SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
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): February 18, 2000
- --------------------------------------------------------------------------------
TRIDEX CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut
- --------------------------------------------------------------------------------
(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)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 18, 2000, Tridex Corporation ("Tridex" or "Company") completed
the sale of the stock of its wholly-owned subsidiary Ultimate Technology
Corporation ("Ultimate") to CFG Capital Management II, L.P. ("CFG") for
approximately $13,000,000 in cash. This purchase price was agreed upon by the
parties after arms-length negotiations. Ultimate, located in Victor, New York,
is a leading designer, developer, manufacturer, marketer and integrator of high
quality, specialized hardware systems and components for the point-of-sale
("POS") industry. CFG or an affiliate intends to continue to operate the
business of Ultimate. Ultimate is considered a significant segment of Tridex and
accordingly the disposition will be accounted for as a discontinued operation in
accordance with Accounting Principles Board Opinion No. 30. Tridex intends to
use the proceeds of the sale primarily to pay down debt (see Item 5 "Other
Events").
Tridex now consists of its operating subsidiary Progressive Software,
Inc., which was acquired in a purchase transaction on April 17, 1998. Pro forma
financial statements reflecting the acquisition of Progressive as if it occurred
January 1, 1998 and Ultimate as a discontinued operation for all periods are set
forth under Item 7 of this report.
The statements contained in this report which are not historical facts may
be deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties.
Item 5. Other Events.
On February 18, 2000, the Company entered into an amendment to its Credit
Agreement with Fleet National Bank ("Fleet") in which Tridex and Fleet agreed to
defer the maturity of the $12 million term loan and the $8 million working
capital line of credit from December 31, 1999 and March 31, 2000, respectively,
to December 31, 2000. The Company also agreed to make a principal payment of
$8,000,000 on the term loan payable to Fleet on or before February 29, 2000.
Such payment was made on February 18, 2000. The Company also agreed to make an
additional principal payment of $1,000,000 on or before June 30, 2000. As a
result of this amendment, the Company will pay fees to Fleet of $3,000 monthly
and $50,000 on September 30, 2000, in addition to other fees required in
connection with earlier amendments to the Credit Agreement. If all indebtedness
to Fleet is paid in full prior to September 30, 2000, the $50,000 fee will be
waived.
On February 18, 2000, the Company entered into an amendment to the
Securities Purchase Agreements with Massachusetts Mutual Life Insurance Company
and certain of its affiliates (collectively, the "MassMutual Investors") in
which Tridex and the MassMutual Investors agreed to defer the payment of each of
the April 17, 1999, July 17, 1999, October 17, 1999, January 17, 2000, April 17,
2000, July 17, 2000 and October 17, 2000 interest payments on the $11 million
senior subordinated notes until December 31, 2000. The maturity date of the
notes issued under the Securities Purchase Agreements has been advanced to
December 31, 2000 from the original maturity date of April 2005. Copies of the
Fleet and MassMutual amendments are filed as exhibits to this report.
2
<PAGE>
Item 7. Financial Statements and Exhibits. Page No.
(b) Pro forma financial information
Tridex Corporation and Subsidiaries unaudited pro forma
consolidated condensed financial statements:
Unaudited Pro Forma Consolidated
Condensed Financial Information 4
Unaudited Pro Forma Consolidated Condensed Balance Sheet
at September 30, 1999 5
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the nine months ended September 30, 1999
and 1998, and for the years ended December 31, 1998, 1997
and 1996 6
Notes to Unaudited Pro Forma Consolidated Condensed
Financial Statements 11
(c) Exhibits.
4.1 Fifth amendment to Securities Purchase Agreements
dated February 18, 2000 among Tridex Corporation,
Progressive Software, Inc., Ultimate Technology
Corporation, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation
Investors and MassMutual Corporate Value Partners Limited. 14
4.2 Letter Agreement dated February 18, 2000 regarding Fifth
amendment to Securities Purchase Agreements dated February
18, 2000 among Tridex Corporation, Progressive Software.
Inc., Ultimate Technology Corporation, Massachusetts Mutual
Life Insurance Company, MassMutual Corporate Investors,
MassMutual Participation Investors and MassMutual Corporate
Value Partners Limited. 20
10.1 Stock Purchase Agreement, dated as of February 8,
2000, between Tridex Corporation, Ultimate Technology
Corporation and CFG Capital Management II, L.P. 23
10.2. Amendment No. 5 to Credit Agreement dated as of
February 18, 2000 among Tridex Corporation, Progressive
Software, Inc., Ultimate Technology Corporation and Fleet
National Bank 61
99.1 Press Release, dated February 22, 2000 69
3
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed financial information
of Tridex Corporation ("Tridex" or the "Company") gives effect to the
discontinuation of the Ultimate Technology Corporation ("Ultimate") business,
the sale of Ultimate by the Company, the application of the net proceeds
therefrom, and the acquisition of Progressive Software, Inc. The unaudited pro
forma consolidated condensed financial information should be read in conjunction
with the separate historical consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
The Unaudited Pro Forma Consolidated Condensed Statements of Operations for the
nine month periods ended September 30, 1999 and 1998, and for the years ended
December 31, 1998, 1997 and 1996 give pro forma effect to the discontinuation
and sale of Ultimate as if it had occurred on January 1, 1996. The Unaudited Pro
Forma Consolidated Condensed Balance Sheet gives pro forma effect to the sale of
Ultimate as if it occurred on September 30, 1999.
The Unaudited Pro Forma Consolidated Condensed Statements of Operations for the
nine month period ended September 30, 1998 and for the year ended December 31,
1998 also give pro forma effect to the acquisition of Progressive as if it had
occurred at January 1, 1998, using the purchase method of accounting.
The Unaudited Pro Forma Financial Statements do not purport to be indicative of
the results of operations or financial position of the Company that would have
actually been obtained had such transactions been completed as of the assumed
dates and for the periods presented or which may be obtained in the future. The
Unaudited Pro Forma Financial Statements do not reflect any anticipated cost
savings or other benefits that are anticipated to result from the sale of
Ultimate or the acquisition of Progressive and there can be no assurance that
any such cost savings or other benefits will occur. The pro forma adjustments
are described in the accompanying notes and are based on available information
and certain assumptions that the Company believes are reasonable.
4
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Balance Sheet
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of September 30, 1999
-----------------------------------------------------------
Less
Historical Historical Proceeds Use of
Tridex Ultimate From Sale Proceeds Pro Forma
(a) (b)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 426 $ 11,750 $ (11,750) $ 426
Receivables 9,296 $ (3,505) 5,791
Inventories 7,774 (3,496) 4,278
Deferred tax assets 954 (363) 591
Other current assets 380 (216) 250 414
-----------------------------------------------------------
Total current assets 18,830 (7580) 12,000 (11,750) 11,500
-----------------------------------------------------------
Plant and equipment, net 2,622 (890) 1,732
Goodwill and intangible assets, net 12,785 (1,638) 11,147
Purchased and internally developed software
costs, net 10,418 10,418
Deferred tax assets 8,138 (52) 8,086
Other assets 259 250 509
-----------------------------------------------------------
$ 53,052 $ (10,160) $ 12,250 $ (11,750) $ 43,392
===========================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loan payable $ 5,400 $ (2,750) $ 2,650
Current portion of long term debt 11,100 (9,000) 2,100
Accounts payable 6,333 $ (3,154) 3,179
Accrued liabilities 3,549 (571) $ 1,256 4,234
Deferred revenue 583 (51) 532
-----------------------------------------------------------
Total current liabilities 26,965 (3,776) 1,256 (11,750) 12,695
-----------------------------------------------------------
Long term obligations, less current portion 9,508 9,508
-----------------------------------------------------------
Shareholders' equity 16,579 4,610 21,189
-----------------------------------------------------------
$ 53,052 $ (3,776) $ 5,866 $ (11,750) $ 43,392
===========================================================
</TABLE>
5
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Nine Months Ended September 30, 1999
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Less
Historical Historical Pro Forma
Tridex Ultimate Subtotal Adjustments Pro Forma
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 48,040 $ (23,934) $ 24,106 $ 24,106
--------------------------------------------------------------
Operating costs and expenses:
Cost of sales 34,912 (18,122) 16,790 16,790
Engineering, design and product development
costs 3,476 (661) 2,815 2,815
Selling, administrative and general expenses 7,428 (1,941) 5,487 5,487
Depreciation and amortization 3,270 (663) 2,607 2,607
--------------------------------------------------------------
49,086 (21,387) 27,699 27,699
--------------------------------------------------------------
Operating loss (1,046) (2,547) (3,593) (3,593)
Operating charges (income):
Interest expense (income), net 2,454 0 2,454 $ (765)(c) 1,689
Other, net (51) 0 (51) (51)
--------------------------------------------------------------
2,403 0 2,403 (765) 1,638
--------------------------------------------------------------
Loss from continuing operations
before income taxes (3,449) (2,547) (5,996) 765 (5,231)
Benefit for income taxes (1,000) (1,223) (2,223) 284(h) (1,939)
--------------------------------------------------------------
Loss from continuing operations $ (2,449) (1,324) $ (3,773) $ 481 $ (3,292)
==============================================================
Loss per share - basic and diluted:
From continuing operations $ ($0.38) $ (0.59) $ (0.52)
========== ========= =========
Weighted average shares outstanding
Basic and diluted 6,368,000 6,368,000 6,368,000
</TABLE>
6
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Nine Months Ended September 30, 1998
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Less
Historical Historical Progressive Pro Forma
Tridex Ultimate Subtotal Acquisition Adjustments Pro Forma
(1/1 - 4/17/98)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 30,840 $(19,199) $ 11,641 $ 6,466 $ 18,107
-----------------------------------------------------------------------------
Operating costs and expenses:
Cost of sales 22,790 (14,601) 8,189 3,432 11,621
Engineering, design and product development
costs 2,212 (662) 1,550 734 2,284
Selling, administrative and general expenses 5,708 (1,803) 3,905 2,531 6,436
Depreciation and amortization 2,175 (634) 1,541 1,050 $ 872(e) 3,463
Purchased in-process software technology 17,600 17,600 (17,600)(g) 0
-----------------------------------------------------------------------------
50,485 (17,700) 32,785 7,747 (16,728) 23,804
-----------------------------------------------------------------------------
Operating loss (19,645) (1,499) $ (21,144) (1,281) 16,728 (5,697)
Operating charges (income):
Interest expense (income), net 1,024 1,024 1,024 768(d)
(712)(c) 2,104
Other, net 15 15 0 15
-----------------------------------------------------------------------------
1,039 0 1,039 1,024 56 2,119
-----------------------------------------------------------------------------
Loss from continuing operations
before income taxes (20,684) (1,499) (22,183) (2,305) 16,672 (7,816)
Benefit for income taxes (7,294) (660) (7,954) (352) 5,471(h) (2,835)
-----------------------------------------------------------------------------
Loss from continuing operations $ (13,390) $ (839) $ (14,229) $ (1,953) $ 11,201 $ (4,981)
=============================================================================
Loss per share - basic and diluted:
Loss from continuing operations $ (2.24) $ (2.38) $ (0.78)
========= ========= =========
Weighted average shares outstanding
Basic and diluted 5,975,000 5,975,000 392,000(f) 6,367,000
</TABLE>
7
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1998
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Less
Historical Historical Progressive Pro Forma
Tridex Ultimate Subtotal Acquisition Adjustments Pro Forma
(1/1 - 4/17/98)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 43,504 $(25,608) $ 17,896 $ 6,466 $ 24,362
------------------------------------------------------------------------------
Operating costs and expenses:
Cost of sales 31,670 (19,601) 12,069 3,432 15,501
Engineering, design and product development
costs 2,821 (934) 1,887 734 2,621
Selling, administrative and general expenses 8,713 (2,540) 6,173 2,531 8,704
Depreciation and amortization 3,264 (862) 2,402 1,273 $ 872(e) 4,547
Purchased in-process software technology 17,600 17,600 (17,600)(g) 0
------------------------------------------------------------------------------
64,068 (23,937) 40,131 7,970 (16,728) 31,373
------------------------------------------------------------------------------
Operating loss (20,564) (1,671) (22,235) (1,504) 16,728 (7,011)
Operating charges (income):
Interest expense (income), net 1,735 1,735 1,024 768(d)
(942)(c) 2,585
Other, net 22 22 22
------------------------------------------------------------------------------
1,757 0 1,757 1,024 (174) 2,607
------------------------------------------------------------------------------
Loss from continuing operations before income
taxes (22,321) (1,671) (23,992) (2,528) 16,902 (9,618)
Benefit for income taxes (8,175) (792) (8,967) (795) 5,556(h) (4,206)
------------------------------------------------------------------------------
Loss from continuing operations $ (14,146) $ (879) $ (15,025) $ (1,733) $ 11,346 $ (5,412)
==============================================================================
Loss per share - basic and diluted:
Loss from continuing operations $ (2.33) $ (2.47) $ (0.85)
========== ========== ==========
Weighted average shares outstanding:
Basic and diluted 6,077,000 6,077,000 294,000(f) 6,371,000
</TABLE>
8
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Less
Historical Historical
Tridex Ultimate Pro Forma
--------------------------------------
<S> <C> <C> <C>
Net Sales $ 25,833 $ (24,897) $ 936
--------------------------------------
Operating costs and expenses:
Cost of sales 19,629 (19,112) 517
Engineering, design and product development costs 693 (693) 0
Selling, administrative and general expenses 5,661 (2,282) 3,379
Depreciation and amortization 864 (741) 123
--------------------------------------
26,847 (22,828) 4,019
--------------------------------------
Operating Loss (1,014) (2,069) (3,083)
Operating charges (income):
Interest expense (income), net (603) 1 (602)
Other, net 201 0 201
--------------------------------------
(402) 1 (401)
--------------------------------------
Loss from continuing operations before income
taxes (612) (2,070) (2,682)
Benefit for income taxes (44) (881) (925)
--------------------------------------
Loss from continuing operations $ (568) $ (1,189) $ (1,757)
======================================
Loss per share:
Basic and diluted:
Loss from continuing operations $ (0.11) $ (0.23) $ (0.34)
======================================
Weighted average shares outstanding:
Basic and diluted: 5,157,000 5,157,000 5,157,000
</TABLE>
9
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended December 31, 1996
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Less
Historical Historical
Tridex Ultimate Pro Forma
--------------------------------------
<S> <C> <C> <C>
Net Sales $ 22,325 $ (21,466) $ 859
--------------------------------------
Operating costs and expenses:
Cost of sales 16,371 (15,721) 650
Engineering, design and product development costs 447 (447) 0
Selling, administrative and general expenses 4,145 (2,418) 1,727
Depreciation and amortization 1,056 (662) 394
--------------------------------------
22,019 (19,248) 2,771
--------------------------------------
Operating (loss) income 306 (2,218) (1,912)
Operating charges (income):
Gain on sale of subsidiary stock (6,200) (6,200)
Interest expense (income), net 827 0 827
Other, net 145 0 145
--------------------------------------
(5,228) 0 (5,228)
--------------------------------------
Income from continuing operations before income
taxes 5,534 (2,218) 3,316
Benefit for income taxes (112) (1,026) (1,138)
--------------------------------------
Income from continuing operations $ 5,646 $ (1,192) $ 4,454
======================================
Earnings (loss) per share:
Basic:
Income from continuing operations $ 1.44 $ (0.30) $ 1.14
======================================
Diluted:
Income from continuing operations $ 1.23 $ (0.26) $ 0.97
======================================
Weighted average shares outstanding
Basic 3,913,000 3,913,000 3,913,000
Diluted 4,599,000 4,599,000 4,599,000
</TABLE>
10
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(a) Reflects the proceeds and gain on sale resulting from the sale of
Ultimate:
Proceeds:
Gross proceeds $ 13,100
Transaction expenses (850)
--------
Net proceeds 12,250
Escrow (short-term) 250
Escrow (long-term) 250
--------
Net cash proceeds $ 11,750
========
Estimated gain:
Proceeds, net of transaction
expenses $ 12,250
Less:
Net assets 6,384
Tax expense 1,256
--------
Estimated gain $ 4,610
========
(b) Reflects use of proceeds resulting from the sale of Ultimate to repay term
loan and working capital as required by the underlying debt agreements
as follows:
Term Loan $ 9,000
Working Capital Loan 2,750
--------
Total cash proceeds $ 11,750
========
(c) Reflects reduction in interest expense based on application of sale
proceeds to pay down the term loan and working capital debt as follows:
Nine months ending September 30, 1999:
Imputed Interest
Rate Amount Expense
Term Loan 8.69% $ 9,000 $ 586
Working Capital Loan 8.69% 2,750 179
---------------------
$ 11,750 $ 765
=====================
Nine months ending September 30, 1998:
Imputed Interest
Rate Amount Expense
Term Loan 8.09% $ 9,000 $ 545
Working Capital Loan 8.09% 2,750 167
---------------------
$ 11,750 $ 712
=====================
Year ended December 31, 1998:
11
<PAGE>
Imputed Interest
Rate Amount Expense
Term Loan 8.02% $ 9,000 $ 722
Working Capital Loan 8.02% 2,750 220
---------------------
$ 11,750 $ 942
=====================
(d) Reflects additional interest expense for the period January 1, 1998
through April 17, 1998, assuming the Progressive acquisition occurred on
January 1, 1998 as follows:
Imputed Interest
Rate Amount Expense
Term Loan 8.15% $ 11,550 $ 277
Subordinated Debt 13.86% 11,000 449
Working Capital Loan 8.15% 1,751 42
---------------------
$ 24,301 $ 768
=====================
(e) Reflects adjustments for additional amortization expense of purchased
software technology ($10,800 over 6 years) and the excess of cost over
fair value of net assets acquired ($12,719 over ten years) for the period
January 1, 1998 through April 16, 1998, assuming the Progressive
acquisition occurred on January 1, 1998.
(f) Represents increase in weighted average shares outstanding to reflect the
Progressive acquisition as occurring on January 1, 1998.
(g) Represents the write-off of purchased in-process software technology at
Progressive and it has been eliminated in the unaudited pro forma
statement of operations due to its non-recurring nature.
(h) Reflects adjustment of provision (benefit) for income taxes as a result of
pro forma adjustments.
