FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: ______________________to: ______________________
Commission file number: ________________________________________________
TRIDEX CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0682273
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
61 Wilton Road, Westport CT 06880
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(Address of principal executive offices)
(Zip Code)
(203) 226-1144
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(Registrant's telephone number, including area code)
Former address:
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 Months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES |X| NO |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES |_| NO |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding October 31, 1998
- ------------------------- -------------------------------
Common stock, no par value 6,379,123
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
INDEX
Page No.
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Income for the
Quarters and Nine Months Ended September
30, 1998 and September 27, 1997 4
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1998
and September 27, 1997 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
the Results of Operations and Financial
Condition 10
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
2
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TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 504 $ 11,839
Short term investments 4,403
Receivables 9,170 3,043
Inventories 7,444 2,987
Deferred tax assets 679 659
Other current assets 147 343
-------- --------
Total current assets 17,944 23,274
-------- --------
Plant and equipment 3,911 2,436
Less accumulated depreciation (1,611) (1,195)
-------- --------
2,300 1,241
-------- --------
Excess of cost over fair value of net assets
acquired 9,431 2,517
Capitalized software 7,449
Deferred tax assets 9,495 206
Other assets 157 160
Investment in net assets of discontinued
operations 605
-------- --------
$ 46,776 $ 28,003
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines of credit $ 3,200
Current portion of long term debt (Note 3) 1,500
Accounts payable 5,500 $ 1,820
Accrued liabilities 1,658 1,964
Deferred revenue 1,586
-------- --------
Total current liabilities 13,444 3,784
-------- --------
Long term debt, less current portion (Note 3) 19,740
Shareholders' equity:
Common stock, no par value 1,633 1,377
Additional paid-in capital 33,315 25,273
Retained earnings (deficit) (19,613) (673)
Receivable from sale of stock (801) (816)
Common shares held in treasury, at cost (942) (942)
-------- --------
13,592 24,219
-------- --------
$ 46,776 $ 28,003
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
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TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
-------------------------- --------------------------
September September September September
30, 1998 27, 1997 30, 1998 27, 1997
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales $ 12,815 $ 6,872 $ 30,840 $ 18,592
-------------------------- --------------------------
Operating costs and expenses:
Cost of sales 9,423 5,075 22,790 14,034
Engineering, design and product
development costs 786 174 1,985 473
Selling, administrative and general
expenses 2,355 1,259 5,708 4,002
Depreciation and amortization 1,015 198 2,150 613
Purchased in-process software
technology 26,300
-------------------------- --------------------------
13,579 6,706 58,933 19,122
-------------------------- --------------------------
Operating income (loss) (764) 166 (28,093) (530)
Other charges (income):
Interest expense (income), net 688 (175) 1,024 (340)
Other, net 7 1 15 9
-------------------------- --------------------------
695 (174) 1,039 (331)
-------------------------- --------------------------
Income (loss) from continuing
operations before income taxes (1,459) 340 (29,132) (199)
Provision (benefit) for income taxes (797) 340 (10,192) (24)
-------------------------- --------------------------
Loss from continuing operations (662) 0 (18,940) (175)
Income from discontinued operations
(Note 4) 607
-------------------------- --------------------------
Net income (loss) $ (662) $ 0 $ (18,940) $ 432
========================== ==========================
Earnings (loss) per share:
Basic and diluted:
Loss from continuing operations $ (0.10) $ (3.17) $ (0.03)
Income from discontinued operations $ 0.00 0.11
-------------------------- --------------------------
Net income (loss) $ (0.10) $ 0.00 $ (3.17) $ 0.08
========================== ==========================
Weighted average common shares
outstanding
Basic and diluted 6,377,000 5,351,000 5,975,000 5,089,000
========================== ==========================
</TABLE>
See notes to consolidated condensed financial statements.
4
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TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
September September
30, 1998 27, 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(18,940) $ 432
Adjustments to reconcile net income to net cash
provided in operating activities:
Depreciation and amortization 2,150 613
Debt discount amortization 68
Charge for purchased in-process software
technology 26,300
Deferred income taxes (9,309)
Income from discontinued operations (607)
Stock incentive compensation expense 794
Changes in operating assets and liabilities, net
of amounts acquired:
Receivables (1,998) (687)
Inventory (171) 803
Other assets (23) 122
Accounts payable, accrued liabilities and
income taxes payable 1,810 (666)
-------- --------
Net cash provided by (used in) operating
activities (113) 804
-------- --------
Cash flows from investing activities:
Capital expenditures (419) (273)
Capitalized software development costs (1,178)
Net cash paid for acquisition (42,570)
Proceeds from sale of assets 855 5,200
Receipt of principal of note receivable from
TransAct 1,000
-------- --------
Net cash provided by (used in) investing
activities (43,312) 5,927
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long term debt 23,000
Net proceeds from line of credit 3,200
Proceeds from issuance of stock 2,000
Principal payments on long term debt (600)
Net decrease in short term investments 4,403
Proceeds from exercise of stock options and warrants 87 5,580
Net transactions with discontinued operations (96)
Purchase of treasury shares (69)
-------- --------
Net cash provided by financing activities 32,090 5,415
-------- --------
Increase (decrease) in cash and cash equivalents (11,335) 12,146
Cash and cash equivalents at beginning of period 11,839 2,787
-------- --------
Cash and cash equivalents at end of period $ 504 $ 14,933
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 718 $ 84
Income taxes 116 63
Supplemental disclosures of non-cash investing
and financing activities:
Stock issued for acquisition $ 4,998
Conversion of convertible notes and debentures to
common stock $ 3,710
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General:
In the opinion of Tridex Corporation ("Tridex" or the "Company"), the
accompanying unaudited consolidated condensed financial statements contain
all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly its financial position as of September 30,
1998, the results of its operations for the quarters and nine months ended
September 30, 1998 and September 27, 1997 and changes in its cash flows
for the nine months ended September 30, 1998 and September 27, 1997. The
December 31, 1997 consolidated condensed balance sheet has been derived
from the Company's audited financial statements at that date. These
interim financial statements should be read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. Certain prior year data has been
reclassified to conform to the 1998 classifications.
