,860,000 3,868,000
========= ========= ========= ========= ========
Fully diluted 4,648,000
=========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common stock
Common stock held in treasury Additional Cumulative
------------------- ---------------- paid-in Accumulated Valuation
Shares Amount Shares Amount capital deficit Adjustments
------ ------ ------ ------ ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1995 3,789,682 $ 950 109,996 $738 $ 21,853 $(5,612) $ 124
Exercise of warrants and
stock options 111,125 28 86
Purchase of treasury stock 10,000 90
Translation adjustment (99)
Appreciation of marketable
securities held for sale 57
Net loss (997)
--------- ------ ------- ---- -------- ------- -----
Balance, December 31, 1995 3,900,807 978 119,996 828 21,939 (6,609) 82
Exercise of warrants and
stock options 147,414 37 482
Purchase of treasury stock 4,502 45
Conversion of debentures 112,210 28 940
Translation adjustment 163
Net income 8,848
--------- ------ ------- ---- -------- ------- -----
Balance, December 31, 1996 4,160,431 $1,043 124,498 $873 $ 23,361 $ 2,239 $ 245
========= ====== ======= ==== ======== ======= =====
</TABLE>
17
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
----------------------- -------------------- ----------
December December December December April
31, 1996 31, 1995 31, 1995 31, 1994 1, 1995
-------- -------- --------- -------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,848 $ 214 $ (997) $ 1,475 $ 2,686
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in (used in) subsidiary's income from
discontinued operations (3,109) (1,332) (916) (1,883) (2,304)
Gain on sale of subsidiary stock (6,200)
Depreciation and amortization 1,721 1,658 1,265 957 1,350
Deferred income taxes 720 (688) (80) (608)
Loss (gain) on disposal of assets (153) 8 6 104 106
Changes in operating assets and liabilities:
Receivables (1,210) (854) 1,592 1,697 (749)
Inventory (2,250) (652) (590) (524) (586)
Other current assets (29) (125) 54 42 (137)
Other assets (129) (64) (28) (38) (74)
Accounts payable, accrued liabilities and
income taxes payable 1,878 937 143 (228) 566
Other 36 36
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities 87 (862) 449 1602 286
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of plant and equipment (2,011) (964) (439) (757) (1,282)
Proceeds from sale of assets 333 7 3 (7) (2)
Acquired net assets and acquisition costs, net of cash (68) (5,508) (5,576)
Other 81 31 (64) (15)
--------- --------- --------- --------- ---------
Net cash used in investing activities (1,678) (944) (405) (6,336) (6,875)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Net change in borrowings under line of credit 285 (343) (1,993) 750 2,400
Net proceeds from issuance of long term debt 997 5,782 5,676 3,500 3,606
Principal payments on long term borrowings (6,096) (4,357) (3,573) (882) (1,666)
Proceeds from exercise of stock options and warrants 474 25 24 47 48
Proceeds from repayment of TransAct debt 7,500
Net transactions with TransAct prior to IPO 1,087 278 551 2,131 1,863
Other (291) (140) (134) 644 638
--------- --------- --------- --------- ---------
Net cash provided by financing activities 3,956 1,245 551 6,190 6,889
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash 56 (9) (1) 8
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents 2,421 (561) 586 1,455 308
Cash and cash equivalents at beginning of year 933 1,494 347 39 39
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year $ 3,354 $ 933 $ 933 $ 1,494 $ 347
========= ========= ========= ========= =========
Supplemental cash flow information:
Interest paid $ 899 $ 788 $ 621 $ 851 $ 1,018
Income taxes paid 1,226 1,155 498 435 1,092
Supplemental non-cash investing and financing activities:
Conversion of convertible debentures to common stock $ 1,010
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and summary of significant accounting policies:
Business: Tridex Corporation (the "Company"), through its wholly-owned
subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash Bases
GB Limited ("Cash Bases"), and its Tridex Ribbons Division, operates in
one industry segment, computer peripheral equipment. Operations in this
segment include the design, development, manufacture and sale of terminal
devices, customer displays, keyboards and cash drawers for point-of-sale
("POS") applications and ribbon cartridges for specialty dot matrix
printers.
Principles of consolidation: The accompanying consolidated financial
statements include the accounts of the Company after elimination of all
material intercompany accounts and transactions. See Note 2 for treatment
of discontinued operations. Prior years have been restated to reflect
discontinued operations.
Change in fiscal year end: In December 1995, the Company changed its
fiscal year to end on December 31, effective December 31, 1995.
Previously, the Company's fiscal year ended on the Saturday closest to
March 31.
Cash and cash equivalents: Cash equivalents consist primarily of
certificates of deposit with maturities of less than ninety days and are
carried at cost which approximates market value.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Foreign Currency: The financial position and results of operations of the
Company's foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of such subsidiaries have
been translated at current exchange rates, and related revenues and
expenses have been translated at weighted average exchange rates. The
aggregate effect of translation adjustments so calculated is included as
a separate component of shareholders' equity. Transaction gains and
losses are included in other income.
Inventories: Inventories are stated at the lower of cost (principally
first-in, first-out) or market.
Plant and equipment and depreciation: Plant and equipment and leasehold
improvements are stated at cost. Depreciation is provided for primarily
by the straight-line method over the estimated useful lives. The
estimated useful life of machinery, furniture and equipment is five to
ten years. Leasehold improvements are amortized over the shorter of the
term of the lease or the useful life of the asset.
Excess of cost over fair value of net assets acquired: The excess of cost
over fair value of net assets acquired (goodwill) resulted from the
acquisitions of Cash Bases in fiscal year 1995 and Ultimate in fiscal
year 1993. The amount applicable to these acquisitions totaled $6,493,000
at December 31, 1996, and is being amortized on the straight line method
between ten and twenty years. Accumulated amortization of the excess of
cost over fair value of net assets acquired was $2,469,000 and $1,772,000
at December 31, 1996 and December 31, 1995, respectively. The Company
periodically reviews goodwill to assess recoverability based upon
expectations of non-discounted cash flows from operations for each
subsidiary having a material goodwill balance. The Company believes that
no material impairment of goodwill exists at December 31, 1996 or
December 31, 1995.
Other assets: Included in other assets at December 31, 1996 are deferred
tax assets of $460,000 (see Note 11) and real estate held for sale in the
amount of $196,000. At December 31, 1995, such amounts were $1,049,000
and $196,000, respectively. Also included in other assets are bond issue
costs (see Note 7) which are being amortized over the term of the bond.
Accumulated amortization of other assets was $361,000, and $285,000 at
December 31, 1996, and December 31, 1995, respectively.
19
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and summary of significant accounting policies: (continued)
Revenue recognition: Sales are recognized when the product is shipped.
Sales to Lowe's Companies, Inc. accounted for approximately 13% of net
sales for the year ended December 31, 1996. Sales to Advance Stores
Company Inc. ("Advance Auto") accounted for approximately 12% of net
sales for the nine months ended December 31, 1995.
Income taxes: Income tax expense is based on estimated taxes payable or
refundable on a tax return basis for the current year and changes in the
amount of deferred tax assets and liabilities during the year. Deferred
income taxes are provided for revenue and expenses which are recognized
in different periods for income tax and financial statement purposes. The
Company accounts for income taxes in accordance with FAS 109 "Accounting
for Income Taxes," which mandates the liability method for computing
deferred income taxes. The objective of the liability method is to
recognize the amount of current and deferred taxes payable or refundable
at the financial statement date resulting from all events that have been
recognized in the financial statement based upon the provisions of
enacted tax laws. See Note 11 for a further discussion.
Earnings (loss) per share: Primary earnings (loss) per common and common
equivalent share are based on the weighted average number of common
shares outstanding during the period, including stock options and
warrants when the result is dilutive. Fully diluted earnings per common
share assumes conversion of dilutive securities, when the result is
dilutive.
2. Discontinued Operations:
During 1996, the Company implemented a Plan to spin-off its printer
group, which was formed in December 1995 by combining the operations of
its subsidiaries, Magnetec Corporation ("Magnetec") and Ithaca
Peripherals Incorporated ("Ithaca"). In April 1996, the Company announced
that it had engaged an investment banking firm to pursue an underwritten
public offering of up to 20% of the printer group. In June 1996, the
Company incorporated TransAct Technologies Incorporated ("TransAct") as a
wholly-owned subsidiary of Tridex. Following the incorporation, Tridex,
TransAct, Magnetec and Ithaca entered into a Plan of Reorganization (the
"Plan of Reorganization"), pursuant to which: (i) Ithaca merged into
Magnetec; (ii) TransAct transferred to Tridex certain assets of Magnetec
used in manufacturing operations of the Tridex Ribbons Division; (iii)
TransAct issued 5,400,000 shares of its common stock to Tridex in
exchange for all the outstanding shares of Magnetec; (iv) TransAct sold
in an initial public offering 1,322,500 shares or approximately 19.7% of
its common stock; (v) TransAct repaid $8,500,000 of intercompany
indebtedness to Tridex; (vi) Tridex applied to the Internal Revenue
Service (the "IRS") for a ruling that the pro rata distribution to Tridex
stockholders of the 5,400,000 shares of TransAct owned by Tridex (the
"Distribution") would constitute a tax-free reorganization for federal
income tax purposes; and (vii) Tridex agreed to effect the Distribution
promptly after receipt of a favorable ruling from the IRS and the
satisfaction of certain other conditions. TransAct received approximately
$8,991,000 of net proceeds from its initial public offering and used
$7,500,000 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, Tridex used approximately
$5,254,000 to repay all outstanding indebtedness to Fleet National Bank.
TransAct paid the remaining $1,000,000 of intercompany indebtedness on
February 14, 1997, together with interest at the rate of 8.25 percent.
On February 12, 1997, the Company received a favorable ruling from the
IRS confirming the tax-free nature of the Distribution and announced that
it will effect the Distribution on March 31, 1997 to Tridex stockholders
of record on March 14, 1997. After the Distribution, Tridex and TransAct
will be separate publicly traded companies. The Consolidated Financial
Statements have been restated from historical financial statements to
present the results of operations of TransAct as discontinued operations.
Such results are summarized below.
20
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Discontinued Operations: (continued)
Year Ended Nine Months Ended Year Ended
----------------- ----------------- -------------
December 31, 1996 December 31, 1995 April 1, 1995
----------------- ----------------- -------------
(Dollars in thousands)
Net sales $42,134 $25,497 $33,362
Operating income 5,233 1,579 3,705
Net income 3,340 916 2,304
Earnings per share $ 0.57 $ 0.17 $ 0.43
3. Business combinations:
On June 20, 1994 the Company completed the acquisition of Cash Bases, of
Newhaven, England. The acquisition has been accounted for using the
purchase method of accounting. The acquired company's assets and
liabilities have been recorded in the Company's financial statements at
their estimated fair values at the acquisition date. The Consolidated
Statements of Operations include the results of operations of the
acquired company from the acquisition date. On a pro forma (unaudited)
basis, if the acquisition had occurred at the beginning of fiscal 1995,
fiscal 1995 data would have been: Net sales $26,624,000; Operating income
$1,042,000; Net income $2,749,000; and earnings per common and common
equivalent shares $0.70. The fair value of assets acquired, excluding
cash acquired, was $3,881,000 and goodwill was $3,978,000. The
acquisition was financed by debt incurred of $4,800,000, the assumption
of liabilities of $2,351,000, the issuance of warrants of $644,000 and
the use of $64,000 in cash.
4. Receivables:
Receivables are net of the allowance for doubtful accounts. The
reconciliation of the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
----------------- ----------------- -------------
December 31, 1996 December 31, 1995 April 1, 1995
----------------- ----------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 116 $ 113 $ 130
Provision for doubtful accounts 24 5 25
Accounts written off, net of recoveries (22) (2) (42)
----------------- ----------------- -------------
Balance at end of year $ 118 $ 116 $ 113
================= ================= =============
</TABLE>
5. Inventories:
The components of inventories are:
December 31, 1996 December 31, 1995
----------------- -----------------
(Dollars in thousands)
Raw materials and component parts $2,051 $1,663
Work-in-process 359 477
Finished goods 3,199 1,104
----------------- -----------------
$5,609 $3,244
================= =================
21
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Accrued liabilities:
The components of accrued liabilities are:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Payroll, fringe benefits and commissions $ 822 $ 773
Unfunded pension obligation 577 318
Interest and taxes other than income taxes 241 150
Customer advances, deferred revenue and warranty 57 37
Environmental matters 322 347
Professional services and insurance 220 181
Restructuring 326
Litigation 776
Other 779 177
----------------- -----------------
$3,018 $3,085
================= =================
</TABLE>
7. Bank credit agreement and long term debt:
On August 30, 1996, the Company and Fleet National Bank ("Fleet"),
entered into an amended agreement (the "Fleet Credit Agreement") which
provides the Company with a $2,000,000 working capital revolving credit
facility. The working capital facility expires on June 30, 1998, bears
interest payable monthly at a rate equal to Fleet's prime rate (8.25% at
December 31, 1996), and bears a non-utilization fee of .25% of the unused
facility. Under the prior agreement, Fleet provided the Company with a
$5,500,000 term loan (included in the accompanying table as "Term Loan
Payable") which was repaid in full during 1996. The Fleet Credit
Agreement is secured by a first priority security interest in certain
assets, imposes certain covenants (including a minimum tangible net
worth, a maximum leverage ratio, a minimum interest coverage ratio and a
minimum current ratio) and restricts the amount available for payment in
cash dividends and capital stock distributions.
During 1996, Fleet waived compliance with certain covenants of the prior
agreement for the period ended December 31, 1995, and amended the Working
Capital Facility to reduce the minimum tangible net worth requirement for
the quarter ended March 30, 1996. As of December 31, 1996, the Company
was in full compliance with all covenants of the Fleet Credit Agreement
and expects to be in full compliance with all covenants during 1997.
The components of long term debt are:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Term loan payable $ 5,500
10.5% Senior Subordinated Convertible
Debentures due 1997, net of discount of $6
and $16 $ 2,454 3,454
8% Subordinated Convertible Term Promissory
Notes due 1997, net of discount of $76 and 1,174 1,414
Other 1,178 367
----------------- -----------------
4,806 10,735
Current portion 3,997 2,411
----------------- -----------------
$ 809 $ 8,324
================= =================
</TABLE>
The 10.5% Senior Subordinated Convertible Debentures due 1997 (the "10.5%
Debentures") were issued in 1993 in conjunction with the acquisition of
Ultimate. Interest is payable quarterly on March 15, June 15, September
15 and December 15. The 10.5% Debentures are convertible into Tridex
common stock at $9.00 per share. As of December 31, 1996, the Company had
reserved 273,318 shares of common stock pursuant to the conversion
feature. The indenture restricts the amount available for the payment of
cash
22
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Bank credit agreement and long term debt: (continued)
dividends and capital stock distributions. In conjunction with the issuance
of the 10.5% Debentures, the Company issued to each debenture holder
detachable warrants (the "Warrants") to purchase common stock of Tridex at
a rate of 10 shares per $1,000 principal amount of debentures. The Warrants
are exercisable for a period of five years at $9.25 per share. As of
December 31, 1996, the Company had reserved 42,500 shares of common stock
for the exercise of the Warrants. The estimated fair market value of the
Warrants has been recorded as a discount to the principal amount of the
outstanding debentures and is being amortized over the term of the debt.
Costs incurred in connection with the issuance of the 10.5% Debentures of
approximately $448,000 are recorded in other assets and are being amortized
over the term of the debentures.
The 8% Subordinated Convertible Term Promissory Notes (the "8% Notes") were
issued in conjunction with the acquisition of Ultimate from its former
shareholders. The 8% Notes are payable in quarterly installments over five
years and are convertible into Tridex common stock at $12.00 per share. As
of December 31, 1996, the Company had reserved 104,127 shares of common
stock pursuant to this conversion feature. The discount on the 8% Notes
represents imputed interest at a rate of approximately 18%. The discount,
recorded as a reduction of the purchase price of Ultimate, is being
amortized over the life of the notes using the interest rate method. During
1996, certain holders of 8% Notes requested that quarterly principal
payments be suspended indefinitely. At December 31, 1996, such suspended
principal payments aggregated $450,000. Holders may require payment of any
suspended payments upon five days notice.
Cash Bases has an agreement with Barclay's Bank that provides line of
credit, term loan and equipment financing facilities. At December 31, 1996,
(pounds) 432,000 (approximately $740,000) was outstanding under the line of
credit facility with availability of (pounds) 68,000 (approximately
$116,000). Other long term debt consists of the term notes payable and
equipment financing obligations of Cash Bases. The equipment financing
obligations are collateralized by the underlying equipment.
Maturities of long term debt, including sinking fund requirements and
scheduled retirement of the 10.5% Debentures and 8% Notes are as follows:
$4,079,000 in 1997, $282,000 in 1998, $204,000 in 1999, $177,000 in 2000,
and $146,000 in 2001. See Note 15 for discussion of debt conversions.
Interest expense is stated net of interest income of $92,000 in 1996,
$14,000 in the nine months ended December 31, 1995, and $33,000 in fiscal
1995.
8. Pension plan:
Effective December 31, 1995, the Company established a non-qualified
unfunded pension arrangement for Alvin Lukash, a significant shareholder
and former corporate officer and director. The pension arrangement, which
replaced a prior consulting services agreement, requires the Company to pay
an annual benefit of $100,000, payable monthly, through the earlier of
March 31, 2000 or the death of Mr. Lukash. Effective December 31, 1996, the
arrangement was amended to provide the annual benefit through the death of
Mr. Lukash. The unfunded accumulated benefit obligation at December 31,
1996 of $577,000 is included in Accrued Liabilities in the accompanying
balance sheet. The Company recorded the actuarial present value of the
benefits calculated at a 7.2% discount rate. The Company recorded pension
expense of $358,000 in 1996, of which $320,000 was related to the 1996
amendment and was recorded in the quarter ended December 31, 1996.
9. Commitments and contingencies:
(a) Lease obligations:
At December 31, 1996, the Company was lessee on long term
operating leases for equipment and real property. The terms of
certain leases provide for escalating rent payments in later years
of the lease as well as payment of minimum rent and real estate
taxes. Rent expense amounted to approximately $555,000 in 1996,
$329,000 in the nine months ended December 31, 1995, and $381,000
in fiscal 1995. Minimum aggregate rental payments required under
operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 1996 are as
follows: $567,000 in 1997, $567,000 in 1998; $543,000 in 1999;
$443,000 in 2000; $334,000 in 2001 and $16,000 thereafter.
23
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Commitments and contingencies: (continued)
(b) Environmental matters:
The Company is involved in one significant environmental matter:
Allu Realty Trust ("Allu"), a Massachusetts business trust with
transferable shares, all of which are owned by Tridex, is the
former owner of land improved with a manufacturing-warehouse
building located at 100 Foley Street, Somerville, Massachusetts
(the "Site"). Although Allu has sold the property to 100 Foley
Street Incorporated ("Foley"), an unrelated entity, Allu and
Tridex remain responsible for certain environmental problems
associated with the Site.