12
<PAGE>
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
By: /s/ Seth M. Lukash
---------------------------
Seth M. Lukash
Chairman of the Board
and Chief Executive Officer
Date: March 6, 2000
13
Exhibit 4.1
TRIDEX CORPORATION
PROGRESSIVE SOFTWARE, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
February 18, 2000
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
MASSMUTUAL CORPORATE INVESTORS
MASSMUTUAL PARTICIPATION INVESTORS
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
1295 State Street
Springfield, Massachusetts 01111
Re: Fifth Amendment to Securities Purchase Agreements
Ladies and Gentlemen:
TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"),
PROGRESSIVE SOFTWARE, INC., a North Carolina corporation and successor to Tridex
NC, Inc. ("PSI"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation
("UTC") (the Holding Company, PSI, and UTC are sometimes collectively referred
to herein as the "Issuers" and each as an "Issuer"), jointly and severally agree
with each of you as follows.
Background:
A. Reference is made to those certain Securities Purchase Agreements dated
April 17, 1998, as amended by that certain letter of waiver and limited
amendment dated November 12, 1998 relating thereto, as further amended by that
certain Second Amendment to Securities Purchase Agreements dated March 26, 1999
(the "Second Amendment"), as further amended by that certain Third Amendment to
Securities Purchase Agreement dated June 30, 1999, and as further amended by
that certain Fourth Amendment to Securities Purchase Agreements dated September
30, 1999 (as so amended, the "Securities Purchase Agreements"), among the
Issuers and each of you. Capitalized terms used herein without definition have
the meanings ascribed to them in the Securities Purchase Agreements.
B. The Issuers have requested that the holders of the Securities approve
certain amendments to and waivers under the Securities Purchase Agreements and
the other Operative Documents in connection with the Amendment No. 5 to Credit
Agreement dated as of February 18, 2000 (the "Fifth Amendment to Fleet Bank
Agreement") among the Holding Company, PSI, UTC, and Fleet National Bank,
pursuant to which certain amendments are being made to the Fleet Bank Documents
and Fleet National Bank is agreeing to the deferral of certain payments of
principal thereunder.
1. Consents and Waivers. Each of you hereby agrees that (a) the Issuers may
defer the payment of each of the April 17, 1999, July 17, 1999, October 17,
1999, January 17, 2000, April 17, 2000, July 17, 2000 and October 17, 2000
interest payments on the Notes and any scheduled principal or other payments in
respect of
1
<PAGE>
the Notes until the earlier of January 1, 2001 or the sale of the capital stock
or assets of the Holding Company or PSI, at which date all such interest
payments on the Notes shall be due and payable in full together with the entire
outstanding principal amount of the Notes and all other amounts due in respect
of the Notes; and (b) notwithstanding anything to the contrary in the Securities
Purchase Agreements, the Issuers' failure to comply with section 13.6 of the
Securities Purchase Agreements prior to the date of this Fifth Amendment in
respect of the period ending December 31, 1998, shall not constitute an Event of
Default and the holders hereby waive any such Event of Default which existed for
such period prior to the date of this Fifth Amendment, provided that such
section 13.6 of the Securities Purchase Agreements as amended by the Second
Amendment shall only remain in effect in respect of periods ending subsequent to
December 31, 1998, and prior to January 1, 2001. As of January 1, 2001, such
section 13.6, as in effect prior to the date of the Second Amendment, shall be
deemed reinstated.
2. Conditions to Effectiveness of Fifth Amendment. This Fifth Amendment shall be
effective upon the first date upon which the following conditions shall have
been satisfied to your reasonable satisfaction:
(a) The Issuers shall have delivered to you executed copies of each of the
following documents in form and substance satisfactory to you:
(i) a fully executed counterpart of this Fifth Amendment;
(ii) certified copies of (A) the resolutions of the Board of
Directors of each of the Issuers approving this Fifth Amendment and the
matters contemplated hereby and (B) all documents evidencing other
necessary corporate actions and governmental approvals, if any, with
respect to this Fifth Amendment and the other documents to be delivered
hereunder;
(iii) a certificate of the Secretary or an Assistant Secretary of
each of the Issuers certifying the names and true signatures of the
officers of each Issuer authorized to sign this Fifth Amendment and the
other documents to be delivered hereunder;
(iv) a schedule setting forth the uses of all proceeds of the sale
of all of the capital stock of UTC on the date hereof;
(v) projections prepared in good faith and based upon assumptions
that the Holding Company believes are reasonable and take into account all
material information regarding the matters set forth therein and
representing the Holding Company's current estimate of the future
financial performance of the Holding Company and its Subsidiaries;
(vi) an opinion, dated the date hereof, from Messrs. Hinckley, Allen
& Snyder LLP, counsel for the Issuers, substantially in the form of
Exhibit 2(a)(vi) attached hereto; and
(vii) an executed counterpart of the Fifth Amendment to Fleet Bank
Agreement, substantially in the form of Exhibit 2(a)(vii) attached hereto.
(b) The Issuers shall have paid in full all fees, expenses and
disbursements incurred by you in connection with this Fifth Amendment,
including, without limitation, the fees, expenses and disbursements of your
special counsel.
2.1 Conditions Subsequent. Within seven (7) days after the date of this Fifth
Amendment, the Issuers shall have deliver to you executed copies of each of the
following documents in form and substance satisfactory to you:
(a) replacement Notes substantially in the form of Exhibit 2.1(a)
attached hereto, which replacement Notes shall evidence the change in
maturity of the outstanding Notes to January 1, 2001,
2
<PAGE>
and letters from Standard & Poor's assigning new private placement numbers
to the replacement Notes;
(b) a stock pledge agreement substantially in the form of Exhibit
2.1(b) attached hereto (the "Pledge Agreement") evidencing a pledge of and
perfected security interest (subject only to Liens permitted by section
13.8 of the Securities Purchase Agreements, including, without limitation,
the pledge of and first priority perfected security interest evidenced by
the Fleet Bank Documents) in all of the shares of capital stock of PSI;
and in all of the membership interests of Digital Restaurant Solutions,
LLC.
3. No Default, Representations and Warranties, Etc.
(a) The Issuers represent and warrant that the representations and
warranties contained in the Securities Purchase Agreements and the other
Operative Documents are in all material respects correct on and as of the date
hereof (after giving effect hereto) as if made on such date (except as a result
of transactions permitted under the Securities Purchase Agreements), that no
Default or Event of Default exists (other than those which have been
specifically waived pursuant to section 1 hereof) and that no condition exists
which has resulted in, or could reasonably be expected to result in, a Material
Adverse Change.
(b) Each of the Issuers ratifies and confirms the Securities Purchase
Agreements and each of the other Operative Documents to which it is a party and
agrees that, after giving effect to the amendments, modifications and
supplements effected hereby, each such agreement, document and instrument is in
full force and effect, that its obligations thereunder and under this Fifth
Amendment are its legal, valid and binding obligations enforceable against it in
accordance with the terms thereof and hereof and that it has no defense, whether
legal or equitable, setoff or counterclaim to the payment and performance of
such obligations.
3
<PAGE>
(c) The Issuers agree that (i) if any default shall be made in the
performance or observation of any covenant, agreement or condition contained
herein or (ii) if any representation or warranty made by any Issuer herein or
therein shall prove to have been false or incorrect on the date as of which
made, the same shall constitute an Event of Default under the Securities
Purchase Agreements and the other Operative Documents and, in such event, you
and each other holder of any of the Securities shall have all rights and
remedies provided by law and/or provided or referred to in the Securities
Purchase Agreements and the other Operative Documents. The Issuers further agree
that this Fifth Amendment is an Operative Document and all references thereto in
the Securities Purchase Agreements and in any other of the Operative Documents
shall include this Fifth Amendment.
4. Payment of Transaction Costs. Without limiting the generality of the
provisions of the Operative Documents, the Issuers jointly and severally shall
pay all reasonable fees and disbursements incurred by you in connection
herewith, including, without limitation, the reasonable fees, expenses and
disbursements of your special counsel.
5. Governing Law. This Fifth Amendment, including the validity hereof and the
rights and obligations of the parties hereunder, 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.
6. Miscellaneous. The headings in this Fifth Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. This
Fifth Amendment embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any provision in this Fifth Amendment
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 Fifth Amendment may be executed in any number of
counterparts and by the parties hereto on separate counterparts but all such
counterparts shall together constitute but one and the same instrument. Except
as specifically amended or modified pursuant to this Fifth Amendment, the
Securities Purchase Agreements shall remain in full force and effect, and the
execution and delivery of this Fifth Amendment shall not, except as expressly
provided herein, operate as a waiver of any of your rights, powers, or remedies
under the Securities Purchase Agreements or the documents and instruments
delivered in connection therewith.
[The remainder of this page is left blank intentionally.]
4
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart hereof, whereupon this Fifth Amendment
shall become a binding agreement under seal among the parties hereto. Please
then return one of such counterparts to the Issuers.
Very truly yours,
TRIDEX CORPORATION
By /s/ Seth M. Lukash
------------------
(Title)
PROGRESSIVE SOFTWARE, INC.
By /s/ George T. Crandall
----------------------
(Title)
ULTIMATE TECHNOLOGY CORPORATION
By /s/ George T. Crandall
----------------------
(Title)
The foregoing is hereby accepted and agreed to.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: David L. Babson and Company Incorporated, its Investment Adviser
By /s/ Mark A. Ahmed
-----------------
(Title)
5
<PAGE>
MASSMUTUAL CORPORATE INVESTORS
By /s/ Charles C. McCobb, Chief Financial Officer
----------------------------------------------
(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.
MASSMUTUAL PARTICIPATION INVESTORS
By /s/ Charles C. McCobb, Chief Financial Officer
----------------------------------------------
(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.
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: David L. Babson and Company Incorporated, under delegated authority from
Massachusetts Mutual Life Insurance Company, its Investment Manager
By /s/ Mark A. Ahmed
-----------------
(Title)
6
Exhibit 4.2
TRIDEX CORPORATION
PROGRESSIVE SOFTWARE, INC.
ULTIMATE TECHNOLOGY CORPORATION
61 Wilton Road
Westport, Connecticut 06880
February 18, 2000
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
MASSMUTUAL CORPORATE INVESTORS
MASSMUTUAL PARTICIPATION INVESTORS
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
1295 State Street
Springfield, Massachusetts 01111
Re: Fifth Amendment to Securities Purchase Agreements
Reference is made to that certain Fifth Agreement to Securities Purchase
Agreements, a copy of which is attached hereto (the "Fifth Amendment"). Terms
used herein and not otherwise defined shall have the same meanings herein as
provided in the Fifth Amendment. This letter will evidence the agreement of the
Holding Company and PSI that the date "January 1, 2001" set forth in Sections
1(a) and 2.1(a) of the Fifth Amendment is hereby deleted and replaced with the
date "December 31, 2000."
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart hereof, whereupon this letter shall
become a binding agreement under seal among the parties hereto. Please then
return one of such counterparts to the Issuers.
Very truly yours,
TRIDEX CORPORATION
By /s/ George T. Crandall, V.P. & Treasurer
----------------------------------------
(Title)
PROGRESSIVE SOFTWARE, INC.
By /s/ George T. Crandall, V.P. & Treasurer
----------------------------------------
(Title)
ULTIMATE TECHNOLOGY CORPORATION
By /s/ George T. Crandall, V.P. & Treasurer
----------------------------------------
(Title)
The foregoing is hereby accepted and agreed to.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: David L. Babson and Company Incorporated, its Investment Adviser
By /s/ Clifford M. Noreem
------------------------
(Title)
<PAGE>
MASSMUTUAL CORPORATE INVESTORS
By /s/ Clifford M. Noreem
------------------------
(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.
MASSMUTUAL PARTICIPATION INVESTORS
By /s/ Clifford M. Noreem
------------------------
(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.
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: David L. Babson and Company Incorporated, under delegated authority from
Massachusetts Mutual Life Insurance Company, its Investment Manager
By /s/ Clifford M. Noreem
------------------------
(Title)
The foregoing is hereby acknowledged and assented to:
FLEET NATIONAL BANK
By /s/ Vincent J. Pitts
------------------------
(Title)
Exhibit 10.1
======================================
STOCK PURCHASE AGREEMENT
dated as of
February 8, 2000
by and among
TRIDEX CORPORATION,
ULTIMATE TECHNOLOGY CORPORATION
a subsidiary of Tridex Corporation
and
CFG CAPITAL MANAGEMENT II, L.P.
===================================
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 8th day of February, 2000, by and among TRIDEX CORPORATION, a Connecticut
corporation ("Seller"), ULTIMATE TECHNOLOGY CORPORATION, a New York corporation
which is a wholly-owned subsidiary of Tridex Corporation ("Ultimate"), and CFG
CAPITAL MANAGEMENT II, L.P., a New York limited partnership ("Purchaser").
INTRODUCTION
WHEREAS, Ultimate is engaged in the business of designing, manufacturing
and selling hardware solutions and related products and services for
point-of-sale applications in the retail sector (the "Business");
WHEREAS, upon the terms and subject to the conditions set forth herein,
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, all of the issued and outstanding capital stock of Ultimate; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Purchaser, Seller and Ultimate, intending to be legally bound,
do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Terms Defined. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, unless the context expressly or by
necessary implication otherwise requires:
"Accounts Receivable" means the accounts receivable of Ultimate that are
(i) reflected on the Balance Sheet, or (ii) due or recorded on the accounting
records of Ultimate as being due and owing as of the Closing Date.
"Acquisition Proposal" shall have the meaning set forth in Section 5.4
hereof.
"Affiliate" shall mean any Person which directly or indirectly controls,
is controlled by or is under common control with another Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" or "this Agreement" shall mean this Stock Purchase Agreement
as originally executed and delivered, or, if amended or supplemented, as so
amended or supplemented.
"Arbitrator" shall have the meaning set forth in Section 13.3 hereof.
"Balance Sheet" shall have the meaning set forth in Section 3.5 hereof.
"Balance Sheet Date" shall mean December 31, 1999.
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<PAGE>
"Benefit Arrangement" shall have the meaning set forth in Section 3.15
hereof.
"Benefit Plan" shall have the meaning set forth in Section 3.15 hereof.
"Business" shall have the meaning set forth in the Introduction to this
Agreement.
"Closing" means the taking of the actions required to consummate the sale
and purchase of the Shares by the Seller, Ultimate and the Purchaser pursuant to
this Agreement.
"Closing Date" shall have the meaning set forth in Section 11.1 hereof.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, Section 4980B of the Code, Title I, Part 6 of ERISA, and any
regulations and proposed regulations issued thereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor Law, and the rules and regulations issued by the IRS pursuant to the
Code or any successor Law.
"Contracts" means all sales, supplier or service agreements, agreements
with manufacturers, and all other contracts, subcontracts, leases and
commitments necessary for or useful in the conduct of the Business and not fully
performed as of the Closing (other than the Leases).
"Election" shall have the meaning set forth in Section 6.4(a) hereof.
"Employees" shall have the meaning set forth in Section 7.5(a) hereof.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative interpretations
thereof, or similar laws of foreign jurisdictions where Seller conducts
business, whether currently in existence or hereafter enacted or promulgated,
any of which govern (or purport to govern) or relate to pollution, protection of
the environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, injunctions, decrees, rulings and changes or
ordinances, or judicial or administrative interpretations thereof, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, 42 U.S.C. ss.9601, et seq. (collectively "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901
et seq. (collectively "RCRA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. ss.1801, et seq.; the Clean Water Act, as amended, 33 U.S.C.
ss.1311, et seq.; the Clean Air Act, as amended (42 U.S.C. ss.7401-7642); the
Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. ss.136-136y
("FIFRA"); the Emergency Planning and Community Right-to-Know Act of 1986, as
amended, 42 U.S.C. ss.11001, et seq. (Title III of SARA) ("EPCRA"); the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651, et
seq. ("OSHA"); and any and all applicable laws, statutes, ordinances,
regulations and executive orders (but only, with respect to executive orders,
those orders that have the force of law), federal, state and local, related to
the protection of human health or the environment and any other Law of any
Governmental Authority having a similar subject.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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<PAGE>
"ERISA Affiliate" means, with respect to any Person, any other Person that
is a member of a "controlled group of corporations" with, or is under "common
control" with or is a member of the same "affiliated service group" with such
Person as such terms are defined in Section 414 of the Code.
"Escrow Agreement" means the agreement to be entered into effective as of
the Closing among Seller, Purchaser and an escrow agent to be designated by
mutual agreement of the parties.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Law, and the rules and regulations of the SEC promulgated
thereunder or under any successor Law.
"Financial Statements" shall have the meaning set forth in Section 3.5
hereof.
"GAAP" shall mean United States generally accepted accounting principles
in effect as of the date of this Agreement.
"Governmental Authority" shall mean any federal, state, municipal or local
government or political subdivision or any regulatory or administrative agency,
authority, bureau, commission, department, board, bureau or instrumentality of
either, or any court, tribunal, grand jury or arbitrator or arbitral body, in
every case whether foreign or domestic.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended.
"Hazardous Materials" shall mean chemicals products, compounds,
by-products, pollutants, contaminants, hazardous wastes or toxic or hazardous
substances regulated under any Environmental Law, including, but not limited to,
asbestos or asbestos-containing materials, polychlorinated biphenyls, pesticides
and oils, petroleum and petroleum products.
"Inventory" shall have the meaning set forth in Section 3.12 hereof.
"Knowledge" shall mean, as to any party, (i) the actual knowledge of such
party's elected or appointed officers having the title of Vice President or
Treasurer or any title senior thereto, and (ii) the knowledge that such persons
would reasonably be expected to have through the course of performance of their
duties to such party.
"Law" shall mean any applicable constitution, statute, ordinance,
principle of common law, rule, regulation, statute, code, directive, ordinance,
treaty, judgment or order enacted, promulgated, issued, enforced or entered by
any Governmental Authority.
"Leases" shall have the meaning set forth in Section 3.11 hereof.
"License" shall mean a license, certificate of authority, franchise,
permit or other authorization to transact an activity or business, whether
granted by a Governmental Authority or any other Person.
"Lien" shall have the meaning set forth in Section 3.2 hereof.
"Losses" shall have the meaning set forth in Section 13.1 hereof.
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<PAGE>
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, liabilities, results of operations or financial condition of
any party, or on the ability of such party to consummate the transactions
contemplated by this Agreement, provided, however, that the effects of changes
that are generally applicable to the Seller's or Ultimate's respective
industries shall be excluded from the determination of a Material Adverse Effect
with respect to Seller or Ultimate, as the case may be.
