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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 17, 1998
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TRIDEX CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut
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(State or other jurisdiction of incorporation)
1-5513 06-0682273
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(Commission File Number) (IRS Employer Identification Number)
61 Wilton Road, Westport, CT 06880
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(Address of principal executive offices)
(203) 226-1144
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On April 17, 1998 Tridex Corporation (the "Company"), through its
wholly-owned subsidiary Tridex NC, Inc. ("NC"), purchased all of the issued
and outstanding capital stock of Progressive Software, Inc. ("Progressive"),
a privately held company, from its sole shareholder, Paul J. Smith. The total
purchase price was $48,500,000 of which (1) $33,900,000 was paid in cash, (2)
$5,000,000 was paid by delivery of 714,000 shares of the Company's common
stock, and (3) $9,600,000 was paid through the assumption of a certain
portion of Progressive's debt. Immediately after the closing, NC was merged
into Progressive and the $9,600,000 of assumed Progressive debt was paid in
full. The purchase price was determined based upon (a) the current and
estimated future earnings of Progressive, (b) the potential marketability of
Progressive's products and existing contracts, (c) the complimentary nature
of Progressive's products with the Company's existing products, and (d) the
opportunity for broadening the existing customer base of the Company and
Progressive by combining marketing and distribution networks. In connection
with the acquisition, the Company received a fairness opinion from an
investment banker. The purchase price is subject to post closing adjustment
based upon an audited closing date balance sheet.
In order to finance the purchase price, the Company entered into a
Credit Agreement (the "Credit Agreement") on April 17, 1998 with Fleet
National Bank ("Fleet") which provides for a $12 million acquisition term
facility and an $8,000,000 working capital revolving credit facility for
total senior loan availability of $20 million. Additionally, on April 17,
1998 Massachusetts Mutual Life Insurance Company and related parties (the
"MassMutual Investors") purchased at face value $11 million of the Company's
19% senior subordinated notes. In connection with its sale of the 19% senior
subordinated notes to the MassMutual Investors, the Company issued to the
MassMutual Investors 285,714 shares of its common stock at a purchase price
of $7.00 per share. Further, the Company agreed, subject to shareholder
approval, to issue to the MassMutual Investors warrants to purchase 350,931
shares of its common stock at $7.00 per share. If the Company is successful
in obtaining shareholder approval, effective upon the date of shareholder
approval the interest rate on the subordinated notes will be reduced from 19%
to 12%. At the annual meeting of shareholders of the Company, scheduled for
May 27, 1998, the shareholders will vote on the proposed issuance of the
warrants.
The sources of funds for the purchase price and the payment of the
assumed debt were as follows:
<TABLE>
<CAPTION>
<S> <C>
Company cash on hand $16,300,000
Fleet Term Loan 12,000,000
Fleet Revolving Credit Facility 2,200,000
19% Senior Subordinated Notes 11,000,000
Sale of common stock to the MassMutual Investors 2,000,000
Sale of common stock to Paul Smith 5,000,000
-----------
Total $48,500,000
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-----------
</TABLE>
The Company intends to operate Progressive as a wholly-owned
subsidiary. Progressive will continue to be engaged in the design and
manufacture of software and the sale of software and hardware for point of
sale ("POS") systems. The Company anticipates that Progressive will continue
to have its headquarters and principal operating facility in Charlotte, North
Carolina. The Company's April 20, 1998 News Release is included as an exhibit
to this report,
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Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
(a) Financial statements of businesses acquired.
The required financial statements of Progressive Software,
Inc. are not filed herewith as it is impractical to do so.
Such statements will be filed within 60 days of May 2, 1998.
(b) Pro forma financial information
The required pro forma financial information is not filed
herewith as it is impractical to do so. Such information
will be filed within 60 days of May 2, 1998.
(c) Exhibits
2. Plan of acquisition, reorganization, liquidation or
succession
2.1 Stock Purchase Agreement dated as of February 5
24, 1998, by and among Paul J. Smith,
Progressive Software, Inc., Tridex Corporation
and Tridex NC, Inc., with index of Schedules
and Exhibits thereto (which shall be provided
upon request).
4. Instruments defining the rights of security holders
4.1 Registration Rights Agreement by and between 45
Paul J. Smith and Tridex Corporation dated as
of April 17, 1998.
4.2 Securities Purchase Agreements dated as of 58
April 17, 1998, by and among Massachusetts
Mutual Life Insurance Company and certain of
its affiliates and Tridex Corporation, with
index of Schedules and Exhibits thereto (which
shall be provided upon request).
4.3 Form of 19% senior subordinated notes due April 130
17, 2005 (included in Exhibit 4.2).
10. Material Contracts
10.1 Credit Agreement dated as of April 17, 1998, by 144
and between Fleet National Bank, Tridex
Corporation, Progressive Software, Inc.,
Ultimate Technology Corporation, and Tridex NC,
Inc., with index of Schedules and Exhibits
thereto (which shall be provided upon request).
10.2 Term Note in the amount of $12,000,000, due 192
March 31, 2003; payable by Tridex Corporation
and its affiliates to Fleet National Bank.
10.3 Working Capital Note in the amount of 195
$8,000,000 due June 30, 1999, payable by Tridex
Corporation and its affiliates to Fleet.
99. Additional Exhibits 198
99.1 News Release Dated April 20, 1998
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRIDEX CORPORATION
(Registrant)
By: /s/ Seth M. Lukash
----------------------------
Seth M. Lukash
Chairman of the Board
and Chief Executive Officer
Date: April 30, 1998
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Introduction
This Stock Purchase Agreement, dated as of February 24, 1998 is by and
among Paul J. Smith (the "Shareholder"), Progressive Software, Inc., a North
Carolina corporation (the "Corporation"), Tridex Corporation, a Connecticut
corporation ("Tridex"), and Tridex NC, Inc., a North Carolina corporation and a
wholly owned subsidiary of Tridex (the "Buyer").
Background
The Shareholder owns all of the issued and outstanding capital stock of
the Corporation. The Shareholder desires to sell, and the Buyer desires to
purchase, all of the issued and outstanding shares of capital stock of the
Corporation (the "Shares") for the Purchase Price, pursuant to the terms and
conditions set forth in this Agreement.
Agreements
IT IS MUTUALLY agreed by the parties hereto as follows:
I. Definitions and Construction.
1.1 In addition to the other definitions set forth herein, when used in
this Agreement, the following terms have the meanings set forth below:
"Agreement" means this Agreement.
"Affiliate(s)" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. In this
context, "control" means the possession, directly or indirectly, of the power to
direct the management and policies of such person, whether by contract or
through the ownership of voting securities, membership interests, beneficial
interests or otherwise.
"Audited Closing Balance Sheet" means the audited balance sheet of
the Corporation prepared in accordance with GAAP as at the Closing Date, to be
audited by the Corporation's accountants, McGaladrey & Pullen, LLP ("McGaladrey
& Pullen"), and verified by the Buyer's accountants, Price Waterhouse, LLP
("Price Waterhouse"), as set forth in Section 5.4.
"Balance Sheet" means the balance sheet of the Corporation as at
December 31, 1997, which is included in the Financial Statements.
"Balance Sheet Date" means December 31, 1997.
"Buyer" see Introduction.
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"Closing" means the taking of the actions required to consummate the
sale of the Shares by the Shareholder and the purchase of the Shares by the
Buyer pursuant to this Agreement.
"Closing Date" see Section 11.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Corporation" see Introduction.
"Damages" means all losses, claims, damages, costs, fines,
penalties, obligations, payments and liabilities, together with all reasonable
attorneys' fees and expenses, incurred in connection with the foregoing.
"Deficiencies" means a final determination by a Governmental
Authority that additional taxes are due.
"Employee Program" see Section 6.26.
"Escrow Amount" means Five Hundred Thousand Dollars ($500,000),
subject to increase pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements" means those financial statements prepared in
accordance with GAAP for the year ended December 31, 1996, which were audited by
McGaladrey & Pullen, LLP, the Corporation's independent public accountants,
those financial statements prepared in accordance with GAAP for the year ended
December 31, 1995, which were audited by Arthur Andersen, LLP, the Corporation's
independent public accountants for the year ended December 31, 1995, as well as
unaudited financial statements for the year ended December 31, 1997 prepared in
accordance with GAAP (except for the absence of footnotes and normal, recurring
audit adjustments) by the Corporation, copies of which are attached as Schedule
6.5. The Financial Statements for the year ended December 31, 1997 attached as
part of Schedule 6.5 are unaudited as of the date hereof but will be audited and
delivered to Buyer prior to Closing.
"GAAP" means generally accepted accounting principles consistent
with those adopted by the Financial Accounting Standards Board and its
predecessor, as in effect on the date of this Agreement.
"Governmental Authority" means all agencies, authorities, bodies,
boards, commissions, institutions, legislatures and offices of any nature
whatsoever for any governing unit or political subdivision, whether federal,
state, county, district, municipal, city or otherwise, and whether now or
hereafter in existence.
"Hazardous Materials" see Section 6.30.
"Inventories" see Section 6.10.
"Leased Properties" means the real properties leased by the
Corporation.
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"Legal Requirements" means all statutes, laws, rules, regulations,
orders, judgments, decrees, permits and contracts of any Governmental Authority
including, but not limited to, those relating to employment of labor (for
example, ERISA, equal opportunity, occupational safety and health, worker
adjustment and retraining, wages, hours and the payment of Social Security and
similar taxes), protection of the environment (for example, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq., the
Federal Water Pollution Control Act, the Federal Clean Air Act and state
equivalents, including M.G.L. c. 21C and 21 E), all building, zoning, health,
fire and safety codes and laws imposing taxes or other forms of payment to
Governmental Authorities.
"Liens" means pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
"Ordinary Course of Business" means the usual and customary way in
which the Corporation has conducted its business in the past year.
"Parties" means the Shareholder, the Corporation, Tridex and the
Buyer.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Parties" means the Shareholder and the Corporation.
"Shareholder" see Introduction.
"Taxes" means all taxes, fees, assessments, levies, duties and
similar charges imposed by any Governmental Authority, together with all
interest, penalties, fines and other additions imposed in respect thereof,
including, without limitation, all income, corporate excise tax, gains, real
property gains, profits, gross receipts, payroll, employment, social security
(and similar), disability, health, hospitalization, unemployment compensation,
worker's compensation, Pension Benefit Guaranty Corporation, severance, windfall
profits, environmental, license, occupation, customs, imposts, capital stock,
franchise, ad valorem, excise, sales, use, transfer, registration, value added,
alternative minimum, add-on minimum, successor, withholding and estimated taxes
or other charges.
"Tax Returns" means all original and amended returns, declarations,
certifications, statements, notices, elections, estimates, reports, claims for
refund and information returns relating to or required to be filed or maintained
in connection with any Tax, together with all schedules and attachments thereto.
"Treasury" means the United States Department of Treasury.
1.2 In this Agreement, unless the context otherwise requires:
(a) The words "hereby," "hereof," "hereto," "herein," "hereunder"
and any similar words refer to this Agreement; the word "hereafter" means after
the date of this Agreement, and the word "heretofore" means before the date of
this Agreement.
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(b) The word "person" refers to partnerships (including limited
partnerships and limited liability partnerships), corporations, limited
liability companies, governmental entities, trusts, other legal entities, and
natural persons.
(c) References to the "knowledge," the "best knowledge of," "have no
knowledge of" or "do not know of" and similar phrases mean (i) in the case of a
natural person, the particular fact was actually known, or not actually known,
as the context requires, to such person after reasonable investigation and
inquiry by such person, and (ii) in the case of the Corporation, means the
knowledge or best knowledge of the persons whose names are listed on Schedule
1.2.
1.3. Section and subsection titles are for convenience of reference only
and are not to be considered in the interpretation or construction of any of the
provisions hereof.
II. Purchase and Sale of Shares.
2.1 Subject to the terms and conditions set forth in this Agreement, at
the Closing, the Shareholder will sell and transfer the Shares to the Buyer and
the Buyer will purchase the Shares from the Shareholder.
III. Purchase Price.
3.1 The purchase price payable by the Buyer (the "Purchase Price") in
consideration for the transfer of the Shares shall be Forty Eight Million Five
Hundred Thousand Dollars ($48,500,000), subject to adjustment as provided in
Article V. At least two business days before the Closing Date, the Corporation
shall deliver to the Buyer and Tridex its unaudited income statement (the
"Interim Income Statement") and unaudited balance sheet (the "Interim Balance
Sheet") for the period ending on the Friday before the Closing Date. If Working
Capital (as defined in Section 5.1) calculated on the basis of the Interim
Balance Sheet is less than Eight Million Three Hundred Fifty Thousand Dollars
($8,350,000), then the Escrow Amount shall be increased to equal the difference
between the Required Working Capital (as defined in Section 5.1) and the Working
Capital calculated on the basis of the Interim Balance Sheet.
3.2 In accordance with the 338(h)(10) election, to be made under Section
8.14 hereof, the Parties shall establish and agree upon the modified aggregate
deemed sales price, as defined under applicable Treasury regulations (the
"MADSP"), at which the assets of the Corporation are deemed to have been sold
pursuant to the Section 338(h)(10) election, and the allocation of the MADSP
among the assets of the Corporation. The allocation of the MADSP among the
assets of the Corporation shall be made by the Parties in accordance with
Section 338 of the Code and applicable Treasury regulations. The Parties agree
to file their federal income tax returns, including Treasury Form 8023A,
consistent with such allocation.
IV. Payment of Purchase Price.
4.1 At the Closing, Buyer shall:
(a) deliver to the Shareholder a certificate representing Seven Hundred
Fourteen Thousand (714,000) shares (the "Tridex Shares") of common stock, no par
value, of Tridex ("Tridex Common Stock") subject to reduction as follows: (i) if
the number of shares, or warrants or other securities convertible or exercisable
to obtain shares, of Tridex Common Stock
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that Tridex is required to provide in connection with subordinated debt
financing obtained by Tridex or the Buyer to fund the transaction hereunder (the
"Sub Debt Financing Shares") exceeds 336,000, then the number of the Tridex
Shares to be delivered to the Shareholder shall be reduced by the remainder (the
"Excess Shares") of (A) the number of Sub Debt Financing Shares, minus (B)
336,000; and (ii) the Closing Cash Payment shall include an amount of cash equal
to (A) the number of Excess Shares, multiplied by (B) Seven Dollars ($7.00) (the
"Excess Shares Value"); and
(b) pay, by wire transfer, an amount in cash (the "Closing Cash Payment")
equal to (i) the Purchase Price (including the Excess Shares Value, if any)
minus (ii) the number of Tridex Shares delivered pursuant to Section 4.1(a)
multiplied by Seven Dollars ($7.00), minus (iii) the Escrow Amount. The Escrow
Amount shall be paid by the Buyer at Closing to Hinckley, Allen & Snyder (the
"Escrow Agent"), who shall hold such funds in an escrow account (the "Escrow
Account") pursuant to the terms of an Escrow Agreement substantially in the form
attached hereto as Exhibit A (the "Escrow Agreement").
V. Purchase Price Adjustments.
5.1 Working Capital Defined.
The Purchase Price agreed to by the Parties assumes that the Working
Capital of the Corporation on the Closing Date shall equal Eight Million Eight
Hundred Fifty Thousand Dollars ($8,850,000) ("Required Working Capital").
"Working Capital" shall mean the sum of the following amounts, all determined as
of the Closing Date: (i) the Corporation's Inventories valued at the lower of
cost (determined on a first-in, first-out basis) or market value (meaning the
Corporation's market in the ordinary course of its business) in accordance with
GAAP; (ii) the Corporation's accounts receivable (excluding loans or advances to
employees or the Shareholder), less an appropriate allowance for bad debts,
returns, discounts and other customer allowances computed in accordance with
GAAP, minus (iii) the Corporation's trade payables and current accrued
liabilities computed in accordance with GAAP (excluding any deferred revenue
currently estimated at $1,000,000 attributable to the Software License Agreement
between the Corporation and McDonald's Corporation dated August 31, 1997), which
shall include, without limitation, professional expenses, insurance, payroll,
commissions, sales, use and other taxes, utilities and other similar expenses.
5.2 Adjustment for Working Capital.
(a) If the amount of the Working Capital as shown on the Audited Closing
Balance Sheet (the "Actual Working Capital") is greater or lesser than the
Required Working Capital, there shall be an increase or decrease, respectively,
in the Purchase Price equal to the amount of the difference between the Actual
Working Capital and the Required Working Capital (the "Working Capital
Adjustment").
(b) If the Actual Working Capital is greater than the Required Working
Capital, then, subject to Section 5.4, (i) the Buyer shall pay to the
Shareholder the amount of the Working Capital Adjustment; and (ii) the Escrow
Agent shall release the balance of the Escrow Account to the Shareholder on or
before ten (10) business days after the expiration of the Review Period (as
defined in Section 5.4(c)).
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(c) If the Actual Working Capital is less than the Required Working
Capital and the Working Capital Adjustment is less than the Escrow Amount, then,
subject to Section 5.4, prior to expiration of the Review Period, Buyer shall
notify the Escrow Agent and the Shareholder and make a written claim for that
portion of the Escrow Amount that is equal to the Working Capital Adjustment.
(d) If the Actual Working Capital is less than the Required Working
Capital and the Working Capital Adjustment is greater than the Escrow Amount,
then, subject to Section 5.4, prior to expiration of the Review Period, Buyer
shall notify the Escrow Agent and the Shareholder and make a written claim for
the return of all of the Escrow Amount.
5.3 Adjustment for Cash on Hand.
After the adjustment for Working Capital pursuant to Section 5.2,
the Purchase Price shall be increased, subject to Section 5.4(d), by the amount
of the Corporation's cash on hand and in accounts, as set forth on the Audited
Closing Balance Sheet.
5.4 Procedure for Payment of Adjustments.
(a) The adjustment to the Purchase Price for Working Capital
specified in Section 5.2(a) shall be determined based upon the Audited Closing
Balance Sheet. The costs incurred for preparing the Audited Closing Balance
Sheet shall be borne by the Shareholder.
(b) The Selling Parties and the Buyer agree that each will cooperate
with the other so that the Audited Closing Balance Sheet is completed no later
than sixty (60) days after the Closing Date. The Shareholder shall cause
McGaladrey & Pullen (i) to provide access to and, upon request, copies of its
working papers and otherwise to cooperate with Price Waterhouse during and after
the preparation of the Audited Closing Balance Sheet, and (ii) to complete the
Audited Closing Balance Sheet as soon as practicable after the Closing Date.
(c) Upon completion, the Audited Closing Balance Sheet (and the
audited income statement prepared in conjunction therewith) shall be provided to
the Shareholder, the Buyer, Tridex and the Escrow Agent. The Buyer shall have no
more than sixty (60) days from the date of its receipt of the Audited Closing
Balance Sheet (the "Review Period") to review the Audited Closing Balance Sheet
with its own accountants, Price Waterhouse. Tridex will cause Price Waterhouse
to complete its review as soon as practicable after receipt of the Audited
Closing Balance Sheet. The Shareholder and the Corporation agree that the
Audited Closing Balance Sheet shall present fairly in all material respects the
financial condition of the Corporation at the Closing Date in conformity with
GAAP, in a manner consistent with the balance sheet included in the December 31,
1997 audited Financial Statement and, in consideration thereof, Tridex and the
Buyer agree that the Buyer and Price Waterhouse may challenge the Audited
Closing Balance Sheet only on the basis that it has not been so prepared.
(d) If the Buyer has any disagreements with the Audited Closing
Balance Sheet then, prior to the expiration of the Review Period, the Buyer
shall notify the Shareholder and the Escrow Agent in writing of such
disagreements, setting forth the amount and basis for such disagreement. If the
Buyer and the Shareholder cannot resolve the disagreement regarding the Audited
Closing Date Balance Sheet, such disagreement shall be subject to arbitration
pursuant to Section 5.4(f).
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(e) If the Buyer has made a claim pursuant to Section 5.2(c) or (d)
to all or a portion of the Escrow Amount, the Shareholder shall have ten (10)
days after the Buyer's notice to deliver to the Escrow Agent and the Buyer an
objection in writing to such claim. If the Shareholder does not object to the
claim, the amount of the claim shall be paid to the Buyer by the Escrow Agent,
and the Shareholder shall pay to the Buyer the amount, if any, by which the
Working Capital Adjustment exceeds the Escrow Amount . If the Shareholder
objects to the claim, such objection shall be subject to arbitration pursuant to
Section 5.4(f).
(f) Disputed matters described in Sections 5.4(d)-(e) shall be
submitted by the Shareholder and the Buyer, together with their respective
accountants, to Ernst & Young, LLP (the "Arbitrator") for binding arbitration.
The Shareholder and the Buyer agree that the decision of the Arbitrator with
respect to such matters shall be binding on them and the Escrow Agent and not
subject to further review. The professional fees and expenses of the Arbitrator
shall be borne by the Shareholder if their decision confirms that Buyer is
entitled to receive (by Purchase Price reduction or otherwise) an amount equal
to at least one-half of the amount claimed by Buyer. Otherwise, such fees and
expenses shall be paid by Buyer.
5.5 Reduction for Liabilities Other Than Trade Payables.
In addition to any adjustments made to the Purchase Price based on the
difference between the Required Working Capital and the Actual Working Capital,
the Purchase Price shall be reduced by the total amounts due to third parties
from the Corporation for indebtedness and other liabilities and obligations of
the Corporation, as set forth on the Audited Closing Balance Sheet, subject to
Section 5.4, including but not limited to any indebtedness under the Inventory
and Working Capital Financing Agreement effective August 1, 1997 between the
Corporation and IBM Credit Corporation (the "IBM Credit Agreement"), but
excluding trade payables and current accrued liabilities already excluded from
the calculation of Actual Working Capital pursuant to Section 5.1(iii).
VI. Representations and Warranties of Selling Parties.
The Selling Parties jointly and severally represent and warrant to Tridex
and the Buyer that:
6.1 Corporate Status.
The Corporation is duly organized, validly existing and in good
standing under the laws of the State of North Carolina, with full corporate
power and authority to own its properties and to carry on the business now owned
and carried on by it. The Corporation has all requisite corporate power and
authority to execute and deliver this Agreement. Except as set forth on Schedule
6.1, the Corporation is qualified to do business in all states where its
business requires it to be so qualified except in such states where the failure
to so qualify would not have a material adverse effect on the Corporation's
business or financial condition. A complete list of all states where the
Corporation is so qualified, maintains an office or owns property is set forth
on Schedule 6.1.
6.2 Capitalization and Shareholder.
The authorized capital stock of the Corporation is set forth on
Schedule 6.2. The Shares constitute all of the outstanding shares of capital
stock of the Corporation. All of the
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Shares are validly issued, fully paid and nonassessable and free of preemptive
rights, and there are no outstanding subscriptions rights, options, calls, puts,
rights, warrants, convertible securities, purchase rights or other agreements,
contracts or commitments obligating the Corporation to issue or to transfer from
its treasury any additional capital shares. Except as specified above, there are
no outstanding or authorized stock appreciation rights, phantom stock, profit
participation or similar rights with respect to the stock of the Corporation.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting or transferability of the capital stock of the
Corporation.
6.3 Ownership of Shares.
The Shareholder owns all of the Shares free and clear of all liens,
encumbrances, security interests, claims, restrictions, or rights of any third
parties. There are no holders of shares of stock in the Corporation other than
the Shareholder.
6.4 Subsidiaries.
The Corporation does not have any subsidiaries.
6.5 Financial Statements.
True, correct and complete copies of the Financial Statements have
been or, in the case of the audited Financial Statements for the year ended
December 31, 1997, prior to the Closing will have been, delivered to the Buyer
and attached hereto as Schedule 6.5. The Financial Statements have been prepared
in accordance with GAAP (subject in the case of the unaudited Financial
Statements for the year ended December 31, 1997, to the absence of footnotes and
normal, recurring audit adjustments), and fairly present the financial position
of the Corporation as at the respective dates of the balance sheets included in
the Financial Statements and the results of its operations for the respective
periods indicated.
6.6 Absence of Changes.
Except as disclosed in Schedule 6.6, since the Balance Sheet Date,
there has not been any:
(a) transaction by the Corporation except in the Ordinary Course of
Business;
(b) capital expenditure exceeding $ 50,000 or contract entered into
for the purchase of any capital asset having a cost in excess of $ 50,000;
(c) material adverse change in the financial condition, liabilities,
assets or business of the Corporation;
(d) destruction, damage to or loss of any asset (whether or not
covered by insurance) that materially and adversely affects the financial
condition or business of the Corporation;
(e) loss of a key employee, labor dispute, strike or work stoppage
or other event or condition of any character that materially and adversely
affects the financial condition, business or assets of the Corporation;
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(f) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by the
Corporation;
(g) revaluation of the Corporation's material assets;
(h) declaration, setting aside or payment of a dividend or other
distribution in respect to the capital shares of the Corporation (except as
permitted under Section 8.8), or any direct or indirect redemption, repurchase
or other acquisition by the Corporation of the Corporation's capital shares;
(i) increase in the salary or other compensation payable or to
become payable to any of the Corporation's officers, directors or the
Shareholder, or the declaration, payment or obligation for the payment of a
bonus or other additional salary or compensation to any such person;
(j) sale or transfer of any asset of the Corporation, except in the
Ordinary Course of Business;
(k) amendment or termination of any material contract, agreement or
license to which the Corporation is a party, except in the Ordinary Course of
Business;
(l) loan by the Corporation to any person or entity, or guaranty of
any loan;
(m) mortgage, pledge or other encumbrance of any asset of the
Corporation;
(n) waiver or release of any material right or claim of the
Corporation, except in the Ordinary Course of Business;
(o) other event or condition of any character that has or that might
reasonably be expected to have a material adverse effect on the financial
condition, business or assets of the Corporation;
(p) issuance or sale of any capital shares of the Corporation, or
issuance of any other securities by the Corporation;
(q) any litigation, arbitration or other legal proceeding commenced
by or against the Corporation;
(r) any agreement, the performance of which will result in any of
the things described in the preceding clauses (a) through (q); or
(s) action taken by the Selling Parties that has or that would
likely result in a revocation of the Corporation's status as an S-Corporation
within the meaning of Section 1361(a) of the Code.
6.7 Absence of Undisclosed Liabilities.
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The Corporation has no debt, liability or obligation of any nature,
whether accrued, absolute or contingent, and whether due or to become due, that
is not reflected or reserved against in the Balance Sheet except for those that
are disclosed in Schedule 6.7.
6.8 Tax Returns and Audits.
(a) Returns. All Tax Returns required to have been filed by the
Corporation have been timely filed (taking into account duly granted
extensions), and are true, correct and complete in all material respects. Except
as disclosed in Schedule 6.8(a), (i) the Corporation is not currently the
beneficiary of any extension of time within which to file any Tax Return, and
(ii) no claim has ever been made by any Governmental Authority in a jurisdiction
where the Corporation does not file Tax Returns that the Corporation is or may
be subject to taxation by that jurisdiction.
(b) Taxes. All Taxes of the Corporation which have become due
(without regard to any extension of the time for payment and whether or not
shown on any Tax Return), have been paid. Schedule 6.8(b) sets forth a list of
the names and addresses of all Governmental Authorities with the power to assess
a tax upon the Corporation, the business or the assets of the Corporation, and
sets forth the nature of such taxes including, without limitation, sales,
income, property, excise, use and franchise. The Corporation has withheld and
paid over all Taxes required to have been withheld and paid over and has
complied with all information reporting and back-up withholding requirements
relating to Taxes. There are no liens with respect to Taxes on any of the assets
of the Corporation, other than liens for Taxes not yet due and payable or for
Taxes disclosed in Schedule 6.8(b) that are being contested in good faith
through appropriate proceedings.
(c) Deficiencies, Proceedings, Waivers. No Deficiencies exist or
have been asserted or, to the best of the Selling Parties' knowledge, are
expected to be asserted (verbally or in writing), with respect to Taxes of the
Corporation, and the Corporation has not received notice nor, to the best of the
Selling Parties' knowledge, does it expect to receive notice (verbally or in
writing), that the Corporation has not filed a Tax Return or paid all Taxes
required to be filed or paid by them. Except as disclosed on Schedule 6.8(c), no
audit, examination, investigation, action, suit, claim or proceeding relating to
the determination, assessment or collection of any Tax of the Corporation is
currently in process, pending or, to the best of the Selling Parties' knowledge,
threatened (verbally or in writing). Except as disclosed in Schedule 6.8(a), no
waiver or extension of any statute of limitations relating to the assessment of
collection of any Tax of the Corporation is in effect. There are no outstanding
requests for rulings with any Governmental Authority relating to Taxes of the
Corporation.
(d) Tax Sharing Arrangements, Liability for Others' Taxes. The
Corporation is not and has never been (i) a party to any tax sharing agreement
or arrangement (formal or informal, verbal or in writing), or (ii) a member of
an affiliated group of corporations (within the meaning of Code Section 1504)
filing a consolidated federal income Tax Return, or any similar group under
analogous provisions of other law.
(e) Returns Furnished, Tax Attributes. The Corporation has delivered
to the Buyer true and complete copies of all federal, state, local and foreign
income Tax Returns filed by the Corporation for 1994, 1995 and 1996, together
with all related examination reports, statements of deficiencies and closing and
other agreements. Schedule 6.8(c) indicates which, if
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any, of such returns have been, or currently are, the subject of any audit,
examination or other Tax proceeding.
(f) Elections, Special Status. The Corporation: (i) has not filed a
consent under Code Section 341(f) concerning collapsible corporations; (ii) has
not made any payments, obligated itself to make any payments or become a party
to any agreement that under any circumstance could obligate it or any successor
or assignee to make any payments that are not or will not be deductible under
Code Section 280G or that would be subject to excise Tax under Code Section
4999; (iii) is not a "foreign person" as defined in Code Section 1445(f)(3);
(iv) is not and has not been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii); (v) does not own and has not owned
any interest in any "controlled foreign corporation" as defined in Code Section
957 or "passive foreign investment company" as defined in Code Section 1296;
(vi) is not and has not been a party to any agreement or arrangement for which
partnership Tax Returns are required to be filed; (vii) does not own any asset
that is subject to a "safe harbor lease" within the meaning of Code Section
168(f)(8), as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982; (viii) does not own any "tax-exempt use property"
within the meaning of Code Section 168(h) or "tax exempt bond financed property"
within the meaning of Code Section 168(g)(5); and (ix) has not agreed to and is
not required to make any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise.
(g) Tax Liability in Financial Statements. The liabilities
(including deferred taxes) shown for Taxes, interest and penalties in the
Financial Statements as of the Balance Sheet Date and to be included on the
Audited Closing Date Balance Sheet are and will be adequate accruals and have
been and will be accrued in a manner consistent with the practices utilized for
accruing tax liabilities in the tax year ended December 31, 1996 and take into
account net operating losses, investment credits and other carryovers for
periods ended prior to the Closing Date.
(h) S-Corporation Status. The Corporation is an S-Corporation within
the meaning of Section 1361(a) of the Code and has been an S-Corporation since
it commenced operations in 1994. The Corporation is currently, has been at all
times since electing to be taxed as an S-Corporation and will at all times from
the execution hereof through the Closing be in compliance with all of the
requirements applicable to qualifying for and maintaining eligibility as an
S-Corporation under the Code, including, without limitation, those restrictions
applicable to the number, type and status of shareholders and classes of stock.
The Corporation has not made, nor prior to the Closing will it make or enter
into any agreement or understanding to make any distribution on account of stock
which is at all disproportionate to the interests of the Shareholders in such
Corporation.
6.9 Real Property.
(a) Schedule 6.9 contains a complete and accurate description of
each parcel of real property leased to the Corporation (the "Leased
Properties"). Copies of all the leases listed in Schedule 6.9 (the "Leases")
have been provided to the Buyer and are valid and in full force, and there does
not exist any default or event that, with notice or passage of time, or both,
would constitute a default under any of the Leases.
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(b) The Corporation does not own or hold a fee or any other interest
in any real property except as set forth on Schedule 6.9.
(c) To the best of the Selling Parties' knowledge, the zoning of
each of the Leased Properties described in Schedule 6.9 permits the presently
existing improvements and the continuation of the business presently being
conducted on Leased Property. The Corporation has not commenced, nor has the
Shareholder or the Corporation received notice of the commencement of, any
proceeding that would affect the present zoning classification of any of the
Leased Properties. To the best of the Selling Parties' knowledge, the
Corporation does not occupy any real property in violation of any building,
zoning or other law, ordinance, regulation or order relating to the development,
improvement, use or occupancy of real property.
6.10 Inventories.
The inventories shown on the Balance Sheet or existing at the date
hereof (the "Inventories") of the Corporation consist of items of a quality and
quantity useable and salable by the Corporation in the Ordinary Course of
Business. Except as disclosed in Schedule 6.10, all items included in the
Inventories are the property of the Corporation, except for those shown on the
Balance Sheet which have been sold or disposed of in the Ordinary Course of
Business since the Balance Sheet Date; and for each of these sales, either the
purchaser has made full payment, or the purchaser's liability to make payment is
reflected in the books of the Corporation. Schedule 6.10 contains a complete and
accurate list of each location of Inventories. Except as disclosed in Schedule
6.10, no items included in the Inventories have been pledged as collateral or
are held by the Corporation on consignment from others. The Inventories shown on
the Balance Sheet are based on quantities determined by physical count or
measurement, and are valued at the lower of cost (determined on a first-in,
first-out basis) or market value. The Inventories shown on the Audited Closing
Balance Sheet will be based on quantities determined by physical count or
measurement, taken at the Corporation's warehouse and other facilities in New
Jersey and North Carolina within three (3) days of Closing.
6.11 Other Tangible Personal Property.
The books and records of the Corporation contain a complete and
accurate description of all machinery and equipment and all other material
tangible personal property owned by the Corporations and used in connection with
its business. Except as disclosed in Schedule 6.11, no personal property used by
the Corporation in connection with its business is held under any lease,
security agreement, conditional sales contract or other title retention or
security arrangement, or is other than owned by and in the possession and under
the control of the Corporation. Copies of any leases, security agreements or
other documents listed on Schedule 6.11 have been provided to Buyer and are
valid and in full force, and there does not exist any default or event that,
with notice or passage of time, or both, would constitute a default under any of
such leases, security agreements or other documents. The tangible personal
property reflected in those books and records and on Schedule 6.11 constitutes
all such tangible personal property necessary for the conduct by the Corporation
of the business.
6.12 Accounts Receivable.
Schedule 6.12 to this Agreement contains a complete and accurate
schedule of the accounts receivable of the Corporation as at December 31, 1997,
together with an accurate aging
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of such accounts receivable. All those accounts receivable, and all accounts
receivable of the Corporation arising thereafter, arose from valid sales in the
Ordinary Course of Business.
6.13 Intellectual Property.
(a) Schedule 6.13(a) contains a complete and accurate list of all
trademarks, patents and patent applications, trade names, and registered
copyrights, computer programs and software owned by the Corporation or in which
it has an interest by license, agreement, common law or otherwise and, to the
extent recorded in any form, inventions, processes, discoveries, ideas, designs,
formulas, trade secrets, know-how, concepts, writings or other works used by the
Corporation in and required for the conduct of its business (collectively, the
"Listed Intellectual Property"). Schedule 6.13(a) indicates each instance in
which an item of Listed Intellectual Property is licensed to or otherwise not
owned exclusively by the Corporation and the nature of the Corporation's
interest in such item. To the knowledge of the Corporation and the Shareholder,
no third party is engaged in any activity not duly authorized by the Corporation
which would constitute an infringement of any Listed Intellectual Property or
any inventions, processes, discoveries, ideas, designs, formulas, trade secrets,
know-how, concepts, writings or other works which are used in and material to
the operation of the Corporation's business (collectively, together with the
Listed Intellectual Property, the "Intellectual Property"). There are no claims
or proceedings pending or, to the knowledge of the Corporation or Shareholder,
threatened against the Corporation, nor are there facts or circumstances known
to the Corporation or the Shareholder which could provide the basis for
asserting, that the Corporation has, is or was infringing any patent, trademark,
trade name or other intellectual property rights of any third party.
(b) The Corporation has provided or made available Buyer with true
and correct copies of all contracts, agreements, assignments, security
interests, letters patent, copyright and trademark registrations and
applications therefor and other documents relating to Intellectual Property of
the Corporation. Schedule 6.13(b) is a true and accurate list of such contracts,
agreements, assignments, security interests, letters patent, copyright and
trademark registrations and applications therefor (other than Employee IP
Agreements, as defined in Section 6.13(c)).
(c) Except as described in Schedule 6.13(c), the Corporation has
obtained from all employees, officers, directors, consultants, contractors,
agents and others who have contributed to or participated in the conception and
development of computer software, hardware, point-of-sale systems or
Intellectual Property of the Corporation or who have received copies of or
participated in the creation of source code, drawings, plans or specifications
of the Corporation, a written agreement acknowledging the Corporation's
ownership thereof (or assigning all rights therein to the Corporation) and
agreeing to maintain the confidentiality of all such material (the "Employee IP
Agreements"). The form of such Employee IP Agreement is attached as Schedule
6.13(c). None of the former or current members of management or key personnel of
the Corporation, including all former and current employees, agents,
consultants, contractors and others who have contributed to or participated in
the conception and development of computer software, hardware, point-of-sale
systems or other Intellectual Property of the Corporation has asserted or
threatened in writing any claim against the Corporation or any of its
subsidiaries in connection with the involvement of such persons in the
conception and development of any computer software, hardware, point-of-sale
systems or other Intellectual Property of the Corporation and to the best
knowledge of the Shareholder and the Corporation no basis exists for any such
claim.
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(d) (i) Except as set forth on Schedule 6.13(a) or (b), the
Corporation owns the entire right, title and interest in and to the Listed
Intellectual Property and none of the Intellectual Property owned by the
Corporation is subject to any outstanding orders, decrees, judgments,
stipulations, claims or settlements specifically applicable to the Corporation
by name or as a party, nor is any item of such Intellectual Property subject to
any option, lease, covenant, condition, agreement (written or oral), Lien, or
other claim or restriction.
(ii) Except as set forth in Schedule 6.13(b) the Corporation
has not granted any license and rights to any other Person with respect to any
Intellectual Property owned by the Corporation.
(iii) Except as set forth in Schedule 6.13(b), there are no
contracts in effect for the conversion, modification or enhancement of software
licensed or sold by the Corporation. Except as set forth in Schedule 6.13(b),
there are no marketing agreements or other arrangements, including but not
limited to value-added reseller, distributor or sales agent, for the direct or
indirect marketing of the Corporation's products.
(iv) Except as listed in Schedule 6.13(d), all royalties owed
under any licenses to or by the Corporation for the period up to and including
the Closing have been paid and there exists no default by the Corporation or, to
the Corporation's knowledge, by any other party under the terms of said licenses
and no event has occurred which, upon the passage of time or the giving of
notice, or both, would result in any event of default by the Corporation or, to
the Selling Parties' knowledge, by any other party to any license or prevent the
Corporation from exercising and obtaining the benefits of any rights of the
Corporation contained therein other than those which, in the aggregate, would
not reasonably be expected to have a material adverse effect on the business or
results of operation of the Corporation.
(e) Other than as set forth in Schedule 6.13(e):
(i) there is no suit, claim, action, investigation or
proceeding pending or, to the best knowledge of the Selling Parties, threatened
that the Corporation is infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property and, to the best knowledge of
the Selling Parties, there is no basis for any such suit, claim, action,
investigation or proceeding;
(ii) to the best knowledge of the Selling Parties, no person
is infringing on or otherwise violating any right of the Corporation with
respect to any Intellectual Property owned by, licensed to and/or otherwise used
by the Corporation;
(iii) the execution and delivery of this Agreement, compliance
with its terms and the consummation of the transactions contemplated hereby do
not and will not conflict with or result in any violation, breach or default
(with or without notice or lapse of time or both) under, or give rise to any
right, license or Lien relating to, Intellectual Property owned by the
Corporation or with respect to which the Corporation now has or has had any
license or other agreement with any third party, or any right of termination,
cancellation or acceleration of any material Intellectual Property right or
obligation set forth in any license or other agreement to which the Corporation
is a party, or the loss or encumbrance of any Intellectual Property or material
benefit related thereto, or result in or require the creation, imposition or
extension of any Lien upon any Intellectual Property or right;
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(iv) no licenses or rights have been granted to distribute the
source code of, or to use the source code to create Derivative Works (as
hereinafter defined) of, any product currently marketed by, commercially
available from or under development by the Corporation; and
(v) the Corporation has taken reasonable and necessary steps
to protect its Intellectual Property and its rights thereunder; to the best
knowledge of the Selling Parties, no such rights to Intellectual Property have
been lost or are in jeopardy of being lost through failure to act by the
Corporation.
As used herein "Derivative Work" shall mean a work that is based upon one
or more preexisting works, such as a revision, enhancement, modification,
abridgment, condensation, expansion or any other form in which such preexisting
works may be recast, transformed or adapted, and which, if prepared without
authorization of the owner of the copyright in such preexisting work, would
constitute a copyright infringement. For purposes hereof, a Derivative Work
shall also include any compilation that incorporates such a preexisting work as
well as translations from one human language to another and from one type of
code to another.
6.14 Title to and Condition of Assets.
The Corporation has good and marketable title to all assets, whether
real, personal, mixed, tangible or intangible, owned and currently used by it in
the conduct of its business (including, without being limited to, all assets
referred to or reflected in the Balance Sheet) free and clear of restrictions on
or conditions to transfer or assignment, and free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions or restrictions, except for (a) those disclosed on
Schedule 6.14 to this Agreement; (b) the lien of current taxes not yet due and
payable; and (c) possible minor matters that, in the aggregate, are not
substantial in amount and do not materially detract from or interfere with the
present or intended use of any of these assets, or materially impair the
business operations of the Corporation. All of the material tangible personal
property of the Corporation is in good operating condition and repair, ordinary
wear and tear excepted. The Corporation is in possession of all of the Leased
Properties. Other than as set forth on Schedule 6.14 neither the Shareholder,
nor any officer or director of the Corporation, nor any spouse or child of any
of the foregoing persons nor, to the best knowledge of the Shareholder, any
employee of the Corporation, has any interest, directly or indirectly, in any of
the real or personal property owned by or leased to the Corporation or any
Intellectual Property licensed by the Corporation. The assets (i) reflected on
the Balance Sheet, (ii) acquired after the Balance Sheet Date or (iii) set forth
on Schedule 6.11 constitute all assets and property necessary for the operation
of the Business.
6.15 Customers and Distributors; Suppliers.
(a) Schedule 6.15(a) sets forth any customer, customer
representative or distributor (whether pursuant to a commission, royalty or
other arrangement) who accounted for more than 5% of the sales of the
Corporation for either the year ended December 31, 1997 or the year ended
December 31, 1996 (collectively, the "Customers and Distributors"). No Customer
or Distributor has given notice to the Corporation of its intention to
terminate, to cancel or otherwise materially and adversely modify its
relationship with the Corporation or to decrease
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materially or limit its services, supplies or materials to the Corporation or
its usage, purchase or distribution of the services or products of the
Corporation.
(b) Schedule 6.15(b) sets forth a true and complete list of all
suppliers of the Corporation to whom it made payments aggregating $100,000 or
more during each of the years ended December 31, 1997 and December 31, 1996,
showing, with respect to each, the name, address and dollar volume involved.
6.16 Insurance Policies.
Schedule 6.16 contains a list of all insurance policies held by the
Corporation concerning its business and properties, including the type and
amount of coverage and the annual premium. The Corporation has maintained and
now maintains in full force and effect (a) insurance on all of its assets and
business of a type customarily insured, covering property damage and loss of
income by fire or other casualty, and (b) insurance protection against all
liabilities, claims and risks against which it is customary to insure, both with
respect to the amount and nature of the coverage. True and correct copies of all
insurance policies have been provided to Buyer.
6.17 Other Contracts.
Except for the agreements listed in Schedule 6.17, copies of which
have been furnished to the Buyer, the Corporation is not a party to, nor is any
of the Corporation's property bound by, any distributor's or manufacturer's or
sales representative or agency agreement, any output or requirements agreement,
any agreement not entered into in the Ordinary Course of Business, any loan
agreement, indenture, mortgage, lease or guaranty agreement, or any other
material agreement that is unusual in nature, duration or amount. To the
knowledge of the Selling Parties, there is no default or event that, with notice
or passage of time, or both, would constitute a default by any party to any of
these agreements. The Corporation has not received notice that any party to any
of these agreements intends to cancel or terminate any of these agreements or to
exercise or not exercise any options under any of these agreements. To the
knowledge of the Selling Parties, the Corporation is not a party to, nor is any
of the Corporation's property bound by, any agreement that is materially adverse
to the business, properties or financial condition of the Corporation.
6.18 Compliance with Laws.
(a) The Corporation has complied with all Legal Requirements, the
consequences of a violation of which could have a material adverse effect on its
operations, and with all orders, judgments and decrees of any tribunal under
applicable Legal Requirements.
(b) The Corporation has not directly or indirectly paid or delivered
any fee, commission or other money or property, however characterized, to any
finder, agent, government official or other party, in the United States or any
other country, that is in any manner related to the business or operations of
the Corporation and that the Shareholder or the Corporation knows or has reason
to believe to have been illegal under any Federal, state or local law of the
United States or any other country having jurisdiction. The Corporation has not
participated, directly or indirectly, in any boycott or other similar practice
affecting any of its actual or potential customers.
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6.19 Litigation.
Except as disclosed in Schedule 6.19, there is no suit, action,
arbitration, or legal, administrative or other proceeding, or governmental
investigation pending or, to the best of the Selling Parties' knowledge,
threatened against, involving or affecting the Corporation or any of its
business, assets or financial condition. The matters set forth in Schedule 6.19,
if decided adversely to the Corporation, will not result in a material adverse
change in the business, assets or financial condition of the Corporation. The
Shareholder or the Corporation has furnished or made available to the Buyer
relevant court papers and other documents relating to the matters set forth in
Schedule 6.19. The Corporation is not in default with respect to any order,
writ, injunction or decree of any Federal, state, local, or foreign court,
department, agency or instrumentality. Except as set forth in Schedule 6.19, the
Corporation is not presently engaged in any legal action to recover moneys due
or on account of damages sustained which affect the Corporation, its business
assets or financial condition.
6.20 Agreement Will Not Cause Breach or Violation.
Except as set forth as Schedule 6.20, the consummation of the
transactions contemplated by this Agreement will not result in or constitute any
of the following: (a) a default or an event that, with notice or passage of
time, or both, would be a default, breach or violation of the certificate of
incorporation or bylaws of the Corporation, any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, or other agreement,
instrument or arrangement to which the Shareholder or the Corporation is a party
or by which they or any of their property are bound; (b) an event that would
permit any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of the Corporation; or (c) the creation or
imposition of any Lien, on any of the properties of the Corporation.
6.21 Authorization and Validity.
Each of the Corporation and the Shareholder has the full corporate
or individual power, legal capacity and authority to execute, deliver and
perform its obligations under this Agreement and the other agreements
contemplated hereby to which the Corporation or the Shareholder is a party, and
to consummate the transactions contemplated hereby. Upon execution of this
Agreement and the other agreements contemplated hereby to which the Corporation
or the Shareholder is a party, such agreements shall constitute the legal and
binding obligations of the Corporation and the Shareholder, as the case may be,
and shall be enforceable against each of them in accordance with their terms,
subject to general principles of equity, applicable bankruptcy, insolvency,
moratorium and similar laws and principles of public policy which may limit
enforcement.
6.22 Interest in Customers, Suppliers and Competitors.
Except as disclosed in Schedule 6.22, neither the Shareholder, nor
any other officer or director of the Corporation, nor any spouse or child of any
of the foregoing persons, has any direct or indirect interest (other than the
beneficial ownership of not more than one percent (1%) of the outstanding equity
securities of a publicly traded issuer) in any competitor, supplier or customer
of the Corporation, or in any person from whom or to whom the Corporation leases
any real or personal property, or in any other person with whom the Corporation
is doing business.
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6.23 Corporation's Documents.
The Shareholder and the Corporation have furnished to the Buyer for
examination true, correct and complete (a) copies of the certificate of
incorporation and bylaws of the Corporation; (b) copies of all of the
Corporation's corporate records with respect to all proceedings, consents,
actions and meetings of the shareholders and board of directors of the
Corporation as in existence on the date hereof. The Shareholder is the only
person to whom the Corporation has ever issued any shares of capital stock.
6.24 Personnel; Employee Matters.
(a) Employee Census. Schedule 6.24(a)(i) contains a complete current
employee census, listing the name, position, exempt or non-exempt status,
employment date, age, current compensation, three-year compensation history,
benefit plan participation and geographic location. Schedule 6.24(a)(ii)
contains a complete and accurate list of all employees who are currently on
leave of absence or receiving workers' compensation or disability benefits and
whom the Corporation expects to return to work, as well as a complete and
accurate list of all former employees who are currently receiving severance
benefits or continuation of medical insurance coverage under COBRA, with a
description and the date of expiration of such severance benefits.
(b) Cash Compensation. Schedule 6.24(b) contains a complete and
accurate description of (i) all increases in cash compensation including,
without limitation, wages, salaries, bonuses (discretionary and formula) and
other cash compensation (the "Cash Compensation") of all employees of the
Corporation earning Thirty Thousand Dollars ($30,000) or more annually during
the current and immediately preceding fiscal year of the Corporation and (ii)
any promised increases in Cash Compensation to such employees that have not yet
been effected.
(c) Compensation Plans. Schedule 6.24(c) contains a complete and
accurate list of all compensation plans or arrangements (the "Compensation
Plans") sponsored by the Corporation or to which the Corporation contributes on
behalf of its employees, other than Employee Programs listed in Schedule 6.26.
The Compensation Plans include, without limitation, plans, arrangements or
practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards and stock ownership or stock options. The
Corporation has provided the Buyer a copy of each written Compensation Plan and
a written description of each unwritten Compensation Plan.
(d) Employment Agreements. Schedule 6.24(d) contains a complete and
accurate list of all employment agreements (the "Employment Agreements") to
which the Corporation is a party with respect to its employees. The Employment
Agreements include, without limitation, all temporary employee agreements and
non-competition agreements. The Corporation has provided the Buyer a copy of
each written Employment Agreement and a written description of each unwritten
Employment Agreement.
(e) Employee Policies and Procedures. Schedule 6.24(e) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Corporation. The
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Corporation has provided the Buyer a copy of all written Employee Policies and
Procedures and a written description of all unwritten Employee Policies and
Procedures.
(f) Unwritten Amendments. To the best of the Selling Parties'
knowledge, no unwritten amendments have been made, whether by oral
communication, pattern of conduct or otherwise, with respect to any Compensation
Plans, Employment Agreement or Employee Policies and Procedures.
(g) Labor Compliance.
(i) Except as set forth in Schedule 6.24(g), the Corporation
(A) has been and is in compliance with all material laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, and (B) is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing.