During July 1984, Allu and Tridex disclosed to the Massachusetts
Department of the Attorney General the existence of chromium, oil
and grease at the Site. As a result, the Environmental Protection
Division of the Department of the Attorney General and the
Massachusetts Department of Environmental Protection ("MDEP")
conducted an investigation of the Site. At MDEP's request, the
Company retained an environmental engineering firm, which
completed a Phase II investigation study of the Site. The Company
has conducted further studies to characterize and assess the Site
more specifically and to determine appropriate long term clean-up
measures. In January 1993, the Company entered into an agreement
with Foley pursuant to which Tridex and Foley agreed to pay 75%
and 25%, respectively, of the costs incurred after January 1, 1992
in connection with the investigation and remediation of the Site
(the "Site Participation Agreement"). The Site Participation
Agreement also provides that, to the extent there are available
proceeds from the sale of the Site or, if not sold, from the
operation of the Site after January 1, 1997, Tridex shall be
reimbursed for all or a portion of the $260,000 it expended in
connection with the Site prior to January 1, 1992. Under the terms
of an Escrow Agreement entered into by Tridex and Foley
simultaneously with the Site Participation Agreement (the "Escrow
Agreement"), Tridex and Foley each placed $125,000 in escrow to
fund the payment of their obligations under the Site Participation
Agreement. Under the terms of the Escrow Agreement, Tridex must
place an additional $100,000 in escrow at the request of the
Escrow Agent and thereafter the amount of any additional funds
required by the Escrow Agent shall be contributed 75% by Tridex
and 25% by Foley. Approximately $1,000 is being held in escrow as
of December 31, 1996, all of which was contributed by Foley.
As of December 31, 1996, the Company had spent approximately
$664,000 in connection with the Site. Of this amount,
approximately $494,000 relates to investigation and remediation
costs incurred at the Site. Although it is difficult to
distinguish between amounts spent for investigation and
remediation, the Company estimates that approximately $394,000 has
been spent in connection with investigation and approximately
$100,000 has been spent in connection with remediation of the
Site. The Company estimates that approximately $100,000 to
$300,000 will be spent in connection with the Site during 1997,
including expenditures from the escrow account. Based upon
preliminary estimates provided by a consulting environmental
engineer and based upon the likely future uses of the property, as
of December 31, 1996, the Company had accrued $322,000 for the
Site, which represents currently estimated minimum cost of
remediation, after considering the cost sharing arrangement
discussed above. Accordingly, although no assurances can be given
regarding the materiality of the total costs which may be
incurred, the Company does not believe at this time that the
remediation of the Site is reasonably likely to have a material
effect on the Company's financial condition, results of operations
or liquidity. The implementation of clean-up measures has
commenced, and may be completed in 1997, in which case the entire
amount of remediation costs to be borne by the Company would be
incurred and paid in 1997. The precise scope and timing of
remediation is dependent upon a proposed sale of the property,
which is subject to negotiations to which the Company is not a
party. The Company expects that, as in the past, funds being held
in escrow, cash from operations and the Company's credit
facilities will be sufficient to pay the costs of remediation
without a material effect on the Company's operations.
The Company has also been notified by an adjacent property owner,
Cooper Industries ("Cooper"), that certain petroleum products that
may have migrated from the Site have been detected in a monitoring
well located on Cooper's property. The Company and Foley are
investigating possible oil contamination along the border between
the Site and the property owned by Cooper.
24
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Stock options and warrants:
1989 Long Term Incentive Plan
The 1989 Long Term Incentive Plan (the "Plan") permits stock-based
incentive compensation in the form of: (a) stock options, (b) stock
appreciation rights, (c) restricted stock, (d) deferred stock, (e) stock
purchase rights and (f) other stock-based compensation. Pursuant to the
Plan, up to 1,250,000 shares of common stock may be distributed to
officers, key employees and non-employee directors of the Company.
Options granted are at prices equal to 100% of the fair market value of
the common stock at the date of grant. No charge against income was
required with respect to options. Options granted are exercisable at the
discretion of the Stock Option Committee, but in no event shall the
period be for more than ten years. Ninety days after an employee's
termination, the outstanding options are canceled. At December 31, 1996
the Company had reserved 932,506 shares of common stock for issuance upon
the exercise of options granted under the Plan. The following table
summarizes the activity of the Plan for the year ended December 31, 1996,
for the nine months ended December 31, 1995 and for the year ended April
1, 1995.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
---------------------- ----------------------- ----------------------
December 31, 1996 December 31, 1995 April 1, 1995
---------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 669,530 $6.33 612,465 $5.44 513,855 $5.00
Granted 99,000 8.08 211,800 6.40 127,150 7.05
Exercised (96,964) 2.99 (111,125) 1.12 (14,440) 1.21
Canceled (42,206) 6.24 (43,610) 7.44 (14,100) 8.30
-------- -------- -------
Outstanding at end of period 629,360 7.13 669,530 6.33 612,465 5.44
======== ======== =======
Options exercisable at end of period 236,412 6.68 213,870 5.02 255,295 3.43
======== ======== =======
Weighted average fair value of options
granted during the period:
Equal to market price $ 5.70 $ 4.07
======== ========
Exceeding market price $ 5.74 $ 2.68
======== ========
</TABLE>
The following summarized additional information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------------------------------
Number Weighted- Number
Outstanding at Average Weighted- Exercisable at Weighted-
December 31, Remaining Average December 31, Average
Range of Exercise Prices 1996 Contractual Life Exercise Price 1996 Exercise Price
------------------------ -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.75 - $ 5.00 39,790 4.23 $ 1.34 38,690 $ 1.25
5.01 - 7.50 343,840 7.57 6.52 89,520 6.34
7.51 - 10.00 228,730 5.48 8.75 107,002 8.88
10.01 - 11.75 17,000 7.40 11.19 1,200 10.75
-------------- --------------
629,360 236,412
============== ==============
</TABLE>
Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in Financial Accounting
Standard No. 123, the Company's net income (loss) and earnings per share
would have been:
25
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Stock options and warrants: (continued)
Year Ended Nine Months Ended
----------------- -----------------
December 31, 1996 December 31, 1995
----------------- -----------------
(Dollars in thousands)
Net income (loss):
As reported $ 8,848 $ (997)
Pro forma under FAS 123 8,673 (1,103)
Pro forma earnings per share:
As reported $ 2.13 $ (0.27)
Pro forma under FAS 123 2.09 (0.30)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions used for the grants made during the year ended December 31,
1996 and the nine months ended December 31, 1995: dividend yield of 0%
for both periods; risk-free interest rates ranging from 5.04% to 5.07%
for options granted during the year ended December 31, 1996 and 5.24% to
5.91% for options granted during the nine months ended December 31, 1995;
expected volatility factors ranging from 57.0% to 57.6% for the year
ended December 31, 1996 and 42.9% to 45.0% for the nine months ended
December 31, 1995; and an expected option term ranging from five to ten
years for both periods.
Warrants:
As of December 31, 1996, the Company had outstanding stock purchase
warrants for an aggregate of 233,382 shares of common stock. Stock
purchase warrants for 117,550 shares expiring five years from date of
grant are held by directors of the Company and for 115,832 shares
expiring December 31, 1997 originally issued to the purchasers of the
10.5% debentures and the placement agent for the debentures. The
following table summarizes the activity of outstanding warrants for the
year ended December 31, 1996, for the nine months ended December 31, 1995
and for the year ended April 1, 1995.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
----------------------- ----------------------- ----------------------
December 31, 1996 December 31, 1995 April 1, 1995
----------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 283,832 $ 7.64 283,832 $ 7.64 318,832 $ 6.90
Exercised (50,450) 4.54 0 (35,000) .88
---------- -------- -------- -------- --------- --------
Outstanding at end of period 233,382 8.31 283,832 7.64 283,832 7.64
---------- -------- -------- -------- --------- --------
Warrants exercisable at end of period 209,582 8.43 236,932 7.72 236,932 7.72
---------- -------- -------- -------- --------- --------
</TABLE>
The following summarized additional information about warrants
outstanding at December 31, 1996:
Warrants Outstanding
-----------------------------------------------------
Number Outstanding at Weighted-Average Remaining
Exercise Prices December 31, 1996 Contractual Life
--------------- --------------------- --------------------------
$5.25 22,500 0.29
$7.25 65,050 4.33
$9.25 145,832 1.00
---------------------
233,382
=====================
26
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income taxes:
The sources of profit (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
----------------- ----------------- -------------
December 31, 1996 December 31, 1995 April 1, 1995
----------------- ----------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
United States $ 5,462 $ (1,991) $ (1,714)
Foreign 761 (553) 1,227
----------------- ----------------- -------------
$ 6,223 $ (2,544) $ (487)
================= ================= =============
</TABLE>
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
----------------- ----------------- -------------
December 31, 1996 December 31, 1995 April 1, 1995
----------------- ----------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Current:
Federal $ (685) $ (426) $ (748)
State 94 54 57
Foreign 103 (141) 430
----------------- ----------------- -------------
$ (488) (513) (261)
----------------- ----------------- -------------
Deferred:
Federal 553 (97) (554)
State (16) (9) (9)
Foreign 183 (12) (45)
----------------- ----------------- -------------
720 (118) (608)
----------------- ----------------- -------------
Provision
(benefit) for
income taxes $ 232 $ (631) $ (869)
================= ================= =============
</TABLE>
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the
financial statements. The Company's gross deferred tax assets and
liabilities were comprised of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Gross deferred tax assets:
Current non-deductible liabilities and reserves $ 869 $1,026
Net operating loss carryforwards 609 582
Federal business and foreign tax credit
carryforwards 415 615
Federal minimum tax credit carryforwards 88 211
Depreciation 57
----------------- -----------------
$1,981 $2,491
================= =================
Gross deferred tax liabilities:
Depreciation $ 254
=================
</TABLE>
27
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Income taxes: (continued)
At December 31, 1996 and December 31, 1995, valuation allowances of
$1,127,000 and $1,171,000, respectively, have been recorded which relate
primarily to state net operating loss and federal foreign tax credit
carryforwards, and certain state deferred tax deductions for which a tax
benefit will not likely be realized. The net change since December 31,
1995 in the valuation allowance for deferred tax assets was a decrease of
$44,000 related primarily to a decrease in deferred state tax benefits.
At December 31, 1996, the Company had $7,906,000 of state net operating
loss carryforwards that expire principally in 1996 through 2000. Foreign
tax credit carryforwards which are available to offset future federal
income taxes total $384,000 and principally expire in 1997 through 2002.
The Company has a federal minimum tax credit carryforward of
approximately $88,000 which will be available to reduce federal tax in
future years.
Differences between the U.S. statutory federal income tax rate and the
company's effective income tax rate are analyzed below:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
------------ ----------------- -----------
December 31, December 31, April 1,
1996 1995 1995
------------ ----------------- -----------
<S> <C> <C> <C>
Federal statutory tax rate 34.0% (34.0%) (34.0%)
Nondeductible purchase
accounting 3.8 7.0 45.1
State income taxes, net of
federal income taxes .07 1.0 5.9
Gain on sale of subsidiary stock (33.9)
Valuation allowance (0.7) -- (231.5)
Federal benefit of acquired loss
carryforwards used to reduce
goodwill -- -- 6.9
Effect of foreign operations 0.4 2.0 26.1
Other .03 (0.8) 3.1
------------ ----------------- -----------
Effective tax rate 3.7% (24.8%) (178.4%)
============ ================= ===========
</TABLE>
12. Disclosure about Fair Value of Financial Instruments:
The carrying amount of cash, trade accounts receivable, other current
assets, trade accounts payable, and accrued expenses approximate fair
value because of the short maturity of those instruments. The carrying
amount of borrowings under the Barclay's agreement approximates their
fair value. The fair value of the Company's debt is estimated based on
the quoted market prices of the same or similar issues or on the current
rates offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's debt instruments at 12/31/96
are as follows:
Carrying Amount Fair Value
(Dollars in thousands)
10.5% Debentures $2,454 $3,835
8% Notes 1,174 1,600
13. International Operations:
Prior to fiscal year 1995, the Company had no foreign operations and
export sales were minimal. As a result of the acquisition of Cash Bases,
the Company acquired manufacturing facilities in the United Kingdom.
Amounts included in the accompanying consolidated financial statements
associated with operations outside the United States consist of the
following (in 000's):
28
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. International Operations: (continued)
<TABLE>
<CAPTION>
At and for the
At and for the Years Ended At and for the Nine Months Ended Year Ended
------------------------------- -------------------------------- --------------
December 31, December 31, December 31, December 31, April 1,
1996 1995 1995 1994 1995
------------ ------------ ------------ ------------ --------------
(Unaudited) (Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Sales:
Domestic $ 22,340 $ 18,874 $ 14,413 $ 9,010 $ 13,471
Foreign 14,713 11,902 8,486 7,105 10,528
Elimination (20) (27)
------------ ------------ ------------ ------------ --------------
Total $ 37,053 $ 30,756 $ 22,872 $ 16,115 $ 23,999
------------ ------------ ------------ ------------ --------------
Operating Income:
Domestic $ 280 $ (446) $ (878) $ (470) $ (158)
Foreign 889 (512) (536) 849 993
------------ ------------ ------------ ------------ --------------
Total $ 1,169 $ (958) $ (1,414) $ 379 $ 835
------------ ------------ ------------ ------------ --------------
Identifiable Assets:
Domestic $ 16,246 $ 11,613 $ 11,613 $ 10,981 $ 14,994
Foreign 10,985 8,332 8,332 7,682 8,887
------------ ------------ ------------ ------------ --------------
Total $ 27,231 $ 19,945 $ 19,945 $ 18,663 $ 23,881
------------ ------------ ------------ ------------ --------------
</TABLE>
Net sales are based on the location of the operation. Transfers between
geographic areas are recorded at amounts generally above cost and in
accordance with the regulations of applicable taxing jurisdictions.
Operating income consists of total net sales less operating expenses and
corporate expenses, and does not include either interest, other income or
income taxes. Identifiable assets of geographic areas are those assets
used in the Company's operations in each area.
The Company had export sales from its United States operations of
approximately $130,000 in 1996, $100,000 in the nine months ended
December 31, 1995 and $731,000 in fiscal year 1995. Such sales were
primarily to Canada and were not material in prior years. Export sales
from the Company's foreign operations, which were primarily to European
countries, totaled approximately $7,760,000 in 1996, $4,900,000 and in
the nine months ending December 31, 1995. The Company recorded net
foreign exchange transaction losses of approximately $264,000 in 1996,
$29,000 in the nine months ended December 31, 1995 and $85,000 in the
year ended April 1, 1995.
14. Other Significant Transactions:
See Note 2 for discussion regarding the formation and spin-off of
TransAct Technologies Incorporated. During the quarter ended December 31,
1996, the Company recorded a $320,000 provision to amend the unfunded
pension arrangement established in the prior year.
During the quarter ended December 31, 1995, the Company recorded
provisions for the following non-recurring operating expenses: litigation
settlement of $680,000, restructuring costs of $125,000, pension of
$339,000 and other non-recurring items totaling $246,000. In addition,
the Company recorded other charges of $42,000 for estimated loss on
disposal of unused real estate and $75,000 for environmental clean-up.
The provision for restructuring covers the discontinuance of certain
products. A substantial portion of the provision relates to employee
severance costs.
During the fourth quarter of fiscal 1995, the Company recorded an
additional provision for the estimated loss on disposal of unused real
estate of $50,000 and an additional provision for estimated environmental
clean-up costs of $60,000. Also in the fourth quarter, the Company
recorded an adjustment to fully recognize federal deferred tax benefits.
29
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Subsequent events:
In connection with the Distribution, the vesting of all outstanding
options to purchase Tridex common stock was accelerated so that all such
options became exercisable. The Company also issued a notice of
redemption of its convertible debentures with a March 14, 1997 redemption
date.
During the period January 1, 1997 through March 14, 1997, the Company
issued common stock as follows: (a) 599,300 shares to optionees under the
Company's 1989 Long Term Incentive Plan upon payment of $4,185,000
exercise price, (b) 260,632 shares to holders of warrants upon payment of
$2,211,000 exercise price, (c) 273,318 shares to holders of 10.5%
Debentures upon conversion of $2,460,000 principal amount of debentures,
(d) 104,127 shares to holders of 8% Notes upon conversion of $1,250,000
principal amount, and (e) 100,000 shares to certain officers of Ultimate
in accordance with the Stock Incentive Compensation Agreement.
In connection with the exercise of options under the Plan, the Company
offered loans to all employees whose total exercise price of options
under the Plan exceeded $50,000. The loans, which total $893,000, are
full recourse loans due in may 1998, bear interest at the rate of 6.08%
and are secured by pledges of the shares acquired by the employees
through the exercise of Plan options.
At March 14, 1997, the Company had outstanding 5,373,310 shares of common
stock. Thus the ratio for the distribution of TransAct shares is 1.005
shares of TransAct for each share of Tridex Corporation.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) Directors.
The information contained in "Information Concerning Nominees for
Election as Directors and Executive Officers" of the Company's Proxy
Statement (the "Proxy Statement") for its Annual Meeting of Shareholders
which is scheduled to be held on May 14, 1997 is hereby incorporated
herein by reference. Also see Item 1(E)(i) above.
(B) Executive Officers.
See Item 1(E)(ii) above.
(C) Compliance with Section 16(a) of the Exchange Act.
The information contained in "Compliance with Section 16(a)" of the Proxy
Statement is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in "Compensation of Directors and Executive Officers"
of the Proxy Statement is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in "Security Ownership of Certain Beneficial Owners
and Management" of the Proxy Statement is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
The information contained in "Certain Relationships and Related Transactions" of
the Proxy Statement is hereby incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following financial statements and exhibits are filed as part of this
report:
(i) Financial statements
See Item 8 on page 12.
(ii) Financial statement schedules
See Item 8 on page 12.
(iii) List of Exhibits.
See Exhibit Index on page 33.
(B) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the last
quarter of the period covered by this report.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
------------------------------
Seth M. Lukash
Chairman of the Board, President,
Chief Executive Officer, Chief
Operating Officer and Director
Date: March 25, 1997
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Seth M. Lukash Chairman of the Board, March 25, 1997
- ------------------------------ President, Chief
Seth M. Lukash Executive Officer,
(Principal Executive Officer) Chief Operating Officer
and Director
/s/ George T. Crandall Vice President, Treasurer, March 25, 1997
- ------------------------------ Controller and Secretary
George T. Crandall (Principal Accounting
Officer)
/s/ Graham Y. Tanaka Director March 25, 1997
- ------------------------------
Graham Y. Tanaka
/s/ Paul J. Dunphy Director March 25, 1997
- ------------------------------
Paul J. Dunphy
/s/ C. Alan Peyser Director March 25, 1997
- ------------------------------
C. Alan Peyser
/s/ Thomas R. Schwarz Director March 25, 1997
- ------------------------------
Thomas R. Schwarz
32
<PAGE>
Exhibit Index
Page
Number
------
3.1 Certificate of Incorporation of Tridex, as amended,
filed on June 28, 1985 as Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
March 30, 1985, is hereby incorporated herein by
reference.
3.2 Certificate of Amendment of Incorporation of Tridex,
dated October 1, 1987, filed on July 18, 1988 as
Exhibit 3.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 2, 1988 is hereby
incorporated herein by reference.