"Net Working Capital" shall mean (i) the sum of Ultimate's Accounts
Receivables (less allowances for doubtful and uncollectable accounts),
Inventory, and prepaid items (such as prepaid insurance, municipal, local or
franchise tax payments or deposits, and other security or similar deposits owned
by Ultimate or in which Ultimate has any interest), minus (ii) Ultimate's
current accounts payable, customer deposits and accrued expenses (other than
current lease payments and accrued interest expense) reflected on the Initial
Net Working Capital Statement or the Closing Net Working Capital Statement, as
applicable. Net Working Capital shall not include cash, cash equivalents or
negative cash balances, any accrued income Taxes, indebtedness for capitalized
leases, any bank indebtedness, or intercompany accounts between Seller and
Ultimate. The items included in Ultimate's Net Working Capital shall include
only those accounts which are set forth in the statement of Ultimate's initial
Net Working Capital as of October 31, 1999, attached hereto as Schedule A (the
"Initial Net Working Capital Statement"), which was prepared in accordance with
GAAP, consistently applied.
"Person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, unincorporated organization, voluntary
association, joint stock company, business trust joint venture, Governmental
Authority or any other entity.
"Post-Closing Period" shall have the meaning set forth in Section 6.2
hereof.
"Pre-Closing Period" shall have the meaning set forth in Section 6.1(a)
hereof.
"Pro Forma Tax Payment" shall have the meaning set forth in Section 2.4(a)
hereof.
"Proprietary Rights" shall have the meaning set forth in Section 3.10
hereof.
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Purchaser Defined Contribution Plan" shall have the meaning set forth in
Section 8.5 hereof.
"Purchaser Plans" shall have the meaning set forth in Section 7.5(a)
hereof.
"Purchaser's Indemnified Parties" shall have the meaning set forth in
Section 13.1 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor Law, and the rules and regulations of the SEC promulgated thereunder
or under any successor Law.
"SEC" shall mean the United States Securities and Exchange Commission or
any successor agency.
"Seller's Indemnified Parties" shall have the meaning set forth in Section
13.2 hereof.
"Shares" shall have the meaning set forth in Section 2.1 hereof.
"Short Period" shall have the meaning set forth in Section 6.1(a) hereof.
5
<PAGE>
"Taxes" shall mean all taxes, however denominated, including any interest,
penalties or additions to tax that may become payable in respect thereof,
imposed by any federal, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income taxes, estimated taxes,
payroll and employee withholding taxes, backup withholding taxes, unemployment
insurance taxes, social security taxes, sale and use taxes, excise taxes,
franchise taxes, gross receipts taxes, occupation taxes, real and personal
property taxes, stamp taxes, transfer taxes, workers' compensation taxes,
capital stock taxes, taxes on services, and other obligations of the same or of
a similar nature, whether arising before, on or after the date hereof.
"Tax Gross-Up Payment" shall have the meaning set forth in Section 2.4(a)
hereof.
"Tax Return" shall mean any return, report, filing, estimate, declaration,
or information statement related to, or required to be filed in connection with,
any Tax pursuant to statutes, rules and regulations of any federal, state, local
or foreign government taxing authority.
"Total Retirement Savings Plan Transfer Amount" shall have the meaning set
forth in Section 8.5 hereof.
"Transfer Date" shall have the meaning set forth in Section 8.5 hereof.
"Unaudited Financial Statements" shall have the meaning set forth in
Section 3.5 hereof.
"$" means United States dollars.
"Year 2000 Compliant" shall have the meaning set forth in Section 3.26
hereof.
"Year 2000 Problem" shall have the meaning set forth in Section 3.26
hereof.
Section 1.2. In this Agreement, unless the context otherwise requires, the
words "hereby", "hereof", "hereto", "herein", "hereunder", and any similar words
refer to this Agreement; and the word "hereafter" means after, and the word
"heretofore" means before, the date of this Agreement.
Section 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.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares. Subject to the terms and
conditions set forth in this Agreement, Seller agrees to sell to the Purchaser,
and the Purchaser agrees to purchase from Seller, 500,000 shares of issued and
outstanding Class A common stock and 497,000 shares of Class B common stock of
Ultimate, representing all of the issued and outstanding capital stock of
Ultimate (the "Shares").
Section 2.2 Purchase Price and Terms. As consideration for the Shares, on
the Closing Date, Purchaser shall pay to Seller the estimated purchase price in
an amount equal to Thirteen Million Dollars ($13,000,000) (the "Purchase
Price"), adjusted in accordance with the Estimated Net Working Capital Statement
referred to below, payable by wire transfer of immediately available funds in an
amount equal to Five Hundred
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<PAGE>
Thousand Dollars $500,000.00 into escrow pursuant to Escrow Agreement and the
balance to an account designated by Seller on the Closing Date.
Section 2.3 Working Capital Adjustment.
(a) At least one day prior to the Closing, Seller, in consultation
with Purchaser, shall prepare and deliver to Purchaser an estimate of the Net
Working Capital of Ultimate as of the Closing Date (the "Estimated Net Working
Capital Statement"), and the estimated Purchase Price payable by Purchaser at
the Closing shall be adjusted, upward or downward, by the amount by which
Ultimate's Net Working Capital as reflected on the Estimated New Working Capital
Statement exceeds, or is less than, Ultimate's Net Working Capital reflected on
the Initial Net Working Capital Statement.
(b) As soon as reasonably practicable following the Closing Date,
and in any event within thirty (30) days thereafter, Seller's accountant,
PricewaterhouseCoopers LLP ("PWC") shall prepare and deliver to Seller and
Purchaser a final statement of the Net Working Capital of Ultimate as of the
Closing Date (the "Closing Net Working Capital Statement"). Purchaser shall have
access to the individual at PWC who is preparing the Closing Net Working Capital
Statement and full access to such person's work papers. The parties agree that
the statements contemplated by this Section 2.3 are solely intended to show
changes in working capital from October 31, 1999 to the Closing Date and,
accordingly, that the Closing Net Working Capital Statement shall be prepared in
accordance with GAAP in a manner consistent with the preparation of the Initial
Net Working Capital Statement (without regard to any purchase accounting
adjustments arising out of the consummation of the transactions contemplated
hereby).
(c) After the Closing Net Working Capital Statement has been
presented to Seller and Purchaser pursuant to Section 2.3(b), Purchaser may
formally dispute the calculation of any element of the Closing Net Working
Capital Statement, by notifying Seller of such disagreement in writing, setting
forth in detail the particulars of such disagreement, within thirty (30) days
after its receipt of the Closing Net Working Capital Statement. In the event
that Purchaser does not provide such a notice of disagreement within such thirty
(30) day period, Purchaser shall be deemed to have accepted the Closing Net
Working Capital Statement, which shall be final, binding and conclusive for all
purposes hereunder. In the event any such notice of disagreement is timely
provided, Purchaser and Seller shall use their reasonable best efforts for a
period of thirty (30) days following the date of such notice (or such longer
period as they may mutually agree) to resolve any disagreements with respect to
the calculation of the items reflected on the Closing Net Working Capital
Statement. If, at the end of such period, they are unable to resolve such
disagreements, the dispute shall be submitted to Arthur Anderson LLP (or, if
Arthur Anderson LLP has historically been the accountant for Purchaser, another
national independent accounting firm, mutually agreeable to the parties
("Independent Accountant")) for resolution. The Independent Accountant shall
review the Closing Net Working Capital Statement and such underlying information
as it deems appropriate and deliver within 30 calendar days its written
determination ("Accountant's Determination") of the Closing Net Working Capital
Statement. The fees and expenses of the Independent Accountant shall be borne
equally by the parties. The Accountant's Determination shall be final,
conclusive and binding on the parties. The date on which the Accountant's
Determination is delivered to the parties in accordance with this Section 2.3(c)
is hereinafter referred to as the "Determination Date."
(d) Upon the later of acceptance of the Closing Net Working Capital
Statement or the Determination Date, Purchaser and Seller shall determine the
amount (the "Working Capital Adjustment") by which Net Working Capital as
reflected on the Closing Net Working Capital Statement differs from Net Working
Capital as reflected on the Estimated Net Working Capital Statement. In the
event that the Net Working Capital of Ultimate as reflected on the Closing Net
Working Capital Statement is greater than the Net
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<PAGE>
Working Capital amount reflected on the Estimated Net Working Capital Statement,
then, promptly and in any event within ten (10) days following the later of the
Determination Date or the acceptance of the Closing Net Working Capital
Statement, Purchaser shall pay to Seller, by wire transfer of immediately
available funds to an account designated in writing by Seller, an amount equal
to the difference. In the event that the Net Working Capital of Ultimate as
reflected on the Estimated Net Working Capital Statement exceeds the Net Working
Capital of Ultimate as reflected on the Closing Net Working Capital Statement,
then, promptly and in any event within ten (10) days following the later of the
Determination Date or the acceptance of the Closing Net Working Capital
Statement, Seller shall pay to Purchaser, by wire transfer of immediately
available funds, to an account designated in writing by Purchaser, an amount
equal to the difference.
Section 2.4 Additional Payment for Tax Election.
(a) If the Election is made pursuant to Section 6.4(a), the Purchase
Price paid by Purchaser to Seller hereunder shall be increased by an amount (the
"Tax Gross-Up Payment") equal to the "Pro Forma Incremental Tax" divided by the
"Gross-Up Percentage." For purposes of this Section 2.4, the "Pro Forma
Incremental Tax" shall be equal to (A) the difference between Seller's total Tax
on the gain recognized by Seller (on a consolidated basis) (including the amount
of any investment tax credit recapture) calculated giving effect to the
Election, minus (B) Seller's total Tax on the gain recognized by Seller
calculated without regard to the Election, in both cases calculated without
regard to any net operating loss carryforwards ("NOL's") which may be available
to offset the gain arising from sale of the Shares and/or the Election. The
payment to Seller under this Section 2.4 shall be calculated and paid as
follows:
(i) Gross-Up Percentage. The Tax Gross-Up Payment shall be
determined by dividing the Pro Forma Incremental Tax by the "Gross-Up
Percentage", which shall be computed by subtracting from the number one (1) the
sum of (i) the federal income tax rate applicable to corporations in the year
the additional tax liability is incurred plus (ii) the state income tax rate
applicable to corporations in the year the additional tax liability is incurred
for each state in which Seller would be subject to income tax (without regard to
any NOL's) with respect to the sale of the Shares or the Election.. The parties
agree that the federal income tax rate applicable to Seller is 34%, the
Connecticut income tax rate applicable to Seller is 8.5% and the New York income
tax rate applicable to Seller is 9%. The parties further agree that the Gross-Up
Percentage to be applied to the Pro Forma Incremental Tax to calculate the Tax
Gross-Up Payment equals the Pro Forma Incremental Tax divided by 48.50
determined as follows:
<TABLE>
<S> <C>
Tax Gross-Up Payment = Pro Forma Incremental Tax /[1-(federal rate + state rates]
</TABLE>
(ii) Calculation of Pro Forma Incremental Tax and Tax Gross-Up
Payment. If the Election is made, Seller's certified public accountant shall
prepare a calculation of each of the Pro Forma Incremental Tax and the Tax
Gross-Up Payment, without regard to Seller's NOL's. Seller shall deliver the
calculations to Purchaser.
(iii) Acceptance of Tax Gross-Up Payment. If Purchaser
disputes the correctness of the Tax Gross-Up Payment calculation, Purchaser
shall notify the Seller of its objections in writing within ten (10) business
days of its receipt of the calculation and shall set forth in reasonable detail
the reasons for such objections. If Purchaser fails to deliver such notice of
objection within such time period, it shall be deemed to have accepted the
Seller's accountant's calculation of the Tax Gross-Up Payment. If Purchaser
delivers such notice, Purchaser and Seller shall attempt in good faith to
resolve the dispute within thirty (30) days of Seller's receipt of the notice of
objection. If they are unable to do so, the dispute shall be submitted to the
Independent Accountant, who shall resolve the dispute within thirty (30) days.
The decision of the Independent Accountant
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shall be final, conclusive and binding upon the parties. Purchaser shall pay the
fees and expenses of the Independent Accountant.
(b) Payment. The Tax Gross-Up Payment shall be made not later than
the 10th day following the date Seller's accountant provides the calculations
set forth above in Section (ii) or the date on which the Independent Accountant
makes a determination as to the Tax Gross-Up Payment calculation. Purchaser
shall pay an amount which is equal to the Tax Gross-Up Payment by wire transfer
of immediately available funds to an account designated by Seller. Purchaser
shall pay the fees and expenses of Seller's accountant in connection with the
Election.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND ULTIMATE
Seller and Ultimate jointly and severally represent and warrant to
Purchaser, as of the date of this Agreement and as of the Closing, that, except
as has been otherwise disclosed by Seller or Ultimate to Purchaser in any
Schedule hereto:
Section 3.1 Corporate Organization and Authority of Seller and Ultimate.
(a) Seller. Seller has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Connecticut. Seller
has the corporate power and authority to own or lease its properties and to
enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of Seller, and no other corporate proceeding
on the part of Seller is necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a legally valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
(b) Ultimate. Ultimate has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of New York.
Ultimate is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which the ownership of its property or the
character of its activities is such as to require it to be so licensed or
qualified, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect. Ultimate has the corporate power and authority
to own or lease its properties and to conduct the Business as it is now being
conducted, to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by Ultimate and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors and sole shareholder of
Ultimate and no other corporate proceeding on the part of Ultimate is necessary
to authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Ultimate and
constitutes a legally valid and binding obligation of Ultimate, enforceable
against Ultimate in accordance with its terms.
Section 3.2 No Conflict. Except as set forth in Schedule 3.2, the
consummation of the transactions contemplated by this Agreement by Seller and
Ultimate 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 articles of incorporation or bylaws of Seller or
Ultimate, any Contract, lease, License, promissory note, conditional sales
contract, commitment, indenture, mortgage, or other agreement, instrument, or
arrangement to which Seller or Ultimate (or the Business) is a party or by which
the Shares or any of Ultimate's assets or
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properties are bound; (b) an event that would permit any party to terminate any
agreement relating to the Business or which would violate or conflict with any
law, statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or any arbitration award which is either
applicable to, binding upon or enforceable against, Seller, Ultimate or the
Business; (c) result in the creation or imposition of any mortgage, deed of
trust, pledge, hypothecation, encumbrance, security interest, restriction or
lien of any kind (a "Lien") upon any of the Shares or the assets or properties
of Ultimate, or constitute an event which, after notice or lapse of time or
both, would result in any such violation, breach, acceleration, termination or
creation of a Lien upon any of the Shares or the assets or properties of
Ultimate; or (d) require the consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except any SEC and other filings required to be
made by the Seller.
Section 3.3 Capitalization. (a) The authorized capital stock of Ultimate
consists of 500,000 shares of Class A common stock, of which 500,000 shares are
issued and outstanding as of the date hereof, and 500,000 shares of Class B
common stock, of which 497,000 shares are issued and outstanding as of the date
hereof. All of the Shares are duly authorized, validly issued, fully paid and
non-assessable, and the full consideration has been received therefor by
Ultimate. There are no outstanding options, warrants, rights or other securities
exercisable or exchangeable for any capital stock or other equity security of
Ultimate, any other commitments or agreements providing for the issuance of
additional shares or other equity securities, the sale of treasury shares, or
for the repurchase or redemption of shares of Ultimate's capital stock or other
equity securities, or any agreements of any kind which may obligate Ultimate to
issue, purchase, register for sale, redeem or otherwise acquire any of
Ultimate's capital stock or other equity securities.
(b) Title to Shares. Seller owns of record and beneficially all of the
Shares, which constitute all of the issued and outstanding capital stock of
Ultimate. Except as set forth on Schedule 3.3(b), Seller has good title to the
Shares, free of all liens, claims, charges, restrictions, encumbrances and
proxies. Upon consummation of the transactions contemplated hereby, Purchaser
will hold good title to all of the Shares, free and clear of all liens, claims,
charges, encumbrances, restrictions and proxies arising through Seller.
Section 3.4 Subsidiaries. Ultimate has no subsidiaries. Ultimate does not
own, directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any other corporation, partnership, association, trust,
joint venture or other entity.
Section 3.5 Financial Statements. Seller has furnished Purchaser with (a)
the unaudited financial statements of Ultimate for the years ended December 31,
1997, December 31, 1998 and December 31, 1999, attached hereto as Schedule
3.5(a) (the "Unaudited Financial Statements"), which unaudited financial
statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except that the Unaudited
Financial Statements are not accompanied by footnotes) and present fairly the
financial position and the results of operations and cash flows of Ultimate as
at the respective dates and for the periods indicated; and (b) the unaudited
statement of operations and balance sheet of Ultimate as of October 31, November
30 and December 31, 1999, attached hereto as Schedule 3.5(b) (the "Balance
Sheets"), which balance sheets have been prepared in accordance with GAAP
applied consistently with prior accounting periods of Ultimate; and (the
Unaudited Financial Statements, the Balance Sheets shall be referred to
collectively herein as the "Financial Statements").
Section 3.6 Title to and Condition of Assets. Except as set forth on
Schedule 3.6, and except with respect to property which is the subject of the
Leases as to which certain representations are made pursuant to Section 3.11
hereof, Ultimate owns and has good and marketable title to all of the properties
and assets reflected as owned on the Balance Sheet and all properties and assets
acquired by Ultimate since the Balance Sheet Date in the ordinary course of
business, with full power to sell, transfer and assign the same, free and clear
of any
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Liens, other than (a) those disclosed in the Financial Statements, and (b) as
set forth in Schedule 3.6 to this Agreement. Except as disclosed on Schedule
3.6, the properties and assets of Ultimate are in good operating condition and
repair, normal wear and tear excepted, and have been maintained in accordance
with all applicable specifications and warranties and normal industry practice.
Ultimate does not own fee interests (in whole or in part) in any real property.
Section 3.7 Customers and Suppliers. (a) Set forth in Schedule 3.7(a) is
an accurate and current listing of the ten (10) largest customers of Ultimate
for each of the two most recent fiscal years. Except as set forth in Schedule
3.7(a), neither Seller nor Ultimate has any Knowledge that any of Ultimate's
customers intend to cease doing business with Ultimate, or alter the amount of
the business that it is presently doing with Ultimate to the extent that such
alteration would have a Material Adverse Effect.
(b) Schedule 3.7(b) contains a correct and current list of the ten
(10) largest suppliers of Ultimate during the two (2) most recent fiscal years.
Except as indicated in Schedule 3.7(b), neither Seller nor Ultimate has any
Knowledge that any of Ultimate's suppliers intend to cease doing business with
Ultimate, or materially alter the amount of the business that they are presently
doing with Ultimate to the extent that such alteration would have a Material
Adverse Effect.