Revenue includes hardware sales, design, implementation and support of
software systems, and related consultation services. Revenue on hardware
sales is recognized upon shipment to the customer. Revenue on software
sales is recognized in accordance with Statement of Position (SOP) 97-2,
"Software Revenue Recognition". Software license revenues are recognized
when a software contract has been signed, delivery has occurred, fees are
fixed and determinable and collectibility is probable. Maintenance
revenues are deferred and recognized ratably over the maintenance period,
generally one year.
The results of operations for the quarters and nine months ended September
30, 1998 and September 27, 1997 are not necessarily indicative of the
results to be expected for the full year.
2. Acquisition of Progressive Software, Inc.:
On April 17, 1998, the Company purchased all of the issued and outstanding
shares of privately-held Progressive Software, Inc. ("Progressive"), a
point-of-sale ("POS") software and systems provider for the restaurant and
specialty retail industries. The acquisition of Progressive was accounted
for by the purchase method. Accordingly the results of operations of
Progressive have been included in the accompanying consolidated financial
statements from the date of acquisition.
The purchase price of Progressive was approximately $48,111,000 including
estimated acquisition costs. The consideration paid for Progressive was
comprised of $4,998,000 in Tridex common stock and approximately
$43,113,000 in cash, including payment of Progressive's line of credit of
$9,632,000. The cash portion of the purchase price was financed by: (a)
$12,000,000 borrowed under a senior term loan from Fleet National Bank
("Fleet"), (b) $11,000,000 proceeds from the sale of senior subordinated
notes to Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, MassMutual Participation Investors and MassMutual Corporate
Value Partners Limited (the "MassMutual Investors"), (c) $2,000,000
proceeds from the sale of 285,714 shares of Tridex common stock to the
MassMutual Investors, (d) $1,736,000 borrowed under a working capital
facility with Fleet, and (e) the balance from the Company's cash. In June
1998, the Company reached an agreement with the seller of Progressive to
reduce the purchase price of Progressive by approximately $2,400,000,
based upon the April 17, 1998 audited closing balance sheet in accordance
with the terms of the Stock Purchase Agreement. The Company received these
funds in July 1998 and used them to reduce the line of credit and for
general working capital purposes.
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<PAGE>
At September 30, 1998, the Company estimated the allocation of the
purchase price, in thousands, to be as follows:
Tangible net assets $ 6,892
Purchased in-process software technology 26,300
Estimated goodwill and other intangibles 14,919
--------
$ 48,111
========
The tangible net assets consist primarily of accounts receivable,
inventory, equipment and leasehold improvements and liabilities assumed.
The purchased in-process software technology, as determined by an
independent appraisal firm, was charged to expense in accordance with
applicable accounting rules during the quarter ended June 30, 1998 because
it has not yet reached technological feasibility and it has no alternative
future use. The estimated goodwill and other intangibles are being
amortized over five years.
The following pro forma data (unaudited) reflect the 1998 acquisition of
Progressive as if the acquisition had occurred at the beginning of 1997,
but excluded the one-time write off of in-process software technology,
discussed above. Such data do not purport to be indicative of what would
have occurred had this transaction been made on that date:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------- -----------------
September 27, 1997 September 30, 1998 September 27, 1997
------------------ ------------------ ------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Sales $15,814 $ 37,306 $ 45,919
Operating loss (48) (2,259) (123)
Net loss (458) (2,552) (1,366)
Loss per share - basic: $ (0.07) $ (0.40) $ (0.22)
</TABLE>
3. Bank credit agreement and long term debt:
On April 17, 1998, the Company entered into a Credit Agreement (the
"Credit Agreement") with Fleet which provides for an $8 million working
capital facility (the "Working Capital Facility") and a $12 million term
loan facility (the "Term Loan"). The Working Capital Facility expires on
June 30, 1999 and bears a non-utilization fee on the unused facility
ranging from .25% to .625% depending upon certain performance criteria.
The Term Loan requires the Company to make quarterly principal payments
commencing June 30, 1998 in the amount of $300,000 per quarter during the
first year, $450,000 per quarter during the second year and $750,000 per
quarter thereafter. The Credit Agreement allows the Company to borrow at
interest rates based upon Fleet's prime rate, plus a margin of up to one
percentage point, depending upon certain performance criteria. At the
Company's option, it may borrow at interest rates based upon LIBOR, plus a
margin ranging from 1.25 to 2.75 percentage points, depending upon certain
performance criteria. Interest on prime rate-based loans is payable
monthly. Interest on LIBOR-based loans is payable at the end of the LIBOR
measuring period.
The Credit Agreement is secured by a first priority security interest in
certain assets, imposes certain financial covenants (including minimum
tangible capital base, maximum ratio of senior funded debt to EBITDA,
maximum ratio of total consolidated funded debt to EBITDA, minimum
interest coverage ratio and minimum fixed charge coverage ratio) and
restricts the amount available for payment of cash dividends and capital
stock distributions. As of September 30, 1998, the Company was not in
compliance with the covenants related to the ratio of senior funded debt
to EBITDA, the ratio of total consolidated funded debt to EBITDA, the
interest coverage ratio and the fixed charge coverage ratio. As of
November 1, 1998, Fleet agreed to waive the non-compliance as of September
30, 1998 and to amend the method of calculation of the financial covenants
for December 31, 1998, March 30, 1999 and June 30, 1999. In addition,
Fleet imposed a
7
<PAGE>
temporary reduction of $2,000,000 in the availability under the Working
Capital Facility until the Company obtains from the selling shareholder of
Progressive a reduction in any amount of the purchase price paid for
Progressive. The Company paid a fee to the Fleet of $70,000 for the
amendment, which is being amortized over the term of the Credit Agreement.
On April 17, 1998, the Company sold to the MassMutual Investors at face
value $11 million of the Company's senior subordinated notes due April 17,
2005 (the "Notes"). On May 27, 1998, the Company issued to the MassMutual
Investors warrants to purchase 350,931 shares of the Company's common
stock at $7.00 per share and the interest rate on the Notes was reduced to
12% from 19%. The estimated fair market value of the warrants has been
recorded as a discount to the principal amount of the outstanding Notes
and is being amortized over the term of the Notes. The Notes require
prepayments of $3,666,667 on each of April 17, 2003 and April 17, 2004.