(ii) The Corporation has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex, national
origin, age, or disability in its employment conditions or practices.
(iii) There are no (A) unfair labor practice charges or
complaints or racial, color, religious, sex, national origin, age or disability
discrimination charges or complaints pending or, to the best of the Selling
Parties' knowledge, threatened, against the Corporation before any Federal,
state or local court, board, department, commission or agency, nor does any
basis therefor exist or (B) existing or, to the best of the Selling Parties'
knowledge, threatened, labor strikes, disputes, grievances, controversies or
other labor troubles affecting the Corporation nor, to the best of the Selling
Parties' knowledge, does any basis therefor exist.
(h) Unions. The Corporation has never been a party to any agreement
with any union, labor organization or collective bargaining unit. No employees
of the Corporation are represented by any union, labor organization or
collective bargaining unit. To the best knowledge of the Corporation, the
employees of the Corporation have no intention to and have not threatened to
organize or join a union, labor organization or collective bargaining unit.
(i) Aliens. To the best of the Selling Parties knowledge, all
employees of the Corporation are citizens of, or are authorized to be employed
in, the United States. The Corporation has complied fully with all applicable
laws, rules and regulations of Governmental Authority requiring new employees to
provide proof of United States citizenship or employment authorization.
6.25 Powers of Attorney/Bank Accounts.
Schedule 6.25 contains a list of (i) the names and addresses of all
persons holding a power of attorney on behalf of the Corporation; and (ii) the
names and addresses of all banks or other financial institutions in which the
Corporation has an account, deposit or safe deposit box, with the names of all
persons authorized to draw on these accounts or deposits, or to have access to
these boxes.
6.26 Employee Programs.
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(a) Schedule 6.26 sets forth a list of every Employee Program (as
defined below) that has been maintained (as such term is further defined below)
by the Corporation at any time during the three (3) year period ending on the
date hereof.
(b) Each Employee Program which has been maintained by the
Corporation and which has at any time been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination,
notification, opinion or approval letter from the IRS regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
through and including the Closing (or, if earlier, the date that all of such
Employee Program's assets were distributed). No event or omission has occurred
which would cause any such Employee Program to lose such qualification under the
applicable Code section.
(c) Except as otherwise disclosed on Schedule 6.26, there has not
been any failure of any party to comply with any laws applicable to or the terms
of any Employee Programs that have been maintained by the Corporation, except
for any failures to comply that, individually or in the aggregate, would not
have a material adverse effect on the properties, financial condition,
operations or prospects of the Corporation. With respect to any Employee Program
now or heretofore maintained by the Corporation, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code,
or breach of any duty under ERISA or, to the best of the Selling Parties'
knowledge, other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could result, directly
or indirectly (including, without limitation, through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
the Corporation or any ERISA Affiliate (as defined below). No litigation,
arbitration or governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for benefits) is
pending or, to the best of the Selling Parties' knowledge, threatened, with
respect to any such Employee Program.
(d) Neither the Corporation nor any ERISA Affiliate of the
Corporation has ever maintained any Employee Program subject to Title IV of
ERISA.
(e) Except as otherwise disclosed on Schedule 6.26, with respect to
each Employee Program maintained by the Corporation within the three years
preceding the date hereof, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Buyer: (i) all documents embodying or governing such Employee
Program and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination, notification, opinion or approval letter
with respect to such Employee Program under Code Section 401 or 501(c)(9) and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; and (vi) any documents evidencing any loan to an Employee
Program that is a leveraged employee stock ownership plan.
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(f) The Corporation has not made any written or, to the best
knowledge of the Shareholder, oral representations to its employees inconsistent
with the written description of any Employee Program maintained by the
Corporation as of the date hereof.
(g) There are no unfunded obligations under any Employee Program
providing benefits after termination of employment to any employee or former
employee of the corporation (or to any beneficiary or dependent of any employee
or former employee), including, but not limited to, retiree health coverage and
deferred compensation, but excluding continuation of health coverage required to
be continued under Section 4980B of the Code and insurance conversion privileges
under state law.
(h) For purposes of this Section 6.26:
(i) "Employee Program" means (a) all employee benefit plans
within the meaning of ERISA Section 3(3) including, but not limited to, multiple
employer welfare arrangements (within the meaning of ERISA Section 3(40)), plans
to which more than one unaffiliated employer contributes and employee benefit
plans (such as foreign or excess benefit plans) that are not subject to ERISA.
In the case of an Employee Program funded through an organization described in
Code Section 501(c)(9), each reference to such Employee Program shall include a
reference to such organization;
(ii) an entity "maintains" an Employee Program if such entity
sponsors, contributes to or provides (or has promised to provide) benefits under
such Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under such Employee Program, or if
such Employee Program provides benefits to or otherwise covers employees of such
entity (or their spouses, dependents, or beneficiaries);
(iii) an entity is an "ERISA Affiliate" of the Corporation for
purposes of this Section 6.26 if it would have ever been considered a single
employer with the Corporation under ERISA Section 4001(b) or part of the same
"controlled group" as the Corporation for purposes of ERISA Section
302(d)(8)(c).
6.27 Millennium Capability; Status of Debugging.
(a) For purposes of this Section 6.27, software will be "Millennium
Capable" if it will accurately process Date Data without error or interruption
caused by such Date Data, where dates are before, after and during December 31,
1999, the year 2000 and subsequent years, including, but not limited to,
recognizing the year 2000 as a leap year, providing correct results when moving
backwards and forwards between the 20th and 21st century, and functioning
without error or interruption related to or caused by such Date Data. "Date
Data" means any information relating to dates expressed in days, months and
calendar years.
(b) The Corporation's software product known as the Intelligent
Restaurant Information System (IRIS), when used in conjunction with the
Windows-NT operating system, and in accordance with the Corporation's other
specifications for such software, including without limitation those
specifications related to hardware, is Millennium Capable.
(c) Except as set forth on Schedule 6.27(c), the Corporation's
software product known as Sophisticated Multi-Unit Advanced Restaurant
Technology ("SMART"), when used in conjunction with the DOS operating system and
in accordance with the
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Corporation's other specifications for such software is Millennium Capable. No
representation or warranty is made pursuant to this Section 6.27(c) regarding
the capability of the SMART software to prevent any error or interruption
related to Date Data which is caused by hardware, operating system software or
other computer system components not included in the existing SMART
installations and sold by the Corporation.
6.28 Consents.
Except as set forth on Schedule 6.28, no consent, authorization,
approval, permit or license (each a "Consent") of, or filing with, any
Governmental Authority, any lessor, lender or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of the Selling Parties.
6.29 Adverse Agreements.
The Corporation is not a party to any agreement or instrument, or
subject to any charter or other corporate restriction, or any judgment, order,
writ, injunction, decree, rule or regulation that materially and adversely
affects, or so far as the Corporation can now foresee, may in the future
materially and adversely affect, the condition (financial or otherwise),
operations, assets, liabilities or business of the Corporation.
6.30 Environmental Matters.
(a) Except as used in compliance with Environmental Law and as set
forth in Schedule 6.30, (i) the Corporation has never generated, transported,
used, stored, treated, disposed of, or managed any Hazardous Waste (as defined
below); (ii) no Hazardous Material (as defined below) has ever been or is
threatened to be spilled, released, or disposed of by the Corporation at any
site presently or formerly owned, operated, leased, or used by the Corporation,
or, to the Selling Parties' knowledge, has ever come to be located in the soil
or groundwater at any such site; (iii) to the Selling Parties' knowledge, no
Hazardous Material has ever been transported from any site presently or formerly
owned, operated, leased, or used by the Corporation for treatment, storage, or
disposal at any other place; (iv) there are no underground storage tanks on the
premises of the Corporations' headquarters facility in Charlotte, North Carolina
and, to the Selling Parties' knowledge, the Corporation does not presently own,
operate, lease, or use, nor has the Corporation previously owned, operated,
leased, or used any other site on which underground storage tanks are or were
located; and (v) no lien has ever been imposed by any Governmental Entity on the
property which includes the Corporation's Charlotte, North Carolina headquarters
and, to the Selling Parties' knowledge, no lien has ever been imposed by an
Governmental Entity on any other property, facility, machinery, or equipment
owned, operated, leased, or used by the Corporation in connection with the
presence of any Hazardous Material.
(b) Except as set forth in Schedule 6.30 hereto, (i) the Corporation
has no liability under, nor has the Corporation ever violated in any material
respect, any Environmental Law (as defined below); (ii) the property which
includes the Corporation's Charlotte, North Carolina headquarters is presently
in compliance and, to the Selling parties' knowledge, any other property owned,
operated, leased, or used by the Corporation and any facilities and operations
thereon are presently in compliance in all material respects with all applicable
Environmental Laws and no capital expenditure will be required to maintain such
compliance; (iii) the
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Corporation has never entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law (as defined below);
and (iv) neither the Corporation nor the Shareholder has any reason to believe
that any of the items enumerated in clause (iii) of this paragraph will be
forthcoming.
(c) Except as set forth in Schedule 6.30, the property which
includes the Corporation's Charlotte, North Carolina headquarters does not
contain and, to the Selling Parties' knowledge, no other site owned, operated,
leased, or used by the Corporation contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (pcbs) or equipment containing pcbs, or
any urea formaldehyde.
(d) For purposes of this Section 6.30: (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, or contaminant,
as defined or regulated under any Environmental Law or any other substance which
may pose a threat to the environment or to human health or safety; (ii)
"Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental laws, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, existing as of the date hereof; and (iv) "the
Corporation" shall mean and include the Corporation, its predecessors and all
other entities for whose conduct the Corporation is or may be held responsible
under any Environmental Law.
6.31. Warranty and Related Matters. There are no product liability,
warranty or other similar claims against the Corporation existing or, to the
knowledge of the Selling Parties, threatened in writing, alleging that any of
its products or services are defective or fail to meet any product or service
warranties except as disclosed in Schedule 6.31. The Corporation has not
received notice of any statements, citations, correspondence or decisions by any
Governmental Entity stating that any product manufactured, marketed or
distributed at any time by the Corporation (the "Corporation Products") is
defective or unsafe or fails to meet any product warranty or any standards
promulgated by any such Governmental Entity. There is no (a) latent or overt
design, manufacturing or other defect known to the Selling Parties in any
Product or (b) liability for warranty or other claim or return with respect to
any Corporation Product except in the ordinary course of business consistent
with the past experience of the Corporation for such kinds of claims and
liabilities; provided, however, that this Section 6.31 shall not apply to any
matter related to Date Data.
6.32 Full Disclosure.
None of the representations and warranties made herein by the
Selling Parties, or made in any certificate delivered pursuant to this
Agreement, furnished or to be furnished by them or on their behalf, contain or
will contain any untrue statement of a material fact, or omit any material fact
the omission of which would be misleading.
VI. A. Investment Representations and Warranties of Shareholder.
6A.1 Tridex Shares Restricted.
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Shareholder understands that the Tridex Shares to be issued to Shareholder
will, until registered pursuant to the Registration Rights Agreement, be
restricted and that:
(a) the Tridex Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the laws of any other jurisdiction
and are being sold in reliance upon an exemption from such registration. The
Tridex Shares cannot be sold or transferred by Shareholder unless they are
subsequently registered under applicable law or an exemption from registration
is available. Except as set forth in the Registration Rights Agreement, neither
Tridex nor Buyer is required to register the Tridex Shares nor to make any
exemption from registration available; and
(b) Shareholder's right to sell or transfer Tridex Shares will be
restricted as set forth herein, and the certificates representing the Tridex
Shares may bear a legend, which includes restrictions against sale or transfer
in violation of applicable securities laws, and which requires that Shareholder
furnish an opinion of counsel that any proposed sale or transfer will not
violate such laws and other restrictions and requirements.
6A.2 Information Provided to Shareholder.
Shareholder has: (a) been furnished with all documents and information
concerning Tridex which he has requested; (b) had the opportunity to ask
questions and receive answers from Tridex concerning the Tridex Shares and to
obtain any additional information necessary to verify the accuracy of the
information furnished; and (c) relied only on the foregoing information and
documents in determining to make an investment in the Tridex Shares.
6A.3 Accredited Investor Status.
Shareholder is an "accredited investor," as defined in Rule 501 under the
Securities Act, and is acquiring the Tridex Shares for his own account and not
on behalf of any other person, and is acquiring the Tridex Shares for investment
purposes only, and not with a view to resale or distribution thereof.
Shareholder has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of investing in Tridex.
Shareholder recognizes that the information furnished by Tridex does not
constitute investment, accounting, legal or tax advice. Shareholder is relying
on his own professional advisers, if any, for such advice. Shareholder
recognizes that an investment in the Tridex Shares involves substantial risks
and has determined that the Tridex Shares are a suitable investment.
VII. Representations and Warranties of Tridex and Buyer.
Tridex and the Buyer jointly and severally represent and warrant to the
Shareholder that:
7.1 Corporate Status; Authorization; Consents.
(a) Each of Tridex and the Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
(b) each of Tridex and the Buyer has the full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other
agreements contemplated hereby to which it is a party, and to consummate the
transactions contemplated hereby; (c) upon execution of this Agreement and the
other agreements contemplated hereby to which Tridex or the Buyer is a party,
this Agreement and such other agreements shall constitute the legal and binding
obligations of Tridex or the
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Buyer, as the case may be; (d) no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority is required
to be made or obtained by Tridex or the Buyer in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement.
7.2 SEC Reports and Financial Statements.
Tridex has filed with the SEC, and has heretofore made available to
Shareholder, true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it since December 31,
1996 under the Exchange Act or the Securities Act (such forms, reports,
schedules, statements or schedules included therein, are referred to as the
"Tridex SEC Documents"). The Tridex SEC Documents, at the time filed, (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Except to the extent
that information contained in any Tridex SEC Document has been revised or
superseded by a subsequently filed Tridex Filed SEC Document (as defined in
Section 7.3) (a copy of which has been made available to Shareholder prior to
the date hereof), none of the Tridex SEC Documents contains an untrue statement
of a material fact or omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Tridex included in the Tridex SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q) and fairly present (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position of
Tridex and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
7.3 Absence of Certain Changes or Events.
Except as disclosed in the Tridex SEC Documents filed and publicly
available prior to the Closing (the "Tridex Filed SEC Documents"), since
December 31, 1996, Tridex and its subsidiaries have conducted their respective
business only in the ordinary course, and there has not been (i) any material
adverse change with respect to Tridex, (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to its capital stock
or any redemption, repurchase or other acquisition of any of its capital stock,
(iii) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iv)
any damage, destruction or loss, whether or not covered by insurance, that has
or reasonably could be expected to have a material adverse effect on Tridex or
(v) any material change in accounting methods, principles or practices by
Tridex.
7.4 No Undisclosed Liabilities.
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Except as and to the extent set forth in the Tridex Filed SEC Documents,
neither Tridex nor any of its subsidiaries has any liabilities of any nature,
whether or not accrued, contingent or otherwise, that would be reasonably
expected to have a material adverse effect on Tridex.
VIII. Selling Parties' Obligations before Closing.
From the date of this Agreement until the Closing, the Selling
Parties agree that:
8.1 Access to Premises and Information.
Tridex, the Buyer and their counsel, accountants and other
representatives will have full access during normal business hours to all
properties, books, accounts, records, contracts and documents of or relating to
the Corporation. The Shareholder will furnish or cause to be furnished to
Tridex, the Buyer and their representatives all data and information concerning
the business, finances and properties of the Corporation that are reasonably
requested by Tridex, Buyer or their representatives.
8.2 Conduct of Business in Ordinary Course.
The Corporation will diligently conduct its affairs in the Ordinary
Course of Business, and will not make or institute any unusual or novel methods
of manufacture, purchase, sale, lease, management, accounting or operation that
will vary materially from those methods used by the Corporation during the
twelve (12) month period ending on the date of this Agreement. The obligations
set forth in this section include, but are not limited to, the specific
obligations set forth hereafter in this Article VIII.
8.3 Preservation of Business and Relationships.
The Corporation will use its best efforts to preserve its business
organization intact, to keep available to the Corporation its present officers
and employees and to preserve the Corporation's present relationships with
suppliers, customers and others having material business relationships with the
Corporation.
8.4 Maintenance of Corporate and Tax Status.
The Corporation will not (a) amend its certificate of incorporation
or bylaws; (b) issue any shares of capital stock; (c) issue or create any
warrants, obligations, subscriptions, options, convertible securities, or other
commitments under which any additional shares of its capital stock of any class
might be directly or indirectly authorized, issued or transferred from treasury;
(d) take any action that would likely result in a revocation of its status as a
S-Corporation within the meaning of Section 1361(a) of the Code; or (e) agree to
do any of the acts listed in this Section 8.4(a) through (d) above.
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8.5 Maintenance of Insurance.
The Corporation will maintain its existing insurance policies and
coverage, subject to variations in amounts required by the ordinary operations
of its business. At the request of the Buyer and at the Buyer's sole expense,
the amount of insurance against fire and other casualties which, at the date of
this Agreement the Corporation carries on any of its properties or in respect of
its operations, shall be increased by such amount or amounts as the Buyer
specifies.
8.6 Employees and Compensation.
The Corporation will not do, nor will it agree to do, any of the
following: (a) make any change in compensation payable to or to become payable,
to any officer, employee (except in the Ordinary Course of Business), sales
agent, or representative; or (b) make any change in benefits payable to any
officer, employee (except in the Ordinary Course of Business), sales agent, or
representative under any bonus or pension plan or other contract or commitment.
8.7 New Transactions.
The Corporation will not do, nor will it agree to do any of the
following acts, without the Buyer's prior written consent: (a) enter into any
contract, commitment or transaction not in the Ordinary Course of Business; (b)
enter into any contract, commitment or transaction in the Ordinary Course of
Business involving an amount exceeding $10,000, individually; (c) make any
capital expenditures in excess of $10,000 for any single item, or enter into any
leases of capital equipment or property under which the annual lease charge is
in excess of $10,000; or (d) sell or dispose of any capital assets with a net
book value exceeding $10,000, individually; provided that the Corporation may
sell a 1997 Chevrolet truck to Smith Investments, an Affiliate of the
Shareholder, for no less than its fair market value.
8.8 Dividends, Distributions and Acquisitions of Stock.
The Corporation will not: (a) declare, set aside or pay any
dividend, or make any distribution in respect of, its capital stock, except for
the distribution of up to $300,000 to the Shareholder between January 1, 1998
and the Closing Date; (b) directly or indirectly purchase, redeem or otherwise
acquire any shares of its capital stock; or (c) enter into any agreement
obligating it to do any of the foregoing prohibited acts.
8.9 Payment of Liabilities and Waiver of Claims.
Except as disclosed in Schedule 8.9, the Corporation will not do,
nor will it agree to do, any of the following: (a) pay any obligation or
liability, fixed or contingent, other than current liabilities incurred in the
Ordinary Course of Business; (b) waive or compromise any right or claim in
excess of $10,000; or (c) cancel, without full payment, any note, loan or other
obligation owing to the Corporation.
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8.10 Existing Agreements.
The Corporation will not modify, amend, cancel or terminate any of
its existing material contracts or agreements, or agree to modify, amend, cancel
or terminate any of its existing material contracts or agreements.
8.11 Documentation of Procedures and Trade Secrets.
At the request of the Buyer, the Corporation will document and
describe any of its trade secrets, processes or business procedures specified by
the Buyer in form and content satisfactory to the Buyer.
8.12 Representations and Warranties True at Closing.
Neither the Shareholder nor the Corporation will take, or will agree
to take, any action that will result in any representation or warranty being
untrue or incorrect at any time from the date of this Agreement to the Closing.
8.13 Consents of Others.
As soon as reasonably practical after the execution and delivery of
this Agreement, and in any event on or before the Closing, the Shareholder will
obtain the written consent of the persons described in Schedule 6.28 to this
Agreement and will furnish to the Buyer executed copies of those consents.
8.14. 338(h)(10) Election.
At the request of Tridex, the Selling Parties, Buyer and Tridex shall
jointly make a valid, timely and effective election under Section 338(h)(10) of
the Code with respect to Buyer's purchase of Shares from Shareholder.
IX. Conditions Precedent to Buyer's Performance.
The obligations of the Buyer under this Agreement are subject to the
satisfaction, at or before the Closing, of all the conditions set out below. The
Buyer may waive any or all of these conditions in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by the Buyer of any of the Buyer's other rights or remedies, at law or in
equity.
9.1 Accuracy of Selling Parties' Representations and Warranties.
Except as otherwise permitted by this Agreement, all representations
and warranties by the Selling Parties in this Agreement, or in any written
statement that is delivered to the Buyer pursuant to this Agreement, will be
true in all material respects on and as of the Closing as though made at that
time.
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9.2 Performance by Selling Parties.
The Selling Parties will have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by the Shareholder or the
Corporation on or before the Closing.
9.3 No Material Adverse Change.
During the period from the date hereof until the Closing, there will
not have been any material adverse change in the financial condition, results of
operations or business of the Corporation, and the Corporation will not have
sustained any material loss or damage to its assets, whether or not insured. A
material adverse change in the business of the Corporation includes, but is not
limited to, the occurrence of an event or change in facts or circumstances which
would cause any material assumption underlying the Plan B Financial Forecast
attached hereto as Schedule 9.3 to cease to be accurate and reasonably be
expected to cause total revenues under such plan to be decreased by more than
$1,000,000.
9.4 Audited Financial Statements.
The Shareholder shall have delivered to the Buyer a complete and
accurate copy of the Corporation's financial statements prepared in accordance
with GAAP for the year ended December 31, 1997, audited by McGaladrey & Pullen,
showing net sales of at least $33,707,000, and earnings before interest, taxes,
depreciation and amortization ("EBITDA") of at least $3,700,000.
9.5 Opinion of Selling Parties' Counsel.
The Buyer will have received from Kilpatrick Stockton LLP, counsel
for the Selling Parties, an opinion dated the day of the Closing, in form and
substance satisfactory to the Buyer and the Buyer's counsel, that:
(a) the Corporation is validly existing and in good standing under
the laws of the state of its incorporation and has all necessary corporate power
to own its properties as now owned and to operate its business as now operated;
(b) the authorized capital shares of the Corporation is as set forth
on Schedule 6.2, and, based entirely on a certificate from the Shareholder (as
to which such counsel has no knowledge of any inconsistent facts or
circumstances), all outstanding shares are validly issued, fully paid and
nonassessable, and there are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments obligating
the Corporation to issue or transfer from treasury any additional capital share
of any class;
(c) this Agreement has been duly and validly authorized by the
Corporation and, when executed and delivered by the Selling Parties, this
Agreement will be valid and binding on the Selling Parties and enforceable in
accordance with its terms, except as limited by general principles of equity,
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally, and public policy;
(d) based entirely on a certificate from the Shareholder (as to
which such counsel has no knowledge of any inconsistent facts or circumstances),
the Shareholder owns,
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beneficially and of record, all the issued and outstanding capital shares of the
Corporation free and clear of all liens, encumbrances, equities, options,
claims, charges and restrictions, and the Shareholder has full power to transfer
such shares to the Buyer without obtaining the consent or approval of any other
person or Governmental Authority;
(e) except as disclosed in Schedule 6.19, counsel has no knowledge,
without independent investigation, of any suit, action, arbitration, or legal,
administrative or other proceeding or governmental investigation pending or
threatened against, or affecting the Corporation business or properties, or
financial or other condition;
(f) neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated in this Agreement will constitute
(i) a default or an event that would, with notice or passage of time, or both,
constitute a default under, or violation or breach of, the Corporation's
certificate of incorporation, bylaws, or to such counsel's knowledge, any
indenture, license, lease, franchise, mortgage, instrument or other agreement
identified on the Schedules to this Agreement to which the Corporation is a
party or by which the properties of the Corporation may be bound, or (ii) to
such counsel's knowledge, an event that would permit any party to any such
agreement or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of the Corporation, or (iii) to such counsel's
knowledge, an event that would result in the creation or imposition of any lien,
charge or encumbrance on any asset of any of the Corporation; and
(g) to such counsel's knowledge, every consent, approval,
authorization or order of any court or governmental agency or body that is
required for the consummation by the Corporation and the Shareholder of the
transactions contemplated by this Agreement has been obtained and is in effect
on the day of the Closing.
9.6 Absence of Litigation.
No action, suit or proceeding before any court or any governmental
body or authority, challenging the transactions contemplated by this Agreement,
will have been instituted or threatened on or before the Closing.
9.7 Buyer's Acquisition Financing. The Buyer shall have closed
transactions providing financing in an amount totaling at least Thirty-One
Million Dollars ($31,000,000), consisting of senior bank financing and
subordinated debt financing from institutional investors, subject only to
completion of the Closing hereunder; provided, however, that if all conditions
set forth in this Article IX other than this Section 9.8 have been satisfied or
waived and the Closing has not occurred on or before April 31, 1998, Tridex
shall pay to the Corporation the sum of One Hundred and Fifty Thousand Dollars
($150,000) plus, upon presentation of invoices for reasonable professional fees
and expenses greater than $150,000 incurred by the Corporation solely in
connection with the transactions described in this Agreement, an additional
payment of up to Fifty Thousand Dollars ($50,000) to reimburse the Corporation
for its actual expenses in an aggregate amount not to exceed Two Hundred
Thousand Dollars ($200,000).
9.8 Payoff of Corporation Loans to Shareholder and Affiliates. Any and
all loans or advances from the Corporation to the Shareholder, Smith
Investments, Inc. or any other Affiliate of the Shareholder shall be paid in
full, with such payment documented to the reasonable satisfaction of Buyer.
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9.9 Consents.
Each of the Consents listed on Schedule 6.28, including but not limited to
the Consents of McDonald's Corporation and Micros Systems, Inc., shall have been
obtained by the Corporation, provided that the Corporation shall not be required
to obtain a consent from the landlord of its Colorado office.
9.10 Release of IBM Lien.
The Corporation shall have obtained, subject only to the payment in full
of amounts due under the IBM Credit Agreement, a release and termination on
UCC-3 for each financing statement on UCC-1 on record regarding the security
interest securing the loan under the IBM Credit Agreement (the "IBM Releases").
9.11 Headquarters Lease.
The Shareholder shall cause the Smith Family Limited Partnership, the
landlord (the "Landlord") under the lease for the Corporation's headquarters in
Charlotte, North Carolina to obtain from the Landlord's mortgage lender a
subordination, non-disturbance and attornment Agreement among such lender,
Landlord and the Corporation, in form reasonably satisfactory to Tridex and
Buyer. In addition, if Tridex receives a report from a qualified independent
leasing professional, mutually acceptable to Shareholder and Tridex, that the
fair market rent for the headquarters facility is less than $28,500, the
Shareholder shall cause the Landlord to amend such lease to reduce the rent to
the fair market rent.
9.12 Auto Leases.
The Corporation shall terminate or assign, and shall have paid to the
lessor all fees, charges and penalties required in connection such termination
or assignment, all leases to which the Corporation is a party or for which it is
otherwise liable for motor vehicles, other than the two (2) 1996 Honda vans, the
two (2) 1998 Ford vans and the one (1) 1996 GMC Yukon truck.
X. Conditions Precedent to Shareholder's Performance.
The obligations of the Shareholder under this Agreement are subject
to the satisfaction, at or before the Closing, of the following conditions:
10.1 Accuracy of Buyer's Representations and Warranties.
All representations and warranties by the Buyer contained in this
Agreement, or in any written statement delivered by the Buyer pursuant to this
Agreement, will be true in all material respects on and as of the Closing Date
as though such representations and warranties were made on and as of that date.
10.2 Buyer's Performance.
The Buyer will have performed and complied in all material respects
with all covenants and agreements and satisfied all conditions which it is
required by this Agreement to perform, comply with or satisfy, before or at the
Closing.
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10.3 Opinion of Buyer's Counsel.
The Shareholder will have received from Hinckley, Allen & Snyder,
counsel for the Buyer, an opinion dated the day of the Closing, in form and
substance satisfactory to the Shareholder and counsel for the Selling Parties,
to the effect that: (a) the Buyer is a corporation in good standing under the
laws of the State of Connecticut and has all requisite corporate power and
authority to perform its obligations under this Agreement; (b) all corporate
proceedings required by law or by the provisions of this Agreement to be taken
by the Buyer on or before the Closing, in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement, have been duly and validly taken; (c) the Buyer has the
corporate power and authority to acquire the Shares for the consideration set
forth in this Agreement; (d) this Agreement, the Registration Rights Agreement
(as defined in Section 10.4) and the Consulting and Employment Agreement (as
defined in Section 11.2(a)) have been duly and validly authorized by Buyer and,
when executed and delivered by the Buyer, will be valid and binding on the Buyer
and enforceable in accordance with their respective terms, except as limited by
general principles of equity, bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally, and public policy; (e) every
consent, approval, authorization or order of any court or governmental agency or
body that is required for the consummation by the Buyer of the transactions
contemplated by this Agreement has been obtained and is in effect on the day of
the Closing (f) the Tridex Shares, when issued, will be duly authorized, validly
issued, fully paid and nonassessable.
10.4 Registration Rights Agreement.
The Buyer will have executed a Registration Rights Agreement (the
"Registration Rights Agreement") substantially in the form of Exhibit B between
the Buyer and Shareholder covering the Tridex Shares.
10.5 Absence of Litigation.
No action, suit or proceeding before any court or any governmental
body or authority, challenging the transaction contemplated by this Agreement or
to its consummation, will have been instituted or threatened on or before the
Closing.
XI. Closing.
11.1 Time and Place.
The consummation of the sale and purchase of the Shares by the
Shareholder and the Buyer pursuant to this Agreement (the "Closing") will take
place at the offices of Hinckley, Allen & Snyder, 28 State Street, Boston,
Massachusetts 02109 beginning at 10:00 a.m. on April 3, 1998, or at such other
time and place to which the parties may agree in writing (the "Closing Date"),
but in no event later than April 3, 1998.
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11.2 Shareholder's Obligations at the Closing.
At the Closing, the Shareholder will deliver to the Buyer the
following, all documents to be in form and substance reasonably satisfactory to
the Buyer and the Buyer's counsel:
(a) A certificate or certificates representing the Shares,
registered in the name of the Shareholder duly endorsed for transfer to the
Buyer and accompanied by stock powers or other instrument of assignment of the
Shares to the Buyer duly executed by the Shareholder.
(b) The Corporation's minute book showing all of the Corporation's
corporate records with respect to all proceedings, consents, actions and
meetings of the shareholders and board of directors of the Corporation and the
corporate seal of the Corporation.
(c) The opinion of counsel to the Corporation and Shareholder as
provided in Section 9.5.
(d) A certificate of the president and treasurer of the Corporation
and the Shareholder respecting the continued truth of the Selling Parties'
representations and warranties, the performance by the Selling Parties of, or
the compliance by the Selling Parties with, any covenant or obligation required
to be performed or complied with by the Selling Parties and the absence of any
change in the financial condition or results of operations of the Corporation,
except changes occurring in the Ordinary Course of Business during the period
from the Balance Sheet Date to the Closing that, in the aggregate, are not
materially adverse, and such other changes or transactions, if any, as
contemplated by this Agreement.
(e) A certificate of the secretary of the Corporation regarding the
votes taken to authorize the transactions contemplated under this Agreement and
the incumbency of the offices of the Corporation.
(f) Except as otherwise specified by the Buyer, the written
resignations of all the officers and directors of the Corporation.
(g) A Consulting Agreement between the Corporation and the
Shareholder substantially in the form attached hereto as Exhibit C (the
"Employment and Consulting Agreement"), and an Employee IP Agreement, each duly
executed by the Shareholder.
(h) Employment Agreements between each employee of the Corporation
listed on Exhibit D-1 (each a "Key Employee") and the Corporation substantially
in the form attached hereto as Exhibit D-2 (the "Key Employee Agreements"), duly
executed by the Key Employees.
(i) The Escrow Agreement, duly executed by the Shareholder.
(j) The Registration Rights Agreement, substantially in the form of
Exhibit B attached hereto, duly executed by the Shareholder.
(k) A General Release executed by the Shareholder, dated the day of
the Closing, to be in form and substance reasonably satisfactory to counsel for
the Shareholder and the Buyer.
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(l) All consents, elections and other documentation or filings which
the Buyer reasonably believes to be required or advisable in connection with the
making of an election to have the transaction under this Agreement taxed under
the provisions of Section 338(h)(10) of the Code with respect to the
Corporation, together with a limited power of attorney irrevocably authorizing
the Buyer to file the same with the Internal Revenue Service.
(m) The Consents listed on Schedule 6.28.
(n) All documents, including but not limited to votes of the board
of directors of the Corporation and signature cards, necessary to redesignate
the officers and employees who will have authority with respect to the bank
accounts identified on Schedule 6.25.
(o) The amendment of the lease, executed by the Landlord, and the
subordination, nondisturbance and attornment agreement, executed by the Landlord
and its mortgage lender, as set forth in Section 9.11.
(p) Documentation of the termination or assignment of automotive
leases, as set forth in Section 9.12.
(q) The IBM Releases.
11.3 Buyer's Obligations at the Closing.
At the Closing, the Buyer will pay the Closing Cash Payment as
provided in Section 4.1(b) and will deliver to the Shareholder the following:
(a) A certificate for the Tridex Shares, substantially in the form
attached hereto as Exhibit E, including the legends placed on the reverse
thereof.
(b) A certificate of the president and treasurer of the Corporation
respecting the continued truth of the Buyer's representations and warranties,
the performance by the Buyer of, or the compliance by Buyer with, any covenant
or obligation required to be performed or complied with by the Buyer.
(c) A certificate of the secretary of the Buyer regarding the votes
taken to authorize the transactions contemplated under this Agreement (including
the initial election of Shareholder to the Board of Directors of the Buyer) and
the incumbency of the officers of the Buyer.
(d) The opinion of the counsel as provided in Section 10.3.
(e) The Employment and Consulting Agreement between the Corporation
and the Shareholder, duly executed by the Corporation.
(f) The Key Employee Agreements. duly executed by the Corporation.
(g) The Escrow Agreement, duly executed by the Buyer and the Escrow
Agent.
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(h) The Registration Rights Agreement, duly executed by the Buyer.
XII. Indemnity.
12.1 Indemnification by the Shareholder. Subject to the other provisions
of this Article XII, the Shareholder shall indemnify and hold Tridex, Buyer,
their Affiliates and their respective employees, representatives, officers,
directors and agents (the "Buyer Indemnitees") harmless from and against any and
all Damages suffered by any Buyer Indemnitee arising out of:
(a) the breach of any representation or warranty made by any of the
Selling Parties in this Agreement or in any certificate delivered by any of the
Selling Parties at the Closing;
(b) the breach of any covenant by any of the Selling Parties in this
Agreement; or
(c) after the Closing Date, the failure by any of the Selling
Parties to perform any of their respective obligations under this Agreement;
provided, however, that no claim for indemnification under this Section 12.1
shall be made by the Buyer Indemnitees unless and until the Buyer Indemnitees
have incurred Damages in excess of One Hundred Thousand ($100,000) (the "Buyer
Threshold Amount"). Once the Buyer Indemnitees have incurred Damages in excess
of the Threshold Amount, the Buyer Indemnitees shall be entitled to
indemnification for all Damages suffered by the Buyer Indemnitees. In no event
shall the Shareholder's obligations for indemnification under this Section 12.1
exceed Five Million Dollars ($5,000,000) and in no event shall Shareholder's
obligations for indemnification with respect to Section 6.27 exceed Seven
Hundred Fifty Thousand Dollars ($750,000). Except for claims regarding a breach
of Sections 6.3, 6.8 and 6.27, the Buyer Indemnitees shall not be permitted to
make claims after the first anniversary of the Closing Date, provided that any
liability with respect to any claim, or notice of proposed claim, that is made
in writing prior to the first anniversary of the Closing Date shall survive
until finally determined and paid. The Buyer Indemnitees shall be permitted to
make claims regarding a breach of Sections 6.3 until, but not later than, the
second anniversary of the Closing Date, provided that any liability with respect
to any such claim, or notice of proposed claim, that is made in writing prior to
the second anniversary of the Closing Date shall survive until finally
determined and paid. The Buyer Indemnitees shall be permitted to make claims
regarding a breach of Section 6.8 or 6.27 until, but not later than, the third
anniversary of the Closing Date, provided that any liability with respect to any
such claim, or notice of proposed claim, that is made in writing prior to the
third anniversary of the Closing Date shall survive until finally determined and
paid.
12.2 Indemnification by Buyer. Subject to the other provisions of this
Article XII, Buyer shall indemnify and hold the Shareholder, and his heirs,
executors, personal representatives, successors and assigns (the "Shareholder
Indemnitees") harmless from and against any Damages suffered by any Seller
Indemnitee arising out of:
(a) the breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer at the Closing;
(b) the breach of any covenant by Buyer in this Agreement or in any
other agreement executed and delivered at the Closing;
(c) after the Closing Date, the failure by Buyer to perform any of
its obligations under this Agreement provided, however, that no claim for
indemnification under this Section
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12.2 shall be made by the Shareholder Indemnitees unless and until the
Shareholder Indemnitees have incurred Damages in excess of One Hundred Thousand
Dollars ($100,000) (the "Shareholder Threshold Amount"). Once the Shareholder
Indemnitees have incurred Damages in excess of the Threshold Amount, the
Shareholder Indemnitees shall be entitled to indemnification for all Damages
suffered by the Shareholder Indemnitees. In no event shall the Buyer's
obligations for indemnification under this Section 12.2 exceed Five Million
Dollars $5,000,000. The Shareholder Indemnitees shall not be permitted to make
claims after the first anniversary of the Closing Date, provided that any
liability with respect to any such claim, or notice of proposed claim, that is
made in writing prior to the first anniversary of the Closing Date shall survive
until finally determined and paid.
12.3 Notice and Resolution of Claims.
Each indemnified party (a "Beneficiary") shall promptly give written
notice to the indemnifying party after obtaining knowledge of any claim that the
Beneficiary may have pursuant to this Article XII. Such notice shall set forth
in reasonable detail the claim and the basis for indemnification. The
indemnifying party shall have thirty (30) days within which to review the notice
provided by the Beneficiary. If the indemnifying party agrees to pay the claim
for indemnification as presented, the indemnifying party shall promptly pay the
Beneficiary the amount of such claim. If the indemnifying party disputes the
claim, the indemnifying party shall provide written notice of such dispute to
the Beneficiary prior to the expiration of the thirty (30) day review period. If
the indemnifying party and the Beneficiary cannot resolve such dispute through
negotiation within thirty (30) days of the date of the indemnifying party's
notice of dispute, the parties shall submit the dispute to binding arbitration
under the rules of, and before the American Arbitration Association in
Baltimore, Maryland (the "Arbitration"). The decision of the Arbitration shall
be final and binding upon the indemnifying party and the Beneficiary. The
indemnifying party and the Beneficiary shall share equally the fees, costs and
expenses of the Arbitration. If the indemnifying party fails to dispute the
claim for indemnification within the thirty (30) day review period, the claim
shall be paid by the indemnifying party to the Beneficiary in the amount
originally claimed. If the indemnifying party and the Beneficiary are able to
resolve a disputed claim, the claim shall be paid in the amount agreed. If a
disputed claim is arbitrated, the claim shall be paid by the indemnifying party
in the amount determined by the Arbitration. Failure to dispute a claim,
resolution of a dispute through negotiation of the parties, or the decision of
the Arbitration shall constitute final determination of a claim for
indemnification (in each instance, an "Allowed Claim"). The indemnifying party
shall promptly pay or reimburse the Beneficiary, as appropriate, the amount of
an Allowed Claim. The Shareholder acknowledges and agrees that the Buyer shall
have the right to offset against any amounts due the Shareholder, the full
amount of any and all Allowed Claims made by Buyer against the Selling Parties;
provided that Buyer has made written demand for payment by the Shareholder of a
finally determined claim, and such claim remains unpaid ten (10) days after such
demand.
12.4 Right to Assume Defense.
If a claim for indemnity shall arise from a claim or action
involving a third party (a "Third Party Claim"), the Beneficiary shall permit
the indemnifying party to assume its defense. If the indemnifying party assumes
the defense of such Third Party Claim, it shall take all reasonable steps
necessary to investigate, defend or settle such claim and, to the extent
required by this Agreement, shall hold the Beneficiary harmless from and against
any and all Damages caused by or arising out of any settlement approved by the
indemnifying party or any
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judgment in connection with such Third Party Claim. Without the written consent
of the Beneficiary, the indemnifying party shall not consent to entry of any
judgment or enter into any settlement that does not include an unconditional and
complete release of the Beneficiary with respect to the Third Party Claim by the
claimant making the Third Party Claim. The Beneficiary may participate in such
defense or settlement through its own counsel, but at its own expense. Any
settlement shall be subject to the Beneficiary's consent, which consent shall
not be unreasonably withheld or delayed.
12.5 Insurance Proceeds. Notwithstanding any other provision of this
Section XII to the contrary, the Buyer Indemnitees shall not be entitled to any
recovery from the Shareholder under this Section XII for any Damages which are
attributable to matters for which any Buyer Indemnitee has received, or is
entitled to receive, proceeds of insurance under a policy which was in effect at
the Closing with respect to the matter for which indemnification is otherwise
available hereunder, provided that the availability of insurance coverage for
any such claim shall not require a Buyer Indemnitee to make or prosecute an
insurance claim as a condition to exercising rights to receive indemnification
from Shareholder under this Section XII.
XIII. Publicity.
13.1 Subject to the Buyer's obligations under the Exchange Act and other
applicable Legal Requirements, all public announcements and notices to third
parties concerning the transactions contemplated by this Agreement will be
jointly planned, coordinated and approved by the Buyer and the Shareholder. No
party will act unilaterally in this regard without the prior approval of the
other; however, this approval will not be unreasonably withheld or delayed.
XIV. No Broker.
14.1 Each of the parties represents and warrants that it has not dealt
with any broker or finder in connection with any of the transactions
contemplated by this Agreement and, insofar as each party knows, no broker or
other person is entitled to any commission or finder's fee in connection with
any of these transactions. Tridex has engaged Lehman Brothers, Inc. to act as
its financial advisor for purposes of this transaction, and Tridex is
responsible for payment of any and all fees, commissions and expenses of Lehman
Brothers, Inc., and agrees to indemnify and hold the Shareholder harmless for
any and all fees, commissions and expenses due to Lehman Brothers, Inc.
XV. Expenses.
15.1 Each party will pay all costs and expenses incurred or to be
incurred by the party in negotiating and preparing this Agreement and in closing
and carrying out the transactions contemplated by this Agreement. Seller will
pay all state and local Taxes due as a result of the purchase and sale
hereunder.
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XVI. Entire Agreement; Amendment; Waiver.
16.1 This Agreement and the schedules and exhibits attached hereto
constitute the entire agreement between the parties pertaining to the subject
matter contained in it, and supersede all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement will be binding unless executed in writing by all
of the parties. No waiver of any of the provisions of this Agreement will be
effective unless in writing; no waiver will constitute a waiver of any other
provision; and no waiver of a breach of any provision of this Agreement will
operate to waive any subsequent breach.
XVII. Counterparts.
17.1 This Agreement may be executed in one or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
XVIII. Parties in Interest.
18.1 Nothing in this Agreement, whether express or implied, is intended
to confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement, nor
will any provision give any third persons any right of subrogation or action
against any party to this Agreement.
XIX. Successors and Assigns.
19.1 This Agreement will be binding on, and will inure to the benefit of,
the parties and their respective successors, assigns, heirs or personal
representatives.
XX. Further Assurances.
20.1 The Shareholder from time to time will execute and deliver such
additional documents and instruments and take such additional actions as may be
necessary to carry out the transactions contemplated by this Agreement
including, but not limited to, any documents required to complete or confirm the
assignment and transfer by the Shareholder to the Corporation of any and all
right, title and interest he has or had, at any time, to the Intellectual
Property of the Corporation.
XXI. Survival.
21.1 All representations, warranties, covenants and agreements of the
Parties contained in this Agreement, or in any instrument, certificate or
opinion provided for herein, will survive the Closing, subject to the limits set
forth in Section XII.
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XXII. Notices.
22.1 Any notice, consent, approval or other communication required or
permitted hereunder will be in writing and will be given (i) by delivery in
person, (ii) by certified mail, return receipt requested, (iii) by commercial
overnight courier, or (iv) by facsimile transmission (telecopy) (with telephone
confirmation of receipt), as follows:
(a) If to the Shareholder, to -
Mr. Paul J. Smith
2214 Hogan Court
Charlotte, NC 28227
with a copy to:
E. Lynwood Mallard, Esq.
Kilpatrick Stockton LLP
3500 One First Union Center
301 South College Street
Charlotte, NC 28202-6001
Tel: (704) 338-5002
Fax: (704) 338-5125
(b) If to the Buyer and/or Tridex, to -
Tridex NC, Inc. and/or
Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attn: Seth M. Lukash
President and Chief Executive Officer
Tel: (203) 226-1144
Fax: (203) 226-8806
with a copy to -
Stephen J. Carlotti, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
Tel: (401) 274- 2000
Fax: (401) 277-9600
or to such other address for any of the above as may be designated by notice to
the others. Any such notice or other communication will be considered to have
been given (i) on the date of delivery in person, (ii) on the fifth day after
mailing by certified mail, provided that receipt of delivery is confirmed in
writing, (iii) on the first business day following delivery to a commercial
overnight courier, or (iv) on the day of facsimile transmission (telecopy),
provided that the giver of the notice obtains telephone confirmation of receipt.
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XXIII. Governing Law
23.1 This Agreement and the performance thereof will be construed in
accordance with, and governed by, the laws of the State of Connecticut.
XXIV. Severability.
24.1 If any provision of this Agreement is held invalid or unenforceable
by any court of final jurisdiction, it is the intent of the parties that all
other provisions of this Agreement be construed to remain fully valid,
enforceable and binding on the parties.
XXV. Guarantee of Tridex
25.1 Tridex hereby guarantees the payment and performance by Buyer of all
of its liabilities and obligations hereunder, in accordance with and subject to
the terms and conditions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
SELLING PARTIES:
PROGRESSIVE SOFTWARE, INC.
- -------------------------------
PAUL J. SMITH
BY:
- ------------------------------- -------------------------------
Paul J. Smith,
President and
Chief Executive Officer
BUYER
TRIDEX NC, INC. TRIDEX CORPORATION
By:
---------------------------- ------------------------------------
Seth M. Lukash, Seth M. Lukash
President President and Chief Executive Officer
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of April 17,
1998, is by and between Tridex Corporation (the "Company"), a Connecticut
corporation, and Paul J. Smith, an individual residing at 2214 Hogan Court,
Charlotte, North Carolina 28227 ("Holder").
Preliminary Statement
In consideration of that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") by and among the parties hereto, Progressive Software,
Inc., a North Carolina corporation ("Progressive"), and Tridex NC, Inc., a
wholly owned North Carolina subsidiary of the Company (the "Buyer"), dated as of
the date hereof, the Company has issued to the Holder 714,000 shares of common
stock, without par value (the "Common Stock"), of the Company.
The parties wish to set forth herein certain agreements and understandings
relating to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of the shares of Common Stock held by the Holder, including
any additional shares of Common Stock or other securities of which the Company
is the issuer that may hereafter be issued in respect of such shares or upon
conversion of or in exchange for such shares or other securities (collectively,
the "Covered Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
independent covenants contained herein, the parties hereto hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, capitalized terms not otherwise
defined shall have the same meaning herein as provided in the Stock Purchase
Agreement and the following capitalized terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Demand Registration" See Section 2(a)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the Holder identified in the introductory paragraph to this
Agreement or such other Person to whom such Holder shall have assigned or
transferred such Holder's Registrable Securities in accordance with the Stock
Purchase Agreement and Section 12(e) of this Agreement.
"Indemnified Party" See Section 8(c).
"Indemnifying Party" See Section 8(c).
"Piggyback Registration" See Section 3(a)(i).
"registered" and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act (other than a registration statement
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on Form S-4 or S-8 or any comparable form) and the declaration or ordering by
the Commission of effectiveness of such registration statement.
"Registrable Securities" means (a) the shares of Common Stock issued or
issuable to the Holder upon the closing of the transactions contemplated by the
Stock Purchase Agreement and (b) any securities of the Company issued as a
dividend or other distribution with respect to, or in exchange for a replacement
of, the securities referred to in clause (a).
"Registration Expenses" See Section 7(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Purchase Agreement" means that certain Stock Purchase Agreement of
even date herewith by and between the Company, the Buyer, the Holder, and
Progressive Software, Inc.
"Underwriters' Maximum Number" means for any Piggyback Registration,
Demand Registration or other registration which is an underwritten registration,
that number of securities to which such registration should be limited, in the
opinion of the managing underwriters of such registration.
2. Demand Registration.
(a) Request for Demand Registration.
(i) Subject to the limitations contained in the following
paragraphs of this Section 2, the Holder may at any time after the date hereof,
give to the Company, pursuant to this clause (i), a written request (a "Demand
Notice") for the registration by the Company under the Securities Act of all or
any part of the Registrable Securities then owned by the Holder (such
registration being herein called a "Demand Registration").
(ii) Subject to the limitations contained in the following
paragraphs of this Section 2, after the receipt of such Demand Notice, the
Company will use its best efforts in good faith to cause the Demand Registration
to become effective as soon as practicable after the date of filing and to keep
such Demand Registration continuously effective until all or any portion of the
Registrable Securities are eligible for sale by the Holder under Rule 144(k)
under the Securities Act in order to permit the prospectus forming a part
thereof to be usable by Holder during such period. The Company will use its best
efforts in good faith to register such shares in connection with an underwritten
offering if an underwritten offering is requested by the Holder.
(iii) The Holder shall be permitted to withdraw all or any
part of the Registrable Securities from any Demand Registration at any time
prior to the effective date of such Demand Registration; provided, however, that
if such Demand Registration is withdrawn as a result of the Holder's withdrawal,
it shall nonetheless count as a Demand Registration for purposes of Section 2(b)
hereof, unless the Holder reimburses the Company for all Registration Expenses
incurred by it in connection with such Demand Registration.
(b) Limitations on Demand Registration.
(i) The Holder will not be entitled to require the Company to
effect more than one (1) Demand Registrations pursuant to Section 2(a). If a
Demand Registration
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would be eligible for registration on Form S-3, the Company may effect such
Demand Registration pursuant to Form S-3. The Registration Expenses for each
Demand Registration, if any, will be borne and paid by the Company.
(ii) Any registration initiated by the Holder as a Demand
Registration pursuant to Section 2(a) hereof shall not count as a Demand
Registration for purposes of Section 2(b)(i) hereof unless and until such
registration shall have been declared effective by the Securities and Exchange
Commission.