Section 3.8 Contracts. Except as set forth in Schedule 3.8, all Contracts
are in full force and effect and there exists no default or event of default or
event, occurrence, condition or act (including but not limited to the purchase
of the Shares hereunder) which, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or event
of default thereunder. Except as set forth in Schedule 3.8, Ultimate is not a
party to and is not bound by any:
(a) agreement, contract or commitment relating to the employment of
any person by Ultimate, including but not limited to collective bargaining
agreements and employment agreements, or bonus arrangements or commitments;
(b) agreement, contract or commitment relating to capital
expenditures in excess of $10,000;
(c) loan or advance to, or investment in, any other Person or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment;
(d) guarantee or other contingent liability in respect of any
indebtedness or obligation of any other Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business);
(e) agreement, contract or commitment limiting the freedom of
Ultimate to engage in any line of business or to compete with any other person;
(f) agreement, contract or commitment not entered into in the
ordinary course of business which involves $25,000 or more in annual payments
and is not cancelable without penalty within thirty (30) days;
(g) distributor's, manufacturer's, sales representative or agency
agreements;
(h) output or requirements agreements;
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(i) agreements obligating Ultimate to issue shares of its capital
stock, or granting rights to acquire shares of its capital stock or instruments
convertible into capital stock;
(j) any agreement with any customer or supplier other than in the
ordinary course of business;
(k) any agreement, indenture or other instrument pursuant to which
Ultimate has borrowed money ("Loan Agreements"); or
(l) agreements, contracts or commitments which might reasonably be
expected to have a Material Adverse Effect.
Ultimate has not violated any of the terms or conditions of any contract or
agreement set forth in Schedule 3.8 in any material respect.
Section 3.9 Books and Records. The books of account, minute books, stock
record books, and other records of Ultimate, all of which have been made
available to Purchaser, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of Ultimate contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Board of Directors, and committees of the Boards
of Directors of Ultimate, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books.
Section 3.10 Intellectual Property. Set forth in Schedule 3.10 is a
complete and accurate list of all patents, patent applications, trademarks,
trade names, service marks, and copyrights owned or (as indicated) licensed by
Ultimate. To Seller's and Ultimate's Knowledge, Ultimate is not infringing,
violating or otherwise acting adversely to, the rights of any person under or in
respect of any Proprietary Rights. Except as set forth in Schedule 3.10, there
are no claims that Ultimate or the operation of the Business infringes, violates
or otherwise is adverse to, the rights of any person under or in respect of any
Proprietary Rights. Except as set forth in Schedule 3.10, Ultimate is not a
party to any license agreement, or arrangement, whether written or oral, express
or implied, or whether as licensee, licensor, or otherwise, with respect to any
Proprietary Rights. "Proprietary Rights" means any one or more of the following:
(a) letters patent and any applications therefor, whether foreign or domestic
and all rights associated therewith; (b) trademarks, service marks, collective
marks, and certificate marks, whether registered (state and/or federal) or
unregistered, and whether foreign or domestic and the goodwill and all rights
associated therewith; (c) copyrights, whether registered or unregistered, and
whether foreign or domestic, and all rights associated therewith; (d) trade
names and business identifications, including, but not limited to, the name
"Ultimate Technology Corporation"; (e) trade secrets and other legally
protectable proprietary information, data or knowledge, (f) methods, processes,
inventions, technology and know-how; and (g) all other similar proprietary
rights and intellectual property.
Section 3.11 Leases. Set forth in Schedule 3.11 is an accurate and
complete list of (i) all leases for real property used or held for use in the
Business, including the lease for the real property housing the headquarters of
Ultimate located in Victor, New York, and (ii) all leases for personal property
used or held in connection with the Business to which Ultimate is a party (as
lessee or lessor) (the "Leases"). Each Lease set forth in Schedule 3.11 is in
full force and effect; all rents and additional rents due to date on each such
Lease have been paid; in each case, Ultimate has been in possession since the
commencement of the original term of such Lease and is not in default thereunder
and no waiver, indulgence or postponement of Ultimate's obligations thereunder
has been requested by Ultimate or granted by the lessor; and, to Ultimate's and
Seller's Knowledge, there exists no event of default or event, occurrence,
condition or act (including but not limited to
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the purchase of the Shares hereunder) which, with the giving of notice, the
lapse of time or the happening of any further event or condition, would become a
default under such conditions under any such Lease by either lessor or lessee in
each instance.
Section 3.12 Inventory. The inventory of supplies, raw materials, work in
process, finished goods, supplies and spare parts held, including any such item
which is in transit or on order as of the Closing Date relating to the Business
(collectively, the "Inventory") consists of items of a quality and quantity
usable and salable in the ordinary course of business before and after the
Closing, net of reserves on the Financial Statements. Neither Ultimate nor
Seller has any Knowledge that any customer of Ultimate intends to request that
Ultimate take back or otherwise repurchase or give credit for any amount of the
Inventory, other than in the ordinary and usual course of Ultimate's Business as
conducted consistent with Ultimate's past experience. All items included in the
Inventory are the property of Ultimate, except as set forth on Schedule 3.12.
Except as set forth on Schedule 3.12, no items included in the Inventory have
been pledged as collateral or are held by Ultimate on consignment from others.
The Inventories shown on the Balance Sheet are based on quantities determined by
physical count or measurement, taken within the preceding twelve (12) months,
and are valued on a basis consistent with that of prior years as described in
the Financial Statements.
Section 3.13 Litigation and Proceedings. Except as set forth in Schedule
3.13, there is no suit, action, claim, arbitration, investigation or legal,
administrative or other proceeding pending, or, to Seller's or Ultimate's
Knowledge, threatened, against or affecting Ultimate or the Business or the
condition (financial or otherwise), properties, assets, rights, results of
operations, operations or prospects of Ultimate or the Business. Schedule 3.13
sets forth all such matters that to Seller's and Ultimate's Knowledge have been
commenced, asserted or settled in the last three (3) years. Seller has furnished
or made available to Purchaser relevant court papers and other documents
relating to the matters set forth in Schedule 3.13. Ultimate is not subject to
any judgment, order or decree entered in any lawsuit or proceeding. Ultimate 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.
Section 3.14 Employee Relations. Ultimate is in compliance with all
applicable Laws and regulations respecting labor, employment, wages and hours
and occupational safety and health. There is no pending or, to the Knowledge of
Seller or Ultimate, threatened labor dispute, strike or work stoppage which
would reasonably be likely to interfere with continued operations of the
Business. There has been no strike, walkout or work stoppage involving any of
the employees of Ultimate during the twenty-four (24) months prior to the date
hereof. Ultimate has not received written notice of pending or threatened
changes with respect to (including, without limitation, resignation of) the
senior management or key supervisory personnel of the Business.
Section 3.15 Benefit Arrangements.
(a) Schedule 3.15 lists all employee benefit plans and collective
bargaining, employment or severance agreements or other similar arrangements
which Seller or Ultimate currently sponsor, maintain or to which contributions
are made, or for which obligations have been incurred and are outstanding, for
the benefit of employees of Ultimate, including, without limitation, (1) any
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) (the
"Benefit Plans"), (2) any profit-sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, severance,
welfare or incentive plan, agreement or arrangement, (3) any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to employees,
officers, directors or agents, including but not limited to benefits relating to
automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave,
medical, dental, hospitalization, life insurance and other types of insurance,
and (4) any employment agreement. The plans, agreements and arrangements
described in this Section 3.15 are referred to herein as "Benefit Arrangements."
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(b) None of the Benefit Arrangements is (i) a plan subject to Title
IV of ERISA or (ii) a "multiemployer plan" (within the meaning of Section 3(37)
of ERISA).
(c) Neither Seller nor Ultimate nor any ERISA Affiliate of Seller or
Ultimate has ever contributed to, or had an obligation to contribute to, any
multiemployer plan (within the meaning of Section 3(37) of ERISA) or any plan
subject to Title IV of ERISA.
(d) Seller or Ultimate has delivered to Purchaser true and complete
copies of all documents and summary plan descriptions of the Benefit
Arrangements or summary descriptions of any such Benefit Arrangement not
otherwise in writing. Seller or Ultimate has delivered to Purchaser true and
complete copies of the most recent determination letters and Form 5500s filed in
the most recent three plan years with respect to any Benefit Plan, including all
schedules thereto and financial statements with attached opinions of independent
accountants.
(e) Each Benefit Arrangement (and any related trust agreement) has
been administered in accordance with its terms, and Seller and Ultimate are in
material compliance with the applicable provisions of ERISA, the Code and other
laws applicable thereof.
(f) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
Benefit Arrangement.
(g) All reports, returns and similar documents with respect to each
Benefit Arrangement required to be filed with any governmental agency or
distributed to any participant of each Benefit Arrangement have been duly and
timely filed or distributed.
(h) No actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to Seller's and Ultimate's
Knowledge, threatened with respect to any Benefit Arrangement.
(i) Neither Seller, Ultimate nor any Benefit Arrangement fiduciary
has, with respect to the Benefit Arrangements, engaged in a prohibited
transaction, as such term is defined in Section 4975 of the Code or Section 406
of ERISA and no event or condition exists with respect to any Benefit
Arrangement which constitutes a reportable event within the meaning of Section
4043 of ERISA, as to which a waiver is not applicable.
(j) Each Benefit Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service that such Benefit Plan is qualified under Section
401(a) of the Code. To Seller's and Ultimate's Knowledge, no event has occurred
that will or could give rise to disqualification or loss of tax-exempt status of
any such Benefit Plan or trust under Sections 401(a) or 501(a) of the Code.
(k) Each of the Benefit Arrangements can be terminated within a
period of thirty (30) days following the Closing Date, without any additional
contribution to such Benefit Arrangement or the payment of any additional
compensation or amount or acceleration of any benefits.
Section 3.16 Compliance with Laws. To the Knowledge of Seller and
Ultimate, Ultimate has complied with, is not in violation of and has received no
notices or communication from any Governmental Authority relative to alleged,
actual or potential violation of any applicable foreign, federal, state or local
statutes, Laws and regulations (including but not limited to any applicable
building, zoning or other Law, but
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specifically excluding Environmental Laws as to which Section 3.17 shall govern)
affecting Ultimate's properties and assets or the operation of the Business,
including but not limited to under the Occupational Safety and Health Act of
1970, as amended.
Section 3.17 Environmental Matters. Except as disclosed in Schedule 3.17,
(a) Ultimate does not currently, and in the past did not, generate,
manufacture, use, store, release, transport or have transported or dispose of
Hazardous Materials, except in material compliance with Environmental Laws;
(b) Ultimate is currently, and in the past has been, in material
compliance with all Environmental Laws and no notice, request, investigation,
administrative order, consent order, agreement, litigation or settlement is
proposed, threatened, anticipated or in existence with respect to the material
violation of any Environmental Law;
(c) Ultimate is in possession of all material permits required under
any applicable Environmental Law for the conduct and operation of the Business
or any part thereof, and Ultimate is in compliance with all of the material
requirements and limitations included in such permits; and
(d) without in any way limiting the generality of the foregoing:
(i) all on-site locations where Ultimate has stored, treated
or disposed or arranged for disposal of Hazardous Materials are identified in
Schedule 3.17(d)(i),
(ii) to Seller's and Ultimate's Knowledge, all above ground
and underground storage tanks used for storage of Hazardous Materials and the
capacity and contents of such tanks located on property owned or leased by
Ultimate, are identified in Schedule 3.17(d)(ii),
(iii) except as set forth in Schedule 3.17(d)(iii), to
Seller's and Ultimate's Knowledge, there is no asbestos contained in or forming
part of any building, building component, equipment, structure or office space
owned or leased by Ultimate, which asbestos is friable, deteriorating or
reasonably in need of removal or replacement for the purpose of human health,
and
(iv) Schedule 3.17(d)(iv) lists (A) all environmental
investigation, clean up, remediation and/or audit reports prepared for, or in
the possession or control of, Ultimate with respect to each parcel of real
property owned or leased by Ultimate or with respect to Ultimate's operations,
and (B) all material written communications between Ultimate or any Ultimate
Affiliate, and any Governmental Authorities arising under or related to
Environmental Laws. Ultimate has provided Purchaser with accurate and complete
copies of such environmental reports and communications.
For purposes of this Section 3.17, a matter shall not be deemed "material"
unless and until all Purchaser's Claims for indemnification under this section,
individually or in the aggregate, equal at least $10,000, which amount shall
count toward the Threshold set forth in Section 13.6 hereof.
Section 3.18 Taxes. Except as disclosed on Schedule 3.18, (i) within the
times and in the manner prescribed by Law, Seller has filed or caused to be
filed all consolidated federal, state, local and foreign tax returns and tax
reports which are required by Law and has paid all Taxes, assessments, interest
and penalties that are due and payable arising from its ownership of Ultimate
and operation of Ultimate's Business (other than amounts that are being
contested in good faith); and (ii) there are no Liens for Taxes upon the Shares
or upon
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any of the assets of Ultimate. Ultimate has filed all Tax Returns that it was
required to file and all such Tax Returns were correct and complete in all
material respects. Ultimate has paid all taxes that are due and payable (other
than amounts being contested in good faith). To Ultimate's Knowledge, no claim
has ever been made by an authority in a jurisdiction where Ultimate does not
file Tax Returns that it is or may be subject to tax in such jurisdiction.
Ultimate has no liability for the Taxes of Seller or any other person for any
reason, including, without limitation: (a) under Treasury Reg. ss.1.1502-6 (or
any similar provision of state, local or foreign law), (b) as a transferee or
successor, or (c) by contract. To Seller's and Ultimate's Knowledge, the
charges, accruals and reserves in the Financial Statements in respect of Taxes
relating to Ultimate are adequate for all federal, state and local Taxes and any
penalties, interest or other charges for the period ended December 31, 1999 and
for all prior periods, whether or not disputed, and Seller and Ultimate have
withheld and paid or accrued all Taxes to the appropriate Governmental Authority
required to have been withheld and paid by each of them in connection with
amounts paid or owing to any employee, independent contractor or other party as
a result of Ultimate's conduct of the Business. Except as set forth on Schedule
3.18, no examination of any Tax Return of Ultimate is currently in progress.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Return of Ultimate.
Section 3.19 Authority and Consents. Schedule 3.19 lists all consents of
Persons or entities which are necessary to permit Seller or Ultimate to carry
out their respective obligations under this Agreement (the "Consents"). Except
as set forth in Schedule 3.19, Seller and Ultimate have the right, power, legal
capacity, and authority to enter into, and perform the obligations under, this
Agreement, and no approval, Consent, authorization, waiver, License, clearance
or order of, any declaration or notice to, or any filing or registration with,
any other Persons (including any Governmental Authority) with respect thereto is
necessary in connection with this Agreement. Except as set forth in Schedule
3.19, neither Seller nor Ultimate is subject, or a party to, any charter, bylaw,
mortgage, Lien, lease, License, permit, agreement, contract, instrument, Law,
rule, ordinance, regulation, order, judgment, decree or any other restriction of
any kind or character which would prevent consummation of the transactions
contemplated by this Agreement or compliance by Seller or Ultimate with the
terms, conditions and provisions hereof or the continued operation of the
Business after the date hereof or the Closing Date on substantially the same
basis as heretofore operated.
Section 3.20 Licenses, Permits and Authorizations. Schedule 3.20 lists all
Licenses, franchises and other permits held by Ultimate. Except as set forth in
Schedule 3.20, all Licenses, franchises and other permits held by Ultimate are
in full force and effect and such Licenses, franchises and permits (i)
constitute all of the Licenses, franchises and permits necessary to allow
Ultimate to conduct the Business as currently conducted and (ii) after Closing,
will, subject to obtaining any necessary consents, constitute all of the
Licenses, franchises and permits necessary to allow for the conduct of the
Business in the same manner as currently conducted by Ultimate.
Section 3.21 Insurance. Seller has delivered to Purchaser true and
complete copies of all policies of insurance to which Ultimate is a party or
under which any of Ultimate's properties or assets are covered (collectively,
the "Insurance Policies"). Schedule 3.21 sets forth the following information
with respect to each Insurance Policy: (a) the name of the insurer, (b) the
period of coverage and (c) the type and amount of coverage.
Section 3.22 Brokers' Fees. No broker, finder, investment banker or other
person or entity, other than BancBoston Robertson Stephens, is entitled to any
brokerage fee, finders' fee or other commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
Seller or Ultimate. Seller is solely responsible for all fees, costs and
expenses in connection with its engagement of BancBoston Robertson Stephens, and
Ultimate has no liability therefor.
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Section 3.23 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.23, since the Balance Sheet Date, there has not been any:
(a) transaction by Ultimate except in the ordinary course of
business as conducted during the twelve (12) month period ending on that date;
(b) event, whether as a result of any legislative or regulatory
change, revocation of any License or rights to do business, fire, explosion,
accident, casualty, labor, trouble, flood, drought, riot, storm, condemnation or
act of God or other public force or otherwise, which has had a Material Adverse
Effect on Ultimate or the Business;
(c) material adverse change in the business or condition (financial
or otherwise), liabilities, properties, assets, rights, operations, results of
operations or prospects of Ultimate;
(d) change in Ultimate's authorized or issued capital stock, grant
of any stock option or right to purchase shares of capital stock of Ultimate,
issuance of any security convertible into capital stock of Ultimate, grant of
any registration rights by Ultimate, purchase, redemption, retirement or other
acquisition by Ultimate of any shares of such capital stock, or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock (except as effected pursuant to the lockbox arrangement
established between Seller's lenders and Ultimate providing for a daily sweep by
such lenders of Ultimate's cash accounts);
(e) change in accounting methods or practices as they relate to
Ultimate (including, without limitation, any change in depreciation or
amortization policies or rates) by Seller, or revaluation of any of Ultimate's
assets;
(f) payment, discharge or satisfaction of any existing claims,
liabilities, obligations or indebtedness of Ultimate, except in the ordinary
course of business;
(g) loans or advances to third parties or any employees, except in
the ordinary course of business; or
(h) agreement, the performance of which will result in any of the
things described in the preceding clauses (a) through (g).
Section 3.24 Absence of Undisclosed Liabilities. Ultimate has no claims
against it, indebtedness, liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
that are not reflected or reserved against in the Financial Statements except
for: (a) those that are set forth in Schedule 3.24; (b) those that may have been
incurred after the Balance Sheet Date in the ordinary and usual course of
business and are usual and normal in amount both individually and in the
aggregate; or (c) those that are not required by GAAP to be included in a
balance sheet. Other than as set forth at Schedule 3.24, neither Seller nor
Ultimate is in default in respect of the terms and conditions of any
indebtedness. Ultimate has no indebtedness other than (i) indebtedness incurred
by Seller listed on Schedule 3.24, and (ii) indebtedness associated with the
Leases, or purchase money indebtedness incurred in the ordinary course of
business which is not material in the aggregate. Ultimate has no negative cash
balances.