Interest is payable quarterly on the 17th day of January, April, July and
October commencing on July 17, 1998. The Notes impose certain financial
covenants, including minimum consolidated net worth, minimum fixed charge
coverage ratio and maximum leverage ratio. As of September 30, 1998, the
Company was not in compliance with the covenants related to the fixed
charge coverage ratio and the leverage ratio. As of November 1, 1998, the
MassMutual Investors agreed to waive the non-compliance as of September
30, 1998 and to amend the financial covenants for December 31, 1998 and
March 30, 1999. The Company paid a fee to the MassMutual Investors of
$39,600 for the amendment, which is being amortized over the term of the
Notes.
4. Discontinued operations:
Discontinued operations consist of the Company's former subsidiaries
TransAct Technologies Incorporated ("TransAct") and Cash Bases GB Limited
("Cash Bases"). The stock of TransAct owned by the Company was distributed
to Tridex shareholders in March 1997. The Company's investment in Cash
Bases was sold in May 1997. The final proceeds of the sale of Cash Bases
were received in March 1998. The consolidated financial statements have
been restated to present the results of operations of TransAct and Cash
Bases as discontinued operations.
5. Earnings (loss) per common share:
Basic earnings (loss) per common share is based on the weighted average
number of common shares outstanding during the period. Diluted earnings
per common share assumes the exercise of options and warrants and the
conversion of dilutive securities, when the result is dilutive.
6. Inventories:
Components of inventory are:
September 30, 1998 December 31, 1997
------------------ -----------------
(Dollars in Thousands)
Raw materials and component
parts $ 2,674 $2,097
Work-in-process 68 75
Finished goods 4,702 815
-------- ------
$ 7,444 $2,987
======== ======
7. Research and Development Expenditures:
The Company capitalizes software development costs in accordance with
Statement of Financial Accounting Standards Number 86 "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed"
(SFAS 86). As of September 30, 1998 and December 31, 1997, capitalized
software development costs were $1,178,000 and zero, respectively. The
capitalization of software development costs begins when the technological
feasibility of a product has been established by development of a working
model and ends when the product is available for general release to
customers. The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development costs
require considerable judgement by
8
<PAGE>
management with respect to certain external factors, including, but not
limited to, anticipated future revenues, estimated economic life and
changes in software and hardware technologies. Annual amortization charged
to cost of sales will be computed on an individual product basis and will
be the greater of: (a) the ratio of current gross revenues for a product
to the total current and anticipated future gross revenues for the
product, or (b) the straight-line method over the estimated economic life
of the product, which is generally estimated to be 3 years.
All other research and development expenditures are charged to research
and development expense in the period incurred.
8. Commitments and contingencies:
The Company is involved in an environmental matter discussed in Note 8 to
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. As of September
30, 1998 and to the date of this report, there has been no material
development in the resolution of this matter.
9
<PAGE>
Item 2. 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 of
which involves risks and uncertainties, including, but not limited to, the
Company's expectations regarding net sales, gross profit, operating income and
financial condition and the Company's evaluation of the Year 2000 issue.
Results of Operations
As described in Note 4 of the Notes to Consolidated Financial Statements, the
Company completed the spin-off of TransAct in March 1997 and the sale of Cash
Bases in May 1997. 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 and Cash Bases had been separate entities during the
periods presented. The discussion and analysis set forth below is based upon
continuing operations only.
Quarter Ended September 30, 1998 Compared to Quarter Ended September 27, 1997
Consolidated net sales for the quarter ended September 30, 1998 increased
$5,943,000 (86%) to $12,815,000 from $6,872,000 in the comparable quarter of the
prior year. The increase reflects sales of Progressive, which was acquired on
April 17, 1998, offset by decreased volume of shipments of point-of-sale ("POS")
component products manufactured by Ultimate, particularly custom keyboards and
pole displays, as well as distributed products.
Consolidated gross profit increased $1,595,000 (89%) to $3,392,000 from
$1,797,000 in the prior year's quarter, primarily as a result of the
contribution of Progressive offset by the impact of decreased volume of
shipments of Ultimate's POS products. Consolidated gross profit margin increased
to 26.5% of sales from 26.1% of sales in the prior year's quarter as a result of
the addition of software sales offset by a decrease in margin on POS component
products.
Consolidated engineering, design and product development costs increased
$612,000 to $786,000 from $174,000 in the prior year's quarter. The increase is
primarily the result of the inclusion of such costs for Progressive and is net
of $688,000 of software development costs capitalized during the quarter.
Consolidated selling, administrative and general expenses increased $1,096,000
(87%) to $2,355,000 from $1,259,000 in the prior year's quarter. The increase in
selling expenses is primarily the result of the inclusion of such costs for
Progressive. The increase in administrative and general expenses is primarily
the result of the inclusion of such costs for Progressive and the inclusion of a
non-recurring charge of approximately $150,000 associated with the due diligence
review for a transaction that was not completed. Prior year results include a
non-cash expense of $195,000 related to a stock incentive compensation agreement
with the principal executive officers of Ultimate.
Consolidated operating income (loss) for the current quarter was a loss of
$764,000 compared to income of $166,000 in the prior year's quarter. The loss in
the current period was primarily the result of the increase in selling,
administrative and general expenses. Consolidated operating income (loss) as a
percentage of sales was a 6.0% loss compared to income of 2.4% of sales in the
prior year's quarter.
Net interest expense for the quarter was $688,000 compared to net interest
income of $175,000 in the prior year's quarter. Interest expense for the quarter
primarily consists of interest on debt incurred to acquire Progressive.
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<PAGE>
Other non-operating expense of $7,000 represents costs associated with
non-operating properties held for sale.
Provision for income taxes in the current quarter reflects an estimated
effective tax rate of 55% for the quarter.
Net loss for the current quarter was $662,000 (or $0.10 per share), as compared
to zero in the prior year's quarter. The average number of common shares
outstanding increased to 6,377,000 shares from 5,531,000 shares in the prior
year's quarter.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 27,
1997
Consolidated net sales for the nine months ended September 30, 1998 increased
$12,248,000 (66%) to $30,840,000 from $18,592,000 in the comparable period of
the prior year. The increase reflects sales of Progressive from the date of
acquisition, April 17, 1998, and greater volume of shipments of Ultimate's POS
component products, particularly custom manufactured keyboards and pole
displays, as well as distributed products.