(iii) The Company shall not be obligated or required to effect
the Demand Registration of any Registrable Securities pursuant to Section 2(a)
hereof (A) within ninety (90) days after the Closing Date (as defined in the
Stock Purchase Agreement), unless prior to the expiration of that ninety-day
period the Company and its accountants shall have been able to secure from
Progressive and its accountants information necessary to file financial
statements required by SEC Regulation SK, and (B) during the period commencing
on the date falling 60 days prior to the Company's estimated date of filing of,
and ending on the date 180 days following the effective date of, any
registration statement pertaining to any underwritten registration initiated by
the Company, for the account of the Company, if the written request of the
Holder for such Demand Registration pursuant to Section 2(a)(i) hereof is
received by the Company after the Company has given to the Holder a written
notice stating that the Company is commencing an underwritten registration,
provided, however, that the Company will use its best efforts in good faith to
cause any such registration statement to be filed and to become effective as
expeditiously as shall be reasonably possible.
(c) Priority on Demand Registration. If the managing underwriters in
any Demand Registration pursuant to this Section 2 shall give written advice to
the Company and the Holder of an Underwriters' Maximum Number, then: (i) the
Company will be obligated and required to include in such registration that
number of Registrable Securities requested by the Holder which does not exceed
the Underwriters' Maximum Number; (ii) if the Underwriters' Maximum Number
exceeds the number of Registrable Securities requested by the Holder to be
included in such registration, then the Company will be entitled to include in
such registration that number of shares of Common Stock or other securities
which shall have been requested by the Company to be included in such
registration for the account of the Company and which shall not be greater than
such excess. The Company shall not be entitled to include any shares of Common
Stock in any underwritten Demand Registration unless the Company shall have
agreed in writing to sell such securities on the same terms and conditions as
shall apply to the Registrable Securities to be included in such Demand
Registration. An underwritten Demand Registration shall not, without the consent
of the Holder, include any shares other than Registrable Securities and shares
of Common Stock sold for the account of the Company.
(d) Selection of Underwriters. If any Demand Registration or any
registration effected pursuant to Section 2 hereof is a firm commitment or a
best efforts underwritten offering, the investment bankers and managing
underwriters for such offering will be selected by the Company, subject to the
approval of the Holder, or, if the investment bankers and managing underwriters
selected by the Company decline to underwrite the Demand Registration, the
investment bankers and managing underwriters will be selected by the Holders,
subject to the approval of the Company. In either case, approval shall not be
unreasonably withheld or delayed.
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3. Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) the Company proposes to
register any of its equity securities under the Securities Act for its own
account (each such registration not withdrawn or abandoned prior to the
effective date thereof being herein called a "Piggyback Registration"), the
Company will give written notice (the "Piggyback Notice") to the Holder of such
proposal not later than 20 days prior to the anticipated filing date of such
Piggyback Registration.
(ii) Subject to the provisions contained in paragraphs (b) and
(c) of this Section 3 and in the last sentence of this Section 3(a)(ii), (A) the
Company will be required to include in each Piggyback Registration all
Registrable Securities with respect to which the Company shall receive from the
Holder, within 10 days after the date Piggyback Notice, the written request of
the Holder for inclusion in such Piggyback Registration, and (B) the Company
will use its best efforts in good faith to effect promptly the registration of
all such Registrable Securities. The Holder shall be permitted to withdraw all
or any part of the Registrable Securities of the Holder from any Piggyback
Registration at any time prior to the effective date of such Piggyback
Registration but only if the Holder is permitted to do so by the managing
underwriters or pursuant to any agreement therewith. The Company will not be
obligated or required to include any Registrable Securities in any registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 of the Commission is applicable.
(b) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration initiated by the Company, and the
managing underwriters shall give written advice to the Company of an
Underwriters' Maximum Number, then the number of Registrable Securities to be
offered for the account of the Holder shall be reduced (or excluded) as provided
below to the extent necessary to reduce the total amount of the securities to be
included in the offering to the Underwriters' Maximum Number, provided that the
number of shares to be included in an underwritten Piggyback Registration for
the account of any selling security holders, including the Holder, shall be
subject to reduction pro rata, based on the number of shares which each selling
security holder has requested to be included in such Piggyback Registration.
(c) Selection of Underwriters. In any Piggyback Registration, the
Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
4. Lockup Agreement. In the case of an underwritten offering pursuant to
which the Holder offers Registrable Securities, the Holder will not, without the
prior written consent of the Company or the managing underwriters, effect any
sale or other distribution of any equity securities of the Company, including
any sale pursuant to Rule 144, during the period from the date of any Demand
Notice or Piggyback Notice until the expiration of any customary lockup period,
up to one hundred eighty (180) days, required by the managing underwriters
following the effective date of such underwritten registration, except in
connection with such underwritten registration. In addition, for the period, if
any, during which the Holder serves as a director of the Company, and for ninety
(90) days after he ceases to so serve, the Holder shall comply with the
Company's policy regarding trading by officers, directors and employees.
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5. Registration Procedures. If (and on each occasion that) the Company
shall become obligated hereunder to effect any registration of any Registrable
Securities, the Company will use its best efforts in good faith to effect
promptly the registration of such Registrable Securities and to permit the
public offering and sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and, in connection therewith, the
Company, as expeditiously as shall be reasonably possible, will:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective as soon as practicable following
the filing thereof (provided, that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
one counsel, selected by the Holder, copies of all such documents proposed to be
filed, which documents will be subject to the timely review of such counsel);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
not more than six (6) months, and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement during such effective period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by each such
seller and, pursuant to Rule 153 under the Securities Act, promptly deliver to
each national securities exchange on which shares of the Company's Common Stock
are voted, copies of each prospectus filed under Rule 424 under the Securities
Act;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided that the Company will not be required (i) to qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (d), (ii) to subject itself to taxation in any
such jurisdiction or (iii) to consent to general service of process in any such
jurisdiction;
(e) promptly notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and the Company will promptly prepare (and, when completed, give
notice to each seller of Registrable Securities) and file with the Securities
and Exchange Commission a supplement or amendment to such prospectus or Demand
Registration so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading; that upon such notification by the Company, each seller
of such Registrable Securities will not offer or sell such Registrable
Securities until the Company has notified such seller that it has prepared a
supplement or amendment to such prospectus and
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delivered copies of such supplement or amendment to such seller; provided that
the number of trading days on which the Holder may be required by the Company
not to offer or sell Registrable Securities pursuant to this Section 5(e) shall
not exceed 45 days in any twelve (12) month period;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be quoted for trading on the Nasdaq Stock
Market if then eligible;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) in order to expedite or facilitate the disposition
of such Registrable Securities;
(i) make available for inspection on a confidential basis by the
Holder, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Holder or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply on a confidential
basis all information reasonably requested by the Holder or any such
underwriter, attorney, accountant or agent in connection with such registration
statement prior to its effectiveness;
(j) permit the Holder to participate in the preparation of such
registration or comparable statement;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, the Company will use its best efforts promptly to obtain the
withdrawal of such order.
(l) to extent practicable, promptly prior to filing any document
that is to be incorporated by reference into any Registration Statement or
prospectus forming a part thereof, and in any event no later than the date such
document is filed, provide copies to the Holder if requested, and make
representatives available for discussion of such documents and other customary
due diligence matters.
(m) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of any registration of the Registrable
Securities hereunder, or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction;
(n) if requested by the Holder, or any underwriter, promptly
incorporate in such registration statement or prospectus, pursuant to a
supplement or post effective amendment if necessary, such information as the
Holder and any underwriter may reasonably request to have included therein,
including, without limitation, information relating to the "plan of
distribution" of the Registrable Securities, information with respect to the
principal amount or number of shares of Registrable Securities being sold to
such underwriter, the purchase price being paid
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therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering and make all required filings of any such prospectus
supplement or post-effective amendment as soon as practicable after the Company
is notified of the matters to be incorporate in such prospectus supplement or
post effective amendment; and
(o) from time to time, provide such opinions of counsel,
certificates and any other documentation, and take such actions, including
entering into such agreements, as are reasonably requested by any Holder in
connection with any sale by a Holder of Registrable Securities covered by a
registration statement hereunder.
6. Cooperation by Holder.
(a) The Holder will furnish to the Company in writing such
information as the Company may reasonably require from the Holder, and otherwise
reasonably cooperate with the Company in connection with any registration
statement with respect to such Registrable Securities.
(b) The failure of any Holder to furnish any information or
documents in accordance with any provision contained in this Agreement shall not
affect the obligations of the Company under this Agreement to any other Holder
who furnishes such information and documents unless in the reasonable opinion of
counsel to the Company or the underwriters, such failure impairs or may impair
the viability of the offering or the legality of the registration statement or
the underlying offering.
(c) The Holder of Registrable Securities included in any
registration statement will not (until further notice) effect sales thereof
after receipt of telegraphic or written notice from the Company to suspend sales
to permit the Company to correct or update such registration statement or
prospectus; but the obligations of the Company with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect.
(d) At the end of any period during which the Company is obligated
to keep any registration statement current and effective as provided by Section
5(b) hereof (and any extensions thereof required by the preceding paragraph (c)
of this Section 6), the Holder of Registrable Securities included in such
registration statement shall discontinue sales of shares pursuant to such
registration statement upon receipt of notice from the Company of its intention
to remove from registration the shares covered by such registration statement
which remain unsold, and the Holder shall notify the Company of the number of
shares registered which remain unsold promptly after receipt of such notice from
the Company.
7. Registration Expenses.
(a) Except as otherwise provided in Sections 2(a)(iii) and 7(b)
hereof, all costs and expenses incurred or sustained in connection with or
arising out of each registration pursuant to Sections 2 and 3 hereof, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or Blue Sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with the Blue Sky
qualification of Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for the
Company, fees and disbursements of all independent certified public accountants
(including the expenses relating to the preparation and delivery of any special
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audit or "cold comfort" letters required by or incident to such registration),
and fees and disbursements of underwriters (excluding discounts, commissions and
expenses representing disguised commissions), the reasonable fees and expenses
of any special experts retained by the Company of its own initiative or at the
request of the managing underwriters in connection with such registration, and
fees and expenses of all (if any) other persons retained by the Company (all
such costs and expenses being herein called, collectively, the "Registration
Expenses"), will be borne and paid by the Company. The Company will, in any
case, pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, and the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which similar securities of the Company are then listed.
(b) The Company will not bear the cost of nor pay for any (i) stock
transfer taxes imposed in respect of the transfer of any Registrable Securities
to any purchaser thereof by the Holder of Registrable Securities in connection
with any registration and sale of Registrable Securities pursuant to this
Agreement, (ii) any underwriting discounts or commissions or similar fees
related to an underwritten offering of the Registrable Securities or (iii) any
fees and disbursements of counsel representing the Holder.
(c) To the extent that Registration Expenses incident to any
registration are, under the terms of this Agreement, not required to be paid by
the Company, the Holder of Registrable Securities included in such registration
will pay all Registration Expenses which are attributable to the registration of
the Holder's Registrable Securities so included in such registration.
8. Indemnification.
(a) Indemnification by the Company. The Company will indemnify the
Holder requesting or joining in a registration and each underwriter of the
securities so registered, the officers, directors and partners of each such
Person and each Person, if any, who controls any thereof (within the meaning of
the Securities Act) against any and all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of any material fact contained in any prospectus,
offering circular or other document incident to any registration, qualification
or compliance (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to such Person and relating to
any action or inaction required of such Person in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, underwriter, officer, director, partner and controlling person for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission based upon written information furnished to
the Company in writing by such Holder, underwriter, officer, director, partner
or controlling person for use in such prospectus, offering circular or other
document.
(b) Indemnification by the Holder. The Holder requesting or joining
in a registration will indemnify each underwriter of the securities so
registered, the Company and the officers, directors and partners of each such
Person and each Person, if any, who controls any
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thereof (within the meaning of the Securities Act) and their respective
successors in title and assigns against any and all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of any material fact contained in
any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein any material fact required to be stated therein or necessary to
make the statement therein not misleading, and the Holder will reimburse each
underwriter, the Company and each other person indemnified pursuant to this
paragraph (b) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that this paragraph (b) shall apply only
if (and only to the extent that) such statement or omission was made in reliance
upon written information furnished to such underwriter or the Company by the
Holder for use in such prospectus, offering circular or other document (or
related registration statement, notification or the like) or any amendment or
supplement thereto; and provided further that the Holder's liability hereunder
with respect to any particular registration shall be limited to an amount equal
to the proceeds received by the Holder from the Registrable Securities sold by
the Holder in such registration.
(c) Indemnification Proceedings. Each party entitled to
indemnification pursuant to this Section 8 (the "Indemnified Party") shall give
notice to the party required to provide indemnification pursuant to this Section
8 (the "Indemnifying Party") promptly after such Indemnified Party acquires
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be reasonably acceptable to the Indemnified Party, and the Indemnified
Party may participate in such defense at such party's expense; and provided,
further, that the failure by any Indemnified Party to give notice as provided in
this paragraph (c) shall not relieve the Indemnifying Party of its obligations
under this Section 8 except to the extent that the failure results in a failure
of actual notice to the Indemnifying Party and such Indemnifying Party is
damaged as a result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. The reimbursement required by this
Section 8 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
9. Contribution in Lieu of Indemnification. If the indemnification
provided for in Section 8 hereof is unavailable to a party that would have been
an Indemnified Party under any such section in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each party that would have been an Indemnifying Party thereunder shall, in lieu
of indemnifying such Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and such
Indemnified Party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof). The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or such Indemnified Party
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and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holder agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 9. The amount paid or payable
by an Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 9
shall include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to indemnification or
contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. Rule 144 Requirements: Form S-3. The Company will use its best efforts
in good faith to take all steps necessary to ensure that the Company will be
eligible to register securities on Form S-3 (or any comparable form adopted by
the Commission), and to make publicly available and available to the Holder,
pursuant to Rule 144 of the Commission under the Securities Act, such
information as shall be necessary to enable the Holder to make sales of
Registrable Securities pursuant to that Rule. The Company will promptly provide
any opinions by counsel reasonably required in connection with a sale of
Registrable Securities under Rule 144.
The Company will use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act, and so long as there are
outstanding any Registrable Securities, furnish to the Holder, upon request, a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Holder to sell
any such securities without registration.
11. Participation in Underwritten Registrations. No person may participate
in any underwritten registration pursuant to this Agreement unless such person
(a) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled, under the provisions
hereof, to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required by the terms of such underwriting
arrangements. The Holder shall be entitled at any time to withdraw such
Registrable Securities from such registration prior to its effective date in the
event that the Holder shall disapprove of any of the terms of the related
underwriting agreement but only if the Holder is permitted to do so by the
managing underwriters or pursuant to any agreement therewith.
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12. Miscellaneous.
(a) No Inconsistent Agreements. Except for agreements or contracts
with institutional lenders providing financing to the Company or the Buyer in
connection with the transactions under the Stock Purchase Agreement, the Company
will not, at any time after the date hereof, enter into any agreement or
contract (whether written or oral) with respect to any of its securities which
grants to any security holder (other than the Holder as such) any demand
registration rights which prevent the Company from complying with the
registration rights granted by the Company to the Holder hereunder.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this paragraph (b), may not be amended, modified or
supplemented, and any waiver or consent to or any departure from any of the
provisions of this Agreement may not be given and shall not become or be
effective, unless and until (in each case) the Company shall have received the
prior written consent of each Holder to any such amendment, modification,
supplement, waiver or consent.
(c) Term. The agreements of the Company contained in this Agreement
shall continue in full force and effect so long as the Holder holds any
Registrable Securities.
(d) Notices. All notices provided for or permitted hereunder shall
be made in writing by hand delivery, registered or certified first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery:
(i) if to the Holder, at:
Paul J. Smith
2214 Hogan Court
Charlotte, North Carolina 28227
with copies to:
E. Lynwood Mallard, Esq.
Kilpatrick Stockton LLP
3500 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
(ii) if to the Company, at:
Tridex Corporation
61 Wilton Road
Westport, Connecticut 06880
Attention: Seth M. Lukash, Chairman
with a copy to:
Stephen J. Carlotti, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
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and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 12(d). All such notices shall be deemed to
have been duly given: when delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, provided that the Holder may not assign his rights hereunder to any
third party other than a trust, family limited partnership or similar estate
planning entity, in which the beneficiaries or equity owners are limited to the
Holder and his spouse and children.
(f) Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning or effect.
(h) Governing Law. The validity, performance, construction and
effect of this Agreement shall be governed by and construed in accordance with
the internal laws of the State of Connecticut without giving effect to
principles of conflicts of law.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(k) Availability of Rule 144. Notwithstanding anything to the
contrary in this Agreement, the Company shall not be required to register any
Registrable Securities pursuant to a request under Section 2 or Section 3 hereof
if, within 25 days after its receipt of a request therefor, counsel for the
Company delivers an opinion to the Holder, in form and substance reasonably
satisfactory to counsel to the Holder, that the proposed sale of Registrable
Securities requested to be so registered may be effected in its entirety within
any 90 day period without registration and without any further holding period
pursuant to Rule 144(k) of the Securities Act.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TRIDEX CORPORATION
By:
---------------------------
Seth M. Lukash
Chief Executive Officer
HOLDER
---------------------------------
Paul J. Smith
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EXHIBIT 4.2
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- --------------------------------------------------------------------------------
TRIDEX CORPORATION
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
$11,000,000 19% Senior Subordinated Notes due April 17, 2005
of Tridex Corporation, Tridex NC, Inc. and Ultimate Technology Corporation
285,714 Shares of Common Stock, no par value, of Tridex Corporation
Warrants for 350,931 Shares of Common Stock, no par value
(subject to adjustment), of Tridex Corporation
--------------
SECURITIES PURCHASE AGREEMENT
--------------
April 17, 1998
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TABLE OF CONTENTS
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1. Authorization of Securities; Other Purchasers; etc...................1
2. Sale and Purchase of Securities......................................3
3. Closing..............................................................3
4. Conditions to Closing................................................3
4.1. Representations and Warranties Correct........................3
4.2. Performance; No Default.......................................3
4.3. Related Transactions..........................................4
4.4. Compliance Certificate........................................5
4.5. Opinion of Counsel for the Issuers............................5
4.6. Opinion of Your Special Counsel...............................5
4.7. Certain Additional Documents to be Delivered at or
Prior to the Closing..........................................5
4.8. Sale of Securities to Other Purchasers........................5
4.9. Legal Investment; Certificate.................................5
4.10. Sale and Purchase Not Forbidden by Law........................5
4.11. Payment of Transaction Costs..................................6
4.12. Proceedings and Documents.....................................6
4.13. The Term "Obligor"............................................6
5. Representations and Warranties.......................................6
5.1. Organization, Standing, etc...................................6
5.2. Names; Jurisdictions of Incorporation; Subsidiaries...........7
5.3. Qualification.................................................7
5.4. Business, etc.................................................7
5.5. Shares; Voting Provisions; Options; Warrant Shares, etc.......7
5.6. Financial Statements..........................................8
5.7. Changes; Solvency, etc........................................9
5.8. Tax Returns and Payments......................................9
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions
with Affiliates, Leases......................................10
5.10. Title to Properties; Liens; Leases; Real Property............10
5.11. Litigation, etc..............................................11
5.12. Valid and Binding Obligations; Compliance with Other
Instruments; Absence of Restrictions, etc....................11
5.13. ERISA........................................................13
5.14. Consents, etc................................................14
5.15. Proprietary Rights; Licenses.................................14
5.16. Offer of Securities; Investment Bankers......................14
5.17. Government Regulation........................................15
5.18. Disclosure...................................................15
5.19. Labor Relations; Suppliers, Distributors and Customers.......15
6. Use of Proceeds; Regulation U, etc..................................15
</TABLE>
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7. Financial Statements and Information................................16
8. Inspection; Board Visitation Rights; Confidentiality................21
9. Prepayment of Notes.................................................22
9.1. Required Prepayment Without Premium of Notes.................22
9.2. Optional Prepayment With Premium of Notes....................23
9.3. Prepayment Without Premium of the Notes at the Option of
Holders of Notes upon a Change of Control....................23
9.4. Allocation of Partial Prepayments of Notes...................24
9.5. Notice of Optional Prepayments of Notes......................24
9.6. Maturity; Accrued Interest; Surrender, etc. of Notes.........24
9.7. Purchase of Notes............................................24
9.8. Payment on Non-Business Days.................................24
9.9. Application of Notes in Satisfaction of Exercise Price
of Warrants..................................................24
10. Subordination of Notes and Note Guarantees..........................25
11. Securities Act Matters; Option Plans................................25
12. Registration Rights.................................................25
12.1. Registration on Request......................................25
12.2. Incidental Registration......................................27
12.3. Permitted Registration.......................................28
12.4. Registration Procedures......................................29
12.5. Indemnification..............................................30
12.6. Restrictions on Other Agreements.............................32
13. Covenants of the Holding Company....................................32
13.1. Books of Record and Account; Reserves........................32
13.2. Payment of Taxes; Corporate Existence; Maintenance of
Properties; Compliance with Laws; Lines of Business;
Proprietary Rights and Licenses..............................32
13.3. Insurance....................................................33
13.4. Limitation on Discount or Sale of Receivables................33
13.5. Limitation on Funded Debt and Current Debt...................33
13.6. Certain Financial Covenants..................................35
13.7. Limitation on Tax Consolidation..............................37
13.8. Limitation on Liens..........................................37
13.9. Limitation on Transactions with Affiliates...................38
13.10. Limitation on Investments....................................38
13.11. Limitation on Issuance of Shares of Subsidiaries.............38
13.12. Limitation on Subsidiary's Consolidation or Merger...........38
13.13. Limitation on the Holding Company's Consolidation or Merger..39
13.14. Limitation on Disposition of Property........................40
13.15. Limitation on Leasebacks.....................................41
13.16. Modification of Certain Documents, Agreements and
Instruments; Fiscal Year.....................................41
13.17. Further Assurances...........................................42
</TABLE>
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13.18. Additional Subsidiaries......................................42
13.19. Listing Status...............................................42
14. Definitions.........................................................42
14.1. Definitions of Capitalized Terms.............................42
14.2. Other Definitions............................................57
14.3. Accounting Terms and Principles; Laws........................58
15. Remedies............................................................58
15.1. Events of Default Defined; Acceleration of Maturity..........58
15.2. Suits for Enforcement, etc...................................63
15.3. No Election of Remedies......................................63
15.4. Remedies Not Waived..........................................63
15.5. Application of Payments......................................63
16. Registration, Transfer and Exchange of Securities; Limitations on
Transfers...........................................................64
17. Replacement of Securities...........................................65
18. Amendment and Waiver................................................65
19. Method of Payment of Securities.....................................66
20. Expenses; Indemnity.................................................67
21. Taxes...............................................................67
22. Communications......................................................67
23. Survival of Agreements, Representations and Warranties, etc.........68
24. Successors and Assigns; Rights of Other Holders.....................69
25. Purchase for Investment; ERISA......................................69
26. Governing Law; Jurisdiction; Waiver of Jury Trial...................71
27. Miscellaneous.......................................................71
</TABLE>
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Schedule I Schedule of Purchasers
Exhibit 1(a) Form of Note
Exhibit 1(b) Form of Certificate for Common Stock
Exhibit 1(c) Form of Warrant
Exhibit 1(g) Form of Note Guarantee
Exhibit 3 Wire Instructions
Exhibit 4.3(b) Indebtedness to be Repaid at Closing
Exhibit 4.5 Opinion of Hinckley, Allen & Snyder
Exhibit 4.6 Opinion of Choate, Hall & Stewart
Exhibit 4.7 Additional Documents to be Delivered at or Prior to the
Closing
Exhibit 5.2 Names; Jurisdictions of Incorporation; Subsidiaries
Exhibit 5.4 Disclosure Documents
Exhibit 5.5(a) Shares; Voting Provisions
Exhibit 5.5(b) Rights, Options, Warrants, etc.
Exhibit 5.6(a) Financial Statements
Exhibit 5.6(b) Projections and Pro Forma Unaudited Consolidated Balance
Sheet
Exhibit 5.8 Tax Returns and Payments
Exhibit 5.9 Funded Debt, Current Debt, Liens, Investments,
Transactions with Affiliates and Leases
Exhibit 5.10 Real Property
Exhibit 5.11 Litigation, etc.
Exhibit 5.13 ERISA
Exhibit 5.14 Consents
Exhibit 6 Use of Proceeds
Exhibit 7(c)(iv) Information as to New Subsidiaries
Exhibit 12.6 Restrictions on Other Agreements
Exhibit 16(b)(iv) Acknowledgment (re: subordination)
</TABLE>
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TRIDEX CORPORATION
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
April 17, 1998
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
Ladies and Gentlemen:
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY
CORPORATION, a New York corporation ("UTC" and, together with the Holding
Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes
collectively referred to herein as the "Issuers" and each, individually, as an
"Issuer"), agree with you as follows. Certain capitalized terms used herein are
defined in section 15.
1. Authorization of Securities; Other Purchasers; etc.
(a) The Obligor has authorized the issue and sale of its 19% Senior
Subordinated Notes due April 17, 2005 (herein, together with any notes
issued in exchange therefor or replacement thereof, called the "Notes") in
the aggregate principal amount of $11,000,000. The Notes are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Holding Company has authorized the issue and sale of 285,714
shares of its Common Stock (herein, such 285,714 shares, together with any
Shares issued in exchange therefor or replacement thereof, called the
"Purchased Common Shares"). The certificates for the Common Stock are to
be substantially in the form of Exhibit 1(b) attached hereto.
(c) The Holding Company has authorized the issue and sale of its
warrants (herein, together with any warrants issued in exchange therefor
or replacement thereof, called the "Warrants") evidencing rights to
purchase in the aggregate 350,931 shares of its Common Stock, subject only
to the approval thereof by the stockholders of the Holding Company. The
Warrants shall be exercisable for $7.00 per share, shall expire on April
17, 2008 and shall be substantially in the form of Exhibit 1(c) attached
hereto.
(d) The Notes, the Purchased Common Shares, the Warrants and, unless
the context clearly requires otherwise, the Warrant Shares (as defined in
the Warrants), are collectively referred to as the "Securities" and each
as a "Security".
(e) As further provided in each of the Notes, prior to the Warrant
Exchange, the Notes shall bear interest at 19% per annum and, at the
option of the Obligor, 12/19th
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of the amount of interest which is due and payable on the Notes on any
regularly scheduled interest payment date shall be paid in cash and 7/19th
of the amount of interest which is due and payable on the Notes on any
regularly scheduled interest payment date shall be paid in kind by adding
to the principal amount of each such Note an amount equal to the interest
not then paid in cash. Commencing immediately after the Warrant Exchange,
the Notes shall bear interest at 12% per annum, payable entirely in cash.
Interest on the Notes is payable quarterly on each January 17, April 17,
July 17 and October 17, commencing July 17, 1998. In no event shall the
amount paid or agreed to be paid by the Obligor as interest and premium on
any Note exceed the highest lawful rate permissible under any law
applicable thereto.
(f) The Holding Company shall use its best efforts to cause its
stockholders to approve the issue and sale of the Warrants at the May,
1998 annual meeting of the stockholders of the Holding Company. In the
event that the stockholders of the Holding Company shall approve the issue
and sale of the Warrants, the Holding Company shall promptly thereafter
cause the Warrants to be issued and sold to you and the Other Purchasers
in consideration of the reduction of the interest rate required to be paid
in respect of the Notes to 12% per annum (the "Warrant Exchange").
(g) The Notes shall be secured by and entitled to the benefits of
unconditional guarantees from each of the Subsidiaries of the Holding
Company hereafter organized or acquired, pursuant to one or more note
guarantees substantially in the form of Exhibit 1(g) attached hereto (each
a "Note Guarantee" and collectively the "Note Guarantees").
The Securities are to be issued under this Agreement and separate Securities
Purchase Agreements (the "Other Securities Purchase Agreements") identical
herewith (except as to the name and address of each of the other purchasers)
being entered into concurrently by the Company with each of the other purchasers
(the "Other Purchasers") named in Schedule I attached hereto. The issue of
Securities to you and the issues of Securities to each of the Other Purchasers
are separate transactions and you shall not be liable or responsible for the
acts or defaults of the Other Purchasers.
2. Sale and Purchase of Securities. The Issuers will issue and sell to you and,
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Issuers contained herein and in the other
Operative Documents, you will purchase from the Issuers, at the Closing, as
specified in section 3, such Securities (other than the Warrants) as are
specified on that portion of Schedule I attached hereto as is applicable to you.
The aggregate purchase price of the Notes and the Purchased Common Shares shall
be $13,000,000 which shall be allocated (a) $11,000,000 to the Notes and (b)
$2,000,000 to the Purchased Common Shares. The Issuers, you and each of the
Other Purchasers agree that the values ascribed to the Securities (which values
shall be used by the Issuers, you and the Other Purchasers, as well as any
subsequent holder of any of the Securities, for all purposes, including the
preparation of tax returns) shall be determined in accordance with the
foregoing.
3. Closing. The closing of the sale and purchase of the Securities hereunder
(the "Closing") shall take place at the office of Messrs. Choate, Hall &
Stewart, Exchange Place, 53 State Street, Boston, Massachusetts 02109, on April
17, 1998 (or on such other date (not later than April 17, 1998) as may be agreed
to in writing by the Issuers, you and each of the Other Purchasers) (the
"Closing Date"). The Closing shall occur not later than 11:00 A.M. Boston time
(your reinvestment deadline) on the Closing Date. At the Closing, the Issuers
will deliver to you the
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Securities to be purchased by you at the Closing against payment of the purchase
price thereof to (or for the benefit of) the Issuers in immediately available
funds in accordance with the wire instructions set forth on Exhibit 3 attached
hereto. Delivery of the Securities to be purchased by you at the Closing shall
be made in the form of one or more Notes and Purchased Common Shares, in such
denominations and registered in such names as are specified on Schedule I
attached hereto and in each case dated, and in the case of the Notes, bearing
interest from the Closing Date. If at the Closing the Issuers shall fail to
tender the Securities to be delivered to you thereat as provided herein, or if
at the Closing any of the conditions specified in section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby waiving any other
rights you may have by reason of such failure or such non-fulfillment.
4. Conditions to Closing. Your obligation to purchase and pay for the Securities
to be purchased by you hereunder at the Closing is subject to the fulfillment to
your reasonable satisfaction, prior to or at the Closing, of the following
conditions:
4.1. Representations and Warranties Correct. The representations and
warranties made by the Issuers herein and in the other Operative Documents shall
have been correct when made and shall be correct in all material respects at and
as of the time of the Closing (after giving effect to the transactions
consummated at the Closing).
4.2. Performance; No Default. Each of the Issuers shall have performed all
agreements and complied with all conditions contained herein and in the other
Operative Documents required to be performed or complied with by it prior to or
at the Closing. At the time of the Closing, no Default or Event of Default shall
exist. Since December 31, 1997, no event shall have occurred which could
reasonably be expected to result in a Material Adverse Change.
4.3. Related Transactions.
(a) Pursuant to and in accordance with the terms of the Stock
Purchase Agreement dated as of February 24, 1998 (the "Acquisition
Agreement") by and among Paul J. Smith (the "Seller"), Progressive
Software, Inc., a North Carolina corporation ("Progressive"), the Holding
Company and TNC (the Acquisition Agreement and the other agreements,
documents and instruments executed or to be executed in connection
therewith are sometimes collectively referred to as the "Acquisition
Documents"), TNC shall have purchased from the Seller all of the issued
and outstanding shares of capital stock of Progressive and immediately
thereafter merged with and into Progressive (such purchase and merger and
the other transactions contemplated by the Acquisition Documents are
hereinafter referred to as the "Acquisition"). All provisions of relevant
law with respect to the Acquisition shall have been complied with. All
filings necessary to effectuate the Acquisition, including, without
limitation, the filing of a Certificate of Merger with the Secretary of
State of North Carolina, shall have been made. The aggregate consideration
to be paid to or for the account of the Seller in consideration for the
transfer of the capital stock of Progressive, excluding all transaction
fees and expenses (which shall not exceed $2,000,000), shall not exceed
the amount specified in the Acquisition Agreement. The terms of the
Acquisition Documents shall be satisfactory to you in all material
respects.
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(b) The debt and equity capitalization of the Holding Company and
its Subsidiaries shall be in all respects satisfactory to you. Without
limiting the generality of the foregoing, the Persons indicated on Exhibit
5.5(a) attached hereto shall have acquired from the Holding Company the
Shares of the Company specified on such exhibit in connection with the
Acquisition and shall have paid the consideration specified for such
Shares on such exhibit, in each case upon terms satisfactory to you in all
material respects. After giving effect to the Closing, neither the Holding
Company nor any of its Subsidiaries shall have any Funded Debt or Current
Debt other than that evidenced by the Notes and that which is specified on
Exhibit 5.9 attached hereto. The Obligor shall have repaid in full all of
the Indebtedness specified on Exhibit 4.3(b) attached hereto and all
related Liens shall have been terminated or adequate provision shall have
been made therefor and you or your special counsel shall have received
evidence of the same.
(c) The Organizational Documents of the Holding Company and each of
its Subsidiaries shall be in form and substance satisfactory to you in all
material respects.
(d) The Fleet Bank Documents shall have been executed and delivered
and shall be in full force and effect. The Holding Company, TNC and UTC
shall have established pursuant thereto (i) an $8,000,000 one-year senior
secured revolving credit facility and (ii) a $12,000,000 five-year senior
secured term loan facility. The aggregate amount of the unused borrowing
availability immediately following the Closing under such revolving credit
facility shall be at least $4,500,000 and you shall have been furnished
with a borrowing base certificate satisfactory in form and substance to
you evidencing the same. The terms of the Fleet Bank Documents shall be
satisfactory to you in all material respects.
4.4. Compliance Certificate. You shall have received an Officer's
Certificate, dated the Closing Date, certifying that the conditions specified in
sections 4.1 and 4.2 have been fulfilled.
4.5. Opinion of Counsel for the Issuers. At the Closing, you shall have
received an opinion, dated the Closing Date, from Messrs. Hinckley, Allen &
Snyder, counsel for the Issuers, substantially in the form of Exhibit 4.5
attached hereto.
4.6. Opinion of Your Special Counsel. At the Closing, you shall have
received an opinion dated the Closing Date, from your special counsel, Messrs.
Choate, Hall & Stewart, substantially in the form of Exhibit 4.6 attached
hereto.
4.7. Certain Additional Documents to be Delivered at or Prior to the
Closing. You shall have received the items specified on Exhibit 4.7 attached
hereto, each of which shall be in form and substance satisfactory to you in all
material respects.
4.8. Sale of Securities to Other Purchasers. At the Closing, the Issuers
shall sell to the Other Purchasers the Securities to be purchased at the Closing
by the Other Purchasers pursuant to the Other Securities Purchase Agreements and
shall receive payment in full of the purchase price thereof.
4.9. Legal Investment; Certificate. At the time of the Closing, your
purchase of the Securities to be issued pursuant hereto shall be permitted under
the laws and regulations of any jurisdiction to which you are subject (without
resort to any provision of any such law permitting
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limited investments by you without restriction as to the character of the
particular investment), and you shall, if requested by you, have received an
Officer's Certificate, dated the Closing Date, certifying as to such matters as
you may reasonably request to enable you to determine whether your purchase is
so permitted.
4.10. Sale and Purchase Not Forbidden by Law. The offer, issue, sale and
delivery by the Issuers of the Securities to be issued pursuant hereto and your
purchase of such Securities at the Closing shall not be prohibited by and shall
not subject you to any tax, penalty, liability or other onerous condition under
or pursuant to any law, statute, rule or regulation then in effect.
4.11. Payment of Transaction Costs. The Issuers shall have paid, in
immediately available funds, all reasonable fees, expenses and disbursements
incurred by you and the Other Purchasers at or prior to the time of the Closing
in connection with the transactions contemplated by the Operative Documents,
including, without limitation, the reasonable fees, expenses and disbursements
of Choate, Hall & Stewart.
4.12. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by the Operative Documents and all agreements,
documents and instruments incident to such transactions shall be satisfactory in
substance and form to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or copies thereof as
you or they may reasonably request.
4.13. The Term "Obligor". All references to the "Obligor" herein shall
refer to and include each of the Holding Company, TNC and UTC separately and all
representations contained herein shall be deemed to be separately made by each
of them, and each of the covenants, agreements and obligations set forth herein
shall be deemed to be the joint and several covenants, agreements and
obligations of each of them. Any notice, request, consent, report or other
information or agreement delivered by any of the Holding Company, TNC or UTC
shall be deemed to be ratified by, consented to and also delivered by each of
the others. Each of the Holding Company, TNC and UTC recognizes and agrees that
each covenant and agreement of the "Obligor" under this Agreement and the other
Operative Documents shall create a joint and several obligation of the Holding
Company, TNC and UTC, which may be enforced against all of them, jointly, or
against each of them separately, provided, however, that the principal, premium,
if any, interest and other amounts due and payable under or in respect of the
Notes shall be payable first from TNC and the liability of the Holding Company
and UTC with respect to the Notes shall be enforced by you and the Other
Purchasers only at such time as a demand by you or the Other Purchasers for
payment of such amounts has first been made to TNC pursuant to this Agreement
and the Other Securities Purchase Agreements and TNC shall have failed to make
such payment within two (2) days after the date such demand is made.
5. Representations and Warranties. Each of the Issuers hereby represents and
warrants that (after giving effect to the transactions consummated at the
Closing):
5.1. Organization, Standing, etc. The Holding Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as now conducted, and now proposed to be
conducted as described in the Disclosure Documents referred to in section 5.4,
and to execute, deliver and perform each of the Operative Documents to which it
is (or is to be) a party and to consummate the transactions contemplated by the
Operative Documents.
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5.2. Names; Jurisdictions of Incorporation; Subsidiaries. Exhibit 5.2
attached hereto correctly specifies as to the Holding Company and each of its
Subsidiaries (a) its legal name, (b) the jurisdiction of its incorporation, (c)
each jurisdiction (other than its jurisdiction of incorporation) in which it is
qualified to do business (or in which it has submitted an application for such
qualification), and (d) each jurisdiction in which any of its material
properties are (or are to be) located. The Holding Company does not have any
Subsidiary that is not named on Exhibit 5.2 attached hereto.
5.3. Qualification. The Holding Company and each of its Subsidiaries is
duly qualified or licensed (or has applied to become qualified or licensed) to
do business and is in good standing in each jurisdiction in which the character
of the properties owned or leased or the nature of the activities conducted
makes such qualification or licensing necessary, except for those jurisdictions
in which the failure to be so qualified or licensed or to be in good standing
has not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change.
5.4. Business, etc. The Holding Company and its Subsidiaries are engaged
in the business of (i) designing and manufacturing point-of-sale (POS)
electronic display monitors, keyboards and other peripheral equipment and, upon
completing the Acquisition in designing and developing computer software, which
hardware and software products are used by retailers and restaurants and in
other transaction-based applications, and (ii) assembling and integrating
customized POS systems consisting of terminals, monitors, keyboards, scanners,
touch-screens, microprocessors, printers and cash drawers used by retailers and
restaurants and in other transaction-based applications (the "Business"). The
Issuers have furnished to you a true, correct and complete copy of the documents
listed on Exhibit 5.4 attached hereto (the "Disclosure Documents").
5.5. Shares; Voting Provisions; Options; Warrant Shares, etc.
(a) Exhibit 5.5(a) attached hereto correctly and fully specifies as
to the Holding Company and each of its Subsidiaries (after giving effect
to the transactions consummated at the Closing) (i) its authorized and
outstanding Shares and (ii) the name of each record and beneficial owner
of such Shares who has acquired such Shares in connection with the
Acquisition, together with the number (and class, if any) of such Shares
held by each such Person and the aggregate consideration paid by such
Person for such Shares (which consideration, unless otherwise noted on
such exhibit, was paid in cash in full on or prior to the Closing Date).
All of the outstanding Shares of the Holding Company and each of its
Subsidiaries are, and all Warrant Shares issued upon exercise of the
Warrants in accordance with the terms thereof will be, duly authorized,
validly issued, fully paid and non-assessable and not subject to any
preemptive right, right of first refusal or similar right on the part of
the Holding Company or any other Person (except as provided in section 16)
and all of such Shares have been (or will have been) offered, issued and
sold in all material respects in accordance with all applicable laws. To
the knowledge of the Issuers, except as set forth on Exhibit 5.5(a)
attached hereto, each of the owners of the Shares indicated on Exhibit
5.5(a) attached hereto own the Shares indicated on such exhibit free of
any Lien, proxy, voting agreement, voting trust, stockholders agreement or
similar agreement or restriction. Except as set forth on Exhibit 5.5(a)
attached hereto, neither the Organizational Documents nor any other
agreement, document or instrument binding on or applicable to the Holding
Company or any of its Subsidiaries or any of its stockholders contains any
provision requiring a higher voting
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requirement with respect to action taken (and/or to be taken) by its board
of directors or stockholders than that which would apply in the absence of
such provision.
(b) Except as provided in section 12, except for the Warrants and
except as set forth on Exhibit 5.5(b) attached hereto, (i) there are no
outstanding rights, options, warrants or agreements for the purchase from,
or sale or issuance by, the Holding Company or any of its Subsidiaries of
any of its Shares or any securities convertible into or exercisable or
exchangeable for such Shares; (ii) there are no agreements on the part of
the Holding Company or any of its Subsidiaries to issue, sell or
distribute any of its Shares, other securities or assets; (iii) neither
the Holding Company nor any of its Subsidiaries has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of
its Shares or any interest therein or to pay any dividend or make any
distribution in respect thereof; and (iv) no Person is entitled to any
rights with respect to the registration of any Shares of the Holding
Company or any of its Subsidiaries under the Securities Act (or the
securities laws of any other jurisdiction).
(c) Assuming that the Warrant Exchange were to have occurred on the
Closing Date, the aggregate number of shares of Common Stock issuable upon
exercise in full of the Warrants immediately after the Closing is 350,931,
which, if then issued, would constitute not less than 4.17% of the Common
Stock (calculated on a fully-diluted basis assuming the conversion,
exercise and exchange of all outstanding securities convertible into and
exercisable or exchangeable for Common Stock, including, without
limitation, the Warrants). The Holding Company has reserved 350,931 shares
of Common Stock solely for issuance upon exercise of the Warrants.
(d) The aggregate number of the Purchased Common Shares constitute
(i) 4.49% of the outstanding Common Stock and (ii) 3.40% of the Common
Stock, calculated on a fully-diluted basis in accordance with section
5.5(c).
5.6. Financial Statements. You have been furnished with:
(a) the financial statements referred to on Exhibit 5.6(a) attached
hereto, which financial statements (subject, in the case of any unaudited
financial statements, to normal year-end and audit adjustments and the
omission of footnote disclosure) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
and present fairly in all material respects the financial position and the
results of operations and cash flows of the Person(s) purported to be
covered thereby as at the respective dates and for the respective periods
indicated in conformity with GAAP (subject, in the case of any unaudited
financial statements, to normal year-end and audit adjustments and the
omission of footnote disclosure);
(b) the projections referred to on Exhibit 5.6(b) attached hereto,
which projections were prepared in good faith, are based upon assumptions
that the Holding Company believes are reasonable and take into account all
material information regarding the matters set forth therein. Such
projections represent the Holding Company's current estimate of the future
financial performance of the Holding Company and its Subsidiaries. The
Holding Company does not currently anticipate any material deviation from
such projections; and
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(c) the pro forma unaudited consolidated balance sheet referred to
on Exhibit 5.6(b) attached hereto, which balance sheet sets forth the
estimated financial position of the Holding Company and its Subsidiaries
as at the Closing Date, adjusted on a pro forma basis to give effect to
the consummation on the Closing Date of the transactions contemplated by
the Operative Documents, and reflects all known material liabilities of
the Persons purported to be covered thereby, contingent or other, as at
the Closing Date.
5.7. Changes; Solvency, etc. Since December 31, 1997: (a) there has been
no change in the assets, liabilities or financial condition of the Holding
Company and its Subsidiaries from that set forth in the balance sheet as at such
date referred to on Exhibit 5.6(a) attached hereto, other than changes in the
ordinary course of business which have not been, either in any single case or in
the aggregate, materially adverse and (b) no condition or event has occurred
which has resulted in, or could reasonably be expected to result in, a Material
Adverse Change. Each of the Holding Company and each of its Subsidiaries is
(and, after giving effect to the consummation of the transactions at Closing,
will be) Solvent.
5.8. Tax Returns and Payments. The Holding Company and, except as set
forth on Exhibit 5.8 attached hereto, each of its Subsidiaries have filed all
tax returns required by law to be filed and have paid all taxes and assessments
shown to be due and payable on such returns and all other governmental charges
levied upon any of their respective properties, assets, income, receipts,
franchises or sales other than those not yet delinquent. The income tax
liability of each of the Holding Company and each of its Subsidiaries has been
finally determined by all applicable foreign and domestic, federal, state and
local governmental authorities, including, without limitation, the Internal
Revenue Service, and satisfied, or the time for audit has expired, for all
fiscal years through the fiscal year specified as applicable for such Person on
Exhibit 5.8 attached hereto. Neither the Holding Company nor any of its
Subsidiaries has executed any waiver or waivers that would have the effect of
extending the applicable statute of limitations in respect of income tax
liabilities. The charges, accruals and reserves in the financial statements
referred to on Exhibit 5.6(a) attached hereto in respect of taxes for all fiscal
periods are adequate, and there are no known unpaid assessments for additional
taxes for any fiscal period or of any basis therefor. The Holding Company and
its Subsidiaries are indemnified under the Acquisition Agreement by the Seller
for certain liabilities in respect of taxes (and all related penalties and other
amounts) of the Seller and Progressive.
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with
Affiliates, Leases. Exhibit 5.9 attached hereto correctly describes as to the
Holding Company and each of its Subsidiaries (after giving effect to the
transactions consummated at the Closing):
(a) all of its Funded Debt and Current Debt to be outstanding
immediately following the Closing in an amount, either individually or in
the aggregate, of $100,000 or more (other than that evidenced by the
Notes);
(b) all Liens to which any of its properties and assets will be
subject immediately following the Closing (other than those of the
character described in section 13.8(b));
(c) all of its Investments having a fair market value, individually
or in the aggregate, of $100,000 or more (and all agreements and
commitments to make Investments) to be owned or held immediately following
the Closing (other than
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Investments of the character described in clauses (b) through (g),
inclusive, of the definition of Permitted Investments);
(d) all of its Affiliates, and all agreements (including, without
limitation, all employment and management consulting agreements) with such
Affiliates and all transactions with such Affiliates which it is now
obligated or now intends to consummate at any time in the future; and
(e) each lease of real and/or personal property (other than any
lease under which the Holding Company and its Subsidiaries pay less than
$100,000 in the aggregate during any period of twelve consecutive months)
under which it is a lessee or sublessee and the name of the lessor, the
lessee or sublessee, a general description of the property leased, the
annual rents payable thereunder and the term thereof.
5.10. Title to Properties; Liens; Leases; Real Property. The Holding
Company and each of its Subsidiaries has good and valid (in the case of
personalty) and good and marketable (in the case of real property) title to all
of their respective properties and assets (including, without limitation, the
properties and assets reflected in the balance sheet dated December 31, 1997,
referred to on Exhibit 5.6(a) attached hereto), except properties and assets
disposed of since such date in the ordinary course of business, free and clear
of all Liens (other than Liens permitted under section 13.8). The Holding
Company and each of its Subsidiaries enjoys peaceful and undisturbed possession
under all leases under which it operates, and all of such leases are valid,
subsisting and in full force and effect and are on "arm's length" terms. The
only leases of real property to which the Holding Company or any of its
Subsidiaries is a party are listed on Exhibit 5.9 attached hereto. Except as set
forth on Exhibit 5.10 attached hereto, there are no subtenants or licensees of
any real property leased by the Holding Company or any of its Subsidiaries. The
only real property owned by the Holding Company or any of its Subsidiaries is
described on Exhibit 5.10 attached hereto, and there are no tenants or licensees
thereof or thereon.
5.11. Litigation, etc. Except as set forth on Exhibit 5.11 attached
hereto, there is no action, proceeding or investigation pending or, to the
knowledge of the Issuers, threatened (or any basis therefor known to the
Issuers) against or affecting either the Holding Company or any of its
Subsidiaries which (a) questions the validity of any of the Operative Documents
or any action taken or to be taken pursuant thereto or (b) has resulted in, or
could reasonably be expected to result in, a Material Adverse Change. There is
no outstanding judgment, decree or order against or affecting either the Holding
Company or any of its Subsidiaries which has resulted in, or could reasonably be
expected to result in, a Material Adverse Change.
5.12. Valid and Binding Obligations; Compliance with Other Instruments;
Absence of Restrictions, etc.
(a) This Agreement has been duly authorized, executed and delivered
by each Issuer and constitutes the valid and legally binding obligation of
each Issuer enforceable against each Issuer in accordance with its terms,
except that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar
laws of general application now or hereafter in effect affecting the
rights and remedies of creditors and by general equity principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity). Each of the other Operative Documents to which the Holding
Company or any of its Subsidiaries is (or is to be) a party has been duly
authorized by the Holding Company or such Subsidiary, as the case may be,
and,
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when executed and delivered, will constitute the valid and legally binding
obligation of the Holding Company or such Subsidiary, as the case may be,
enforceable against it in accordance with its terms, except that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws of general
application now or hereafter in effect affecting the rights and remedies
of creditors and by general equity principles (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) Neither the Holding Company nor any of its Subsidiaries is in
violation of or in default under any term of its Organizational Documents,
or of any agreement, document, instrument, judgment, decree, order, law,
statute, rule or regulation applicable to it or any of its properties and
assets, in any way which has resulted in, or could reasonably be expected
to result in, a Material Adverse Change. Without limiting the generality
of the foregoing, the Holding Company and each of its Subsidiaries is in
compliance with (and neither it nor any of its predecessors in interest
has received any notice to the contrary) and there is no reasonable
possibility of any liability of or any judgment, decree or order binding
upon or applicable to any such Person or any of its properties or assets
under or on account of, any Environmental Laws, except where the same has
not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change.
(c) The execution, delivery and performance of and the consummation
of the transactions contemplated by the Operative Documents will not
violate or constitute a default under, or permit any Person to accelerate
or to require the prepayment of any Indebtedness of the Holding Company or
any of its Subsidiaries or to terminate any lease or agreement of the
Holding Company or any of its Subsidiaries pursuant to, or result in the
creation of any Lien (other than the Liens created by the Fleet Bank
Documents) upon any of the properties or assets of the Holding Company or
any of its Subsidiaries pursuant to, any term of the Organizational
Documents of the Holding Company or any of its Subsidiaries or of any
agreement, document, instrument, judgment, decree, order, law, statute,
rule or regulation applicable to the Holding Company or any of its
Subsidiaries or any of their respective properties and assets.