Section 3.25 Accounts Receivable. Except as set forth on Schedule 3.25,
all Accounts Receivable of Ultimate shown or reflected on the Balance Sheets
represent bona fide transactions at arm's length and arose in the ordinary
course of Ultimate's Business. To Ultimate's Knowledge, none of such Accounts
Receivable is or as of the Closing Date will be subject to any counterclaim or
set off, except to the extent of any provision or
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reserve therefor, and Ultimate has no Knowledge that any Account Receivable will
not be fully collectible when due (except to the extent of any reserve).
Schedule 3.25 contains a complete and accurate schedule of the Accounts
Receivable of Ultimate as at October 31, 1999, together with an accurate aging
of such Accounts Receivable.
Section 3.26 Year 2000 A. D. (a) Seller has (i) initiated a review and
assessment of all areas within Ultimate's business and operations (including
those affected by suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Ultimate (or its suppliers, vendors or customers) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. Based on
the foregoing, Seller believes that all computer applications (including those
of suppliers, vendors and customers) that are material to the business and
operations of Ultimate are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dated before and after January
1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse Effect on
Ultimate or the Business.
(b) Except as provided on Schedule 3.26 hereto, to Ultimate and
Seller's Knowledge, (i) all products manufactured by Ultimate, and (ii) all
products sold by Ultimate, are designed to, and can be, used prior to, during,
and after the calendar year 2000 A.D., and such products have been designed or
modified, as applicable, to be, and are, Year 2000 Compliant.
Section 3.27 Accuracy of Representations and Warranties. No representation
or warranty of either Seller or of Ultimate contained in this Agreement
(including the Financial Statements, Schedules and Exhibits hereto) or in any
certificate delivered to Purchaser by Seller or Ultimate pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller, as of the date of this
Agreement and as of the Closing, that, except as has otherwise been disclosed by
Purchaser to Seller, its agents or representatives:
Section 4.1 Organization and Authority of Purchaser. Purchaser has been
duly organized and is validly existing as a limited partnership in good standing
under the laws of the state of New York and has the power and authority to enter
into and perform its obligations under this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
general partner of Purchaser, and no other proceeding on the part of Purchaser
is necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legally valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms. Purchaser has used
or will use its best efforts prior to the Closing Date to take all action
required by Law (including, without limitation, federal and state securities
laws), its Certificate of Limited Partnership and Agreement of Limited
Partnership, this Agreement and all other action necessary to consummate,
deliver and perform each of the transactions and its obligations contemplated
under this Agreement.
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Section 4.2 No Conflict. The execution and delivery of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby does not
and will not violate any provision of, or result in the breach of any applicable
Law, rule or regulation of any Governmental Authority, the Certificate of
Limited Partnership, Agreement of Limited Partnership, or other organizational
documents of Purchaser or any agreement, indenture or other instrument to which
Purchaser is a party or by which Purchaser may be bound, or of any order,
judgment or decree applicable to Purchaser , or terminate or result in the
termination of any such agreement, indenture or instrument, or result in the
creation of any Lien upon any of the properties or assets of Purchaser or
constitute an event which, after notice or lapse of time or both, would result
in any such violation, breach, acceleration, termination or creation of a Lien.
Section 4.3 Litigation and Proceedings. There are no lawsuits, actions,
suits, claims or other proceedings at law or in equity, or, to the Knowledge of
Purchaser, investigations before or by any court or Governmental Authority or
before any arbitrator pending or, to the Knowledge of Purchaser, threatened,
against Purchaser. There is no unsatisfied judgment or any open injunction
binding upon Purchaser.
Section 4.4 Authority and Consents. Except as set forth in Schedule 4.4,
no consent, approval or authorization of, or designation, declaration or filing
with, any Governmental Authority or other third party is required on the part of
Purchaser with respect to Purchaser's execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby.
Section 4.5 Financing; Financial Ability. Purchaser has the financial
resources necessary to consummate the transactions contemplated by this
Agreement, including, without limitation, the ability to pay the Purchase Price
at Closing and any adjustment thereto. Purchaser has received and furnished
copies to Seller of a commitment letter (the "Commitment Letter") pursuant to
which a reputable financial institution has committed, subject to the terms and
conditions thereof, to provide to Purchaser a $10,425,000 credit facility. The
commitment in the Commitment Letter is referred to herein as the "Financing
Commitment" and the financing provided thereunder is referred to herein as the
"Financing." The aggregate proceeds of the Financing (along with cash held by or
available to Purchaser) will be in an amount sufficient to (i) consummate the
transaction contemplated hereby, and (ii) pay all related fees and expenses
allocated to the Purchaser hereunder.
Section 4.6 Brokers' Fees. No broker, finder, investment banker or other
person, other than Capital Formation Group of Rochester, L.P., is entitled to
any brokerage fee, finders' fee or other commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
Purchaser.
Section 4.7 Antitrust Requirements. Purchaser and its "ultimate parent
entity" (as such term is defined under the HSR Act), after full and diligent
inquiry, has determined that there is no filing required under the HSR Act as a
result of or in relation to the transaction contemplated by this Agreement.
Section 4.8 Accuracy of Representations and Warranties. No representation
or warranty of Purchaser contained in this Agreement (including the Schedules
and Exhibits hereto) or in any certificate delivered by Purchaser pursuant to
this Agreement contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
Section 4.9 Purchase for Investment. Purchaser is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof, and Purchaser will not offer to sell
or otherwise dispose of the Shares so acquired by it in violation of any of the
registration requirements of the Securities Act.
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ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER AND ULTIMATE
From the date of this Agreement until the Closing Date, Seller and
Ultimate hereby agree as follows:
Section 5.1 Termination of Liens. Seller and Ultimate shall cause (a) all
Liens encumbering the assets or properties of Ultimate to be terminated and (b)
Ultimate to be released of liability under or in respect of all Loan Agreements,
in each case concurrent with the Closing.
Section 5.2 Business Operating Covenants.
(a) Conduct of the Business. From the date hereof through Closing,
Ultimate will, except to the extent consented to by Purchaser, which consent
shall not be unreasonably withheld: (i) conduct the Business only in the
ordinary and usual course in a manner consistent with past practices, and (ii)
use commercially reasonable efforts to keep available (in the ordinary and usual
course of business consistent with past practice and without any obligation to
spend money other than in the ordinary and usual course of business) the
services of the employees of the Business and take all reasonable actions to
preserve contracts and other business relationships with licensors, suppliers,
dealers, customers and others having contracts or business relationships with
the Business.
(b) Forbearance by Seller and Ultimate. Neither Seller nor Ultimate
will, after the date hereof and prior to Closing, without the prior written
consent of Purchaser which consent will not be unreasonably withheld or delayed,
take any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the events or changes set forth in Section
3.23 is likely to occur; except that (i) Seller and Ultimate may cancel
intercompany accounts in accordance with the provisions of Section 8.2, and (ii)
Ultimate may make distributions of cash and cash equivalents to Seller prior to
the Closing Date.
Section 5.3 Access to Premises and Information. From the date hereof
through the Closing, Seller and Ultimate shall afford to Purchaser and its
accountants, counsel and other representatives reasonable access during normal
business hours, to the properties, books, contracts, commitments, Tax Returns,
records and appropriate officers and employees of Seller and Ultimate and shall
furnish such representatives with all financial and operating data and other
information concerning the affairs of Ultimate as they may reasonably request in
connection with this Agreement or for any reasonable business purpose relating
to the Business.
Section 5.4 No Solicitations. From the date hereof until the Closing Date,
neither Seller nor Ultimate shall (a) enter into any discussions or transactions
with any third party relating to the sale or disposition, directly or
indirectly, of the stock or substantially all the assets or Business of
Ultimate, or a merger, consolidation or similar transaction involving Ultimate
(other than in the ordinary course of business), or (b) disclose to any other
person (other than Seller's and Ultimate's officers, directors, management
employees, and lenders) the nature of the transaction contemplated by this
Agreement; provided, however, that nothing herein shall prohibit the Board of
Directors of Seller from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal; or (ii) furnishing
information to, or entering into negotiations or discussions with, any person or
entity that makes an unsolicited proposal (an "Acquisition Proposal") to acquire
Ultimate pursuant to a merger, consolidation, share exchange, business
combination or other similar transaction, but only to the extent that Seller's
Board of Directors, after having consulted with and received the advice of legal
counsel and Seller's lenders, reasonably determines in good faith that such
action is
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required for the Board of Directors of Seller to comply with its fiduciary
duties to Seller's shareholders imposed by Connecticut law, in which case the
Company shall provide notice to the Purchaser to the effect that it has
furnished information to, or entered into discussions or negotiations with such
person or entity and disclose to Purchaser the material terms of any such
Acquisition Proposal or the substance of any such discussions and, if Seller's
Board of Directors determines that it should accept such Acquisition Proposal,
of the acceptance of such Acquisition Proposal.
Section 5.5 Maintenance of Insurance. Between the date hereof and Closing,
Seller shall maintain the Insurance Policies in full force and effect.
Section 5.6 Consents, Approvals and Filings. As soon as reasonably
possible after the execution and delivery of this Agreement, and in any event on
or before the Closing Date, Seller and Ultimate will obtain the written Consents
of all Persons or entities listed on Schedule 3.19 and will furnish to Purchaser
executed copies of such Consents. Seller and Ultimate will use their
commercially reasonable best efforts to comply as promptly as practicable with
any governmental requirements, domestic or foreign, applicable to the
consummation of the transactions contemplated hereby, and to obtain on or before
the Closing Date all necessary approvals, authorizations, Consents, Licenses and
clearances of such Governmental Authorities required to be obtained by Seller
and Ultimate in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. Seller will provide
Purchaser with copies of all filings made by Seller with any Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby.
Section 5.7 Subsequent Events. Seller and Ultimate will promptly advise
Purchaser of (i) any event occurring prior to the Closing Date which would
render any representation or warranty of Seller and/or Ultimate contained
herein, if made on the date of such event or on the Closing Date, untrue or
inaccurate; and (ii) any material adverse change in the Business.
Section 5.8 Resignations. At the Closing, Seller shall deliver or cause to
be delivered to Purchaser duly signed resignations, effective immediately after
the Closing, of all directors of Ultimate (other than those directors and
officers designated in writing by Purchaser at least five (5) days prior to the
Closing Date).
Section 5.9 COBRA Requirements. Notwithstanding anything in this Agreement
to the contrary, on and after the Closing Date, Seller will comply in all
respects with the group health plan continuation coverage requirements of COBRA
with regard to employees of Ultimate, their spouses and dependents, that were
terminated on or prior to the Closing Date.
ARTICLE VI
TAX MATTERS
Section 6.1 Apportionment.
(a) The parties hereto will, to the extent permitted by applicable
law, elect with the relevant taxing authority to treat for all purposes the
Closing Date as the last day of a taxable period of Ultimate (a "Short Period")
and such period shall be treated as a taxable period ending on or before the
Closing Date (a "Pre-Closing Period") for purposes of this Agreement. Seller
shall prepare and file on a timely basis any Tax Return attributable to such
Short Period and pay any Tax liability due with respect thereto.
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(b) In any case where applicable law does not permit the parties
hereto to treat the Closing Date as the last day of a taxable period, then for
purposes of this Agreement, the portion of each such Tax that is attributable to
the income, properties or operations of Ultimate for the period that would have
included the Closing Date if the Closing Date were permitted to be treated as
the last day of a taxable period shall be (A) in the case of a Tax that is not
based on net income, the total amount of such Tax for the taxable period that
includes the Closing Date, multiplied by a fraction, the numerator of which is
the number of days from the first day of such period through the Closing Date,
and the denominator of which is the total number of days in such period, and (B)
in the case of a Tax that is based on net income, the Tax that would be due with
respect to such period if the Closing Date were permitted to be treated as the
last day of the taxable period.
(c) Except as otherwise provided in subparagraph (a) of this Section
6.1, Purchaser shall be responsible for the preparation and filing of all Tax
Returns of Ultimate with respect to any period ending after the Closing Date.
Upon reasonable notice from Purchaser and delivery to Seller of evidence
reasonably satisfactory to Seller of the amount to be paid by Seller, to the
extent not reserved on the Financial Statements, Seller shall promptly pay
Purchaser an amount equal to Seller's liability in respect of such Taxes
attributable to any Pre-Closing Period (actually reflected in any such Tax
Return).
Section 6.2 Cooperation in Tax Return Preparation. Seller and Purchaser
will cooperate fully with each other in connection with the preparation of all
Tax Returns and all audit examinations of, or claims or assertions against
Ultimate by any governmental taxing authority with respect to (i) any
Pre-Closing Period and (ii) any taxable period ending after the Closing Date (a
"Post-Closing Period") to the extent that the audit, claim or assertion relates
to property, income or operations of Ultimate, in each case including but not
limited to the furnishing or making available of records, books of account or
other materials and appropriate personnel necessary or helpful for the defense
against the assertions of any taxing authority.
Section 6.3 Contests. Promptly upon receipt by any party hereto of notice
of the assertion of any claim by a taxing authority with respect to Taxes
relating to Ultimate that, if successful, would result in the imposition of any
Tax for which Seller would be obligated to indemnify Purchaser pursuant to this
Agreement, such party shall promptly notify Seller in writing of such fact.
Seller shall have right, at its option, and at its own expense to assume the
defense of any such claim; provided, however, that Seller shall not settle,
compromise or abandon without Purchaser's prior written consent any claim for
Tax which would adversely affect the tax liability of Purchaser or Seller with
respect to any taxable period ending after the Closing Date to any extent. Such
consent shall not be unreasonably withheld.
Section 6.4 Tax Election.
(a) 338(h)(10) Election. The parties hereby agree, at the option of
Purchaser, jointly to make a valid, timely and effective election under Section
338(h)(10) of the Code, with respect to Purchaser's purchase of the Shares, to
treat the acquisition of the Shares as an asset acquisition (the "Election"). If
Purchaser determines to make the Election, it shall timely notify Seller in
writing, and Purchaser and Seller shall cooperate and provide each other with
all necessary and appropriate documentation (including filing such forms,
returns, elections, schedules and other documents as may be required) to effect
and preserve a timely Election.
(b) If Purchaser notifies Seller of its determination to make the
Election, Purchaser and Seller shall act together in good faith to (i) determine
and agree upon the amount of the "adjusted grossed-up basis" of Ultimate's
assets (within the meaning of Treas. Reg. ss. 1.338(h)(10)-1), which adjusted
grossed-up basis shall be determined in a manner consistent with the Purchase
Price for purposes of Treas. Reg. ss. 1.338(h)(10)-1 and (ii) agree upon the
proper allocations of the adjusted grossed-up basis of Ultimate's assets among
the assets of Ultimate in accordance with Section 338(b)(5) of the Code and the
Treasury Regulations promulgated
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thereunder. Seller shall calculate gain or loss, if any, resulting from the
Election in a manner consistent with the allocations and shall not take any
position inconsistent with the allocations in any Tax Return or otherwise.
Purchaser shall allocate the adjusted grossed-up basis of Ultimate's assets
among the assets of Ultimate in a manner consistent with the allocations and
shall not take any position inconsistent with the allocations in any Tax Return
or otherwise.
(c) In the event that Purchaser or Seller receives notice, whether
orally or in writing, of any pending or threatened federal, state, local,
municipal or foreign Tax examination, claim, settlement, proposed adjustment,
assessment or related matter with respect to Taxes that could affect Seller, or
if Seller receives notice of matters that could affect Purchaser or Seller, the
party receiving notice shall notify in writing the potentially affected party
within 10 days thereof. The failure of any party to give the notice required by
this paragraph shall not impair that party's rights under this Agreement except
to the extent that the other parties demonstrate that they have been materially
damaged thereby.
(d) Each of Seller and Purchaser (as applicable, the "Controlling
Party") shall have the right to control any audit or examination by any taxing
authority, initiate any claim for refund, file any amended return, and contest,
resolve and defend against any assessment, notice of deficiency or other
adjustment or proposed adjustment relating to or with respect to those Tax
Returns, and only those Tax Returns, that each is required to prepare and file
pursuant to this Section 6.4(d); provided, that, in the event that any
adjustment could have an adverse effect on the tax liability of the other party
(the "Affected Party"), the Controlling Party (A) shall give the Affected Party
written notice of any such adjustment, (B) shall permit the Affected Party to
participate in the proceeding to the extent the adjustment may affect the tax
liability of the Affected Party and (C) shall not settle or otherwise compromise
such proceeding without the prior written consent of the Affected Party, which
consent shall not be unreasonably withheld. Seller and Purchaser shall each be
entitled to retain for its own account any refunds of Taxes attributable to
those Tax Returns that each is required to prepare and file pursuant to this
Section 6.4(d) and shall pay to the other the amount of any refund to which the
other is entitled
Section 6.5 Tax Sharing Agreements. Any tax sharing agreement between
Seller and Ultimate is terminated as of the Closing Date and will have no
further effect for any taxable year, whether current, past or future.
ARTICLE VII
COVENANTS AND AGREEMENTS OF PURCHASER
From and after the date of this Agreement, Purchaser hereby agrees as
follows:
Section 7.1 Product Warranties. Purchaser shall honor Ultimate's product
warranty claims with respect to goods or products manufactured or sold by
Ultimate shipped before the Closing Date ("Warranty Claims").
Section 7.2 Retention of Records; Inspection.
(a) Unless otherwise consented to in writing by Seller, which
consent shall not be unreasonably withheld, Purchaser shall at no time after the
Closing cause or permit Ultimate to destroy or otherwise dispose of any of its
books and records existing as of the Closing, which books and records are less
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than seven years old at the time of such proposed destruction, without first
offering to surrender to Seller such books and records or any portion thereof.
(b) Purchaser shall afford to Seller and its accountants, counsel
and other authorized representatives reasonable access, after the Closing,
during normal business hours and in a manner so as not to interfere with normal
business operations, to the properties, books, contracts, commitments, Tax
Returns, records and appropriate officers and employees of Ultimate, and shall
furnish such representatives with all financial and operating data and other
information concerning the Business as they may reasonably request in connection
with this Agreement or for any reasonable business purpose relating to the
Business, including but not limited to the preparation of tax returns and
responding to Tax audits, the preparation of periodic financial statements, and
other governmental filings and legal proceedings or inquiries. Seller shall be
entitled, at its own expense, to make copies of such items.
Section 7.3 Consents, Approvals and Filings. Purchaser will use its best
efforts to comply as promptly as practicable with any governmental requirements,
domestic or foreign, applicable to the consummation of the transactions
contemplated hereby, and to obtain on or before the Closing Date all necessary
approvals, authorizations, consents (including those listed on Schedule 4.4),
Licenses and clearances of such Governmental Authorities required to be obtained
by Purchaser in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. Purchaser will provide
Seller with copies of all filings made by Purchaser with any Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby.