Consolidated gross profit increased $3,492,000 (77%) to $8,050,000 from
$4,558,000 in the prior year's period, primarily as a result of the contribution
of Progressive and greater volume of shipments of POS products. Consolidated
gross profit margin increased to 26.1% of sales from 24.5% of sales in the prior
year's period as a result of the addition of software sales from Progressive and
a more favorable product mix and lower manufacturing costs from Ultimate.
Consolidated engineering, design and product development costs increased
$1,512,000 to $1,985,000 from $473,000 in the prior year's period. The increase
is primarily the result of the inclusion of such costs for Progressive and is
net of $1,178,000 of software development costs capitalized during the period.
Consolidated selling, administrative and general expenses increased $1,706,000
(43%) to $5,708,000 from $4,002,000 in the prior year's period. The increase in
selling, administrative and general expenses is primarily the result of the
inclusion of such costs for Progressive and the inclusion of a non-recurring
charge of approximately $310,000 associated with the due diligence review for a
transaction that was not completed. Operating expenses in the current year
include the $26,300,000 write-off of in-process software technology acquired as
part of the purchase of Progressive. Prior year administrative and general
expenses include a non-cash expense of $794,000 related to a stock incentive
compensation agreement with the principal executive officers of Ultimate.
Consolidated operating income (loss) for the current period was a loss of
$1,793,000 (exclusive of the write-off of in process software technology)
compared to a loss of $530,000 in the prior year's period. The loss in the
current period was primarily the result of the increase in selling,
administrative and general expenses. Consolidated operating income (loss) as a
percentage of sales was a 5.8% loss compared to a 2.9% loss in the prior year's
period.
Net interest expense for the current period was $1,024,000 compared to net
interest income of $340,000 in the prior year's period. Interest expense for the
period primarily consists of interest on debt incurred to acquire Progressive.
Interest income for the prior year period primarily consisted of interest earned
on temporary cash investments and interest earned on receivables from the sale
of stock.
Other non-operating expense of $15,000 for the current period represents costs
associated with non-operating properties held for sale. Other non-operating
expenses in the prior year's period represents the Company's 10% share of the
losses of Cash Bases.
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<PAGE>
Provision (benefit) for income taxes in the first nine months reflects an
estimated effective tax rate. The benefit recorded in the current period
reflects the recognition of deferred taxes of approximately $9,700,000 related
to the write-off of in-process software technology.
Net loss for the current period was $18,940,000 (or $3.17 per share) as compared
to net income of $432,000 (or $0.08 per share) in the prior year's period. The
average number of common shares outstanding increased to 5,975,000 shares from
5,252,000 shares in the prior year's period.
Liquidity and Capital Resources
At September 30, 1998, the Company had $504,000 in cash and availability of
$2,800,000 under the Company's $8,000,000 working capital revolving credit
facility. The Company's working capital at September 30, 1998 was $4,500,000
compared with $19,490,000 at December 31, 1997. The current ratio was 1.3 : 1.0
at September 30, 1998 and 6.2 : 1.0 at December 31, 1997.
The decrease in working capital is primarily the result of the purchase of all
of the issued and outstanding shares of privately-held Progressive on April 17,
1998. The purchase price of Progressive was approximately $48,111,000 including
estimated acquisition costs. The consideration paid for Progressive was
comprised of $4,998,000 in Tridex common stock and the balance of approximately
$43,113,000 payable in cash, including payment of Progressive's line of credit
of $9,632,000. The cash portion of the purchase price was financed by: (a)
$12,000,000 borrowed under the senior Term Loan from Fleet, (b) $1,736,000
borrowed under the Working Capital Facility with Fleet, (c) $11,000,000 proceeds
from the sale of the Notes to the MassMutual Investors, (d) $2,000,000 proceeds
from the sale of 285,714 shares of Tridex common stock to the MassMutual
Investors and (e) the balance from the Company's cash. See note 3 to the
Company's financial statements of this Form 10-Q for a description of the Fleet
Credit Agreement and the Notes.
At September 30, 1998, the Company had no material commitment for capital
expenditures.
The Company believes that funds generated from operations of the combined
companies and borrowings under the Working Capital Facility of the Credit
Agreement, if necessary, will continue to satisfy its working capital needs,
support a certain level of growth and meet scheduled debt retirements.
The Year 2000
The Company has undertaken a survey of its products, information systems,
suppliers, customers and other third parties with significant relationships with
the Company, to identify risks related to the year 2000 issue and address the
potential impact on its operations and financial condition. Based upon its
survey and the advice of technical consultants, the Company believes that the
year 2000 issue will not have a material impact on its products and that the
cost of addressing the year 2000 issue is not likely to have a material impact
on the Company's operations or financial condition. All costs associated with
the Company's plan for Year 2000 compliance are being expenses as incurred. The
Company will continue to review the year 2000 issue for potential impact on its
products, operations and financial condition.
Nasdaq Listing
On August 17, 1998 the Nasdaq Stock Market notified the Company that based on
the Company's quarterly report for the quarter ended June 30, 1998, the Company
did not meet the Nasdaq National Market listing requirement of maintaining
$4,000,000 of net tangible assets. The Company's net tangible assets were
$3,866,000 and $4,161,000 at June 30, 1998 and September 30, 1998, respectively.
The net tangible assets shortfall at June 30, 1998 resulted from the
$26,300,000 write-off of in-process software technology acquired as part of the
purchase of Progressive on April 17, 1998. The Company believes the June 30,
1998 shortfall is transitory and the Company is, and expects to be, in
compliance with all requirements for continued listing on the Nasdaq National
Market through 1999. The Company has reviewed its listing status with Nasdaq,
but has not received confirmation whether Nasdaq believes that the Company's
common stock should be listed on the Nasdaq National Market or the Nasdaq Small
Cap Market.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 4.1 Form of Letter of Waiver and Amendment dated
November 12, 1998 by and among Massachusetts
Mutual Life Insurance Company and certain of its
affiliates and Tridex Corporation.
Exhibit 10.1 Amendment No. 1 to Credit Agreement dated as of
November 1, 1998, to Credit Agreement dated as
of April 17, 1998, by and between Fleet National
Bank, Tridex Corporation, Progressive Software,
Inc. and Ultimate Technology Corporation.