(d) Neither the Holding Company nor any of its Subsidiaries is a
party to or bound by or subject to any Organizational Document, or any
agreement, document, instrument, judgment, decree, order, law, statute,
rule or regulation (other than the Operative Documents and the Fleet Bank
Documents and laws, statutes, rules or regulations affecting businesses
generally): (i) which restricts its right or ability to incur
Indebtedness, to issue securities or to consummate the transactions
contemplated hereby; (ii) under the terms of or pursuant to which its
obligation to pay all amounts due from it and/or to perform all
obligations imposed on it and/or to comply with the terms applicable to it
under any of the Operative Documents is in any way restricted; or (iii)
which restricts its right or ability to pay dividends and/or to make any
other distributions in respect of its Shares, to mortgage or dispose of
its properties, to consummate any merger, consolidation or acquisition, to
make Investments or capital expenditures, to enter into and perform
leases, to pay executive compensation and/or to conduct its business as
now conducted and now proposed to be conducted.
5.13. ERISA.
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(a) The Holding Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance which have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Change. Neither
the Holding Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions
of the Code relating to employee benefit plans (as defined in section 3 of
ERISA), and no event, transaction or condition has occurred or exists that
could reasonably be expected to result in the incurrence of any such
liability by the Holding Company or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets of the
Holding Company or any ERISA Affiliate, in either case pursuant to Title I
or IV of ERISA or to such penalty or excise tax provisions or to section
401(a)(29) or 412 of the Code, other than such liabilities or Liens as
would not individually or in the aggregate result in a Material Adverse
Change.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities.
The term "benefit liabilities" has the meaning specified in section 4001
of ERISA and the terms "current value" and "present value" have the
meaning specified in section 3 of ERISA.
(c) Neither the Holding Company nor any of the ERISA Affiliates has
incurred withdrawal liabilities (or are subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate is likely to
result in a Material Adverse Change. The Holding Company and each ERISA
Affiliate have made all required contributions to Multiemployer Plans.
Neither the Holding Company nor any ERISA Affiliate has incurred, nor
would reasonably expect to incur, any Withdrawal Liability upon a complete
or partial withdrawal from any Multiemployer Plan that individually or in
the aggregate is likely to result in a Material Adverse Change. To the
knowledge of the Issuers, no Multiemployer Plan is, or is reasonably
expected to be, insolvent, in reorganization or terminated within the
meaning of Title IV of ERISA.
(d) Except as set forth on Exhibit 5.13 attached hereto, neither the
Holding Company nor any of its Subsidiaries has any expected
postretirement benefit obligation (determined in accordance with Financial
Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section
4980B of the Code).
(e) The consummation of the transactions contemplated by the
Operative Documents will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Holding Company in the first sentence of this
section 5.13(e) is made in reliance upon and subject to the accuracy of
your representation in section 25(b) as to the sources of the funds used
to pay the purchase price of the Securities to be purchased by you.
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5.14. Consents, etc. No consent, approval or authorization of, or
declaration or filing with, or other action by, any Person (including, without
limitation, any governmental authority) is required on the part of the Holding
Company or any of its Subsidiaries as a condition precedent to the valid
execution, delivery and performance of and the consummation of the transactions
contemplated by the Operative Documents and/or the exercise by any holder of any
Securities of any of its rights in respect thereof, including, without
limitation, the Acquisition, other than (a) those specified on Exhibit 5.14
attached hereto, all of which, if related to the Acquisition or the transactions
to be consummated in connection therewith, shall have been obtained and are
unconditional, in full force and effect and not subject to appeal or review, and
(b) other consents which, if not obtained, could not reasonably be expected to
result in a Material Adverse Change. Without limiting the generality of the
foregoing, all filings under the Clayton Act and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 required in connection with the Acquisition have been
made and the "waiting period" under such Acts has expired or been terminated.
5.15. Proprietary Rights; Licenses. The Holding Company and each of its
Subsidiaries have all Proprietary Rights and Licenses as are necessary for the
conduct of their respective businesses as now conducted and now proposed to be
conducted, without any known conflict with the rights of others, except where
the failure to have any such Proprietary Right and/or License has not resulted
in, and could not reasonably be expected to result in, a Material Adverse
Change. Each such Proprietary Right and License is in full force and effect, all
material obligations with respect thereto have been fulfilled and performed and,
to the knowledge of the Issuers, there is no material infringement thereon by
any other Person. No default in the performance or observance by the Holding
Company or any of its Subsidiaries (or any of their predecessors in interest) of
its obligations thereunder has occurred which permits, or after notice of lapse
of time or both would permit, the revocation or termination of any Proprietary
Right or License which has resulted in, or could reasonably be expected to
result in, a Material Adverse Change.
5.16. Offer of Securities; Investment Bankers. Neither the Holding Company
nor any of its Subsidiaries nor any Person acting on its behalf (a) has directly
or indirectly offered the Securities or any part thereof or any similar
securities for issue or sale to, or solicited any offer to buy any of the same
from, anyone other than you, the Other Purchasers and not more than 20 other
institutional investors, (b) has taken or will take any action which would bring
the issuance and sale of the Securities within the provisions of Section 5 of
the Securities Act or the registration or qualification provisions of any
applicable blue sky or other securities laws, (c) has dealt with any broker,
finder, commission agent or other similar Person in connection with the sale of
the Securities and the other transactions contemplated by the Operative
Documents, other than Fleet Corporate Finance, or (d) is under any obligation to
pay any broker's fee, finder's fee or commission in connection with such
transactions, other than fees to Fleet Corporate Finance, which fees are the
obligation solely of the Issuers.
5.17. Government Regulation. Neither the Holding Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each
as amended.
5.18. Disclosure. Neither this Agreement, nor any of the other Operative
Documents nor the Disclosure Documents, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading in the light of the
circumstances under which such statements were made, it being
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understood that, except as set forth in section 5.6, no representation or
warranty is made with respect to any projections or other prospective financial
information. There is no fact known to any of the Issuers (other than
information concerning general economic conditions known to the public
generally) which has resulted in, or could reasonably be expected to result in,
a Material Adverse Change which has not been set forth in this Agreement, the
other Operative Documents and the Disclosure Documents.
5.19. Labor Relations; Suppliers, Distributors and Customers. No dispute
involving employees of the Holding Company or any of its Subsidiaries or their
respective relationships with their respective employees has resulted in, or
could reasonably be expected to result in, any Material Adverse Change. The
relationships with the suppliers to and distributors for and customers of the
Holding Company and its Subsidiaries are satisfactory commercial working
relationships and, during the 12-month period ended on the Closing Date, no such
supplier, distributor or customer has cancelled or otherwise terminated its
relationship with or decreased its services, supplies or materials to or its
usage or purchase of the services or products of the Holding Company or any of
its Subsidiaries in a manner which has resulted in, or could reasonably be
expected to result in, a Material Adverse Change. The Holding Company is not
aware of any intention of any such supplier, distributor or customer to take any
such action.
6. Use of Proceeds; Regulation U, etc.
(a) The proceeds of the sale of the Securities (together with loan
proceeds under the Fleet Bank Documents received by the Holding Company at
the Closing) will be used on the Closing Date to make the payments to the
Persons and for the purposes specified on Exhibit 6 attached hereto.
(b) Neither the Holding Company nor any of its Subsidiaries owns, or
will use, directly or indirectly, any part of the proceeds of the sale of
the Securities for the purpose of purchasing or carrying, any "margin
stock" within the meaning of Regulation U (12 CFR Part 221) of the Board
of Governors of the Federal Reserve System (herein called a "margin
security") or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any margin security or
for any other purpose which might constitute the transactions contemplated
by the Operative Documents a "purpose credit" within the meaning of said
Regulation U or cause this Agreement or any of the other Operative
Documents to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System, or the Exchange Act or any other
applicable law, statute, regulation, rule, order or restriction.
7. Financial Statements and Information. The Holding Company will furnish to you
in duplicate, so long as you shall be obligated to purchase Securities hereunder
or shall hold any of the Securities, and to each other institutional holder from
time to time of the Securities:
(a) within 60 days after the end of each of the first three
quarterly accounting periods in each fiscal year of the Holding Company,
the consolidated and consolidating balance sheets of the Holding Company
and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income, changes in
stockholders' equity and cash flows for such period and for the portion of
such fiscal year ended on the last day of such period, in each case
setting forth in comparative form the corresponding figures for the same
period and portion of the next preceding fiscal year, provided that the
delivery by the Holding Company of a true and complete copy of its
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Form 10-Q report as filed with the Commission (or any analogous foreign
governmental authority) or any securities exchange within the time period
specified by the Commission (or such foreign governmental authority) or
such securities exchange shall be deemed compliance with the requirements
of this section 7(a);
(b) within 120 days after the end of each fiscal year of the Holding
Company, the consolidated and consolidating balance sheets of the Holding
Company and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, changes in
stockholders' equity and cash flows for such year, in each case setting
forth in comparative form the corresponding figures for the next preceding
fiscal year and the corresponding figures from the budget for such fiscal
year, all in reasonable detail and accompanied by the standard unqualified
report on such consolidated financial statements of the Holding Company
and its Subsidiaries of Price Waterhouse LLP (or other accountants of
recognized national standing selected by the Holding Company, provided
that the delivery by the Holding Company of a true and complete copy of
its Form 10-K report as filed with the Commission (or any analogous
foreign governmental authority) or any securities exchange within the time
period specified by the Commission (or such foreign governmental
authority) or such securities exchange shall be deemed compliance with the
requirements of this section 7(b) other than clause (iv) hereof, which
report shall (i) state that the audit of such accountants in connection
with such consolidated financial statements has been conducted in
accordance with generally accepted auditing standards and that such
accountants believe that such audit provides a reasonable basis for their
opinion, (ii) contain the other statements required from time to time by
the American Institute of Certified Public Accountants for an auditor's
standard unqualified opinion (and shall not contain any additional
explanatory paragraph concerning uncertainties or other matters), (iii)
include the opinion of such accountants that such consolidated financial
statements present fairly in all material respects the consolidated
financial position of the Holding Company and its Subsidiaries as at the
end of such fiscal year and the consolidated results of operations and
cash flows for such fiscal year, in conformity with GAAP, and (iv) be
accompanied by a separate certificate from such accountants which shall
state (A) that such accountants are familiar with the terms of the
Operative Documents and provide negative assurance relative to compliance
with the applicable covenants of the Operative Documents as they relate to
accounting matters and (B) whether or not their examination has disclosed
the existence, during or at the end of the fiscal year covered by such
financial statements and/or the date of such certificate, of (x) any
"reportable condition" (as defined in Statement on Auditing Standards No.
60 issued by the Auditing Standards Board of the American Institute of
Certified Public Accountants) in the internal control structure of the
Holding Company or any of its Subsidiaries, (y) any Change of Control or
(z) any Default or Event of Default and, if their examination has
disclosed such a condition or event, specifying in reasonable detail the
nature and period of existence thereof;
(c) together with each delivery of financial statements pursuant to
sections 7(a) and 7(b), an Officer's Certificate which shall:
(i) certify that such financial statements have been prepared
in accordance with GAAP (subject, in the case of any unaudited
financial statements, to normal year-end and audit adjustments and
the omission of footnotes) applied on a consistent basis throughout
the periods covered thereby and present fairly in all material
respects the consolidated financial position
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and the consolidated results of operations and cash flows of the
Holding Company and its Subsidiaries as at the end of and for the
periods covered thereby in conformity with GAAP (subject, in the
case of any unaudited financial statements, to normal year-end and
audit adjustments and the omission of footnotes);
(ii) state that, after due inquiry, the signers do not have
knowledge of the existence, during the fiscal period covered by such
financial statements or as at the date of such Officer's
Certificate, of (A) any "reportable condition" (as defined in
Statement on Auditing Standards No. 60 issued by the Auditing
Standards Board of the American Institute of Certified Public
Accountants) in the internal control structure of the Holding
Company or any of its Subsidiaries, (B) any Change of Control or (C)
any Default or Event of Default, or, if such is not the case,
specifying in reasonable detail the nature and period of existence
thereof and what action the Holding Company or the applicable
Subsidiary has taken, is taking and proposes to take with respect
thereto;
(iii) in the case of each such Officers' Certificate
accompanying the quarterly financial statements delivered pursuant
to section 7(a) and the annual financial statements delivered
pursuant to section 7(b):
(A) show in reasonable detail all computations required
to demonstrate compliance, during and at the end of the fiscal
period covered by such financial statements, with the
provisions of section 13.5, 13.6, and 13.14; and
(B) unless already included in the relevant Form 10-Q
report or 10-K report delivered pursuant hereto, include in
reasonable detail management's discussion and analysis of the
results of operations and the financial condition of the
Holding Company and its Subsidiaries as at the end of and for
the fiscal period covered by such financial statements; and
(iv) if there shall exist any Subsidiary of the Holding
Company as of the date of such Officer's Certificate which did not
exist as of the date of the last Officer's Certificate delivered
pursuant to this section 7(c), specify with respect to each such
Subsidiary the information called for by Exhibit 7(c)(iv), contain a
brief description of the nature of each such Subsidiary's business
and certify that each such new Subsidiary has executed and delivered
pursuant to section 13.17 a Note Guarantee to each holder of any
Notes;
(d) as promptly as practicable (but in any event not later than
five Business Days) after receipt thereof, copies of all material reports
or written comments (including, without limitations, audit reports,
so-called management letters and any other reports or communications with
respect to the internal control structure of the Company or any of its
Subsidiaries) submitted by independent accountants or other management
consultants;
(e) at such time as any securities of the Holding Company or any of
its Subsidiaries are publicly held, as promptly as practicable (but in any
event not later than five Business Days) after the same are available,
copies of (i) all material press releases issued by the Holding Company or
any Subsidiary of the Holding Company, and all notices, proxy statements,
financial statements, reports and documents as the Holding
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Company shall send or make available generally to its stockholders or as
any Subsidiary of the Holding Company shall send or make available
generally to its stockholders, other than the Holding Company, and (ii)
all periodic and special reports, documents and registration statements
(other than on Form S-8) which the Holding Company or any Subsidiary of
the Holding Company furnishes or files, or any officer, director or
stockholder of the Holding Company or any of its Subsidiaries furnishes or
files with respect to the Holding Company or any of its Subsidiaries, with
the Commission (or any analogous foreign governmental authority) or any
securities exchange, excluding the Forms 3, 4 and 5 filed by directors,
officers and 10% stockholders of the Holding Company;
(f) as promptly as practicable (but in any event not later than five
Business Days) after any officer or senior management employee of the
Holding Company or any of its Subsidiaries becomes aware of the occurrence
of any of the following conditions or events, an Officer's Certificate
specifying in reasonable detail the nature and period of existence
thereof, what action the Holding Company or any of its Subsidiaries has
taken, is taking and proposes to take with respect thereto: (i) with
respect to any Plan, any reportable event, as defined in section 4043(b)
of ERISA and the regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on the date hereof;
(ii) the taking by the PBGC of steps to institute, or the threatening by
the PBGC of the institution of, proceedings under section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Holding Company or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or (iii) any event,
transaction or condition that could result in the incurrence of any
liability by the Holding Company or any ERISA Affiliate pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Holding Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or
excise tax provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, has resulted in, or could
reasonably be expected to result in, a Material Adverse Change;
(g) as promptly as practicable (but in any event not later than
three Business Days) after any officer or senior management employee of
the Holding Company or any of its Subsidiaries obtains knowledge of the
occurrence of any Default or Event of Default, or of any condition or
event which has resulted in, or could reasonably be expected to result in,
a Material Adverse Change, an Officer's Certificate specifying in
reasonable detail the nature and period of existence thereof, what action
the Holding Company or any of its Subsidiaries has taken, is taking and
proposes to take with respect thereto and the date, if any, on which it is
estimated the same will be remedied;
(h) as promptly as practicable (but in any event not later than 30
days) after the end of each fiscal year of the Holding Company, an annual
budget prepared on a monthly basis for the Holding Company and its
Subsidiaries for the succeeding fiscal year and, promptly upon preparation
thereof, any other significant budgets which the Holding Company or any of
its Subsidiaries prepares and any revisions of such annual or other
budgets;
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(i) as promptly as practicable (but in any event not later than five
Business Days) after the occurrence of any condemnation, taking or
destruction of or damage to (whether or not covered by insurance) any
properties or assets of the Holding Company or any of its Subsidiaries
having a value in excess of $500,000, an Officer's Certificate specifying
in reasonable detail the nature of such event, what action the Holding
Company or any of its Subsidiaries has taken, is taking and proposes to
take with respect thereto and the date, if any, on which it is estimated
the same will be remedied;
(j) as promptly as practicable (but in any event not later than five
Business Days) after receipt thereof, copies of all material notices and
communications given or received by the Holding Company or any of its
Subsidiaries under the Acquisition Documents (including, without
limitation, copies of (i) all documents related to adjustments to the
consideration paid under the Acquisition Agreement and (ii) all notices
and communications relating to claims of breaches and defaults and claims
for indemnification given or received by the Holding Company or any of its
Subsidiaries), or any of the other agreements, documents and instruments
referred to in section 4.3;
(k) such other material information relating to the Holding Company
or any of its Subsidiaries as shall be furnished to any bank, financial
institution or other Person to which the Holding Company or any of its
Subsidiaries is indebted for borrowed money or for any letters of credit
or similar instruments (other than information relating solely to
collateral therefor); and
(l) such other information as from time to time may reasonably be
requested by the Required Holders of any class of Securities.
8. Inspection; Board Visitation Rights; Confidentiality.
(a) The Holding Company will permit any Person designated by you and
the Other Purchasers on reasonable notice, during regular business hours
(unless a Default or Event of Default shall have occurred and be
continuing, in which case, at any time) and at your and the Other
Purchasers' expense (unless a Default or Event of Default shall have
occurred and be continuing, in which case, at the Holding Company's
expense), to visit and inspect any of the properties of the Holding
Company and its Subsidiaries, to examine their books and records (and to
make copies thereof) and to discuss their affairs, finances and accounts
with and to be advised as to the same by, their directors, officers,
consultants, counsel and accountants, all at such intervals as you and the
Other Purchasers may desire (but not more frequently than twice in any
fiscal year, unless a Default or Event of Default shall have occurred and
be continuing, in which case, as frequently as you and the Other
Purchasers may request). Representatives of the Holding Company and its
Subsidiaries may be present at any such meeting.
(b) You and the Other Purchasers shall have the right, as a group,
to appoint one representative who shall: (a) receive notice of all
meetings (both regular and special) of the board of directors of the
Holding Company and each committee thereof (such notice to be delivered or
mailed as specified in section 22 at the same time as notice is given to
the members of such board and/or committee); (b) receive all notices,
information and reports which are furnished to the members of such board
and/or committee at the same time and in the same manner as the same is
furnished to such members; and (c) receive as soon as available (but in
any event prior to the next
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succeeding meeting of such board and/or committee) copies of the minutes
of all such meetings. If any action is proposed to be taken after the
Closing by such board and/or committee by written consent in lieu of a
meeting, the Holding Company will give written notice thereof to such
representative, which notice shall describe in reasonable detail the
nature and substance of such proposed action and shall be delivered or
mailed as specified in section 22 at the same time as notice is given to
the members of such board and/or committee (but in no event later than
seven days prior to the date upon which such action is proposed to be
taken). The Holding Company will furnish such representative with a copy
of each such written consent not later than five days after it has been
signed by its last signatory. Such representative shall not constitute a
member of such board and/or committee and shall not be entitled to vote on
any matters presented at meetings of such board and/or committee or to
consent to any matter as to which the consent of any such board and/or
committee shall have been requested. The board of directors (or other
governing board) of the Holding Company shall meet not less frequently
than three (3) times during each fiscal year of the Holding Company.
(c) Each holder of any Securities agrees by its acceptance thereof
that any non-public information concerning the Holding Company and its
Subsidiaries which is furnished by the Holding Company to such holder
pursuant to this Agreement or any of the other Operative Documents
(collectively "Confidential Information") shall be kept confidential by
such holder in accordance with procedures adopted by such holder in good
faith to protect confidential information of third parties. The term
"Confidential Information" shall not include, however, any information
which (x) was publicly known or otherwise known to any holder at the time
of disclosure by the Holding Company to any holder; (y) subsequently
becomes publicly known through no act or omission of any holder or any
agent of any holder or (z) becomes known to any holder otherwise than
through disclosure by the Holding Company. Notwithstanding the foregoing,
each holder of any Securities may disclose Confidential Information: (i)
with the consent of the Holding Company (which shall not be unreasonably
withheld or delayed); (ii) when required by law or regulation; (iii) in
any report, statement or testimony submitted by such holder to any
regulatory body having or claiming to have jurisdiction over such holder;
(iv) to the National Association of Insurance Commissioners or any similar
organization or to any rating agency; (v) to the officers, directors,
employees, agents, representatives and professional consultants of such
holder and of such holder's Affiliates who have a need to know such
information; (vi) in connection with the preservation, exercise and/or
enforcement of any of such holder's rights or remedies under this
Agreement and the other Operative Documents; (vii) in connection with any
contemplated transfer of any of the Securities held by such holder to any
institutional investor or financial institution (so long as the recipient
of such information agrees to keep such information confidential on terms
substantially similar to those set forth in this section 8(c)); (viii) in
a response to any summons, subpoena or other legal process or in
connection with any judicial or administrative proceeding or inquiry; or
(ix) to correct any false or misleading information which may become
public concerning the relationship of such holder to the Holding Company
or any of its Subsidiaries and/or the transactions contemplated hereby.
9. Prepayment of Notes.
9.1. Required Prepayment Without Premium of Notes. In addition to paying
the entire outstanding principal amount of and the interest due on the Notes on
the maturity date thereof, on
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each of April 17, 2003 and April 17, 2004, the Obligor will prepay without
premium $3,666,667 aggregate principal amount of the Notes. In addition, on
April 17, 2003, the Obligor will prepay without premium the aggregate principal
amount of the Notes which represent Capitalized Interest (as such term is
defined in the Notes). No partial prepayment of the Notes pursuant to section
9.2 or any other provision of this Agreement shall alter the obligation of the
Obligor to make the required prepayments provided for in this section 9.1.
9.2. Optional Prepayment With Premium of Notes. At any time and from time
to time after April 17, 1999, the Obligor may, at its option, upon notice as set
forth in section 9.5, prepay all or any part (in an integral multiple of
$100,000 and a minimum of $500,000 or such lesser principal amount thereof as
shall then be outstanding) of the Notes, upon the concurrent payment of either
(i) an amount equal to the Make Whole Amount, in the event that the Warrant
Exchange shall not have occurred before April 17, 1999, or (ii) a premium (a
percentage of the principal amount so prepaid pursuant to this section 9.2) (the
"Applicable Premium"), in the event that the Warrant Exchange shall have
occurred before April 17, 1999, such percentage to be that set forth in the
following table opposite the period in which the date fixed for such prepayment
occurs:
<TABLE>
<CAPTION>
Applicable
Period Premium
------ -------
<S> <C>
April 18, 1999 through April 17, 2000 4.0%
April 18, 2000 through April 17, 2001 3.0%
April 18, 2001 through April 17, 2002 2.0%
April 18, 2002 through April 17, 2003 1.0%
April 18, 2003 and thereafter 0.0%
</TABLE>
Any partial prepayment of Notes pursuant to this section 9.2 shall be applied to
the payment of installments of principal of the Notes in inverse order of
maturity.
9.3. Prepayment Without Premium of the Notes at the Option of Holders of
Notes upon a Change of Control.
(a) If any Change of Control is to occur, then not less than 30 days
nor more than 60 days prior to the occurrence of such Change of Control,
the Issuers will notify each holder of any Notes of such pending Change of
Control and the date upon which it is scheduled to occur. If the Required
Holders of the Notes then outstanding furnish a written request for
prepayment to the Obligor (in accordance with section 22) not more than 90
days after receipt by such holders of such notice of such Change of
Control from the Issuers, the Obligor will prepay without premium all of
the Notes then outstanding. Each such prepayment shall occur on the date
upon which the Change of Control occurs, unless the Obligor and the
Required Holders of the Notes agree to a different date, and no prepayment
requested pursuant to this section 9.3 shall be due unless the Change of
Control shall occur.
(b) Each notice from the Issuers pursuant to this section 9.3 shall
make explicit reference to this section 9.3 and shall state that the right
of the Required Holders of the Notes then outstanding to require
prepayment thereof must be exercised within 90 days of the receipt of such
notice.
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9.4. Allocation of Partial Prepayments of Notes. In the case of each
partial prepayment of the Notes under this section 9, the principal amount of
the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding (excluding any Notes at the time owned by the Holding Company or any
Affiliate of the Holding Company) in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof, with adjustments, to the extent
practicable, to compensate for any prior prepayments not made exactly in such
proportion.
9.5. Notice of Optional Prepayments of Notes. In the case of each
prepayment of the Notes under section 9.2, the Obligor shall give written notice
thereof to each holder of Notes being prepaid not less than 10 nor more than 30
days prior to the date fixed for such prepayment. Each such notice shall set
forth: (a) the date fixed for prepayment; (b) the aggregate principal amount of
Notes to be prepaid on such date; and (c) the aggregate principal amount of
Notes held by such holder to be prepaid on such date and the amount of accrued
interest and an estimation of the Make Whole Amount or Applicable Premium, as
applicable, to be paid to such holder on such date (together with the
calculation of such Make Whole Amount or Applicable Premium, as applicable,
which calculation shall be satisfactory to each holder of the Notes to be so
prepaid). Any such notice of optional prepayment may be rescinded and the
Obligor shall have the right, through the date fixed for such optional
prepayment, to cancel such optional prepayment.
9.6. Maturity; Accrued Interest; Surrender, etc. of Notes. In the case of
each prepayment of all or any part of any Note, the principal amount to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the premium, if any, due thereon. Any Note prepaid in full shall be
surrendered to the Obligor at the Obligor's principal place of business promptly
following prepayment and canceled and shall not be reissued, and no Note shall
be issued in lieu of any prepaid principal amount of any Note.
9.7. Purchase of Notes. The Obligor will not, and will not permit any of
its Affiliates to, directly or indirectly, purchase or otherwise acquire, or
offer to purchase or otherwise acquire, any outstanding Notes except by way of
payment or prepayment in accordance with the provisions of the Notes and this
Agreement.
9.8. Payment on Non-Business Days. If any amount hereunder or under the
Notes shall become due on a day which is not a Business Day, such payment shall
be due on the next succeeding Business Day without including the additional
day(s) elapsed in the computation of the interest payable on such next
succeeding Business Day.
9.9. Application of Notes in Satisfaction of Exercise Price of Warrants.
In the event that any holder of any Note shall apply all or any portion of the
principal amount of such Notes in satisfaction (in whole or in part) of the
payment of the Exercise Price (as defined in the Warrants), any partial
application of the principal amount of any such Note shall be applied to the
payment of installments of principal due thereunder in order of maturity. No
such application of principal to the payment of the Exercise Price shall
constitute a prepayment which requires the payment of any prepayment premium.
10. Subordination of Notes and Note Guarantees. The payment of the Notes and
Note Guarantees and the rights of the holders thereof are subordinated to the
payment of the Superior Indebtedness (as defined in the Notes) and the rights of
the holders thereof upon the terms of subordination set forth in the Notes.
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11. Securities Act Matters; Option Plans.
(a) The Holding Company will take, or will cause to be taken, such
action as any holder of Securities may reasonably request from time to
time to facilitate any sale or disposition by any such holder of any
Securities without registration under the Securities Act and/or any
applicable securities laws within the limitation of the exemptions
provided by any rule or regulation thereunder, including, without
limitation, Rule 144A under the Securities Act.
(b) Exhibit 5.5 sets forth a true and complete description of the
Tridex Corporation 1997 Long Term Incentive Plan, the Tridex Corporation
Non-Employee Directors' Stock Plan and the proposed Tridex 1998
Corporation Non-Executive Long Term Incentive Plan, pursuant to which
employees and non-employee directors of the Holding Company and its
Subsidiaries have been and may be issued Common Stock (or options
therefor), which option plans are hereinafter called the "Option Plans."
You agree that pursuant to the Option Plans the Holding Company may issue,
or grant options or other rights to purchase, up to 744,306 shares of
Common Stock at purchase or exercise prices less than the Exercise Price
under the Warrants and that such issuance or grant shall not cause any
adjustment in the Exercise Price under the Warrants.
12. Registration Rights.
12.1. Registration on Request.
(a) In case the Holding Company shall receive from the Required
Holders of any Registrable Shares a written request or requests that the
Holding Company effect any registration, qualification and/or compliance
of any Registrable Shares held by (or issuable to) such holder or holders,
and specifying the intended method of offering, sale and distribution, the
Holding Company will:
(i) promptly give written notice of the proposed registration,
qualification and/or compliance to each holder of any Registrable
Shares; and
(ii) as soon as practicable, effect such registration,
qualification and/or compliance (including, without limitation, the
execution of an undertaking for post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and
as would permit or facilitate the sale and distribution of such
amount of Registrable Shares as is specified in a written request or
requests, made within 60 days after receipt of such written notice
from the Holding Company, by any holder or holders of any
Registrable Shares.
(b) The obligations of the Holding Company under this section 12.1
are subject to the following qualifications:
(i) except as provided in section 12.1(b)(vi), the Holding
Company shall only be obligated to effect one registration pursuant
to this section 12.1;
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(ii) the Holding Company shall not be obligated to effect any
registration pursuant to this section 12.1 unless it shall have been
(A) requested to do so by the holder or holders of a majority of the
Registrable Shares at the time issued (and issuable) and (B)
requested to effect the registration of Registrable Shares having an
aggregate Fair Value of not less than $2,000,000;
(iii) the Holding Company shall not be obligated to cause any
registration statement relating to a registration effected pursuant
to this section 12.1 to become effective prior to April 17, 1999;
(iv) the Holding Company shall not include in any
registration, qualification or compliance requested pursuant to this
section 12.1 any other securities (including, without limitation,
those to be issued and sold by the Holding Company) without the
prior written consent of the holder or holders of a majority of the
Registrable Shares to be included in such registration,
qualification or compliance;
(v) the Holding Company shall pay all Registration Expenses
related to any registration, qualification and compliance requested
pursuant to this section 12.1;
(vi) if, in connection with any registration of Registrable
Shares pursuant to this section 12.1, the holders of Registrable
Shares requesting registration are unable for any reason to include
in such registration all of the Registrable Shares for which
registration has been requested, then the holder or holders of the
Registrable Shares shall be entitled to additional registrations of
Registrable Shares pursuant to this section 12.1, sufficient to
permit the holders of the Registrable Shares to register all of the
Registrable Shares, provided, however, that in the event that any
Registrable Shares are not so registered as a result of the
imposition by the managing underwriter(s) of any underwritten
offering pursuant to this section 12.1 of a limitation on the number
of Registrable Shares which may be included in any such
registration, the holders of such Registrable Shares shall be
limited to one additional registration of Registrable Shares
pursuant to this section 12.1; and
(vii) if the Holding Company shall furnish to each holder of
Registrable Shares an Officer's Certificate certifying that the
Holding Company has determined, as evidenced by a written resolution
of the board of directors of the Holding Company, that it is
necessary to delay the filing of the registration statement because
such a filing at the time requested, or the offering of securities
pursuant thereto, would materially interfere with any pending
material transaction to which the Holding Company is a party, the
Holding Company shall have the right to delay such filing for a
period ending not more than 135 days after the first date upon which
it shall have received a written request for such registration from
the holder or holders of a majority of the Registrable Shares at the
time issued (and issuable); provided that (A) the Holding Company
may not exercise this right to delay the filing of a registration
statement on more than one occasion in any 12 month period and (B)
the Holding Company shall reimburse each holder of Registrable
Shares for all expenses (including, without limitation, fees,
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expenses and disbursements of counsel) incurred in connection with
any such registration prior to receipt of any such Officer's
Certificate.
12.2. Incidental Registration.
(a) If the Holding Company at any time or from time to time shall
determine to effect the registration, qualification and/or compliance of
any of its Shares (whether in connection with an offering by the Holding
Company or others) (otherwise than pursuant to a registration on a form
inappropriate for an underwritten public offering or relating solely to
securities to be issued in a merger, acquisition of the stock or assets of
another entity or in a similar transaction), then, in each such case, the
Holding Company will:
(i) promptly give written notice of the proposed registration,
qualification and/or compliance (which shall (A) specify if such
registration shall involve an underwritten offering and (B) include
a list of the jurisdictions in which the Holding Company intends to
register or qualify such securities under the applicable blue sky or
other state securities laws) to each holder of any Registrable
Shares; and
(ii) use its commercially reasonable best efforts to include
among the Shares which it then registers or qualifies all
Registrable Shares specified by any holder thereof in a written
request or requests, made within 30 days after receipt of such
written notice from the Holding Company.
(b) The obligations of the Holding Company under this section 12.2
are subject to the following qualifications:
(i) the Holding Company shall pay all Registration Expenses
related to any registration, qualification or compliance requested
pursuant to this section 12.2;
(ii) if, in connection with any underwritten offering pursuant
to this section 12.2, the managing underwriter(s) shall impose a
limitation on the number or kind of securities which may be included
in any such registration because, in its reasonable judgment, such
limitation is necessary to effect an orderly public distribution,
then the Holding Company shall be obligated to include in such
registration statement only such limited portion of the Registrable
Shares (which may be none) as is determined in good faith by such
managing underwriter, provided that, if any securities are being
offered for the account of any Person other than the Holding Company
and the holders of the Registrable Shares, the reduction in the
number of Registrable Shares included in such registration shall not
represent a greater percentage of the amount of Registrable Shares
originally requested to be registered and sold in such registration
than the lowest such percentage reduction imposed upon any other
Person;
(iii) in the case of any underwritten offering, the right of
any holder of Registrable Shares to participate in such offering
shall be conditioned upon such holder's entering into an
underwriting agreement in customary form (and containing other terms
and provisions consistent herewith) with the representative(s) of
the underwriter(s) selected by the Holding Company; and
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(iv) in the case of any offering effected pursuant to the
demand registration rights granted to the Seller in connection with
the Acquisition, the rights of the holders of Registrable Shares to
participate in such offering shall be subject to rights of the
Seller to limit the number of Registrable Shares which may be
included in any such registration. The Holding Company hereby agrees
to use its commercially reasonable best efforts to cause the Seller
to include the Registrable Shares in any such registration.
12.3. Permitted Registration. If and to the extent that any holder or
holders of any Registrable Shares shall have, at the time of delivery of the
written request referred to in section 12.2, no present intention of selling or
distributing such securities, the Holding Company shall be obligated to effect
the registration, qualification and compliance of such securities of such holder
or holders only if and to the extent, in each case, that such registration,
qualification and compliance are at the time permitted by the applicable
statutes or rules and regulations thereunder or the practices of the
governmental authority concerned.
12.4. Registration Procedures. In the case of each registration,
qualification and/or compliance contemplated by this section 12, the Holding
Company will keep the holder or holders of Registrable Shares advised in writing
as to the initiation of proceedings for such registration, qualification and
compliance and as to the completion thereof, and will advise each such holder,
upon request, of the progress of such proceedings. In addition, the Holding
Company will follow procedures customarily observed by issuers in registered
public offerings, and accord to the holder or holders of Registrable Shares all
rights (including, without limitation, the right to perform appropriate "due
diligence") customarily accorded to selling stockholders in secondary
distributions and to managing underwriters if the transaction in question is or
were an underwritten public offering. The holders of the Registrable Shares
shall cooperate in the preparation of any registration statement by providing
any information or materials and entering into any customary agreements
(including, without limitation, underwriting agreements) customarily required of
selling security holders in similar transactions. At the expense of the Holding
Company or of the party or parties bearing the expenses of such registration,
qualification and compliance, the Holding Company will (a) keep such
registration, qualification and compliance current and effective by such action
as may be necessary or appropriate, including, without limitation, the filing of
post-effective amendments and supplements to any registration statement or
prospectus, for such period (not to exceed 180 days) as is necessary to permit
the sale and distribution of the Registrable Shares pursuant thereto, (b) take
all necessary action under any applicable blue sky or other state securities law
to permit such sale and/or distribution, all as requested by the holder or
holders of Registrable Shares included therein, provided that the Holding
Company shall not be required to so register or qualify the Registrable Shares
in any jurisdiction if, solely as a result thereof, the Holding Company must
qualify generally to do business therein or consent to general service of
process therein, (c) comply with applicable requirements of all regulatory
entities, including, without limitation, the National Association of Securities
Dealers, Inc., (d) furnish each holder of Registrable Shares included therein
such number of registration statements, prospectuses, supplements, amendments,
offering circulars and other documents incidental thereto as such holder from
time to time may reasonably request, (e) list all Registrable Shares on each
securities exchange on which securities of the same class are then listed and
(f) furnish (or cause to be furnished) to each holder of Registrable Shares, all
undertakings, agreements, certificates, opinions, financial statements and
"comfort letters" of the sort customarily provided to selling stockholders in
secondary distributions and to
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the managing underwriters, if the transaction in question is or were an
underwritten public offering.
12.5. Indemnification.
(a) Without limiting the generality of section 20, the Holding
Company will indemnify, defend and hold harmless each holder of
Registrable Shares included in any registration, qualification and/or
compliance contemplated by this section 12 and each underwriter of such
securities, and each Person, if any, who controls each such holder and
underwriter within the meaning of the Securities Act, and their respective
directors, officers, employees, agents, advisors and Affiliates (each, an
"Indemnified Person"), to the fullest extent enforceable under applicable
law against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, supplement, amendment, offering circular or other
document related to any registration, qualification or compliance or any
omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation (or alleged violation) of the Securities Act
or other securities laws in connection with any such registration,
qualification or compliance, and will reimburse each such Indemnified
Person for any legal or any other expenses reasonably incurred in
connection with investigating and/or defending (and/or preparing for any
investigation or defense of) any such claim, loss, damage, liability,
action or violation; provided that the Holding Company will not be liable
in any such case to any such Indemnified Person if, but only to the extent
that, any such claim, loss, damage, liability, action, violation or
expense is finally determined to arise out of or result from any untrue
statement in or omission from written information furnished to the Holding
Company by an instrument duly executed by such Indemnified Person and
stated to be specifically for use therein. Each holder of Registrable
Shares will, if securities held by such holder are included in a
registration effected pursuant to this section 12, indemnify, defend and
hold harmless the Holding Company, each of its directors and officers who
signs the related registration statement, and each Person, if any, who
controls the Holding Company within the meaning of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, supplement, amendment, offering circular or other
document or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Holding Company and such
directors, officers or Persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending (and/or
preparing for any investigation or defense of) any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) was made in (or omitted from) such
registration statement, prospectus, supplement, amendment, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Holding Company by an instrument duly
executed by such holder and stated to be specifically for use therein;
provided that the liability of any such holder under this section 12.5
shall be limited to the net sales proceeds actually received by such
holder as a result of the sale by it of securities in such registration.
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(b) Each party entitled to indemnification under this section 12.5
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of such claim or any litigation resulting therefrom, provided that
(i) the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
section 12.5, except to the extent of any claim, loss, damage, liability
or expense caused solely by such failure, (ii) counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), (iii) the Indemnified
Party may participate in such defense at such party's expense and (iv) the
Indemnified Party shall be entitled to separate counsel at the expense of
the Indemnifying Party if, in the reasonable opinion of counsel to the
Indemnified Party, there shall exist any conflict of interest (or
potential conflict of interest) between the Indemnified Party and the
Indemnifying Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(c) If the indemnification provided for in this section 12.5 is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any claim, loss, damage, liability or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
claim, loss, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on
the one hand, or of the Indemnified Party, on the other hand, in
connection with such claim, loss, damage, liability or expense, as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
12.6. Restrictions on Other Agreements. Except as set forth on Exhibit
12.6 attached hereto, the Holding Company will not grant any right relating to
the registration of its securities if the exercise thereof interferes with or is
inconsistent with or will delay (or could reasonably be expected to interfere
with or be inconsistent with or delay) the exercise and enjoyment of any of the
rights granted under this section 12, without the written consent of holders of
66-2/3% or more of the Registrable Shares at the time outstanding, which consent
may be given or withheld in the sole discretion of such holders. The Holding
Company will not permit any of its Subsidiaries to grant any right relating to
the registration of its securities.
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13. Covenants of the Holding Company. So long as any of the Notes shall remain
outstanding, the Holding Company will duly perform and observe each and all of
the covenants and agreements hereinafter set forth:
13.1. Books of Record and Account; Reserves. The Holding Company will, and
will cause each of its Subsidiaries to, (a) at all times keep proper books of
record and account in which full, true and correct entries shall be made of its
transactions in accordance with GAAP and (b) set aside on its books from its
earnings for each fiscal year all such proper reserves as shall be required in
accordance with GAAP in connection with its business.
13.2. Payment of Taxes; Corporate Existence; Maintenance of Properties;
Compliance with Laws; Lines of Business; Proprietary Rights and Licenses. The
Holding Company will, and will cause each of its Subsidiaries to:
(a) pay and discharge promptly as they become due and payable all
taxes, assessments and other governmental charges or levies imposed upon
it or its income or upon any of its property, as well as all claims of any
kind (including claims for labor, materials and supplies) which, if
unpaid, could reasonably be expected by law to become a Lien upon its
property and could reasonably be expected to result in a Material Adverse
Change; provided that no such Person shall be required to pay any such
tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings promptly initiated and diligently conducted and if it shall
have set aside on its books such reserves, if any, with respect thereto as
are required by GAAP; provided, further, that the Holding Company will,
and will cause each of its Subsidiaries to, pay any such tax, assessment,
charge, levy or claim prior to the commencement of any proceeding to
foreclose any Lien securing the same;
(b) do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence;
(c) maintain and keep its material properties in good repair,
working order and condition (ordinary wear and tear and casualties
excepted);
(d) comply in all respects with all applicable laws, statutes,
rules, regulations and orders of, and all applicable restrictions imposed
by, all governmental authorities in respect of the conduct of its business
and the ownership of its property (including, without limitation, all
Environmental Laws), if the failure to do so could reasonably be expected
to result in a Material Adverse Change; provided that no such Person shall
be required by reason of this section 13.2(d) to comply therewith at any
time while it shall be contesting its obligation to do so in good faith by
appropriate proceedings promptly initiated and diligently conducted, and
if it shall have set aside on its books such reserves, if any, with
respect thereto as are required by GAAP;
(e) engage only in the Business (and lines of business related to
and supportive of the Business), and keep substantially all its assets in
the United States of America; and
(f) own or have a valid license for all material Proprietary Rights
and Licenses used by it in the conduct of its business.
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13.3. Insurance. The Holding Company will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers,
insurance with respect to its properties and businesses against loss or damage
of the kinds customarily insured against by Persons of established reputation
engaged in the same or a similar business and similarly situated, in such
amounts and by such methods (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect thereto) as
shall be customary for such Persons and reasonably deemed adequate by the
Holding Company.
13.4. Limitation on Discount or Sale of Receivables. The Holding Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, discount or sell any of its accounts receivable, except that any
such Person may settle doubtful accounts or may grant discounts (such as
quantity or prompt payment discounts) in the ordinary course of business.
13.5. Limitation on Funded Debt and Current Debt. The Holding Company will
not, and will not permit any of its Subsidiaries to, be liable or create,
assume, incur, guarantee, or in any manner become liable, contingently or
otherwise, in respect of any Funded Debt or Current Debt other than:
(a) Funded Debt evidenced by the Notes (and Note Guarantees);
(b) Funded Debt and/or Current Debt under (i) the Fleet Bank
Agreement and (ii) other senior credit facilities which the Holding
Company and/or its Subsidiaries may enter into from time to time, provided
that (x) both at the time of and immediately after the establishment of
any such credit facility, no Default or Event of Default shall have
occurred and be continuing, (y) the lender under any such credit facility
shall have agreed in writing that (A) the documents executed and delivered
in connection with such credit facility shall be subject to provisions
identical to those set forth in section 13.16(c) and (B) the Indebtedness
evidenced by the Notes and Note Guarantors shall be subordinate to such
senior credit facility on terms materially identical to the subordination
provisions set forth in the Notes, and (z) the Indebtedness issued
pursuant to such senior credit facility bears interest at market rates
prevailing at its date of issuance and has other terms and conditions no
more restrictive in any material respect upon the Holding Company or any
of its Subsidiaries than those provided in the Fleet Bank Documents, and
provided, further, that the aggregate outstanding principal amount
thereof, including, without limitation, all amounts due (contingently or
otherwise) in respect of reimbursement obligations under letters of
credit, interest rate protection agreements or similar instruments (and
all related reimbursement agreements) does not exceed (1) in the case of
the Fleet Bank Agreement, $20,000,000 plus the interest and other amounts
directly attributable to such principal amount plus the maximum amount of
Indebtedness incurred in respect of the interest rate protection agreement
provided under the Fleet Bank Agreement or (2) in the case of such other
credit facilities, at any time the maximum amount of Consolidated Total
Debt (calculated on a pro forma basis giving effect to the proposed Funded
Debt and/or Current Debt) permitted under section 13.6(c);
(c) Funded Debt and/or Current Debt outstanding on the date hereof
and referred to on Exhibit 5.9 attached hereto (but, in each case, no
renewal, extension, refinancing or refunding of any thereof);
(d) Funded Debt and/or Current Debt under Capital Leases or
consisting of purchase money loans in addition to that permitted pursuant
to section 13.5(c), provided
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that (i) both at the time of and immediately after giving effect to the
incurrence thereof and the retirement of any Indebtedness which is
concurrently being retired, no Default or Event of Default shall have
occurred and be continuing, (ii) the aggregate outstanding principal
amount of such Funded Debt and Current Debt incurred pursuant to this
section 13.5(d) shall at no time exceed $3,000,000 and (iii) any Liens
securing such Funded Debt and/or Current Debt are permitted under section
13.8(d);
(e) Funded Debt and/or Current Debt incurred to extend, refinance,
refund or renew (the "Refinancing Debt") any other outstanding Funded Debt
and/or Current Debt permitted under this section 13.5 (the "Refinanced
Debt"), provided that:
(i) the aggregate outstanding principal amount of the
Refinancing Debt shall not at any time exceed (A) that of the
Refinanced Debt immediately prior to such refinancing or (B) in the
case of any extensions, refinancings, refundings or renewals of the
Funded Debt and Current Debt under the Fleet Bank Agreement or any
Refinancing Debt thereof, the amount permitted under section
13.5(b);
(ii) the scheduled final maturity date of the Refinancing Debt
is not earlier than that of the Refinanced Debt;
(iii) the Weighted Average Life to Maturity of the Refinancing
Debt is not less than that of the Refinanced Debt;
(iv) the Refinancing Debt has a ranking which is not senior
(as a result of any contractual or structural subordination, the
grant of any collateral security therefor, any change in the Persons
obligated with respect thereto or otherwise) to the ranking of the
Refinanced Debt;
(v) the Refinancing Debt bears interest at market rates
prevailing at its date of issuance; and
(vi) both at the time of and immediately after giving effect
to the incurrence of the Refinancing Debt and the retirement of the
Refinanced Debt, no Default or Event of Default shall have occurred
and be continuing;
(f) Funded Debt and/or Current Debt owing to the Holding Company or
to any Wholly-Owned Subsidiary of the Holding Company; and
(g) Funded Debt and/or Current Debt owing to any former employee in
connection with a purchase of Shares of the Holding Company from such
former employee.
For purposes of this section 13.5, any Person becoming a Subsidiary of the
Holding Company after the date hereof shall be deemed, at the time it becomes a
Subsidiary, to have incurred all of its then outstanding Funded Debt and Current
Debt.
13.6. Certain Financial Covenants.
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(a) Consolidated Net Worth. On and as of the last day of each fiscal
quarter of the Holding Company, Consolidated Net Worth shall not be less
than an amount equal to 75% of the Consolidated Net Worth as of the
Closing Date, plus an aggregate amount equal to 75% of positive
Consolidated Net Income for the period commencing on the Closing Date to
and including such last day (but without reduction for any losses).
(b) Fixed Charges Coverage Ratio. On and as of the last day of each
fiscal quarter of the Holding Company during the periods referred to
below, the ratio of Consolidated Cash Flow for the period of four
consecutive fiscal quarters of the Holding Company then ended to
Consolidated Fixed Charges for such period shall not be less than the
applicable ratio specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including
June 30, 1999 2.00 to 1.00
From and after July 1, 1999
to and including December 31, 2001 2.50 to 1.00
From and after January 1, 2002 3.00 to 1.00
</TABLE>
Notwithstanding any provision hereof to the contrary, the ratio specified
in this section 13.6(b) shall be tested initially as of the fiscal quarter
ending September 30, 1998 and Consolidated Cash Flow as of such date shall
be determined by annualizing the Consolidated Cash Flow for the six months
then ended. Consolidated Cash Flow for purposes of the ratio specified in
this section 13.6(b) as of December 31, 1998 shall be determined by
annualizing the Consolidated Cash Flow for the nine months then ended.
(c) Leverage Ratio. The Holding Company will not permit, on any date
during any period specified below, the ratio of Consolidated Total Debt
outstanding on such date to Consolidated Cash Flow for the period of four
consecutive fiscal quarters of the Company ending on, or most recently
ended prior to, such date, to exceed the applicable ratio specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including
June 30, 1999 5.50 to 1.00
From and after July 1, 1999
to and including December 31, 2001 5.00 to 1.00
From and after January 1, 2002
to and including December 31, 2002 4.00 to 1.00
From and after January 1, 2003 3.50 to 1.00
</TABLE>
Notwithstanding any provision hereof to the contrary, the ratio specified
in this section 13.6(c) shall be tested initially as of the fiscal quarter
ending September 30, 1998
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and Consolidated Cash Flow as of such date shall be determined by
annualizing the Consolidated Cash Flow for the six months then ended.
Consolidated Cash Flow for purposes of the ratio specified in this section
13.6(c) as of December 31, 1998 shall be determined by annualizing the
Consolidated Cash Flow for the nine months then ended.
13.7. Limitation on Tax Consolidation. The Holding Company will not, and
will not permit any of its Subsidiaries to, become a party to a consolidated or
combined income tax return with any Person other than the Holding Company and
its Subsidiaries.