Section 7.4 Subsequent Events. Purchaser will promptly advise Seller of
(i) any event occurring prior to the Closing Date which would render any
representation or warranty of Purchaser contained herein, if made on the date of
such event or on the Closing Date, untrue or inaccurate in any material respect;
and (ii) any material adverse change in the business or properties of Purchaser.
Section 7.5 Employee Benefit Plans. Effective at the Closing, Purchaser
will offer to the employees of Ultimate who continue employment after the
Closing Date (the "Employees") for the period of one (1) year after the Closing
Date, the Benefit Arrangements which are substantially similar to the benefit
arrangements offered by Ultimate to its employees immediately prior to the
Closing Date and disclosed on Schedule 3.15 on substantially the same terms and
conditions as are currently offered by Ultimate to its employees, under which
such Employees shall be entitled to pension and other benefits (including, but
not limited to, medical, life and disability insurance), provided that Purchaser
shall not be obligated to offer any arrangements similar to the Tridex 1997 Long
Term Incentive Plan, the Tridex 1998 Non-Executive Long-Term Incentive Plan or
the Stock Incentive Compensation Agreement between Dennis Lewis, Gary German and
Paul Wolf dated March 1997. Notwithstanding the foregoing, Purchaser shall not
be subject to any ongoing employment obligation regarding the employees of
Ultimate following the Closing Date and Purchaser shall not assume sponsorship
of any existing Benefit Arrangements.
Section 7.6 Employment Contract. Purchaser shall assume all of Seller's
rights and obligations from and after the Closing Date under that certain
Employment Agreement between Seller and Samuel J. Villanti dated as of March 26,
1999.
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ARTICLE VIII
JOINT COVENANTS AND AGREEMENTS
From the date of this Agreement until the Closing Date, Seller, Ultimate
and Purchaser hereby agree as follows:
Section 8.1 Support of Transaction. Purchaser, Seller and Ultimate shall
each (i) use reasonable best efforts to assemble, prepare and file any
information (and, as needed, to supplement such information) as may be
reasonably necessary to obtain as promptly as practicable any and all consents
required to be obtained in connection with the transactions contemplated hereby,
(ii) use its reasonable best efforts to obtain all consents and approvals of
third parties that any of Purchaser or Seller or Ultimate are required to obtain
in order to consummate the transactions contemplated hereby, (iii) take such
other action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Articles IX and X or otherwise to comply
with this Agreement, and (iv) take all appropriate actions, and do, or cause to
be done, all things necessary, proper or advisable under any applicable laws,
regulations and Contracts to consummate and make effective the transactions
contemplated herein. Each of the parties agrees to cooperate with the other in
the preparation and filing of, and the provision of information for, all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Law, rule or regulation or the rules of The NASDAQ
Stock Market, Inc., the Securities Act, the Exchange Act or any Governmental
Authority, in connection with the transactions contemplated by this Agreement,
and to use their respective best efforts to agree jointly on a method to
overcome any objections by any Governmental Authority to any such transactions.
The parties also agree to use reasonable best efforts to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and to lift or rescind any injunction or
restraining order or other adversely affecting the ability of the parties to
consummate the transactions contemplated hereby.
Section 8.2 Intercompany Accounts. Seller and Purchaser agree that all
intercompany accounts between Seller and Ultimate shall be canceled effective as
of the Closing Date automatically and without any repayment or other action by
either Seller or Ultimate, which cancellation shall be treated as a distribution
and/or a contribution to capital, as the case may be.
Section 8.3 Confidentiality. Unless and until the Closing has been
consummated, the parties and their Affiliates, officers, directors, members,
managers, agents, employees and other representatives will hold in strict
confidence, and will not use to the detriment of the other party, any and all
secret and confidential data and information with respect to the other party's
business obtained in connection with the transactions contemplated by this
Agreement. If the transactions contemplated by this Agreement are not
consummated, the parties will return to each other all data and information
relating to the other party's business, including, but not limited to,
worksheets, reports, lists, memoranda and other documents delivered in
connection with this transaction, and thereafter shall not use any information
so obtained, shall not disclose or divulge such information to any other person
and shall keep confidential all information so obtained; provided, however, (i)
that any disclosure of such information may be made to the extent required by
applicable Law or regulation or judicial or regulatory process; (ii) neither
party shall not be obligated to treat as confidential any information with
respect to the other party which is publicly available or readily ascertainable
from public sources, or which is lawfully known to it at the time that such
information is disclosed to it by the other party or which is rightfully
received from a third party, and (iii) that the parties shall be permitted to
discuss the terms and conditions of this Agreement with any lenders or potential
lenders who execute a confidentiality agreement. The obligations of this
provision shall survive any termination or abandonment of this Agreement. The
obligations of the parties under this Section 8.3 are supplemental to, and do
not supersede, the Confidentiality Agreement dated June 29, 1999, 1999 between
the Purchaser and BancBoston Robertson Stephens, as attorney
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in fact for the Seller.
Section 8.4 Disclosure; Publicity. Except as may be required by Law or any
Governmental Authority or as otherwise permitted or expressly contemplated
herein, no party hereto or their respective Affiliates, employees, agents and
representatives shall disclose to any third party this Agreement or the subject
matter or terms hereof without the prior consent of the other parties hereto.
Subject to the parties' respective obligations under federal securities law, no
press release or other public announcement related to this Agreement or the
transactions contemplated hereby shall be issued by any party hereto without the
prior approval of the other parties, which shall not be unreasonably withheld.
Section 8.5 Transfer of Defined Contribution Plan Assets.
(a) As of the Closing Date, each Employee who is a participant in
the Tridex Corporation Retirement Savings Plan shall become fully vested in his
account balance in the Tridex Corporation Retirement Savings Plan. Purchaser
agrees to establish, designate or maintain a defined contribution employee
pension benefit plan that is qualified under Section 401(a) of the Code (the
"Purchaser Defined Contribution Plan"), effective no later than the Transfer
Date. In accordance with the provisions of this Section 8.5, Seller agrees to
cause the trustee of the Tridex Corporation Retirement Savings Plan to transfer,
to the trustee of the Purchaser Defined Contribution Plan, the Total Retirement
Savings Plan Transfer Amount.
(b) The "Total Retirement Savings Plan Transfer Amount" shall be the
amount equal to the account balances in the Tridex Corporation Retirement
Savings Plan attributable to the participants and beneficiaries in such plan who
are Employees as shown on the valuation report for the valuation date occurring
on, or immediately before, the Transfer Date (including any amounts accrued as
of such date but not yet contributed to the Tridex Corporation Retirement
Savings Plan or not yet allocated to the account of an Employee under the Tridex
Corporation Retirement Savings Plan). The Total Retirement Savings Plan Transfer
Amount shall take into account any distributions, in-service withdrawals or
participant loans received by Employees, including any such distributions,
withdrawals or loans received after the Closing Date. The Total Retirement
Savings Plan Transfer Amount shall be transferred to the trustee of the
Purchaser Defined Contribution Plan entirely in (a) cash or other assets
acceptable to the trustee of the Purchaser Defined Contribution Plan, and (b)
notes which represent the participant loans of Employees.
(c) Seller shall cause the trustee of the Tridex Corporation
Retirement Savings Plan to make a transfer to the Purchaser Defined Contribution
Plan, in an amount equal to the Total Retirement Savings Plan Transfer Amount,
as soon as practicable after Seller has completed the allocation of investment
earnings on, and reconciliation of, the account balances of participants and
beneficiaries in the Tridex Corporation Retirement Savings Plan as of the
valuation date occurring on, or immediately preceding the date that Seller
receives an initial request from Purchaser for transfer of the Total Retirement
Savings Plan Transfer Amount (the "Transfer Date"), provided that such transfer
shall be made as soon as administratively feasible after the Transfer Date.
(d) Seller agrees to prepare and provide to Purchaser, as soon as
practicable following the Closing Date, a list of the Employees who were
participants in or otherwise entitled to benefits under the Tridex Corporation
Retirement Savings Plan as of the Closing Date, together with a listing of each
such Employee's term of service for eligibility and vesting purposes under the
Tridex Corporation Retirement Savings Plan and a listing of each such Employee's
account balance thereunder, and Purchaser and Seller agree to provide one
another with such additional information in the possession of one company and
not already in the possession of the other as may be reasonably requested by
either of them and necessary in order for Purchaser to establish and administer
the transferred account balances of Employees. In addition, with respect to any
amounts payable prior to the Transfer Date by Employees on participant loans
received from the Tridex Corporation Retirement
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Savings Plan, Purchaser shall execute whatever actions and make whatever
arrangements may be necessary to permit the periodic repayment of such amounts
through payroll deduction and the remittance of the payments to the Tridex
Corporation Retirement Savings Plan.
ARTICLE IX
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligations of Purchaser under this Agreement are subject to the
satisfaction, at or before the Closing, of all the conditions set forth below.
Purchaser may waive any or all of such conditions in whole or in part without
prior notice; provided, however, that no such waiver shall constitute a waiver
by Purchaser of any of Purchaser's other rights or remedies, at Law or in
equity, if Seller or Ultimate is in default of any of the representations,
warranties or covenants contained in this Agreement.
Section 9.1 Truth of Seller's and Ultimate's Representations and
Warranties. The representations and warranties of Seller and Ultimate contained
in this Agreement or in any Schedule, Exhibit or written statement delivered by
Seller or Ultimate, under, in connection with or pursuant hereto shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and Seller and Ultimate shall each have delivered to Purchaser on the
Closing Date a certificate, dated the Closing Date, to such effect.
Section 9.2 Seller's and Ultimate's Performance of Agreements. Seller and
Ultimate shall have performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by them on or before the Closing Date, and Seller and Ultimate shall each
have delivered to Purchaser, on the Closing Date a certificate, dated the
Closing Date, to such effect.
Section 9.3 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the liabilities, the business or
condition (financial or otherwise), the properties, assets, rights, operations,
results of operations or prospects of Ultimate, whether as a result of any
legislative or regulatory change, revocation of any License or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force or otherwise,
except for changes in the ordinary course of business.
Section 9.4 Opinion of Seller's and Ultimate's Counsel. Purchaser will
have received from Hinckley, Allen & Snyder LLP, counsel to Seller and Ultimate,
a favorable opinion dated the Closing Date, in form and substance satisfactory
to Purchaser and Purchaser's counsel, that: (a) Seller is a corporation duly
organized and validly existing and in good standing under the laws of the state
of Connecticut and has all necessary corporate power to enter into and perform
its obligations under this Agreement; (b) Ultimate is a corporation duly
organized and validly existing and in good standing under the laws of the state
of New York and has all necessary corporate power to own its properties as now
owned and operate its business as now operated; (c) this Agreement has been duly
authorized, executed and delivered by each of Seller and Ultimate and is valid
and binding on Seller and Ultimate and enforceable in accordance with its terms,
except as limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally; (d) except as set forth in Schedule 3.13 to
this Agreement, counsel has no knowledge of any suit, action, arbitration or
legal, administrative or other proceeding or governmental investigation pending
or threatened against or affecting Ultimate or any of its businesses or
properties, or financial or other condition; and (e) neither the execution nor
the 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,
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or violation or breach of, Seller's or Ultimate's certificate of incorporation,
bylaws or any indenture, License, lease, franchise, mortgage, instrument or
other agreement of which such counsel has knowledge and to which Seller or
Ultimate is a party or by which the properties of Ultimate may be bound, or (ii)
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 Ultimate, or (iii) an event that would result in the creation or
imposition of any Lien, charge or encumbrance on any asset of Ultimate Purchaser
acknowledges and agrees that Hinckley, Allen & Snyder LLP may rely in its
opinion on the written legal opinion of Wiggin & Dana as to the corporate
proceedings required to be effected by Seller under Connecticut Law with respect
to the authorization of this Agreement and the transaction contemplated hereby.
Section 9.5 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, or by any public authority,
pertaining to the transaction contemplated by this Agreement will have been
instituted or threatened on or before the Closing Date.
Section 9.6 Good Standing and Tax Certificates. Seller and Ultimate shall
have delivered to Purchaser (a) copies of Seller's certificate of incorporation,
including all amendments thereto, certified by the Secretary of the State of
Connecticut; (b) copies of Ultimate's articles of incorporation, including all
amendments thereto, certified by the Secretary of the State of New York; (c) a
certificate from the Secretary of State or other appropriate official in each
state in which Ultimate is qualified to do business to the effect that Ultimate
is in good standing in such state; and (d) certificates as to the tax status of
Ultimate in the State of New York and each state in which Ultimate is qualified
to do business.
Section 9.7 Consents and Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been obtained, including but not
limited to the Consents listed on Schedule 3.19.
Section 9.8 Approval of Proceedings and Documentation. All proceedings to
be taken in connection with the transactions contemplated by this Agreement and
all documents incident thereto, and all certificates, instruments, opinions and
other documents delivered to Purchaser under this Agreement, shall be reasonably
satisfactory in form and substance to Purchaser and its counsel, and Purchaser
shall have received copies of all such documents and other evidences as it or
its counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
Section 9.9 Transfer of Shares. At the Closing, Seller shall have
delivered certificates representing the Shares, duly endorsed or accompanied by
duly endorsed stock powers for transfer to Purchaser.
Section 9.10 Purchaser Financing. Purchaser's Financing Commitment shall
not have been retracted or substantially reduced as a result of (i) a
determination by Lowe's Companies, Inc. ("Lowe's"), communicated to Ultimate,
that Ultimate will not be a supplier to Lowe's for Lowe's next generation of POS
hardware, or (ii) Lowe's advising Ultimate that the terms and conditions on
which Ultimate may supply such POS hardware to Lowe's differ materially and
adversely from the terms and conditions contained in Ultimate's proposal to
Lowe's to supply Ultimate's Model 40 hardware; or (iii) failure of Ultimate to
obtain either (a) a waiver from Ithaca Peripherals, Inc. ("Ithaca") for the
benefit of Purchaser's lender(s) of the purchase money security interest granted
to Ithaca under Section 10 of the Printer Supply Agreement between Ultimate and
Ithaca or (b) the subordination of such purchase money security interest to the
security interest to be granted by Ultimate to Purchaser's lender(s) in a form
or on terms acceptable to Purchaser's lender(s).
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ARTICLE X
CONDITIONS PRECEDENT TO SELLER'S AND ULTIMATE'S PERFORMANCE
The obligations of each of Seller and Ultimate under this Agreement are
subject to the satisfaction, at or before the Closing, of the conditions set
forth below. Seller may waive any or all of such conditions in whole or in part
without prior notice.
Section 10.1 Truth of Purchaser's Representations and Warranties. All
representations and warranties by Purchaser contained in this Agreement or in
any written statement delivered by Purchaser under, in connection with or
pursuant to this Agreement will be true and correct in all material respects on
and as of the Closing as though such representations and warranties were made on
and as of that date, and Purchaser shall have delivered to Seller on the Closing
Date a certificate, dated the Closing Date, to such effect.
Section 10.2 Purchaser's Performance of Agreements. Purchaser will have
performed and complied with all covenants and agreements and satisfied all
conditions which Purchaser is required by this Agreement to perform, comply
with, or satisfy, before or at the Closing, and shall have delivered to Seller
on the Closing Date a certificate, dated the Closing Date, to such effect.
Section 10.3 Opinion of Purchaser's Counsel. Seller will have received
from Harter, Secrest & Emery LLP, counsel for Purchaser, an opinion dated the
Closing Date, in form and substance satisfactory to Seller and counsel for
Seller, to the effect that: (a) Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
New York and has all requisite corporate power 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 Purchaser on or before the Closing
Date, 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) this Agreement has been duly authorized, executed and
delivered by Purchaser and is valid and binding on Purchaser and enforceable in
accordance with its terms, except as limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally; and (d) neither
the execution nor the delivery of this Agreement nor the consummation of the
transactions contemplated in this Agreement will constitute a default, or an
event that would with notice or passage of time or both constitute a default
under, or violation or breach of, Purchaser's certificate of limited partnership
or agreement of limited partnership or any indenture, License, lease, franchise,
mortgage, instrument or other agreement of which such counsel has knowledge to
which Purchaser is a party or by which the properties of Purchaser may be bound,
or 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 Purchaser.
Section 10.4 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, or by any public authority,
pertaining to the transaction contemplated by this Agreement will have been
instituted or threatened on or before the Closing Date.
Section 10.5 Consents and Approvals. All governmental and other consents
and approvals, if any, necessary to permit Purchaser's consummation of the
transactions contemplated by this Agreement shall have been obtained.
Section 10.6 Approval of Proceedings and Documentation. All proceedings to
be taken in connection with the transactions contemplated by this Agreement and
all documents incident thereto, and all certificates,
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instruments, opinions and other documents delivered to Seller under this
Agreement, shall be reasonably satisfactory in form and substance to Seller and
its counsel, and Seller shall have received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
Section 10.7 Release of Seller. Seller shall have been released from any
and all agreements, contracts, commitments, understandings and arrangements
entered into by Seller for, on behalf of or for the benefit of, Ultimate
(including, but not limited to, any guarantees by Seller of obligations of
Ultimate).
Section 10.8 Good Standing Certificates. Purchaser shall have delivered to
Seller (a) copies of Purchaser's Certificate of Limited Partnership, including
all amendments thereto, certified by the Secretary of State of New York, and (b)
a certificate of good standing relating to Purchaser issued by the Secretary of
State of New York.
Section 10.9 Fairness Opinion. Seller shall have received on or before
February 16, 2000, an opinion from KPMG LLP to the effect that, in the opinion
of such firm, the consideration to be received by Seller in connection with the
sale of the Shares is fair, from a financial point of view, to Tridex.
ARTICLE XI
CLOSING
Section 11.1 Closing. The Closing shall take place at 10:00 a.m., Eastern
Standard Time, on February 15, 2000, at the offices of Hinckley, Allen & Snyder
LLP, counsel to Seller and Ultimate, 1500 Fleet Center, Providence, Rhode Island
02903, or at such other time and place as the parties may agree (the "Closing
Date").
Section 11.2 Seller and Ultimate Deliveries at Closing. At the close of
business on the Closing Date, Seller shall deliver, or shall cause to be
delivered, to Purchaser:
(a) certificates representing the Shares, duly endorsed or
accompanied by duly executed stock powers, with signatures guaranteed by a
commercial bank or by a member firm of [stock exchange], for transfer to
Purchaser;
(b) the opinion of counsel as provided in Section 9.4;
(c) the certificates, dated the Closing Date, as provided in
Sections 9.1, 9.2 and 9.6;
(d) certified corporate votes of the Board of Directors of each of
Seller and Ultimate, in form satisfactory to counsel for Purchaser, authorizing
the execution and performance of this Agreement and all actions to be taken by
Seller and Ultimate under this Agreement;
(e) the Escrow Agreement; and
(f) such other documents and instruments as Purchaser reasonably may
request to effectuate the transactions contemplated by this Agreement.