Exhibit 10.2 Employment Agreement dated April 9, 1998 between
Tridex Corporation and Daniel A. Bergeron
Exhibit 10.3 Employment Agreement dated May 11, 1998 between
Tridex Corporation and John MacWillie
Exhibit 10.4 Employment Agreement dated April 21, 1998
between Tridex Corporation and Raymond J.
Mueller
Exhibit 11 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule.
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIDEX CORPORATION
------------------
(Registrant)
November 13, 1998 /s/ Seth M. Lukash
--------------------------------------------
Seth M. Lukash
Chairman of the Board, President, Chief
Executive Officer, and Chief Operating
Officer
November 13, 1998 /s/ Daniel A. Bergeron
--------------------------------------------
Daniel A. Bergeron
Vice President and Chief Financial Officer
November 13, 1998 /s/ George T. Crandall
--------------------------------------------
George T. Crandall
Vice President and Treasurer
13
<PAGE>
EXHIBIT INDEX
Exhibit 4.1 Form of Letter of Waiver and Amendment dated November 15
12, 1998 by and among Massachusetts Mutual Life
Insurance Company and certain of its affiliates and
Tridex Corporation.
Exhibit 10.1 Amendment No. 1 to Credit Agreement dated 17
as of November 1, 1998, to Credit Agreement
dated as of April 17, 1998, by and between Fleet
National Bank, Tridex Corporation, Progressive
Software, Inc. and Ultimate Technology Corporation.
Exhibit 10.2 Employment Agreement dated April 9, 1998 between 23
Tridex Corporation and Daniel A. Bergeron
Exhibit 10.3 Employment Agreement dated May 11, 1998 between 29
Tridex Corporation and John MacWillie
Exhibit 10.4 Employment Agreement dated April 21, 1998 35
between Tridex Corporation and Raymond J. Mueller
Exhibit 11 Computation of Per Share Earnings 40
Exhibit 27 Financial Data Schedule
14
Exhibit 4.1
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
November 12, 1998
Tridex Corporation
Progressive Software, Inc., as successor to Tridex NC, Inc.
Ultimate Technology Corporation
61 Wilton Road
Westport, CT 06880
Attn: Daniel A. Bergeron
Chief Financial Officer & Treasurer of Tridex NC, Inc.
REF: Securities Purchase Agreement dated April 17, 1998 ("Purchase Agreement")
Gentlemen:
Terms used in this letter of waiver and limited amendment shall have the same
meanings assigned to them in the Purchase Agreement unless otherwise specified.
Pursuant to the request of the Issuers, the undersigned hereby consents and
agrees to the following:
(i) to waive compliance with the provisions of Section 13.6(b) of the
Purchase Agreement for the fiscal quarter ending September 30, 1998
and to further waive compliance with such Section 13.6(b) for the
fiscal quarters ending December 31, 1998 and March 31, 1999 subject
to the condition that the Fixed Charges Coverage Ratio for the
fiscal quarter ending December 31, 1998 shall be not less than 1.00
to 1.00 and for the quarter ending March 31, 1999 shall be not less
than 1.40 to 1.00; and
(ii) to waive compliance with the provisions of Section 13.6(c) of the
Purchase Agreement for the fiscal quarter ending September 30, 1998
and further to waive compliance with Section 13.6(c) for the fiscal
quarters ending December 31, 1998 and March 31, 1999 subject to the
condition that the Leverage Ratio for the fiscal quarter ending
December 31, 1998 shall not exceed 15.00 to 1.00 and that the
Leverage Ratio for the fiscal quarter ending March 31, 1999 shall
not exceed 7.00 to 1.00.
<PAGE>
In consideration for the granting of the foregoing waivers and limited
amendments, the Issuers agree to pay to the holders of the $11,000,000 of Senior
Subordinated Notes due April 17, 2005 an aggregate fee of $39,600 to be paid on
a pro rata basis. This letter of waiver and limited amendment shall become
effective upon the payment of the fee set forth in the preceding sentence and
the execution of similar letters by each of the holders of the Senior
Subordinated Notes due April 17, 2005 and by each of Tridex Corporation,
Progressive Software, Inc. as successor to Tridex NC, Inc., and Ultimate
Technology Corporation.
Except as set forth above, all terms of the Purchase Agreement shall remain in
full force and effect.
Very truly yours,
Massachusetts Mutual Life Insurance Company
By: _________________________________
Mark A. Ahmed
Managing Director
Accepted and Agreed To:
Tridex Corporation
By: _______________________________
Name: _______________________________
Date: _______________________________
Progressive Software, Inc.
By: _______________________________
Name: _______________________________
Date: _______________________________
Ultimate Technology Corporation
By: _______________________________
Name: _______________________________
Date: _______________________________
Exhibit 10.1
AMENDMENT NO. 1 TO CREDIT AGREEMENT
Dated as of November 1, 1998
AMENDMENT No. 1 to Credit Agreement (this "Amendment") by and among TRIDEX
CORPORATION, a Connecticut corporation ("Tridex"), PROGESSIVE SOFTWARE, INC., a
North Carolina corporation, ("PSI"), ULTIMATE TECHNOLOGY CORPORATION, a New York
corporation ("UTC", and collectively, together with TRIDEX, and PSI, the
"Borrowers" and each, individually a "Borrower"), and FLEET NATIONAL BANK, a
national banking association organized under the laws of the United States of
America (the "Bank").
PRELIMINARY STATEMENTS:
A. The Borrowers and the Bank have entered into the Credit Agreement
as of April 17, 1998. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given thereto in the Credit Agreement, as
amended.
B. The Borrowers and the Bank have agreed to amend the Credit
Agreement, as hereinafter set forth.