13.8. Limitation on Liens. The Holding Company will not, and will not
permit any of its Subsidiaries to, create or suffer to exist any Lien in respect
of any property of any character of the Holding Company or any of its
Subsidiaries (whether owned on the date hereof or hereafter acquired); provided
that there shall be excluded from the operation of this section 13.8:
(a) Liens securing Funded Debt and Current Debt, including amounts
due (contingently or otherwise) in respect of reimbursement obligations
under letters of credit, interest rate protection agreements or similar
instruments and all related reimbursement agreements, under the Fleet Bank
Agreement to the extent permitted under section 13.5(b) or any Refinancing
Debt incurred to refinance or refund the same to the extent permitted
under section 13.5(e);
(b) Liens (other than any Lien created by any Environmental Law or
by Section 4068 of ERISA), charges and encumbrances which (i) are incurred
in the ordinary course of business and which are incidental to the conduct
of the business of the Holding Company and its Subsidiaries and the
ownership of its and their property, (ii) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit, (iii)
do not in the aggregate materially detract from the value of the property
of the Holding Company or its Subsidiaries or materially impair the use
thereof in the operation of its or their business and (iv) do not (and
could not reasonably be expected to) materially adversely affect the
rights of the holders of the Notes;
(c) any Lien existing on the date hereof and referred to on Exhibit
5.9 attached hereto;
(d) any Lien securing Funded Debt and/or Current Debt under Capital
Leases or consisting of purchase money loans permitted under section
13.5(d), provided that (i) such Lien does not extend to or cover any
property other than that being leased or acquired and (ii) the aggregate
amount of Indebtedness secured thereby does not exceed the cost of such
property; and
(e) any Lien upon or in any property at the time such property is
acquired by the Holding Company or any of its Subsidiaries, including
property of any Person which is to be acquired by the Holding Company or
any of its Subsidiaries and thereafter becomes a Subsidiary of the Holding
Company; provided that (i) such Lien was not incurred in contemplation of
the acquisition of such property and does not and shall not extend to or
cover any other property of the Holding Company or any of its Subsidiaries
and (ii) the Funded Debt and Current Debt secured thereby is permitted
under section 13.5 and does not exceed the fair market value of such
property.
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13.9. Limitation on Transactions with Affiliates. The Holding Company will
not, and will not permit any of its Subsidiaries to, engage in any transaction
(including, without limitation, the purchase, sale or exchange of any properties
and assets or the rendering of any services or the payment of compensation) with
an Affiliate of the Holding Company or of any of its Subsidiaries on terms less
favorable to the Holding Company or any such Subsidiary in any material respect
than would be obtainable at the time in comparable transactions with a Person
not such an Affiliate.
13.10. Limitation on Investments. The Holding Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, make or commit to
make any Investments other than Permitted Investments.
13.11. Limitation on Issuance of Shares of Subsidiaries. The Holding
Company will not permit any of its Subsidiaries to (a) issue, sell or otherwise
dispose of any Shares (or any securities convertible into or exercisable or
exchangeable for Shares) of such Subsidiary except to the Holding Company or to
a Wholly-Owned Subsidiary of the Holding Company or (b) sell, transfer or
otherwise dispose of any Shares (or any securities convertible into or
exercisable or exchangeable for Shares) of any other Subsidiary of the Holding
Company except to the Holding Company or to a Wholly-Owned Subsidiary of the
Holding Company. The Holding Company will not, in any event, permit any
Subsidiary of the Holding Company to have outstanding any Preferred Shares.
13.12. Limitation on Subsidiary's Consolidation or Merger. The Holding
Company will not permit any of its Subsidiaries to consummate any merger or
consolidation with any other Person, provided that any Wholly-Owned Subsidiary
of the Holding Company may be merged into the Holding Company or into another
Wholly-Owned Subsidiary of the Holding Company, if (a) the Holding Company or
such other Wholly-Owned Subsidiary is the surviving Person from such merger and
is Solvent (both at the time of and immediately after giving effect thereto),
(b) the Holding Company or such other Wholly-Owned Subsidiary shall have
delivered to each holder of a Security such opinions, confirmations and other
agreements and instruments as the Required Holders of each class of Securities
shall have reasonably requested and (c) both at the time of and immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing. No transaction permitted by this section 13.12
shall have the effect of releasing the Holding Company or any other party to any
of the Operative Documents from any liability or obligation under any of the
Operative Documents.
13.13. Limitation on the Holding Company's Consolidation or Merger. The
Holding Company will not consolidate with or merge into any other Person or
Transfer all or substantially all of its property in a single transaction or
series of transactions to any Person, provided that the foregoing restriction
does not apply to the consolidation or merger of the Holding Company with or
into, or the Transfer of all or substantially all of its property in a single
transaction or series of transactions to, any other Person so long as:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires as a result of such Transfer all
or substantially all of the property of the Holding Company, as the case
may be (the "Successor Corporation"), shall be a Solvent corporation
organized and existing under the laws of and conducting a majority of its
business in the United States of America, any state thereof or the
District of Columbia and whose lines of business are related to or not
materially different from the Business;
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(b) if the Holding Company is not the Successor Corporation, the
Successor Corporation shall have executed and delivered to each holder of
Notes its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and each of the other
Operative Documents (pursuant to such agreements and instruments as shall
be reasonably satisfactory to the Required Holders of the Notes), and the
Holding Company shall have caused to be delivered to each holder of Notes
an opinion of counsel reasonably satisfactory to the Required Holders, to
the effect that all agreements or instruments effecting such assumption
are legal, valid and binding obligations of such Successor Corporation
enforceable against it in accordance with their respective terms and
covering such other matters as the Required Holders may reasonably
request; and
(c) immediately after giving effect to such transaction (i) no
Default or Event of Default shall have occurred and be continuing, (ii)
the Net Worth of the Successor Corporation shall not be less than the Net
Worth of the Holding Company immediately prior to such transaction and
(iii) the Holding Company or the Successor Corporation, as the case may
be, would be able to incur at least $1 of additional Funded Debt and/or
Current Debt under section 13.5.
No such transaction by the Holding Company shall have the effect of releasing
the Holding Company or any Successor Corporation that shall theretofore have
become such in the manner prescribed in this section 13.13 from its liability
under this Agreement or any of the other Operative Documents.
13.14. Limitation on Disposition of Property. The Holding Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
sell, lease or otherwise dispose of any of their respective properties and
assets (or any right, title or interest therein), whether owned on the date
hereof or hereafter acquired and whether real, personal or mixed, tangible or
intangible, including, without limitation, any Shares, securities or
Indebtedness of any Subsidiary of the Holding Company, except for (a) sales of
inventory and licenses of software or other Proprietary Rights in the ordinary
course of business, (b) dispositions of tangible personal property and assets
that have suffered casualties if the proceeds thereof (including insurance
proceeds) are reinvested in tangible personal properties and assets of
substantially similar value and utility and/or applied to the permanent
reduction of Superior Indebtedness, in each case within 180 days following the
receipt of such proceeds, (c) transactions permitted under section 13.13, and
(d) other sales of properties and assets if, in the case of this clause (d), on
the date of such sale and after giving effect thereto:
(i) no Default or Event of Default shall have occurred and be
continuing;
(ii) in the case of any sale of properties and assets having a
value of $1,000,000 or more, the board of directors of the Holding
Company shall have reasonably determined in good faith, as evidenced
by written resolutions thereof promptly delivered to the holders of
the Notes, that (A) the sale of such properties and assets is in the
best interests of the Holding Company and its Subsidiaries and is
not disadvantageous in any material respect to the holders of the
Notes and (B) such properties and assets are being disposed of for
fair and adequate consideration on fair and adequate terms; and
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(iii) the aggregate value of all properties and assets sold
pursuant to this clause (e) during the period commencing on the
Closing Date and ended on the date of such sale is not more than 25%
of Consolidated Total Assets as at the end of the most recently
completed fiscal quarter of the Holding Company immediately prior to
the date of such sale; provided that, if the proceeds of a sale made
pursuant to this clause (d) (net of all costs and out-of-pocket
expenses in connection therewith) are applied within 180 days of the
consummation of such sale to (x) the purchase by the Holding Company
(or the Subsidiary effecting such sale) of other property and assets
used and useful in the ordinary course of business of the Holding
Company or such Subsidiary, (y) the prepayment (and permanent
reduction) of the Funded Debt under the Fleet Bank Agreement (or any
Refinancing Debt incurred to refinance or refund such Funded Debt)
or (z) the prepayment of the Notes pursuant to section 9.2, then,
from and after the date such net proceeds are so applied, such sale
shall be disregarded for purposes of any subsequent computation
under this clause (d).
For purposes of determining compliance with this section 13.14, the value of any
properties and assets (other than cash) to be sold by the Holding Company or any
of its Subsidiaries shall be deemed to be the fair market value thereof (as
reasonably determined by the board of directors of the Holding Company as of the
date of disposition thereof).
13.15. Limitation on Leasebacks. The Holding Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, sell or otherwise
dispose of any of its property if, as part of the same transaction or series of
related transactions, any such Person shall then or thereafter rent or lease as
lessee, or similarly acquire the right to possession or use of, such property
(or a major portion thereof), or other property which it intends to use for
substantially the same purpose or purposes, under any lease, agreement or other
arrangement which obligates any such Person to pay rent as lessee or make any
other payments for such possession or use.
13.16. Modification of Certain Documents, Agreements and Instruments;
Fiscal Year. The Holding Company will not, and will not permit any of its
Subsidiaries to:
(a) file after the Closing any resolution of its board of directors
(or other governing body) with the Secretary of State of the jurisdiction
of its organization to establish or create a series of Preferred Shares
having terms which require the mandatory redemption of such Preferred
Shares on a date prior to the date of maturity of the Notes or a separate
class of equity securities;
(b) amend, modify, supplement or waive any term, condition or
provision of its Organizational Documents, the Option Plans or any of the
agreements, documents or instruments referred to in section 4.3 including,
without limitation, the Acquisition Documents (other than the Fleet Bank
Documents as to which the following section 13.16(c) applies), if the
effect thereof is, or could reasonably be expected to be, to impose
restrictions upon the Holding Company or any of its Subsidiaries that are
more restrictive in any material respect than those set forth in its
Organizational Documents or such other agreements, documents and
instruments as in effect on the Closing Date; or
(c) amend, supplement, modify or waive any term of the Fleet Bank
Documents (or the documents relating to any Refinancing Debt thereof) if
the effect
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thereof is (i) to increase the aggregate outstanding principal amount of
the Indebtedness thereunder to an amount in excess of that permitted under
section 13.5(b), (ii) to make the scheduled final maturity date of the
Indebtedness thereunder earlier than that specified under the Fleet Bank
Agreement as in effect on the Closing Date (except that the working
capital loan facility thereunder may be renewed and extended on any number
of occasions), (iii) to make the Weighted Average Life to Maturity of the
Indebtedness thereunder less than that of the Indebtedness under the Fleet
Bank Agreement as in effect on the Closing Date, (iv) to make the ranking
of the Indebtedness thereunder senior (as a result of any contractual or
structural subordination, the grant of any collateral security therefor,
any change in the Persons obligated with respect thereto or otherwise) to
the ranking of the Indebtedness under the Fleet Bank Agreement as in
effect on the Closing Date, or (v) to make the interest rate(s) applicable
to the Indebtedness thereunder higher than the market rates prevailing at
the time of such amendment, supplement, modification or waiver.
13.17. Further Assurances.
(a) From time to time hereafter, the Holding Company will execute
and deliver, or will cause to be executed and delivered, such additional
agreements, documents and instruments and will take all such other actions
as any holder or holders of the Notes may reasonably request for the
purpose of implementing or effectuating the provisions of the Operative
Documents.
(b) Without limiting the generality of the foregoing, in the event
that the Holding Company at any time or from time to time shall organize
or acquire any direct or indirect Subsidiary, then and in each such case
the Holding Company will (i) promptly (but in any event not later than 20
days prior to consummating any such transaction) notify each holder of the
Notes and (ii) not later than the date upon which such transaction is
consummated cause such Subsidiary to execute and deliver to each holder of
any Notes a Note Guarantee.
13.18. Additional Subsidiaries. Notwithstanding anything to the contrary
set forth herein, without the prior written consent of the Required Holders of
the Notes (which consent shall not be unreasonably withheld or delayed), the
Holding Company shall not, and shall not permit any of its Subsidiaries to,
organize or acquire any Subsidiary (other than a Subsidiary organized or
acquired in connection with a Permitted Investment of the kind described in
clause (h) of the definition of the term "Permitted Investment").
13.19. Listing Status. The Holding Company shall use its best efforts to
assure that the Common Stock shall at all times be listed on the Nasdaq stock
exchange or another recognized national stock exchange in the United States.
14. Definitions.
14.1. Definitions of Capitalized Terms. The terms defined in this section
14.1, whenever used in this Agreement, shall, unless the context otherwise
requires, have the following respective meanings:
"Acquisition", "Acquisition Agreement" and "Acquisition Documents" shall
have the respective meanings specified in section 4.3.
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"Affiliate" of any Person shall mean any other Person which, directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with such first-mentioned Person; provided that in no
event shall you or any other institutional holder of Securities be deemed to be
an Affiliate of the Holding Company or any of its Subsidiaries. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock or other Shares or by contract or
otherwise.
"Applicable Premium" shall have the meaning specified in section 9.2.
"Business" shall have the meaning specified in section 5.4.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day which shall be in Boston, Massachusetts, or New York, New York, a legal
holiday or a day on which banking institutions therein are authorized by law to
close.
"Capital Lease" shall mean any lease or similar arrangement which is of
such a nature that payment obligations of the lessee or obligor thereunder are
required to be capitalized and shown as liabilities upon a balance sheet of such
lessee or obligor prepared in accordance with GAAP or for which the amount of
the asset and liability thereunder as if so capitalized should be disclosed in a
note to such balance sheet.
"Capitalized Interest" shall have the meaning specified in the Notes.
"Cash Flow" of any Person shall mean, for any period, the Net Income of
such Person for such period after restoring thereto amounts deducted for (a)
Fixed Charges, (b) taxes in respect of income and profits, (c) depreciation and
amortization, and (d) non-cash stock issuance employee compensation expense,
determined in accordance with GAAP.
"Change of Control" shall mean an event or series of events (occurring for
whatever reason) following which:
(a) Seth M. Lukash shall cease to serve as Chairman and Chief
Executive Officer of the Holding Company (in both title and function) for
any reason other than his death or permanent disability;
(b) Seth M. Lukash shall cease to serve as Chairman and Chief
Executive Officer of the Holding Company (in both title and function) as a
result of his death or permanent disability and the Holding Company shall
have failed to engage an individual satisfactory to the Required Holders
of each class of Securities within six months after such event; or
(c) the Holding Company shall cease to own beneficially and control
100% of the outstanding Shares of each of TNC and UTC.
"Closing" and "Closing Date" shall have the respective meanings specified
in section 3.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency from time to time administering the Securities Act and/or
the Exchange Act.
"Common Stock" shall mean the Common Stock, without par value, of the
Holding Company as constituted on the Closing Date and any Shares into which
such Common Stock shall have been changed or any Shares resulting from any
reclassification of such Common Stock.
"Confidential Information" shall have the meaning specified in section 8.
"Consolidated Cash Flow" [13.6], "Consolidated Fixed Charges" [13.6],
"Consolidated Interest Charges" [13.6], "Consolidated Net Income" [13.6],
"Consolidated Net Worth" [13.6],"Consolidated Total Debt" [13.6] and
"Consolidated Total Assets" [13.14] shall mean the Cash Flow, Fixed Charges,
Interest Charges, Net Income, Net Worth, Total Debt and Total Assets, as the
case may be, of the Holding Company and its Subsidiaries (whether or not
ordinarily consolidated in consolidated financial statements of the Holding
Company and its Subsidiaries), all consolidated in accordance with GAAP, and
after giving appropriate effect to outside minority interests, if any, in
Subsidiaries, provided that in determining Consolidated Cash Flow and
Consolidated Net Income there shall be excluded (a) the Net Income of any Person
(other than a Subsidiary of the Holding Company) in which the Holding Company or
any Subsidiary of the Holding Company has an ownership interest, except to the
extent that any such Net Income has been actually received by the Holding
Company or such Subsidiary in the form of cash dividends or similar cash
distributions, (b) any extraordinary gains and losses, (c) any equity interest
of the Holding Company or any of its Subsidiaries in the unremitted earnings of
any Person not a Subsidiary of the Holding Company or any of its Subsidiaries,
(d) any amounts representing the write-off of in-process research and
development expenses to be incurred in connection with the Acquisition, (e) the
one-time charges related to the Acquisition.
"Current Debt" of any Person shall mean, at any date, without duplication
of amounts, (a) all Indebtedness for borrowed money or in respect of Capital
Leases or the deferred purchase price of property (including, without
limitation, all Indebtedness of the kind referred to in clauses (b), (c), (d)
and (e) of the definition of Indebtedness but excluding trade payables and
employee wages arising in the ordinary course of business), whether or not
interest-bearing, and whether secured or unsecured, of such Person at such date
which would, in accordance with GAAP, be classified as short-term Indebtedness
at such date, but specifically excluding the current maturities of such Person's
Funded Debt, (b) all Guarantees by such Person at such date of Current Debt of
others and (c) the aggregate amount which is due on or before the expiration of
one year from such date in respect of any Redeemable Shares of such Person
(other than the Warrants and Warrant Shares).
"Current Market Price" of any security (including, without limitation, any
share of Common Stock) as of any date herein specified shall mean the average of
the daily closing prices for the 20 consecutive trading days immediately prior
to, but not including the day in question (or in the event that a security has
been traded for less than 20 days, each of the trading days prior to the day in
question on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any domestic
national securities exchange, the closing sale price of such security, regular
way, or the average of the closing bid prices thereof if no such sale occurred,
in each case as officially reported on the
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principal securities exchange on which such security is listed, or (b) if not
reported as described in clause (a), the closing sale price of such security, or
the average of the closing bid prices thereof if no such sale occurred, in each
case as reported by the Nasdaq Stock Market, or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, as reported by any member firm of the New York Stock Exchange selected
by the Company, or (c) if not quoted as described in clause (b), the average of
the closing bid and asked prices for such security as reported by the National
Quotation Bureau Incorporated or any similar successor organization, as reported
by any member firm of the New York Stock Exchange selected by the Company.
"Default" shall mean any condition or event which constitutes or, after
notice or lapse of time or both, would constitute an Event of Default.
"Disclosure Documents" shall have the meaning specified in section 5.4.
"Environmental Laws" shall mean any law, statute, rule, regulation or
other governmental standard or requirement relating or pertaining to (a) the
generation, manufacture, management, handling, use, sale, transportation,
treatment, storage, disposal, delivery, discharge, release or emission of any
waste, pollutant or toxic, hazardous or other similar substance (including,
without limitation, petroleum and petroleum-derived materials), or (b) any other
act, omission or condition affecting or involving pollution or contamination of
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and rulings thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) that, together with the Holding Company, would be treated as a
single employer under section 4001(b) of ERISA, or that is a member of a group
of which the Holding Company is a member and that is a controlled group within
the meaning of section 4971(e)(2)(B) of the Code.
"Event of Default" shall have the meaning specified in section 15.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Fair Value" shall mean the fair value of the appropriate security,
property, asset, business or entity as determined by the board of directors of
the Holding Company, provided that if, within 15 days following receipt of the
writing setting forth any such determination of Fair Value by the board of
directors of the Holding Company, the Required Holders of the Warrants (for
purposes of any determination of Fair Value pursuant to section 4 of the
Warrants) shall notify the Holding Company of their disagreement with such
determination, then Fair Value shall be determined by an independent appraiser
of recognized national standing (selected by the Holding Company and reasonably
satisfactory to the Required Holders of the Warrants. Each determination of Fair
Value shall be made in accordance with generally accepted financial practice
(but without any adjustment on account of any lack of liquidity, lack of control
and/or restriction on transferability of any securities) and shall be set forth
in writing, and the Holding Company shall, immediately following such
determination, deliver a copy thereof to each holder or holders of the
Securities then outstanding. For purposes of any determination of Fair Value
pursuant to section 4 of the Warrants, Fair Value shall be calculated on a basis
which assumes
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(x) the exercise of the Warrants and the receipt of the consideration payable
upon such exercise and (y) the issuance of all Common Stock permitted to be
issued pursuant to the Option Plans and the receipt of the consideration payable
upon such issuance. The determination of any such independent appraiser so made
shall be conclusive and binding on the Holding Company and on all holder or
holders of the applicable class of Securities. The Holding Company shall pay all
of the expenses incurred in connection with any such determination, including,
without limitation, the expenses of the independent appraiser engaged to make
such determination. If the Holding Company shall not have engaged such appraiser
within 20 days after the occurrence of the event giving rise to the need
therefor, then such appraiser may be engaged by the Required Holders of the
Warrants (for purposes of any determination of Fair Value pursuant to section 4
of the Warrants). Notwithstanding the foregoing, in the case of any security, if
clauses (a), (b) or (c) of the definition of Current Market Price are applicable
to such security, then the Fair Value of such security shall be the Current
Market Price of such security.
"Fixed Charges" of any Person shall mean, for any period, the sum (without
duplication of amounts) of all Interest Charges and all Rental Obligations of
such Person for such period, determined in accordance with GAAP.
"Fleet Bank Agreement" shall mean the Credit Agreement dated as of April
17, 1998 among the Holding Company, TNC, UTC and Progressive, acting as joint
and several obligors, and Fleet National Bank, and an interest rate protection
agreement, as the same may be from time to time amended, restated or otherwise
modified in accordance with provisions of section 13.16(c).
"Fleet Bank Documents" shall mean the Fleet Bank Agreement and the other
agreements, documents and instruments related thereto.
"Funded Debt" of any Person shall mean, at any date, without duplication
of amounts, (a) all Indebtedness for borrowed money or in respect of Capital
Leases or the deferred purchase price of property (including, without
limitation, all Indebtedness of the kind referred to in clauses (b), (c), (d)
and (e) of the definition of Indebtedness), whether or not interest-bearing, of
such Person which would, in accordance with GAAP, be classified as long-term
Indebtedness at such date, but in any event including all such Indebtedness,
whether secured or unsecured, of such Person which matures (or which, pursuant
to the terms of a revolving credit agreement or otherwise, is directly or
indirectly renewable or extendible at the option of such Person for a period
ending) more than one year after the date of the creation thereof,
notwithstanding the fact that payments in respect thereof (whether installment,
serial maturity or sinking fund payments or otherwise) are required to be made
by such Person not more than one year after the date as of which the amount of
Funded Debt is being determined, other than any amount thereof which is at the
time included in Current Debt of such Person, (b) all Guarantees by such Person
at such date of Funded Debt of others and (c) the aggregate amount which is due
more than one year from such date in respect of any Redeemable Shares of such
Person (other than the Warrants and Warrant Shares). For all purposes under this
Agreement, the Indebtedness incurred in respect of the interest rate protection
agreement provided under the Fleet Bank Agreement shall constitute Funded Debt
of the Holding Company, TNC, UTC and Progressive.
"GAAP" shall mean generally accepted accounting principles as in effect in
the United States from time to time, consistently applied.
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"Guarantee" of any Person shall mean, at any date, any obligation of such
Person at such date guaranteeing, directly or indirectly, any Indebtedness,
liability or other obligation of any other Person in any manner, but in any
event including all endorsements (other than for collection or deposit in the
ordinary course of business), all discounts with recourse and all obligations
incurred through an agreement, contingent or otherwise (a) to purchase the
obligations of any other Person or any security therefor or to advance or supply
funds for the payment or purchase of such obligations, or (b) to purchase, sell
or lease (as lessee or lessor) property, products, materials or supplies or to
purchase or sell transportation or services, primarily for the purpose of
enabling the obligor to make payment of such obligations or to assure the owner
of such obligations against loss, regardless of the delivery or non-delivery of
the property, products, materials or supplies or the furnishing or nonfurnishing
of the transportation or services, or (c) to provide funds for the payment of,
or obligating such Person to make, any loan, advance, capital contribution or
other investment in the obligor for the purpose of assuring a minimum equity,
asset base, working capital or other balance sheet condition for any date or to
provide funds for the payment of any obligation, dividend or stock liquidation
payment, or otherwise to supply funds to or in any manner invest in the obligor.
The amount of any Guarantee shall be equal to the amount of all Indebtedness,
liabilities and other obligations directly or indirectly guaranteed thereby.
"Holding Company" shall have the meaning specified at the beginning of
this Agreement.
"Indebtedness" of any Person shall mean, at any date, all indebtedness,
liabilities and other obligations of such Person at such date (other than items
of stockholders' equity) which would, in accordance with GAAP, be classified as
liabilities of such Person, but in any event including (without duplication):
(a) all Guarantees of such Person;
(b) all indebtedness, liabilities and other obligations secured by
any Lien on any property owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligations;
(c) all indebtedness, liabilities and other obligations of such
Person arising under any conditional sale or other title retention
agreement, whether or not the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property;
(d) the amount of the obligation required to be recorded by the
lessee in respect of any Capital Lease under which such Person is lessee;
and
(e) all indebtedness, liabilities and other obligations arising in
connection with letters of credit, bankers acceptances or other credit
enhancement facilities and Swaps;
provided that, in the case of any Indebtedness of the kind referred to in
clauses (b) and (c) of this definition, if such Indebtedness is "nonrecourse" to
such Person (that is, such Person has no liability in respect thereof other than
to return the property securing such Indebtedness or the property subject to the
conditional sale or other title retention agreement), then, for purposes hereof,
the amount of such Indebtedness at such date shall be equal to the fair market
value of such property.
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"Indemnified Costs" and "Indemnitee" shall have the respective meanings
specified in section 20.
"Interest Charges" of any Person shall mean, for any period, the
aggregate amount of all cash interest paid, payable or guaranteed during such
period by such Person in respect of Funded Debt and Current Debt, including,
without limitation, the "imputed interest" portion of Rental Obligations on
Capital Leases and all interest capitalized and/or deferred during such period
on any Funded Debt and Current Debt, determined in accordance with GAAP.
"Investment" of any Person shall mean any investment made by such Person
in any other Person by stock purchase, capital contribution, loan, advance,
acquisition of Indebtedness, Guarantee or otherwise.
"Issuer" or Issuers" shall have the respective meanings specified at the
beginning of this Agreement.
"Licenses" shall mean certificates of public convenience and necessity,
franchises, licenses and other permits and authorizations from governmental
authorities.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, lien (statutory or otherwise), preference, priority, security
interest, chattel mortgage or other charge or encumbrance of any kind, or any
other type of preferential arrangement, including, without limitation, the lien
or retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property and any lease having
substantially the same effect as any of the foregoing.
"Make Whole Amount" shall mean, at any date, with respect to any
prepayment or payment (whether on account of acceleration or otherwise) of any
Notes, if the Treasury Rate plus 100 basis points at such date is lower than 19%
per annum (prior to the Warrant Exchange ) or 12% per annum (after the Warrant
Exchange), the excess of (x) the present value of the principal and interest
payments on and in respect of the Notes being prepaid or paid, as the case may
be, that would otherwise become due and payable (without giving effect to such
prepayment or payment) (including the final payment on the maturity date of the
Notes), discounted at a rate which is equal to the Treasury Rate plus 100 basis
points over (y) the principal amount of the Notes being prepaid or paid, as the
case may be, at par. If the Treasury Rate plus 100 basis points at the date of
such prepayment or payment is equal to or higher than 19% per annum (prior to
the Warrant Exchange ) or 12% per annum (after the Warrant Exchange), the Make
Whole Amount is zero.
"Material Adverse Change" shall mean a material adverse change in or
effect upon (a) the condition (financial or otherwise), business, performance,
operations, properties, profits or prospects of the Holding Company and its
Subsidiaries taken as a whole, (b) the legality, validity or enforceability of
this Agreement, the Securities or any of the other Operative Documents; (c) the
rights and remedies of any holder of Securities with respect thereto or (d) the
ability of the Holding Company or any of its Subsidiaries to perform their
obligations under any of the Operative Documents and/or to comply with any of
the terms thereof applicable to it. The parties agree that if the maximum
aggregate amount of all losses, damages, expenses and liabilities attributable
to any breach of a representation made by the Holding Company herein or in any
of the other Operative Documents is and shall be not more than $1,000,000, the
same shall not constitute a Material Adverse Change.
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"Multiemployer Plan" shall mean any Plan that is a "multiemployer plan" as
defined in section 4001(a)(3) of ERISA.
"Net Income" of any Person shall mean, for any period, the net income (or
net loss) of such Person for such period, determined in accordance with GAAP.
"Net Worth" of any Person shall mean, at any date, (a) the total assets of
such Person which would be shown as assets on a balance sheet of such Person at
such date prepared in accordance with GAAP minus (b) the total liabilities of
such Person which would be shown as liabilities on a balance sheet of such
Person at such date prepared in accordance with GAAP.
"Note Guarantees" shall have the meaning specified in section 1.
"Notes" shall have the meaning specified in section 1.
"Obligor" shall have the meaning specified at the beginning of this
Agreement and in section 4.13.
"Officer's Certificate" shall mean a certificate signed on behalf of the
Holding Company by its Chairman, its President, its Chief Financial Officer or
one of its Senior Vice Presidents.
"Operative Documents" shall mean this Agreement, the Other Securities
Purchase Agreements, the Securities, the Note Guarantees, and each of the other
agreements, documents and instruments executed in connection herewith and
therewith, each as it may from time to time be amended, modified or
supplemented.
"Option Plans" shall have the meaning specified in section 11.
"Organizational Documents" of any Person shall mean such Person's charter
and by-laws, partnership agreement, operating agreement, members agreement,
trust agreement, as applicable, and/or any other similar agreement, document or
instrument.
"Other Securities Purchase Agreements" and "Other Purchasers" shall have
the respective meanings specified in section 1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Investment" shall mean any of the following Investments:
(a) Investments, if any, existing on the date hereof and referred to
in Exhibit 5.9 attached hereto;
(b) Investments by the Holding Company or by any of its Subsidiaries
in any Wholly-Owned Subsidiary of the Holding Company (or in any Person
which simultaneously therewith becomes a Wholly-Owned Subsidiary of the
Holding Company) made by stock purchase, capital contribution, loan or
advance, provided that (i) both at the time of and immediately after
giving effect to any such Investment, no Default or Event of Default shall
have occurred and be continuing and (ii) all such
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Investments are made only in Solvent entities (A) which are organized
under the laws of and conduct substantially all of their respective
businesses in the United States of America (or a state thereof or the
District of Columbia) and (B) whose lines of business are related to or
not materially different from the Business;
(c) readily marketable obligations (having a maturity not in excess
of 12 months from the date of acquisition thereof) of, or fully and
unconditionally guaranteed (as to both principal and interest) by, the
United States of America or an agency thereof;
(d) negotiable certificates of deposit (having a maturity not in
excess of 12 months from the date of acquisition thereof) evidencing
direct obligations of any federally insured commercial bank or trust
company organized and operating in the United States of America having
capital and surplus and undivided profits of at least $100,000,000 and
having the highest or second highest rating available from Moody's
Investors Service, Inc., Standard & Poor's Corporation or Fitch Investors
Service;
(e) Shares of so-called "money market funds" registered under the
Investment Company Act of 1940, as amended, organized and operating in the
United States of America, having total net assets of $1,000,000,000 or
more and investing primarily in securities of the character described in
the preceding clauses (c) and (d) of this definition;
(f) Investments in Repurchase Agreements;
(g) accounts receivable arising from transactions in the ordinary
course of business; contingent liabilities represented by endorsements of
negotiable instruments for collection or deposit in the ordinary course of
business; advances (including advances to employees), deposits, down
payments and prepayments on account of firm purchase orders, in each case
made in the ordinary course of business; and
(h) Investments made after the date hereof not otherwise permitted
by the preceding clauses (a) through (g) of this definition, provided that
both at the time of and immediately after giving effect to any such
Investment (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Holding Company would be able to incur at least $1
of additional Funded Debt and/or Current Debt under section 13.5, and
(iii) the aggregate amount of Investments made pursuant to this clause (h)
shall not exceed $1,500,000 at any time.
"Person" shall mean an individual, a corporation, a limited liability
company, an association, a joint-stock company, a business trust or other
similar organization, a partnership, a joint venture, a trust, an unincorporated
organization or a government or any agency, instrumentality or political
subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Holding Company or any ERISA
Affiliate or with respect to which the Holding Company or any ERISA Affiliate
may have any liability.
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"Preferred Shares", as applied to any Person, shall mean Shares of such
Person which shall be entitled to preference or priority over any other Shares
of such Person in respect of either the payment of dividends or the distribution
of assets upon liquidation.
"Progressive" shall have the meaning specified in section 4.3.
"Proprietary Rights" shall mean any patents, registered and common law
trademarks, service marks, trade names, copyrights, licenses and other similar
rights (including, without limitation, know-how, trade secrets and other
confidential information) and applications for each of the foregoing, if any.
"Purchased Common Shares" shall have the meaning specified in section 1.
"Redeemable" shall mean, with respect to any Shares of any Person, each
Share of such Person that is (a) redeemable, payable or required to be purchased
or otherwise retired or extinguished, or convertible into Funded Debt or Current
Debt of such Person, (i) at a fixed or determinable date, whether by operation
of any sinking fund or otherwise, (ii) at the option of any Person other than
such Person or (iii) upon the occurrence of a condition not solely within the
control of such Person or (b) convertible into other Redeemable Shares.
"Refinanced Debt" shall have the meaning specified in section 13.5.
"Refinancing Debt" shall have the meaning specified in section 13.5.
"Registrable Shares" shall mean any Warrant Shares, except that, as to any
particular Registrable Shares, such securities, once issued, will cease to be
Registrable Shares when (a) a registration statement covering such securities
has been declared effective and such securities have been disposed of pursuant
to an effective registration statement or (b) such securities are sold to the
public in accordance with Rule 144 (or any similar provision then in force)
under the Securities Act. A Person shall be deemed a "holder" of Registrable
Shares for purposes of section 12 if such Person is the holder of any Warrants
or any Warrant Shares issued upon exercise of any Warrant.
"Registration Expenses" shall mean all fees, expenses and disbursements
related to any registration, qualification or compliance pursuant to section 12,
including, without limitation, all registration, filing, rating and listing
fees, blue sky fees and expenses, printing expenses, fees and disbursements of
counsel (including, without limitation, the fees, expenses and disbursements of
counsel for the holder or holders of the Registrable Shares), and expenses of
any special audits incident to or required by any registration, qualification or
compliance, except that Registration Expenses shall not include any
underwriters' discounts or commissions attributable to any Registrable Shares
registered and sold pursuant to any such registration.
"Rental Obligations" of any Person shall mean, for any period, all rents
and other amounts (including as such, all payments which such Person is
obligated to make to the lessor on termination of any lease and/or on surrender
of the leased property other than payments for which such Person is contingently
liable on account of early termination or breach of such lease) paid, payable or
guaranteed during such period by such Person, as lessee or sublessee under any
lease, excluding any amount required to be paid by such Person (whether or not
designated as rents or additional rents) on account of maintenance, repairs,
insurance, taxes, utilities and similar charges, determined in accordance with
GAAP. Whenever it is necessary to determine
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the amount of Rental Obligations for any period, to the extent that such Rental
Obligations are not definitely determinable by the terms of the lease, the
Rental Obligations not so definitely determinable shall be estimated in good
faith and in such reasonable manner as the board of directors of the Holding
Company may determine.
"Repurchase Agreement" shall mean any written agreement (a) that provides
for (i) the transfer of one or more United States Governmental Securities (as
defined below) in an aggregate principal amount at least equal to the amount of
the Transfer Price (as defined below) to the Holding Company or any of its
Subsidiaries from an Acceptable Bank (as defined below) or an Acceptable
Broker-Dealer (as defined below) against a transfer of funds (the "Transfer
Price") by the Holding Company or such Subsidiary to such Acceptable Bank or
Acceptable Broker-Dealer, and (ii) a simultaneous agreement by the Holding
Company or such Subsidiary, in connection with such transfer of funds, to
transfer to such Acceptable Bank or Acceptable Broker-Dealer the same or
substantially similar United States Governmental Securities for a price not less
than the Transfer Price plus a reasonable return thereon at a date certain not
later than 365 days after such transfer of funds; (b) in respect of which the
Holding Company or such Subsidiary shall have the right, whether by contract or
pursuant to applicable law, to liquidate such agreement upon the occurrence of
any default thereunder; and (c) in connection with which the Holding Company or
such Subsidiary, or an agent thereof, shall have taken all action required by
applicable law or regulations to perfect a Lien in such United States
Governmental Securities. For purposes of this definition, (x) the term
"Acceptable Bank" shall mean any bank or trust company of the sort described in
clause (d) of the definition of Permitted Investments; (y) the term "Acceptable
Broker-Dealer" shall mean any Person other than a natural person (i) which is
registered as a broker or dealer pursuant to the Exchange Act and (ii) whose
long-term unsecured debt obligations shall have been given the highest or second
highest rating available from Standard & Poor's Corporation, Moody's Investors
Service, Inc. or any other credit rating agency of recognized national standing;
and (z) "United States Governmental Securities" shall mean securities of the
kind referred to in clause (c) of the definition of Permitted Investment.
"Required Holders" as applied to describe the requisite holder or holders
of any class of the Securities, shall mean, at any date, the holder or holders
of a majority or more in interest of such class of Securities at the time
outstanding (excluding all Securities at the time owned by the Holding Company
or any Affiliate of the Holding Company).
"Securities" shall have the meaning specified in section 1.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Seller" shall have the meaning specified in section 4.3.
"Shares" of any Person shall include any and all Shares of capital stock,
partnership interests, limited liability company interests, membership
interests, or other Shares, interests, participations or other equivalents
(however designated and of any class) in the capital of, or other ownership
interests in, such Person, and, as applied to the Holding Company, includes the
Common Stock.
"Solvent" as applied to any Person at any date shall mean that on and as
of such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities,
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including, without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature and (d) such Person
is not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities on and as of
any date shall be computed as the amount that, in the light of all the facts and
circumstances existing on and as of such date, represents the amount that can
reasonably be expected to become an actual or matured liability. For purposes of
this definition, "Person" shall mean, where so required by the context in which
the term "Solvent" appears, such Person and its Subsidiaries taken as a whole.
"Source" shall have the meaning specified in section 25.
"Subsidiary" of any Person at any date shall mean (a) any other Person a
majority (by number of votes) of the Voting Stock of which is owned by such
first-mentioned Person and/or by one or more other Subsidiaries of such
first-mentioned Person, (b) any Person of which the first-mentioned Person or
any of its other Subsidiaries is a general partner and (c) any other Person with
respect to which such first-mentioned Person and/or any one or more other
Subsidiaries of such first-mentioned Person (i) is entitled to more than 50% of
such Person's profits or losses or more than 50% of such Person's assets on
liquidation or (ii) holds an equity interest in such Person of more than 50%. As
used herein, unless the context clearly required otherwise, the term
"Subsidiary" refers to a Subsidiary of the Holding Company.
"Successor Corporation" shall have the meaning specified in section 13.13.
"Superior Indebtedness" shall have the meaning specified in the Notes.
"Swaps" shall mean, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TNC" shall have the meaning specified at the beginning of this Agreement.
"Total Assets" of any Person shall mean, at any date, the depreciated book
value of all properties and assets of such Person (whether real, personal or
mixed, tangible or intangible) at such date, determined in accordance with GAAP.
"Total Debt" of any Person shall mean, at any date, all Funded Debt and
Current Debt of such Person at such date, determined in accordance with GAAP.
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"Transfer" shall mean, with respect to any Person, any transaction in
which such Person sells, conveys, transfers or leases (as lessor) any of its
property or assets, including, without limitation, the capital stock of any
Subsidiary.
"Treasury Rate" at any time with respect to any Notes being prepaid or
paid (whether on account of acceleration or otherwise), as the case may be,
shall mean and shall be determined by reference to the applicable display on the
Bloomberg Financial Markets Service as of 10:00 A.M., Boston time, on the second
business Day prior to the date fixed for such prepayment or payment (or, if such
display is no longer available, any publicly available source of similar market
data as selected by the Required Holders of the Notes and reasonably acceptable
to the Company), and shall be the yield on actively traded United States
Treasury securities adjusted to a maturity equal to the then remaining Weighted
Average Life to Maturity of the Notes then being prepaid or paid (whether on
account of acceleration or otherwise) (the "Remaining Life"). If the Remaining
Life is not equal to the maturity of a United States Treasury security for which
a yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of the two closest United States Treasury securities for which such yields are
given, except that if the Remaining Life is less than one year, the average
yield on actively-traded United States Treasury securities adjusted to a
constant maturity of one year shall be used. The Treasury Rate shall be computed
to the fifth decimal place (one-thousandth of a percentage point) and then
rounded to the fourth decimal place (one-hundredth of a percentage point).
"UTC" shall have the meaning specified at the beginning of this Agreement.
"Voting Stock", when used with reference to any Person, shall mean Shares
(however designated) of such Person having ordinary voting power for the
election of a majority of the members of the board of directors (or other
governing board) of such Person, other than Shares having such power only by
reason of the happening of a contingency.
"Warrant Exchange" shall have the meaning specified in section 1.
"Warrant Shares" shall have the meaning specified in the Warrants.
"Warrants" shall have the meaning specified in section 1.
"Weighted Average Life to Maturity" of any Indebtedness or obligation
shall mean, at any date, the number of years obtained by dividing the then
Remaining Dollar-years of such Indebtedness or obligation by the then
outstanding principal amount of such Indebtedness or obligation. For purposes of
this definition, the "Remaining Dollar-years" of any Indebtedness or obligation
shall mean, at any date, the total of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" of any Person at any date shall mean any
Subsidiary of such Person at such date all of the outstanding Shares of which,
other than directors' qualifying Shares and the like, shall at the time be owned
by such Person and/or by one or more other Wholly-Owned Subsidiaries of such
Person and the accounts of which are consolidated with those of such Person in
accordance with GAAP.
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"Withdrawal Liability" shall have the meaning given such term under Part 1
of Subtitle E of Title IV of ERISA.
14.2. Other Definitions. The terms defined in this section 14.2, whenever
used in this Agreement, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified.
"this Agreement" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof" (and
"thereof"), "hereunder" (and "thereunder") and words of similar import shall
refer to, such instruments as they may from time to time be amended, modified or
supplemented.
"beneficial" ownership of any Shares or other securities by any Person
shall be determined in the manner set forth in Rule 13d-3 of the Commission
under the Exchange Act.
a "class" of Securities shall refer to the Notes, the Warrants or the
Warrant Shares, as the case may be, each of which is a separate class.
"corporation" shall include an association, joint stock company, business
trust or other similar organization.
"premium" when used in conjunction with references to principal of and
interest on the Notes, shall mean any amount due upon any payment or prepayment
of any of the Notes, other than principal and interest, and shall include the
Make Whole Amount or Applicable Premium, as the case may be.
"qualification" or "compliance" shall mean the qualification or compliance
of all Registrable Shares included in any registration pursuant to section 12
under all applicable blue sky or other state securities laws.
"register", "registered" and "registration" as used in section 12 refer to
a registration effected by filing a registration statement in compliance with
the Securities Act to permit the sale and disposition of the Registrable Shares
and any amendment filed or required to be filed to permit any such disposition.
14.3. Accounting Terms and Principles; Laws.
(a) All accounting terms used herein which are not expressly defined
in this Agreement shall have the respective meanings given to them in
accordance with GAAP; all computations made pursuant to this Agreement
shall be made in accordance with GAAP and all financial statements shall
be prepared in accordance with GAAP. If there shall occur any change in
accounting principles from GAAP as in effect on the Closing Date, then the
Holding Company and the Required Holders of the Notes shall make
adjustments to such financial covenants as are determined in good faith to
be appropriate to reflect such changes so that the criteria for evaluating
the financial condition and operations of the Holding Company and its
Subsidiaries shall be the same after such changes as if such changes had
not been made.
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(b) All references herein to laws, statutes, rules, regulations
and/or to other governmental restrictions, standards and/or requirements
shall, unless the context clearly requires otherwise, be deemed to refer
to those promulgated, issued and/or enforced by any domestic or foreign
federal, state or local government, governmental agency, authority, court,
instrumentality or regulatory body, including, without limitation, those
of the United States of America or any state thereof or the District of
Columbia.
15. Remedies.
15.1. Events of Default Defined; Acceleration of Maturity. If any one or
more of the following events ("Events of Default") shall occur (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of all
or any part of the principal of, or premium (if any) on, any Note when and
as the same shall become due and payable, whether at the stated maturity
thereof, by notice of or demand for prepayment, or otherwise;
(b) if default shall be made in the due and punctual payment of any
interest on any Note or any fee when and as the same shall become due and
payable and such default shall have continued for a period of three
Business Days;
(c) if default shall be made in the performance or observance of any
covenant, agreement or condition contained in sections 7(g), 8(a), 8(b),
9.6, 13.2(b), 13.5 to 13.7, inclusive, or 13.9 to 13.19, inclusive;
(d) if default shall be made in the performance or observance of any
other of the covenants, agreements or conditions contained in this
Agreement or any of the other Operative Documents and such default shall
have continued for a period of 30 days after the earlier to occur of (i)
the Holding Company's obtaining actual knowledge of such default or (ii)
the Holding Company's receipt of written notice of such default;
(e) if the Holding Company or any Subsidiary of the Holding Company
shall make a general assignment for the benefit of creditors, or shall
generally not pay its debts as they become due, or shall admit in writing
its inability to pay its debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated bankrupt or
insolvent, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against it in any such
proceeding, or shall seek or consent to or acquiesce in the appointment of
any trustee, custodian, receiver, liquidator or fiscal agent for it or for
all or any substantial part of its properties, or shall (or its directors
or stockholders shall) take any action looking to its dissolution or
liquidation;
(f) if, within 60 days after the commencement of an action against
the Holding Company or any Subsidiary of the Holding Company seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or
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similar relief under any present or future statute, law or regulation,
such action shall not have been dismissed or all orders or proceedings
thereunder affecting the operations or the business of the Holding Company
or any Subsidiary of the Holding Company stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if, within 60
days after the appointment without the consent or acquiescence of the
Holding Company or any Subsidiary of the Holding Company of any trustee,
custodian, receiver, liquidator or fiscal agent for the Holding Company or
any Subsidiary of the Holding Company or for all or any substantial part
of their respective properties, such appointment shall not have been
vacated;
(g) if, under the provisions of any law for the relief or aid of
debtors, any court or governmental agency of competent jurisdiction shall
assume custody or control of the Holding Company or of any Subsidiary of
the Holding Company or of all or any substantial part of their respective
properties and such custody or control shall not be terminated or stayed
within 60 days from the date of assumption of such custody or control;
(h) if the Holding Company or any Subsidiary of the Holding Company
shall fail to (i) make any payment due on any Indebtedness (other than the
Notes) or other obligation (including any in respect of any performance
bond, bid bond or lease or any Shares upon the exercise by any Person of
any put or call option or other similar right of redemption or repurchase
with regard to such Shares), if the aggregate outstanding amount thereof
(and of any other Indebtedness or other obligation as to which the Holding
Company or any Subsidiary of the Holding Company is in default) exceeds
$3,000,000 (or the equivalent thereof, as of any date of determination, in
any other currency), or (ii) perform, observe or discharge any covenant,
condition or obligation in any agreement, document or instrument
evidencing, securing or relating to such Indebtedness or other obligation,
if the effect of any such failure of the character described in this
clause (h) is to cause, or any other Person shall cause, any payment in
respect thereof in an aggregate amount of $3,000,000 (or the equivalent
thereof, as of any date of determination, in any other currency) or more
to become due and payable;
(i) if a final judgment or judgments for the payment of money which,
together with all other outstanding final judgments for the payment of
money against the Holding Company and/or any Subsidiary of the Holding
Company (excluding any judgment or judgments as to which a financially
sound and reputable insurance company (having the highest or second
highest rating available from A.M. Best Holding Company or an equivalent
Person) has accepted full liability in writing), exceeds an aggregate of
$1,000,000 (or the equivalent thereof, as of any date of determination, in
any other currency) shall be rendered against the Holding Company or any
Subsidiary of the Holding Company which judgments are not, within 60 days
after entry thereof, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay;
(j) if any representation or warranty made by or on behalf of the
Holding Company or any Subsidiary of the Holding Company in this Agreement
or in any of the other Operative Documents or in any agreement, document
or instrument delivered under or pursuant to any provision hereof or
thereof shall prove to have been false or incorrect in any material
respect on the date as of which made;
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(k) if, at any time, this Agreement or any of the other Operative
Documents shall for any reason (other than the scheduled termination
thereof in accordance with its terms) expire, fail to be in full force and
effect or be disaffirmed, repudiated, cancelled, terminated or declared to
be unenforceable, null and void; or
(l) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under section
4042 of ERISA to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Holding Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (iii) the
aggregate "amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $500,000 (or the equivalent thereof,
as of any date of determination, in any other currency), (iv) the Holding
Company or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit
plans, (v) the Holding Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Holding Company or any Subsidiary of the
Holding Company establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would
increase the liability of the Holding Company or any Subsidiary of the
Holding Company thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually or together with any
other such event or events, has resulted in, or could reasonably be
expected to result in, a liability in excess of $1,000,000;
then, upon the occurrence and during the continuance of any Event of Default
(other than one of the character described in clauses (e), (f) or (g) of this
section 15.1) and at the option of the holder or holders of 66-2/3% or more in
aggregate principal amount of the Notes at the time outstanding (excluding any
Notes at the time owned by the Holding Company or any Affiliate of the Holding
Company), exercised by written notice to the Obligor, the principal of all Notes
shall forthwith become due and payable, together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Obligor shall forthwith upon any such
acceleration pay to the holder or holders of all the Notes then outstanding (i)
the entire principal of and interest accrued on the Notes and (ii) in addition,
to the extent permitted by applicable law, an amount equal to the Make Whole
Amount or the Applicable Premium, as applicable, as liquidated damages and not
as a penalty; provided that, in the case of an Event of Default of the character
described in clauses (a) or (b) of this section 15.1 and irrespective of whether
all of the Notes have been declared due and payable by the holder or holders of
66-2/3% or more in aggregate principal amount of the Notes at the time
outstanding, any holder of Notes who or which has not consented to any waiver
with respect to such Event of Default may, at the option of such holder, by
written notice to the Obligor, declare all Notes then held by such holder to be,
and such Notes shall thereupon become, forthwith due and payable, together with
interest accrued thereon, without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived, and the Obligor shall
forthwith upon any such acceleration pay to such holder (i) the entire principal
of and interest accrued on such Notes, and (ii) in addition, to the extent
permitted by applicable law, an amount equal to the Make Whole Amount or the
Applicable Premium, as applicable, as liquidated damages and not as a penalty;
provided, further, that, in the case of an Event of Default of the character
described in
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clauses (e), (f) or (g) of this section 15.1, the principal of all Notes shall
forthwith become due and payable, together with interest accrued thereon
(including any interest accruing after the commencement of any action or
proceeding under the federal bankruptcy laws, as now or hereafter constituted,
or any other applicable domestic or foreign federal or state bankruptcy,
insolvency or other similar law, and any other interest that would have accrued
but for the commencement of such proceeding, whether or not any such interest is
allowed as an enforceable claim in such proceeding), without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, and the Obligor shall forthwith upon any such acceleration pay to the
holder or holders of all the Notes then outstanding (i) the entire principal of
and interest accrued on the Notes, and (ii) in addition, to the extent permitted
by applicable law, an amount equal to the Make Whole Amount or the Applicable
Premium, as applicable, as liquidated damages and not as a penalty.