Section 11.3. Purchaser Deliveries at Closing. At the Closing, Purchaser
shall cause to be executed and delivered or paid to Seller:
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(a) the Purchase Price;
(b) the opinion of the counsel as provided in Section 10.3;
(c) the certificates, dated the Closing Date, as provided in
Sections 10.1, 10.2 and 10.8;
(d) certified votes of Purchaser's board of directors, in form
satisfactory to counsel for Seller, authorizing the execution and performance of
this Agreement and all actions to be taken by Purchaser under this Agreement;
and
(e) the Escrow Agreement.
ARTICLE XII
TERMINATION
Section 12.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) By mutual written consent of the parties at any time prior to
the Closing.
(b) Prior to the Closing, by written notice to Seller from
Purchaser, if (i) the Closing has not occurred on or before February 22, 2000,
other than as a result of a breach of a representation, warranty, covenant or
agreement of Purchaser, or (ii) there is any material breach of any
representation, warranty, covenant or agreement on the part of Seller or
Ultimate set forth in this Agreement, or if a representation or warranty of
Seller or Ultimate shall be untrue in any material respect, in either case, such
that the condition specified in Section 9.1 hereof would not be satisfied at the
Closing (a "Terminating Seller Breach"), except that, if such Terminating Seller
Breach is curable by Seller through the exercise of its reasonable best efforts,
then, for a period of up to thirty (30) days, but only as long as Seller
continues to use its reasonable best efforts to cure such Terminating Seller
Breach (the "Seller Cure Period"), such termination shall not be effective, and
such termination shall become effective only if the Terminating Seller Breach is
not cured within the Seller Cure Period, or (iii) consummation of any of the
transactions contemplated hereby is enjoined, prohibited or otherwise restrained
by the terms of a final, non-appealable order or judgment of a court of
competent jurisdiction. Notwithstanding the foregoing, in the event any
condition precedent to the performance of Purchaser under this Agreement has not
been satisfied as of the Closing Date, Purchaser may elect to proceed with the
transaction.
(c) Prior to the Closing, by written notice to Purchaser from
Seller, if (i) the Closing has not occurred on or before February 22, 2000 other
than as a result of a breach of a representation, warranty, covenant or
agreement of Seller or Ultimate, or (ii) there is any material breach of any
representation, warranty, covenant or agreement on the part of Purchaser set
forth in this Agreement, or if a representation or warranty of Purchaser shall
be untrue in any material respect, in either case, such that the condition
specified in Section 10.1 hereof would not be satisfied at the Closing (a
"Terminating Purchaser Breach"), except that, if such Terminating Purchaser
Breach is curable by Purchaser through the exercise of its reasonable best
efforts, then, for a period of up to thirty (30) days, but only as long as
Purchaser continues to exercise such reasonable best efforts to cure such
Terminating Purchaser Breach (the "Purchaser Cure Period"), such termination
shall not be effective, and such termination shall become effective only if the
Terminating Purchaser Breach is not cured
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within Purchaser Cure Period, or (iii) consummation of any of the transactions
contemplated hereby is enjoined, prohibited or otherwise restrained by the terms
of a final, non-appealable order or judgment of a court of competent
jurisdiction. Notwithstanding the foregoing, in the event any condition
precedent to the performance of Seller under this Agreement has not been
satisfied as of the Closing Date, Seller may elect to proceed with the
transaction.
(d) Prior to the Closing, by either Seller or Purchaser by written
notice to the other, if Seller has accepted an Acquisition Proposal as permitted
under Section 5.4 hereof.
Section 12.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 12.1, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party hereto or
their respective affiliates, officers, directors or stockholders, other than
liability for an intentional breach or violation by Seller or Purchaser, as the
case may be, occurring prior to such termination, provided that the provisions
of Section 14.5 hereof shall survive any termination of this Agreement.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 Indemnification of Purchaser. Seller shall indemnify, defend
and hold harmless Purchaser and its Affiliates and their respective officers,
directors, employees, and agents (collectively, the "Purchaser's Indemnified
Parties") from and against any and all losses, damages, costs, expenses, fines,
penalties, settlement payments and expenses, liabilities, obligations and claims
of any kind, including, without limitation, reasonable attorney's fees and other
reasonable legal and professional costs and expenses (hereinafter referred to
collectively as "Losses"), that any of the Purchaser's Indemnified Parties may
at any time suffer or incur, or become subject to, as a result of or in
connection with the following: (i) any breach or inaccuracy of any of the
representations and warranties made by the Seller or Ultimate in or pursuant to
this Agreement, and (ii) any failure of the Seller or Ultimate to carry out,
perform, satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and instruments delivered by the Seller or Ultimate pursuant to this Agreement.
In addition, Seller shall indemnify, defend and hold harmless Purchaser's
Indemnified Parties from and against any and all Losses that any of the
Purchaser's Indemnified Parties might at any time suffer or incur in connection
with, arising out of, resulting from or relating to (i) any fact inconsistent
with, or any untruth or inaccuracy of, any representation or warranty of or by
the Seller contained in Section 3.18; (ii) all Taxes with respect to all
Pre-Closing Periods; (iii) all Taxes with respect to any Tax period beginning
before the Closing Date and ending after the Closing Date (including the Federal
Tax Period commencing January 1, 1999 and ending after the Closing Date), but
only with respect to the Pre-Closing Period and excluding Taxes attributable to
the Election (the Seller is not indemnifying and shall not be required to
indemnify the Purchaser for Taxes with respect to any Post-Closing Period); and
(iv) any Tax liability not directly imposed on Ultimate but arising out of
Ultimate's relationship with the Seller or any Seller Affiliate, including
without limitation, Taxes imposed: (x) under Treasury Reg. ss.1.1502-6 (or any
similar provision of state, local or foreign law), (y) as a transferee or
successor, or (z) by contract.
Section 13.2 Indemnification of Seller. Purchaser shall indemnify, defend
and hold harmless Seller and its Affiliates and their respective officers,
directors, employees, and agents (collectively, the "Seller's Indemnified
Parties") from and against any and all Losses that any of Seller's Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with the following: (i) any breach or inaccuracy of any of the
representations and warranties made by the Purchaser in or pursuant to this
Agreement or under any of the documents and instruments delivered by the
Purchaser pursuant to this Agreement; (ii) any failure of the Purchaser to carry
out, perform, satisfy and discharge any of its covenants, agreements,
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undertakings, liabilities or obligations under this Agreement or under any of
the documents and instruments delivered by the Purchaser pursuant to this
Agreement; (iii) all federal and state income and other taxes which relate to
the Purchaser's conduct of the Business from and after the Closing Date; and
(iv) any event or occurrence subsequent to the Closing Date relating to the
Business. In addition, Purchaser and Ultimate agree, after the Closing Date,
jointly and severally to indemnify and hold harmless Seller's Indemnified
Parties from and against any and all Losses (including, but not limited to,
Taxes attributable to the loss of any tax benefits arising from any NOL's of
Seller as of the Closing Date) that such parties may incur, or become subject
to, as a result of or in connection with the Election, to the extent that such
Losses exceed, in the aggregate, the Tax Gross-Up Payment. Purchaser's and
Ultimate's indemnification obligations under the preceding sentence shall not be
subject to any limitations of or Threshold relating to liability set forth in
Section 13.6 hereof.
Section 13.3 Notice of Claim. Each party to this Agreement shall give
prompt written notice to the other party or parties to this Agreement of each
claim for indemnification under this Article 13 (a "Claim"), specifying the
amount and nature of the Claim, and of any matter which is likely to give rise
to an indemnification Claim. The indemnifying party shall have thirty (30) days
within which to review the notice provided by the indemnified party. If the
indemnifying party agrees to pay the Claim for indemnification as presented, the
indemnifying party shall promptly pay the indemnified party the amount of such
Claim, and if the indemnifying party fails to dispute the Claim for
indemnification within the thirty (30) day review period, the Claim shall be
paid in the amount originally claimed. If the indemnifying party disputes the
Claim, the indemnifying party shall provide written notice of such dispute to
the indemnified party prior to the expiration of the thirty (30) day review
period. If the indemnifying party and the indemnified party 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 Commercial Arbitration Rules of the American
Arbitration Association in New York, New York (the "Arbitrator"). The
arbitration award shall be final and binding upon the indemnifying party and
indemnified party and, if so directed by the award, the Claim shall be paid by
the indemnifying party in the amount determined thereby. The indemnifying party
and the indemnified party shall share equally the fees, costs and expenses of
the arbitration. If the indemnifying party and the indemnified party are able to
resolve a disputed Claim, the Claim shall be paid in the amount agreed. Failure
to dispute a Claim, resolution of a dispute through negotiation of the parties,
or an arbitration award shall constitute final determination of a Claim for
indemnification.
Section 13.4 Right to Assume Defense. If a claim for indemnification shall
arise from a claim or action involving a third party (a "Third Party Claim"),
the indemnified party 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 shall, subject to Section 13.7, hold the indemnified party harmless
from and against any and all damages caused by or arising out of any settlement
approved by the indemnifying party or any judgment in connection with such Third
Party Claim. Without the written consent of the indemnified party, 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
indemnified party with respect to the Third Party Claim by the claimant making
the Third Party Claim. The indemnified party may participate in such defense or
settlement through its own counsel, but at its own expense. Any settlement shall
be subject to the indemnified party's consent, which consent shall not be
unreasonably withheld or delayed.
Section 13.5 Survival of Representations and Warranties. The
representations and warranties of the parties hereto shall survive the Closing
for a period of fifteen (15) months after the Closing Date. Notwithstanding the
foregoing, (i) the representations and warranties of Seller set forth in Section
3.3 shall survive without limitation, expiration or termination; (ii) the
representations and warranties of Seller set forth in Section 3.15 (as to
matters governed by ERISA) and Section 3.18 shall survive for the applicable
statute of
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limitations period; and (iii) the representations and warranties of Seller set
forth in Section 3.17 shall survive for six (6) years after the Closing Date.
Section 13.6 Limitation of Liability. Notwithstanding any other provision
hereof to the contrary (i) no Claim for indemnification shall be asserted by
Purchaser against Seller until, and only to the extent that, the aggregate
amount of all Claims exceeds $250,000 (the "Threshold"). Once the aggregate
amount of a party's Claims for indemnification exceeds the Threshold, then the
party seeking indemnification will be entitled to make a claim for the full
amount, including the Threshold. The foregoing notwithstanding, the Threshold
shall not apply to the failure of Seller's representations and warranties in
Sections 3.3(a), 3.15 (as to matters governed by ERISA) and 3.18. In no event
shall the aggregate indemnification obligation of Seller pursuant to this
Article 13 exceed $1,500,000, other than the failure of Seller's representations
and warranties in Sections 3.3(a), 3.15 (as to matters governed by ERISA) and
3.18, as to which such limitation shall not apply. In all cases, recovery shall
be made first under the Escrow Agreement in accordance with the terms thereof
until the funds held by the escrow agent thereunder are exhausted.
Indemnification under this Article 13 shall be the sole and exclusive remedy for
all matters subject to indemnification, other than Taxes.
Section 13.7 Damages; Mitigation. Neither party hereto shall be
responsible for any damages pursuant to this Article 13 to the extent that such
damages are: (a) caused, contributed to or exacerbated by the actions of any
Purchaser's Indemnified Parties (in the case of the Seller's indemnification
obligations) or any Seller's Indemnified Parties (in the case of the Purchaser's
indemnification obligations) after notice of any claim to such indemnified
party, or (b) recovered by the indemnified party from any third party (including
insurers).
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Waiver. Either party to this Agreement may, at any time prior
to the Closing, waive any of the terms or conditions of this Agreement or agree
to an amendment or modification to this Agreement by an agreement in writing
executed in the same manner as this Agreement.
Section 14.2 Notices. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) five (5) days after posting in the United States
mail having been sent registered or certified mail return receipt requested, or
(iii) two (2) days after being sent by a reputable, nationally recognized
overnight courier, or (iv) delivered by telecopy and promptly confirmed by
delivery in person or in first class mail in each case, with postage prepaid,
addressed as follows:
(a) If to Purchaser, to:
CFG Capital Management II, L.P.
387 East Main Street
Suite 201
Rochester, NY 14604
Attention: Kyle Monroe
Telephone No.: (716) 454-6990
Telecopy No.: (716) 454-3204
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with a copy to:
Harter, Secrest & Emery LLP
700 Midtown tower
Rochester, New York 14604
Attention: Gary L. Karl, Esquire
Telephone No.: (716) 231-1147
Telecopy No.: (716) 232-2152
and
Key Equity Capital Group
127 Public Square
Cleveland, OH 44114-1216
Attention: Sean Ward
and
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, OH 44114-3485
Telephone No.: (216) 621-0200
Telecopy No.: (216) 696-0740
Attention: Michael McNamara, Esquire
(b) If to Seller or Ultimate, to:
Ultimate Technology Corporation
c/o Tridex Corporation
61 Wilton Road
Westport, CT 06880
Attention: Seth M. Lukash, Chief Executive Officer
Telephone No.: (203) 226-1144
Telecopy No.: (203) 226-8806
and
Hinckley, Allen & Snyder LLP
1500 Fleet Center
Providence, Rhode Island 02903-2393
Attention: Stephen J. Carlotti, Esquire
Telephone No.: (401) 274-2000
Telecopy No.: (401) 277-9600
or to such other address or addresses as the parties may from time to time
designate in writing.
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Section 14.3 Assignment. Neither party hereto shall assign this Agreement
or any part hereof without the prior written consent of the other party, except
that Purchaser may assign all of its rights under this Agreement to a
corporation to be formed prior to the Closing Date; provided, however, that such
assignment of its rights hereunder will not relieve Purchaser of any of its
duties or obligations under this Agreement. This Agreement shall be binding upon
and inure to the benefit of the heirs, legal representatives, successors and
assigns of each party hereto.
Section 14.4 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person or
entity, other than the parties hereto, any right or remedies under or by reason
of this Agreement.
Section 14.5 Expenses. Each party hereto shall bear its own expenses
incurred in connection with this Agreement and the transactions herein
contemplated, including, without limitation, all fees of its legal counsel,
financial advisers and accountants, except as otherwise provided herein;
provided, however, that all transfer, conveyance, sales and similar taxes
imposed as a result of the sale of the Shares, including, without limitations,
any applicable transfer and any similar taxes, shall be paid by Purchaser. In
the event the transactions contemplated hereby are not consummated each party
hereto shall pay its own costs and expenses including, without limitation, all
fees of its legal counsel, financial advisers and accountants; provided, that in
the event that this Agreement is terminated by either Purchaser or Seller
pursuant to the provisions of Section 12.1(d), upon the earlier to occur of (x)
the consummation of the transaction contemplated by the Acquisition Proposal, or
(y) six months from the date of termination of this Agreement, Seller shall pay
to Purchaser a breakup fee in the amount of $250,000, whereupon Seller shall
have no further liability to Purchaser.
Section 14.6 Captions; Counterparts. The captions in this Agreement are
for convenience only and shall not be considered a part of or affect the
construction or interpretation provision of this Agreement. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 14.7 Entire Agreement. This Agreement (together with the Schedules
and Exhibits to this Agreement, which, although they may be bound separately,
constitute part of this Agreement), constitute the entire agreement the parties
and supersede any other agreements, whether written or oral, that may have made
or entered into by or among any of the parties hereto relating to the
transactions contemplated hereby. No representations, warranties,
understandings, agreements, oral or otherwise, relating to the transactions
contemplated by this Agreement exist between the parties except as expressly set
forth in this Agreement.
Section 14.8 Severability. If any term of provision of this Agreement, or
the application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than those
as to which it is invalid or unenforceable, shall be considered severable and
shall not be affected thereby, and each term of this Agreement shall be valid
and enforceable to the fullest permitted by Law. The invalid or unenforceable
provisions shall, to the extent permitted by Law, be deemed amended and given
such interpretation as to achieve the economic intent of this Agreement.
Section 14.9 Amendment. This Agreement may be amended or modified in whole
or in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
Section 14.10 Publicity. All press releases or other public communications
of any nature whatsoever relating to the transactions contemplated by this
Agreement issued prior to or concurrent with the Closing, and
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<PAGE>
the method of the release for publication thereof, shall be subject to the prior
mutual approval of Purchaser and Seller, which approval shall not be
unreasonably withheld by any party.
Section 14.11 Further Assurances. Each of Seller and Purchaser covenants
that at any time, and from time to time, after the Closing Date, it will execute
such additional instruments and take such actions as may be reasonably requested
by another party to confirm or perfect or otherwise to carry out the
conveyances, intent and purposes of this Agreement.
Section 14.12 Non-Exclusivity of Remedies. Subject to Section 13.6, the
remedies specifically provided for in this Agreement are intended to be
cumulative and shall not be deemed to exclude any other right or remedy that the
parties may have at Law or in equity.
Section 14.13 Governing Law. This Agreement has been made in and its
validity, interpretation, construction and performance shall be governed by and
be in accordance with the laws of the State of New York, without reference to
its laws governing conflicts of law. Each party irrevocably agrees that any
legal action or proceedings against with respect to this Agreement may be
brought in the courts of the State of New York, or in the United States District
Court for the Western District of New York, and, by its execution and delivery
of this Agreement, each party hereby irrevocably submits to each such
jurisdiction and hereby irrevocably waives any and all objections which it may
have as to venue in any of the above courts. Each party further consents and
agrees that any process or notice of motion or other application to either of
said Courts or any judge thereof, or any notice in connection with any
proceedings hereunder, may be served inside or outside the State of New York or
the Western District of New York by registered or certified mail, return receipt
requested, postage prepaid, and be effective as of the receipt thereof, or in
such other manner as may be permissible under the rules of said Courts. Each
party hereby waives trial by jury in any action or proceeding in connection with
this Agreement.
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IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
duly executed as of the date first above written.
TRIDEX CORPORATION ULTIMATE TECHNOLOGY CORPORATION
By: /s/ Seth M. Lukash By: /s/ Seth M. Lukash
---------------------- ----------------------
Name: Seth M. Lukash Name: Seth M. Lukash
Title: Chairman CEO Title: Chairman CEO
CFG CAPITAL MANAGEMENT II, L.P.