SECTION 1. Amendments. The Facility Documents are, effective as of
the date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
(a) The first sentence of Section 2.1(a) of the Credit Agreement is
hereby amended and restated in full to read as follows:
Subject to the terms and conditions of this Agreement, the Bank
agrees to make revolving loans ("Working Capital Loans") to the
Borrowers from time to time from and including the date hereof to
and including the Revolving Credit Termination Date, up to but not
exceeding in the aggregate principal amount at any one time
outstanding the amount of the Working Capital Commitment, and
provided that the aggregate outstanding principal amount of Working
Capital Loans shall at no time exceed the Borrowing Base; provided
further that until such time as Tridex obtains from the selling
stockholder of PSI a reduction in the purchase price paid for PSI,
by way of indemnification from such selling stockholder or otherwise
and until such time as Tridex complies with the remaining provisions
of this Section 2.1(a), the sum of $2,000,000 will be deemed to be
added to the outstanding amount of Working Capital Loans from time
to time in determining remaining availability under the Borrowing
Base. In addition, any and all of such purchase price reduction
received by such Borrower in cash shall be paid by such Borrower
immediately to the Bank, and the value of any and all proceeds of
such purchase price reduction received by such
<PAGE>
Borrower in the form of Tridex common stock shall be paid by such
Borrower to the Bank as soon as practicable after receipt thereof,
such Borrower to use its commercially reasonable best efforts to
convert such stock to cash as expeditiously as possible, and in all
events such payment shall be made to the Bank no later than 120 days
after receipt by such Borrower of such stock. All payments to the
Bank by a Borrower pursuant to this Section 2.1(a) shall be applied
to reduce the existing Term Loan, with all such payments being
applied in the inverse order of their maturity.
Upon full payment to the Bank of all amounts referred to in
the preceding paragraph, the provisions of the first sentence of Section
2.1(a) of the Credit Agreement in effect immediately before this Amendment
shall once again be in full force and effect.
(b) Section 8.4 of the Credit Agreement is hereby deleted in its
entirety and is hereby amended and restated in full to read as follows:
Section 8.4. Minimum Interest Coverage Ratio. The Borrowers,
on a consolidated basis, shall maintain an Interest Coverage Ratio
of not less than the ratios set forth below in respect of the
following periods:
2.0 to 1.0 for the three month period ending
December 31, 1998;
2.0 to 1.0 for the three month period ending
March 31, 1999;
2.0 to 1.0 for the three month period ending
June 30, 1999; and
<PAGE>
2.0 to 1.0 as of the end of each quarter thereafter for the
twelve month period then ended (a rolling twelve month
calculation measured as of the end of each such successive
quarter).
(c) Section 8.5 of the Credit Agreement is hereby deleted in its
entirety and is hereby amended and restated in full to read as follows:
Section 8.5. Minimum Fixed Charge Coverage Ratio. The
Borrowers, on a consolidated basis, shall maintain a Fixed Charge
Coverage Ratio of not less than the ratios set forth below in
respect of the following:
1.25 to 1.0 for the three month period ending
December 31, 1998;
1.50 to 1.0 for the three month period ending
March 31, 1999;
1.50 to 1.0 for the three month period ending
June 30, 1999; and
1.50 to 1.0 as of the end of each quarter thereafter for the
twelve month period then ended (a rolling twelve month
calculation measured as the end of each successive quarter).
SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Bank shall have received counterparts of this
Amendment executed by the Borrowers and the Bank, and Section 1 hereof shall
become effective when, and only when, the Bank shall have additionally received
all of the following documents or items, each document (unless otherwise
indicated) being dated the date of receipt thereof by the Bank (which date shall
be the same for all such documents), in form and substance satisfactory to the
Bank:
(a) Certified copies of (i) the resolutions of the Board of
Directors of each of the Borrowers approving this Amendment and the matters
contemplated hereby and (ii) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment and
the matters contemplated hereby.
(b) A certificate of the Secretary or an Assistant Secretary of each
of the Borrowers certifying the names and true signatures of the officers of the
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder.
(c) An amendment fee equal to $70,000, for the account of the Bank,
which fee shall be applied $35,000 in respect of the Working Capital Commitment
and $35,000 in respect of the Term Loan.
SECTION 3. Representations and Warranties of Each of the Borrowers.
Each Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
<PAGE>
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Facility Documents, as amended hereby, to which it is or is to
be a party are within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action and do not contravene (i) the Borrower's
charter or by-laws, (ii) any law or any contractual restriction binding on or
affecting the Borrow, or result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge,
encumbrance or preferential arrangement of any nature upon or with respect to
any of the properties now owned or hereafter acquired by the Borrower.
(c) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Amendment or
any of the Facility Documents, as amended hereby, to which it is or is to be a
party.
(d) This Amendment and each of the other Facility Documents as
amended hereby, constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
(e) The Credit Agreement and the Security Agreement creates valid
and perfected first priority security interests and liens in and to the
Collateral covered thereby enforceable against all third parties in all
jurisdictions, securing the payment of all Obligations, and the execution,
delivery and performance of this Amendment do not adversely affect the aforesaid
security interests and liens of the Credit Agreement and the Security Agreement.
(f) Except as set forth in the Credit Agreement, there is no pending
or threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower or any Subsidiary. There is no pending or threatened action or
proceeding affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator which purports to affect the legality,
validity or enforceability of this Amendment or any of the other Facility
Documents, as amended hereby.
(g) The Facility Documents existing on the date hereof constitute
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms. After giving effect to the
amendments provided for in this Amendment, no event has occurred and is
continuing which constitutes a Default or an Event of Default.
SECTION 4. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Section 1 hereof, on and after the
date hereof each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference in
any Facility Documents to the Credit Agreement or any other Facility Document,
shall mean and be a reference to the Credit Agreement or such other Facility
Document as amended hereby.
(b) Except as specifically amended or modified pursuant to this
Amendment, the provisions of the Credit Agreement, the Notes and the other
Facility Documents shall remain in full force and effect and are hereby ratified
and confirmed. Without limiting the generality of the foregoing, the Credit
Agreement, the Security Agreement and all of the Collateral described therein do
and shall continue to secure the payment of all indebtedness and liabilities of
the Borrowers to the Banks and the Bank under the Credit Agreement and the other
Facility Documents, as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Bank or the Banks
<PAGE>
under any of the Facility Documents, nor constitute a waiver of any provision of
any of the Facility Documents.
(d) Notwithstanding anything to the contrary herein, the Bank agrees
that the failure of the Borrowers to comply with the financial covenants set
forth in Sections 8.2, 8.3, 8.4 and 8.5 of the Agreement in respect of the
period ending September 30, 1998, shall not constitute in the Event Default,
provided that the financial covenants set forth in Article 8 as amended shall
remain in full force and effect in respect of all periods ending subsequent to
September 30, 1998.