3.3 Certificate of Amendment of Incorporation of Tridex,
dated August 15, 1988, filed on June 29, 1989 as
Exhibit 3.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 1, 1989 is hereby
incorporated herein by reference.
3.4 Certificate of Amendment of Incorporation of Tridex,
dated March 31,1989 filed on June 29, 1989 as Exhibit
3.4 to the Company's Annual Report on Form 10-K for the
fiscal year ended April 1, 1989 is hereby incorporated
herein by reference.
3.5 Bylaws of Tridex, as amended and restated as of January
22, 1996, filed on March 26, 1996 as Exhibit 3.5 to the
Company's Transition Report on Form 10-K for the
transition year ended December 31, 1995 is hereby
incorporated herein by reference.
4.1 Description of the Company's common stock set forth in
the Company's Registration Statement on Form 8-A filed
July 14, 1986, is hereby incorporated herein by
reference.
4.2 The Tridex Corporation 1989 Long Term Incentive Plan
(as amended and restated), filed as Exhibit A to the
Company's Proxy Statement for Annual Meeting of
Shareholders filed September 14, 1994 is hereby
incorporated herein by reference.
4.3 Form of 8% Subordinated Convertible Term Promissory
Notes dated January 20, 1993, by and among the Company
and the shareholders of Ultimate Technology
Corporation, filed as an Exhibit to Current Report on
Form 8-K filed February 10, 1993, is hereby
incorporated herein by reference.
4.4 Form of Registration Rights Agreement, dated January
20, 1993, filed as an Exhibit to Current Report on Form
8-K filed February 10, 1993, is hereby incorporated
herein by reference.
4.5 Indenture dated as of December 31, 1992 by and among
the Company and American Stock Transfer & Trust
Company, as Trustee, filed as an Exhibit to Current
Report on Form 8-K filed February 10, 1993, is hereby
incorporated herein by reference.
4.6 Form of 10.5% Senior Subordinated Convertible
Debentures due December 31, 1997, filed as an Exhibit
to Current Report on Form 8-K filed February 10, 1993,
is hereby incorporated herein by reference.
4.7 Form of Warrant, dated January 20, 1993, to purchase
shares of Tridex common stock, filed as an Exhibit to
Current Report on Form 8-K filed February 10, 1993, is
hereby incorporated herein by reference.
4.8 Form of Registration Rights Agreement, filed as an
Exhibit to Current Report on Form 8-K filed February
10, 1993, is hereby incorporated herein by reference.
4.9 Form of Warrant dated January 20, 1993, to purchase
common stock of Tridex Corporation, filed as an exhibit
to the Company's Annual Report on Form 10-K for the
fiscal year ended April 3, 1993 is hereby incorporated
herein by reference.
10.1 Employment and Non-Competition Agreement, dated as of
January 20, 1993, between Ultimate Technology
Corporation and Dennis J. Lewis, filed as an exhibit to
the Company's Annual Report on Form 10-K for the fiscal
year ended April 3, 1993 is hereby incorporated herein
by reference.
10.2 The Tridex Corporation 1989 Long Term Incentive Plan
(as amended and restated) filed as Exhibit A to the
Company's Proxy Statement for Annual Meeting of
Shareholders filed July 23, 1992 is hereby incorporated
herein by reference.
10.3 Employee Performance Compensation Agreement, dated
January 20, 1993 by and among Tridex and the Ultimate
shareholders, filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended
April 3, 1993 is hereby incorporated herein by
reference.
10.4 Amended and Restated Credit Agreement dated as of
December 15, 1995 among Tridex Corporation, Ithaca
Peripherals Incorporated, Ultimate Technology
Corporation, Magnetec Corporation, Cash Bases
Incorporated and Fleet Bank, National Association.
Filed on March 29, 1996 as Exhibit 10.12 to the
Company's Transition Report on Form 10-K for the
transition period ended December 31, 1995 is hereby
incorporated herein by reference.
10.5 Amendment No. 1, dated as of March 15, 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 Bank,
National Association. Filed on March 29, 1996 as
Exhibit 10.13 to the Company's Transition Report on
Form 10-K for the transition period ended December 31,
1995 is hereby incorporated herein by reference.
33
<PAGE>
Page
Number
------
10.6 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, filed on November 12, 1996 as Exhibit 10.9 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 28, 1996 is hereby incorporated herein
by reference.
10.7 Service Agreement, dated June 20, 1994, between Cash
Bases G.B. Limited and Hugh T. Burnett filed on June
30, 1994 as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 2,
1994 is hereby incorporated by reference.
10.8 Retirement Agreement, dated as of December 31, 1995,
between Tridex Corporation and Alvin Lukash, Filed on
March 29, 1996 as Exhibit 10.15 to the Company's
Transition Report on Form 10-K for the transition year
ended December 31, 1995 is hereby incorporated herein
by reference.
10.9 First Amendment to Retirement Agreement dated December
31, 1996 between Tridex Corporation and with Alvin
Lukash. 35
10.10 Employment Agreement dated December 2, 1996 between
Tridex Corporation and Seth M. Lukash. 36
10.11 Employment Agreement dated August 7, 1996 between
Tridex Corporation and George T. Crandall. 42
10.12 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"), filed on November 12, 1996 as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 28, 1996 is hereby incorporated
herein by reference.
10.13 Amendment to Plan of Reorganization dated as of August
30, 1996 among Tridex, Magnetec, TransAct and Ithaca,
filed on November 12, 1996 as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 28, 1996 is hereby incorporated herein
by reference.
10.14 Agreement and Plan of Merger dated as of July 16, 1996
between Magnetec and Ithaca, filed on November 12, 1996
as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996 is
hereby incorporated herein by reference.
10.15 Asset Transfer Agreement dated as of July 31, 1996
between Magnetec and Tridex, filed on November 12, 1996
as Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996 is
hereby incorporated herein by reference.
10.16 Manufacturing Support Services Agreement dated as of
September 28, 1996 between Magnetec and Tridex, filed
on November 12, 1996 as Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 28, 1996 is hereby incorporated herein by
reference.
10.17 Corporate Services Agreement dated as of June 24, 1996
between Tridex and TransAct, filed on November 12, 1996
as Exhibit 10.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996 is
hereby incorporated herein by reference.
10.18 Printer Supply Agreement dated as of July 30, 1996
between Magnetec and Ultimate Technology Corporation,
filed on November 12, 1996 as Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 28, 1996 is hereby incorporated herein
by reference.
10.19 Tax Sharing Agreement dated as of July 31, 1996 between
Tridex and TransAct, filed on November 12, 1996 as
Exhibit 10.8 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 28, 1996 is hereby
incorporated herein by reference.
10.20 Stock Incentive Compensation Agreement among Tridex
Corporation, Ultimate Technology Corporation, 47 Dennis
Lewis, Gary German and Paul Wolf dated March 10, 1997. 47
10.21 Employment Agreement dated February 21, 1997 between
Ultimate Technology Corporation and Dennis Lewis. 57
10.22 Employment Agreement dated February 21, 1997 between
Ultimate Technology Corporation and Gary German. 63
10.23 Employment Agreement dated February 21, 1997 between
Ultimate Technology Corporation and Paul Wolf. 69
11.1 Statement re: computation of per share earnings. 75
21.1 List of Subsidiaries of Tridex. 76
23.1 Consent of Independent Accountants. 77
23.2 Consent of Independent Accountants. 78
27.1 Financial Data Schedule.
34
Exhibit 10.9
AMENDMENT TO RETIREMENT AGREEMENT
This First Amendment to Retirement Agreement made and entered into as of this
31st day of December, 1996, by and between Tridex Corporation ("Tridex" or the
"Company"), a Connecticut corporation with a principal place of business at 61
Wilton Road, Westport, Connecticut 06880 and Alvin Lukash ("Lukash"), an
individual residing at 805 Cypress Boulevard, Apt. 311, Building 96, Palm Aire,
Pompano Beach, Florida 33069 with reference to the following background.
WHEREAS, on August 16, 1992, Tridex and Lukash entered into a Consulting
Services Agreement which was amended by Agreement dated April 1, 1995 (the
"Consulting Services Agreement"), and
WHEREAS, pursuant to paragraph 8 of the Consulting Services Agreement, Company
was required to maintain insurance on Lukash's life in the amount of Five
Hundred Thousand Dollars ($500,000), and
WHEREAS, Lukash contributed such life insurance policy to an Irrevocable Trust
dated August 20, 1981, the Trustees of which are Seth M. Lukash and Stephen H.
Friedman, and
WHEREAS, the Trustees of said Trust and its principal beneficiary, Mildred
Lukash, are willing to waive the requirement that Alvin Lukash maintain such
life insurance policy, and
WHEREAS, the Company is willing to agree to maintain a life insurance policy on
Alvin Lukash's life in the amount of Seventy-Five Thousand Dollars ($75,000),
pursuant to a policy issued by United of Omaha, policy number BU1014551, and to
amend the Retirement Agreement between Lukash and the Company, dated December
31, 1995 (the "Retirement Agreement") to provide that the retirement benefit
contained therein shall continue throughout the life of Lukash.
NOW, THEREFORE, in consideration of the promises and agreements herein
contained, and for other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Termination of Portion of Consulting Services Agreement. Tridex and Lukash
agree to terminate the provisions of paragraph 8 of the Consulting Services
Agreement effective on the date hereof. The remainder of the covenants,
terms and conditions of the Consulting Services Agreement, to the extent
not heretofore or hereby terminated, shall remain in full force and effect
as set forth therein and in the Retirement Agreement.
2. Paragraph 2 of the Retirement Agreement is hereby amended to read as
follows: "Retirement Benefit. Effective as of January 1, 1997 Tridex shall
pay Lukash in equal monthly installments, a pension benefit at the rate of
One Hundred Thousand Dollars ($100,000) a year until his death. In
addition, Tridex shall maintain and pay the premiums required to maintain
in full force and effect a life insurance policy on Lukash's life in the
face amount of Seventy-Five Thousand Dollars ($75,000)."
3. Except as modified herein, the Retirement Agreement is hereby ratified,
confirmed and approved.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first-above written.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
/s/ Alvin Lukash
-------------------------------------------
Alvin Lukash
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 2nd day of
December, 1996, by and between Tridex Corporation, a Connecticut corporation
with a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the
"Company"), and Seth M. Lukash, an individual with a residence address of 404
Harvest Commons, Westport, Connecticut 06880 ("Executive").
INTRODUCTION
1. The Company is in the business of designing, developing, manufacturing and
marketing Point of Sale printers and related products (the "Business").
Executive possesses special and unique knowledge, experience and skill
respecting the management, operating, financial affairs and business of
Tridex that the Board of Directors of Tridex believes are important for the
future growth and success of Tridex.
2. The Company desires to employ Executive and Executive desires to accept
such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Employment Period. The term of this Agreement (the "Employment Period")
shall commence on the date hereof and, subject to termination by the
Executive or the Company as hereinafter provided, shall continue for a
period of two (2) years beginning on the first day of each month after the
date hereof.
2. Employment Duties. Subject to the terms and conditions set forth herein,
the Company hereby employs Executive to act as Chairman and Chief Executive
Officer of the Company during the Employment Period, and Executive hereby
accepts such employment. Executive shall have supervision and control over
and responsibility for the management and day-to-day operations of the
Company subject to the direction and control of the Board of Directors.
Executive's duties may not be altered in any material fashion without the
approval of Executive.
Executive agrees to perform his duties for the Company diligently,
competently, and in a good faith manner.
3. Salary and Bonus.
(a) Base Salary. The Company agrees to pay Executive $270,000 per year,
payable monthly in advance. Executive's base salary shall not be
decreased. In addition, no later than December 31 of each year during
the Employment Period, commencing December 31, 1996, the Board of
Directors of the Company (or any appropriate committee thereof) shall
review and may increase, but not decrease, the Executive's annual base
salary in its discretion, based upon the Company's performance and the
Executive's particular contributions.
(b) Bonus. Executive shall have an opportunity to earn an annual cash bonus
commensurate with his position as Chairman and Chief Executive Officer
under the Company's Executive Incentive Compensation Plan at a target
bonus level of at least 50% of the Executive's base salary, subject to
the discretion of the Company's Board of Directors (or any appropriate
committee thereof).
4. Other Benefits.
(a) Insurance and Other Benefits. The Executive shall be entitled to
participate in, and shall receive the maximum benefits available under,
the Company's insurance programs (including health, disability and life
insurance) and any ERISA benefit plans, as the same may be adopted
and/or amended from time to time, and shall receive all other fringe
benefits that are provided by the Company to other senior executives.
The Company shall contribute to the Executive's account the maximum
amount permitted under the Company's 401(k) Plan and any other Company
pension or retirement plan during the Employment Period.
<PAGE>
(b) Vacation. Executive shall be entitled to an annual vacation of such
duration as may be determined by the Board of Directors, but not less
than that generally established for other executives of Company and in
no event less than five (5) weeks, without interruption of salary.
(c) Automobile Allowance. The Company shall provide the Executive with the
automobile allowance provided for the office of Chairman and Chief
Executive Officer under the Company's automobile allowance policy.
(d) Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or
paid by the Executive in connection with, or related to, the
performance of his duties or responsibilities under this Agreement,
provided that Executive submits to the Company substantiation of such
expenses sufficient to satisfy the record keeping guidelines
promulgated from time to time by the Internal Revenue Service.
(e) Service Fees. The Company shall reimburse the Executive, in an
aggregate amount not to exceed $2,500 per year, for professional and
other fees incurred by Executive in connection with (i) an annual
medical examination of Executive and (ii) the annual planning for and
preparation of Executive's personal income tax returns. The Company
shall also reimburse the Executive, in an aggregate amount not to
exceed $5,000 every twenty-four (24) months during the Employment
Period, for estate planning services performed during the Employment
Period. Additionally, the Company shall reimburse the Executive, in an
amount not to exceed $7,500, for fees and expenses of counsel for the
Executive incurred in connection with the negotiation and execution of
this Agreement.
(f) Consulting Agreement. If any amounts due or paid to Executive would
constitute an Excess Parachute Payment under Section 280G of the
Internal Revenue Code of 1986, such excess, including any excise tax
thereon, shall be paid to Executive for consulting services rendered by
Executive after termination of this Agreement.
5. Termination by the Company With Cause. The Company may terminate this
Agreement if any of the following events shall occur:
(a) the death or disability of the Executive (For purposes of this
Agreement, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent
from the full-time performance of his duties with the Company for a
period of six (6) consecutive months.);
(b) any action or inaction by the Executive that constitutes larceny,
fraud, gross negligence, a willful or negligent misrepresentation to
the directors or officers of the Company, its successors or assigns, a
crime involving moral turpitude; or
(c) the refusal of the Executive to follow the reasonable and lawful
written instructions of the Board of Directors of the Company with
respect to the services to be rendered and the manner of rendering such
services by Executive, provided such refusal is material and repetitive
and is not justified or excused either by the terms of this Agreement
or by actions taken by the Company in violation of this Agreement, and
with respect to the first two refusals Executive has been given
reasonable written notice and explanation thereof and reasonable
opportunity to cure and no cure has been effected within a reasonable
time after such notice.
The Company may terminate this Agreement pursuant to this Section 5 upon
written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
6. Termination and Severance.
6.1 Notice/Events/Defined Terms.
(a) Termination by the Executive. Executive may terminate this
Agreement at any time by providing written notice to the Company.
(b) Termination by the Company Without Cause. The Company may
terminate this Agreement at any time, without Cause by providing
written notice to Executive. As used in this Agreement, the term
2
<PAGE>
"without Cause" shall mean termination for any reason not
specified in Section 5 hereof, except for retirement.
(c) Change in Control. A "Change in Control" will be deemed to have
occurred if: (1) a Takeover Transaction occurs; or (2) any
election of directors of the Company takes place (whether by the
directors then in office or by the stockholders at a meeting or
by written consent) and a majority of the directors in office
following such election are individuals who were not nominated by
a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company
effectuates a complete liquidation of the Company or a sale or
disposition of all or substantially all of its assets. A "Change
in Control" shall not be deemed to include, however, a merger or
sale of stock, assets or business of the Company if the Executive
immediately after such event owns, or in connection with such
event immediately acquires (other than in the Executive's
capacity as an equity holder of the Employer or as a beneficiary
of its employee stock ownership plan or profit sharing plan), any
stock of the buyer or any affiliate thereof which, at the time of
Executive's initial investment in such stock, had a purchase
price or fair market value greater than $25,000.
(d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a
merger or consolidation of the Company with, or an acquisition of
the Company or all or substantially all of its assets by, any
other corporation, other than a merger, consolidation or
acquisition in which the individuals who were members of the
Board of Directors of the Company immediately prior to such
transaction continue to constitute a majority of the Board of
Directors of the surviving corporation (or, in the case of an
acquisition involving a holding company, constitute a majority of
the Board of Directors of the holding company) for a period of
not less than twelve (12) months following the closing of such
transaction, or (ii) when any person or entity or group of
persons or entities (other than any trustee or other fiduciary
holding securities under an employee benefit plan of the Company)
either related or acting in concert becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended) of securities of the Company
representing more than fifty percent (50%) of the total number of
votes that may be cast for the election of directors of the
Company.
(e) Terminating Event. A "Terminating Event" shall mean: (i)
termination by the Company of the employment of the Executive
without Cause occurring within twelve (12) months of a Change of
Control; or (ii) resignation of the Executive from the employ of
the Company, while the Executive is not receiving payments or
benefits from the Company by reason of the Executive's
disability, subsequent to any of the following events occurring
within twelve (12) months of a Change of Control: (A) a
significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from
the responsibilities, authorities, powers, functions or duties
exercised by the Executive immediately prior to the Change in
Control; (B) a decrease in the salary payable by the Company to
the Executive from the salary payable to the Executive
immediately prior to the Change in Control except for
across-the-board salary reductions similarly affecting all
management personnel of the Company; or (C) the relocation of the
Company's executive offices (or, if the Executive is primarily
located at the Company's manufacturing facilities, such
facilities) by more than 50 miles from their current location in
Westport, Connecticut (unless such new location is closer than
Westport, Connecticut to the Executive's then residence)
provided, however, that a Terminating Event shall not be deemed
to have occurred solely as a result of the Executive being an
employee of any direct or indirect successor to the business or
assets of the Company, rather than continuing as an employee of
the Company, following a Change in Control; or (D) elimination or
reduction of the Executive's participation in the Company's
Executive Incentive Compensation Plan.