Notwithstanding the foregoing provisions, at any time after the occurrence
of any Event of Default and of notice thereof, if any, by any holder or holders
of Notes and before any judgment, decree or order for payment of the money due
has been obtained by or on behalf of any holder or holders of the Notes, the
Required Holders of the Notes by written notice to the Obligor, may rescind and
annul such Event of Default and/or notice of such Event of Default and the
consequences thereof with respect to all of the Notes (including any Notes which
were accelerated pursuant to the first proviso in the preceding paragraph by any
holder or holders on account of an Event of Default of the character described
in clause (a) or (b) of this section 15.1) if:
(1) the Obligor has paid a sum sufficient to pay
(A) all overdue interest on all Notes;
(B) the principal of (and premium, if any, on) any Notes which
have become due otherwise than by such Event of Default or notice
thereof; and
(C) interest on such overdue principal (and premium, if any)
and, to the extent that payment of such interest is lawful, interest
upon overdue interest, all at the rate for overdue amounts specified
in such Notes; and
(2) all Defaults and Events of Default, other than the non-payment
of amounts which have become due solely by such acceleration, have been
cured or waived as provided in section 18.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
The holder or holders of the Notes will endeavor to furnish to the holders
of Superior Indebtedness (or their agent or representative) copies of any notice
furnished by such holder or holders of the Notes to the Obligor of the
occurrence of an Event of Default and of the acceleration of the Notes pursuant
to this section 15.1, provided that the failure to furnish such copies of any
such notice to the holder or holders of the Superior Indebtedness shall not be
actionable by any Person and shall not have any effect upon any of the rights of
the holder or holders of the Notes on account of any Event of Default or
otherwise.
15.2. Suits for Enforcement, etc. In case any one or more of the Events of
Default specified in section 15.1 shall have occurred and be continuing, and
irrespective of whether any
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Notes have become or have been declared immediately due and payable under
section 15.1, the holder of any Security may proceed to protect and enforce its
rights either by suit in equity or by action at law, or both. Each of the
Issuers stipulates that the remedies at law of the holder or holders of the
Securities in the event of any Event of Default by it or any of its Subsidiaries
in the performance of or compliance with any covenant or agreement in this
Agreement or any of the other Operative Documents are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance thereof, whether
by an injunction against a violation thereof or otherwise. Without limiting the
generality of the foregoing (and without derogating from any provision contained
in this Agreement or any of the other Operative Documents), upon the occurrence
and during the continuance of an Event of Default, the Required Holders of the
Notes at the time outstanding shall, as a group, have the right to apply for and
have a receiver appointed for the Holding Company and its Subsidiaries, or any
one or more of them, by a court of competent jurisdiction in any action taken by
any such holders to enforce their respective rights and remedies hereunder and
under the other Operative Documents in order to manage, protect and preserve the
assets of the Holding Company and its Subsidiaries and continue the operation of
the business of the Holding Company and its Subsidiaries, or to sell or dispose
of the assets of the Holding Company and its Subsidiaries, and to collect all
revenues and profits thereof and apply the same to the payment of all expenses
and other charges of such receivership, including the compensation of the
receiver, and each of the Issuers hereby consents to such appointment without
regard to the presence or absence of any misfeasance or malfeasance or any other
fact or circumstance which otherwise would provide a defense to such
appointment.
15.3. No Election of Remedies. No remedy conferred in this Agreement or in
any of the other Operative Documents upon the holder of any Security is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
thereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
15.4. Remedies Not Waived. No course of dealing between the Holding
Company and any of its Subsidiaries, on the one hand, and any holder of any
Security, on the other hand, and no delay by any such holder in exercising any
rights hereunder or under any of the other Operative Documents shall operate as
a waiver of any rights of any such holder.
15.5. Application of Payments. In case any one or more of the Events of
Default specified in section 15.1 shall have occurred and be continuing, all
amounts to be applied to the prepayment or payment of any Notes shall be
applied, after the payment of all related costs and expenses incurred by the
holders of the Notes (including, without limitation, compensation to any and all
trustees, liquidators, receivers or similar officials and reasonable fees,
expenses and disbursements of counsel) in such order of priority as is
determined by the Required Holders of the Notes entitled to such amounts.
16. Registration, Transfer and Exchange of Securities; Limitations on Transfers.
(a) Securities issued hereunder shall be issued in registered form.
Each of the Issuers shall keep at its principal executive office (which is
now located at the address set forth at the beginning of this Agreement)
registers in which it shall provide for the registration and transfer of
the Securities issued by it. The name and address of each holder of the
Securities shall be registered in such registers. The Issuers shall give
to any institutional holder of any Security promptly (but in any event
within 10 days) following
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request therefor, a complete and correct copy of the names and addresses
of all registered holders of the Securities and the amount and kind of
Securities held by each. Whenever any Security or Securities shall be
surrendered for transfer or exchange, the Issuers at their expense will
execute and deliver in exchange therefor a new Security or Securities (in
such denominations and registered in such name or names as may be
requested by the holder of the surrendered Security or Securities), in the
same aggregate unpaid principal amount (in the case of the Notes and, in
such case, dated so as not to result in any loss of interest and together
with all necessary Note Guarantees) or the same aggregate number of Shares
(in the case of the Warrants and Warrant Shares), as applicable, as that
of the Security or Securities so surrendered. The Issuers may treat the
Person in whose name any Security is registered as the owner of such
Security for all purposes.
(b) Notwithstanding anything to the contrary herein or in any of the
other Operative Documents, no holder of any Security may transfer any
Security to any other Person unless each of the following conditions is
satisfied:
(i) after giving effect to the proposed transfer, (A) the
transferee shall hold at least 10% of the aggregate principal amount
or aggregate number of Shares, as the case may be, of each class of
Securities then outstanding and (B) there are not more than eight
holders of the Securities;
(ii) the transferee is not a competitor of the Holding Company
or any of its Subsidiaries; provided that in no event shall any
bank, insurance company or other institutional investor be deemed,
for purposes of this section 16(b), to be a competitor of the
Holding Company and its Subsidiaries;
(iii) at least 51% of the aggregate principal amount of the
Notes then outstanding is held by the MassMutual Group (as defined
below);
(iv) in the case of any transfer of any Note, the transferee
shall have executed an acknowledgment substantially in the form of
Exhibit 16(b)(iv) attached hereto and delivered the same to the
holders of Superior Indebtedness (or their agent or representative);
and
(v) in the case of any transfer of any Note by any holder of
any Note, the transferor shall deliver to the Obligor an opinion of
counsel, which in the case of the MassMutual Group (as herein
defined) may be in-house counsel (or, in the case of MassMutual
Corporate Investors and MassMutual Participation Investors, an
appropriate officer) to the effect that such transfer does not
violate the provisions of Section 5 of the Securities Act;
provided that the provisions of this section 16(b): (A) shall not apply to
any transfer to any Affiliate of an initial holder of the Securities or to
any Person for whom any initial holder of the Securities serves as
investment advisor or investment manager and (B) shall not apply to any
transfer (other than a transfer described in section 16(b)(ii)) if at the
time of such transfer any Default or Event of Default shall have occurred
and be continuing. As used herein, the term "MassMutual Group" shall mean
Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, MassMutual Participation Investors, MassMutual Corporate Value
Partners Limited, their respective Affiliates and
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any other Person for whom any such Person serves as investment advisor or
investment manager.
17. Replacement of Securities. Upon receipt by the Issuers of reasonably
satisfactory evidence of the loss, theft, destruction or mutilation of any
Security and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnity, and (in the case of mutilation) upon surrender of such
Security, the Issuers at their expense will execute and deliver in lieu of such
Security a new Security of like tenor and, in the case of any new Note, dated so
as not to result in any loss of interest and accompanied by all necessary Note
Guarantees. Your unsecured agreement to indemnify and/or affidavit and that of
any other institutional holder shall constitute satisfactory indemnity and/or
satisfactory evidence of loss, theft or destruction for the purpose of this
section 17.
18. Amendment and Waiver.
(a) Any term of this Agreement and the Other Securities Purchase
Agreements and, unless explicitly provided otherwise therein, of any of
the other Operative Documents may, with the consent of the Issuers, be
amended, or compliance therewith may be waived, in writing only, by the
Required Holders of each class of Securities entitled to the benefits of
such term, provided that (i) without the consent of the holders of all of
the Notes at the time outstanding, no such amendment or waiver shall (A)
change the amount of the principal of or any rate of interest on or
premium payable with respect to any of the Notes or change the payment
terms of any of the Notes or, except as provided in the Notes, subordinate
the obligation of the Obligor (or of any other Person primarily or
secondarily liable therefor) to pay any amount due on such Notes to any
other obligation, or (B) change the percentage of holders of Notes
required to approve any such amendment, effectuate any such waiver or
accelerate payment of the Notes; (ii) without the consent of the holders
of all of the Warrants and Warrant Shares at the time outstanding, no such
amendment or waiver shall (A) modify any of the provisions of section 12,
or (B) change the percentage of holders of the Warrants and Warrant Shares
required to approve any such amendment or effect any such waiver; and
(iii) no such amendment or waiver shall extend to or affect any obligation
not expressly amended or waived or impair any right consequent thereon.
Executed or true and correct copies of any amendment, waiver or consent
effected pursuant to this section 18 shall be delivered by the Issuers to
each holder of Securities forthwith (but in any event not later than five
days) following the effective date thereof.
(b) The Issuers will not, directly or indirectly, request or
negotiate for, or offer or pay any remuneration or grant any security as
an inducement for, any proposed amendment or waiver of any of the
provisions of this Agreement or any of the other Operative Documents
unless each holder of the Securities (irrespective of the kind and amount
of Securities then owned by it) shall be informed thereof by the Issuers
and, if such holder is entitled to the benefit of any such provision
proposed to be amended or waived, shall be afforded the opportunity of
considering the same, shall be supplied by the Issuers with sufficient
information to enable it to make an informed decision with respect thereto
and shall be offered and paid such remuneration and granted such security
on the same terms.
(c) In determining whether the requisite holders of Securities have
given any authorization, consent or waiver under this section 18, any
Securities owned by the
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Holding Company or any of its Affiliates shall be disregarded and deemed
not to be outstanding.
19. Method of Payment of Securities. Irrespective of any provision hereof or of
the other Operative Documents to the contrary, so long as you (or your nominee)
or any other institutional holder shall hold any Security, the Issuers (and each
other Person primarily or secondarily liable therefor) will make all payments
thereon to you or such other institutional holder by the method and at the
address for such purpose specified in Schedule I attached hereto or by such
other method or at such other address as you or such institutional holder may
designate in writing, without requiring any presentation or surrender of such
Security, except that if any Security shall be paid, prepaid and/or repurchased
in full, such Security shall be surrendered to the Issuers promptly following
such payment, prepayment or repurchase and cancelled.
20. Expenses; Indemnity. Whether or not the transactions contemplated by any of
the Operative Documents shall be consummated, the Issuers will pay or cause to
be paid (or reimbursed, as the case may be) and will defend, indemnify and hold
you (and each other holder of any of the Securities) and each of your (and such
other holder's) directors, officers, employees, agents, advisors and Affiliates
(each, an "Indemnitee") harmless (on an after tax basis) in respect of all
costs, losses, expenses (including, without limitation, the reasonable fees,
costs, expenses and disbursements of one counsel for all of the Indemnitees) and
damages (collectively, "Indemnified Costs") incurred by or asserted against any
Indemnitee in connection with the negotiation, execution, delivery, performance
and/or enforcement of this Agreement or any of the other Operative Documents
(including, without limitation, so-called work-outs and/or restructurings and
all amendments, waivers and consents hereunder and thereunder, whether or not
effected) and/or the consummation of the transactions contemplated hereby and
thereby or which may otherwise be related in any way to this Agreement or any
other Operative Documents or such transactions or such Indemnitee's relationship
to the Holding Company or any of its Affiliates or any of its properties and
assets, including, without limitation, any and all Indemnified Costs related in
any way to the requirements of any Environmental Laws (as the same may be
amended, modified or supplemented from time to time) or to any environmental
investigation, assessment, site monitoring, containment, clean up, remediation,
removal, restoration, reporting and sampling, whether or not consented to, or
requested or approved by, any Indemnitee, and whether or not such Indemnified
Cost is attributable to an event or condition originating from any properties or
assets of the Holding Company or any of its Subsidiaries or any other properties
previously or hereafter owned, leased, occupied or operated by the Holding
Company or any of its Subsidiaries. Notwithstanding the foregoing, (a) the
Holding Company shall not have any obligation to an Indemnitee under this
section 20 with respect to any Indemnified Cost to the extent such Indemnified
Cost arises solely as a result of the gross negligence, willful misconduct or
bad faith of such Indemnitee and (b) the Holding Company shall not be liable
with respect to the fees, costs, expenses and disbursements of your counsel if
the sale and purchase of the Securities pursuant to this Agreement and the other
Securities Purchase Agreements is not consummated due to your investment
committee's failure to approve such transaction.
21. Taxes. The Issuers will pay all taxes and fees (including interest and
penalties), including, without limitation, all recording and filing fees,
issuance and documentary stamp and similar taxes, which may be payable in
respect of the execution and delivery of this Agreement and each of the other
Operative Documents and the issuance of the Securities.
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22. Communications. All communications provided for herein and, unless
explicitly provided otherwise therein, in any of the other Operative Documents
shall be in writing and sent (a) by telecopy if the sender on the same day sends
a confirming copy of such communication by a recognized overnight delivery
service (charges prepaid), (b) by a recognized overnight delivery service
(charges prepaid), or (c) by messenger. Any such communication must be sent (i)
if to the Holding Company or to any of its Subsidiaries, to it at:
Tridex Corporation
61 Wilton Road
Westport, Connecticut 06880
Attention: Mr. Seth M. Lukash
Telecopy No.: (203) 266-8806
with a copy (which shall not constitute notice) to:
Hinckley, Allen & Snyder
28 State Street
Boston, Massachusetts 02109
Attention: Stephen J. Carlotti, Esq.
Telecopy No.: (617) 345-9020
or at such other address (or telecopy number) as may be furnished in writing by
the Holding Company to each holder of any Security and (ii) if to you, at your
address for such purpose set forth in Schedule I attached hereto, with a copy
(which shall not constitute notice) to:
Choate, Hall & Stewart
Exchange Place
53 State Street,
Boston, Massachusetts 02109
Attention: Frank B. Porter, Jr., Esq.
Telecopy No.: (617) 248-4000
and if to any other holder of any Security, at the address of such holder as it
appears on the applicable register maintained pursuant to section 16, or at such
other address as may be furnished in writing by you or by any other holder to
the Holding Company. Communications under this section 22 shall be deemed given
only when actually received.
23. Survival of Agreements, Representations and Warranties, etc. All agreements,
representations and warranties contained herein and in the other Operative
Documents shall be deemed to have been relied upon by you and shall survive the
execution and delivery of this Agreement and each of the other Operative
Documents, the issue, sale and delivery of the Securities and payment therefor
and any disposition of the Securities by you, whether or not any investigation
at any time is made by you or on your behalf. All indemnification provisions,
including, without limitation, those contained in sections 12.5, 20 and 21,
shall survive the date upon which none of the Securities shall be outstanding
and the termination of this Agreement and each of the other Operative Documents.
24. Successors and Assigns; Rights of Other Holders. This Agreement and, unless
explicitly provided otherwise therein, each of the other Operative Documents
shall bind and inure to the benefit of and be enforceable by the Issuers and
you, successors to the Issuers and your
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successors and assigns, and, in addition, shall inure to the benefit of and be
enforceable by each holder from time to time of any Securities who, upon
acceptance thereof, shall, without further action, be entitled to enforce the
applicable provisions and enjoy the applicable benefits hereof and thereof. The
Issuers may not assign any of its rights or obligations hereunder or under any
of the other Operative Documents without the written consent of all of the
holders of the Securities then outstanding.
25. Purchase for Investment; ERISA.
(a) You represent and warrant (i) that you have been furnished with
all information that you have requested for the purpose of evaluating your
proposed acquisition of the Securities to be issued to you pursuant
hereto, (ii) that you will acquire such Securities for your own account
for investment and not for distribution in any manner that would violate
applicable securities laws, but without prejudice to your rights to
dispose of such Securities or a portion thereof to a transferee or
transferees, in accordance with such laws if at some future time you deem
it advisable to do so and (iii) that you are an "accredited investor" as
such term is defined in Regulation D of the Commission under the
Securities Act. The acquisition of such Securities by you at the Closing
shall constitute your confirmation of the foregoing representations and
warranties. You understand that such Securities are being sold to you in a
transaction which is exempt from the registration requirements of the
Securities Act, and that, in making the representations and warranties
contained in section 5.16, each of the Issuers is relying, to the extent
applicable, upon your representations and warranties contained herein.
(b) You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "Source") to be
used by you to pay the purchase price of the Securities to be purchased by
you hereunder:
(i) the Source is an "insurance company general account" as
defined in Section V(e) of Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995) and, except as you have disclosed to
the Holding Company in writing pursuant to this section (i), the
amount of reserves and liabilities for the general account
contract(s) held by or on behalf of any employee benefit plan or
group of plans maintained by the same employer or employee
organization do not exceed 10% of the total reserves and liabilities
of the general account (exclusive of separate account liabilities)
plus surplus as set forth in the NAIC Annual Statement filed with
the state of domicile of the insurer; or
(ii) the Source is a separate account of an insurance company
maintained by you in which an employee benefit plan (or its related
trust) has an interest, which separate account is maintained solely
in connection with your fixed contractual obligations under which
the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant)
are not affected in any manner by the investment performance of the
separate account; or
(iii) the Source is either (A) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (B) a bank collective investment fund, within the meaning
of the PTE 91-38 (issued July 12,
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1991) and, except as you have disclosed to the Issuers in writing
pursuant to this section (iii), no employee benefit plan or group of
plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
(iv) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part
I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns
a 5% or more interest in the Holding Company and (A) the identity of
such QPAM and (B) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to
the Issuers in writing pursuant to this section (iv); or
(v) the Source is a governmental plan; or
(vi) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Issuers in
writing pursuant to this section (vi); or
(vii) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this section 25(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have
the respective meanings assigned to such terms in Section 3 of ERISA, and
the term "QPAM Exemption" means PTE 84-14 (issued March 13, 1984).
26. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement and,
unless explicitly provided otherwise therein, each of the other Operative
Documents, including the validity hereof and thereof and the rights and
obligations of the parties hereunder and thereunder, and all amendments and
supplements hereof and thereof and all waivers and consents hereunder and
thereunder, shall be construed in accordance with and governed by the domestic
substantive laws of The Commonwealth of Massachusetts without giving effect to
any choice of law or conflicts of law provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction. Each of
the Issuers, to the extent that it may lawfully do so, hereby consents to
service of process, and to be sued, in The Commonwealth of Massachusetts and
consents to the jurisdiction of the courts of The Commonwealth of Massachusetts
and the United States District Court for the District of Massachusetts, as well
as to the jurisdiction of all courts to which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out of
any of its obligations hereunder or thereunder or with respect to the
transactions contemplated hereby or thereby, and expressly waives any and all
objections it may have as to venue in any such courts. Each of the Issuers
further agrees that a summons and
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complaint commencing an action or proceeding in any of such courts shall be
properly served and shall confer personal jurisdiction if served personally or
by certified mail to it at its address referred to in section 22 or as otherwise
provided under the laws of The Commonwealth of Massachusetts. Notwithstanding
the foregoing, each of the Issuers agrees that nothing contained in this section
26 shall preclude the institution of any such suit, action or other proceeding
in any jurisdiction other than The Commonwealth of Massachusetts. EACH OF THE
ISSUERS IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR
OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
27. Miscellaneous. The headings in this Agreement and in each of the other
Operative Documents are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof or thereof. This Agreement (together with
the other Operative Documents) embodies the entire agreement and understanding
between you and the Holding Company and supersedes all prior agreements and
understandings relating to the subject matter hereof. Each covenant contained
herein and in each of the other Operative Documents shall be construed (absent
an express provision to the contrary) as being independent of each other
covenant contained herein and therein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. If any provision in this Agreement or in any
of the other Operative Documents refers to any action taken or to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable, whether such action is taken directly or indirectly by such
Person. In case any provision in this Agreement or any of the other Operative
Documents shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. This Agreement and, unless explicitly provided otherwise
therein, each of the other Operative Documents, may be executed in any number of
counterparts and by the parties hereto or thereto, as the case may be, on
separate counterparts but all such counterparts shall together constitute but
one and the same instrument.
[The remainder of this page is intentionally left blank.]
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement,
whereupon it shall become a binding agreement under seal between you
and the Issuers. Please then return one of such counterparts to the
Issuers.
Very truly yours,
TRIDEX CORPORATION
By
---------------------------
(Title)
TRIDEX NC, INC.
By
---------------------------
(Title)
ULTIMATE TECHNOLOGY
CORPORATION
By
---------------------------
(Title)
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By
-------------------------------
(Title)
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement, whereupon it shall
become a binding agreement under seal between you and the Issuers. Please then
return one of such counterparts to the Issuers.
Very truly yours,
TRIDEX CORPORATION
By
---------------------------
(Title)
TRIDEX NC, INC.
By
---------------------------
(Title)
ULTIMATE TECHNOLOGY
CORPORATION
By
---------------------------
(Title)
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL CORPORATE INVESTORS
By
----------------------------------
(Title)
The foregoing is executed on behalf of MassMutual Corporate Investors, organized
under a Declaration of Trust, dated September 13, 1985, as amended from time to
time. The obligations of such Trust are not personally binding upon, nor shall
resort be had to the property of, any of the Trustees, shareholders, officers,
employees or agents of such Trust, but the Trust's property only shall be bound.
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement, whereupon it shall
become a binding agreement under seal between you and the Issuers. Please then
return one of such counterparts to the Issuers.
Very truly yours,
TRIDEX CORPORATION
By
---------------------------
(Title)
TRIDEX NC, INC.
By
---------------------------
(Title)
ULTIMATE TECHNOLOGY
CORPORATION
By
---------------------------
(Title)
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL PARTICIPATION INVESTORS
By
--------------------------------
(Title)
The foregoing is executed on behalf of MassMutual Participation Investors,
organized under a Declaration of Trust, dated April 7, 1988, as amended from
time to time. The obligations of such Trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the Trust's property only shall
be bound.
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement, whereupon it shall
become a binding agreement under seal between you and the Issuers. Please then
return one of such counterparts to the Issuers.
Very truly yours,
TRIDEX CORPORATION
By
---------------------------
(Title)
TRIDEX NC, INC.
By
---------------------------
(Title)
ULTIMATE TECHNOLOGY
CORPORATION
By
---------------------------
(Title)
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
By Massachusetts Mutual Life Insurance
Company, as Investment Manager
By
------------------------------------
(Title)
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TRIDEX CORPORATION
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
April 17, 1998
MASSMUTUAL CORPORATE INVESTORS
1295 State Street
Springfield, Massachusetts 01111
Ladies and Gentlemen:
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY
CORPORATION, a New York corporation ("UTC" and, together with the Holding
Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes
collectively referred to herein as the "Issuers" and each, individually, as an
"Issuer"), agree with you as follows. Certain capitalized terms used herein are
defined in section 15.
1. Authorization of Securities; Other Purchasers; etc.
(a) The Obligor has authorized the issue and sale of its 19% Senior
Subordinated Notes due April 17, 2005 (herein, together with any notes
issued in exchange therefor or replacement thereof, called the "Notes") in
the aggregate principal amount of $11,000,000. The Notes are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Holding Company has authorized the issue and sale of 285,714
shares of its Common Shares (herein, such 285,714 shares, together with
any Shares issued in exchange therefor or replacement thereof, called the
"Purchased Common Shares"). The certificates for the Common Stock are to
be substantially in the form of Exhibit 1(b) attached hereto.
(c) The Holding Company has authorized the issue and sale of its
warrants (herein, together with any warrants issued in exchange therefor
or replacement thereof, called the "Warrants") evidencing rights to
purchase in the aggregate 350,931 shares of Common Shares, subject only to
the approval thereof by the stockholders of the Holding Company. The
Warrants shall be exercisable for consideration of $7.00 per share, shall
expire on April 17, 2008 and shall be substantially in the form of Exhibit
1(c) attached hereto.
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TRIDEX CORPORATION
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
April 17, 1998
MASSMUTUAL PARTICIPATION INVESTORS
1295 State Street
Springfield, Massachusetts 01111
Ladies and Gentlemen:
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY
CORPORATION, a New York corporation ("UTC" and, together with the Holding
Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes
collectively referred to herein as the "Issuers" and each, individually, as an
"Issuer"), agree with you as follows. Certain capitalized terms used herein are
defined in section 15.
1. Authorization of Securities; Other Purchasers; etc.
(a) The Obligor has authorized the issue and sale of its 19% Senior
Subordinated Notes due April 17, 2005 (herein, together with any notes
issued in exchange therefor or replacement thereof, called the "Notes") in
the aggregate principal amount of $11,000,000. The Notes are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Holding Company has authorized the issue and sale of 285,714
shares of its Common Shares (herein, such 285,714 shares, together with
any Shares issued in exchange therefor or replacement thereof called the
"Purchased Common Shares"). The certificates for the Common Stock are to
be substantially in the form of Exhibit 1(b) attached hereto.
(c) The Holding Company has authorized the issue and sale of its
warrants (herein, together with any warrants issued in exchange therefor
or replacement thereof, called the "Warrants") evidencing rights to
purchase in the aggregate 350,931 shares of Common Shares, subject only to
the approval thereof by the stockholders of the Holding Company. The
Warrants shall be exercisable for consideration of $7.00 per share, shall
expire on April 17, 2008 and shall be substantially in the form of Exhibit
1(c) attached hereto.
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TRIDEX CORPORATION
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
April 17, 1998
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
1295 State Street
Springfield, Massachusetts 01111
Ladies and Gentlemen:
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY
CORPORATION, a New York corporation ("UTC" and, together with the Holding
Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes
collectively referred to herein as the "Issuers" and each, individually, as an
"Issuer"), agree with you as follows. Certain capitalized terms used herein are
defined in section 15.
1. Authorization of Securities; Other Purchasers; etc.
(a) The Obligor has authorized the issue and sale of its 19% Senior
Subordinated Notes due April 17, 2005 (herein, together with any notes
issued in exchange therefor or replacement thereof, called the "Notes") in
the aggregate principal amount of $11,000,000. The Notes are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Holding Company has authorized the issue and sale of 285,714
shares of its Common Shares (herein, such 285,714 shares, together with
any Shares issued in exchange therefor or replacement thereof called the
"Purchased Common Shares"). The certificates for the Common Stock are to
be substantially in the form of Exhibit 1(b) attached hereto.
(c) The Holding Company has authorized the issue and sale of its
warrants (herein, together with any warrants issued in exchange therefor
or replacement thereof, called the "Warrants") evidencing rights to
purchase in the aggregate 350,931 shares of Common Shares, subject only to
the approval thereof by the stockholders of the Holding Company. The
Warrants shall be exercisable for consideration of $7.00 per share, shall
expire on April 17, 2008 and shall be substantially in the form of Exhibit
1(c) attached hereto.
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EXHIBIT 4.3
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS NOTE ARE
SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS (AS HEREINAFTER DEFINED)
AND THE RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE TERMS OF
SUBORDINATION SET FORTH IN THIS NOTE.
TRIDEX CORPORATION,
TRIDEX NC, INC.
ULTIMATE TECHNOLOGY CORPORATION
19% Senior Subordinated Note due April __, 2005
No. R-
$____________ April __, 1998
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
TRIDEX NC, INC., a North Carolina Corporation ("TNC"), and ULTIMATE
TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the
Holding Company and TNC, acting as joint and several obligors, the
"Obligor"), for value received, hereby promises to pay to
_____________________, or registered assigns, the principal amount of
_______________ DOLLARS ($ ________ ) on April __, 2005, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
unpaid balance of such principal amount at the rate of 19% per annum until
the Warrant Exchange, and thereafter at the rate of 12% per annum, from the
date hereof, payable quarterly on the ____ day of January, April, July and
October of each year after the date hereof, commencing on
[July , 1998/the first such date next succeeding the date hereof], until the
principal hereof shall have become due and payable (whether at maturity or at
a date fixed for prepayment or by declaration or otherwise), and with
interest on any overdue principal (including any overdue prepayment of
principal) and (to the extent permitted by applicable law) premium, if any,
and (to the extent permitted by applicable law) on any overdue installment of
interest, at the rate of 21% per annum until the Warrant Exchange, and
thereafter at the rate of 14% per annum until paid, payable quarterly as
aforesaid or, at the option of the holder hereof, on demand and, upon
acceleration of this Note, together with the Make Whole Amount or the
Applicable Premium, as applicable, specified in the Securities Purchase
Agreements hereinafter referred to, as liquidated damages and not as a
penalty; provided that in no event shall the amount payable by the Obligor as
interest on this Note exceed the highest lawful rate permissible under any
law applicable hereto. Payments of principal, premium, if any, and interest
hereon shall be made in lawful money of the United States of America by the
method and at the address for such purpose specified in the Securities
Purchase Agreements hereinafter referred to, and such payments shall be
overdue for purposes hereof if not made on the originally scheduled date of
payment therefor, without giving effect to any applicable grace period and
notwithstanding
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that such payment may be prohibited under the terms of subordination applicable
hereto set forth below.
As further provided in section 2, the Obligor may, at its option, in lieu
of paying cash, pay a portion of the interest due on this Note on any regularly
scheduled interest payment date by adding to the principal amount of this Note
an amount equal to such portion of the interest, and all references herein (or
in any of the other Operative Documents (as defined in the Securities Purchase
Agreements)) to the principal amount of this Note shall, unless the context
clearly requires otherwise, mean the principal amount as so adjusted from time
to time.
This Note is one of the Obligor's 19% Senior Subordinated Notes due April
__, 2005, limited to $11,000,000 aggregate principal amount, issued pursuant to
those certain Securities Purchase Agreements dated April __, 1998 (such
agreements, as amended, modified and supplemented from time to time, the
"Securities Purchase Agreements") between the Issuers and the institutional
investors named therein, and the holder hereof is entitled to the benefits of
the Securities Purchase Agreements and the other Operative Documents referred to
in the Securities Purchase Agreements, including, without limitation, the Note
Guarantees (if any), and may enforce the agreements contained therein and
exercise the remedies provided for thereby or otherwise available in respect
thereof, all in accordance with the terms thereof. This Note is subject to
prepayment as specified in the Securities Purchase Agreements.
Capitalized terms used herein without definition have the meanings
ascribed to them in the Securities Purchase Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note, and
the rights of the holder hereof and of all guarantees with respect hereto, are
subordinate and junior in right of payment, to the extent specified in this
section 1, to Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the following terms
have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as from time
to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section 1.4.
"Covenant Default" shall have the meaning specified in section 1.4.
"Enforcement Notice"shall have the meaning specified in section
1.11.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase Agreements,
together with all agreements, documents and instruments executed in
connection therewith.
"Payment Default" shall have the meaning specified in section 1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the
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Subordinated Indebtedness, to the payment of all Superior Indebtedness at
the time outstanding and all securities issued in exchange therefor and
(b) any Shares of the Obligor.
"Senior Subordinated Notes" shall mean the Obligor's 19% Senior
Subordinated Notes due April __, 2005 (together with any notes issued in
exchange therefor or replacement thereof), of which this Note is one.
"Subordinated Indebtedness" shall mean the principal amount of the
Indebtedness evidenced by the Senior Subordinated Notes, together with any
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding), and premium and any other amount
(including any fee or expense) due thereon or payable, if any, with
respect thereto, including any such amounts payable by any guarantor
thereof.
"Subordination Notice" shall have the meaning specified in section
1.4.
"Superior Indebtedness" shall mean the principal amount of, interest
(including any interest accruing after the commencement of any action or
proceeding under any bankruptcy, insolvency or other similar law, and any
interest that would have accrued but for the commencement of any such
proceeding, whether or not any such interest is allowed as an enforceable
claim in such proceeding) and premium (if any) or other amount (including
any fee, expense or indemnification payment) due in respect of the Funded
Debt and/or Current Debt specified in and to the extent permitted by
sections 13.5(b), (c) and (d) of the Securities Purchase Agreements (or
any Refinancing Debt thereof permitted under section 13.5(e) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that in no event shall Superior Indebtedness include any amount
due in respect of (a) the Senior Subordinated Notes, (b) any Indebtedness
which is expressly made equal or subordinate in right of payment to the
Senior Subordinated Notes or (c) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior Indebtedness; No
Amendments.
(a) The Obligor for itself and its successors and assigns, and for
its Subsidiaries and the successors and assigns of such Subsidiaries,
covenants and agrees, and each holder of any Subordinated Indebtedness, by
its acceptance thereof, shall be deemed to have agreed, notwithstanding
anything to the contrary in this Note or any of the other Operative
Documents, that the payment of the Subordinated Indebtedness shall be
subordinated and junior in right of payment to the extent and in the
manner set forth in this section 1, to the prior payment in full in cash
or cash equivalents of all Superior Indebtedness, and that each holder of
Superior Indebtedness, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, shall be deemed to have acquired Superior
Indebtedness in reliance upon the provisions contained in this section 1.
No present or future holder of Superior Indebtedness shall be prejudiced
in the right to enforce the subordination of the Subordinated Indebtedness
effected pursuant to this section 1 by any act or failure to act on the
part of the Obligor.
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(b) Neither this section 1 nor any of the terms of the Subordinated
Indebtedness relating to the timing or amount of any payment (or
prepayment) of the principal of or premium, if any, or interest on the
Subordinated Indebtedness, shall be amended without the written consent of
the holder or holders of at least 66-2/3% in aggregate principal amount of
the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in full
in cash or cash equivalents, the Obligor shall not grant to the holders of
the Subordinated Indebtedness any Lien in or on any of the assets of the
Obligor to secure the Subordinated Indebtedness without the written
consent of the holder or holders of not less than 66-2/3% in aggregate
principal amount of the Superior Indebtedness at the time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon any payment or
distribution of the assets of the Obligor (or any of its Subsidiaries) of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution, winding-up, total or partial liquidation, reorganization,
composition, arrangement, adjustment or readjustment of the Obligor (or any of
its Subsidiaries) or its (or their) securities, whether voluntary or
involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or upon a general assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the Obligor
(or any of its Subsidiaries), or otherwise (hereinafter a "Liquidation
Payment"), then and in any such event:
(a) the holders of the Superior Indebtedness shall be entitled to
receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
representative or representatives, ratably according to the aggregate
amounts remaining unpaid on account of the Superior Indebtedness, for
application to the payment thereof, to the extent necessary to pay the
Superior Indebtedness in full in cash or cash equivalents after giving
effect to any concurrent payment or distribution, or provision therefor,
to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's representative to collect and
receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor, provided that such holder of
Superior Indebtedness shall
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concurrently send written notice thereof to each holder of Subordinated
Indebtedness together with a copy of the proof of claim so filed; and
(d) the holders of the Subordinated Indebtedness shall execute and
deliver to the holders of the Superior Indebtedness or their
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this section 1,
the holders of the Subordinated Indebtedness shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
bankruptcy, insolvency, reorganization, liquidation, receivership or other
proceeding is pending, or a certificate of the debtor, custodian, liquidating
trustee, agent or other Person making any such payment or distribution to such
holders, for the purpose of ascertaining the Persons entitled to participate
therein, the holders of the Superior Indebtedness, the then outstanding
principal amount of the Superior Indebtedness and any and all amounts payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness in Certain
Circumstances.
(a) The Obligor will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make or agree to make, and
neither the holder nor any assignee or successor holder of any
Subordinated Indebtedness will accept or receive any payment or
distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution, such payment or distribution is prohibited by Section 7.1 of
the Fleet Bank Agreement or is made in contravention of the payment rights
in respect of the Superior Indebtedness set forth in Section 2.5 of the
Fleet Bank Agreement or if, at the time of such payment or distribution or
immediately after giving effect thereto:
(i) a default in the payment when due of all or any portion of
the principal of or premium, if any, or interest on any Superior
Indebtedness or of any other amount (including any fee, expense or
indemnification payment) due in respect thereof shall have occurred
(a "Payment Default"); or
(ii) all of the following four conditions shall exist:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof to immediately
accelerate the maturity thereof (a "Covenant Default"); and
(B) the Obligor and the holder or holders of
Subordinated Indebtedness shall have received written notice
(given as provided in the Securities Purchase Agreements)
(each a "Subordination Notice") of such
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Covenant Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii)); and
(C) such Covenant Default shall not have been cured by
the Obligor pursuant to the provisions of the agreements
governing such Superior Indebtedness or waived in writing by
the requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the date
of receipt by the Obligor and the holders of the Subordinated
Indebtedness of such Subordination Notice (any period during
which the restrictions imposed by this section 1.4(a)(ii) are
in effect being hereinafter referred to as a "Blockage
Period");
provided, however, that, for the purpose of this section 1.4(a)(ii),
(1) Blockage Periods shall not be in effect for more than an
aggregate of 180 days during any period of 365 consecutive days, (2)
Blockage Periods shall not be in effect on more than three occasions
for an aggregate of 180 days during any period of 365 consecutive
days, and (3) no facts or circumstances known to the holders of
Superior Indebtedness giving any Subordination Notice on the date
any Subordination Notice is given may be used or shall be effective
as a basis for any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to apply
and the Obligor may resume payments in respect of the Subordinated
Indebtedness (including any payments which shall not have been made on
account of the provisions of this section 1, but excluding any payments
which may have become due upon any acceleration of the maturity of the
Subordinated Indebtedness) or any judgment with respect thereto upon the
earliest to occur of (i) the cure of the Payment Default or Covenant
Default by the Obligor pursuant to the provisions of the agreements
governing such Superior Indebtedness, (ii) the written waiver thereof by
the requisite holder or holders of the Superior Indebtedness with respect
to which such Payment Default or Covenant Default shall have occurred or
(iii) in the case of a Covenant Default, (A) the expiration of the
applicable Blockage Period or (B) the termination of such Blockage Period
by such requisite holder or holders of such Superior Indebtedness.
(c) In the event of either (i) the failure of the Obligor to pay the
principal of and interest and premium, if any, on any Superior
Indebtedness upon the maturity thereof or any other amount (including any
fee, expense or indemnification payment) due in respect thereof or (ii) an
acceleration of the maturity of the principal of any Superior Indebtedness
in accordance with the terms thereof (which acceleration has not been
rescinded or annulled), such Superior Indebtedness shall first be paid in
full in cash or cash equivalents (or provision for such payment in cash or
cash equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment or
distribution (in cash, properties or securities (other than Permissible
Securities), by set-off or otherwise) is made on account of or applied to
the Subordinated Indebtedness.
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(d) Nothing herein shall affect or impair the right of any holder of
any Senior Subordinated Notes to apply any amount payable in respect
thereof to the payment of any amount due upon the exercise of any Warrants
at any time.
1.5. Payments and Distributions Received. If any payment or distribution
of any kind or character, whether in cash, property or securities (other than
Permissible Securities), shall be received by any holder of any of the
Subordinated Indebtedness in contravention of this section 1, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered and transferred to, the holders of the Superior Indebtedness, or
their representative or representatives, ratably according to the aggregate
amount remaining unpaid on account of such Superior Indebtedness, for
application to the payment of the Superior Indebtedness, to the extent necessary
to pay all such Superior Indebtedness in full in cash or cash equivalents, after
giving effect to any concurrent payment or distribution, or provision therefor,
to the holders of such Superior Indebtedness. In the event of the failure of any
holder of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or assign
the same.
1.6. Subrogation. Subject to the payment in full of all Superior
Indebtedness in cash or cash equivalents, in case cash, property or securities
otherwise payable or deliverable to the holders of the Subordinated Indebtedness
shall have been applied pursuant to this section 1 to the payment of Superior
Indebtedness, then and in each such case, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of each holder of Superior
Indebtedness to receive any further payment or distribution in respect of or
applicable to the Superior Indebtedness; and, for the purposes of such
subrogation, no payment or distribution to the holders of Superior Indebtedness
of any cash, property or securities to which any holder of Subordinated
Indebtedness would be entitled except for the provisions of this section 1
shall, and no payment over pursuant to the provisions of this section 1 to the
holders of Superior Indebtedness by the holders of the Subordinated Indebtedness
shall as between the Obligor, its creditors other than the holders of Superior
Indebtedness and the holders of Subordinated Indebtedness, be deemed to be a
payment by the Obligor to or on account of Superior Indebtedness.
1.7. Certain Notices. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the occurrence of
a default or any event of default or (b) any term or provision of any agreement,
document or instrument related to the Superior Indebtedness or Subordinated
Indebtedness shall be amended, modified or supplemented, or compliance therewith
waived, the Obligor will give immediate written notice in writing of such event
to each holder of Subordinated Indebtedness and Superior Indebtedness (together
with copies of all related agreements, documents and instruments). Each notice
of any transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of this
section 1. The holder or holders of Superior Indebtedness shall be obligated to
give a Subordination Notice (as defined in section 1.4) to a holder of
Subordinated Indebtedness other than the initial holders thereof only if the
holder or holders of Superior Indebtedness shall have been furnished written
notice of such other holder's address for purposes of this section 1. No holder
of Subordinated Indebtedness shall be obligated to give any notice under section
1.11 to any holder of Superior Indebtedness unless such holder of Subordinated
Indebtedness shall have been furnished written notice of the address of such
holder of Superior Indebtedness for purposes of this section 1. All notices to
the holders of the Superior
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Indebtedness arising under the credit facility established by Fleet Bank
Agreement shall be sent to: Fleet National Bank, One Landmark Square, Stamford,
Connecticut 06901, Attention: Frederick A. Meagher.
1.8. Subordination Not Affected, etc. The terms of this section 1, the
subordination effected hereby and the rights created hereby of the holders of
the Superior Indebtedness shall not be affected by (a) any amendment or
modification of or supplement to any Superior Indebtedness (or any renewal,
extension, refinancing or refunding thereof) or any agreement, document or
instrument relating thereto to the extent not prohibited by the Securities
Purchase Agreements, (b) any exercise or non-exercise of any right, power or
remedy under or in respect of any Superior Indebtedness (or any security or
collateral therefor) or pursuant to any agreement, document or instrument
relating thereto or (c) any waiver, consent, release, indulgence, delay or other
action, inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1 are solely
for the purpose of defining the relative rights of the holders of Superior
Indebtedness on the one hand and the holders of Subordinated Indebtedness on the
other hand, and (a) subject to the rights, if any, under this section 1 of the
holders of Superior Indebtedness, nothing in this section 1 shall (i) impair as
between the Obligor and the holder of any Subordinated Indebtedness the
obligation of the Obligor, which is unconditional and absolute, to pay to the
holder thereof all amounts due thereon in accordance with the terms thereof or
(ii) except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such holder,
whether arising under the Operative Documents, applicable law or otherwise, and
(b) no Person is entitled to any third party beneficiary rights or other similar
rights on account of or under this section 1 other than the holders of the
Superior Indebtedness. The failure to make any payment due in respect of the
Subordinated Indebtedness or to comply with any of the terms and conditions of
any of the agreements, documents and instruments related to the Subordinated
Indebtedness by reason of any provision of this section 1 shall not be construed
as preventing the occurrence of any Default or Event of Default with respect to
the Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume Payments Not
Prohibited in Absence of Notice. No holder of Subordinated Indebtedness shall at
any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to it, unless and until such holder shall
have received written notice thereof (given as provided in the Securities
Purchase Agreements) from the Obligor or from any holder of Superior
Indebtedness or any agent or representative thereof. Prior to the receipt of any
such notice, each holder of Subordinated Indebtedness shall be entitled to
assume conclusively that no such facts exist, without, however, limiting any
right of any holder of Superior Indebtedness under this section 1 to recover
from any holder of the Subordinated Indebtedness any payment made in
contravention of this section 1 (including, without limitation, any such payment
made in violation of Section 7.1 of the Fleet Bank Agreement or in contravention
of the payment rights in respect of the Superior Indebtedness set forth in
Section 2.5 of the Fleet Bank Agreement). Each payment on the Subordinated
Indebtedness by the Obligor shall be deemed to constitute a representation of
the Obligor that such payment is permitted to be paid by the Obligor under this
section 1.
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Each holder of Subordinated Indebtedness shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself to be a
holder of Superior Indebtedness or to be the agent or representative of any
holder of Superior Indebtedness to establish that such notice has been given by
any such Person. In the event that such holder of Subordinated Indebtedness
determines in good faith that further evidence is required with respect to the
right of any such Person to participate in any payment or distribution pursuant
to this section 1, such holder of Subordinated Indebtedness may request such
Person to furnish evidence to the reasonable satisfaction of such holder of
Subordinated Indebtedness as to any fact pertinent to the rights of such Person
under this section 1, and if such evidence is not furnished, such holder of
Subordinated Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to the
contrary contained in this Note or any of the other Operative Documents,
including, without limitation, the rights of the holders of Subordinated
Indebtedness under section 2.2 of this Note and sections 9.4 and 16 of the
Securities Purchase Agreements, the holders of the Subordinated Indebtedness
agree that, if any Superior Indebtedness is outstanding, the holders of the
Subordinated Indebtedness will not accelerate any of the Subordinated
Indebtedness or take any other enforcement action with respect to the
Subordinated Indebtedness, unless:
(a) the holder or holders of any Superior Indebtedness shall have
accelerated the Superior Indebtedness or shall have foreclosed upon any
collateral securing the same;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Obligor by Persons other than the holders of the Subordinated
Indebtedness; or
(c) not less than 10 days prior to accelerating any of the
Subordinated Indebtedness or taking any other enforcement action with
respect to the Subordinated Indebtedness, the holders of Subordinated
Indebtedness shall have given each holder of Superior Indebtedness written
notice of the same, which notice shall specify in reasonable detail the
default on the basis of which the holders of the Subordinated Indebtedness
shall take any enforcement action and the enforcement action that the
holders of Subordinated Indebtedness then intend to take (each an
"Enforcement Notice");
(d) in the event that a Blockage Period shall have commenced during
the 10-day period subsequent to delivery of an Enforcement Notice, such
Blockage Period shall have expired or been terminated by the requisite
holder or holders of the Superior Indebtedness; or
(e) the Superior Indebtedness shall have been paid in full in cash
or cash equivalents and all commitments of the holder or holders of the
Superior Indebtedness shall have been terminated.
In the event that the holders of the Subordinated Indebtedness shall have
accelerated the Subordinated Indebtedness solely based upon an acceleration of
the Superior Indebtedness and the holder or holders of the Superior Indebtedness
shall thereafter rescind such acceleration, the holders of the Subordinated
Indebtedness shall likewise rescind their acceleration of the Subordinated
Indebtedness.
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1.12 Notices to Holders of Subordinated Indebtedness. Notwithstanding my
provision to the contrary herein or in any other Operative Documents, any notice
required or permitted hereby to be given by the holder or holders of the
Superior Indebtedness to the holders of the Subordinated Indebtedness which are
members of the MassMutual Group shall be deemed to have been properly given if
given solely to Massachusetts Mutual Life Insurance Company acting on behalf of
all holders of the Subordinated Indebtedness which are members of the MassMutual
Group and in the manner provided in the Securities Purchase Agreements.
2. Provisions Concerning Capitalized Interest.
2.1. Option of the Obligor to Capitalize a Portion of Interest. During the
period commencing on the date of this Note and ending on the earlier to occur of
the Warrant Exchange or April 17, 2003, the Obligor may, at its option (upon
notice as provided in section 2.2), in lieu of paying cash, pay up to 7/19th of
the amount of interest which is due and payable on this Note on any regularly
scheduled interest payment date (the portion of interest that is not so paid in
cash on any regularly scheduled interest payment date being hereinafter referred
to as the "Capitalized Interest") by increasing the principal amount of this
Note, as of such regularly scheduled interest payment date (any such date on and
as of which the principal amount shall be so increased being referred to as an
"Adjustment Date"), by an amount equal to the Capitalized Interest, provided
that (a) the Obligor exercises such option proportionately with respect to all
of the Notes then outstanding and (b) on such regularly scheduled interest
payment date, the Obligor pays in cash in full all interest (other than interest
that is capitalized pursuant to this section 2) which is due and payable on such
date on all of the Notes then outstanding. If the Obligor shall, in accordance
with the terms of this section 2, exercise such option, then, from and after
each Adjustment Date, the outstanding principal amount of each Note shall,
without further action, be increased by an amount equal to the Capitalized
Interest added thereto as of such Adjustment Date.
2.2. Notice from the Obligor. To exercise its option under section 2.1,
the Obligor shall deliver to each holder of any Note not less than 10 or more
than 30 days prior to an Adjustment Date, an Officers' Certificate which shall
specify:
(a) the applicable Adjustment Date;
(b) (i) the portion of the interest which is due and payable on such
Adjustment Date on the Notes to be treated as Capitalized Interest, (ii)
the aggregate amount of Capitalized Interest to be added as of such
Adjustment Date to the principal amount of the Notes then outstanding and
(iii) the amount of Capitalized Interest to be added as of such Adjustment
Date to the principal amount of each Note then held by such holder;
(c) the aggregate amount of interest to be paid in cash on such
Adjustment Date on all of the Notes then outstanding and the amount of
interest to be paid in cash on such Adjustment Date with respect to each
Note then held by such holder;
(d) the aggregate principal amount of the Notes then outstanding and
the principal amount of each Note then held by such holder, in each case
both before and after giving effect to the adjustments to be made as of
such Adjustment Date;
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(e) the aggregate amount of each interest payment to be made on and
after such Adjustment Date on all of the Notes then outstanding (if paid
entirely in cash) and the amount of each such interest payment on each
Note then held by such holder; and
(f) in reasonable detail, all computations made in determining the
foregoing.
In the absence of manifest error, the computations set forth in such Officers'
Certificate shall be deemed final binding and conclusive upon the Obligor and
the holders of the Notes, unless, in any case, the Required Holders of the Notes
shall notify the Obligor in writing of their objection (in reasonable detail) to
any portion of such Officers' Certificate within 30 days of the date upon which
such Officers' Certificate was furnished to the holders of the Notes. In such
event, the Obligor shall, at its expense, within 15 days following the receipt
of any such notice from the Required Holders of the Notes, deliver to the
holders of the Notes a certificate signed by a firm of independent certified
public accountants of recognized national standing (which may be the regular
auditors of the Obligor), setting forth in reasonable detail any adjustments
which, in the opinion of such accountants, should be made to the amounts set
forth in such Officers' Certificate in order for such amounts to be correct and
consistent with the terms hereof and of the other Operative Documents and, in
reasonable detail, all computations made in determining any such adjustments.
The certificate of any such firm of accountants shall be conclusive evidence of
the correctness of such amounts under this section 2.2.
2.3 Limitations on the Option of the Obligor to Capitalize Interest.
Notwithstanding anything to the contrary contained in this section 2, the
Obligor may not capitalize any interest pursuant to the provisions of this
section 2 on any Adjustment Date if on such Adjustment Date any Default or Event
of Default shall have occurred and be continuing.
3. General.
3.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of the
Obligor as provided in the Securities Purchase Agreements. The Obligor may treat
the person in whose name this Note is registered on the Note register maintained
at such office pursuant to the Securities Purchase Agreements as the owner
hereof for all purposes, and the Obligor shall not be affected by any notice to
the contrary.