SECTION 5. Costs, Expenses and Taxes. Each of the Borrowers agrees
to pay on demand all costs and expenses of the Bank in connection with the
preparation, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Bank with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities hereunder and thereunder. Each of the Borrowers further agrees
to pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 5. In addition, each of the Borrowers
shall pay any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TRIDEX CORPORATION
By _____________________________________
George T. Crandall, Treasurer
Address for Notices:
61 Wilton Avenue
Westport, CT 06880
ULTIMATE TECHNOLOGY CORPORATION
By ____________________________________
George T. Crandall, Treasurer
Address for Notices:
100 Rawson Road
Victor, NY 14564
PROGRESSIVE SOFTWARE INC.
<PAGE>
By ____________________________________
Daniel Bergeron, Treasurer
Address for Notices:
2301 Crown Center Drive
Charlotte, NC 28227
FLEET NATIONAL BANK
By ____________________________________
Frederick A. Meagher, Vice President
Address for Notices:
Fleet National Bank
One Landmark Square
2nd Floor
Stamford, CT 06901
Attn: Frederick A. Meagher
Vice President
Facsimile No.: (203) 964-4850
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 9th day of
April, 1998, by and between Tridex Corporation, a Connecticut corporation with a
mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the "Company"),
and Daniel A. Bergeron, an individual with a residence address of 31 Bunker Hill
Drive, Trumbull, Connecticut 06611, (the "Executive").
INTRODUCTION
1. The Company is in the business of manufacturing terminals and other
peripheral devices and integrated systems for retail point-of-sale and other
transaction-based markets (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,
thereafter, 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 termination.
2. Employment Duties. Subject to the terms and conditions set forth herein, the
Company hereby employs Executive to act as Vice President and Chief Financial
Officer 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, and the CEO. 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 at an annualized rate
of $150,000, payable semi-monthly, in arrears. Executive's base salary shall not
be decreased. In addition, no later than March 31, 1999 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.
<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
three (3) weeks, without interruption of salary.
(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, or 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 or the CEO, 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
immediately 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 a minimum of two (2) weeks of 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
<PAGE>
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 Company 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 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.
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 in Control; or (ii) resignation of the Executive from
the employ of the Company subsequent to any of the following events occurring
within twelve (12) months of a Change in 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; (C) elimination or reduction of the Executive's
participation in the Company's Executive Incentive Compensation Plan; or (D) 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 (iii) 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
(iv) while the Executive is receiving payments or benefits from a Company
sponsored plan by reason of the Executive's disability.
6.2 Severance
(a) Without Cause. If the Company terminates this Agreement without Cause,
other than as a result of a Terminating Event, then commencing on the date of
such termination, 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 annualized 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
<PAGE>
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
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.
Resignation. If the Executive terminates this Agreement, he shall have no rights
to receive severance payments from the Company.
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, 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): (i) 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 (ii)
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 (iii) 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.
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 could not be
quantified 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 to the fullest extent permitted by law 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
<PAGE>
"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 the 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 could not be
quantified and for which money damages would be 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.
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:
31 Bunker Hill 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 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.
<PAGE>
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 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 executed this Agreement as of the date
first written above.
Tridex Corporation
by: /s/ Seth M. Lukash
Title: Chairman and CEO
EXECUTIVE:
/s/ D. A. Bergeron
Daniel A. Bergeron
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 11th day
of May, 1998, by and between Tridex Corporation, a Connecticut corporation with
a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the
"Company"), and John MacWillie, an individual with a residence address of 148
Grove Street, Tarrytown, New York 10591, (the "Executive").
INTRODUCTION
1. The Company is in the business of manufacturing terminals and other
peripheral devices and integrated systems for retail point-of-sale and other
transaction-based markets (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,
thereafter, 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 termination.
2. Employment Duties. Subject to the terms and conditions set forth herein, the
Company hereby employs Executive to act as Vice President of Technology and
Strategic Business Development 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, and the CEO. 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 at an annualized rate
of $150,000, payable semi-monthly, in arrears. Executive's base salary shall not
be decreased. In addition, no later than March 31, 1999 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.
<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
three (3) weeks, without interruption of salary.
(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, or 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 or the CEO, 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
immediately 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 a minimum of two (2) weeks of 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
<PAGE>
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 Company 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 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.
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 in Control; or (ii) resignation of the Executive from
the employ of the Company subsequent to any of the following events occurring
within twelve (12) months of a Change in 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; (C) elimination or reduction of the Executive's
participation in the Company's Executive Incentive Compensation Plan; or (D) 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 (iii) 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
(iv) while the Executive is receiving payments or benefits from a Company
sponsored plan by reason of the Executive's disability.
6.2 Severance
(a) Without Cause. If the Company terminates this Agreement without Cause,
other than as a result of a Terminating Event, then commencing on the date of
such termination, 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 annualized 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
<PAGE>
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
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.
Resignation. If the Executive terminates this Agreement, he shall have no rights
to receive severance payments from the Company.
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, 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): (i) 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 (ii)
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 (iii) 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.
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 could not be
quantified 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 to the fullest extent permitted by law 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
<PAGE>
"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 the 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 could not be
quantified and for which money damages would be 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.
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:
148 Grove Street
Tarrytown, NY 10591
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 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.
<PAGE>
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 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 executed this Agreement as of the date
first written above.
Tridex Corporation
by: /s/ Seth M. Lukash
Title: Chairman and CEO
EXECUTIVE:
/s/ John MacWillie
John MacWillie
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the 21
day of April, 1998, by and between Tridex Corporation, a Connecticut corporation
with a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the
"Company"), and Raymond J. Mueller, an individual with a residence address of
5963 Elm Court, Littleton, Colorado, 80121 (the "Executive").
INTRODUCTION
1. The company is in the business of providing custom hardware and software
solutions for retail point-of-sale, restaurant, hospitality and other
transaction-based markets (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 terms of this Agreement 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 the Executive giving
written notice to terminate. The term of the Executive's employment hereunder is
hereinafter referred to as the "Employment Period".