6.2 Executive's Right-to-Terminate. Executive may terminate Executive's
employment for Good Reason at any time during the term of this
Agreement. For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express written consent):
(a) the assignment to Executive by the Company of any duties
materially inconsistent with Executive's status with the Company
or a substantial and material alteration in the nature or status
of Executive's responsibilities from those in effect on the date
hereof, or a material reduction in Executive's titles or offices
as in effect on the date hereof, or any removal of Executive
from, or any failure to reelect Executive to, any of such
positions, except in connection with the termination of his
employment for Disability or Cause or as a result of Executive's
death or by Executive other than for Good Reason;
3
<PAGE>
(b) a reduction by the Company in Executive's Salary as in effect on
the date hereof or as the same may be increased from time to time
during the term of this Agreement;
(c) except if such action applies to all senior executive officers of
the Company generally, any failure by the Company to continue in
effect any Fringe Benefits, the taking of any action by the
Company which would, directly or indirectly, materially reduce
Executive's Fringe Benefits or deprive Executive of any Fringe
Benefits enjoyed by Executive at the date hereof, or the failure
by the Company to provide Executive with the number of paid
vacation days to which Executive is entitled at the date hereof;
(d) a relocation of the Company's principal executive offices to a
location more than 50 miles from their current location in , or
the Company's requiring Executive to be based anywhere other than
the Company's principal executive offices; or
(e) any material breach, uncured after reasonable notice, by the
Company of any provisions of this Agreement.
6.3 Severance.
(a) Without Cause. If the Company terminates this Agreement without
Cause, other than as a result of a Terminating Event, or if
Executive has the right to terminate this Agreement pursuant to
Section 6.2 hereof, then commencing on the date of termination of
this Agreement, the Company shall provide Executive with a
severance package which shall consist of the following: (i) for a
period equal to two (2) years after the date of termination (A)
payment on the first business day of each month of an amount
equal to one-twelfth of the Executive's then current annual base
salary under Section 3(a) hereof and (B) continuation of all
benefits under Section 4; and (ii) payment on the first business
day of each month of an amount equal to one-twelfth of the
Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan for the year of
termination.
(b) With a Terminating Event. If the Company terminates this
Agreement as a result of a Terminating Event, then commencing on
the date of such termination and for a period equal to three (3)
years thereafter, the Company shall provide Executive with a
severance package which shall consist of the following: (i)
payment on the first business day of each month an amount equal
to one-twelfth of the Executive's then current annual base salary
under Section 3(a) hereof; (ii) payment on the first business day
of each month of an amount equal to one-twelfth of the
Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan; and (iii) continuation of
all benefits under Section 4. In addition, if the Company
terminates this Agreement as a result of a Termination Event,
then the Company shall cause the immediate vesting of all options
and other rights granted to the Executive under the Company's
stock plans. At any time when the Company is obligated to make
monthly payments under Section 6.3(b), the Company shall, ten
(10) days after receipt of a written request from the Executive,
pay the executive an amount equal to the balance of the amounts
payable under Section 6.3(b)(i) and (ii) provided that the
obligation of the Company to continue to provide the benefits
under Section 6.3(b)(iii) or to make monthly payments under
6.3(b)(i)-(ii) shall cease upon the payment of such amount.
(c) General Release. As a condition precedent to receiving any
severance payment, the Executive shall execute a general release
of any and all claims which Executive or his heirs, executors,
agents or assigns might have against the Company, its
subsidiaries, affiliates, successors, assigns and its past,
present and future employees, officers, directors, agents and
attorneys.
(d) Withholding. Subject to Section 4(f), all payments made by the
Company under this Agreement shall be net of any tax or other
amounts required to be withheld by the Employer under applicable
law.
7. Non-Competition. During the term of this Agreement and (a) in the case of
termination other than as a result of a Terminating Event and provided that
the executive is receiving the severance payments provided for in Section
6.3(a), for two (2) years following the termination of this Agreement or
(b) in the case of termination as a result of a Terminating Event and
provided that the executive is receiving, or after the Executive has
received, the severance payments provided for in Section 6.3(b), for three
(3) years following the termination
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<PAGE>
of this Agreement, Executive will not directly or indirectly whether as a
partner, consultant, agent, employee, co-venturer, greater than two percent
owner or otherwise or through any other person (as hereafter defined): (a)
be engaged in any business or activity which is competitive with the
business of the Company in any part of the world in which the Company is at
the time of the Executive's termination engaged in selling its products
directly or indirectly; or (b) attempt to recruit any employee of the
Company, assist in their hiring by any other person, or encourage any
employee to terminate his or her employment with the Company; or (c)
encourage any customer of the Company to conduct with any other person any
business or activity which such customer conducts or could conduct with the
Company.
For purposes of this Section 7, the term "Person" shall mean an individual
or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this
Section 7 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this
covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed.
However, should a determination nonetheless be made by a court of competent
jurisdiction at a later date that the character, duration or geographical
scope of this covenant not to compete is unreasonable in light of the
circumstances as they then exist, then it is the intention of both
Executive and the Company that this covenant not to compete shall be
construed by the court in such a manner as to impose only those
restrictions on the conduct of Executive which are reasonable in light of
the circumstances as they then exist and necessary to provide the Company
the intended benefit of this covenant to compete.
8. Confidentiality Covenants. Executive understands that Company may impart to
him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans,
product development information the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership
of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information
to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents and representatives of
the Company on a need-to-know basis; and (3) not to otherwise disclose or
use any Confidential Information. Upon demand by the Company or upon
termination of Executive's employment, Executive will deliver to the
Company all manuals, photographs, recordings, and any other instrument or
device by which, through which, or on which confidential Information has
been recorded and/or preserved, which are in my Executive's possession,
custody or control. Executive acknowledges that for purposes of this
Section 8 the term "Company" means any person or entity now or hereafter
during the term of this Agreement, which controls, is under common control
with, or is controlled by, the Company
9. Governing Law/Jurisdiction This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered
into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this
Agreement.
10. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written ad oral, regarding
the subject matter hereof between the parties hereto. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement
signed by both parties hereto.
11. Notices. All notices, requests, demands and other communications required
or permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
5
<PAGE>
(a) to the Company at:
61 Wilton Road
Westport, Connecticut 06880
Attn: Chairman of the Tridex Compensation Committee
(b) to the Executive at:
404 Harvest Commons
Westport, Connecticut 06880
Any such notice or other communication will be considered to have been
given (i) on the date of the delivery in person, (ii) on the third 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 date of facsimile
transmission (telecopy) provided that the giver of the notice obtains
telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
12. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than
those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law. The invalid or unenforceable provisions shall, to the extent permitted
by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.
13. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as
a waiver of such terms, conditions, rights or privileges, but same shall
continue to remain in full force and effect. Any waiver by any party of any
violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
14. Successors and Assigns. This Agreement shall be binding upon the Company
and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TRIDEX CORPORATION
By: /s/ Thomas R. Schwarz
-----------------------------------
Chairman, Tridex Compensation
Committee
EXECUTIVE:
/s/ Seth M. Lukash
----------------------------------------
Seth M. Lukash
6
Exhibit 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 7th day of
August, 1996, by and between Tridex Corporation, a Connecticut corporation with
a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the
"Company"), and George Crandall, an individual with a residence address of 32
Mayflower Drive, Trumbull, Connecticut 06611, (the "Executive").
INTRODUCTION
1. The Company is in the business of designing, developing, manufacturing and
marketing Point of Sale printers and related products (the "Business").
2. The Company desires to employ Executive and Executive desires to accept
such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Employment Period. The term of this Agreement (the "Employment Period")
shall commence on the date hereof and, subject to earlier termination as
hereinafter provided, shall terminate one (1) year from the date hereof
provided that the term of this Agreement shall automatically extend by
thirty (30) days for each thirty (30) day period which shall expire without
either the Company or Executive giving written notice of an intent to
terminate.
2. Employment Duties. Subject to the terms and conditions set forth herein,
the Company hereby employs Executive to act as Vice President, Treasurer,
and Controller of the Company during the Employment Period, and Executive
hereby accepts such employment. The duties assigned and authority granted
to Executive shall be as set forth in the By-laws of the Company and as
determined by its Board of Directors from time to time. Executive agrees to
perform his duties for the Company diligently, competently, and in a good
faith manner. The Executive may also engage in civic and charitable
activities to the extent they are not inconsistent with Executive's duties
hereunder.
3. Salary and Bonus.
(a) Base Salary. The Company agrees to pay Executive $93,000 per year,
payable monthly at the beginning of each month. Executive's base
salary shall not be decreased. In addition, no later than March 31,
1997 the Board of Directors of the Company (or any appropriate
committee thereof) shall review and may increase the Executive's
annual base salary in its discretion, based upon the Company's
performance and the Executive's particular contributions.
(b) Bonus. Executive shall have an opportunity to earn an annual cash
bonus under the Company's Executive Incentive Compensation Plan,
subject to the discretion of the Company's Board of Directors (or any
appropriate committee thereof).
4. Other Benefits.
(a) Insurance and Other Benefits. The Executive shall be entitled to
participate in, and shall receive the maximum benefits available under
the Company's insurance programs (including health, disability and
life insurance) and any ERISA benefit plans, as the same may be
adopted and/or amended from time to time, and shall receive all other
fringe benefits that are provided by the Company to other senior
executives. The Company shall contribute the maximum amount permitted
under current law to the Executive's 401(k) Plan, and any other
Company pension or retirement plan during the Employment Period.
(b) Vacation. Executive shall be entitled to an annual vacation of such
duration as may be determined by the Board of Directors, but not less
than that generally established for other executives of Company and in
no event less than three (3) weeks, without interruption of salary.
<PAGE>
(c) Automobile Allowance. The Company shall provide Executive with an
automobile allowance.
(d) Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or
paid by the Executive in connection with, or related to, the
performance of his duties or responsibilities under this Agreement,
provided that Executive submits to the Company substantiation of such
expenses sufficient to satisfy the record keeping guidelines
promulgated from time to time by the Internal Revenue Service.
5. Termination by the Company with Cause. The Company may terminate this
Agreement if any of the following events shall occur:
(a) the death or disability of the Executive (for purposes of this
Agreement, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent
from the full-time performance of his duties with the Company for a
period of six (6) consecutive months.).
(b) any action or inaction by the Executive that constitutes larceny,
fraud, gross negligence, a willful or negligent misrepresentation to
the directors or officers of the Company, its successors or assigns, a
crime involving moral turpitude; or
(c) the refusal of the Executive to follow the reasonable and lawful
written instructions of the Board of Directors of the Company with
respect to the services to be rendered and the manner of rendering
such services by Executive, provided such refusal is material and
repetitive and is not justified or excused either by the terms of this
Agreement or by actions taken by the Company in violation of this
Agreement, and with respect to the first two refusals Executive has
been given reasonable written notice and explanation thereof and
reasonable opportunity to cure and no cure has been effected within a
reasonable time after such notice.
The Company may terminate this Agreement pursuant to this Section 5 upon
written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
6. Termination and Severance.
6.1 Notice/Events/Defined Terms.
(a) Termination of the Executive. Executive may terminate this Agreement
at any time by providing written notice to the Company.
(b) Termination by the Company Without Cause. The Company may terminate
this Agreement at any time, without cause by providing written notice
to Executive. As used in this Agreement, the term "without cause"
shall mean termination for any reason not specified in Section 5
hereof, except for retirement.
(c) Change in Control. A "Change in Control" will be deemed to have
occurred if: (1) the Company effectuates a Takeover Transaction; or
(2) any election of directors of the Company (whether by the directors
then in office or by the stockholders at a meeting or by written
consent) where a majority of the directors in office following such
election are individuals who were not nominated by a vote of
two-thirds of the members of the Board of Directors immediately
preceding such election; or (3) the Company effectuates a complete
liquidation of the Company or a sale or disposition of all or
substantially all of its assets. A "Change in Control" shall not be
deemed to including, however, a merger or sale of stock, assets or
business of the Company if the Executive immediately after such event
owns, or in connection with such event immediately acquires (other
than in the Executive's capacity as an equity holder of the Employer
or as a beneficiary of its employee stock ownership plan or profit
sharing plan), any stock of the buyer or any affiliate thereof.
(d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger
or consolidation of the Company with, or an acquisition of the Company
or all or substantially all of its assets by, any other corporation,
other than a merger, consolidation or acquisition in which the
individuals who were members of the Board of Directors of the
surviving corporation (or, in the case of an acquisition involving a
holding company, constitute a majority of the Board of Directors of
the holding company) for a period of not less than twelve (12) months
following the closing of such transaction, or (ii) when any person or
entity or group of persons
2
<PAGE>
or entities (other than any trustee or other fiduciary holding
securities under an employee benefit plan of the Company either
related or acting in concert becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the Company representing more than fifty
percent (50%) of the total number of votes that may be cast for the
election of directors of the Company.
(e) Terminating Event. A "Terminating Event" shall mean: (i) termination
by the Company of the employment of the Executive without Cause
occurring within twelve (12) months of a Change of Control; or (ii)
resignation of the Executive from the employ of the Company, while the
Executive is not receiving payments or benefits from the Company by
reason of the Executive's disability, subsequent to any of the
following events occurring within twelve (12) months of a Change of
Control: (A) a significant reduction in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or duties
from the responsibilities, authorities, power functions or duties
exercised by the Executive immediately prior to the Change in Control;
(B) a decrease in the salary payable by the Company to the Executive
from the salary payable to the Executive immediately prior to the
Change in Control except for across-the-board salary reductions
similarly affecting all management personnel of the Company; or (C)
the relocation of the Company's executive offices (or, if the
Executive is primarily located at the Company's manufacturing
facilities, such facilities) by more than 50 miles from their current
location in Westport, Connecticut (unless such new location is closer
than Westport, Connecticut to the Executive's then residence)
provided, however, that a Terminating Event shall not be deemed to
have occurred solely as a result of the Executive being an employee of
any direct or indirect successor to the business or assets of the
Company, rather than continuing as an employee of the Company,
following a Change in Control; or (D) elimination or reduction of the
Executive's participation in the Company's Executive Incentive
Compensation Plan.
6.2 Severance
(a) Without Cause. If the Company terminates this Agreement without Cause,
other than as a result of a Terminating Event and for a period equal
to one (1) year thereafter, the Company shall provide Executive with a
severance package which shall consist of the following: (i) payment on
the first business day of each month of an amount equal to one-twelfth
of the Executive's then current annual base salary under Section 3(a)
hereof; (ii) payment on the first business day of each month of an
amount equal to one-twelfth of the Executive's annual target bonus
amount under the Company's Executive Incentive Compensation Plan for
the year of termination, pro rated for the portion of the fiscal year
occurring prior to termination; and (iii) continuation of all benefits
under Section 4(a), (b) and (d).
(b) With A Terminating Event. If the Company terminates this Agreement as
a result of a Terminating Event, then commencing on the date of such
termination and for a period equal to two (2) years thereafter, the
Company shall provide Executive with a severance package which shall
consist of the following: (i) payment on the first business day of
each month an amount equal to one-twelfth of the Executive's then
current annual base salary under Section 3(a) hereof; (ii) payment on
the first business day of each month of an amount equal to one-twelfth
of the Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan; and (iii) continuation of all
benefits under Section 4(a), (b), and (d). In addition, if the Company
terminates this Agreement as a result of a Terminating Event, then the
Company shall cause the immediate vesting of all options granted to
the Executive under the Company's stock plans. At any time when the
Company is obligated to make monthly payments under Section 6.2(b),
the Company shall, ten (10) days after receipt of a written request
from the Executive, pay the Executive an amount equal to the balance
of the amounts payable under Section 6.2(b)(i)-(ii), provided that the
obligation of the Company to continue to provide benefits pursuant to
Section 6.2(b) (iii) or to make monthly payments under 6.2(b) (i)-(ii)
shall cease upon the payment of such amount.
(c) General Release. As a condition precedent to receiving any severance
payment, the Executive shall execute a general release of any and all
claims with Executive or his heirs, executors, agents or assigns might
have against the Company, its subsidiaries, affiliates, successors,
assigns and its past, present and future employees, officers,
directors, agents and attorneys.
7. Non-Competition. During the term of this Agreement and (a) in the case of
termination other than as a result of a Terminating Event, for one (1) year
following the termination of this Agreement or (b) in the case of
termination as a result of a Terminating Event, for two (2) years following
the termination of this Agreement,
3
<PAGE>
Executive will not directly or indirectly whether as a partner, consultant,
agent, employee, co-venturer, greater than two percent owner or otherwise
or through any other person (as hereafter defined): (a) be engaged in any
business or activity which is competitive with the business of the Company
in any part of the world in which the Company is at the time of the
Executive's termination engaged in selling its products directly or
indirectly; or (b) attempt to recruit any employee of the Company, assist
in their hiring by any other person, or encourage any employee to terminate
his or her employment with the Company; or (c) encourage any customer of
the Company to conduct with any other person any business or activity which
such customer conducts or could conduct with the Company. For purpose of
this Section 7, the term "Company" shall include any person controlling
under common control with or controlled by, the Company, provided, however,
that with respect to Tridex Corporation or any subsidiary of Tridex
Corporation, the provisions of this Section 7 shall cease and be of no
force and effect one (1) year after the Company is no longer a subsidiary
of Tridex.
For purposes of this Section 7, the term "Person" shall mean an individual
or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this
Section 7 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this
covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed.
However, should a determination nonetheless be made by a court of competent
jurisdiction at a later date that the character, duration or geographical
scope of this covenant not to compete is unreasonable in light of the
circumstances as they then exist, then it is the intention of both
Executive and the Company that this covenant not to compete shall be
construed by the court in such a manner as to impose only those
restrictions on the conduct of Executive which are reasonable in light of
the circumstances as they then exist and necessary to provide the Company
the intended benefit of this covenant to compete.
8. Confidentiality Covenants. Executive understands that Company may impart to
him confidential business information including, without limitations,
designs, financial information, personnel information, strategic plans,
product development information and the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership
of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information
to provide services to the Company; (2) only to communicate Confidential
Information to fellow employees, agents and representatives of the Company
on a need-to-know basis; and (3) not to otherwise disclose or use any
Confidential Information. Upon demand by the Company or upon termination of
Executive's employment, Executive will deliver to the Company all manuals,
photographs, recordings, and any other instrument or device by which,
through which, or on which Confidential Information has been recorded
and/or preserved, which are in my Executive's possession, custody or
control. Executive acknowledges that for purposes of this Section 8 that
term "Company" means any person or entity now or hereafter during the term
of this Agreement which controls, is under common control with, or is
controlled by, the Company.
The Executive recognizes and agrees that because a violation by him of this
Section 8 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violations, without the necessity of posting a bond.
9. Governing Law/Jurisdiction. This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered
into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this
Agreement.
10. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written and oral, regarding
the subject matter hereof between the parties hereto. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement
signed by both parties hereto.
4
<PAGE>
11. Notices. All notices, requests, demands and other communications required
or permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) to the Company at:
61 Wilton Road
Westport, Connecticut 06880
Attn: Chairman and CEO
(b) to the Executive at:
32 Mayflower Drive
Trumbull, Connecticut 06611
Any such notice or other communication will be considered to have been
given (i) on the date of delivery in person, (ii) on the third 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 date of facsimile transmission
(telecopy) provided that the given of the notice obtains telephone
confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this Section, designate another address or person for receipt of notices
hereunder.
12. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any
extent by invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than
those as to which it is invalid of unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law. The invalid or unenforceable provisions shall, to the extent permitted
by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.
13. Waiver. The failure of any party to insist in any once instance or more
upon strict performance of any of the terms and conditions hereof, or to
exercise any right of privilege herein conferred, shall not be construed as
a waiver of such terms, conditions, rights or privileges, but same shall
continue to remain in full force and effect. Any waiver by any party of any
violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
14. Successors and Assigns. This Agreement shall be binding upon the Company
and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executive this Agreement as of the date
first written above.