By: /s/ Thomas W. Cimino
----------------------
Name: Thomas W. Cimino
Title: Executive Managing Director
38
Exhibit 10.2
AMENDMENT NO. 5 TO CREDIT AGREEMENT
Dated as of February 18, 2000
This Amendment No. 5 to Credit Agreement (this "Amendment") is made by and
among TRIDEX CORPORATION, a Connecticut corporation ("Tridex"), PROGRESSIVE
SOFTWARE, INC., a North Carolina corporation ("PSI"), ULTIMATE TECHNOLOGY
CORPORATION, a New York corporation ("UTC", and collectively, together with
TRIDEX and PSI, the "Borrowers" and each, individually, a "Borrower"), and FLEET
NATIONAL BANK, a national banking association organized under the laws of the
United States of America (the "Bank").
PRELIMINARY STATEMENTS:
A. The Borrowers and the Bank have entered into a Credit Agreement dated
as of April 17, 1998. The Borrowers and the Bank have also entered into an
Amendment No. 1 to Credit Agreement dated as of November 1, 1998 ("Amendment No.
1"). The Borrowers and the Bank have further entered into an Amendment No. 2 to
Credit Agreement dated as of March 15, 1999 ("Amendment No. 2"). The Borrowers
and the Bank have further entered into Amendment No. 3 to Credit Agreement dated
as of June 30, 1999 ("Amendment No. 3"). The Borrowers and the Bank have further
entered into Amendment No. 4 to Credit Agreement dated as of September 30,1999
("Amendment No. 4"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings given thereto in the Credit Agreement, as
amended. As used herein, the term "Credit Agreement" shall mean the Credit
Agreement, as amended pursuant to Amendment No. 1, Amendment No. 2, Amendment
No. 3, Amendment No. 4 and this Amendment.
B. For good and valuable consideration, the receipt of which is
acknowledged, the Borrowers and the Bank have agreed to further amend the Credit
Agreement, as hereinafter set forth.
SECTION 1. Recitals; Acknowledgement of Indebtedness. The above recitals
are true and correct.
Prior to the receipt of any payments mentioned herein, as of February 18,
2000, the Borrowers are legally, validly, enforceably, jointly and severally
indebted to the Bank under the Facility Documents, without defense, recoupment,
counterclaim or offset as follows:
Principal
---------
Working Capital Loans $ 6,000,000.00
Term Loan $ 11,100,000.00
together with accrued and unpaid interest thereon and all other amounts due and
owing thereunder.
SECTION 2. Amendments. The Facility Documents are, effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 3 hereof, hereby amended as follows:
(a) The following definitions in the Credit Agreement are hereby
amended and modified as follows:
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"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 (c) all Inventory of PSI prior to the
date that UTC is sold and thereafter such inventory of PSI shall no longer be
excluded hereunder, (d) all work-in-progress, packaging and labeling of any
finished Inventory units housed at customer locations, and (e) all other
Inventory deemed ineligible by the Bank because of any circumstance that could,
in the Bank's judgement, 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 the premises
owned by or leased 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.
"Margin" means the percentage points to be added to the Bank's Prime
Rate or the then applicable LIBOR Rate, as follows:
Libor Margin Prime Rate Margin
------------ -----------------
4.75% 2.5%
(b) Effective as of the sale of UTC , the Borrowers shall have a net
worth of not less than $15,400,000.00.
(c) Except as otherwise provided for herein, the Working Capital
Loans and the Term Loan, plus all accrued and unpaid interest and fees of every
kind due thereon as evidenced in the Credit Agreement, including all amendments,
shall be due and payable in full on December 31, 2000. Interest shall continue
to be payable monthly in accordance with the terms of the Facility Documents;
(d) The $300,000.00 principal payment originally due on the Term
Loan on March 31, 1999, which was deferred to June 30, 1999, and was further
deferred until September 30, 1999, which was further deferred until December 31,
1999, is hereby further deferred to not later than February 29, 2000, or the
Sale of UTC, whichever occurs first. Interest shall continue to be payable
monthly in accordance with the terms of the Facility Documents;
(e) The $450,000.00 principal payment originally due on the Term
Loan on June 30, 1999 which was deferred until September 30, 1999, and which was
further deferred until December 31, 1999 is hereby further deferred to not later
than February 29, 2000, or the sale of UTC, whichever occurs first. Interest
shall continue to be payable monthly in accordance with the terms of the
Facility Documents;
(f) The $450,000.00 principal payment originally due on the Term
Loan on September 30, 1999 and which was deferred until December 31, 1999 is
hereby deferred until not later than February 29, 2000, or the sale of UTC,
whichever occurs first. Interest shall continue to be payable monthly in
accordance with the terms of the Facility Documents;
(g) The $450,000 principal payment originally due on the Term Loan
on December 31, 1999 is hereby further deferred until not later than February
29, 2000, or the sale of UTC, whichever occurs first. Interest shall continue to
be payable monthly in accordance with the terms of the Facility Documents. Any
2
<PAGE>
other scheduled principal payments due on the Term Loan after December 31, 1999
are also further deferred until December 31, 2000. Interest shall continue to be
payable monthly in accordance with the terms of the Facility Documents.
(h) On or before February 29, 2000 the Borrowers shall cause to be
made a principal payment on the Term Loan, inclusive of the principal payments
referred to in paragraphs (d), (e) (f) and (g), above, in the amount of not less
than $8 million, and a further principal payment of not less than $1 million on
or before June 31, 2000.
(i) In consideration of the deferrals by the Bank set forth herein,
the Borrowers agree to pay an extension fee in the amount of Three Thousand
Dollars per month, ("Extension Fee"), on the first day of each month commencing
on April 1, 2000 until the Loans are paid in full. This extension fee is in
addition to any other fee or payment requirement provided for in the Credit
Agreement, including all amendments, including the previous obligation of the
Borrowers to pay an Extension Fee of Five Thousand Dollars per month through
March, 2000;
(j) In further consideration of the deferral by the Bank as set
forth herein, the Borrowers agree to pay an Accomodation Fee of One Hundred
Thousand Dollars ($100,000), payable upon the earlier of the final maturity of
the Credit Agreement, as amended, or the sale of the capital stock or assets of
Tridex or Progressive. Of this amount, $50,000 will be waived if the sale of the
Ultimate occurs and the principal payment on the Term Note in the amount of
Eight Million Dollars ($8,000,000) as specified above is timely made. The
remaining $50,000 of this Accomodation Fee will be waived if all sums due to
Fleet under the Credit Agreement are paid in full by no later than September 30,
2000.
(k) Within one (1) day after the sale of UTC, the Borrowers shall
deliver to the Bank an updated Borrowing Base Certificate, certified by Tridex's
President or Chief Financial Officer. In the event that the Borrowing Base
Certificate demonstrates that the Working Capital Loans exceed the Borrowing
Base, then the Borrowers shall immediately make such payment as is necessary so
that the Working Capital Loans do not exceed the Borrowing Base.
SECTION 3. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Bank shall have received counterparts of this
Amendment executed by the Borrowers and approved by the Bank and a counterpart
executed by the Bank, and Section 2 hereof shall become effective when, and only
when, the Bank shall have additionally received all of the following documents
or items, each document (unless otherwise indicated) being dated the date of
receipt thereof by the Bank (which date shall be the same for all such
documents), in form and substance satisfactory to the Bank:
(a) Certified copies of (i) the resolutions of the Board of
Directors of each of the Borrowers approving this Amendment and the matters
contemplated hereby and (ii) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment and
the matters contemplated hereby;
(b) A certificate of the Secretary or an Assistant Secretary of each
of the Borrowers certifying the names and true signatures of the officers of the
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder;
(c) Evidence that Massachusetts Mutual Life Insurance Company and
its Affiliates ("Mass Mutual") have agreed to continue to defer all payments due
(whether principal or interest) on the $11,000,000.00 Subordinated Debt to a
date no earlier than January 1, 2001, and waive any other defaults that
3
<PAGE>
may exist under the documents and/or instruments evidencing such Subordinated
Debt. In connection with this, the Bank agrees and consents to the granting of a
lien on the corporate stock of Progressive to Mass Mutual, fully subordinate to
the interests of Fleet; and
(d) An opinion of counsel to the Borrowers in form and substance
acceptable to the Bank.
SECTION 4. Representations and Warranties of Each of the Borrowers. Each
of the representations and warranties made by each of the Borrowers in the
Facility Documents or otherwise made by or on behalf of the Borrowers in
connection therewith after the date thereof shall have been true and correct in
all respects on the date when made and shall also be true and correct in all
material respects on the date hereof, except to the extent of changes resulting
from transactions contemplated or permitted by the Facility Documents and
changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse.
SECTION 5. Reaffirmation of Facility Documents. The Borrowers agree that:
(a) This Amendment and each of the other Facility Documents as
amended hereby, constitute legal, valid and binding obligations of the Borrowers
enforceable against each Borrower in accordance with their respective terms.
(b) The Credit Agreement and the Security Agreement create valid and
perfected first priority security interests and liens in and to the Collateral
covered thereby enforceable against all third parties in all jurisdictions,
securing the payment of all Obligations, and the execution, delivery and
performance of this Amendment do not adversely affect the aforesaid security
interests and liens of the Credit Agreement and the Security Agreement.
(c) Except as set forth in the Credit Agreement, there is no pending
or threatened action or proceeding affecting the Borrowers or any of their
Subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrowers or any of their Subsidiaries. There is no pending or threatened action
or proceeding affecting the Borrowers or any of their Subsidiaries before any
court, governmental agency or arbitrator which purports to affect the legality,
validity or enforceability of this Amendment or any of the other Facility
Documents, as amended hereby.
(d) The Facility Documents existing on the date hereof constitute
legal, valid and binding obligations of the Borrowers, enforceable against the
Borrowers in accordance with their respective terms. After giving effect to the
amendments provided for in this Amendment, no event has occurred and is
continuing which constitutes a Default or an Event of Default.
SECTION 6. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Section 2 hereof, on and after the
date hereof each reference in the Credit Agreement to "this Agreement,"
"hereunder, "hereof," "herein" or words of like import, and each reference in
any Facility Documents to the Credit Agreement or any other Facility Document,
shall mean and be a reference to the Credit Agreement or such other Facility
Document as amended hereby.
(b) Except as specifically amended or modified pursuant to this
Amendment, the provisions of the Credit Agreement, the Notes and the other
Facility Documents shall remain in full force and effect and are hereby ratified
and confirmed. Without limiting the generality of the foregoing, the Credit
Agreement, the Security Agreement and all of the Collateral described therein do
and shall continue to secure the payment of all
4
<PAGE>
indebtedness and liabilities of the Borrowers to the Bank under the Credit
Agreement and the other Facility Documents, as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Bank under any of the Facility Documents, nor
constitute a waiver of any provision of any of the Facility Documents.
SECTION 7. Costs, Expenses and Taxes. Without limiting the foregoing or
anything else contained herein, each of the Borrowers agrees to pay on demand
all reasonable costs and expenses of the Bank in connection with the
preparation, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, including, without limitation, the
reasonable costs and expenses for the performance of a field audit, the
reasonable fees and out-of-pocket expenses of counsel for the Bank (including
the allocated costs of in-house counsel) with respect thereto and with respect
to advising the Bank as to its rights and responsibilities hereunder and
thereunder. Each of the Borrowers further agrees to pay on demand all reasonable
costs and expenses, if any (including, without limitation, reasonable counsel
fees and expenses, including the allocated costs of in-house counsel), in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, reasonable counsel fees
(including the allocated costs of in-house counsel) and expenses in connection
with the enforcement of its rights. In addition, each of the Borrowers shall pay
any and all taxes payable or determined to be payable in connection with the
execution and delivery of this Amendment and the other instruments and documents
to be delivered hereunder, and agrees to save the Bank harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 8. Waivers. The Borrowers waive, release and discharge any and all
claims or causes of action of any kind whatsoever, whether at law or in equity,
arising on or prior to the date hereof, which the Borrowers may have against the
Bank, its affiliates, successors and assigns, agents, directors, employees and
counsel, in connection with the Loans. The waivers and releases made herein
include the Borrowers' waiver of any damages which may have been, or may in the
future be, caused to the Borrowers, their properties or business prospects
because of the actions waived and released and the agreements made herein,
including, without limitation, any actual or implicit, direct or indirect,
incidental or consequential damages suffered by the Borrowers therefrom,
including, but not limited to: (a) lost profits; (b) loss of business
opportunity; (c) increased financing costs; (d) increased legal and other
administrative fees; and (e) damages to business reputation.
SECTION 9. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut, without
reference to Connecticut's choice of law rules.
SECTION 11. 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
5
<PAGE>
WAIVES TO THE EXTEND 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 OF THE CREDIT
AGREEMENT KNOWINGLY, VOLUNTARILY AND AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THESE WAIVERS WITH ITS ATTORNEYS.
SECTION 12. 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 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 ACTIONS, 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 AMENDMENT OR ANY OF THE OTHER
FACILITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 13. Further Assurances.
(a) Regarding Preservation of Collateral. The Borrowers will execute
and deliver to the Bank such further documents, instruments, assignments and
other writings, and will do such other acts necessary or desirable, to preserve
and protect the Collateral at any time securing or intended to secure the
Obligations, as the Bank may reasonably require.
(b) Regarding this Amendment. The Borrowers will cooperate with, and
will do such further acts and execute such further instruments and documents as
the Bank shall reasonably request to carry out to its satisfaction the
transactions contemplated by this Amendment and the other Facility Documents.
SECTION 14. Notices. Notices given after the date hereof shall be
delivered to the parties hereto at their respective "Address for Notices" on the
signature page of this Amendment.
[Remainder of Page Left Intentionally Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
TRIDEX CORPORATION
By: /s/ George T. Crandall
--------------------------
George T. Crandall
Its Treasurer
Duly Authorized
Address for Notices:
61 Wilton Road
Westport, CT 06880
ULTIMATE TECHNOLOGY CORPORATION
By: /s/ George T. Crandall
--------------------------
George T. Crandall
Its Treasurer
Duly Authorized
Address for Notices:
61 Wilton Road
Westport, CT 06880
PROGRESSIVE SOFTWARE, INC.
By: /s/ George T. Crandall
--------------------------
George T. Crandall
Its Treasurer
Duly Authorized
Address for Notices:
61 Wilton Road
Westport, CT 06880
7
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FLEET NATIONAL BANK
By: /s/ Vincent J. Pitts
-----------------------------------------
Vincent J. Pitts
Its Vice President
Duly Authorized
Address for Notices:
Fleet National Bank
777 Main Street
CT MO H21B
Hartford, CT 06115
Facsimile No.: (860) 986-7624
8
Exhibit 99.1
Tridex Corporation
CONTACT: -OR- TRDX's INVESTOR RELATIONS COUNSEL:
Tridex Corporation The Equity Group
Seth M. Lukash Devin Sullivan (212) 836-9608
Chairman and Chief Executive Officer Robert Goldstein (212) 371-8660
(203) 226-1144 www.theequitygroup.com
Wendy Colby, Vice President of Marketing & Business Development
(925) 847-2050
FOR IMMEDIATE RELEASE
TRIDEX SELLS ULTIMATE TECHNOLOGY CORPORATION SUBSIDIARY FOR $13 MILLION
Company Restructures Debt and Announces Management Changes
Westport, CT - February 22, 2000 -- Tridex Corporation (Nasdaq: TRDX), a leading
provider of customized POS ("point-of-sale") and back office application
software for the foodservice industry, today announced that it has sold all of
the issued and outstanding shares of its Ultimate Technology Corporation
("Ultimate") subsidiary to CFG Capital Management II, L.P. ("CFG") for
approximately $13 million in cash. CFG, which is part of Capital Formation Group
of Rochester New York, led this management buyout. Net proceeds from this sale
will be utilized by Tridex to reduce outstanding term debt and the Company's
working capital facility. The investment banking firm of FleetBoston Robertson
Stephens acted as an advisor to Tridex in this sale. Tridex will continue to
utilize the services of FleetBoston Robertson Stephens to assist it in
implementing various aspects of the Company's strategic initiatives.
Tridex also announced that its lenders and noteholders have agreed to extend the
expiration of the Company's banking facilities, while shortening the term of
Tridex's Senior Subordinated Notes. The term loan and working capital facility,
as well as the Senior Subordinated Notes, will become due on December 31, 2000.
Seth Lukash, President and CEO of Tridex, said, "This action reflects Tridex's
strategy to focus on the operations of its Progressive Software ("Progressive")
subsidiary, a leading provider of high-quality, customized POS and back office
application software for the foodservice industry. Progressive has established
strong market recognition and an impressive customer base, including, among
others, Starbucks, McDonald's, Foodmaker (Jack-in-the-Box) and Krispy Kreme
Doughnut Corp. We believe that Progressive's products have the potential to
revolutionize the rapidly evolving foodservice industry and offer substantial
growth opportunities. At the same time, our ability to begin to de-leverage
Tridex's balance sheet through the sale of Ultimate provides us with increased
financial flexibility and an improved financial position."
1
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Tridex Corporation Page 2
February 22, 2000
Mr. Lukash continued, "The divestiture of Ultimate, combined with our own
efforts to reduce corporate overhead expenses, are expected to result in
significant future annual savings. These initiatives reflect our commitment to
create a stronger, more efficient enterprise. We are also pleased to continue
our relationship with FleetBoston Robertson Stephens, which has earned an
outstanding reputation as one of the nation's premier, full-service investment
banking firms. As advisors to Tridex in the sale of Ultimate, FleetBoston
Robertson Stephens gained valuable insight into our business and industry. This
understanding creates a solid and seamless platform upon which to continue our
relationship."
The Company also announced the resignations of Daniel Bergeron, Vice President
and Chief Financial Officer, and John MacWillie, Vice President of Technology
and Strategic Business Development. Both men are pursuing other business
opportunities. All aspects of the Company's financial matters will be overseen
by Seth Lukash, President and Chief Executive Officer, and George Crandall, the
Company's Vice President, Treasurer and Controller. Mr. MacWillie's
responsibilities will be assumed by Progressive, which is headquartered in
Charlotte, North Carolina.
Mr. Lukash commented, "We all appreciate what Dan and John have done for Tridex
and wish them well in their future endeavors."
Tridex, through its Progressive Software subsidiary, is a leading provider of
customized POS ("point-of-sale") and back office application software for the
foodservice industry. The Company offers a full range of products and services
for major chains as well as franchisees and multi-unit independents. Tridex is
the solution of choice for Starbucks, Steak 'n Shake, Golden Corral, McDonald's,
Shoney's and many others.
The statements contained in this release which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, including, without
limitation, the uncertainties detailed in Tridex's Securities and Exchange
Commission filings.
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