2. Employment Duties. Subject to the terms and conditions set forth herein, the
Company hereby employs Executive to act as President of Progressive Software,
Inc., a wholly owned North Carolina subsidiary of the Company ("Progressive")
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 Tridex and as determined by its Board of Directors, and the CEO, 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 $160,000 per year,
payable in bi-weekly installments (the "Base Salary"). Executive's Base Salary
shall not be decreased. In addition, no later than April, 1999 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 bonus
under the Company's Incentive Compensation Plan, subject to attainment of
specific financial and individual objectives and 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
<PAGE>
from time to time, and shall receive other fringe benefits that may be 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.
(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.
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 immediately
upon written notice to the Executive, except for termination due to the death of
the Executive, which shall require no notice.
6. Termination.
(a) Termination by the Executive. Executive may terminate this Agreement
at any time by providing the Company with a minimum of one (1) month of 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 terms "without Cause" shall mean
termination for any reason not specified in Section 5 hereof, except for
retirement, and "with Cause" shall mean termination for those reasons specified
in Section 5 hereof.
(i) Without Cause. If the Company terminates this Agreement without
Cause, for a period equal to six (6) months thereafter, the Company shall
provide Executive with a severance package which shall consist of the following:
(1) 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; (2) 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
<PAGE>
termination, pro rated for the portion of the fiscal year occurring prior to
termination; and (3) continuation of all benefits under Section 4(a) and (c).
(ii) With Cause. If the Company terminates this Agreement with
Cause, then the Executive shall be entitled to receive the Base Salary earned
but unpaid through the date of such termination, as well as reimbursement by the
Company for any out-of-pocket expenses incurred by the Executive in connection
with the business of the Company as contemplated by Section 4(d) above prior to
the date of termination, but no further payments of Base Salary or additional
compensation shall be due by the Company thereafter, and the Executive shall not
thereafter be entitled to receive benefits under Sections 4(a) or (b) hereof.
(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, it 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 for a period of one
(1) year 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 hereinafter defined): (a) be engaged in any business which develops
software or manufactures or sells hardware for use in the specialty retail,
restaurant, supermarket or convenience store sectors of the POS market (A) in
any part of the world in which the Company is engaged in selling its products
directly or indirectly at the time the Executive ceases to provide services
hereunder, (B) if the territorial restriction in the preceding clause is deemed
to be too broad, then the areas shall be the countries in which the Company is
engaged in selling its products directly or indirectly at the time the Executive
ceases to provide services hereunder, (C) if the territorial restriction in the
preceding clause is deemed to be too broad, then the area shall be the continent
of North America, (D) if the territorial restriction in the preceding clause is
deemed to be too broad, then the areas shall be those states of the United
States in which the Company is engaged in selling its products directly or
indirectly at the time the Executive ceases to provide services hereunder, (E)
if the territorial restriction in the preceding clause is deemed to be too
broad, then the areas shall be any states in which the services performed by the
Executive for the Company are directly related to the products and services
provided by the Company to its customers in such states, or (F) if the
territorial restriction in the preceding clause is deemed to be too broad, then
the area shall be the states of North Carolina and any other state in which the
Executive actually performed services for the Company during the Employment
Period; 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 and 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 purpose 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
<PAGE>
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 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 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.
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.
9. 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, except for that certain
Employee Agreement and that certain Agreement as to Inventions and
Non-Disclosure of Company Information executed prior to the date hereof by the
Executive. The Company shall be entitled to enforce each of this Agreement, the
Employee Agreement and the Agreement as to Inventions and Non-Disclosure of
Company Information according to its terms. To the extent that the provisions of
any of this Agreement, the Employee Agreement and the Agreement as to Inventions
and Non-Disclosure of Company Information overlap, the Company shall be entitled
to the maximum protection afforded by either agreement. This Agreement shall not
be changed, altered, modified or amended, except by a written agreement signed
by both parties hereto.
10. 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:
5963 Elm Court
Littleton, CO 80121
<PAGE>
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 giver
or the notice obtains telephone confirmation of receipt.
Either party may, by notice given to the other party in accordance with this
Section 10, designate another address or person for receipt of notices
hereunder.
11. 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 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, be deemed amended and given such
interpretation as to achieve the economic intent of this Agreement.
12. 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 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.
13. 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
Title: Chairman and CEO
EXECUTIVE:
/s/ Raymond J. Mueller
Raymond J. Mueller
TRIDEX CORPORATION AND SUBSIDIARIES
Exhibit 11 Computation of Per Share Earnings
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
---------------------------- --------------------------
September September September September
30, 1998 27, 1997 30, 1998 27, 1997
---------------------------- --------------------------
<S> <C> <C> <C> <C>
BASIC AND DILUTED:
EARNINGS:
Loss from continuing operations $ (662) $ 0 $ (18,940) $ (175)
Income from discontinued
operations 607
---------------------------- --------------------------
Net income (loss) available to
common stockholders $ (662) $ 0 $ (18,940) $ 432
============================ ==========================
SHARES:
Weighted average common shares
outstanding 6,377,000 5,351,000 5,975,000 5,089,000
============================ ==========================
EARNINGS PER SHARE - BASIC AND
DILUTED:
Loss from continuing operations $ (0.10) $ 0.00 $ (3.17) $ (0.03)
Income from discontinued
operations 0.00 0.11
---------------------------- --------------------------
Net income (loss) $ (0.10) $ 0.00 $ (3.17) $ 0.08
============================ ==========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A)Tridex
Corporation quarterly report on Form 10-Q for the quarter ended September 30,
1998 and is qualified in its entirety by reference to such (B)financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 504
<SECURITIES> 0
<RECEIVABLES> 9,201
<ALLOWANCES> 31
<INVENTORY> 7,444
<CURRENT-ASSETS> 826
<PP&E> 3,911
<DEPRECIATION> 1,611
<TOTAL-ASSETS> 46,776
<CURRENT-LIABILITIES> 13,444
<BONDS> 19,740
0
0
<COMMON> 1,633
<OTHER-SE> 11,959
<TOTAL-LIABILITY-AND-EQUITY> 46,776
<SALES> 30,840
<TOTAL-REVENUES> 30,840
<CGS> 22,790
<TOTAL-COSTS> 58,933
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,024
<INCOME-PRETAX> (29,132)
<INCOME-TAX> (10,192)
<INCOME-CONTINUING> (18,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,940)
<EPS-PRIMARY> (3.17)
<EPS-DILUTED> (3.17)
</TABLE>