Tridex Corporation
by: /s/ Seth M. Lukash
-------------------------------------
Title: Chairman and CEO
EXECUTIVE:
/s/ George T. Crandall
----------------------------------------
George Crandall
5
Exhibit 10.20
STOCK INCENTIVE COMPENSATION AGREEMENT
This Stock Incentive Compensation Agreement made and entered into as of this
10th day of March, 1997, by and between Dennis Lewis of 1857 Route 88 North,
Newark, New York 14513 ("Lewis"), Gary German of 820 Coventry Drive, Webster,
New York 14580 ("German") and Paul Wolf of 15 Manitoba Woods Lane, Spencerport,
New York 14559 ("Wolf") (collectively hereinafter referred to as the "Ultimate
Officers") and Tridex Corporation, a Connecticut corporation, with its principal
place of business at 61 Wilton Road, Westport, Connecticut ("Tridex" or the
"Company") and Ultimate Technology Corporation, a New York corporation
("Ultimate"),
RECITALS
The Ultimate Officers are the senior executive management of Ultimate which is a
wholly-owned subsidiary of Tridex. Each of the Ultimate Officers entered into
Employment Agreements (the "January, 1993 Employment Agreement") with Ultimate
on January 20, 1993, which Employment Agreements expire on April 4, 1998. At the
time the Ultimate Officers entered into the January, 1993 Employment Agreements,
they also entered into an Employee Performance and Compensation Agreement with
Ultimate and Tridex dated January 20, 1993 (the "Performance Agreement"). The
Ultimate Officers and Tridex have reached agreement for entering into new
employment agreements and for termination of the Performance Agreement, and for
the entry into this Agreement and new employment agreements effective upon the
Effective Date hereof.
NOW, THEREFORE, in consideration of the promises and agreements herein
contained, and for other good and valuable consideration, the receipt whereof is
hereby acknowledged, the Ultimate Officers and Tridex agree as follows:
1. Definitions. As used herein, the following terms shall have the following
meanings unless the context shall otherwise require:
a. "Commission" means the United States Securities and Exchange
Commission.
b. "Closing Value" means on any day the price of the last trade of a
security on a national exchange, or if no trade occurred on that day
the average of the closing bid and asked prices.
c. "Employment Agreements" means those certain employment agreements
between Ultimate and each of German, Lewis and Wolf, dated of even
date herewith.
d. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
e. "German" - See Introduction.
f. "Holder" means any of German, Lewis or Wolf.
g. "Indemnified Party" - See Section 13(c).
h. "Indemnifying Party" - See Section 13(c).
i. "January, 1993 Employment Agreements" - See Introduction.
j. "Lewis" - See Introduction.
k. "Net TransAct Proceeds" - See Section 7
l. "Performance Agreement" - See Introduction
m. "Piggyback Registration" - See Section 10.
n. "Pledge Agreements" means those certain Pledge Agreements between
Ultimate and each Ultimate Officer, dated of even date herewith, a
form of which is attached hereto as Exhibit A.
o. "Spin Off" means the distribution of TransAct Stock to holders of
Tridex Stock.
p. "TransAct" means TransAct Technologies, Inc., a Delaware corporation.
q. "TransAct Stock" means shares of TransAct Common Stock, par value
$0.01 per share.
r. "TransAct Valuation Date" means a date selected by Tridex a Valuation
Date for determining the fair market value of any or all TransAct
Stock then subject to the Pledge Agreement.
s. "Tridex" - See Introduction.
t. "Tridex Pledged Stock" means Tridex Stock pledged to Ultimate by each
Ultimate Officer pursuant to Section 3 hereof.
u. "Tridex Stock" means shares of Tridex Common Stock, no par value.
v. "Valuation Date" means as the context requires (i) the date shares of
TransAct Stock are sent to the Transfer Agent for registration in the
name of the Ultimate Officers, (ii)any TransAct Valuation Date, or
(iii) the date of the Spin-Off.
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w. "Transfer Agent" means as the context requires, the transfer agent
from time to time for with TransAct Stock or Tridex Stock.
x. "Sharing Percentages" means as to Lewis - 46%, as to German - 29% and
as to Wolf - 25%, or if this Agreement shall be terminated as to any
one of German, Lewis or Wolf in accordance with Section 8 prior to
January 3, 1999, then the Sharing Percentages for the remaining
Ultimate Officers shall be such officer's Sharing Percentage divided
by the Sharing Percentages of all Ultimate Officers then party to this
Agreement.
y. "Ultimate" - See Introduction.
z. "Ultimate Officers" - See Introduction.
aa. "Wolf" - See Introduction.
2. Termination of Employee Performance Agreement. The Performance Agreement is
hereby terminated, and none of the parties to the Performance Agreement
shall have any further obligation thereunder.
3. Tridex Representations and Conditions Precedent. Tridex represents to the
Ultimate Officers that it has (a) received a ruling from the Internal
Revenue Service that the Spin-Off will be tax free to holders of Tridex
Stock, (b)received a No Action Letter from the Securities & Exchange
Commission that shares of TransAct Stock received by holders of restricted
Tridex securities will not be restricted securities except to the extent
that the holders are affiliates of TransAct, and (c) that the shares of
Tridex Stock, when delivered to the Ultimate Officers, will be validly
issued, fully paid and non-assessable.
4. Delivery of Tridex Shares.
a. Within two (2) business days of the date hereof, Tridex shall issue and
deliver to each Ultimate Officer a number of Tridex Shares equal to the
product of (a) 100,000 and (b) such Ultimate Officer's then Sharing
Percentage, which such shares shall be restricted securities and shall
bear the legends as hereinafter provided. Each share certificate shall
bear a restrictive legend as follows:
"The shares represented by this Certificate have been acquired
for investment and have not been registered under the
Securities Act of 1933 as amended, and may not be offered,
sold or otherwise transferred, pledged or hypothecated, unless
and until such shares are registered under such Act or an
opinion of counsel satisfactory to the Company is obtained to
the effect that such registration is not required.."
b. Concurrent with the execution and delivery of this Agreement each
Ultimate Officer has executed and delivered to Ultimate a Pledge
Agreement. Fifty (50%) percent of Tridex Stock received by each
Ultimate Officer shall be pledged to Ultimate pursuant to the Pledge
Agreement and shall be immediately delivered to Ultimate with stock
powers attached to be held by Ultimate pursuant to the terms of this
Agreement and the Pledge Agreement. In addition, such Tridex Pledged
Stock and any TransAct Stock received by each Ultimate Officer as a
dividend with respect to Tridex Pledged Stock shall bear a further
legend as follows:
"The Shares represented by this Certificate are subject to
that Certain Stock Incentive Compensation Agreement, dated
March 10, 1997 between the recordholder and Tridex Corporation
and may not be sold or transferred except pursuant to such
Agreement and are further subject to forfeiture by the
recordholder upon the happening of certain events as more
fully set forth in said Stock Incentive Compensation
Agreement."
5. Additional Distribution.
a. On the date of the Spin-Off, the number of shares of TransAct Stock
received by the Ultimate Officer not subject to the Pledge Agreement
shall be valued based on the Closing Valuation. If and to the extent
that the Closing Value of the such TransAct Stock shall be less than
$600,000, Tridex shall direct Ultimate to release from the Pledge
Agreement and deliver to the Ultimate Officers a number of shares of
TransAct Stock based upon the Closing Value on the date of the
Spin-Off sufficient so that the value of total shares of TransAct
Stock received by the Ultimate Officers by virtue of the Tridex Stock
received pursuant to Section 4 and this Section 5a (and not subject to
the Pledge Agreement) will have a Closing Value on the
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date of the Spin-Off equal to $600,000. Additionally Tridex will cause
the Transfer Agent to remove any restrictive legends with respect to
such TransAct Stock so delivered to the Ultimate Officers.
b. On January 2, 1998 Tridex will direct Ultimate to release from the
Pledge Agreement and deliver to the Ultimate Officers in accordance
with their then respective Sharing Percentages, fifty percent (50%) of
the remaining shares of TransAct and Tridex Stock then held pursuant
to the Pledge Agreement and fifty percent (50%) of the net proceeds of
any sale of TransAct Stock pursuant to Section 7 hereof then being
held by Ultimate. On January 2, 1999, unless this Agreement has been
terminated pursuant to Section 8 with respect to any Ultimate Officer,
Tridex, shall direct to Ultimate to release from the Pledge Agreement
and deliver to the Ultimate Officers in accordance with their then
Sharing Percentages the balance of the shares of Tridex and TransAct
Stock and cash or other securities then being held by Ultimate
pursuant to the Pledge Agreement.
c. All shares of Tridex Stock delivered to the Ultimate Officers pursuant
to this Section 5 shall be restricted securities and bear the legend
set forth in Section 4.a. hereof. Tridex shall cause the Transfer
Agent to remove the legend set forth in paragraph 4. b. from all
TransAct Stock and Tridex Stock delivered pursuant to this Section 5.
d. Any payments or distributions required to be made by Ultimate pursuant
to this Sections 5 shall be reduced by any federal, state or local
withholding obligations incurred by Ultimate as a result of such
distribution as determined by its independent public accountant and
Ultimate is authorized to sell a sufficient number of shares of
TransAct Stock to satisfy such withholding obligations prior to making
any distribution thereof in the event that the Net TransAct Proceeds
which otherwise would be distributed are insufficient to satisfy such
withholding obligations unless the Ultimate officer shall pay to
Ultimate the amount of any such insufficiency.
6. Tridex Guarantee. Tridex guarantees to each Ultimate Officer that in the
aggregate the total value of the TransAct Stock received by him from Tridex
using the sum of Closing Values on each Valuation Date shall equal or
exceed the product of $1.2 million and such Officer's Sharing Percentage
(the "Guarantee Amount"). The Tridex guarantee shall terminate as to any
Ultimate Officer with respect to whom this Agreement is terminated pursuant
to Section 8 hereof. If, on January 3, 1999 the total value of the TransAct
Stock received by each Ultimate Officer valued as aforesaid shall be less
than such Officer's Guarantee Amount, Tridex shall, within ten (10) days,
pay to each such Ultimate Officer an amount equal to the difference between
his Guarantee Amount and the value of the TransAct Stock theretofor
delivered to such Ultimate Officer valued in accordance with the provisions
of this paragraph.
7. TransAct Valuation Date/Ultimate Officers Option. At any time and from time
to time upon one business day actual notice to each Ultimate Officer,
Tridex may set the TransAct Valuation Date with respect to TransAct Stock
held by Ultimate pursuant to the Pledge Agreement. Upon receipt of such
notice, each Ultimate Officer shall have the right to instruct Tridex to
cause Ultimate to sell any or all TransAct Stock which was subject of such
notice. Upon receipt of such instructions, Ultimate shall sell such
TransAct Stock in an orderly fashion and the net proceeds of such sale
shall be distributed in accordance with this Section 7. The Guarantee
Amount with respect to such Officer's shall be reduced by the amount of
proceeds. From the proceeds, Ultimate will (a) immediately pay to itself an
amount determined by its independent public accountants as necessary to
satisfy any federal, state or local withholding obligations Ultimate may
have with respect to each Ultimate Officer by reason of such Officer's
election to sell and (b) on or before March 31 of the year following the
year in which the sale occurs, distribute to such Ultimate Officer cash
equal to the positive difference, if any, between: (1) the excess of: (i)
the actual tax liability of such Ultimate Officer for the calendar year in
which the sale occurred, over (ii) the tax liability which such Ultimate
Officer would have incurred had the proceeds of a sale of TransAct Stock
for such taxable year not been included in such Ultimate Officer's gross
income (as defined in the Internal Revenue Code of 1986) (such amount to be
calculated by such Ultimate Officer at Ultimate's cost and communicated to
Ultimate on or before March 15, and subject to reasonable verification by
Tridex's independent public accountants), over (2) the amount of such
withholding paid by Ultimate with respect to any proceeds of sale of
TransAct Stock during such calendar year. The balance (the "Net TransAct
Proceeds") shall remain subject to this Agreement and the Pledge Agreement
and shall be invested by Ultimate in United States obligations with a
maturity of not more than two years. The account and/or securities in which
such proceeds are placed or invested shall designate that the owner thereof
is the appropriate Ultimate Officer but that the account or securities are
subject to this Agreement and the Pledge
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Agreement. All interest paid with respect to the Net TransAct Proceeds or
securities shall be paid to, or paid over by Ultimate to, the Ultimate
Officer for whom the account was opened or for whose benefit the securities
were purchased. In the event an Ultimate Officer does not elect to sell all
the TransAct Stock which was subject of a TransAct Valuation Date notice,
the TransAct Stock subject to the notice shall be valued at the Closing
Value on the TransAct Valuation Date and the value of TransAct Stock as so
determined with respect to each Ultimate Officer shall reduce such
Officer's Guarantee Amount.
8. Early Termination. Notwithstanding any provisions herein to the contrary,
if prior to January 3, 1999 an Ultimate Officer's Employment Agreement
shall be terminated for Cause, as that term is defined in such Employment
Agreement, or if the Ultimate Officer shall voluntarily terminate his
employment with Ultimate then Ultimate shall have the right to and shall
sell all TransAct Stock then subject to the Pledge Agreement with such
terminated Ultimate Officer. The net proceeds of such sale, any securities
owned by terminated Ultimate Officer then pledged pursuant to Section 7
hereof and the Pledged Tridex Stock shall be the property of Ultimate free
and clear of any claims thereto by such Terminated Ultimate Officer.
Upon the death or disability, as that term is defined in the Employment
Agreement, prior to December 31, 1998 of an Ultimate Officer, Ultimate
shall release from the Pledge Agreement with respect to such deceased or
disabled Ultimate Officer, Net TransAct Proceeds, and all sale TransAct and
Tridex Stock and shall make the following transfers:
a. If such death or disability takes place prior to January 1, 1998, then
that portion equal to fifty percent (50%) of the Net TransAct Proceeds
and a number of shares of TransAct Stock and Tridex Stock multiplied
in each case by a fraction, the numerator of which shall be the number
of days having elapsed in 1997 prior to the date of such death or
disability and the denominator of which shall be 365, shall be paid
(or delivered in the case of stock) to the estate or to the disabled
Ultimate Officer, as the case may be; or
b. If the date of such Ultimate Officer's death or disability shall occur
after December 31, , 1997 but prior to January 1, 1999, then Ultimate
shall distribute to the estate of such Ultimate Officer or to the
disabled Ultimate Officer an amount equal to the Net TransAct
Proceeds, a number of shares of TransAct Stock, and Tridex Stock,
multiplied in each case by a fraction, the numerator of which shall be
the number of days in 1998 having elapsed prior to the date of such
death or disability and the denominator of which shall be 365.
c. Ultimate shall sell the TransAct Stock not so delivered pursuant to
the foregoing Subsections a. or b. and the cash proceeds thereof
together with remaining securities and Pledged Tridex Stock shall be
retained by Ultimate free of any claims of such deceased or disabled
Ultimate Officer.
d. Any payments or distributions required to be made by Ultimate pursuant
to this Sections 8 shall be reduced by any federal, state or local
withholding obligations incurred by Ultimate as a result of such
distribution as determined by its independent public accountant and
Ultimate is authorized to sell a sufficient number of shares of
TransAct Stock to satisfy such withholding obligations prior to making
any distribution thereof in the event that the Net TransAct Proceeds
which otherwise would be distributed are insufficient to satisfy such
withholding obligations unless the Ultimate officer shall pay to
Ultimate the amount of any such insufficiency.
9. Representations. Each Ultimate Officer represents to Tridex on the date
hereof, and agrees that such representation shall be deemed made at the
date of any release of the Tridex Stock from the Pledge Agreement, that:
a. He is an "accredited investor" for purposes of Regulation D under the
Securities Act and that it is acquiring the Tridex Stock for its own
account, and not with a view to selling or otherwise distributing the
Tridex Stock in violation of the Securities Act;
b. He has sufficient knowledge and experience in investing in companies
similar to Tridex so as to be able to evaluate the risks of its
investment in Tridex and is able to financially bear the risks
thereof;
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c. It has had the opportunity to discuss Tridex's, business, financial
affairs and management with the Tridex's management and has received
(or had made available to it) any financial and business documents
requested by it;
d. He understands that (a) the shares of Tridex Stock have not been
registered under the Securities Act of 1933 by reason of their
issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof or Rules 505 or
506 under the Securities Act, (b) such shares must be held
indefinitely unless a subsequent disposition is registered under the
Securities Act or is exempt from registration thereunder, (c) such
shares will bear a legend to that effect, and (d) the Company will
make a notation on its transfer books to such effect.
10. Registration Rights
a. "Piggy-Back" Registration. If the Company proposes to register any of
its Tridex Stock under the Securities Act in connection with any
public offering whether or not for sale for its own account following
the date hereof (other than a registration on Form S-8 relating solely
to the sale of securities to participants in a stock plan offered by
the Company or a registration on Form S-1 or S-4 relating to an
acquisition), the Company shall promptly give each Holder written
notice of such registration. Upon the written request of any Holder
given within thirty (30) days after such notice, the Company shall use
its best efforts to cause a registration statement covering all of the
Tridex Stock then owned by such Holder (the "Registerable Securities")
that each such Holder has requested to be registered to become
effective under the Securities Act. The Company shall be under no
obligation to complete any offering of its securities it proposes to
make under this Section 10 and shall incur no liability to any Holder
for its failure to do so. Notwithstanding any other provisions of this
Section 10, if the managing underwriter for the offering advises the
Company in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise
all Holders of Registerable Securities which would otherwise be so
underwritten, and the number of shares of Registerable Securities that
may be included in the underwriting shall be allocated as follows:
(i) First, to the Company for shares requested to be sold by it in
such offering.
(ii) Second, to the Holders for shares to be sold by them in such
offering in accordance with their initial Sharing Percentage.
In no event shall the rights granted to the Holder in this Agreement
reduce the number of Registerable Securities to be included in any
offering by the Company. In the event that any limitation is imposed
hereunder on the number of Registerable Securities that any Holder may
include in such offering, the registration rights provided herein
shall continue in full force and effect with respect to any remaining
unregistered Registerable Securities of such Holder or any Tridex
Stock thereafter delivered to such Holder pursuant to this Agreement;
provided that the registration rights granted pursuant to this
agreement shall terminate on January 1, 2001.
b. Selection of Underwriters. In any Piggyback Registration, the Company
shall (unless Company shall otherwise agree) have the right to select
the investment bankers and managing underwriters in such registration.
c. Expenses. Tridex shall pay all registration expenses in connection
with one registration of Registerable Securities requested pursuant to
this Section 3; provided that each Holder of Registerable Securities
shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's
Registerable Securities pursuant to a registration statement effected
pursuant to this Section 10.