3.2. Events of Default, etc. In case an Event of Default, as defined in
the Securities Purchase Agreements, shall occur and be continuing, the unpaid
balance of the principal of this Note may be declared and become due and payable
in the manner and with the effect provided in the Securities Purchase
Agreements. Reference is hereby made to section 16.1 of the Securities Purchase
Agreements for certain provisions requiring the holder or holders of the Notes
to endeavor to furnish copies to the holder or holders of Superior Indebtedness
of any notice given to the Obligor by the holder or holders of the Notes
pursuant to section 16.1 of the Securities Purchase Agreements.
3.3. Certain Waivers. The parties hereto, including the makers and all
guarantors and endorsers of this Note, hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Note.
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3.4. Governing Law. This Note shall be construed in accordance with and
governed by the domestic substantive laws of The Commonwealth of Massachusetts
without giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of domestic substantive laws of any other
jurisdiction.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Obligor has executed this Note as an instrument
under seal as of the date first above written.
TRIDEX CORPORATION
By
(Title)
TRIDEX NC, INC.
By
(Title)
ULTIMATE TECHNOLOGY
CORPORATION
By
(Title)
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FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and transfers
unto the within Note, and appoints Attorney to transfer such Note on the books
of TRIDEX CORPORATION, TRIDEX NC, INC. and ULTIMATE TECHNOLOGY CORPORATION with
full power of substitution in the premises.
Date: ,
---------------------------------------------------
(Signature must conform in all respects to name of
Holder as specified on the face of the Note)
Signed in the presence of
- ----------------------------
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EXHIBIT 10.1
CREDIT AGREEMENT
Dated as of April 17, 1998
among
TRIDEX CORPORATION,
PROGRESSIVE SOFTWARE, INC.,
ULTIMATE TECHNOLOGY CORPORATION
TRIDEX NC, INC.
and
FLEET NATIONAL BANK
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CREDIT AGREEMENT dated as of April 17, 1998 among TRIDEX
CORPORATION, a Connecticut corporation ("Tridex"), PROGRESSIVE SOFTWARE, INC., a
North Carolina corporation ("PSI"), ULTIMATE TECHNOLOGY CORPORATION, , a New
York corporation ("UTC"), TRIDEX NC, INC., a North Carolina corporation ("Tridex
NC", and collectively, together with Tridex, UTC 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").
WHEREAS, the Borrowers desire that the Bank extend credit as
provided herein and the Bank is prepared to extend such credit; and
WHEREAS, the Borrowers are and will be operated on an integrated
basis in connection with their respective financial resources and each of the
Borrowers will receive direct and indirect economic and financial benefits from
the credit to be extended under this Agreement, and each of the Borrowers
acknowledges that the Bank would not provide the financing hereunder but for the
joint and several obligations of each such Borrower hereunder with respect to
all such indebtedness incurred hereunder.
NOW THEREFORE, in consideration of the foregoing, which is
incorporated by reference, and other valuable consideration, receipt of which is
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS
Section Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any Borrower or
any of their respective Subsidiaries; (b) which directly or indirectly
beneficially owns or holds five percent or more of any class of voting stock of
any Borrower or any of their respective Subsidiaries; (c) five percent or more
of the voting stock of which is directly or indirectly beneficially owned or
held by any Borrower or any of their respective Subsidiaries; or (d) which is a
partnership in which any Borrower or any of their respective Subsidiaries is a
general partner. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"Amortization Date" means the last day of each calendar quarter,
commencing on June 30, 1998, up to (and including) the Termination Date,
provided that if any such day is not a Banking Day, such day shall be the next
succeeding Banking Day.
"Banking Day" means, a day on which commercial banks settle payments
in (i) New York or London if the payment obligation is calculated by reference
to any LIBO Rate, or (ii) New York, if the payment obligation is calculated by
reference to the Prime Rate.
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"Borrowing" means any Loan requested by any Borrower hereunder.
"Borrowing Base" means an amount equal to the sum of (a) 80% of
Eligible Receivables, and (b) 50% of Eligible Inventory , provided, however, in
no event shall the aggregate amount under clause (b) exceed $3,500,000. Unless
the Bank shall otherwise determine, the Borrowing Base as of any date shall be
the Borrowing Base set forth on the most current Borrowing Base Certificate
certified and delivered by the Borrower pursuant to either Section 6.8 or
Section 4.2. If, at any time, the Borrowing Base shall exceed the Commitment,
for purposes of this Agreement the Borrowing Base shall be deemed to be equal to
the Commitment.
"Borrowing Base Certificate" means a certificate substantially in
the form of Exhibit B hereto or such other form agreed to in writing by the Bank
and the Borrower.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" means any one or more of the following events:
(a) the failure by Seth Lukash to remain active in the day
to day senior management of Tridex; or
(b) the stockholders of any Borrower shall approve a plan or
proposal for the acquisition of, merger, liquidation or dissolution of such
Borrower, or a sale of more than 25% of its assets in one or a series of related
transactions (other than the proposed merger of Tridex NC into PSI; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of any Borrower as
of the date of this Agreement) shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become
the direct or indirect beneficial owner (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended from time to time) of securities
of such Borrower representing 25% or more of the combined voting power of the
outstanding voting securities for the election of directors or shall have the
right to elect a majority of the board of directors of such Borrower.
"Closing Date" means the date this Agreement has been executed by
the Borrowers and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitments" means the Term Loan Commitment and the Working Capital
Commitment.
"Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of a Person in accordance with
GAAP.
"Current Assets" of any Person at any time means all cash,
Receivables and Inventory of such Person.
"Current Funded Bank Debt" means, with respect to any Person, all
Debt of such Person for money borrowed, other than Subordinated Debt.
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"Current Liabilities" means all liabilities of a Person treated as
current liabilities in accordance with GAAP, including without limitation (a)
all obligations payable on demand or within one year after the date in which the
determination is made and (b) installment and sinking fund payments required to
be made within one year after the date on which determination is made, but
excluding all such liabilities or obligations which are renewable or extendible
at the option of such Person to a date more than one year from the date of
determination.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
property or services (except trade payables in the ordinary course of business);
(c) Unfunded Benefit Liabilities of such Person; (d) the face amount of any
outstanding letters of credit issued for the account of such person; (e)
obligations arising under acceptance facilities; (f) guaranties, endorsements
(other than for collection in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person, or otherwise to assure a creditor against loss,
including any contingent obligations under swaps, derivatives, currency
exchanges and similar transactions; (g) obligations secured by any Lien on
property of such Person; and (h) obligations of such Person as lessee under
Capital Leases.
"Default" means any event which with the giving of notice or lapse
of time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and,
to the extent permitted by law, any other amount payable by the Borrowers under
this Agreement or the Notes that is not paid when due (whether at stated
maturity, by acceleration or otherwise), a rate per annum during the period from
and including the due date, to, but excluding the date on which such amount is
paid in full equal to two percentage points above the Prime Rate as in effect
from time to time plus the applicable Margin (provided that, if the amount so in
default is principal of a LIBOR Loan and the due date thereof is a day other
than the last day of the Interest Period therefor, the "Default Rate" for such
principal shall be, for the period from and including the due date and to but
excluding the last day of the Interest Period therefor, two percentage points
above the interest rate for such Loan as provided in Section 2.10 hereof and,
thereafter, the rate provided for above in this definition).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBIT" means, for any Person, for any period, earnings before
Interest Expense and taxes for such Person determined in accordance with GAAP.
"EBITDA" means, for any Person, for any period, earnings before
Interest Expense, taxes, depreciation, amortization and extraordinary items for
such Person determined in accordance with GAAP.
"Eligible Inventory" means, as of any date of determination thereof,
all Inventory (valued at the lower of cost or its net realizable value as
determined using GAAP) owned by the Borrowers, but excluding (a) all Inventory
in which the Bank does not have a first perfected security interest, subject to
no other Lien prior to or on a parity with such security interest, (b) all
Inventory for which warehouse receipts or documents of title have been issued,
unless the same are delivered to the Bank, and (c) all other Inventory deemed
ineligible by the Bank because of any circumstance that could, in the Bank's
judgment, reasonably exercised, adversely affect the quality of such Inventory
as collateral security. Notwithstanding the preceding sentence, "Eligible
Inventory" shall not include any Inventory not located at premises owned by or
leased
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to or contracted to a Borrower, unless such Inventory is in transit (and
insured) or such Borrower has made a formal financing statement filing against
the consignee of such Inventory and has given any party claiming of record a
security interest in such consignee's Inventory, or other assets that might
include such Inventory, notice of such Borrower's consignment arrangements with
such consignee or has taken equivalent protective steps satisfactory to the
Bank.
"Eligible Receivables" means, as of any date of determination
thereof, all Receivables of the Borrowers net of the Borrowers' customary
reserves, discounts, credits, returns, rebates, allowances or set-offs,
excluding the following:
(i) any Receivable unpaid for 90 or more days from the
date of the original invoice;
(ii) any Receivable evidenced by chattel paper or an
instrument of any kind unless such chattel paper or instrument is pledged and
delivered to the Bank or unless the total amount of such Receivables at any one
time does not exceed 5% of total Eligible Receivables at such time;
(iii) any Receivable which is owed by an account debtor
which is insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, which might have an adverse
effect on the business of such account debtor;
(iv) all Receivables deemed uncollectable by a Borrower
or turned over to collection agencies or outside collection attorneys;
(v) any Receivable which is not a valid, legally
enforceable obligation of the account debtor or is subject to any present or
contingent, or any fact exists which is the basis for any future, offset or
counterclaim or other defense on the part of such account debtor;
(vi) any Receivable not evidenced by an invoice or other
documentation in form reasonably acceptable to the Bank;
(vii) any Receivable which arises out of any transaction
between (A) any Borrower and (B) any Subsidiary or any Affiliate or any other
Borrower;
(viii) any Receivable which is subject to any provision
prohibiting its assignment or requiring notice not theretofor given of or
consent not theretofor obtained to such assignment;
(ix) all Receivables from customers having their place
of business outside of the United States of America, except for such Receivables
backed by either (A) letters of credit denominated in Dollars issued to a
Borrower by banks acceptable to the Bank or (B) credit insurance policies
acceptable to the Bank;
(x) all Receivables arising out of or in connection with
advance billings of a customer's requirements of supplies over a period of time,
but only to the extent that such Receivables exceed 10% of all Eligible
Receivables;
(xi) all Receivables that do not conform to the
representations and warranties contained in Article 2 of the Security Agreement;
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(xii) all Receivables in which the Bank does not have a
first perfected security interest, subject to no other Lien prior to or on a
parity with such security interest;
(xiii) all Receivables not denominated in Dollars;
(xiv) all Receivables from an account debtor if more
than 50% of the aggregate Dollar amount of invoices billed with respect to such
account debtor is more than 90 days past due according to the original terms of
payment;
(xv) if any account debtor owes greater than 20% of the
Dollar value of total Receivables collectively owed to the Borrowers on a
consolidated basis, then all Receivables owed by such account debtor in excess
of such 20% limitation shall be ineligible;
(xvi) any Receivable in respect of which the U.S.
Government or any agency thereof is the account debtor;
(xvii) any Receivable which is owed by an account debtor
who has disputed liability or made any claim with respect to any other account
due from such account debtor to a Borrower, except the foregoing exclusion shall
not apply to any account debtor unless and until such disputed amounts equal or
exceed twenty percent (20%) of the aggregate Dollar amount of accounts due from
such account debtor; and
(xviii) any Receivable which is determined by the Bank,
in the exercise of its reasonable judgment, to be ineligible for any other
reason generally accepted in the commercial finance business as a reason for
ineligibility.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of any group of organizations (i) described in section 414(b) or (c)
of the Code of which any Borrower is a member, or (ii) solely for purposes of
potential liability under section 302(c)(11) of ERISA and section 412(c)(11) of
the Code and the lien created under section 302(f) of ERISA and section 412(n)
of the Code, described in section 414(m) or (o) of the Code of which any
Borrower is a member.
"Event of Default" has the meaning given such term in Section 9.1.
"Excess Cash Flow" shall mean (i) excess cash flow of the Borrowers
on a consolidated basis after all sources and uses of cash as shown on the
Borrowers' consolidated annual audited statement of cash flows in respect of
each fiscal year, minus (ii) the amount (if any) by which the outstanding
principal amount of the Working Capital Loans as at the end of
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such fiscal year exceeds the outstanding principal amount of the Working Capital
Loans as at the end of the fiscal year immediately preceding such fiscal year.
"Facility Documents" means this Agreement, the Notes, the
Subordination Agreements, the Security Agreement, the Pledge Agreement and each
of the documents, certificates or other instruments referred to in Article 4
hereof as well as any other document, instrument or certificate to be delivered
by the Borrowers in connection with this Agreement or in connection with the
documents, certificates or instruments referred to in Article 4, including
documents delivered in connection with any Borrowing.
"Fixed Charge Coverage Ratio" means, with respect to any Person, for
any period, the ratio of (i) EBITDA minus cash taxes paid, dividends paid and
any capital expenditures, to (ii) current maturities of long term Debt, plus
Interest Expense, for such period.
"Forfeiture Proceeding" means any action, proceeding or
investigation affecting the Parent or any of its Subsidiaries or Affiliates
before any court, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or the receipt of notice by any such party
that any of them is a suspect in or a target of any governmental inquiry or
investigation, which may result in an indictment of any of them or the seizure
or forfeiture of any of their property.
"Funded Debt" means, with respect to any Person, all Debt (senior
and subordinated) of such Person for money borrowed, including Capital Lease
obligations.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.5 (except for changes concurred in by the Borrowers' independent
public accountants).
"Interest Coverage Ratio" means, with respect to any Person, for any
period, the ratio of (i) EBIT to (ii) Interest Expense for such period.
"Interest Expense" shall mean, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP, of (a) all interest on
Debt that is accrued as an expense during such period (including, without
limitation, imputed interest on Capital Lease obligations), plus (b) all amounts
paid, accrued or amortized as an expense during such period in respect of
interest rate protection agreements, minus (c) all amounts received or accrued
as income during such period in respect of interest rate protection agreements.
"Interest Period" means with respect to any LIBOR Loan, the period
commencing on the date such Loan is made, converted from another type of Loan or
renewed, as the case may be, and ending, as the Borrowers may select pursuant to
Section 2.11, on the numerically corresponding day in the first, second, third,
sixth (or if available through the Bank, the ninth or twelfth) calendar month
thereafter, provided that each such Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month. With respect to Prime Rate
Loans, "Interest Period" means the period commencing on the date such Loan was
made and ending on the Banking Day on which such Prime Rate Loan is repaid.
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"Inventory" means all inventory, now or hereafter owned and wherever
located, of the Borrowers, including (without limitation) raw materials,
work-in-process, finished goods, supplies and packaging materials.
"Lending Office" means the lending office of the Bank set forth on
the signature page.
"LIBO Rate" means, as applicable to any LIBOR Loan, the rate per
annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in U.S. dollars, for a
period of time comparable to such LIBOR Loan which appears on the Telerate page
3750 as of 11:00 a.m. London time on the day that is two London Banking Days
preceding the first day of such LIBOR Loan; provided, however, if the rate
described above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR rate shall be the rate (rounded upwards
as described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is two
(2) London Banking Days prior to the beginning of such interest period.
If both the Telerate and Reuters system are unavailable, then the
rate for that date will be determined on the basis of the offered rates for
deposits in U.S. dollars for a period of time comparable to such LIBOR Loan
which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of such LIBOR Loan as selected by the Bank. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
such LIBOR Loan offered by major banks in New York City at approximately 11:00
a.m. New York City time, on the day that its two London Banking Days preceding
the first day of such LIBOR Loan. In the event that Bank is unable to obtain any
such quotation as provided above, it will be deemed that LIBOR pursuant to a
LIBOR Loan cannot be determined.
In the event that the Board of Governors of the Federal Reserve
System shall impose a Reserve Requirement with respect to LIBOR deposits of the
Bank then for any period during which such Reserve Requirement shall apply, LIBO
Rate shall be equal to the amount determined above divided by an amount equal to
1 minus the Reserve Requirement.
"LIBOR Loan" means any Loan when and to the extent the interest rate
therefor is determined on the basis of the definition "LIBO Rate."
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, negative pledge, charge, conditional
sale, title retention agreement, financing lease or other encumbrance or similar
right of others, or any agreement to give any of the foregoing.
"Loan" means any of the Term Loan or the Working Capital Loans, and
"Loans" means the Term Loan and the Working Capital Loans.
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"Margin" means the percentage points to be added to the Bank's Prime
Rate or the then applicable LIBOR Rate, in each case based upon the following
performance criteria:
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<TABLE>
<CAPTION>
Prime Rate
LIBOR Margin Margin
Senior Funded Debt/EBITDA (Percentage (Percentage
of the Borrowers Points) Points)
---------------- ------- -------
<S> <C> <C>
Greater than or equal to 3.00 2.75 1.00
Less than 3.00, but greater than or 2.25 0.00
equal to 2.00
Less than 2.00, but greater than or 1.75 0.00
equal to 1.00
Less than 1.00 1.25 0.00
</TABLE>
Notwithstanding the foregoing, the applicable Margins set forth above with
respect to the LIBOR Rates will be reduced by .25 percentage points upon
consummation of the Mass Mutual Transaction.
"Mass Mutual Transaction" means a transaction pursuant to which
Massachusetts Mutual Life Insurance Company and/or its affiliates acquire
approximately 285,714 shares of the capital stock of Tridex, which shares shall
be newly issued pursuant to an equity offering by Tridex.
"Multiemployer Plan" means a Plan defined as such in section 3(37)
of ERISA to which contributions have been made by the Borrowers or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Income (Loss)" of any Person for any period means the net
income (loss) of such Person for such period determined in accordance with GAAP.
"Net Income Increase" means, for any period, the aggregate of fifty
percent (50%) of the Borrowers' Net Income, on a consolidated basis, in respect
of such period.
"Notes" means the Term Note and the Working Capital Note.
"Notice of Borrowing" shall mean the notice of each Borrowing
described in Section 2.8 and in the form of Exhibit E hereto.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by any Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
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"Pledge Agreement" means the stock pledge agreement dated as of the
Closing Date by Tridex in favor of the Bank, in substantially the form of
Exhibit D.
"Prime Rate" means that rate of interest from time to time announced
by the Bank at its office located at 111 Westminster Street, Providence, Rhode
Island 02903, which rate may not be the Bank's lowest or best rate.
"Prime Rate Loan" means any Loan when and to the extent the interest
rate therefor is determined in relation to the Prime Rate.
"Receivables" means all accounts owing to a Person arising out of or
in connection with the bona fide sale or lease of goods or services in the
ordinary course of business.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means any change after the date of this
Agreement in United States federal, state, municipal or foreign laws or
regulations (including without limitation Regulation D) or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including the Bank of or under any United States, federal,
state, municipal or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reserve Requirement" means, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in Boston with deposits exceeding $1,000,000,000 against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the LIBO Rate for LIBOR Loans is to be determined as provided
in the definition of "LIBO Rate" in this Section 1.1 or (ii) any category of
extensions of credit or other assets which include LIBOR Loans.
"Revolving Credit Termination Date" means June 30, 1999; provided
that if such date is not a Banking Day, the Revolving Credit Termination Date
shall be the next succeeding Banking Day (or, if such next succeeding Banking
Day falls in the next calendar month, the next preceding Banking Day) or (b) the
earlier date of termination of the Commitments pursuant to Section 9.2.
"Security Agreement" means the security agreement dated as of the
Closing Date by the Borrowers in favor of the Bank, in substantially the form of
Exhibit C.
"Senior Funded Debt" means for any Person at any time, all Funded
Debt, other than Subordinated Debt.
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"Senior Liabilities" means for any Person at any time, all Debt,
other than contingent liabilities and Subordinated Debt.
"Sub Debt Agreements" means collectively the agreements dated April
17, 1998 governing the $11,000,000 Subordinated Debt issued to Massachusetts
Mutual Life Insurance Company and certain of its affiliates.
"Subordinated Debt" means Funded Debt of a Person subordinated to
the Loans on terms satisfactory to the Bank.
"$11,000,000 Subordinated Debt" means the Subordinated Debt issued
pursuant to and governed by the Sub Debt Agreements.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.
"Tangible Capital Base" means, for any Person, the sum of Tangible
Net Worth plus Subordinated Debt.
"Tangible Net Worth" means, at any date of determination thereof,
the excess of total assets of a Person over total liabilities of such Person,
excluding, however, from the determination of total assets: loans and advances
to officers and non-consolidated Affiliates, goodwill, trademarks, patents,
organizational costs, unamortized debt discounts and expenses and other like
intangible assets as defined by GAAP.
"Term Loan" shall have the meaning set forth in Section 2.1(b)
herein.
"Term Loan Commitment" means the obligation of the Bank to make the
Term Loan under this Agreement in the aggregate principal amount of up to
$12,000,000, as such amount may be reduced or otherwise modified from time to
time.
"Term Note" means the promissory note of the Borrowers in the form
of Exhibit A1 hereto evidencing the Term Loan made by the Bank hereunder and all
promissory notes delivered in substitution or exchange therefor, as amended or
supplemented from time to time.
"Termination Date" means March 31, 2003; provided that if such date
is not a Banking Day, the Termination Date shall be the next succeeding Banking
Date.
"Total Liabilities" means all liabilities of a Person which would be
classified as such on a balance sheet in accordance with GAAP.
"Unfunded Benefit Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all benefit liabilities (within
the meaning of section 4001(a)(16) of ERISA) under the Plan exceeds the fair
market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrowers
or any ERISA Affiliate under Title IV of ERISA.
"Working Capital Commitment" means the obligation of the Bank to
make the Working Capital Loans under this Agreement in the aggregate principal
amount of up to
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$8,000,000, as such amount may be limited or reduced pursuant to Article 2 or
otherwise modified from time.
"Working Capital Loans" shall have the meaning set forth in Section
2.1(a) herein.
"Working Capital Note" means the promissory note of the Borrowers in
the form of Exhibit A2 hereto evidencing the Working Capital Loans made by the
Bank hereunder and all promissory notes delivered in substitution or exchange
therefor, as amended or supplemented from time to time.
Section 1.1. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
Section 1.2. Currency Equivalents. For all purposes of this
Agreement, all amounts denominated in a currency other than Dollars shall be
converted into the Dollar equivalent of such amounts. The equivalent in another
currency of an amount in Dollars shall be determined at the rate of exchange
quoted by Fleet National Bank in Boston at 9:00 a.m. (Boston time) on the date
of determination, to prime banks in Boston for the spot purchase in the Boston
foreign exchange market of such amount of Dollars with such other currency.
ARTICLE 2. THE CREDIT
Section 2.1. The Loans.
(a) Subject to the terms and conditions of this Agreement, the
Bank agrees to make revolving loans (the "Working Capital Loans") to the
Borrowers from time to time from and including the date hereof to and including
the Revolving Credit Termination Date, up to but not exceeding in the aggregate
principal amount at any one time outstanding the amount 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. The Working
Capital Loans may be outstanding as Prime Rate Loans or LIBOR Loans (each a
"type" of Loan). The Working Capital Loans shall be due and payable on the
Revolving Credit Termination Date. Each type of Loan shall be made and
maintained at the Bank's Lending Office for such type of Loan. The Bank and the
Borrowers hereby terminate that certain Amended and Restated Credit Agreement
dated as of December 15, 1995, as amended, among Tridex, UTC and the Bank.
(b) Subject to the terms and conditions of this Agreement, the
Bank agrees to make a term loan (the "Term Loan") to the Borrowers on the date
hereof in one advance in the principal amount of $12,000,000. Once so funded,
the Term Loan may be outstanding in full or in part as Prime Rate Loans or LIBOR
Loans (each a "type" of Loan) pursuant to the provisions of this Article 2.
Principal on the Term Loan shall be payable in accordance with the following
amortization schedule:
First Year of Amortization: $300,000 per quarter, payable on
June 30, 1998, September 30, 1998, December 31, 1998 and March
31, 1999.
Second Year of Amortization: $450,000 per quarter, payable on
June 30, 1999, September 30, 1999, December 31, 1999 and March
31, 2000.
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Third Year of Amortization: $750,000 per quarter, payable on
June 30, 2000, September 30, 2000, December 31, 2000 and March
31, 2001.
Fourth Year of Amortization: $750,000 per quarter, payable on
June 30, 2001, September 30, 2001, December 31, 2001 and March
31, 2002.
Fifth Year of Amortization: $750,000 per quarter, payable on
June 30, 2002, September 30, 2002, December 31, 2002 and March
31, 2003.
Each type of Loan shall be made and maintained at the Bank's
Lending Office for such type of Loan.
Section 2.2. The Notes. The Working Capital Loans shall be evidenced
by a promissory note in favor of the Bank in the form of Exhibit A-2, dated the
date of this Agreement, duly completed and executed by the Borrowers. The Term
Loan shall be evidenced by a promissory note in favor of the Bank in the form of
Exhibit A-1, dated the date of this Agreement, duly completed and executed by
the Borrowers.
Section 2.3. Purpose. The Borrowers shall use the proceeds of the
Working Capital Loans for general corporate purposes, including working capital,
leasehold improvements and equipment needs. In addition, up to $3,500,000 of the
proceeds of the Working Capital Loans can be advanced to Tridex NC to fund a
portion of the acquisition purchase price of PSI's stock, provided, however that
in the event the Mass Mutual Transaction closes on or prior to the Closing Date,
the aforesaid $3,500,000 amount will be reduced by the amount of the equity
funds received by Tridex from the Mass Mutual Transaction. The proceeds of the
Term Loan shall also be advanced to Tridex NC to fund a portion of the
acquisition purchase price of PSI's stock. No proceeds of the Loans shall be
used to directly or indirectly fund the needs of any Subsidiary of any Borrower
if such Subsidiary is not also a Borrower hereunder. No proceeds of the Loans
shall be used for the purpose, whether immediate, incidental or ultimate, of
buying or carrying "margin stock" within the meaning of Regulation U.
Section 2.4. Borrowing Procedures. The Borrowers shall give the Bank
notice of each Borrowing to be made hereunder as provided in Section 2.8. Not
later than 1:00 p.m. Hartford, Connecticut time on the date of such Borrowing,
the Bank shall, subject to the conditions of this Agreement, make the amount of
the Loan to be made by it on such day available to the Borrowers, in immediately
available funds, by the Bank crediting an account of the Borrowers designated by
the Borrowers and maintained with the Bank at the Lending Office.
Section 2.5. Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Borrowers shall
have the right to make prepayments of principal, or to convert one type of Loan
into another type of Loan, at any time or from time to time; provided that: (i)
the Borrowers shall give the Bank notice of each such prepayment or conversion
as provided in Section 2.8; and (ii) LIBOR Loans may be prepaid or converted
only on the last day of an Interest Period for such Loans, unless the Borrowers
compensate the Bank as required pursuant to Section 3.4 herein, and (iii)
prepayments made in respect of the Term Loan shall be applied to the
installments of principal in the inverse order of their maturities.
(b) Mandatory Prepayments. The Borrowers shall immediately
repay the excess by which the aggregate principal amount of all outstanding
Working Capital Loans
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exceeds the Working Capital Commitment. In addition, amounts outstanding under
the Term Loan will be reduced from time to time by an amount equal to 50% of the
annual consolidated Excess Cash Flow of the Borrowers and their subsidiaries.
Payment of such Excess Cash Flow amounts shall be made within 30 days of the
annual audited financial statements prepared on a consolidated basis of the
Borrowers and be applied toward payments under the Term Loan in the inverse
order of their maturities. In addition, 100% of the net cash proceeds from any
sale by any of the Borrowers of any material assets outside of the normal course
of business or from any new issuances of stock (other than pursuant to the Mass
Mutual Transaction) otherwise permitted under this Agreement shall be utilized
by the Borrowers to repay amounts under the Term Loan in the inverse order of
their maturities. In addition, at such time, if any, as the Borrowers shall
consummate the Mass Mutual Transaction, the net proceeds from such transaction
shall first be utilized by the Borrowers to repay amounts outstanding as Working
Capital Loans and thereafter will be utilized to repay amounts outstanding under
the Term Loan in the inverse order of their maturities. In addition, upon the
occurrence of any Change of Control, the Borrowers shall immediately, at the
option of and upon demand by the Bank, repay all outstanding amounts under the
Loans, and such amounts shall be repaid prior to making any payments on any
Subordinated Debt. Each such prepayment in accordance with the foregoing
provisions shall be applied first to any expenses incurred by the Bank, second
to any interest due on the amount prepaid, and last to the outstanding principal
amount of the Loans prepaid, in each case in such manner as provided above.
(c) Yield Maintenance Fee. If, at any time (i) the interest
rate on any Loan is a fixed rate, and (ii) the Bank in its sole discretion
should determine that current market conditions can accommodate a prepayment
request, Borrowers shall have the right at any time and from time to time to
prepay the Loan in whole (but not in part), and Borrowers shall pay to the Bank
a yield maintenance fee in an amount computed as follows: The current rate for
United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the maturity
date of the term chosen pursuant to the Fixed Rate Election as to which the
prepayment is made, shall be subtracted from the "cost of funds" component of
the fixed rate in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by the amount
of the principal balance being prepaid. The resulting amount shall be devided by
360 and multiplied by the number of the days remaining in the term chosen
pursuant to the Fixed Rate Election as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury security rate and the number of days remaining in the term chosen shall
be the yield maintenance fee due to the Bank upon prepayment of the fixed rate
Loan. Each reference in this paragraph to "Fixed Rate Election" shall mean the
election by Borrowers pursuant to Section 2.11 hereof.
If by reason of an Event of Default the Bank elects to declare
such Loan to be immediately due and payable, then any yield maintenance fee with
respect to the Loan shall become due and payable in the same manner as though
Borrowers had exercised such right of prepayment.
Section 2.6. Late Charges. Payments not received within 10 days of
the due date therefor (including payments which are incomplete due to there
being insufficient funds in the Borrowers' operating accounts at the Bank) will
be subject to a one-time charge equal to 5% of the amount overdue.
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Section 2.7. Changes of Commitment. The Borrowers shall have the
right to reduce or terminate the amount of the unused portion of the Working
Capital Commitment at any time or from time to time, provided that: (i) the
Borrowers shall give notice of each such reduction or termination to the Bank as
provided in Section 2.8; and (ii) each partial reduction shall be in an
aggregate amount at least equal to $500,000 (and integral multiples of $100,000
in excess thereof). Once reduced or terminated, such Working Capital Commitment
may not be reinstated.
Section 2.8. Certain Notices. Notices by the Borrowers to the Bank
of each Borrowing pursuant to Section 2.4, and each prepayment or conversion
pursuant to Section 2.5(a), and each reduction or termination of a Commitment
pursuant to Section 2.7 shall be irrevocable and shall be effective only if
received by the Bank not later than 12:00 noon Hartford, Connecticut time, and
(a) in the case of Borrowings and prepayments of, conversions into and (in the
case of LIBOR Loans) renewals of (i) Prime Rate Loans, given on the Banking Day
thereof;; and (ii) LIBOR Loans, given two Banking Days prior thereto; and (b) in
the case of reductions or termination of the Working Capital Commitment, given
one Banking Day prior thereto. Each such Notice of Borrowing shall be in the
form of Exhibit E hereto and shall specify the Loans to be borrowed, prepaid,
converted or renewed and the amount (subject to Section 2.9) and type of the
Loans to be borrowed, or converted, or renewed or prepaid and the date of the
Borrowing or prepayment, or conversion or renewal (which shall be a Banking
Day). Each such notice of reduction or termination shall specify the amount of
the Commitment to be reduced or terminated.
Section 2.9. Minimum Amounts. Except for Borrowings which exhaust
the full remaining amount of the unused portion of either of the Commitments or
prepayments or conversions which result in the prepayment or conversion of all
Loans, as the case may be, of a particular type, each Borrowing, optional
prepayment, conversion and renewal of principal of Loans of a particular type
shall be in an amount at least equal to (a) $500,000 with respect to Prime Rate
Loans, and (b) $500,000 and integral multiples of $100,000 in excess thereof
with respect to LIBOR Loans (borrowings, prepayments, conversions or renewals of
or into Loans of different types or, in the case of LIBOR Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, prepayments, conversions and renewals for the purposes of the
foregoing, one for each type of Interest Period).
Section 2.10. Interest.
(a) Interest shall accrue on the outstanding and unpaid
principal amount of each Loan for the period from and including the date of such
Loan to but excluding the date such Loan is due at the following rates per
annum: (i) for Prime Rate Loans, at a variable rate per annum equal to the Prime
Rate plus the Margin and; (ii) for LIBOR Loans, at a fixed rate equal to the
LIBO Rate plus the Margin, for the period from and including the first day of
the Interest Period therefore to but excluding the last day of such Interest
Period. If the principal amount of any Loan and any other amount payable by the
Borrowers hereunder or under the Notes shall not be paid when due (at stated
maturity, by acceleration or otherwise), interest shall accrue on such amount to
the fullest extent permitted by law from and including such due date to but
excluding the date such amount is paid in full at the Default Rate for such type
of Loan.
(b) The interest rate on Prime Rate Loans shall change when
the Prime Rate changes and interest on each such Loan shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed. Interest on
each LIBOR Loan shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed.
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(c) Accrued interest on all types of Loans shall be due and
payable in arrears upon any payment of principal, in arrears on the last day of
any Interest Period and on the last day of each calendar month, commencing May
31, 1998, and, with respect to Working Capital Loans, on the Revolving Credit
Termination Date, and, with respect to the Term Loan, on the Termination Date;
provided that interest accruing at the Default Rate shall be due and payable
from time to time on demand of the Bank.
Section 2.11. Interest Periods; Renewals.
(a) In the case of each LIBOR Loan, the Borrowers shall select
an Interest Period of any duration in accordance with the definition of Interest
Period in Section 1.1, subject to the following limitations: (i) no Interest
Period may extend beyond the Revolving Credit Termination Date, except with
respect to the Term Loan for which no Interest Period may extend beyond an
Amortization Date unless, after giving effect thereto, the aggregate principal
amount of the LIBOR Loans having Interest Periods which end after such
Amortization Date shall be equal to or less than the principal amount to be
outstanding hereunder after such Amortization Date; (iii) notwithstanding
clauses (i) and (ii) above, no Interest Period shall have a duration less than
one month, and if any such proposed Interest Period would otherwise be for a
shorter period, such Interest Period shall not be available; (iv) if an Interest
Period would end on a day which is not a Banking Day, such Interest Period shall
be extended to the next Banking Day; and (v) no more than five Interest Periods
may be outstanding at any one time in respect of either the Term Loan or the
Working Capital Loans.
(b) Upon notice to the Bank as provided in Section 2.8, the
Borrowers may renew any LIBOR Loan on the last day of the Interest Period
therefor as the same type of Loan with an Interest Period of the same or
different duration in accordance with the limitations provided above. If the
Borrowers shall fail to give notice to the Bank of such a renewal, such LIBOR
Loan shall automatically become a Prime Rate Loan on the last day of the current
Interest Period.
Section 2.12. Fees.
(a) Commitment Fee. During the period ending on the Revolving
Credit Termination Date, there will be a per annum commitment fee payable on the
average unused daily availability under the Working Capital Commitment, payable
quarterly in arrears on the first Banking Day after the end of each quarter and
calculated on a 360 day year for actual days elapsed. The commitment fee rate
will vary based on the then prevailing ratio of consolidated Senior Funded Debt
to EBITDA of the Borrowers (the applicable ratio for such quarter will be the
ratio determined as of the last day of the previous quarter for the twelve month
period then ended), as follows:
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<TABLE>
<CAPTION>
Senior Funded Debt/EBITDA
of the Borrowers Commitment Fee
---------------- --------------
<S> <C>
Greater than or equal to 3.00 0.625%
Less than 3.00, but greater than or equal to 2.00 0.50%
Less than 2.00, but greater than or equal to 1.00 0.375%
Less than 1.00 0.25%
</TABLE>
(b) Facility Fees. The Borrowers shall pay to the Bank, on the
Closing Date, a $45,000 upfront facility fee for the Working Capital Loans. In
addition, the Borrowers shall pay to the Bank, on the Closing Date, a $45,000
upfront facility fee for the Term Loan.
Section 1.13. Payments Generally. All payments under this Agreement
or the Notes shall be made in Dollars in immediately available funds not later
than 1:00 p.m. Hartford, Connecticut, time on the relevant dates specified above
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Banking Day) at the Lending Office of the Bank.
The Bank may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Borrowers with the Bank. Until the Bank and the Borrowers otherwise agree, the
Bank shall debit the Borrowers' account number 9361886549 with the Bank for the
amount of any payment required hereunder, but the Bank may also debit any
ordinary deposit account of the Borrowers if the amount in account number
9361886549 is insufficient to make any required payment. The Borrowers shall, at
the time of making each payment under this Agreement or the Notes, specify to
the Bank the principal or other amount payable by the Borrowers under this
Agreement or the Note to which such payment is to be applied (and in the event
that it fails to so specify, or if a Default or Event of Default has occurred
and is continuing, the Bank may apply such payment as it may elect in its sole
discretion). If the due date of any payment under this Agreement or the Notes
would otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1. Additional Costs.
(a) The Borrowers shall pay to the Bank from time to time on
demand such amounts as the Bank may determine to be necessary to compensate it
for any costs which the Bank determines are attributable to its making or
maintaining any LIBOR Loans under this Agreement or the Notes or its obligation
to make any such Loans hereunder, or any reduction in any amount receivable by
the Bank hereunder in respect of any such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to the Bank under this Agreement or the
Notes in respect of any of such Loans (other than taxes imposed on the overall
net income of the Bank or of its Lending Office for any of such Loans by the
jurisdiction in which the Principal Office or such Lending Office is located);
or (ii) imposes or modifies any reserve, special deposit, deposit insurance or
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assessment, minimum capital, capital ratio or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, the Bank (including any of such Loans or any deposits referred
to in the definition of "LIBO Rate" in Section 1.1); or (iii) imposes any other
condition affecting this Agreement or the Notes (or any of such extensions of
credit or liabilities). The Bank will notify the Borrowers of any event
occurring after the date of this Agreement which will entitle the Bank to
compensation pursuant to this Section 3.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 3.1, in the event that, by reason of any Regulatory Change, the
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of the Bank which includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of the Bank which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if the Bank so elects by notice
to the Borrowers, the obligation of the Bank to make or renew, and to convert
Loans of any other type into, Loans of such type hereunder shall be suspended
until the date such Regulatory Change ceases to be in effect, and the Borrowers
shall on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of such type, either prepay such Loans or convert such Loans
into another type of Loan in accordance with Section 2.5.
(c) Without limiting the effect of the foregoing provisions of
this Section 3.1 (but without duplication), the Borrowers shall pay to the Bank
from time to time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which it determines are
attributable to the maintenance by it or any of its affiliates pursuant to any
law or regulation of any jurisdiction or any interpretation, directive or
request (whether or not having the force of law and whether in effect on the
date of this Agreement or thereafter) of any court or governmental or monetary
authority of capital in respect of its Loans hereunder or its obligation to make
Loans hereunder (such compensation to include, without limitation, an amount
equal to any reduction in return on assets or equity of the Bank to a level
below that which it could have achieved but for such law, regulation,
interpretation, directive or request). The Bank will notify the Borrowers if it
is entitled to compensation pursuant to this Section 3.1(c) as promptly as
practicable after it determines to request such compensation.
(d) Determinations and allocations by the Bank for purposes of
this Section 3.1 of the effect of any Regulatory Change pursuant to subsections
(a) or (b), or of the effect of capital maintained pursuant to subsection (c),
on its costs of making or maintaining Loans or its obligation to make Loans, or
on amounts receivable by, or the rate of return to, it in respect of Loans or
such obligation, and of the additional amounts required to compensate the Bank
under this Section 3.1, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis; provided, however, that the Bank
shall provide ninety days' notice of any additional amounts required to
compensate the Bank under this Section 3.1 (the "Adjustment"), and the Borrowers
may thereafter attempt to negotiate the amount of the Adjustment in good faith
with the Bank within ninety days of the day on which the Borrowers are so
notified. If the Borrowers and the Bank are unable to agree on the amount of the
Adjustment within such ninety-day period, then the amount of the Adjustment
shall be the amount set forth in the aforementioned notice from the Bank to the
Borrowers. Whatever the final Adjustment may be, if the Bank shall still have
any Loans outstanding to the Borrowers
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upon the expiration of such ninety-day period, then the Adjustment shall be
effective retroactive to the date on which the Borrowers first received notice
of the Adjustment. The Bank shall not be obligated to offer LIBO Rates with
respect to Interest Periods commencing during the period following any such
notice and prior to agreement by the Bank and the Borrowers as to the amount of
the Adjustment.
Section 3.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if the Bank determines (which determination shall be
conclusive) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "LIBO Rate" in Section 1.1 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any LIBOR Loans as provided in this
Agreement; or
(b) the relevant rates of interest referred to in the
definition of "LIBO Rate" in Section 1.1 upon the basis of which the rate of
interest for any LIBOR Loans is to be determined do not adequately cover the
cost to the Bank of making or maintaining such Loans; then the Bank shall give
the Borrowers prompt notice thereof, and so long as such condition remains in
effect, the Bank shall be under no obligation to make or renew Loans of such
type or to convert Loans of any other type into Loans of such type and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of the affected type, either prepay such Loans or convert
such Loans into another type of Loans in accordance with Section 2.5.
Section 3.3. Illegality. Notwithstanding any other provision in this
Agreement, in the event that it becomes unlawful for the Bank or its Lending
Office to (a) honor its obligation to make or renew LIBOR Loans hereunder or
convert Loans of any type into Loans of such type, or (b) maintain LIBOR Loans
hereunder, then the Bank shall promptly notify the Borrowers thereof and the
Bank's obligation to make or renew LIBOR Loans and to convert other types of
Loans into Loans of such type hereunder shall be suspended until such time as
the Bank may again make, renew or convert and maintain such affected Loans and
the Borrowers shall, on the last day(s) of the then current Interest Period for
the outstanding LIBOR Loans, as the case may be (or on such earlier date as the
Bank may specify to the Borrowers), either prepay such Loans or convert such
Loans into another type of Loans in accordance with Section 2.5.
Section 3.4. Certain Compensation. The Borrowers shall pay to the
Bank, upon the request of the Bank, such amount or amounts as shall be
sufficient (in the reasonable opinion of the Bank) to compensate it for any
loss, cost or expense which the Bank determines is attributable to:
(a) any payment, prepayment, conversion or renewal of a LIBOR
Loan on a date other than the last day of an Interest Period for such Loan
(whether by reason of acceleration or otherwise); or
(b) any failure by the Borrowers to borrow, convert into or
renew a LIBOR Loan to be made, converted into or renewed by the Bank on the date
specified therefor in the relevant notice under Section 2.4, 2.5 or 2.11, as the
case may be.
Without limiting the foregoing, such compensation shall include an amount
equal to the excess, if any, of: (i) the amount of interest which otherwise
would have accrued on the principal amount so paid, prepaid, converted or
renewed or not borrowed, converted or renewed for the
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period from and including the date of such payment, prepayment or conversion or
failure to borrow, convert or renew to but excluding the last day of the then
current Interest Period for such Loan (or, in the case of a failure to borrow,
convert or renew, to but excluding the last day of the Interest Period for such
Loan which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for such Loan provided for herein;
over (ii) with respect to a LIBOR Loan, the amount of interest (as reasonably
determined by the Bank) the Bank would have bid in the London interbank market
for Dollar deposits for amounts comparable to such principal amount and
maturities comparable to such period. A determination of the Bank as to the
amounts payable pursuant to this Section 3.4 shall be conclusive absent manifest
error.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.1. Documentary Conditions Precedent. The obligation of the
Bank to make the Loans is subject to the conditions precedent that the Bank
shall have received on or before the date of such Borrowing each of the
following, in form and substance satisfactory to the Bank and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) the Security Agreement duly executed by the Borrowers,
together with (i) acknowledgment copies of the financing statements (UCC-1) duly
filed under the Uniform Commercial Code of all jurisdictions necessary or, in
the opinion of the Bank, desirable to perfect the security interest created by
the Security Agreement; (ii) certified copies of requests for information (Form
UCC-11) identifying all of the financing statements on file with respect to the
Borrowers in all jurisdictions referred to under (i), including the financing
statements filed by the Bank against the Borrowers, indicating that no party
claims an interest in any of the Collateral (as defined in the Security
Agreement);
(c) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, attesting to all corporate action taken
by such Borrower, including resolutions of its Board of Directors authorizing
the execution, delivery and performance of the Facility Documents to which it is
a party and each other document to be delivered pursuant to this Agreement and
certifying copies of the Certificate of Incorporation and by-laws of such
Borrower;
(d) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Closing Date, certifying the names and true signatures
of the officers of such Borrower authorized to sign the Facility Documents to
which it is a party and the other documents to be delivered by such Borrower
under this Agreement;
(e) a certificate of a duly authorized officer of each
Borrower, dated the Closing Date, stating that the representations and
warranties in Article 5 of this Agreement, and Article 2 of the Security
Agreement, and in each other Facility Document, are true and correct on such
date as though made on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(f) an Environmental Indemnification Agreement duly signed by
the Borrowers in form and substance satisfactory to the Bank;
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(g) a certificate of good standing for each Borrower from the
Secretary of the State of the state in which such Borrower is incorporated and
each other jurisdiction in which such Borrower is qualified to do business;
(h) payment by the Borrowers to the Bank of the facility fees
as required by Section 2.12(b), and all other expenses and fees incurred by the
Bank;
(i) a favorable opinion of counsel for the Borrowers, dated
the Closing Date, in form and substance satisfactory to the Bank;
(j) copies of all instruments evidencing any Subordinated Debt
of any Borrower and a satisfactory review of the same;
(k) evidence of the acquisition by Tridex of PSI on terms
satisfactory to the Bank in all respects;
(l) evidence of the issuance by Tridex of 714,000 shares stock
of Tridex to Paul Smith, representing $5,000,000 of the acquisition purchase
price of PSI's stock;
(m) evidence of successful placement by Tridex of at least
$11,000,000 of the Subordinated Debt relating to the acquisition of PSI stock,
with a current cash coupon interest rate of no greater than 12% (plus deferred
interest or PIK of not greater than 7%), with a bank or other institutional
lender;
(n) evidence of payment by Tridex to Paul Smith of $16,100,000
from available cash, representing a portion of the purchase price of PSI's
stock;
(o) delivery to the Bank of year 2000 compliance forms
satisfactory to the Bank in all respects;
(p) delivery to the Bank of year-end audited financial
statements for both Tridex (consolidated) and PSI showing no material variations
from the draft financial statements previously supplied by the Borrowers to the
Bank;
(q) evidence of no material adverse change in the business,
management, operations, properties, prospects or condition (financial or
otherwise) of any Borrower or any of their respective Subsidiaries since the
date of the commitment letter;
(r) evidence of liability and property insurance of the
Borrowers satisfactory to the Bank, with suitable endorsements naming the Bank
as loss payee;
(s) a Borrowing Base Certificate and a recent receivables and
inventory aging satisfactory to the Bank;
(t) fair value Balance Sheets for each of the Borrowers; and
(u) evidence of the absence of any change in market conditions
which, in the Bank's opinion, would materially impair a financial institution's
ability to fund Loans of this type.
Section 4.2. Additional Conditions Precedent. The obligation of the
Bank to make the Loans pursuant to a Borrowing which increases the amount
outstanding hereunder
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(including the initial Borrowing) shall be subject to the further conditions
precedent that on the date of such Borrowing:
(a) the following statements shall be true:
(i) the representations and warranties contained in
Article 5 herein, and in Article 2 of the Security Agreement, and in each other
Facility Document, are true and correct on and as of the date of such Loan as
though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such Loan; and
(iii) there has been no material adverse change in the
business, management, operations, properties, prospects or condition (financial
or otherwise) of any Borrower or any of their respective Subsidiaries since the
Closing Date;
(b) the Bank shall have received such approvals, opinions or
documents as the Bank may reasonably request; and
(c) the Bank shall have received a current Borrowing Base
Certificate.
Section 4.3. Deemed Representations. Each Notice of Borrowing
hereunder and acceptance by any Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty that the statements contained in
Section 4.2(a) are true and correct both on the date of such notice and, unless
any Borrower otherwise notifies the Bank prior to such Borrowing, as of the date
of such Borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants that:
Section 5.1. Incorporation, Good Standing and Due Qualification.
Each of such Borrowers and its Subsidiaries is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required.
Section 5.2. Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by such Borrower of the Facility Documents
to which it is a party have been duly authorized by all necessary corporate
action and do not and will not: (a) require any consent or approval of its
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing (other than the filing of the financing statements
contemplated by the Security Agreement), registration, consent or approval
under, any law, rule, regulation (including, without limitation, Regulation U),
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to such Borrower or any of its Subsidiaries or
Affiliates; (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which such Borrower is a party or by which it or its
properties may be bound or affected; (e) result in, or require, the creation or
imposition of any Lien (other than as created under the Security Agreement),
upon or with respect to any of the properties now owned or hereafter acquired by
such Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as
the
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case may be) to be in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
Section 5.3. Legally Enforceable Agreements. Each Facility Document
to which such Borrower is a party is, or when delivered under this Agreement
will be, a legal, valid and binding obligation of such Borrower enforceable
against such Borrower in accordance with its terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
Section 5.4. Litigation. Except as set forth on Schedule 5.4, there
are no actions, suits or proceedings pending or, to the knowledge of such
Borrower, threatened, against or affecting such Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which may, in
any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties or business of such Borrower or any such
Subsidiary or of or the ability of such Borrower to perform its obligation under
the Facility Documents to which it is a party.
Section 5.5. Financial Statements. The consolidated and
consolidating balance sheet of such Borrower and its Consolidated Subsidiaries
as at December 31, 1997, and the related consolidated and consolidating income
statement and statements of cash flows and changes in stockholders' equity of
such Borrower and its Consolidated Subsidiaries for the fiscal year then ended,
and the accompanying footnotes, together with the opinion thereon as to the
consolidated statements, of Price Waterhouse, independent certified public
accountants, copies of which have been furnished to the Bank, are complete and
correct and fairly present the financial condition of such Borrower and its
Consolidated Subsidiaries as at such dates and the results of the operations of
such Borrower and its Consolidated Subsidiaries for the periods covered by such
statements, all in accordance with GAAP consistently applied (subject to
year-end adjustments in the case of the interim financial statements). There are
no liabilities of such Borrower or any of its Consolidated Subsidiaries, fixed
or contingent, which are material but are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since December 31, 1997. No information, exhibit or
report furnished by such Borrower to the Bank in connection with the negotiation
of this Agreement contained any material misstatement of fact or omitted to
state a material fact or any fact necessary to make the statement contained
therein not materially misleading. Since December 31, 1997, there has been no
material adverse change in the condition (financial or otherwise), business,
operations or prospects of such Borrower or any of its Subsidiaries.