11. Obligations of the Company
In connection with the registration of any Registerable Securities, the
Company shall take the following actions as expeditiously as reasonably
possible:
a. prepare and file with the Commission a registration statement with
respect to such Registerable Securities and use its best efforts to
cause such registration statement to become effective (provided, that
before filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will
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furnish to one counsel, selected by the Holders, copies of all such
documents proposed to be filed, which documents will be subject to the
timely review of such counsel);
b. prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for not more than nine (9) months, and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such
effective period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
c. upon request, furnish to each seller of Registerable Securities such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as each such seller may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by
each such seller;
d. use its best efforts to register or qualify such Registerable
Securities under such other securities or blue sky laws of such
jurisdictions as any Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in such
jurisdictions of the Registerable Securities owned by such Holder;
provided that the Company will not be required (i) to qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph (d), (ii)
to subject itself to taxation in any such jurisdiction or (iii) to
consent to general service of process in any such jurisdiction;
e. notify each seller of such Registerable Securities, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
seller, the Company will promptly prepare (and, when completed, give
notice to each seller of Registerable Securities) a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registerable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading; that
upon such notification by the Company, each seller of such
Registerable Securities will not offer or sell such Registerable
Securities until the Company has notified such seller that it has
prepared a supplement or amendment to such prospectus and delivered
copies of such supplement or amendment to such seller;
f. provide a transfer agent and registrar for all such Registerable
Securities not later than the effective date of such registration
statement;
g. enter into such customary agreements (including underwriting
agreements in customary form) in order to expedite or facilitate the
disposition of such Registerable Securities; and,
h. permit each Holder, in its sole and exclusive judgment which might be
deemed to be an underwriter or a controlling person of the Company
within the meaning of Section 15 of the Securities Act, to participate
in the preparation of such registration or comparable statement and to
permit the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of the Holder and its
counsel should be included, provided that such material shall be
furnished under such circumstances as shall cause it to be subject to
the indemnification provisions provided pursuant to Section 13(b)
hereof.
12. Cooperation by Prospective Sellers, Etc.
a. Each prospective seller of Registerable Securities will furnish to the
Company in writing such information as the Company may reasonably
require from such seller, and otherwise reasonably cooperate with the
Company in connection with any registration statement with respect to
such Registerable Securities.
b. The failure of any prospective seller of Registerable Securities to
furnish any information or documents in accordance with any provision
contained in this Agreement shall not affect the obligations of the
Company under this Agreement to any remaining sellers who furnish such
information and documents unless in the
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reasonable opinion of counsel to the Company or the underwriters, such
failure impairs or may impair the viability of the offering or the
legality of the registration statement or the underlying offering.
c. each selling Holder shall enter into and perform its obligations under
an underwriting agreement with the managing underwriter for such
offering in customary form not inconsistent with this Agreement,
including furnishing any opinion of counsel and agreeing to
indemnification obligations reasonably requested by the managing
underwriter, but in no event will any Holder be liable for
indemnification obligations in excess of the net offering proceeds
received by such Holder.
13. Indemnification
a. Indemnification by the Company. The Company will indemnify the Holder
requesting or joining in a registration and each underwriter of the
securities so registered, the officers, directors and partners of each
such person and each person, if any, who controls any thereof (within
the meaning of the Securities Act) against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of any
material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or
in any related registration statement, notification or the like) or
any omission (or alleged omission) to state therein any material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to such
person and relating to any action or inaction required of such person
in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, underwriter, officer,
director, partner and controlling person for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or
is based on any untrue statement or omission based upon written
information furnished to the Company in an instrument duly executed by
the Holder, underwriter, officer, director, partner or controlling
person and stated to be specifically for use in such prospectus,
offering circular or other document.
b. Indemnification by the Holder. The Holder requesting or joining in a
registration will indemnify each underwriter of the securities so
registered, the Company and the officers, directors and partners of
each such person and each person, if any, who controls any thereof
(within the meaning of the Securities Act) and their respective
successors in title and assigns against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of any
material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance (or
in any related registration statement, notification or the like) or
any omission (or alleged omission) to state therein any material fact
required to be stated therein or necessary to make the statement
therein not misleading, and the Holder will reimburse each
underwriter, the Company and each other person indemnified pursuant to
this paragraph (b) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action; provided, however, that this
paragraph (b) shall apply only if (and only to the extent that) such
statement or omission was made in reliance upon written information
furnished to such underwriter or the Company in an instrument duly
executed by the Holder and stated to be specifically for use in such
prospectus, offering circular or other document (or related
registration statement, notification or the like) or any amendment or
supplement thereto; and provided further that the Holder's liability
hereunder with respect to any particular registration shall be limited
to an amount equal to the proceeds received by the Holder from the
Registerable Securities sold by the Holder in such registration.
c. Indemnification Proceedings. Each party entitled to indemnification
pursuant to this Section 13 (the "Indemnified Party") shall give
notice to the party required to provide indemnification pursuant to
this Section 13 (the "Indemnifying Party") promptly after such
Indemnified Party acquires actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party (at
its expense) to assume the defense of any claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be
reasonably acceptable to the Indemnified Party, and the Indemnified
Party may participate in such defense at such party's expense; and
provided, further, that the failure by any Indemnified Party to give
notice as provided in this paragraph (c) shall not relieve the
Indemnifying Party of its obligations under this Section 13 except
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to the extent that the failure results in a failure of actual notice
to the Indemnifying Party and such Indemnifying Party is damaged as a
result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such
claim or litigation. The reimbursement required by this Section 13
shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses
incurred.
14. Contribution in Lieu of Indemnification
If the indemnification provided for in Section 13 hereof is unavailable to
a party that would have been an Indemnified Party under any such section in
respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each party that would have been
an Indemnifying Party thereunder shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and such Indemnified Party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or such Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Holder agree that
it would not be just and equitable if contribution pursuant to this Section
14 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 14. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this Section 14 shall
include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
indemnification or contribution from any person who was not guilty of such
fraudulent misrepresentation.
15. Reports Under The Exchange Act
In order to provide the Holder the benefits of Rule 144 under the
Securities Act to sell securities of the Company to the public without
registration, the Company agrees to:
a. Public Information. Make and keep public information available as
those terms are understood and defined in Rule 144, at all times after
the date hereof.
b. Timely Filing. File with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act.
c. Compliance; Information. Furnish to any Holder, so long as Holder owns
any Registerable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any
Holder of Rule 144 rights to sell Registerable Securities to the
public without registration.
16. Lockup Agreement
The Holder, if the Company or the managing underwriters so request in
connection with any underwritten registration of the Company's Securities,
will not, without the prior written consent of the Company or such
underwriters, effect any public sale or other distribution of any equity
securities of the Company, including any sale pursuant to Rule 144, during
the seven days prior to, and during the ninety (90) day period commencing
on the effective date of such underwritten registration, except in
connection with such underwritten registration.
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17. Participation In Underwritten Registrations
No person may participate in any underwritten registration pursuant to this
Agreement unless such person (a) agrees to sell such person's securities on
the basis provided in any underwriting arrangements approved by the persons
entitled, under the provisions hereof, to approve such arrangements, and
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably
required by the terms of such underwriting arrangements. The Holder shall
be entitled at any time to withdraw such Registerable Securities from such
registration prior to its effective date in the event that the Holder shall
disapprove of any of the terms of the related underwriting agreement but
only if the Holder is permitted to do so by the managing underwriters or
pursuant to any agreement therewith.
18. Miscellaneous
a. Amendments and Waivers. The provisions of this Agreement, including
the provisions of this paragraph (a), may not be amended, modified or
supplemented, and any waiver or consent to or any departure from any
of the provisions of this Agreement may not be given and shall not
become or be effective, unless and until (in each case) the Company
shall have received the prior written consent of each Holder to any
such amendment, modification, supplement, waiver or consent.
b. Term. Subject to the provisions of Section 10(a), the agreements of
the Company contained in this Agreement shall continue in full force
and effect so long as the Holder holds any Registerable Securities.
c. Notices. Except as provided in Section 7, all notices provided for or
permitted hereunder shall be made in writing by hand delivery,
registered or certified first-class mail, telex, telecopier or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set after such Holder's name in
the Introduction with a copy to:
Michael R. McEvoy, Esq.
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14804
and
(ii) if to the Company, at:
61 Wilton Road
Westport, Connecticut 06880
with a copy to:
Stephen J. Carlotti
Hinckley, Allen & Snyder
1500 Fleet center
Providence, Rhode Island 02903
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 18(c).
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
d. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including, without limitation, subsequent holders of Registerable
Securities agreeing to be bound by all of the terms and conditions of
this Agreement by executing an Instrument of Accession.
e. Counterparts. This Agreement may be executed in four or more
counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
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f. Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor
shall they affect their meaning construction or effect.
g. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with
the internal laws of the State of Connecticut , without giving effect
to principles of conflicts of law.
h. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or
impaired thereby.
i. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein with respect to the registration
rights granted by the Company with respect to the Registerable
Securities.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
The parties hereto have caused this Agreement to be duly executed under seal as
of the date first above written.
Tridex Corporation
By: /s/ Seth M. Lukash
-------------------------------------
Chairman and Chief Executive Officer
/s/ Gary German
----------------------------------------
Gary German
/s/ Dennis Lewis
----------------------------------------
Dennis Lewis
/s/ Paul Wolf
----------------------------------------
Paul Wolf
10
Exhibit 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 21st day
of February, 1997, by and between Ultimate Technology Corporation, a New York
corporation with a mailing address of 100 Rawson Road, Victor, New York 14564
(the "Company"), and Dennis J. Lewis, an individual with a residence address of
1857 Route 88 North, Newark, New York 14513 ("Executive").
INTRODUCTION
1. On January 20, 1993, Executive and Company entered into an Employment
Agreement (the "January, 1993 Employment Agreement") in connection with the
acquisition of all the issued and outstanding stock of the Company by
Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and
Company wish to terminate the 1993 Employment Agreement and enter into a
new employment agreement.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Termination of 1993 Employment Agreement. Effective on the Effective Date
of that certain Stock Incentive Compensation Agreement between Tridex and
the Employee, among others, dated of even date herewith the 1993 Employment
Agreement is terminated and neither party shall have any further obligation
thereunder.
2. Employment Period. The term of this Agreement (the "Employment Period")
shall commence on the date hereof and, subject to termination by the
Executive or the Company as hereinafter provided, shall continue for a
period of three (3) years, subject, nevertheless, to termination as
hereinafter provided.
3. Employment Duties. Subject to the terms and conditions set forth herein,
the Company hereby employs Executive to act as President of Ultimate
Technology Corporation during the Employment Period, and Executive hereby
accepts such employment. Executive shall have supervision and control over
and responsibility for the management and day-to-day operations of the
Company subject to the direction and control of the Board of Directors.
Executive's duties may not be altered in any material fashion without the
approval of Executive.
Executive agrees to perform his duties for the Company diligently,
competently, and in a good faith manner.
4. Salary and Bonus.
a. Base Salary. The Company agrees to pay Executive $148,320 per year,
payable monthly in advance. Executive's base salary shall not be
decreased. In addition, no later than December 31 of each year during
the Employment Period, commencing December 31, 1997, the Compensation
Committee of the Tridex Board of Directors shall review and may
increase, in its discretion may grant such further increases, based
upon the Company's performance and the Executive's particular
contributions.
b. Bonus. Executive shall have an opportunity to participate in all
annual and/or long term incentive programs, including the Tridex's
Executive Incentive Compensation Plan under which Executive may earn
up to 35% of his base salary as a bonus upon meeting annual targets
and objectives established by the Tridex Board of Directors.
c. Options. In order to induce Executive to enter into this Agreement
effective on the day after the Spin-Off, as that term is defined in
that certain Stock Incentive Compensation Agreement, between Executive
and others and Tridex, dated of even date herewith, Tridex will grant
to Executive under the proposed Tridex 1997 Long Term Incentive
Compensation Plan (or in the event such Plan is not approved by the
Tridex shareholders at their next annual meeting, then under the
Tridex 1989 Long Term Incentive Plan, as amended), 75,000 options to
purchase shares of Tridex Common Stock, no par value, pursuant to an
option agreement between Tridex and Executive in the usual and
customary form, such option to have a ten (10) year term and to vest
over a three (3) year period. Additionally, on or before the record
date for the Spin-Off, Tridex will loan to Executive fifty percent
(50%) of the option exercise price with respect to all
2
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options to purchase Tridex shares currently held by Executive. Such
loan shall be secured by a pledge of the Tridex shares to be received
upon exercise together with any shares received in the Spin-Off, will
have a term of fifteen (15) months will bear a market rate of interest
and also contain such other terms and conditions which are customary
for similar types of instruments issued in connection with the
exercise of options by senior company executives.
5. Other Benefits.
a. Insurance and Other Benefits. The Executive shall be entitled to
participate in, and shall receive the maximum benefits available
under, the Company's or Tridex's insurance programs (including health,
disability and life insurance) and any ERISA benefit plans, as the
same may be adopted and/or amended from time to time, and shall
receive all other fringe benefits that are provided by the Company or
Tridex to other senior executives. The Company shall contribute to the
Executive's account the maximum amount permitted under the Company's
or Tridex's 401(k) Plan and any other Company or Tridex pension or
retirement plan during the Employment Period.
b. Vacation. Executive shall be entitled to an annual vacation of such
duration as may be determined by the Board of Directors, but not less
than that generally established for other executives of Company or
Tridex and in no event less than four weeks, without interruption of
salary.
c. Automobile Allowance. The Company shall provide the Executive with the
automobile allowance provided for the office of President under
Tridex's automobile allowance policy.
d. Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or
paid by the Executive in connection with, or related to, the
performance of his duties or responsibilities under this Agreement,
provided that Executive submits to the Company substantiation of such
expenses sufficient to satisfy the record keeping guidelines
promulgated from time to time by the Internal Revenue Service.
6. Termination by the Company With Cause. The Company may terminate this
Agreement if any of the following events shall occur:
a. the death or disability of the Executive (For purposes of this
Agreement, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent
from the full-time performance of his duties with the Company for a
period of six (6) consecutive months.);
b. any action or inaction by the Executive that constitutes larceny,
fraud, gross negligence, a willful or negligent misrepresentation to
the directors or officers of the Company, its successors or assigns, a
crime involving moral turpitude; or
c. the refusal of the Executive to follow the reasonable and lawful
written instructions of the Chief Executive Officer of Tridex or the
Tridex Board of Directors with respect to the services to be rendered
and the manner of rendering such services by Executive, provided such
refusal is material and repetitive and is not justified or excused
either by the terms of this Agreement or by actions taken by the
Company in violation of this Agreement, and with respect to the first
two refusals Executive has been given reasonable written notice and
explanation thereof and reasonable opportunity to cure and no cure has
been effected within a reasonable time after such notice.
The Company may terminate this Agreement pursuant to this Section 6 upon
written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
7. Termination and Severance.
7.1 Notice/Events/Defined Terms.
a. Termination by the Executive. Executive may terminate this
Agreement at any time by providing written notice to the Company.
b. Termination by the Company Without Cause. The Company may
terminate this Agreement at any time, without Cause by providing
written notice to Executive. As used in this Agreement, the term
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<PAGE>
"without Cause" shall mean termination for any reason not
specified in Section 6 hereof, except for retirement.
c. Change in Control. A "Change in Control" will be deemed to have
occurred if: (1) a Takeover Transaction occurs; or (2) any
election of directors of Tridex takes place (whether by the
directors then in office or by the stockholders at a meeting or
by written consent) and a majority of the directors in office
following such election are individuals who were not nominated by
a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company or Tridex
effectuates a complete liquidation of the Company or a sale or
disposition of all or substantially all of its assets. A "Change
in Control" shall not be deemed to include, however, a merger or
sale of stock, assets or business of the Company if the Executive
immediately after such event owns, or in connection with such
event immediately acquires (other than in the Executive's
capacity as (1) a current equity holder of Tridex, (2) a holder
of options or instruments convertible into an equity interest in
Tridex, or (3) as a beneficiary of any employee stock ownership
plan or profit sharing plan maintained by Tridex or the Company),
any stock of the buyer or any affiliate thereof which, at the
time of Executive's initial investment in such stock, had a
purchase price or fair market value greater than $25,000.
d. Takeover Transaction. A "Takeover Transaction" shall mean (i) a
merger or consolidation of the Company or Tridex with, or an
acquisition of the Company or Tridex or all or substantially all
of its assets by, any other corporation, other than a merger,
consolidation or acquisition in which the individuals who were
members of the Board of Directors of the Company or Tridex
immediately prior to such transaction continue to constitute a
majority of the Board of Directors of the surviving corporation
(or, in the case of an acquisition involving a holding company,
constitute a majority of the Board of Directors of the holding
company) for a period of not less than twelve (12) months
following the closing of such transaction, or (ii) when any
person or entity or group of persons or entities (other than any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or Tridex) either related or acting
in concert becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company or Tridex representing more than fifty
percent (50%) of the total number of votes that may be cast for
the election of directors of the Company or Tridex.
e. Terminating Event. A "Terminating Event" shall mean: (i)
termination by the Company of the employment of the Executive
without Cause occurring within twelve (12) months of a Change of
Control; or (ii) resignation of the Executive from the employ of
the Company, while the Executive is not receiving payments or
benefits from the Company by reason of the Executive's
disability, subsequent to any of the following events occurring
within twelve (12) months of a Change of Control: (A) a
significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from
the responsibilities, authorities, powers, functions or duties
exercised by the Executive immediately prior to the Change in
Control; (B) a decrease in the salary payable by the Company to
the Executive from the salary payable to the Executive
immediately prior to the Change in Control except for
across-the-board salary reductions similarly affecting all
management personnel of the Company; or (C) elimination or
reduction of the Executive's participation in the Company's
Executive Incentive Compensation Plan; (D) the relocation of the
Company's executive offices by more than fifty (50) miles from
their current location in Victor, New York; provided, however,
that a Terminating Event shall not be deemed to have occurred
solely as a result of Executive being an employee of any direct
or indirect successor to the business or assets of the Company,
following a Change in Control..
7.2 Severance.
a. Without Cause. If the Company terminates this Agreement without
Cause, other than as a result of a Terminating Event, or then
commencing on the date of termination of this Agreement, the
Company shall provide Executive with a severance package which
shall consist of the following: (i) for a period equal to one (1)
year after the date of termination (A) payment on the first
business day of each month of an amount equal to one-twelfth of
the Executive's then current annual base salary under Section
4(a) hereof and (B) continuation of all benefits under Section 5;
and (ii) payment on the first business day of each month of an
amount equal to one-twelfth of the Executive's annual target
bonus amount under the Company's or Tridex's Executive Incentive
Compensation Plan for the year of termination.
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b. With a Terminating Event. If the Company terminates this
Agreement as a result of a Terminating Event, then commencing on
the date of such termination and for a period equal to two (2)
years thereafter, the Company shall provide Executive with a
severance package which shall consist of the following: (i)
payment on the first business day of each month an amount equal
to one-twelfth of the Executive's then current annual base salary
under Section 4(a) hereof; (ii) payment on the first business day
of each month of an amount equal to one-twelfth of the
Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan for the year in which such
termination occurs; and (iii) continuation of all benefits under
Section 5. In addition, if the Company terminates this Agreement
as a result of a Termination Event, then the Company shall cause
the immediate vesting of all options and other rights granted to
the Executive under the Company's stock plans. At any time when
the Company is obligated to make monthly payments under Section
7.2(b), the Company shall, ten (10) days after receipt of a
written request from the Executive, pay the executive an amount
equal to the balance of the amounts payable under Section
7.2(b)(i) and (ii) provided that the obligation of the Company to
continue to provide the benefits under Section 7.2(b)(iii) or to
make monthly payments under 7.2(b)(i)-(ii) shall cease upon the
payment of such amount.
c. General Release. As a condition precedent to receiving any
severance payment, the Executive shall execute a release of any
and all claims which Executive or his heirs, executors, agents or
assigns might have against the Company, its subsidiaries,
affiliates, successors, assigns and its past, present and future
employees, officers, directors, agents and attorneys arising out
of the termination of employment.
d. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be
withheld by the Employer under applicable law.
8. Non-Competition. During the term of this Agreement and (a) in the case of
termination other than as a result of a Terminating Event and provided that
the executive is receiving the severance payments provided for in Section
7.2(a), for one (1) year following the termination of this Agreement or (b)
in the case of termination as a result of a Terminating Event and provided
that the executive is receiving, or after the Executive has received, the
severance payments provided for in Section 7.2(b), for two (2) years
following the termination of this Agreement, Executive will not directly or
indirectly whether as a partner, consultant, agent, employee, co-venturer,
greater than two percent owner or otherwise or through any other person (as
hereafter defined): (a) be engaged in any business or activity which is
competitive with the business of the Company in any part of the world in
which the Company is at the time of the Executive's termination engaged in
selling its products directly or indirectly; or (b) attempt to recruit any
employee of the Company, assist in their hiring by any other person, or
encourage any employee to terminate his or her employment with the Company;
or (c) encourage any customer of the Company to conduct with any other
person any business or activity which such customer conducts or could
conduct with the Company.
For purposes of this Section 8, the term "Person" shall mean an individual
or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this
Section 8 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this
covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed.
However, should a determination nonetheless be made by a court of competent
jurisdiction at a later date that the character, duration or geographical
scope of this covenant not to compete is unreasonable in light of the
circumstances as they then exist, then it is the intention of both
Executive and the Company that this covenant not to compete shall be
construed by the court in such a manner as to impose only those
restrictions on the conduct of Executive which are reasonable in light of
the circumstances as they then exist and necessary to provide the Company
the intended benefit of this covenant to compete.
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9. Confidentiality Covenants. Executive understands that Company may impart to
him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans,
product development information the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership
of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information
to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents and representatives of
the Company on a need-to-know basis; and (3) not to otherwise disclose or
use any Confidential Information. Upon demand by the Company or upon
termination of Executive's employment, Executive will deliver to the
Company all manuals, photographs, recordings, and any other instrument or
device by which, through which, or on which confidential Information has
been recorded and/or preserved, which are in my Executive's possession,
custody or control. Executive acknowledges that for purposes of this
Section 9 the term "Company" means any person or entity now or hereafter
during the term of this Agreement, which controls, is under common control
with, or is controlled by, the Company
10. Governing Law/Jurisdiction This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered
into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this
Agreement.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written ad oral, regarding
the subject matter hereof between the parties hereto. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement
signed by both parties hereto.
12. Notices. All notices, requests, demands and other communications required
or permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) to the Company at:
61 Wilton Road
Westport, Connecticut 06880
Attn: Chairman and CEO
(b) to the Executive at:
1857 Route 88 North
Newark, New York 14513
Any such notice or other communication will be considered to have been
given (i) on the date of the delivery in person, (ii) on the third 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 date of facsimile
transmission (telecopy) provided that the giver of the notice obtains
telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
13. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than
those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law. The invalid or unenforceable provisions shall, to the extent permitted
by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.
14. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as
a waiver of such terms, conditions, rights or privileges, but same shall
continue to remain in full force and effect.
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Any waiver by any party of any violation of, breach of or default under any
provision of this Agreement by the other party shall not be construed as,
or constitute, a continuing waiver of such provision, or waiver of any
other violation of, breach of or default under any other provision of this
Agreement.
15. Successors and Assigns. This Agreement shall be binding upon the Company
and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Chairman and Chief Executive Officer
ULTIMATE TECHNOLOGY CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Vice President
EXECUTIVE:
/s/ Dennis J. Lewis
----------------------------------------
Dennis J. Lewis
7
Exhibit 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 21st day
of February, 1997, by and between Ultimate Technology Corporation, a New York
corporation with a mailing address of 100 Rawson Road, Victor, New York 14564
(the "Company"), and Gary German an individual with a residence address of 820
Coventry Drive, Webster, New York 14580 ("Executive").
INTRODUCTION
1. On January 20, 1993, Executive and Company entered into an Employment
Agreement (the "January, 1993 Employment Agreement") in connection with the
acquisition of all the issued and outstanding stock of the Company by
Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and
Company wish to terminate the 1993 Employment Agreement and enter into a
new employment agreement.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Termination of 1993 Employment Agreement. Effective on the Effective Date
of that certain Stock Incentive Compensation Agreement between Tridex and
the Employee, among others, dated of even date herewith the 1993 Employment
Agreement is terminated and neither party shall have any further obligation
thereunder.
2. Employment Period. The term of this Agreement (the "Employment Period")
shall commence on the date hereof and, subject to termination by the
Executive or the Company as hereinafter provided, shall continue for a
period of three (3) years, subject, nevertheless, to termination as
hereinafter provided.
3. Employment Duties. Subject to the terms and conditions set forth herein,
the Company hereby employs Executive to act as Vice President Sales of
Ultimate Technology Corporation during the Employment Period, and Executive
hereby accepts such employment. Executive shall have supervision and
control over and responsibility for the management and day-to-day
operations of the Company subject to the direction and control of the Board
of Directors. Executive's duties may not be altered in any material fashion
without the approval of Executive.
Executive agrees to perform his duties for the Company diligently,
competently, and in a good faith manner.
4. Salary and Bonus.
a. Base Salary. The Company agrees to pay Executive $132,870 per year,
payable monthly in advance. Executive's base salary shall not be
decreased. In addition, no later than December 31 of each year during
the Employment Period, commencing December 31, 1997, the Compensation
Committee of the Tridex Board of Directors shall review and increase,
but not decrease the Executive's annual base salary by the percentage
increase in the Consumer Price Index - CPI-U (1987-100) for the
preceding twelve month period and in its discretion may grant such
further increases, based upon the Company's performance and the
Executive's particular contributions.
b. Bonus. Executive shall have an opportunity to participate in all
annual and/or long term incentive programs, including the Tridex's
Executive Incentive Compensation Plan under which Executive may earn
up to 35% of his base salary as a bonus upon meeting annual targets
and objectives established by the Tridex Board of Directors.
c. Options. In order to induce Executive to enter into this Agreement
effective on the day after the Spin-Off, as that term is defined in
that certain Stock Incentive Compensation Agreement, between Executive
and others and Tridex, dated of even date herewith, Tridex will grant
to Executive under the proposed Tridex 1997 Long Term Incentive
Compensation Plan (or in the event such Plan is not approved by the
Tridex shareholders at their next annual meeting, then under the
Tridex 1989 Long Term Incentive Plan, as amended), 45,000 options to
purchase shares of Tridex Common Stock, no par value, pursuant to an
option agreement between Tridex and Executive in the usual and
customary form, such option to have a
<PAGE>
ten (10) year term and to vest over a three (3) year period.
Additionally, on or before the record date for the Spin-Off, Tridex
will loan to Executive fifty percent (50%) of the option exercise
price with respect to all options to purchase Tridex shares currently
held by Executive. Such loan shall be secured by a pledge of the
Tridex shares to be received upon exercise together with any shares
received in the Spin-Off, will have a term of three (3) years, will
bear a market rate of interest and also contain such other terms and
conditions which are customary for similar types of instruments issued
in connection with the exercise of options by senior company
executives.
5. Other Benefits.
a. Insurance and Other Benefits. The Executive shall be entitled to
participate in, and shall receive the maximum benefits available
under, the Company's or Tridex's insurance programs (including health,
disability and life insurance) and any ERISA benefit plans, as the
same may be adopted and/or amended from time to time, and shall
receive all other fringe benefits that are provided by the Company or
Tridex to other senior executives. The Company shall contribute to the
Executive's account the maximum amount permitted under the Company's
or Tridex's 401(k) Plan and any other Company or Tridex pension or
retirement plan during the Employment Period.
b. Vacation. Executive shall be entitled to an annual vacation of such
duration as may be determined by the Board of Directors, but not less
than that generally established for other executives of Company or
Tridex and in no event less than three (3) weeks, without interruption
of salary.
c. Automobile Allowance. The Company shall provide the Executive with the
automobile allowance provided for the office of President under
Tridex's automobile allowance policy.
d. Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or
paid by the Executive in connection with, or related to, the
performance of his duties or responsibilities under this Agreement,
provided that Executive submits to the Company substantiation of such
expenses sufficient to satisfy the record keeping guidelines
promulgated from time to time by the Internal Revenue Service.
6. Termination by the Company With Cause. The Company may terminate this
Agreement if any of the following events shall occur:
a. the death or disability of the Executive (For purposes of this
Agreement, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent
from the full-time performance of his duties with the Company for a
period of six (6) consecutive months.);
b. any action or inaction by the Executive that constitutes larceny,
fraud, gross negligence, a willful or negligent misrepresentation to
the directors or officers of the Company, its successors or assigns, a
crime involving moral turpitude; or
c. the refusal of the Executive to follow the reasonable and lawful
written instructions of the Chief Executive Officer of Tridex or the
Tridex Board of Directors with respect to the services to be rendered
and the manner of rendering such services by Executive, provided such
refusal is material and repetitive and is not justified or excused
either by the terms of this Agreement or by actions taken by the
Company in violation of this Agreement, and with respect to the first
two refusals Executive has been given reasonable written notice and
explanation thereof and reasonable opportunity to cure and no cure has
been effected within a reasonable time after such notice.
The Company may terminate this Agreement pursuant to this Section 6 upon
written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
7. Termination and Severance.
7.1 Notice/Events/Defined Terms.
(a) Termination by the Executive. Executive may terminate this
Agreement at any time by providing written notice to the Company.
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(b) Termination by the Company Without Cause. The Company may
terminate this Agreement at any time, without Cause by providing
written notice to Executive. As used in this Agreement, the term
"without Cause" shall mean termination for any reason not
specified in Section 6 hereof, except for retirement.
(c) Change in Control. A "Change in Control" will be deemed to have
occurred if: (1) a Takeover Transaction occurs; or (2) any
election of directors of Tridex takes place (whether by the
directors then in office or by the stockholders at a meeting or
by written consent) and a majority of the directors in office
following such election are individuals who were not nominated by
a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company or Tridex
effectuates a complete liquidation of the Company or a sale or
disposition of all or substantially all of its assets. A "Change
in Control" shall not be deemed to include, however, a merger or
sale of stock, assets or business of the Company if the Executive
immediately after such event owns, or in connection with such
event immediately acquires (other than in the Executive's
capacity as (1) a current equity holder of Tridex, (2) a holder
of options or instruments convertible into an equity interest in
Tridex, or (3) as a beneficiary of any employee stock ownership
plan or profit sharing plan maintained by Tridex or the Company),
any stock of the buyer or any affiliate thereof which, at the
time of Executive's initial investment in such stock, had a
purchase price or fair market value greater than $25,000.
(d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a
merger or consolidation of the Company or Tridex with, or an
acquisition of the Company or Tridex or all or substantially all
of its assets by, any other corporation, other than a merger,
consolidation or acquisition in which the individuals who were
members of the Board of Directors of the Company or Tridex
immediately prior to such transaction continue to constitute a
majority of the Board of Directors of the surviving corporation
(or, in the case of an acquisition involving a holding company,
constitute a majority of the Board of Directors of the holding
company) for a period of not less than twelve (12) months
following the closing of such transaction, or (ii) when any
person or entity or group of persons or entities (other than any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or Tridex) either related or acting
in concert becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company or Tridex representing more than fifty
percent (50%) of the total number of votes that may be cast for
the election of directors of the Company or Tridex.
(e) Terminating Event. A "Terminating Event" shall mean: (i)
termination by the Company of the employment of the Executive
without Cause occurring within twelve (12) months of a Change of
Control; or (ii) resignation of the Executive from the employ of
the Company, while the Executive is not receiving payments or
benefits from the Company by reason of the Executive's
disability, subsequent to any of the following events occurring
within twelve (12) months of a Change of Control: (A) a
significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from
the responsibilities, authorities, powers, functions or duties
exercised by the Executive immediately prior to the Change in
Control; (B) a decrease in the salary payable by the Company to
the Executive from the salary payable to the Executive
immediately prior to the Change in Control except for
across-the-board salary reductions similarly affecting all
management personnel of the Company; or (C) elimination or
reduction of the Executive's participation in the Company's
Executive Incentive Compensation Plan; (D) the relocation of the
Company's executive offices by more than fifty (50) miles from
their current location in Victor, New York; provided, however,
that a Terminating Event shall not be deemed to have occurred
solely as a result of Executive being an employee of any direct
or indirect successor to the business or assets of the Company,
following a Change in Control..
7.2 Severance.
(a) Without Cause. If the Company terminates this Agreement without
Cause, other than as a result of a Terminating Event, or then
commencing on the date of termination of this Agreement, the
Company shall provide Executive with a severance package which
shall consist of the following: (i) for a period equal to one (1)
year after the date of termination (A) payment on the first
business day of each month of an amount equal to one-twelfth of
the Executive's then current annual base salary under Section
4(a) hereof and (B) continuation of all benefits under Section 5;
and (ii) payment on the first business
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day of each month of an amount equal to one-twelfth of the
Executive's annual target bonus amount under the Company's or
Tridex's Executive Incentive Compensation Plan for the year of
termination.
b. With a Terminating Event. If the Company terminates this
Agreement as a result of a Terminating Event, then commencing on
the date of such termination and for a period equal to two (2)
years thereafter, the Company shall provide Executive with a
severance package which shall consist of the following: (i)
payment on the first business day of each month an amount equal
to one-twelfth of the Executive's then current annual base salary
under Section 4(a) hereof; (ii) payment on the first business day
of each month of an amount equal to one-twelfth of the
Executive's annual target bonus amount under the Company's
Executive Incentive Compensation Plan for the year in which such
termination occurs; and (iii) continuation of all benefits under
Section 5. In addition, if the Company terminates this Agreement
as a result of a Termination Event, then the Company shall cause
the immediate vesting of all options and other rights granted to
the Executive under the Company's stock plans. At any time when
the Company is obligated to make monthly payments under Section
7.2(b), the Company shall, ten (10) days after receipt of a
written request from the Executive, pay the executive an amount
equal to the balance of the amounts payable under Section
7.2(b)(i) and (ii) provided that the obligation of the Company to
continue to provide the benefits under Section 7.2(b)(iii) or to
make monthly payments under 7.2(b)(i)-(ii) shall cease upon the
payment of such amount.
c. General Release. As a condition precedent to receiving any
severance payment, the Executive shall execute a release of any
and all claims which Executive or his heirs, executors, agents or
assigns might have against the Company, its subsidiaries,
affiliates, successors, assigns and its past, present and future
employees, officers, directors, agents and attorneys arising out
of the termination of employment.
d. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be
withheld by the Employer under applicable law.
8. Non-Competition. During the term of this Agreement and (a) in the case of
termination other than as a result of a Terminating Event and provided that
the executive is receiving the severance payments provided for in Section
7.2(a), for one (1) year following the termination of this Agreement or (b)
in the case of termination as a result of a Terminating Event and provided
that the executive is receiving, or after the Executive has received, the
severance payments provided for in Section 7.2(b), for two (2) years
following the termination of this Agreement, Executive will not directly or
indirectly whether as a partner, consultant, agent, employee, co-venturer,
greater than two percent owner or otherwise or through any other person (as
hereafter defined): (a) be engaged in any business or activity which is
competitive with the business of the Company in any part of the world in
which the Company is at the time of the Executive's termination engaged in
selling its products directly or indirectly; or (b) attempt to recruit any
employee of the Company, assist in their hiring by any other person, or
encourage any employee to terminate his or her employment with the Company;
or (c) encourage any customer of the Company to conduct with any other
person any business or activity which such customer conducts or could
conduct with the Company.
For purposes of this Section 8, the term "Person" shall mean an individual
or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this
Section 8 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this
covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed.
However, should a determination nonetheless be made by a court of competent
jurisdiction at a later date that the character, duration or geographical
scope of this covenant not to compete is unreasonable in light of the
circumstances as they then exist, then it is the intention of both
Executive and the Company that this covenant not to compete shall be
construed by the court in such a manner as to impose only those
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restrictions on the conduct of Executive which are reasonable in light of
the circumstances as they then exist and necessary to provide the Company
the intended benefit of this covenant to compete.
9. Confidentiality Covenants. Executive understands that Company may impart to
him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans,
product development information the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership
of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information
to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents and representatives of
the Company on a need-to-know basis; and (3) not to otherwise disclose or
use any Confidential Information. Upon demand by the Company or upon
termination of Executive's employment, Executive will deliver to the
Company all manuals, photographs, recordings, and any other instrument or
device by which, through which, or on which confidential Information has
been recorded and/or preserved, which are in my Executive's possession,
custody or control. Executive acknowledges that for purposes of this
Section 9 the term "Company" means any person or entity now or hereafter
during the term of this Agreement, which controls, is under common control
with, or is controlled by, the Company
10. Governing Law/Jurisdiction This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered
into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this
Agreement.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written ad oral, regarding
the subject matter hereof between the parties hereto. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement
signed by both parties hereto.
12. Notices. All notices, requests, demands and other communications required
or permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) to the Company at:
61 Wilton Road
Westport, Connecticut 06880
Attn: Chairman and CEO
(b) to the Executive at:
820 Coventry Drive
Webster, New York 14580
Any such notice or other communication will be considered to have been
given (i) on the date of the delivery in person, (ii) on the third 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 date of facsimile
transmission (telecopy) provided that the giver of the notice obtains
telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
13. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than
those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law. The invalid or unenforceable provisions shall, to the extent permitted
by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.
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14. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as
a waiver of such terms, conditions, rights or privileges, but same shall
continue to remain in full force and effect. Any waiver by any party of any
violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
15. Successors and Assigns. This Agreement shall be binding upon the Company
and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Chairman and Chief Executive Officer
ULTIMATE TECHNOLOGY CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Vice President
EXECUTIVE:
By: /s/ Gary German
-------------------------------------
Gary German
6
Exhibit 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 21st day
of February, 1997, by and between Ultimate Technology Corporation, a New York
corporation with a mailing address of 100 Rawson Road, Victor, New York 14564
(the "Company"), and Paul Wolf, an individual with a residence address of 15
Manitoba Woods Lane, Spencerport, New York 14559 ("Executive").
INTRODUCTION
1. On January 20, 1993, Executive and Company entered into an Employment
Agreement (the "January, 1993 Employment Agreement") in connection with the
acquisition of all the issued and outstanding stock of the Company by
Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and
Company wish to terminate the 1993 Employment Agreement and enter into a
new employment agreement.