Section 5.6. Ownership and Liens. Such Borrower and each of its
Consolidated Subsidiaries has title to, or valid leasehold interests in, all of
its properties and assets, real and personal, including the properties and
assets, and leasehold interests reflected in the financial statements referred
to in Section 5.5 (other than any properties or assets disposed of in the
ordinary course of business), and none of the properties and assets owned by
such Borrower or any of its Subsidiaries and none of its leasehold interests is
subject to any Lien, except as disclosed in such financial statements or as may
be permitted hereunder and except for the Lien created by the Security
Agreement.
Section 5.7. Taxes. Except as set forth on Schedule 5.7, such
Borrower and each of its Subsidiaries has filed all tax returns (federal, state
and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interests and
penalties.
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Section 5.8. ERISA. Each Plan, and, to the best knowledge of such
Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable federal or
state law, and no event or condition is occurring or exists concerning which
such Borrower would be under an obligation to furnish a report to the Bank in
accordance with Section 6.8(k) hereof. As of the most recent valuation date for
each Plan, each Plan was "fully funded," which for purposes of this Section 5.8
shall mean that the fair market value of the assets of the Plan is not less than
the present value of the accrued benefits of all participants in the Plan,
computed on a Plan termination basis. To the best knowledge of such Borrower, no
Plan has ceased being fully funded as of the date these representations are made
with respect to any Loan under this Agreement.
Section 5.9. Subsidiaries and Ownership of Stock. Schedule 5.9 is a
complete and accurate list of the Subsidiaries of such Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and showing the
percentage of such Borrower's ownership of the outstanding stock or other
interest of each such Subsidiary. All of the outstanding capital stock or other
interest of each such Subsidiary has been validly issued, is fully paid and
nonassessable and is owned by such Borrower free and clear of all Liens.
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and
correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which such Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or
indicated in such Schedule.
Section 5.11. Operation of Business. Such Borrower and each of its
Subsidiaries possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither such Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing.
Section 5.12. Hazardous Materials. Such Borrower and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the consolidated financial condition, operations, business or
prospects of such Borrower and its Consolidated Subsidiaries. Such Borrower and
each of its Subsidiaries are in compliance with the terms and conditions of all
such permits, licenses and authorizations, and are also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the consolidated financial condition, operations, business or
prospects of such Borrower and its Consolidated Subsidiaries.
In addition, except as set forth in Schedule 5.12 hereto:
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(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by such Borrower or any of its Subsidiaries to have any permit, license
or authorization required in connection with the conduct of the business of such
Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. s/s 9601(22) ("Release") of any substance
regulated under Environmental Laws ("Hazardous Materials") generated by such
Borrower or any of its Subsidiaries.
(b) Neither such Borrower nor any of its Subsidiaries has
handled any Hazardous Material, other than as a generator, on any property now
or previously owned or leased by such Borrower or any of its Subsidiaries to an
extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrowers and their Consolidated Subsidiaries;
and
(i) to the best of its knowledge, no PCB is or has been
present at any property now or previously owned or leased by such Borrower or
any of its Subsidiaries;
(ii) to the best of its knowledge, no asbestos is or has
been present at any property now or previously owned or leased by such Borrower
or any of its Subsidiaries;
(iii) there are no underground storage tanks for
Hazardous Materials, active or abandoned, at any property now or previously
owned or leased by such Borrower or any of its Subsidiaries;
(iv) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any property now or
previously owned by such Borrower or any of its Subsidiaries.
(c) Neither such Borrower nor any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous Material to any
location which is listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLIS") or on any similar state or
foreign list or which is the subject of federal, state, foreign or local
enforcement actions or other investigations which may lead to claims against
such Borrower or any of its Subsidiaries for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA.
(d) No Hazardous Material generated by such Borrower or any of
its Subsidiaries has been recycled, treated, stored, disposed of or Released by
such Borrower or any of its Subsidiaries at any location other than those listed
in Schedule 5.12 hereto.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of such Borrower or any of its
Subsidiaries and no property now or previously owned or leased by such Borrower
or any of its Subsidiaries is listed or proposed for
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listing on the National Priority List promulgated pursuant to CERCLA, on CERCLIS
or on any similar state or foreign list of sites requiring investigation or
clean-up.
(f) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
such Borrower or any of its Subsidiaries, and no government actions have been
taken or are in process which could subject any of such properties to such Liens
and neither such Borrower nor any of its Subsidiaries would be required to place
any notice or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of such Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by such Borrower or any
of its Subsidiaries which have not been made available to the Bank.
Section 5.13. No Default on Outstanding Judgments or Orders. Such
Borrower and each of its Subsidiaries has satisfied all judgments and neither
such Borrower nor any of its Subsidiaries is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Section 5.14. No Defaults on Other Agreements. Neither such Borrower
nor any of its Subsidiaries is a party to any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which could have a material adverse effect on
the business, properties, assets, operations or conditions, financial or
otherwise, of such Borrower or any of its Subsidiaries, or the ability of such
Borrower to carry out its obligations under the Facility Documents to which it
is a party. Neither such Borrower nor any of its Subsidiaries is in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
Section 5.15. Labor Disputes and Acts of God. Neither the business
nor the properties of such Borrower or of any of its Subsidiaries are affected
by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of such Borrower or such
Subsidiary.
Section 5.16. Governmental Regulation. Neither such Borrower nor any
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Power Act or any statute or regulation limiting its ability to
incur indebtedness for money borrowed as contemplated hereby.
Section 5.17. Partnerships. Neither such Borrower nor any of its
Subsidiaries is a partner in any partnership.
Section 5.18. No Forfeiture. Neither such Borrower nor any of its
Subsidiaries or Affiliates is engaged in or proposes to be engaged in the
conduct of any business or activity which could result in a Forfeiture
Proceeding and no Forfeiture Proceeding against any of them is pending or
threatened.
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Section 5.19. Solvency.
(a) The present fair salable value of the assets of such
Borrower after giving effect to all the transactions contemplated by the
Facility Documents and the funding of all Commitments hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such Borrower and
its Subsidiaries as they mature.
(b) The property of such Borrower does not constitute
unreasonably small capital for such Borrower to carry out its business as now
conducted and as proposed to be conducted, including the capital needs of such
Borrower.
(c) Such Borrower does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by such Borrower, and
of amounts to be payable on or in respect of debt of such Borrower). The cash
available to such Borrower, after taking into account all other anticipated uses
of the cash of such Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of such Borrower when such amounts are required
to be paid.
(d) Such Borrower does not believe that final judgments
against it in actions for money damages will be rendered at a time when, or in
an amount such that, such Borrower will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash available
to such Borrower after taking into account all other anticipated uses of the
cash of such Borrower (including the payments on or in respect of debt referred
to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to
pay all such judgments promptly in accordance with their terms.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank shall
have either of the Commitments under this Agreement, the Borrowers shall:
Section 6.1. Maintenance of Existence. Preserve and maintain, and
cause each of their respective Subsidiaries to preserve and maintain, their
corporate existence and good standing in the jurisdiction of their
incorporation, and qualify and remain qualified, and cause each of their
respective Subsidiaries to qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is required.
Section 6.2. Conduct of Business. Continue, and cause each of their
respective Subsidiaries to continue, to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the date of
this Agreement.
Section 6.3. Maintenance of Properties. Maintain, keep and preserve,
and cause each of their respective Subsidiaries to maintain, keep and preserve,
all of their properties (tangible and intangible), necessary or useful in the
proper conduct of their business in good working order and condition, ordinary
wear and tear excepted.
Section 6.4. Maintenance of Records. Keep, and cause each of their
respective Subsidiaries to keep, adequate records and books of account, in which
complete entries will be
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made in accordance with GAAP, reflecting all financial transactions of the
Borrowers and their respective Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain, and cause each of
their respective Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
Section 6.6. Compliance with Laws. Comply, and cause each of their
respective Subsidiaries to comply, in all respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
Section 6.7. Right of Inspection. At any reasonable time and from
time to time, permit the Bank or any agent or representative thereof, to examine
and make copies and abstracts from the records and books of account of, and
visit the properties of, the Borrowers and any of their respective Subsidiaries,
and to discuss the affairs, finances and accounts of the Borrowers and any such
Subsidiary with any of its officers and directors and the Borrowers' independent
accountants.
Section 6.8. Reporting Requirements. Furnish to the Bank:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Borrowers, a consolidated and
consolidating balance sheet of the Borrowers and their respective Consolidated
Subsidiaries as of the end of such fiscal year and a consolidated and
consolidating income statement and statements of cash flows and changes in
stockholders' equity and working capital of the Borrowers and their respective
Consolidated Subsidiaries for such fiscal year, all in reasonable detail and
stating in comparative form the respective consolidated and consolidating
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP and as to the consolidated statements
accompanied by an opinion thereon acceptable to the Bank by Price Waterhouse or
other independent accountants of national standing selected by the Borrowers;
(b) as soon as available and in any event within 60 days after
the end of the first fiscal quarters of Tridex, a true and complete copy of
Tridex's Report on Form 10-Q;
(c) as soon as available and in any event within 60 days after
the end of each fiscal quarter, a consolidating balance sheet of the Borrowers
and their respective Consolidated Subsidiaries as of the end of such month and a
consolidating income statement and statements of cash flows and changes in
stockholders' equity and working capital, of the Borrowers and their respective
Consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such month, all in reasonable detail and
stating in comparative form the consolidating figures for the corresponding date
and period in the previous fiscal year and all prepared in accordance with GAAP
and certified by the President or Chief Financial Officer of each Borrower
(subject to year-end adjustments);
(d) promptly upon receipt thereof, copies of any reports,
inclusive of any management letters, submitted to any Borrower or any of its
Subsidiaries by independent certified public accountants in connection with
examination of the financial statements of such Borrower or any such Subsidiary
made by such accountants;
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(e) promptly at the end of each fiscal quarter, a certificate
of the President or Chief Financial Officer of each Borrower (i) certifying that
to the best of his knowledge no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto, and (ii) with computations demonstrating compliance
with the covenants contained in Articles 7 and 8;
(f) as soon as available and in any event within 120 days
after the end of each fiscal year of Tridex, a true and complete copy of
Tridex's Report on Form 10-K;
(g) within 30 days after the Closing Date, and thereafter, as
soon as available and in any event within 120 days after the end of each fiscal
year of the Borrowers, management's projected financial statements inclusive of
a balance sheet, an income statement and a statement of cash flow (supported by
key assumptions) for each upcoming fiscal year, prepared on a quarterly basis
for such year;
(h) simultaneously with the delivery of the projected
financial statements referred to in Section 6.8( g), a copy of the Borrowers'
business plan for each upcoming fiscal year;
(i) simultaneously with the delivery of the annual financial
statements referred to in Section 6.8( a), a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default or Event of
Default, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(j) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Borrower or any of its Subsidiaries which, if determined adversely
to such Borrower or such Subsidiary, could have a material adverse effect on the
financial condition, properties or operations of such Borrower or such
Subsidiary;
(k) as soon as possible and in any event within five days
after the Borrower's awareness of the occurrence of each Default or Event of
Default, or after the awareness by any Borrower of the violation of any covenant
in any Facility Document, a written notice setting forth the details of such
Default or Event of Default or such violation and the action which is proposed
to be taken by any Borrower with respect thereto;
(l) as soon as possible, and in any event within ten days
after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in section 4043( b)
of ERISA, with respect to a Plan, as to which PBGC has not by regulation waived
the requirement
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of section 4043( a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum funding
standard of section 412 of the Code or section 302 of ERISA including, without
limitation, the failure to make on or before its due date a required installment
under section 412( m) of the Code or section 302( e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance with
section 412( d) of the Code) and any request for a waiver under section 412( d)
of the Code for any Plan;
(ii) the distribution under section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by such Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under
section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Borrower or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by such Borrower or any ERISA Affiliate that results in
liability under section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
of such Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against such Borrower or any ERISA Affiliate to enforce
section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that
pursuant to section 401( a)( 29) of the Code or section 307 of ERISA would
result in the loss of tax-exempt status of the trust of which such Plan is a
part if such Borrower or an ERISA Affiliate fails to timely provide security to
the Plan in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which may
reasonably be expected to constitute grounds for such Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under sections 412( c)(
11) or 412( n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of one or more
Plans increase after the date of this Agreement in an amount which is material
in relation to the financial condition of such Borrower and its Subsidiaries, on
a consolidated basis; provided, however, that such increase shall not be deemed
to be material so long as it does not exceed during any consecutive 2-year
period $200,000;
(m) promptly after the request of the Bank, copies of each
annual report filed pursuant to section 104 of ERISA with respect to each Plan
(including, to the extent required by section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in section 103) and each
annual report filed with respect to each Plan under section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to such Borrower or an ERISA
Affiliate;
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(n) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Bank pursuant to any other clause of this Section 6.8;
(o) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which any Borrower or any
of its Subsidiaries sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements which any Borrower
or any of its Subsidiary files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national securities exchange;
(p) as soon as available, and in any event within 10 days of
the end of each fiscal month, an aging schedule with respect to Receivables of
each Borrower with names of all account debtors, and an Inventory breakdown for
each Borrower, as of the end of such calendar month and certified by the
President or Chief Financial Officer of each Borrower;
(q) a monthly Borrowing Base Certificate certified by Tridex's
President or Chief Financial Officer, within 10 days of the end of each month;
(r) promptly after the sending thereof, copies of any reports
or financial covenant compliance certificates provided to the holders of
Subordinated Debt by any of the Borrowers;
(s) notice of any proposed payment or prepayment under the
$11,000,000 Subordinated Debt, at least 5 Banking Days prior to the date of such
proposed payment;
(t) on a continuous basis, an up-to-date list of the names and
addresses of all holders of the $11,000,000 Subordinated Debt;
(u) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding; and
(v) such other information respecting the condition or
operations, financial or otherwise, of any Borrower or any of its Subsidiaries
as the Bank may from time to time reasonably request.
Section 6.9. Operating Accounts. Maintain, and cause each of their
respective Subsidiaries to maintain, all principal United States operating
accounts at the Bank.
Section 6.10. Hedging of Interest Rate Exposure. Within 30 days of
the Closing Date, the Borrowers shall, on terms and conditions acceptable to the
Bank, hedge not less than 50% of their floating interest rate exposure on the
Term Loan during the first two years of the Term Loan.
ARTICLE 7. NEGATIVE COVENANTS
So long as either of the Notes shall remain unpaid or the Bank shall
have either of the Commitments under this Agreement, the Borrowers shall not:
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Section 7.1. Debt. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist any
Debt, except:
(a) Debt of the Borrowers under this Agreement or the Notes;
(b) Debt described in Schedule 5.10, including renewals,
extensions or refinancings thereof, provided that the principal amount thereof
does not increase;
(c) Debt of the Borrowers or any of their respective
Subsidiaries secured by purchase money Liens permitted by Section 7.3;
(d) Debt represented by Capital Leases in an aggregate amount
not to exceed [$ 500,000], so long as the Bank is provided the first opportunity
to fund such Capital Lease amounts;
(e) Debt of any Borrower to any other Borrower;
(f) Debt of the Borrowers pursuant to any interest rate
protection agreements entered into pursuant to Section 6.10 hereof; and
(g) Debt of the Borrowers or and such Subsidiary, in the
maximum principal amount of $240,000, arising in connection with that certain
Assistance Agreement by and between the State of Connecticut acting by the
Department of Economic Development and Tridex Corporation pursuant to which the
State of Connecticut has agreed to make available up to $240,000, in the form of
loans or grants, for asset acquisitions (the "Assistance Agreement").
Notwithstanding the foregoing, the Borrowers will be permitted to make payments
on the $11,000,000 Subordinated Debt only if the following criteria are met:
(a) Consolidated Senior Funded Debt of the Borrowers divided
by EBITDA is less than 2.0 to 1.0 and remains below such level after such
repayment of such $11,000,000 Subordinated Debt;
(b) Consolidated Tangible Capital Base of the Borrowers is at
least $10,000,000 and remains at or above such level after the repayment of such
$11,000,000 Subordinated Debt;
(c) Consolidated Senior Liabilities divided by Tangible
Capital Base is less than 2.0 to 1.0 and remains at or below such level after
the repayment of such $11,000,000 Subordinated Debt;
(d) The payment of such $11,000,000 Subordinated Debt may not
exceed $5,000,000 annually; and
(e) The Borrowers are in compliance with all covenants and
other terms and provisions of the Facility Documents after giving effect to any
payment or prepayment of such $11,000,000 Subordinated Debt.
Section 7.2. Guaranties, Etc. Assume, guaranty, endorse or otherwise
be or become directly or contingently responsible or liable, or permit any of
their respective Subsidiaries to assume, guarantee, endorse or otherwise be or
become directly or indirectly
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responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods or services or to supply or advance any
funds, assets, goods or services, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth or otherwise to assure
the creditors of any Person against loss) for the obligations of any Person,
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Section 7.3. Liens. Create, incur, assume or suffer to exist, or
permit any of their respective Subsidiaries to create, incur, assume or suffer
to exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(a) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(c) Liens under workers' compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(d) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(e) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by any Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(g) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary;
(h) Liens set forth on Schedule 7.3, provided the Debt secured
by such Liens is permitted by Section 7.1;
(i) purchase money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
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(i) any property subject to any of the foregoing is
acquired by a Borrower or any such Subsidiary in the ordinary course of its
business and the Lien on any such property is created contemporaneously with
such acquisition;
(ii) the obligation secured by any Lien so created,
assumed or existing shall not exceed 80 percent of the lesser of cost or fair
market value as of the time of acquisition of the property covered thereby to a
Borrower or any such Subsidiary acquiring the same;
(iii) each such Lien shall attach only to the property
so acquired and fixed improvements thereon; and
(iv) the obligations secured by such Lien are permitted
by the provisions of Section 7.1; and
Section 7.4. Leases. Create, incur, assume or suffer to exist, or
permit their respective Subsidiaries to create, incur, assume or suffer to
exist, any obligation as lessee for the rental or hire of any real or personal
property, except: (a) leases existing on the date of this Agreement and any
extensions or renewals thereof; (b) leases (other than Capital Leases) which do
not in the aggregate require the Borrowers and their respective Subsidiaries on
a consolidated basis to make payments (including taxes, insurance, maintenance
and similar expense which any Borrower or any Subsidiary is required to pay
under the terms of any lease) in any fiscal year of the Borrowers in excess of
$250,000; (c) Capital Leases permitted by Section 7.3.
Section 7.5. Investments. Make, or permit any of their respective
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any such Subsidiary to purchase or otherwise acquire, any
capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America having
capital and surplus in excess of $500,000,000; and (d) for stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to a Borrower or any such Subsidiary.
Section 7.6. Dividends. Declare or pay any dividends, purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, or make any distribution of assets to its stockholders as
such whether in cash, assets or in obligations of any Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any of their respective
Subsidiaries to purchase or otherwise acquire for value any stock of any
Borrower or another such Subsidiary, except that: (a) any Borrower may declare
and deliver dividends and make distributions payable solely in common stock of
such Borrower; (b) any Borrower may purchase or otherwise acquire shares of its
capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock; (c) payments
may be made on the $11,000,000 Subordinated Debt in accordance with Section 7.1
hereof; and (d) any Subsidiary may declare and deliver dividends and make
distributions to a Borrower which is its parent corporation.
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Section 7.7. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of, or permit any of their respective Subsidiaries to sell,
lease, assign, transfer or otherwise dispose of, any of its now owned or
hereafter acquired assets (including, without limitation, shares of stock and
indebtedness of such Subsidiaries, receivables and leasehold interests); except:
(a) for inventory disposed of in the ordinary course of business; (b) the sale
or other disposition of assets no longer used or useful in the conduct of its
business; and (c) that any such Subsidiary may sell, lease, assign or otherwise
transfer its assets to its parent corporation.
Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise dispose
of any shares of capital stock of any of their respective Subsidiaries or permit
any such Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 7.9. Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate or permit any of
their respective Subsidiaries to enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary than it would obtain in a comparable arms' length transaction with a
Person not an Affiliate, and except as set forth on Schedule 7.9.
Section 7.10. Mergers, Etc. Merge or consolidate with, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or acquire all or substantially all of the
assets or the business of any Person (or enter into any agreement to do any of
the foregoing), or permit any of their respective Subsidiaries to do so except
that any such Subsidiary may merge into or transfer assets to a Borrower, and
except for mergers pursuant to which (i) a Borrower is the surviving entity,
(ii) voting control of the surviving entity remains with the shareholders of
such Borrower immediately preceding such merger and (iii) the Borrowers are
thereafter in full compliance with all covenants herein.
Section 7.11. No Activities Leading to Forfeiture. Neither the
Borrowers nor any of their respective Subsidiaries or Affiliates shall engage in
or propose to be engaged in the conduct of any business or activity which could
result in a Forfeiture Proceeding.
ARTICLE 8. FINANCIAL COVENANTS
So long as either of the Notes shall remain unpaid or the Bank shall
have either of the Commitments under this Agreement:
Section 8.1. Minimum Tangible Capital Base. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured at the end of each
fiscal quarter, commencing June 30, 1998, a Tangible Capital Base of not less
than $4,750,000, and such minimum dollar amount shall increase from year to year
by the sum of (a) 50% of the Borrowers' Net Income for each previous fiscal year
(with no reduction for losses) commencing with the annual net income determined
as of December 31, 1998 plus (b) 100% of net proceeds from the sale of stock or
asset sales after January 1, 1998, plus (c) 100% of the amount of any issuance
of additional Subordinated Debt, plus (d) 75% of the net proceeds from the Mass
Mutual Transaction.
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Section 8.2. Maximum Senior Funded Debt to EBITDA Ratio. The
Borrowers, on a consolidated basis, shall maintain at all times, as measured at
the end of each fiscal quarter, commencing June 30, 1998 for the twelve month
period then ended (a rolling twelve month calculation measured as of the end of
each successive quarter), a ratio of Senior Funded Debt to EBITDA, of not more
than 4.0 to 1.0, provided, however, that this ratio shall be reduced to not more
than 3.0 to 1.0 commencing on March 31, 1999 and shall be reduced to not more
than 2.5 to 1.0 commencing on March 31, 2000.
Section 8.3. Maximum Funded Debt to EBITDA Ratio. The Borrowers, on
a consolidated basis, shall maintain at all times, as measured at the end of
each fiscal quarter, commencing June 30, 1998 for the twelve month period then
ended (a rolling twelve month calculation measured as of the end of each
successive quarter), a ratio of Funded Debt to EBITDA, of not more than 6.25 to
1.0, provided, however, that this ratio shall be reduced to not more than 4.5 to
1.0 commencing on March 31, 1999 and shall be reduced to not more than 4.0 to
1.0 commencing on March 31, 2000.
Section 8.4. Minimum Interest Coverage Ratio. The Borrowers, on a
consolidated basis, shall maintain at all times, as measured at the end of each
fiscal quarter, commencing June 30, 1998 for the twelve month period then ended
(a rolling twelve month calculation measured as of the end of each successive
quarter), an Interest Coverage Ratio of not less than 2.0 to 1.0.
Section 8.5. Minimum Fixed Charge Coverage Ratio. The Borrowers, on
a consolidated basis, shall maintain at all times, as measured at the end of
each fiscal quarter, commencing June 30, 1998 for the twelve month period then
ended (a rolling twelve month calculation measured as of the end of each
successive quarter), a Fixed Charge Coverage Ratio of not less than 1.25 to 1.0,
provided, however, that this ratio shall be increased to not less than 1.5 to
1.0 commencing on March 31, 1999.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1. Events of Default. Any of the following events shall be
an "Event of Default":
(a) the Borrowers shall: (i) fail to pay the principal of any
Note as and when due and payable; or (ii) fail to pay interest on any Note or
any fee or other amount due hereunder as and when due and payable;
(b) any representation or warranty made or deemed made by any
Borrower in this Agreement or in any other Facility Document or which is
contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection with any Facility Document shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made;
(c) any Borrower shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.3 or Articles 7 or 8; or (ii)
fail to perform or observe any term, covenant or agreement on its part to be
performed or observed (other than the obligations specifically referred to
elsewhere in this Section 9.1) in any Facility Document and such failure shall
continue for 20 consecutive days after the earlier to occur of (i) such
Borrower's obtaining actual knowledge of such failure or default or (ii) such
Borrower's receipt of written notice of such default;
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(d) any Borrower, or any of its respective Subsidiaries: (i)
shall generally not, or be unable to, or shall admit in writing its inability
to, pay its debts as such debts become due; or (ii) shall make an assignment for
the benefit of creditors, petition or apply to any tribunal for the appointment
of a custodian, receiver or trustee for it or a substantial part of its assets;
or (iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any
such petition or application filed or any such proceeding shall have been
commenced against it, in which an adjudication or appointment is made or order
for relief is entered, or which petition, application or proceeding remains
undismissed for a period of 30 days or more; or shall be the subject of any
proceeding under which its assets may be subject to seizure, forfeiture or
divestiture (other than a proceeding in respect of a Lien permitted under
Section 7.3( b)); or (v) by any act or omission shall indicate its consent to,
approval of or acquiescence in any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or trustee for all
or any substantial part of its property; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a period
of 30 days or more;
(e) one or more judgments, decrees or orders for the payment
of money in excess of $500,000 in the aggregate shall be rendered against any
Borrower, or any of its respective Subsidiaries and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of 30 consecutive
days without being vacated, discharged, satisfied or stayed or bonded pending
appeal;
(f) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Borrower is under an
obligation to furnish a report to the Bank in accordance with Section 6.8( h)
hereof and as a result of such event or condition, together with all other such
events or conditions, such Borrower or any ERISA Affiliate has incurred or in
the opinion of the Bank is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC or a section 4042 Trustee (or any combination of
the foregoing) which is material in relation to the financial position of such
Borrower and its Subsidiaries, on a consolidated basis; provided, however, that
any such amount shall not be deemed to be material so long as all such amounts
do not exceed in the aggregate during any consecutive 2-year period $500,000;
(g) the Unfunded Benefit Liabilities of one or more Plans have
increased after the date of this Agreement in an amount which is material (as
specified in Section 9.1( g) hereof);
(h) (A) any Forfeiture Proceeding shall have been commenced or
any Borrower shall have given the Bank written notice of the commencement of any
Forfeiture Proceeding as provided in Section 6.8 or (B) the Bank has a good
faith basis to believe that a Forfeiture Proceeding has been threatened or
commenced;
(i) there shall be any material adverse change in the
condition (financial or otherwise), business, management, operations, properties
or prospects of the Borrowers and their respective Subsidiaries since the
Closing Date;
(j) the Security Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to such agreement; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
con-
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tested by the party thereto, or such party shall deny it has further liability
or obligation thereunder or such party shall fail to perform any of its
obligations thereunder;
(k) any refinancing of the Working Capital Loans with another
financial institution, either before or after the Revolving Credit Termination
Date, at a time when the Term Loan is still outstanding; or
(l) any default or event of default shall occur and be
continuing under the Sub Debt Agreements.
Section 9.2. Remedies. If any Event of Default shall occur and be
continuing, the Bank may, by notice to the Borrowers, (a) declare the
Commitments to be terminated, whereupon the same shall forthwith terminate, and
(b) declare the outstanding principal of the Notes, all interest thereon and all
other amounts payable under this Agreement and the Notes or any one of them to
be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrowers; provided that, in the case of an Event of Default
referred to in Section 9.1( d) or Section 9.1( h)( A) above, the Commitments
shall be immediately terminated, and the Notes, all interest thereon and all
other amounts payable under this Agreement shall be immediately due and payable
without notice, presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers.
ARTICLE 10. MISCELLANEOUS
Section 10.1. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Borrowers and the Bank,
and any provision of this Agreement may be waived by the Borrowers and the Bank.
No failure on the part of the Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 10.2. Usury. All agreements between the Borrowers and the
Bank are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced by
the Notes or otherwise, shall the amount paid or agreed to be paid to the Bank
for the use or the forbearance of the indebtedness evidenced by the Notes exceed
the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof provided,
however that in the event there is a change in the law which results in a higher
permissible rate of interest, then the Notes shall be governed by such new law
as of its effective date. In this regard, it is expressly agreed that it is the
intent of the Borrowers and the Bank in the execution, delivery and acceptance
of the Notes to contract in strict compliance with the laws of the State of
Connecticut from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any of the Facility
Documents at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the Bank should
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal balance evidenced hereby and
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not to the payment of interest. This provision shall control every other
provision of all agreements between the Borrowers and the Bank.
Section 10.3. Expenses. The Borrowers shall reimburse the Bank on
demand for all reasonable costs, expenses and charges (including, without
limitation, telephone, telex, courier expenses, printing costs, reasonable fees
and charges of external legal counsel for the Bank and reasonable costs
allocated after the Closing Date by its internal legal department) incurred by
the Bank in connection with the preparation, negotiation, execution, delivery,
filing, recording, performance, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes or any Facility Document (subject to a limit of
$35,000, plus disbursements, for the fees of external counsel in preparing the
Facility Documents). The Borrowers agree to indemnify the Bank and its
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses incurred
by any of them arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any actual or proposed use by the Borrowers or any of
their respective Subsidiaries of the proceeds of the Loans, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
Section 10.4. Survival. The obligations of the Borrowers under
Section 10.3 shall survive the repayment of the Loans and the termination of the
Commitments.
Section 10.5. Assignment; Participations. This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrowers, the Bank and
their respective successors and assigns, except that no Borrower may assign or
transfer its rights or obligations hereunder. The Bank may assign, or sell
participations in, all or any part of any Loan to another bank or other entity,
in minimum amounts of $1,000,000, in which event (a) in the case of an
assignment, upon notice thereof by the Bank to the Borrowers, the assignee shall
have, to the extent of such assignment (unless otherwise provided therein), the
same rights, benefits and obligations as it would have if it were the Bank
hereunder; and (b) in the case of a participation, the participant shall have no
rights under the Facility Documents. The agreement executed by the Bank in favor
of the participant shall not give the participant the right to require the Bank
to take or omit to take any action hereunder except action directly relating to
(i) the extension of a payment date with respect to any portion of the principal
of or interest on any amount outstanding hereunder allocated to such
participant, (ii) the reduction of the principal amount outstanding hereunder or
(iii) the reduction of the rate of interest payable on such amount or any amount
of fees payable hereunder to a rate or amount, as the case may be, below that
which the participant is entitled to receive under its agreement with the Bank.
The Bank may furnish any information concerning the Borrowers in the possession
of the Bank from time to time to assignees and participants (including
prospective assignees and participants); provided that the Bank shall require
any such prospective assignee or such participant (prospective or otherwise) to
agree in writing to maintain the confidentiality of such information. The Bank
shall have the right at any time to pledge all or any portion of its rights
under the Loans or this Agreement or the Notes to any of the twelve (12) Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U. S. C.
Section 341. No such pledge or enforcement thereof shall release the Bank from
its obligations under any of the Facility Documents.
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Section 10.6. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be delivered in person or
sent by overnight courier, facsimile, ordinary mail, cable or telex addressed to
such party at its "Address for Notices" on the signature page of this Agreement.
Notices shall be effective: (a) on the day on which delivered to such party in
person, (b) on the first Banking Day after the day on which sent to such party
by overnight courier, (c) if given by mail, 48 hours after deposit in the mails
with first-class postage prepaid, addressed as aforesaid, and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Bank shall be effective upon receipt. Copies of all notices sent to the Borrower
shall also be provided to Stephen J. Carlotti, Esq., Hinckley, Allen & Snyder,
1500 Fleet Center, Providence, Rhode Island 02930.
Section 10.7. Setoff. The Borrowers hereby grant to the Bank, a
lien, security interest and right of setoff as security for all liabilities and
obligations to the Bank, whether now existing or hereafter in the possession,
custody, safekeeping or control of the Bank or any entity under the control of
Fleet Financial Group, Inc., or in transit to any of them. At any time, without
demand or notice, the Bank may set off the same or any part thereof and apply
the same to any liability or obligation of the Borrowers even though unmatured
and regardless of the adequacy of any other collateral securing the Loans. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWERS OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
SECTION 10.8. JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED
STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, AND EACH BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CONNECTICUT STATE OR FEDERAL
COURT. EACH BORROWER IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO
EACH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 10.6. EACH BORROWER AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH BORROWER FURTHER WAIVES ANY OBJECTION TO VENUE IN
SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE
BASIS OF FORUM NON CONVENIENS. EACH BORROWER FURTHER AGREES THAT ANY ACTION OR
PROCEEDING BROUGHT AGAINST THE BANK SHALL BE BROUGHT ONLY IN CONNECTICUT STATE
OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT. EACH BORROWER WAIVES ANY
RIGHT IT MAY HAVE TO JURY TRIAL.
(a) Nothing in this Section 10.8 shall affect the right of the
Bank to serve legal process in any other manner permitted by law or affect the
right of the Bank to bring
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any action or proceeding against any Borrower or its property in the courts of
any other jurisdictions.
(b) To the extent that any Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Note.
Section 10.9. Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 10.10. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 10.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 10.12. Integration. The Facility Documents set forth the
entire agreement between the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CONNECTICUT.
Section 10.14. Confidentiality. The Bank agrees (on behalf of itself
and each of its affiliates, directors, officers, employees and representatives)
to use reasonable precautions to keep confidential, in accordance with safe and
sound banking practices, any nonpublic information supplied to it by the
Borrowers pursuant to this Agreement which is identified by the Borrowers as
being confidential at the time the same is delivered to the Bank, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in
connection with any litigation to which the Bank is a party or (v) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) agrees to
maintain the confidentiality of such information; and provided finally that in
no event shall the Bank be obligated or required to return any materials
furnished by the Borrowers.
Section 10.15. Treatment of Certain Information. Each Borrower (a)
acknowledges that services may be offered or provided to it (in connection with
this Agreement or otherwise) by the Bank or by one or more of its subsidiaries
or affiliates and (b) acknowledges that information delivered to the Bank by any
Borrower may be provided to each such subsidiary and affiliate.
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SECTION 10.16. COMMERCIAL WAIVER. EACH BORROWER ACKNOWLEDGES THAT
THE LOANS EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY
RIGHT TO NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE
CONNECTICUT GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE
ATTORNEY OF THE BANK, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT
REMEDY WITHOUT COURT ORDER. FURTHER, EACH BORROWER HEREBY WAIVES, TO THE EXTENT
PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD,
EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY
HEREAFTER BECOME LAWS. EACH BORROWER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS
AND THE WAIVERS CONTAINED IN SECTION 10.8 KNOWINGLY, VOLUNTARILY AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE WAIVERS WITH ITS
ATTORNEYS.
SECTION 10.17. WAIVER OF JURY TRIAL BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE BORROWERS AND THE BANK WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
BORROWERS AND THE BANK DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE BORROWERS AND THE BANK
HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF
THE OTHER FACILITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 10.18. Multiple Borrowers.
(a) It is understood and agreed by each Borrower that the
handling of this credit facility on a joint borrowing basis as set forth in this
Agreement is solely as an accommodation to the Borrowers and at their request,
and that the Bank shall not incur liability to the Borrowers as a result
thereof. To induce the Bank to do so and in consideration thereof, each Borrower
hereby agrees to indemnify the Bank and to hold the Bank harmless from and
against any and all liabilities, expenses, losses, damages and claims of damage
or injury asserted against the Bank by any Borrower or by any other Person
arising from or incurred by reason of the Bank's handling of the financing
arrangements of the Borrowers as provided herein, reliance by the Bank on any
request or instruction from any other Borrower or any other action taken by the
Bank with respect to this Section 10.18.
(b) Each Borrower represents and warrants to the Bank that the
request for joint handling of the Loans to be made by the Bank hereunder was
made because the Borrowers are engaged in an integrated operation which required
financing on a basis permitting the availability of credit from time to time to
each Borrower as required for the continued successful operation of each
Borrower of the integrated operation of the Borrowers. Each Borrower expects to
derive benefit, directly or indirectly, from such availability because the
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successful operation of the Borrowers is dependent on the continued successful
performance of the functions of the integrated group.
(c) Each Borrower hereby irrevocably designates Tridex as its
attorney to borrow, sign and endorse notes, and execute and deliver all
instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of each Borrower, and does hereby authorize the
Bank to pay over or credit all Loan proceeds hereunder to Tridex as the
Borrowers' attorney in fact, recognizing, however, that the Bank is not bound by
such authorization and may elect either to disburse loan proceeds to each
Borrower directly for its use, to Tridex as attorney for any Borrower or to
Tridex for its own account, in which case Tridex may advance or lend such
proceeds to the other Borrowers. Notwithstanding the foregoing, the Bank agrees
to advance (i) the proceeds of the Term Loan and (ii) an initial advance of
$3,500,000 (subject to reduction pursuant to Section 2.3 in the event of the
Mass Mutual Transaction) under the Working Capital Loans directly to Tridex NC
to be utilized to pay a portion of the acquisition price of PSI's stock. In
addition, and notwithstanding any other provision to the contrary in this
Agreement, the Term Loan and that portion of the Working Capital Loans so
advanced to Tridex NC to pay a portion of the purchase price of PSI is stock
shall be repaid to the Bank in accordance with this Agreement first from Tridex
NC and the liability of the other three Borrowers in respect of such Loans shall
be asserted by the Bank only at such time as a demand for payment for such Loans
has first been made by the Bank to Tridex NC. Subject to the foregoing, the
Borrowers shall remain jointly and severally liable on all of the Loans, and
each of Tridex, UTI and PSI hereby jointly and severally and unconditionally
guaranty the prompt payment and performance of all obligations of Tridex NC in
respect of the Loans. Each Borrower further agrees that all obligations
hereunder or referred to herein or under any other Facility Document shall be
joint and several, and that each Borrower shall make payment upon any notes
issued pursuant hereto and any and all other obligations hereunder or referred
to herein or under any other Facility Document upon their maturity by
acceleration or otherwise, and that such obligation and liability on the part of
each Borrower shall in no way be affected by any extensions, renewals and
forbearances granted by the Bank to any Borrower, failure of the Bank to give
any Borrower notice of borrowing or any other notice, any failure of the Bank to
pursue or preserve its rights against any other Borrower, the release by the
Bank of any collateral now or hereafter acquired from any Borrower, failure of
the Bank to realize upon such collateral in a commercially reasonable manner,
and that such agreement by each Borrower to pay upon any notice issued pursuant
hereto is unconditional and unaffected by prior recourse by the Bank to the
other Borrowers or any collateral for such Borrowers' obligations or the lack
thereof.
(d) Each Borrower hereby grants a right of contribution to
each other Borrower for any amount paid by such other Borrower in satisfaction
of any obligations under this Agreement, the Notes or any other Facility
Document; provided, however, that the aggregate of the rights of contribution
against any Borrower hereunder shall not exceed such Borrower's net worth. In
calculating the net worth of any Borrower for purposes of this paragraph, such
Borrower's obligations under the Facility Documents will not be included in its
liabilities and such Borrower's rights of contribution against other Borrowers
for amounts paid under the Facility Documents will not be included in its
assets.
(e) All notices to, or other communications with, the
Borrowers or any one of them shall be sufficient if given to any of the
Borrowers. Although the Bank may require that all of the Borrowers or a
particular Borrower execute any document (including any Notice of Borrowing) in
any matter pertaining to this Agreement or any of the other Facility Documents,
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<PAGE>
any one of the Borrowers may bind all of the Borrowers and any document
(including any Notice of Borrowing) signed by any Borrower, and any and all
action taken by any Borrower, is sufficient to represent all of the Borrowers.
Without limiting the foregoing, any single Borrower may make representations and
warranties on behalf of all the Borrowers or any other Borrower, and such
representations and warranties shall be of the same force and effect as if made
directly by such other Borrowers.
Section 10.19. Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted by
an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or Event of Default if such action
is taken or condition exists.
Section 10.20. Time of the Essence. Time and punctuality shall be of
the essence with respect to this instrument, but no delay or failure of the Bank
to enforce any of the provisions herein contained and no conduct or statement of
the Bank shall waive or affect any of the Bank's rights hereunder.
Section 10.21. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of this Agreement, on and after the
date hereof each reference in the Facility Documents to the Credit Agreement or
the Note, shall mean and be a reference to this Credit Agreement as amended and
restated hereby or the Note as amended and restated in connection with the
execution and delivery of this Agreement.
(b) The execution, delivery and effectiveness of this
Agreement shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank under any of the Facility Documents, nor
constitute a waiver of any provision of any of the Facility Documents.
Section 10.22. Replacement Promissory Note. Upon receipt of an
affidavit of an officer of the Bank as to the loss, theft, destruction or
mutilation of any Note or any other security document which is not of public
record, and, in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such Note or other security document,
Borrower will issue, in lieu thereof, a replacement Note or other security
document in the same principal amount thereof and otherwise of like tenor.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
TRIDEX CORPORATION
By
------------------------------------
George T. Crandall
Treasurer
Address for Notices to Borrower:
61 Wilton Avenue
Westport, Connecticut 06880
ULTIMATE TECHNOLOGY CORPORATION
By
------------------------------------
George T. Crandall
Treasurer
Address for Notices to Borrower:
100 Rawson Road
Victor, New York 14564
PROGRESSIVE SOFTWARE, INC.
By
------------------------------------
Daniel Bergeron
Treasurer
Address for Notices to Borrower:
2301 Crown Center Drive
Charlotte, North Carolina 28227
TRIDEX NC, INC.
By
------------------------------------
Daniel Bergeron
Treasurer
189
<PAGE>
Address for Notices to Borrower:
61 Wilton Avenue
Westport, Connecticut 06880
FLEET NATIONAL BANK
By
------------------------------------
Frederick A. Meagher
Vice President
Address for Notices and Lending Office:
One Landmark Square
Stamford, Connecticut 06901
Attn: Frederick A. Meagher
Vice President
Facsimile No.: (203) 964-4836
190
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EXHIBITS
Exhibit A-1 - Term Note
Exhibit A-2 - Working Capital Note
Exhibit B - Borrowing Base Certificate
Exhibit C - Security Agreement
Exhibit D - Pledge Agreement
Exhibit E - Notice of Borrowing
SCHEDULES
Schedule 5.4 - Litigation
Schedule 5.7 - Taxes
Schedule 5.9 - Subsidiaries of Borrowers
Schedule 5.10 - Credit Arrangements
Schedule 5.12 - Hazardous Materials
Schedule 7.3 - Liens
Schedule 7.9 - Transactions with Affiliates Outside the Ordinary Course of
Business
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<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
$12,000,000 Stamford, Connecticut
April 17, 1998
For value received, TRIDEX CORPORATION, ULTIMATE TECHNOLOGY
CORPORATION, TRIDEX NC, INC. and PROGRESSIVE SOFTWARE, INC. (the "Borrowers"),
hereby jointly and severally promise, to pay to the order of FLEET NATIONAL
BANK, (the "Bank") at the office of the Bank at One Landmark Square, Stamford,
Connecticut 06901, for the account of the appropriate Lending Office of the
Bank, the principal sum of TWELVE MILLION DOLLARS ($12,000,000), in lawful money
of the United States of America and in immediately available funds, on the
date(s) and in the manner provided in said Credit Agreement. The Borrowers also
promise to pay interest on the unpaid principal balance hereof, for the period
such balance is outstanding, at said principal office for the account of said
Lending Office, in like money, at the rates of interest as provided in the
Credit Agreement referred to below, on the date(s) and in the manner provided in
said Credit Agreement.
This is the Term Note referred to in that certain Credit Agreement
(as amended from time to time the "Credit Agreement") dated of even date
herewith among the Borrowers and the Bank and evidences the Term Loan made by
the Bank thereunder. All terms not defined herein shall have the meanings given
to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrowers waive presentment, notice of dishonor, protest and any
other notice or formality with respect to this Note.
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This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK
TO ACCEPT THIS NOTE AND MAKE THE TERM LOAN.
TRIDEX CORPORATION
By
-------------------------------------
George T. Crandall
Treasurer
ULTIMATE TECHNOLOGY CORPORATION
By
-------------------------------------
George T. Crandall
Treasurer
PROGRESSIVE SOFTWARE, INC.
By
-------------------------------------
Daniel Bergeron
Treasurer
TRIDEX NC, INC.
By
-------------------------------------
Daniel Bergeron
Treasurer
193
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<TABLE>
<CAPTION>
Amount Amount of Balance Notation
Date of Loan Payment Outstanding By
- ---- ------- ------- ----------- --
<S> <C> <C> <C> <C>
194
</TABLE>
<PAGE>
EXHIBIT 10.3
PROMISSORY NOTE
$8,000,000 Stamford, Connecticut
April 17, 1998
For value received, TRIDEX CORPORATION, ULTIMATE TECHNOLOGY
CORPORATION, TRIDEX NC, INC. and PROGRESSIVE SOFTWARE, INC. (the "Borrowers"),
hereby jointly and severally promise, to pay to the order of FLEET NATIONAL
BANK, (the "Bank") at the office of the Bank at One Landmark Square, Stamford,
Connecticut 06901, for the account of the appropriate Lending Office of the
Bank, the principal sum of EIGHT MILLION DOLLARS ($8,000,000) or, if less, the
amount of Working Capital Loans made by the Bank to the Borrowers pursuant to
the Credit Agreement referred to below, in lawful money of the United States of
America and in immediately available funds, on the date(s) and in the manner
provided in said Credit Agreement. The Borrowers also promise to pay interest on
the unpaid principal balance hereof, for the period such balance is outstanding,
at said principal office for the account of said Lending Office, in like money,
at the rates of interest as provided in the Credit Agreement referred to below,
on the date(s) and in the manner provided in said Credit Agreement.
The date and amount of each Working Capital Loan made by the Bank to
the Borrowers under the Credit Agreement referred to below, and each payment of
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other time),
endorsed by the Bank on the schedule attached hereto or any continuation
thereof.
This is the Working Capital Note referred to in that certain Credit
Agreement (as amended from time to time the "Credit Agreement") dated of even
date herewith among the Borrowers and the Bank and evidences the Working Capital
Loans made by the Bank thereunder. All terms not defined herein shall have the
meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrowers waive presentment, notice of dishonor, protest and any
other notice or formality with respect to this Note.
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<PAGE>
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK
TO ACCEPT THIS NOTE AND MAKE THE WORKING CAPITAL LOANS.
TRIDEX CORPORATION
By
-------------------------------------
George T. Crandall
Treasurer
ULTIMATE TECHNOLOGY CORPORATION
By
-------------------------------------
George T. Crandall
Treasurer
PROGRESSIVE SOFTWARE, INC.
By
-------------------------------------
Daniel Bergeron
Treasurer
TRIDEX NC, INC.
By
-------------------------------------
Daniel Bergeron
Treasurer
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<PAGE>
<TABLE>
<CAPTION>
Amount Amount of Balance Notation
Date of Loan Payment Outstanding By
- ---- ------- ------- ----------- --
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
(TRIDEX/PROGRESSIVE) (TRDX) Tridex Corporation Completes Acquisition of
Progressive Software
WESTPORT, Conn.--April 20, 1998--Tridex Corporation (Nasdaq National
Market: TRDX), a leading manufacturer of peripheral devices and integrated
systems for retail point-of-sale ("POS") and other transaction-based markets,
today announced that it has acquired privately-held Progressive Software,
Inc. ("Progressive"), a leading software and systems provider for the
restaurant industry headquartered in Charlotte, North Carolina with branch
locations in seven U.S. cities. Progressive's 1997 revenues were
approximately $34 million. Progressive will operate as a wholly owned
subsidiary of Tridex and remain headquartered in North Carolina.
The purchase price was $48.5 million, comprised of $33.9 million in cash,
$5.0 million in Tridex common stock, and the assumption of $9.6 million of
Progressive debt. Financing of the transaction consisted of a $12.0 million
Senior Term Loan from Fleet Bank, N.A., the purchase of $11.0 million Senior
Subordinated Notes and $2.0 million in shares of Tridex common stock by
Massachusetts Mutual Life Insurance Company and its affiliates ("Mass
Mutual"), a $2.2 million borrowing from a newly established $8.0 million
Revolving Credit Facility with Fleet Bank, N.A., and $16.3 million in cash.
Additionally, Tridex agreed to seek shareholder approval of the issuance to
Mass Mutual of a warrant to purchase 350,931 shares of Tridex common stock at
$7.00 per share.
Exclusive of a one time, non-cash charge of approximately $15.8 million,
net of a deferred tax benefit, which is expected to be recorded during the
second quarter ending June 30, 1998, related to the write off of research and
development in progress, Tridex management believes, based on forecasts
provided by Progressive and on current business conditions, that this
acquisition will be accretive to 1998 earnings.
Seth Lukash, Chairman and Chief Executive Officer of Tridex, commented,
"We are very excited about Progressive joining the Tridex family. We believe
that this acquisition will create significant benefits for our customers and
shareholders. It marks Tridex's entry into the software sector of the
restaurant market and establishes Tridex as a total solution provider of POS
hardware and software. Progressive has a strong management team and an
outstanding industry reputation.
"Since being founded in 1982, Progressive has provided high-quality,
customized POS and back office application software through a direct sales
force to the full service, family dining, and quick service markets in the
United States and Canada. We believe that this market offers significant
opportunity for growth. Progressive's customers include Starbucks Coffee;
Golden Corral; Shoney's; Braum's Ice Cream; Ryan's Steaks, Buffet and Bakery;
and Family Dollar Stores."
Mr. Lukash continued, "The acquisition of Progressive has dramatically
diversified Tridex's revenue base. The efforts of the combined companies to
penetrate new markets and develop new products will be facilitated by
synergies between Progressive and Tridex. Moreover, we feel that we can
achieve appreciable cost reductions for various components and peripherals
through the combined purchasing power of our two organizations. We look forward
to continuing to provide Progressive's customers with the same high-quality
products, service and support they have come to expect."
Ray Mueller, President of Progressive, commented, "We are very pleased to
be associated with a company of Tridex's quality and stability. Tridex's
success has been achieved by acquiring, integrating and growing companies
serving complimentary markets. We
<PAGE>
believe that this relationship bodes well for our customers, employees and
industry. We look forward to a long and mutually beneficial relationship."
Tridex Corporation, which is comprised of its Ultimate Technology
Corporation and Progressive Software, Inc. subsidiaries and the Tridex Ribbon
Division, provides custom hardware and software solutions for retail
point-of-sale, hospitality and other transaction-based markets.
The statements contained in this release which are not historical facts
may be deemed to contained forward-looking statements with respect to events,
the occurrence of which involve risks and uncertainties, including, without
limitation, uncertainties detailed in the Company's Securities and Exchange
Commission filings.
- -0-
All trademarks are held by their respective companies.
CONTACT: Tridex Corporation
Seth M. Lukash
Chairman and Chief Executive Officer
(203) 226-1144
or
TRDX's INVESTOR RELATIONS COUNSEL:
The Equity Group
Devin Sullivan (212) 836-9608
Robert Goldstein (212) 371-8660
(END)