AGREEMENT
In consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Termination of 1993 Employment Agreement. Effective on the Effective Date
of that certain Stock Incentive Compensation Agreement between Tridex and
the Employee, among others, dated of even date herewith the 1993 Employment
Agreement is terminated and neither party shall have any further obligation
thereunder.
2. Employment Period. The term of this Agreement (the "Employment Period")
shall commence on the date hereof and, subject to termination by the
Executive or the Company as hereinafter provided, shall continue for a
period of three (3) years, subject, nevertheless, to termination as
hereinafter provided.
3. Employment Duties. Subject to the terms and conditions set forth herein,
the Company hereby employs Executive to act as Vice President - Engineering
of Ultimate Technology Corporation during the Employment Period, and
Executive hereby accepts such employment. Executive shall have supervision
and control over and responsibility for the management and day-to-day
operations of the Company subject to the direction and control of the Board
of Directors. Executive's duties may not be altered in any material fashion
without the approval of Executive.
Executive agrees to perform his duties for the Company diligently,
competently, and in a good faith manner.
4. Salary and Bonus.
a. Base Salary. The Company agrees to pay Executive $120,510 per year,
payable monthly in advance. Executive's base salary shall not be
decreased. In addition, no later than December 31 of each year during
the Employment Period, commencing December 31, 1997, the Compensation
Committee of the Tridex Board of Directors shall review and increase,
but not decrease the Executive's annual base salary by the percentage
increase in the Consumer Price Index - CPI-U (1987-100) for the
preceding twelve month period and in its discretion may grant such
further increases, based upon the Company's performance and the
Executive's particular contributions.
b. Bonus. Executive shall have an opportunity to participate in all
annual and/or long term incentive programs, including the Tridex's
Executive Incentive Compensation Plan under which Executive may earn
up to 35% of his base salary as a bonus upon meeting annual targets
and objectives established by the Tridex Board of Directors.
c. Options. In order to induce Executive to enter into this Agreement
effective on the day after the Spin-Off, as that term is defined in
that certain Stock Incentive Compensation Agreement, between Executive
and others and Tridex, dated of even date herewith, Tridex will grant
to Executive under the proposed Tridex 1997 Long Term Incentive
Compensation Plan (or in the event such Plan is not approved by the
Tridex shareholders at their next annual meeting, then under the
Tridex 1989 Long Term Incentive Plan, as amended), 45,000 options to
purchase shares of Tridex Common Stock, no par value, pursuant to an
option agreement between Tridex and Executive in the usual and
customary form, such option to have a
<PAGE>
ten (10) year term and to vest over a three (3) year period.
Additionally, on or before the record date for the Spin-Off, Tridex
will loan to Executive fifty percent (50%) of the option exercise
price with respect to all options to purchase Tridex shares currently
held by Executive. Such loan shall be secured by a pledge of the
Tridex shares to be received upon exercise together with any shares
received in the Spin-Off, will have a term of three (3) years, will
bear a market rate of interest and also contain such other terms and
conditions which are customary for similar types of instruments issued
in connection with the exercise of options by senior company
executives.
5. Other Benefits.
a. Insurance and Other Benefits. The Executive shall be entitled to
participate in, and shall receive the maximum benefits available
under, the Company's or Tridex's insurance programs (including health,
disability and life insurance) and any ERISA benefit plans, as the
same may be adopted and/or amended from time to time, and shall
receive all other fringe benefits that are provided by the Company or
Tridex to other senior executives. The Company shall contribute to the
Executive's account the maximum amount permitted under the Company's
or Tridex's 401(k) Plan and any other Company or Tridex pension or
retirement plan during the Employment Period.
b. Vacation. Executive shall be entitled to an annual vacation of such
duration as may be determined by the Board of Directors, but not less
than that generally established for other executives of Company or
Tridex and in no event less than three (3) weeks, without interruption
of salary.
c. Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or
paid by the Executive in connection with, or related to, the
performance of his duties or responsibilities under this Agreement,
provided that Executive submits to the Company substantiation of such
expenses sufficient to satisfy the record keeping guidelines
promulgated from time to time by the Internal Revenue Service.
6. Termination by the Company With Cause. The Company may terminate this
Agreement if any of the following events shall occur:
a. the death or disability of the Executive (For purposes of this
Agreement, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent
from the full-time performance of his duties with the Company for a
period of six (6) consecutive months.);
b. any action or inaction by the Executive that constitutes larceny,
fraud, gross negligence, a willful or negligent misrepresentation to
the directors or officers of the Company, its successors or assigns, a
crime involving moral turpitude; or
c. the refusal of the Executive to follow the reasonable and lawful
written instructions of the Chief Executive Officer of Tridex or the
Tridex Board of Directors with respect to the services to be rendered
and the manner of rendering such services by Executive, provided such
refusal is material and repetitive and is not justified or excused
either by the terms of this Agreement or by actions taken by the
Company in violation of this Agreement, and with respect to the first
two refusals Executive has been given reasonable written notice and
explanation thereof and reasonable opportunity to cure and no cure has
been effected within a reasonable time after such notice.
The Company may terminate this Agreement pursuant to this Section 6 upon
written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
7. Termination and Severance.
7.1 Notice/Events/Defined Terms.
a. Termination by the Executive. Executive may terminate this
Agreement at any time by providing written notice to the Company.
b. Termination by the Company Without Cause. The Company may
terminate this Agreement at any time, without Cause by providing
written notice to Executive. As used in this Agreement, the term
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"without Cause" shall mean termination for any reason not
specified in Section 6 hereof, except for retirement.
c. Change in Control. A "Change in Control" will be deemed to have
occurred if: (1) a Takeover Transaction occurs; or (2) any
election of directors of Tridex takes place (whether by the
directors then in office or by the stockholders at a meeting or
by written consent) and a majority of the directors in office
following such election are individuals who were not nominated by
a vote of two-thirds of the members of the Board of Directors
immediately preceding such election; or (3) the Company or Tridex
effectuates a complete liquidation of the Company or a sale or
disposition of all or substantially all of its assets. A "Change
in Control" shall not be deemed to include, however, a merger or
sale of stock, assets or business of the Company if the Executive
immediately after such event owns, or in connection with such
event immediately acquires (other than in the Executive's
capacity as (1) a current equity holder of Tridex, (2) a holder
of options or instruments convertible into an equity interest in
Tridex, or (3) as a beneficiary of any employee stock ownership
plan or profit sharing plan maintained by Tridex or the Company),
any stock of the buyer or any affiliate thereof which, at the
time of Executive's initial investment in such stock, had a
purchase price or fair market value greater than $25,000.
d. Takeover Transaction. A "Takeover Transaction" shall mean (i) a
merger or consolidation of the Company or Tridex with, or an
acquisition of the Company or Tridex or all or substantially all
of its assets by, any other corporation, other than a merger,
consolidation or acquisition in which the individuals who were
members of the Board of Directors of the Company or Tridex
immediately prior to such transaction continue to constitute a
majority of the Board of Directors of the surviving corporation
(or, in the case of an acquisition involving a holding company,
constitute a majority of the Board of Directors of the holding
company) for a period of not less than twelve (12) months
following the closing of such transaction, or (ii) when any
person or entity or group of persons or entities (other than any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or Tridex) either related or acting
in concert becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company or Tridex representing more than fifty
percent (50%) of the total number of votes that may be cast for
the election of directors of the Company or Tridex.
e. Terminating Event. A "Terminating Event" shall mean: (i)
termination by the Company of the employment of the Executive
without Cause occurring within twelve (12) months of a Change of
Control; or (ii) resignation of the Executive from the employ of
the Company, while the Executive is not receiving payments or
benefits from the Company by reason of the Executive's
disability, subsequent to any of the following events occurring
within twelve (12) months of a Change of Control: (A) a
significant reduction in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties from
the responsibilities, authorities, powers, functions or duties
exercised by the Executive immediately prior to the Change in
Control; (B) a decrease in the salary payable by the Company to
the Executive from the salary payable to the Executive
immediately prior to the Change in Control except for
across-the-board salary reductions similarly affecting all
management personnel of the Company; or (C) elimination or
reduction of the Executive's participation in the Company's
Executive Incentive Compensation Plan; (D) the relocation of the
Company's executive offices by more than fifty (50) miles from
their current location in Victor, New York; provided, however,
that a Terminating Event shall not be deemed to have occurred
solely as a result of Executive being an employee of any direct
or indirect successor to the business or assets of the Company,
following a Change in Control..
7.2 Severance.
a. Without Cause. If the Company terminates this Agreement without
Cause, other than as a result of a Terminating Event, or then
commencing on the date of termination of this Agreement, the
Company shall provide Executive with a severance package which
shall consist of the following: (i) for a period equal to one (1)
year after the date of termination (A) payment on the first
business day of each month of an amount equal to one-twelfth of
the Executive's then current annual base salary under Section
4(a) hereof and (B) continuation of all benefits under Section 5;
and (ii) payment on the first business day of each month of an
amount equal to one-twelfth of the Executive's annual target
bonus amount under the Company's or Tridex's Executive Incentive
Compensation Plan for the year of termination.
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b. Event, then commencing on the date of such termination and for a
period equal to two (2) years thereafter, the Company shall
provide Executive with a severance package which shall consist of
the following: (i) payment on the first business day of each
month an amount equal to one-twelfth of the Executive's then
current annual base salary under Section 4(a) hereof; (ii)
payment on the first business day of each month of an amount
equal to one-twelfth of the Executive's annual target bonus
amount under the Company's Executive Incentive Compensation Plan
for the year in which such termination occurs; and (iii)
continuation of all benefits under Section 5. In addition, if the
Company terminates this Agreement as a result of a Termination
Event, then the Company shall cause the immediate vesting of all
options and other rights granted to the Executive under the
Company's stock plans. At any time when the Company is obligated
to make monthly payments under Section 7.2(b), the Company shall,
ten (10) days after receipt of a written request from the
Executive, pay the executive an amount equal to the balance of
the amounts payable under Section 7.2(b)(i) and (ii) provided
that the obligation of the Company to continue to provide the
benefits under Section 7.2(b)(iii) or to make monthly payments
under 7.2(b)(i)-(ii) shall cease upon the payment of such amount.
c. General Release. As a condition precedent to receiving any
severance payment, the Executive shall execute a release of any
and all claims which Executive or his heirs, executors, agents or
assigns might have against the Company, its subsidiaries,
affiliates, successors, assigns and its past, present and future
employees, officers, directors, agents and attorneys arising out
of the termination of employment.
d. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be
withheld by the Employer under applicable law.
8. Non-Competition. During the term of this Agreement and (a) in the case of
termination other than as a result of a Terminating Event and provided that
the executive is receiving the severance payments provided for in Section
7.2(a), for one (1) year following the termination of this Agreement or (b)
in the case of termination as a result of a Terminating Event and provided
that the executive is receiving, or after the Executive has received, the
severance payments provided for in Section 7.2(b), for two (2) years
following the termination of this Agreement, Executive will not directly or
indirectly whether as a partner, consultant, agent, employee, co-venturer,
greater than two percent owner or otherwise or through any other person (as
hereafter defined): (a) be engaged in any business or activity which is
competitive with the business of the Company in any part of the world in
which the Company is at the time of the Executive's termination engaged in
selling its products directly or indirectly; or (b) attempt to recruit any
employee of the Company, assist in their hiring by any other person, or
encourage any employee to terminate his or her employment with the Company;
or (c) encourage any customer of the Company to conduct with any other
person any business or activity which such customer conducts or could
conduct with the Company.
For purposes of this Section 8, the term "Person" shall mean an individual
or corporation, association or partnership in estate or trust or any other
entity or organization.
The Executive recognizes and agrees that because a violation by him of this
Section 8 will cause irreparable harm to the Company that would be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain
any such violation, without the necessity of posting a bond.
Executive expressly agrees that the character, duration and scope of this
covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed.
However, should a determination nonetheless be made by a court of competent
jurisdiction at a later date that the character, duration or geographical
scope of this covenant not to compete is unreasonable in light of the
circumstances as they then exist, then it is the intention of both
Executive and the Company that this covenant not to compete shall be
construed by the court in such a manner as to impose only those
restrictions on the conduct of Executive which are reasonable in light of
the circumstances as they then exist and necessary to provide the Company
the intended benefit of this covenant to compete.
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9. Confidentiality Covenants. Executive understands that Company may impart to
him confidential business information including, without limitation,
designs, financial information, personnel information, strategic plans,
product development information the like (collectively "Confidential
Information"). Executive hereby acknowledges Company's exclusive ownership
of such Confidential Information.
Executive agrees as follows: (1) only to use the Confidential Information
to provide services to the Company; (2) only to communicate the
Confidential Information to fellow employees, agents and representatives of
the Company on a need-to-know basis; and (3) not to otherwise disclose or
use any Confidential Information. Upon demand by the Company or upon
termination of Executive's employment, Executive will deliver to the
Company all manuals, photographs, recordings, and any other instrument or
device by which, through which, or on which confidential Information has
been recorded and/or preserved, which are in my Executive's possession,
custody or control. Executive acknowledges that for purposes of this
Section 9 the term "Company" means any person or entity now or hereafter
during the term of this Agreement, which controls, is under common control
with, or is controlled by, the Company
10. Governing Law/Jurisdiction This Agreement shall be governed by and
interpreted and governed in accordance with the laws of the State of
Connecticut. The parties agree that this Agreement was made and entered
into in Connecticut and each party hereby consents to the jurisdiction of a
competent court in Connecticut to hear any dispute arising out of this
Agreement.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and thereof
and supersedes any and all previous agreements, written ad oral, regarding
the subject matter hereof between the parties hereto. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement
signed by both parties hereto.
12. Notices. All notices, requests, demands and other communications required
or permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been given if delivered by hand, sent by
generally recognized overnight courier service, telex or telecopy, or
certified mail, return receipt requested.
(a) to the Company at:
61 Wilton Road
Westport, Connecticut 06880
Attn: Chairman and CEO
(b) to the Executive at:
15 Manitoba Woods Lane
Spencerport, New York 14559
Any such notice or other communication will be considered to have been
given (i) on the date of the delivery in person, (ii) on the third 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 date of facsimile
transmission (telecopy) provided that the giver of the notice obtains
telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with
this section, designate another address or person for receipt of notices
hereunder.
13. Severability. If any term or provision of this Agreement, or the
application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than
those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by
law. The invalid or unenforceable provisions shall, to the extent permitted
by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.
14. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as
a waiver of such terms, conditions, rights or privileges, but same shall
continue to remain in full force and effect.
5
<PAGE>
Any waiver by any party of any violation of, breach of or default under any
provision of this Agreement by the other party shall not be construed as,
or constitute, a continuing waiver of such provision, or waiver of any
other violation of, breach of or default under any other provision of this
Agreement.
15. Successors and Assigns. This Agreement shall be binding upon the Company
and any successors and assigns of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Chairman and Chief Executive Officer
ULTIMATE TECHNOLOGY CORPORATION
By: /s/ Seth M. Lukash
-------------------------------------
Vice President
EXECUTIVE:
By: /s/ Paul Wolf
-------------------------------------
Paul Wolf
6
TRIDEX CORPORATION AND SUBSIDIARIES
EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
---------------------------- ------------------------------
December 31, December 31, December 31, December 31,
1996 1995 1995 1994
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PRIMARY:
EARNINGS:
Income (loss) from continuing operations $ 5,991 $ (1,118) $ (1,913) $ (408)
Income from discontinued operations 2,857 1,332 916 1,883
------------ ------------ ------------ ------------
Net income $ 8,848 $ 214 $ (997) $ 1,475
============ ============ ============ ============
SHARES:
Average common shares outstanding 3,913,000 3,711,000 3,722,000 3,625,000
Dilutive effect of outstanding options and warrants
as determined by the treasury stock method 241,000 219,000 235,000
------------ ------------ ------------ ------------
4,154,000 3,930,000 3,722,000 3,860
============ ============ ============ ============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) from continuing operations $ 1.44 $ (0.28) $ (0.52) $ (0.11)
Income from discontinued operations 0.69 0.33 0.25 .49
------------ ------------ ------------ ------------
Net income $ 2.13 $ 0.05 $ (0.27) $ 0.38
============ ============ ============ ============
FULLY DILUTED:
EARNINGS:
Income (loss) from continuing operations $ 5,991
Income from discontinued operations 2,857
------------
Net income 8,848
Add: after-tax interest on convertible debt 341
------------
Adjusted net income $ 9,189
============
SHARES:
Average common shares outstanding 3,913,000
Dilutive effect of outstanding options and warrants
as determined by the treasury stock method 290,000
Dilutive effect of convertible debt assumed
converted at the beginning of the year 445,000
------------
4,648,000
============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) from continuing operations $ 1.36
Income from discontinued operations 0.62
------------
Net income $ 1.98
============
</TABLE>
TRIDEX CORPORATION
EXHIBIT 21.1 SUBSIDIARIES OF TRIDEX CORPORATION
Jurisdiction of Percentage
Name Incorporation Owner Owned
- ---- ------------- ----- -----
Allu Realty Trust * Massachusetts Tridex 100%
Cash Bases Incorporated* Delaware Tridex 100%
Cash Bases GB, Ltd. United Kingdom Tridex 100%
Cash Bases (Deutschland) GmbH Germany Cash Bases 100%
Cash Bases Iberica, S.A. Spain Cash Bases 80%
TransAct Technologies Incorporated Delaware Tridex 80.3%
Magnetec Corporation Connecticut TransAct 100%
Ithaca Peripherals Limited United Kingdom Magnetec 100%
RIL Corporation* Connecticut Tridex 100%
Ultimate Technology Corporation New York Tridex 100%
*Inactive
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of the Tridex Corporation 1989 Long term Incentive Plan of
our report dated February 13, 1997 except as to Note 15 which is as of March 14,
1997, appearing on page 13 of this Form 10-K.
PRICE WATERHOUSE LLP
March 27, 1997
Hartford, Connecticut
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-15021) of
Tridex Corporation of our report dated February 13, 1997 except as to Note 15
which is as of March 14, 1997, appearing on page 13 of this Form 10-K.
PRICE WATERHOUSE LLP
March 27, 1997
Hartford, Connecticut
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,354
<SECURITIES> 0
<RECEIVABLES> 5,799
<ALLOWANCES> 118
<INVENTORY> 5,609
<CURRENT-ASSETS> 15,129
<PP&E> 5,916
<DEPRECIATION> 2,381
<TOTAL-ASSETS> 38,653
<CURRENT-LIABILITIES> 11,829
<BONDS> 809
0
0
<COMMON> 1,043
<OTHER-SE> 24,972
<TOTAL-LIABILITY-AND-EQUITY> 38,653
<SALES> 37,053
<TOTAL-REVENUES> 37,053
<CGS> 27,039
<TOTAL-COSTS> 35,860
<OTHER-EXPENSES> (5,933)
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 879
<INCOME-PRETAX> 6,223
<INCOME-TAX> 232
<INCOME-CONTINUING> 5,991
<DISCONTINUED> 2,857
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,848
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 1.98
</TABLE>
